Economic Survey: Government Must Address ‘Tarikh-Par-Tarikh’ Frustration For Timely Justice

Court delays in India: The story in numbers.

A gavel placed on a block for this arranged photograph (Source: Freepik)
A gavel placed on a block for this arranged photograph (Source: Freepik)

Chief Economic Adviser Arvind Subramanian borrowed from Bollywood to stress that the next frontier on ease of doing business for the government is to reduce the backlog of cases pending in India’s courts.

“The now iconic scream of Tarikh-par-Tarikh, Tarikh-par-Tarikh (‘dates after dates, dates after dates’ symbolising endless court hearings) by Sunny Deol was Bollywood’s counterpart to Shakespeare: two different expressional forms—one loud and melodramatic, the other brooding and self-reflective—but both nevertheless united in forcefully articulating the frustrations of delayed and-hence-denied justice.”

That’s what the Economic Survey 2018 said, admitting to the malaise that plagues India’s courts. Here are the key highlights from chapter on ‘Ease of Doing Business’ Next Frontier: Timely Justice’:

  • India jumped 30 places to break into the top 100 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.
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.
Economic Survey 2018
  • This striking progress notwithstanding, 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.
The government has taken a number of actions to expedite and improve the contract enforcement regime. For example, the government scrapped over 1,000 redundant legislations; rationalized tribunals; amended The Arbitration and Conciliation Act, 2015; passed The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015; reduced intra-government litigation; and expanded the Lok Adalat Programme to reduce the burden on the judiciary.   
Economic Survey 2018

Pendency At Tribunals

  • Analysis of six prominent appellate tribunals that deal exclusively with high-stakes commercial matters reveal two patterns. First, there is a high level of pendency across the six tribunals, estimated at about 1.8 lakh cases . Second, pendency has risen sharply over time... nearly every tribunal started with manageable caseloads, disposing instituted cases every year, but that soon spiraled out of control.
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.
Economic Survey 2018

Pendency At High Courts

  • The creation of tribunals at different points in time did not alter pendency at the high courts of the country nor their ability to deal with other economic cases.
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. The average pendency of tax cases is particularly acute at nearly 6 years per case   
Economic Survey 2018
  • Some high courts of the country retain 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 percent of their workload
The high courts take longer to clear civil suits as compared to their district court counterparts. The average pendency of civil suits at the Delhi High Court is 5.84 years, while that at the lower courts of Delhi is 3.66 years.
Economic Survey 2018

Pendency At Supreme Court

  • In the case of the Supreme Court, 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.
The rate at which the Supreme Court admits Special Leave Petitions under Article 136 of the Constitution increased from around 25 percent in 2008 to nearly 40 percent in 2016. In contrast, the Supreme Court of the United States of America and Canada admit 3 percent and 9 percent, 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 percent of which are SLP cases.
Economic Survey 2018

Pendency And Delay: Costs

The Economic Survey estimates the number and value of government projects in six infrastructure ministries that are currently stayed by court injunctions, as well as the average duration of their stays.

  The project costs (stocks) of stayed projects—at the time they were originally stayed—amounted close to (Rs) 52,000 crores.   
Economic Survey 2018
  • The Ministries of Power, Roads and Railways have been the hardest hit. Since project costs were predominantly debt-financed, it is likely that project costs have increased by close to 60 percent given the average duration of stay.
  • Data collected from the State Bank of India revealed a similar picture for private sector infrastructure projects that sought extensions to arbitration proceedings or court cases.

The Tax-Litigation Picture

  • Pendency, arrears and delays are not just a feature of courts and tribunals, but also the tax departments and their multi-layered process.
As of March 2017, there were approximately 1,37,176 direct tax cases under consideration at the level of ITAT (Income Tax Appellate Tribunal), high courts and Supreme Court. Just 0.2 percent of these cases constituted nearly 56 percent of the total demand value; and 66 percent of pending cases, each less than Rs 10 lakh in claim amount, added up to a mere 1.8 percent of the total locked-up value of pending cases.
Economic Survey 2018
  • The picture is not dissimilar in the case of indirect taxes. As of the quarter ended March 2017, a total of 1.45 lakh appeals were pending with the Commissioner (Appeals), CESTAT (Customs, Excise and Service Tax Appellate Tribunal), high courts and the Supreme Court together, that were valued by the department at (Rs) 2.62 lakh crores.
Together, the claims for indirect and direct tax stuck in litigation (appellate tribunal and upwards) by the quarter ended March 2017 amounted to nearly (Rs) 7.58 lakh crore, over 4.7 percent of the GDP.  
  • The department’s appeals constitute nearly 85 percent of the total number of appeals filed in the case of direct taxes, though that number seems to have improved in the case of indirect taxes.
Of the total number of direct tax cases pending by the quarter ended March 2017, the department initiated 88 percent of the litigation at ITATs and the Supreme Court and 83 percent of the litigation pending at high courts.   
Economic Survey 2018

The survey points out that the government’s efforts to make business and commerce easy have been widely acknowledged. The next frontier on the ease of doing business is addressing pendency, delays and backlogs in the appellate and judicial arenas, it said.