Fairness and legislation for virtual courts

by Mugdha Mohapatra and Ajay Shah.

The weaknesses of the judicial branch are a major problem impeding the Indian state. In the field of legal system reforms, there are substantive issues (such as judicial independence, and intellectual capabilities of judges), and there are process engineering issues (of making courts work as more efficient services production organisations). There has been considerable interest in using modern computer technology, in order to reduce defect rates and increase productivity of these process (Datta et al, 2019).

Computer technology can be applied in many dimensions of the working of courts. As an example, an important path to progress lies in improving scheduling within the day. Here, a layer of rules and computer technology could be layered on top of the existing physical hearings. Within the overall field of computer engineering as applied to the legal system, one important idea is the dream of 'virtual courts'.

In this article, we present a careful definition of the term 'virtual court' and associated words. We examine the foundations of fairness that should be present in the various elements of virtual courts. We describe how the present Indian legislative landscape achieves a certain level of fairness in physical courts. These provisions interfere with the adoption of virtual courts today, and the way forward for policy lies in finding the ways to solve these issues of fairness in a virtual court setting.

The question of virtual courts

Virtual courts are an idea that is much talked about. The Department of Justice has suggested that moving to virtual courts can have significant gains for both the litigant and the court administration, as it reduces the burden on litigants to appear in courts and makes courts processes easier. On September 14, 2023, the Cabinet approved Rs.7000 crores for Phase III of the e-Courts project. A key component of this mission is the establishment of virtual courts, for which, around Rs.500 crores have been allocated. The e-Committee of the Supreme Court, which oversees the implementation of the e-Courts project, visualises `virtual courts' as having cases being filed from anywhere, and where each stage of a case can be conducted online.

Some countries such as the United States, Singapore and Canada have successfully used technology for filing, submission of evidence, and video conferencing in courts. Based on these examples, it is suggested that virtual courts should be relied upon in India, in the adjudication of cheque bouncing cases and motor accident claims, as these constitute the bulk of pending cases in the subordinate courts of India (Parliamentary Standing Committee Report on the Functioning of Virtual Courts, 2020).

Several High Courts have attempted to set up virtual courts. But litigants and lawyers continue to appear in person for adjudication, and these courts are not truly virtual. Three hurdles hold back virtual courts in India today:

1. Laws and rules that are incompatible with the vision of completely virtual courts,
2. Limitations in technology that can meet the standards of authenticity required under the law, and
3. The lack of acceptance of virtual courts by litigants and court personnel today.

In India, virtual courts can not arise in a legal vacuum. An extensive set of laws define aspects of the operation of courts. It is important to identify the provisions in the present Indian legal framework that frustrate the ready rollout of virtual courts.

These restrictions are not anachronisms. These laws and rules have been put in place to achieve important elements of fairness: to ensure that parties are sufficiently aware of proceedings through summons, that electronic evidence is authentic and immutable, witnesses are not coached or coerced and the rights of an accused person are not denied. Violations of these safeguards can disadvantage litigants, and create an uneven playing field for parties. The present arrangements have arisen from over a century of thinking, by some of the best minds that aspired to establish the rule of law within a liberal democracy. The path to virtual courts lies in deeply understanding how fairness arises (or flounders) in a court procedure, and gradually evolving the laws and rules for virtual courts in a way that achieves fairness.

1. Terminology

Several terms are used to describe the use of technology in courts in sometimes confusing ways. Drawing on the E-Courts Phase III Vision Document and documents from the Department of Justice, we assemble a set of terms and definitions for this field.

Online Hearings

The practice of conducting court business through video conferencing, where both/one of the parties appear online. Online hearings were relied upon heavily during the COVID-19 pandemic, without any further digitisation of court processes.

