Opinion | Unclogging the judicial system

Aarti Sathe

Justice delayed is justice denied, goes the adage. In the past month, two steps taken by different arms of the government aim at reducing the delay in an overburdened judicial system by cutting the scope for litigation. That’s a step in the right direction and will immensely help in improving the ease of doing business in India.

On July 11, the Centre issued a circular revising the monetary limits for filing appeals by the tax department before the Income Tax Appellate Tribunal (ITAT), Customs, Excise & Service Tax Appellate Tribunal (CESTAT), high courts and Supreme Court of India.

While earlier the monetary limit was Rs 10 lakh, it has been raised to Rs 20 lakh — which means that the government can file appeals at the tribunal level only if the amount is Rs 20 lakh or above.

Similarly, a 14-member committee set up by the government for decriminalisation of offences under the Companies Act may soon come out with a one-time settlement scheme for minor offences, The Economic Times reported on August 4. Minor offences would include failure or delay in filing resolutions and financial statements, contraventions related to director identification numbers and managerial remuneration and delay in filing of notices for alteration of share capital, the paper reported.

To understand why these steps are important, one should realise that the Indian government is the largest litigant in our judicial system. There’s a huge backlog of cases as a result of this highly litigious attitude of the government, especially that of the tax department. A study by the Union law ministry last year showed that the Centre and the states accounted for 46% of all pending litigations in India.

The current numbers of pending litigations is also huge. According to the National Judicial Data Grid, there are 4.1 million cases in the high courts with three-fourths of them pending for at least two years. The Supreme Court was hearing some 53,000 cases as on May 4, the latest date for which data is available. The National Company Law Tribunal (NCLT), on the other hand, was hearing 9,073 cases as of January-end.

The proposed steps by the tax and company affairs departments will decrease the number of frivolous litigations that take up courts’ time thereby increasing the backlog and further delaying timely disposal of cases. They will check the government from wasting taxpayers' money on frivolous litigations and will facilitate the ease of doing business. They free up space for the various courts to decide issues which have a real bearing on tax jurisprudence and corporate governance. The government will also save on litigation costs.

In case of the tax circular, it will apply retrospectively and all pending appeals will get covered by it. A finance ministry statement said that it expects direct tax litigations to reduce by 41 percent and for indirect and customs by 18 percent. It will also free up the tax amounts which are locked up in litigations resulting in refunds to the assessees and thereby not causing hardship to them.

The ET report cited earlier said that about 22,000 cases in various benches of the NCLT and special courts in the country – around 60 percent of pending legislation - could be withdrawn under this provision

This will usher a sense of cheer among corporates seeking to do business in India as it makes India a more business-friendly jurisdiction, not prone to litigation that can be expensive and drag on for years, even decades. The circular by the finance department and other similar ones are proactive steps by the government which will help in judicial reform and should be pursued vigorously.