Economic Survey: Revamp judicial system to ensure ease of doing business

The Economic Survey is critical about the pendency of cases in various tribunals and suggests the judiciary needs to deliver timely justice if the focus is ease of doing business.

“Delays and pendency of economic cases are high and mounting in the Supreme Court, high courts, economic tribunals and the tax department, which is taking a severe toll on the economy in terms of stalled projects, mounting legal costs, contested tax revenues, and reduced investment,” the Survey states.  It attributes the delay in issue of judgments to the workload and the scope of the tribunals being expanded.

The backlog in high courts by the end of 2017, according to the National Judicial Data Grid, was close to 3.5 million cases. The average time taken to dispose of cases is 4.3 years in the five major high courts.  Disposal of tax cases takes six years on average.

The ministries of power, roads and railways have been the hardest hit. Since project costs are predominantly debt-financed, it is likely that project costs have increased by close to 60 per cent, given the average duration of stays. About Rs 239.13 billion worth of projects have been stayed in the power sector and the average length of stay is three years. In the infrastructure sector, cases have been in court for 5.9 years on average, for instance, in the shipping sector.

As of March 2017, 137,176 direct tax cases were pending at the level of the Income Tax Appellate Tribunal, high courts, and Supreme Court. Of these, 0.2 per cent of cases constituted nearly 56 per cent of the total demand value, and 66 per cent of pending cases, each less than Rs 1 million in claim amount, added up to a mere 1.8 per cent of the total locked-up value in pending cases.

The Survey emphasises the importance of the Insolvency and Bankruptcy Code, which went through a great deal of churning in 2017, in reducing legal uncertainty.