Digital Court

This is a court that uses a digital platform to carry out many processes that are currently being done in a physical form. These courts have dispensed with mandatory physical hearings, and requiring parties to provide physical copies of affidavits and applications. These courts are integrated with filing systems and payment systems, that are online (E-Courts Vision Document-Phase III, p.10). In practice, this has meant a courtroom where court records (such as signed documents and physical evidence) are collected, and stored in a physical format. These are then digitised and shared with the judge and all parties. These courts have the ability to conduct hearings and record evidence online, but often choose to conduct physical proceedings. They also continue to require physical summons to be provided to parties, and physical evidence to be submitted to the court. This has been implemented in the Digital Negotiable Instruments Act Courts of Delhi.

Paperless Courts

All activities in a paperless court are conducted through a digital platform. These include preparation of the list of cases to be heard for the day, dictation and storage of orders, and providing information on case status, through a dashboard. These courts may conduct hearings physically. Physical files and evidence are digitised to prepare an e-file for the judge. A paperless court transitions the internal functioning of courts from relying upon physical records to digital records. While a digital court focuses on making the interaction of the litigant, lawyers and judge digital, a paperless court only changes the inner working of the court.

Virtual Courts

In a virtual court, parties will not have to come to court for any proceedings or processes. Everything from the filing of a case to the delivery of summons, submission of evidence and recording of statements can be done online. These courts are different from the mere use of video conferencing technology in courts, as they seek to fundamentally reimagine the procedure of adjudication.

There are frequently cited examples for progress that has been made in technological developments in courts, such as in Digital Courts in Delhi and Kerala. These are developments that fit within the definitions of digital courts and online hearings, and are not fully virtual courts.

2. Laws of procedure and where it matters in the stages of a case

Procedural justice exists as a foundation of substantive justice. The principles that courts are required to follow are clearly laid down in the Civil Procedure Code (CPC), the Criminal Procedure Code (CrPC) and the Indian Evidence Act.

The recognised object of the CPC is to ensure that all parties appearing before the court are treated equitably, and settle their disputes within a clear framework of rules. In criminal cases, procedural justice is even more important as it ensures that an accused cannot be denied his personal liberty based on the decision of the court without being given a chance to defend himself. The basic safeguards that these laws provide are: (1) Make every attempt to inform a party of proceedings against them before taking any adverse action; (2) Ensure evidence is authentic and immutable; and (3) Ensure a party has all the information necessary to defend themselves. These safeguards are placed by procedural law at various stages in the life-cycle of a case. Table 1 presents the general stages of a case, and how sections of these procedural laws place are reflected as these safeguards, at each stage of the case.

Table 1: Safeguards at each stage of the case

No.	Stages of a case	Safeguard	Relevant Provision
1.	Filing of a Case	Parties should submit complete documents. All documents must be compliant with the specified format.	S. 26 and Order II, Order VI of the CPC, Chapter XVII and Chapter XV of the CrPC.
2.	Summons and Warrants	Every attempt should be made to inform parties regarding the proceedings against them. All modes of issuing summons should be exhausted before adverse proceedings or warrants are used.	Order V of the CPC, Chapter VI of the CrPC.
3.	Submission of Responses	Parties should be given an opportunity to respond to the claims made or charges against them.	Order VIII CPC, Chapter XVI and Chapter XVIII CrPC
4.	Submission of Evidence	Evidence should be authentic and immutable.	Chapter IV and V of the Indian Evidence Act.
5.	Recording of Statements and Cross-Examination	Identity of the person giving a statement must be proven. Statements must not be recorded under coercion and duress or coaching. Statements must be recorded under oath.	Order XVI of CPC, Chapter XXIII of CrPC.
6.	Arguments and Judgement	Every party should have an opportunity to present their argument. Parties should be aware of the outcome and opportunity of appeal	Order XX of the CPC and Chapter XXVII of the CrPC

Recently, there have been some changes to these existing procedural laws, but they have been changes in the name of the law, rather than in the substance of the law, when viewed from the perspective of implementing virtual courts.

