The Economic Survey 2017-18 focuses on the need to address the issues
of pendency, delays and backlogs in the appellate and judicial arenas towards
Ease of Doing Business. These issues, it says hamper dispute resolution and
contract enforcement, discourage investment, stall projects, hamper tax
collection, stress tax payers and escalate legal costs. The Survey suggests
coordinated action between government and the judiciary to boost economic
activity in the country. The Union Minister for Finance and Corporate Affairs,
Arun Jaitley tabled the Economic Survey 2017-18 in Parliament on January 29th.
India leaped 53 and 33 spots in the Taxation and Insolvency indices on the back
of administrative reforms in taxation and the passage of the insolvency and
Bankruptcy code 2016 . The survey notes that India jumped 30 places to break
into the top one hundred for the first time in the World Bank’s Ease of doing
business report 2018.
The rankings reflect the
government’s reform measures on a wide range of indicators. It also made strides on protecting minority
investors and obtaining credit, and retained a high rank on getting
electricity, after a 70 spot rise in EODB, 2017 due to the government’s
electricity reforms. The Survey however says that India continues to lag on the
indicator on enforcing contracts, marginally improving its position from 172 to
164 in the latest report.
The Survey emphasizes the importance of an effective, efficient and expeditious
contract enforcement regime for economic growth and development. It says that 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.
The Government has taken a number of actions to improve the contract
enforcement regime. Some of the steps briefly are as follows:- Scrapping of over 1,000 redundant legislations, Amending the Arbitration and Conciliation Act,
2015, Passing the Commercial Courts
Commercial Divisions and Commercial Appellate Division of High Courts Act, 2015,
Expanding the Lok Adalat Program. The
Judiciary has at the same time expanded the National Judicial Data Grid (NJDG)
and is near to ensuring that every High Court is digitized.
The Survey attempts to make a preliminary enquiry at highlighting the
developments based on new data compiled for the survey, which it says are
simple and stark:- High number of delays and pendency of economic cases in the
Supreme Court, Economic Tribunals and Tax department are taking severe toll on
the economy, in terms of stalled projects, mounting legal costs, contested tax
revenues and reduced investment.
Delays and pendency are caused due to the increase in overall workload of the
judiciary, in turn due to expanding jurisdictions and 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 • Actions by courts and government acting together can
considerably improve the situation.
The Economic Survey also suggests that the Government could consider including
efforts and progress made in alleviating pendency in the lower judiciary as a
performance-based incentive for States. Expenditure could be prioritized for
filing, service and other delivery related issues that tend to cause maximum
delays. However, the review cautions that building additional judicial capacity
may not be effective unless existing capacity is fully utilized.
The Survey goes on to note that the Government and the Courts need to both work
together for large-scale reforms and incremental improvements to combat a
problem that is taking a large toll on the economy. It suggests some steps,
which in brief are as follows:-
Expanding judicial capacity in lower
courts and reducing existing burden on High Courts and The Supreme Court, Considering its low success rate the tax
department could exercise greater self restraint by limiting appeals. Substantially increasing state expenditure on
the judiciary, particularly on modernization and digitization, Building on the
success of the Supreme Court, creating more subject-matter and stage-specific
benches that allow the Court to build internal specialization and efficiencies
in combating pendency and delay.
Courts could consider prioritizing
stayed cases, and impose stricter timelines within which cases with temporary
injunctions may be decided, especially when involving government infrastructure
Improving Courts Case Management and
Court Automation Systems.
The Survey concludes by noting that recent experience with GST has shown how
vertical cooperation between the Centre and States – Cooperative Federalism –
has brought transformational economic policy changes. It says that perhaps
there is scope for a horizontal variant – which it coins as Cooperative Separation
of Powers that could be applied to the relationship between the judiciary on
one hand, and the executive/legislature on the other.