Recently, a leading Indian daily highlighted the anguish of a poor old lady barging into the court room in Maharashtra with sheafs of papers and insisting on the implementation of a 15-year-old order by the judge. As the story goes, she was a victim of domestic cruelty, mental harassment, humiliation and penury, who finally got a divorce from her husband after prolonged litigation. The husband is reportedly not paying alimony. The judge sent her to the district legal cell with an instruction to get the issue resolved quickly.

There may be millions of such untold stories of misery. As per the World Bank, in 2018 India took an average of 1,445 days for the enforcement of contracts, scored low of 10.3 points (out of 18) for the judicial process and ranked 163rd out of 189 overall. Prime Minister Narendra Modi’s push has helped India improve its overall position in the ease of doing business significantly. However, the ranking in the enforcement of contracts has improved only marginally from earlier 186. Former Chief Justice Dipak Mishra in June 2018 voiced concern over more than three crore pending cases in India.

The Modi government has taken a series of steps to improve the country’s position in the regard, including setting up special fast-track courts and repealing a number of archaic laws. The 2018 Economic Survey outlined the government’s anxiety: “Despite several steps taken to expedite and improve contract enforcement regime, economic activity is being affected by the long shadow of delays and the legal landscape.”

Delay seekers

The entire ecosystem of enforcement of contract and attendant litigations is mired with rent-seekers. At every turn, there is an attempt to profit from the delays. Human ingenuity and legal acumen are applied to game the system. The slow speed of disposal of cases filed even under a thoughtful, modern legislation — the Insolvency and Bankruptcy Code, which expressly outlines timelines for disposal — validates this impression.

The cost of litigation in India is around 30 per cent of the total value of a contract, without accounting for the time value of money. If cost exceeds the profits under the contract, the enforcement process becomes a value destroyer. The losers are individuals, MSMEs and SMEs who cannot match the resources of the rich and powerful.

While the inadequacy of infrastructure — including the poor use of information technology, shortage and competence of judges, court holidays, archaic laws etc — have all been spoken about, there has been no debate on how to sterilise the ecosystem so that enforcement processes transform themselves into a faster settlement and value protection exercise. There is no discussion on how to dissuade litigants from gaming the system; encourage lawyers to conclude their submissions in one or two sittings, produce all the documents in one go, use their skills in expediting the process; or intimate judges to deliver verdicts quickly.

Working for change

Transformation of the ecosystem cannot be orchestrated by the government; however, it should revise civil and criminal procedure codes, insist on the use of technology, prevent departments from unnecessary litigation and work toward improving adequacy and the competencies of the judges.

The civil society through its institutions, bar associations, court employees associations, NGOs etc, should come forward and work earnestly for the good of the common man, who is losing faith in India’s judicial system. The media must expose those who sabotage the efficacy of the judicial process.

The jurisprudence of the breach of contract compensates for the loss arising out of the breach, and the quantification thereof becomes a matter of judgment. Hence, the principle of ‘efficient breach of contract’, originally developed in the UK and adopted in India through the special Relief Act 1963, should be replaced by the mandatory fulfilment of the obligation under the contract, rather than simply compensating for loss.

The regulation of professionals should be reoriented with incentives for quicker enforcement of the contracts, and disincentives and penalties for delays. Alternate resolution mechanisms — arbitration, mediation and conciliation — should be made robust, efficacious and promoted whenever suitable.

Adam Smith, the father of modern economics, talked about “the certainty of being able to exchange...”, which can be ensured only if enforcement of contracts is efficient and efficacious. India has run some successful campaigns like ‘Save the Tiger’ and ‘Swachch Bharat’. Maybe the next one should be “Speed up Justice”.

The writer is former chairman, SEBI and LIC