3. Methodology

The analysis in this article takes two broad approaches: (a) An examination of the existing procedural laws (CPC and CrPC) and how they apply to virtual courts, based on both case laws and secondary literature. (b) A study of the rules of practice, policy documents and implementation guidelines for court digitisation in order to identify how technology has been deployed in courts.

We conducted a legal examination of the CPC, CrPC and Indian Evidence Act, from the perspective of the different stages of a case (listed in Table 1). Table 2 presents all the stages of a case which cannot be done online, without violating the safeguards identified in Table 1.

Table 2: Stages of a case and admissibility of online mode

No.	Stages of a case	Can be done entirely online under CPC	Can be done entirely online under CrPC
1.	Filing of a Case	Yes	Yes
2.	Summons and Warrants	No (Order V, CPC)	No (Order VI,CrPC)
3.	Submission of Responses	Yes	Yes
4.	Submission of Evidence	No (S. 64 and S. 65(B) Indian Evidence Act, 1872)	No (S. 64 and S. 65(B) Indian Evidence Act, 1872)
5.	Recording of Statements and Cross-Examination	No	No
6.	Arguments and Judgement	Yes	Yes

Three stages -- Summons, Submission of evidence, and Recording of statements and cross-examination -- cannot be done entirely online. We now describe the presence of safeguards in these laws in the following Sections.

4. Legislative foundations and Digital Delivery of Summons

The physical form of delivery of summons is the only way of delivering summons under the CPC and CrPC. Chapter VI of the Bharatiya Nagarik Suraksha Sanhita, 2023 bill recognises electronic and digital modes of summons as valid in criminal cases. Here, if the court is satisfied that an electronic summons has been delivered, it can deem that the summons is duly served.

Electronic/ digital summons are a mode of delivery in addition to physical summons. But the requirement to deliver a physical summons has not been dispensed with. In order to consider SMS/ Whatsapp/ email as sufficient forms of summons delivery for all matters as a norm, Order V of the CPC, and Chapter VI of the CrPC, requires to be amended.

The aim of the summons processes is to ensure that the defendant is aware of proceedings pending against him, and the required date of appearance. Furthermore, the defendant must also have sufficient time to respond to the summons and find a lawyer. In both civil and criminal cases, registered post and physical delivery of summons is the only form of delivery of summons accepted in the CPC and CrPC. Under Order V of the CPC and Chapter VI of the CrPC, physical delivery may also be done by affixing summons in a public place, publishing summons in a newspaper or handing the summons to an adult male member of the family of the person being summoned.

For instance, in the case of Sushil Kumar Sabharwal v. Gurpreet Singh, the court held that a defendant cannot be set ex-parte (setting a party ex-parte allows the court to proceed with the case in the absence of the defendant), unless sufficient service of summons can be proven and adequate time has been allowed. Not doing so would be tantamount to a failure of justice, for no fault of the defendant.

In a civil case, as per Order IX Rule 6 of the CPC, the court must be satisfied that summons have been duly served, in order to set a party ex-parte. In a criminal case, no proceedings can take place in the absence of the accused or his pleader, and a warrant for arrest must be issued. Courts ensure that summons have been delivered adequately, and only if they find there is non-compliance with summons, do they issue a warrant.

In addition to registered post and physical delivery, summons may be delivered through email/ WhatsApp. The Supreme Court allowed online delivery of summons, owing to the physical difficulties faced during the pandemic, in Re Cognizance For Extension Of Limitation. Each High Court can prescribe additional modes of delivery of summons depending on case types by amending its rules of practice. Service of summons through email has been permitted in Delhi, in addition to physical summons, only for civil cases. The Punjab and Haryana High Court has permitted online service in revenue matters. However, in the case of Hardev Ram Dhaka v. Union of India, the Registrar of the Supreme Court noted that service through e-mail is not valid, as it is not provided for in the rules. Thus, the service of summons through these alternative, electronic forms, have not yet been accepted as the norm for delivery of summons.

