India Needs To Free Up Judicial Time, Address Delays To Make Doing Business Here Easy [Read Report]

Economic Survey finds injunctions, stays, SLPs, original jurisdictions, lack of modernization burdening courts

India needs to address pendency, delays and injunctions which are overburdening courts and severely impacting the progress of cases, especially economic cases, through the different tiers of the appellate and judicial arenas if it wants to further ease the prospects of doing business here, according to Economic Survey 2017-18.

The Survey stresses on India freeing up its judicial time by spending more on modernization to expedite processes like service of summons etc and consider adopting initiatives like the Crown Court Management Services of the UK that are dedicated to the management and handling of administrative duties.

 The economic survey shows India jumped thirty places to break into the top 100 for the first time in the World Bank’s Ease of Doing Business Report (EODB), 2018, attributing the same to government’s reform measures on a wide range of indicators like rationalizing Tribunals, reforms in taxation etc.

“India leaped 53 and 33 spots in the taxation and insolvency indices, respectively, on the back of administrative reforms in taxation and passage of the Insolvency and Bankruptcy Code (IBC), 2016,” the survey shows.

However, despite this progress, India continues to lag on the indicator on enforcing contracts, marginally improving its position from 172 to 164 in the latest report, behind Pakistan, Congo and Sudan.

While the survey in its chapter titled ‘Ease of Doing Business’ Next Frontier: Timely Justice’ acknowledges the number of actions taken by the government to expedite and improve the contract enforcement regime like scrapping over 1000 redundant legislations; rationalizing tribunals; expanding Lok Adalat programme, it says, “economic activity is being affected by the realities and long shadow of delays and pendency across the legal landscape”.

Pendency in Tribunals with high stake commercial matters

The survey analysed six prominent appellate tribunals that deal exclusively with high stakes commercial matters (Telecom Dispute Settlement and Appellate Tribunal- TDSAT), electricity (Appellate Tribunal for Electricity- APTEL), environment (National Green Tribunal- NGT), consumer protection (National Consumer Disputes Redressal Commission- NCDRC), central income tax (Income Tax Appellate Tribunal- ITAT), and central indirect taxes (Customs, Excise and Service Tax Appellate Tribunal- CESTAT

Analysis revealed high level of pendency across the six tribunals, estimated at about 1.8 lakh cases. The pendency has risen sharply over time. Compared to 2012, there is now a 25 percent increase in the size of unresolved cases. The average age of pending cases across these tribunals is 3.8 years.

“It is noteworthy that in two cases—telecommunications and electricity—the explosion in pendency resulted from interventions by the Supreme Court,” it says.

Pendency in overburdened HC, SC 

Delays and pendency of economic cases are high and mounting in the Supreme Court, High Courts, Economic Tribunals, and Tax Department, which is taking a severe toll on the economy in terms of stalled projects, mounting legal costs, contested tax revenues, and reduced investment more broadly.

Delays and pendency stem from the increase in the overall workload of the judiciary, in turn due to expanding jurisdictions and the use of injunctions and stays; in the case of tax litigation, this stems from government persisting with litigation despite high rates of failure at every stage of the appellate process; and

The total backlog in High Courts by the end of 2017 as per the National Judicial Data Grid was close to 3.5 million cases. While the volume of economic cases is smaller than other case categories, their average duration of pendency is arguably the worst of most cases, nearly 4.3 years for 5 major High Courts -- Delhi, Madras, Bombay, Calcutta, and Allahabad. The average pendency of tax cases is particularly acute at nearly 6 years per case.

One reason, according to the survery, for the rising pendency of economic cases at the High Courts could simply be the generalized overload of cases.

HC’s unique Original Jurisdiction occupying docket

The Survey attributes workload and consequent delays in to some High Courts of the country retaining a unique original jurisdiction, under which the High Court, and not the relevant lower court, transforms into the Court of first instance for some civil cases.

These cases occupy a significant share of the Court’s docket. The Delhi and Bombay High Courts have original jurisdictions that occupy nearly 10-15% of their workload

Average pendency of civil suits in Delhi and Bombay high court showed pendency of 19,740 with average pendency of 5.8 years and 16,099 cases with average pendency of 6.1 years respectively.

SC burdened partly from SLPs

 The Supreme Court, like the High Courts, has less capacity to deal with mounting economic cases because of rising overall pendency. In the case of the SC, the burden derives in part from Special Leave Petitions under Article 136 of the Constitution of India, which empowers any party to approach the Supreme Court directly from any court or tribunal.

Initially invoked only in “exceptional circumstances”, SLPs are now an overwhelming feature of practice at the Supreme Court, says the survey.

The rate at which the Supreme Court admits Special Leave Petitions under Article 136 of the Constitution increased from around 25% in 2008 to nearly 40% in 2016.

“In contrast, the Supreme Court of the United States of America and Canada admit 3% and 9% respectively of the cases filed before it. This rising tendency to grant special leave has fundamentally altered the nature of the Court and created a high level of pendency, nearly 85% of which are SLP cases. The Court’s SLP jurisdiction does not include other cases like transfer and review petitions, each of which occupies nearly 4-6% of the Court’s docket. Simultaneously, the share of writ cases has gone down from 7% in 1993 to under 2% in 2011,” says the survey.

Injunctions, lengthy interim orders, ex-parte stays

Rising pendency also results from the injunction of cases by Courts. For example, in the case of Intellectual Property Rights (IPR) cases, injunctions led to about 60 percent of cases being stayed, whose average pendency is 4.3 years. Lengthy interim orders, ex parte ad interim stays, increasing rate of pendency of cases at final arguments, and few final judgments in IPR cases are common traits of IPR practice across different High Courts.

Nearly 50% of these cases are pending at the stage of pleadings, which is the stage at which parties are required to complete formal requirements before hearing.

 Low spending on administration of Justice

The Survey also found that total spending on Administration of Justice by States and the Centre constitutes approximately 0.08- 0.09% of GDP which is low when compared to other countries, especially common law countries.

 Increased spending on modernization can check pendency

“Research shows that while general spending on the judiciary may not impact pendency, spending on modernization, computerization and technology leads to shorter average trial lengths.

Data compiled for the Economic Survey reveals that nearly 30% of a case’s life is taken up by formal proceedings like service of summons and notices, issues that may be easily resolved through technological upgradation for filing and service mechanisms.

It, however, adds that building additional judicial capacity may not be effective unless existing capacity is fully utilized. The higher judiciary is currently operating at 63.6% of existing capacity. Experience from the 1990s confirms that increasing judicial capacity in the case of Income Tax Appellate Tribunals in the mid-1990s substantially reduced pendency.

Some of the steps suggested by the Survey:  

(i) Expanding judicial capacity in the lower courts and reducing the existing burden on the High Courts and Supreme Court;

(ii) The tax department exercising greater self-restraint by limiting appeals, given its low success rate.

(iii) Substantially increasing state expenditure on the judiciary, particularly on their modernization

(iv) Building on the success of the Supreme Court in disposing tax cases, creating more subject-matter and stage-specific benches that allow the Court to build internal specializations and efficiencies in combating pendency and delay;

(v) Reducing reliance on injunctions and stays. Courts may consider prioritizing stayed cases, and impose stricter timelines within which cases with temporary injunctions may be decided, especially when they involve government infrastructure projects; and

(vi) Improving the Courts Case Management and Court Automation Systems.

The survey identified specific issues with India’s poor Court Management and Court Automation systems, which may be used as a template by Courts and the Government. To free up judicial time, initiatives like the Crown Court Management Services of the UK that are dedicated to the management and handling of administrative duties, may be considered.