Beyond Vivad se vishwas. Only strong reforms can clear massive backlog of court cases

The Indian judiciary has long been grappling with an overwhelming number of pending cases. With over 44.5 million cases currently awaiting resolution, the pursuit of justice is frequently hindered, leaving many without a timely settlement. In this vast sea of litigation, the Indian government emerges as the most frequent visitor to the courts and other judicial fora, responsible for nearly half the backlog.

Against this backdrop, the government has recognised the need to ease the pressure on the judiciary. Among the notable measures taken towards this end is the ‘Vivad se vishwas’ scheme, which has evolved over time with multiple iterations to address various types of disputes. The scheme’s name, which in Hindi means “from dispute to trust”, reflects the intention: to foster an environment where disputes can be settled, not fought. 

The first Vivad se vishwas scheme in 2020 was aimed squarely at tax disputes. It met with striking success as more than 1.48 lakh cases were settled, enabling the recovery of 54 per cent of the nearly ₹1 lakh crore that was under litigation. The model proved that, when given the chance, litigants are eager to settle swiftly rather than navigate the cumbersome litigation process. 

The government has since rolled out Vivad se vishwas schemes for other contentious areas, too. For example, the second iteration of the scheme, designed specifically for micro, small and medium enterprises (MSMEs), in response to the economic pressures brought on by the Covid-19 pandemic, led to the settlement of over 43,000 claims and the grant of more than ₹650 crore to MSMEs. 

Another key iteration, introduced in mid-2023, was aimed at contractors who were in dispute with the government over public procurement deals. By allowing the contractors to settle for a portion of the claimed amount, the scheme has already resolved claims worth over ₹1,650 crore. Though dealing with past disputes, these measures send a powerful message to future investors and contractors that India is serious about resolving conflicts quickly and fairly. 

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Clear mechanism

The latest Vivad se vishwas scheme, announced in July 2024, focuses again on direct tax disputes. Known as Vivad se vishwas 2.0, it aims to resolve income tax disputes pending as of July 22, 2024. Irrespective of whether these disputes are pending in the Supreme Court, high courts, the Income Tax Appellate Tribunal (ITAT), or the Commissioner of Income Tax (Appeals), the scheme offers taxpayers a chance to settle cases by paying a percentage of the disputed tax, penalty, or interest. 

What is noteworthy is the range of cases covered. It addresses not only disputes pending in courts, but also cases where objections have been filed before the Dispute Resolution Panel (DRP) and where the DRP is yet to issue a directive to the assessing officer. This ensures that the net is cast far and wide, enabling as many taxpayers as possible to benefit from the scheme. Taxpayers who settle their ‘disputed tax’ cases by the end of December 2024 will pay 100 per cent of the disputed tax, while the interest and penalty on the disputed amount shall be waived. However, those who settle after that date will pay a slight premium equivalent to 110 per cent of the disputed tax. The scheme also offers significant relief to taxpayers involved in disputes over penalties or interest, with the settlement capped at 25-35 per cent of the disputed amounts.Going by the past iterations, this scheme is expected to resolve thousands of pending disputes, providing much-needed certainty to businesses and individuals alike. 

The mechanism is straightforward. Taxpayers file a declaration with the designated authority, who then calculates the amount to be paid. Once the taxpayer pays up, the dispute is considered closed, and any pending litigation is withdrawn. This seamless process makes the scheme attractive to both the taxpayer and the government, as it saves on the time and resources spent on protracted court battles. 

Long-term need

While the Vivad se vishwas schemes have been successful in offering short-term relief, there is a need to acknowledge their limitations. They are, by design, one-time measures aimed at clearing backlogs. For long-term sustainability, more robust reforms are needed. 

The Vivad se vishwas schemes, particularly the latest iteration, have certainly had a positive impact on the business ecosystem. By reducing litigation, they free up capital, allowing businesses to focus on growth rather than prolonged legal battles. This, in turn, boosts investor confidence, making India a more attractive destination for both domestic and international investment. 

While these initiatives offer a commendable stopgap solution, the government must turn its attention to long-term reforms that address the root causes of disputes and litigation. Only then can India’s judiciary be relieved of its crushing burden, paving the way for the nation to truly emerge as a global hub for business and investment. 

(The writers are advocates at Trinity Chambers, Delhi)