Thus, a mere amendment to allow digital summons is not fair as, not ensuring adequate delivery of summons can disadvantage the defendant in a civil case and potentially deprive an accused of his liberty without a chance of being heard.

5. Legislative foundations and Submission of Evidence Online

An important feature of an entirely virtual court is the ability to submit evidence digitally. The Indian Evidence Act (1872) governs the submission and evaluation of evidence in both civil and criminal cases. Allowing parties to submit primary evidence entirely digitally is not possible under the Act. While an electronic record can be submitted digitally, it must be accompanied by a certificate under a separate section of the Act (S. 65B).

Under the Indian Evidence Act, evidence is classified into two types: primary evidence and secondary evidence. Under S. 62 of the Indian Evidence Act, primary evidence refers to an original document submitted to the court. Under S. 63, secondary evidence refers to copies of the original document. Lastly, S. 64 requires that documents must be proved by primary evidence, unless otherwise allowed. This is because of the principle of best evidence.

The principle of best evidence requires that a party cannot provide inferior evidence as long as there is better/ superior proof of it. For instance, in a criminal complaint against the offence of cheque bouncing, the complainant is required to submit a physical copy of the cheque.

A different procedure is required to be followed where an electronic record is required to be submitted as evidence. Under S. 65B, a document which is created, stored, copied on an electronic device, and is then shared, must be accompanied by a certificate, that provides the particulars of the device that it was created on, and a certificate signed by a person who is in charge of its management (S. 65B(4)). The purpose of this section is to ensure the authenticity and immutability of electronic output.

Most recently, in the case of Arjun Panditrao Khotkar vs Kailash Kushanrao Gorantyal, the court clarified that a S. 65B certificate was required to be presented where the digital device, on which the electronic record is first created, cannot be presented before the court. For instance, in a contractual dispute, a copy of the electronically created and signed contract, which is stored in the cloud, must be accompanied by a S. 65B certificate, by the person who is managing/ in charge of the server, as the server cannot be brought to court. Submission of WhatsApp chats, or records of UPI payments where information is stored in the cloud, must also be accompanied by a S. 65B certificate. At the moment, such certificates are physically generated, signed and filed.

The draft of the Bharatiya Sakshya Bill (2023), through S. 61 and S. 63, seeks to address this issue by also recognising electronic/ digital records as primary evidence. The bill continues to maintain a distinction between primary evidence and secondary evidence, and the principle of best evidence has not been done away with it.

The strict standards of authenticity and immutability provided in the Indian Evidence Act should not be changed as this can lead to inaccurate judgements, and cause higher courts to waste time on correcting errors.

6. Legislative foundations, and Recording of Witness Statements and Cross-Examination Online

While video conferencing can be used in both civil and criminal cases, for recording of evidence and cross-examination, these include ensuring the identity of the accused, ensuring that the witness is not being tutored or coerced, and appointing an officer to be present with the witness (State of Maharashtra vs. Dr. Praful B. Desai). The same safeguards have also been implemented through video-conferencing based on the `Model Video Conferencing Rules', prepared by the Supreme Court e-committee.

The desirability of online hearings has been debated extensively (Ferguson, 2022; Legg and Song, 2021). The risks with online hearings include challenges in assessing credibility, establishing emotional connections among courtroom participants, maintaining the solemnity of the legal processes, and transparency in the conduct of proceedings. As a result of these risks, the use of video conferencing depends on the type of case, and varies from case to case. Courts may also require parties to seek permission to use video conferencing. The use of video conferencing has also raised questions on the efficacy of using online modes to conduct trials, because of the possibility of reduced witness credibility, reduced information on non-verbal cues, the reduced importance of the courtroom in the mind of a litigant (Abrams, 2022; Salyzyn, 2012).

