Press Information Bureau
Government of India
Ministry of Finance

Coordinated Action Between Government and Judiciary to Boost Economic Activity- Ease of Doing Business

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, Shri Arun Jaitley tabled the Economic Survey 2017-18 in Parliament today.

The Economic Survey notes that India jumped 30 places to break into the top 100 for the first time in the World Bank’s Ease of Doing Business Report (EODB), 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 (IBC), 2016. 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 Programme .
• 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 projects.
• 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.

Contract enforcement must be strengthened through coordinated government-judiciary reforms to reduce pendency and boost commerce. The central issue is strengthening an effective and expeditious contract enforcement regime to support economic activity. Delays and pendency across courts and tribunals impair dispute resolution, investment and tax administration. Recommended measures include expanding lower-court capacity, digitization, improved case-management, creation of subject-matter and stage-specific benches, stricter timelines for stayed cases, and incentives for States to reduce pendency, supported by coordinated action between the executive and judiciary under a concept of Cooperative Separation of Powers.