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ANUJ JINDAL
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ECONOMIC SURVEY VOLUME 1 CHAPTER 9
CHAPTER -9
THEME
The chapter highlights the importance of effective, efficient and expeditious contract enforcement
regime for economic growth and development. It also suggests certain measures through which both
Government and the Courts can work together to boost economic activity.
INTRODUCTION
• India’s performance in World Bank’s Ease of Doing Business Report (EODB), 2018 has improved
over last few years jumping about 30 places ahead. However, among various individual
indicators, India continues to lag on the indicator on enforcing contracts causing and further
accentuating pendency, delays and backlogs in the appellate & judicial arenas.
• A clear and certain legislative and executive regime backed by an efficient judiciary that fairly
and punctually protects property rights, preserves sanctity of contracts, and enforces the rights
and liabilities of parties is a prerequisite for business and commerce.
Actions taken by the government to expedite and improve the contract enforcement regime:
Delay and pendency take severe toll on the economy in terms of stalled projects, mounting legal costs,
contested tax revenues, reduced investment.
Actions taken by the government and Courts acting together can considerably improve the situation.
Economic Tribunals:
- There is high level of pendency across the Tribunals (estimated at about 1.8 lakh cases). The
average age of pending cases is 3.8 years.
- Pendency has risen sharply over time (Compared to 2012, there is now a 25% increase in the
size of unresolved cases)
High Courts
- Despite the creation of tribunals, the overall pendency of the High Courts and the case-wise
pendency of economic cases continue to increase. Total backlog of close to 3.5 million cases by
the end of 2017.
- Though 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)
- Reductions in pendency, if any, were either due to changes in the counting methodology or due
to changes in pecuniary jurisdictions.
• Numerous projects stayed by the court injunction lead to high amount of losses (close to 52,000
crores in six infrastructure ministries)
• Since the project costs were predominantly debt financed, the likely increase in the cost of
project is estimated to be around 60% given the average duration of stay.
• All this has led to a spiraling of legal expenses of corporate India.
• 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.
• Research shows spending on modernization, computerization and technology leads to shorter
average trial lengths.
• Expenditure may be prioritized for filing, service and other delivery related issues that tend to
cause the maximum delays.
• Need to utilize existing capacity ( the higher judiciary is currently operating at 63.6% of its
existing capacity)
POLICY IMPLICATIONS
(a) Expanding judicial capacity in the lower courts and reducing the existing burden on the High Courts
and Supreme Court:
- Build capacity in the lower judiciary, allow the HCs to focus on streamlining and clarifying
questions of law, training of judges in commercial and economic cases.
- Downsizing or removing original and commercial jurisdiction of High Courts, and enabling the
lower judiciary to deal with such cases.
- Courts may revisit the size and scale of their discretionary jurisdictions and avoid resorting to
them unless necessary.
- Existing judicial capacity ought to be fully utilized.
(b) The tax department exercising greater self-restraint by limiting appeals, given its low success rate:
- Ex ante rules limiting appeals,
- Panel to decide on further appeals of tax verdicts against the Department.
- Number of tiers of scrutiny may be limited to three forums for taxation cases.
(c) Substantially increasing state expenditure on the judiciary, particularly their modernization:
- Incentivizing expenditure on court modernization and digitization.
- Legislations should be accompanied by judicial capacity and public expenditure memorandums,
to lay out necessary provisions required to address increasing judicial requirements and ensure
(f) Improving the Courts Case Management and Court Automation Systems:
- Initiatives like the Crown Court Management Services of the UK that are dedicated to the
management and handling of administrative duties, may be considered.
CONCLUSION
Pendency, delays and injunctions are overburdening courts and severely impacting the progress of
cases, which requires the Government and the Courts to work together for large scale reforms and
incremental improvements.
Recent experience with the GST has shown that vertical cooperation between the center and states--
Cooperative Federalism--has brought transformational economic policy changes.
Perhaps there is a horizontal variant of that-- one might call it the Cooperative Separation of Powers--
that could be applied to the relationship between the judiciary on the one hand, and the
executive/legislature on the other.
It is desirable for these branches to come together to ensure speedier justice to help overall economic
activity.