The rigour of these requirements have led to the deployment of non-IT-based alternatives to ease the ability to record witness statements and conduct cross-examinations. For instance, in Delhi, witnesses are not required to go to a courtroom, but to a 'Court Point'. A Court Point is the courtroom, or where the court is physically convened, or where proceedings are conducted in accordance with court directions. These 'court points' are, in fact, extensions of the physical court, and require the physical presence of the litigant, where oath is administered in the presence of a coordinator. The verification of identity is carried out based on government issued identity cards, or an affidavit by a specified authority. Similar rules exist in several other states, such as Odisha and Telangana (P.R. and Mishra, 2021).

7. The way forward for virtual courts

During the pandemic, courts in India relied upon online hearings, where the court staff and registry continued to prepare physical files to sent to the judge. These were not `virtual courts' in the sense of the terminology of this article. The delivery of summons through physical forms was affected, and courts allowed digital summons. But they did not issue any adverse orders against non-compliance with summons. The submission of evidence was through physical forms. Legal scholars highlighted how online hearings during the pandemic led to the loss of certain protections of accused persons, reduced the amount of information on litigants, and the testimony that is available to a judge (Kirby, 2021).

The analysis of legal provisions in procedural laws shows that, at present, it is not possible to construct a fully virtual court owing to the present text of the Civil Procedure Code, the Criminal Procedure Code and the Indian Evidence Act. The safeguards embedded in these laws are over a 100 years old, and are motivated by fundamental concepts of fairness, rule of law and liberal democracy. These include ensuring parties are aware of the proceedings, that evidence is authentic and reliable, that witnesses are not coached or coerced, and that the right of an accused to observe proceedings against him are not compromised. As the cases cited above show, these principles have been reiterated over and over, and are binding upon all judges in India.

What, then, is the path to virtual courts? The need of the hour is not a fragile legal strategy to get things done, nor is it in a quick amendment bill. The need of the hour is sophisticated research. We must delve deeper into what Kelkar and Shah, 2022, term the `invisible infrastructure' that shapes the working of courts in India. These are the unnoticed underlying systems, frameworks, norms, and processes that enable interventions to succeed. There is a need for cautious examination of the law and technological solutions, in order to avoid unintended consequences. A research literature is now required around the following important questions. Will virtual courts be beneficial for litigants? What are the technological solutions that can be used to maintain the legal safeguards highlighted above? How should Courts be trained to use such technical solutions? How can procedural principles of fair play in courts be balanced with the rules that enable virtual courts?

References

P. Datta, M. Hans, M. Mishra, I. Patnaik, P. Regy, S. Roy, S. Sapatnekar, A. Shah, A. P. Singh and S. Sundaresan, How to Modernise the Working of Courts and Tribunals in India, NIPFP Working paper series (2019).

A. Ferguson, Courts without Court , Vanderbilt Law Review (2022).

A. Salyzyn, New Lens: Reframing the Conversation about the Use of Video Conferencing in Civil Trials in Ontario , Osgoode Hall Law Journal (2012).

Supreme Court E-Committee, E-Courts- Phase III Vision Document , 2023.

M. Kirby, Covid-19 & Law in India & Australia- Lessons from the Pandemic for the Costs and Delays of Legal Process, National Law School of India Review (2021).

M. Legg and A. Song, The Courts, the Remote Hearing and the Pandemic: From Action to Reflection, UNSW Law Journal (2021).

Parliamentary Standing Committee Report on the functioning of virtual courts, (2020).

Sandhya P.R. and A. Mishra, Video Conferencing, E- Filing, and Live Streaming in the High Court, (2021).

Z. Abrams, Can justice be served online?, American Psychological Association (2022).

Mugdha Mohapatra is a Research Associate at XKDR Forum. Discussions with Ayushi Singhal, Aayush Tainwala, Aayush Kedia, Anjali Sharma, Karthik Suresh, Pavithra Manivannan, Siddarth Raman, Shubho Roy, Susan Thomas, and two anonymous reviewers have helped shape and improve this article.

