India’s Contract Enforcement Problem and its Implications
While India was seeking to climb the rankings for the World Bank’s Doing Business index, a critical area of concern was contract enforcement, otherwise known as adjudication. In this area, India lagged significantly behind other nations. However, the government has been observed to have a contradicting stance on this issue, blaming courts for impeding the ‘ease of doing business’ while simultaneously being the largest litigant. This is a clear pattern that needs to be addressed for India to move forward. We need to identify solutions to unnecessary litigation if we are serious about reaching ‘Viksit Bharat’— a developed India.
Government Litigation: An Area for Improvement
Conflicting suits have frequently been raised by various government agencies against each other, further clogging the judicial system. Ideally, these disagreements should be resolved within the government bureaucracy rather than resorting to the courts. Issues surrounding an urban dog menace, pollution and same-sex marriage are just of a few of the areas that beg administration and legislative intervention. Such instances of government litigation not only drain resources but also put unnecessary strain on the judiciary.
One key observation made over half a century ago was by Justice V.K. Krishna Iyer in 1973 who decried the callous and cantankerous nature of state litigation, which placed serious strain on public funds. This remains valid even today, with some government officials using public resources to fund drawn-out legal battles, while demonstrating an unwillingness to resolve disputes at a more personal level.
Gross Inefficiency in Litigation
The Economic Survey 2020-21 outlined a grim picture of the current state of government litigation. The government lost 73% of all taxation-related cases at the apex court, and even more startling is the 87% legal loss in high courts nationwide. This clearly indicates a broken system that demands thorough attention and reform.
Ineffective Case Monitoring
In an attempt to reduce litigation burden, the Indian railways and Department of Revenue have taken measures such as the creation of the Legal Information Management & Briefing System (LIMBS) in 2016. Unfortunately, case reporting by relevant ministries continues to be a weak point, with case numbers continually rising, stressing the urgent need for a more effective system.
Lack of National Litigation Policy
Despite having been drafted and announced in 2011 and revisited in 2015, a National Litigation Policy never saw implementation due to opposition from various quarters. This has only served to exacerbate the situation. For example, the GST law disputes introduction took six years to get a tribunal for adjudication, and as of September 2023, the tribunal has still not begun to function. This delay led to a surge of lawsuits in high courts.
Urgent Need for a National Policy
The government must be more selective in its litigation pursuits. This can be achieved by requiring the relevant government officers to provide detailed reasoning behind each litigation initiative, and performing a cost-benefit analysis of each case. Decisions regarding litigation should be made by sufficiently senior officials and regularly reviewed. The choice to proceed or drop a case should depend on whether litigation costs exceed the benefits and whether alternative dispute-resolution mechanisms could offer net benefits.
Such policy changes could significantly improve business operations in India. It’s time to stop wasting resources on unnecessary litigation and focus on creating a more effective and efficient environment for justice.
