Modi 3.0: Law minister Arjun Meghwal hits the ground running with national litigation policy

National Litigation Policy sees the light of the day after 14 years

Arjun Meghwal, who on June 11 assumed charge as the Minister of State (Independent Charge) at the law ministry, signed the national litigation policy as his first order and forwarded it to the Union Cabinet for further deliberation. The policy has been in the making for over 14 years now.

The policy will essentially lay down conditions for filing litigations by the central government, under which a ministry or a department will not be allowed to pursue cases if they do not fall within certain conditions. This will not burden the judiciary and give them time to clear cases quickly.

For instance, the finance ministry has a litigation policy which does not allow it to appeal in income tax cases before the Supreme Court if the amount disputed is less than Rs 2 crore. The national litigation policy will lay down such conditions for all other litigation-heavy ministries such as the Ministry of Railways and the Ministry of Road Transport and Highways.

The central government is the largest litigant in India, with its ministries filing thousands of cases in courts every year.

This resulted in an increase in the pendency of cases leading to the judiciary finding it difficult to grapple with the sheer volume of cases.

In 2010, the central government came up with the idea of a national litigation policy to lay down guidelines for preventing, controlling and reducing litigations initiated by the government.

While nearly 2.5 crore cases were pending in courts in 2010, there are almost 4.5 crore pending cases today.

Lawyers welcome move

Lawyers hailed the decision of law minister Arjun Ram Meghwal to clear the National Litigation Policy document saying that the policy will improve the ease of doing business.

“The law minister clearing the National Litigation Policy paper is a very positive step. It shows that the government is prioritising administration of and access to justice in India and is keen to deliver on its promise of ease of doing business in India,” said Indranil D Deshmukh, Partner (Head - Disputes), Cyril Amarchand Mangaldas.

Ruby Singh Ahuja, senior partner at Karanjawala and Co, said, “It is good to lay down conditions to be complied with before the government steps in as a litigator in court, and it will save money for public exchequer and reduce the burden of courts.”

“The litigation policy is definitely the way forward and does cover most of the revenue-heavy areas of litigation. However, a substantial reduction in the number of cases filed by and/or against the Union of India could be further achieved by arriving at some form of a mid-path in the services and employment sectors, covering issues of appointment, promotion, seniority, retirement, etc,” said Rohini Musa, Advocate on Record, Supreme Court.

Finance ministry’s litigation policy

Among the Union ministries, the finance ministry is fighting the highest number of cases in court. As of July 2023, the ministry was fighting over 1.5 lakh cases. The majority of these litigations are directly attributable to taxes. Time and again, budgetary announcements are made to reduce tax disputes pending in court.

In 2019, the Ministry of Finance increased the limit for filing appeals by the income tax department. For appeals before the Income Tax Appellate Tribunal (ITAT), the limit was enhanced to Rs 50 lakh, for appeals before high courts, it was enhanced to Rs 1 crore, and for special leave petitions (SLPs)/appeals before the Supreme Court, the limit was enhanced to Rs 2 crore. Thus, if the amount in dispute is less than that mentioned above, the department cannot file an appeal.

Similarly, for central excise and service tax, the government can file an appeal in the Customs Excise Service Tax Appellate Tribunal (CESTAT) if the amount in dispute is a minimum of Rs 50 lakh, in HCs if it is Rs 1 crore and in the SC if its Rs. 2 crore. For customs, the limit is Rs 5 lakh before CESTAT, Rs 10 lakh before HC and Rs 25 lakh before the SC.

Other suggestions for Modi 3.0

Push towards institutional arbitration

“India ranks 163rd out of 190 countries in the World Bank Enforcement of Contracts indicator. There is a set perception amongst not only our foreign clients but even domestic clients that enforcing a contract in India is never ending,” said Rohit Jain, managing partner at Sighania and Co.

According to Jain, promoting institutional arbitration will prove effective in reducing the time taken to enforce contracts. Institutional arbitrations are filed and adjudicated by organisations such as the Singapore International Arbitration Centre (SIAC) or the Delhi International Arbitration Centre (DIAC).

He said, “Though we as a country seek to promote alternatives, such as mediation and arbitration, even arbitrations have come under huge scrutiny of late, so much so that some PSUs have started omitting arbitration clauses from their agreements. With Meghwal continuing as law minister, it is expected that the push towards promoting institutional arbitration and bringing changes to expedite dispute resolution will continue. “

Noting that litigation policy will encourage arbitration, Alay Rizvi, partner at Accord Juris, said, “The government and various courts have been encouraging arbitration for quicker resolution. Adopting the policy also opens up doors for making India an International Arbitration Hub.”

Samir Jain, managing partner at PSL Advocates and Solicitors, noted that the government must continue with its work of repealing old laws and substituting them with laws that are in line with international best practices. He said, “The Ministry of Law has the task of continuing the reforms including modernisation of district judiciary, which has been highlighted by the Hon’ble CJI multiple times. The earlier task of repealing old and archaic laws needs to be repeated. Some laws need amendment to bring them in line with the international best practices.”