A conservative path to get to a fully working Linux computer

by Ajay Shah.

Linux has long been a great operating system, but there is a bottleneck on getting it properly installed and working. It is hard to get it to work with all the hardware such as the wifi, USB devices, audio, suspend/hibernate, etc. This is because this hardware tends to evolve rapidly. The device vendors frequently do not release source code, or even binaries for Linux. The Linux community solves this through large applications of brainpower. As a consequence, Linux support for the devices comes through with a lag. If you get a state of the art computer, and try to install Linux on it, this will often prove to be challenging.

How can we avoid these risks and complexities? There are three conservative pathways to get to a fully working Linux machine.

 

Method 1: Use a chromebook

 

Chromebooks are wonderful machines where Google takes responsibility for your Linux install, and for over-the-air updates (exactly as they do with Android). There are a wealth of good Chromebooks out there, and one that is noteworthy is the Acer Chromebook Spin 513. The basics all work on a Chromebook, and then you get "the Linux development environment" which gives a familiar apt-get interface to installing packages. I have installed emacs, svn, R, latex, etc. and it all just-worked. On many Sundays, my morning ritual of writing a column for the Business Standard is done using emacs on a chromebook.

Method 2: Buy linux pre-installed

 

Firms like Dell or Lenovo offer Linux pre-installed on some computers [example]. Here, again, you're up and running with zero friction. You are guaranteed that all the devices are supported. But there is a downside: You are stuck with the distribution that was chosen by the vendor. This may or may not be to your taste.

 

It's good to have the complete knowledge, so as to deal with future situations of systems administration or full reinstall. As an example, it's nice to have your servers on the identical distribution as your laptop. So I feel incomplete if someone gives me a perfectly working machine that I did not install. This is indeed schizophrenic: with a chromebook or an android device, I do not expect to ever require systems administration or reinstall, but with a Linux machine, I do.

Method 3: A conservative path to choosing hardware and OS

 

As a long-time Linux user, I have found that it's good to understand and get used to one Linux distribution, and then stick with it across the years on all my systems. For me, this distribution of choice is Debian stable.

Debian stable will often not work well on a state of the art laptop. The moniker `stable' implies something that has stabilised after years of testing, and it will not know recent developments in the hardware. What is the way out?

 

Two factors that should be kept in mind. The laptops where Linux is available pre-installed from the vendor are those where device support is superior. And, the laptops that have high production volume are more likely to go out into the expert community that makes Linux work. As an example, Xiaomi's Mi laptops are a high volume part (so the second factor is in favour) but where Linux pre-installed is not a choice (so the first factor is not).

The key idea of this article is to look at the gap between the date of a laptop release and the date of the Linux kernel. Based on your ability to deal with glitches, you must establish a minimum delay that makes you comfortable. For me, this minimum delay is 1 year: once the linux kernel is atleast a year younger than the laptop, I'm in good shape, based on my ability to deal with difficulties and my risk tolerance. Each person should choose this one number.

With this in hand, we have a recipe for screening a laptop before purchase :

1. For a laptop of interest, find out its release date. As an example, when I liked the Mi Notebook Ultra, I found this the release was in August 2021. Similarly the release date for the Xiaomi Notebook Pro 120G was August 2022.
2. Look carefully at the Debian release of interest. The Debian stable of today, which is called `bookworm' has the kernel version 6.1. This has a release date of December 2022. 
3. Restrict yourself to machines which are atleast a year older than this kernel.
   

Example: Mi Notebook Ultra. There is a decent delay between the release date of the Mi Notebook Ultra (August 2021) and the 6.1 kernel release date (December 2022). Hence, this is likely to work well.

Example: Xiaomi Notebook Pro 120G. This has a release date of August 2022. As an example of how these problems play out, this laptop has the sweet Intel work in the 12th generation "Alder Lake" CPU, with performance cores and efficiency cores. Harnessing these properly in the Linux kernel is non-trivial, and got done for kernel 5.18 in August 2022. Going by our recipe, we should wait a year after the laptop release, and thus ask for kernel 6.4. We don't yet know when it will show up in future Debian releases. What is Debian testing today ("trixie") uses kernel 6.3 that was released in April 2023, which does not satisfy the one-year test when compared with the release date of August 2022.

A long-run strategy that harnesses this recipe, to stay on contemporary hardware and software, consists of buying a new machine every time Debian testing reaches "release candidate 1" ("RC1"):

1. Watch the current Debian testing. (At present, this is `trixie').
2. Wait for it to achieve its Release Candidate 1 ("RC1"). For Debian 12 this was 3 April 2023.
   
3. Identify the kernel version that they have in it and the release date of this kernel (using the URLs placed above).
   
4. Limit yourself to examining equipment which has a release date of more than a year prior to this kernel release date. Buy this, and it's likely to work well.
   
5. At this point, you are on a fully working Debian testing RC1, but this will rapidly mature into Debian stable, and then you have a few years of stability. For Debian 12, the stable release was 10 June 2023, which was about two months after RC1.
   

Under this strategy, every few years, when Debian testing reaches RC1, it is time to buy a new laptop. You will regularly buy a laptop that is at least one year older than the kernel version in Debian testing. Modern computers are fast enough that this is not an important constraint, and older laptops are cost-efficient.

Jumping into a testing RC1 is a bit risky. This level of risk seems fine for a personal laptop but for production systems it is better to do this differently: instead of going in roughly 3 months before the release date, it's good to wait 6 months after the release date.

I thank Chirag Anand, Ayush Patnaik and Megha Patnaik for useful conversations.

Announcement

TrustBridge is an organisation that works on improving Rule of Law for better economic outcomes. We focus on understanding the gaps in the existing legal and regulatory framework, evaluating how they impact economic growth, and studying the various ways that these could be improved upon. We aim to undertake legal, quantitative and policy oriented research and dissemination that will inform principles and evidence-based policy making. We believe that implementing ideas that emerge from our research will help bring us closer to our objective of improving the Rule of Law. Our work is in the areas of Energy Transition, Financial Markets, Contract Performance in government and private contracts, and Governance in the start-up ecosystem.

TrustBridge is looking for two full time associates to work on its projects.

Position 1: Quantitative Research Associate

As a quantitative research associate you will deploy quantitative techniques to create and analyse data sets and to generate insights about the problems we are working on.

The requirements for the role are:

• Prior demonstrable experience of working with R, Python, Julia and other open source tools for generating statistical/economic analysis.
• A degree or a professional qualification in Mathematics, Statistics, Economics or Computer Science will be desirable.
• You must be curious and passionate about research and be comfortable working in an interdisciplinary environment. You must be ready to work on independent outputs as well as function in teams.

Position 2: Policy Research Associate

As a policy research associate you will be required to work on projects that seek to engage with governments and with the private sector to generate sustainable reforms in the areas of our interest.

The requirements for the role are:

• A Master's degree or a professional qualification in economics/management/public policy, strong written and oral communication skills.
• Prior work experience in the the areas of interest to TrustBridge.
• A quantitative/computational orientation will be a plus.
• You must be curious and passionate about research and be comfortable working in an interdisciplinary environment. You must be ready to work on independent outputs as well as function in teams.

The remuneration offered will be commensurate with your skill and experience.

Please send an email with your CV to careers@trustbridge.in if you are interested.

Helping litigants make informed choices in resolving debt disputes

by Pavithra Manivannan, Susan Thomas, and Bhargavi Zaveri-Shah.

The Indian legal system faces numerous difficulties, and the discourse on legal system reforms has emphasised the workings of the courts from the perspective of judges and registries. Such a focus is not so useful for litigants who are also participants in the legal system. The decisions that they make and the incentives that they face add up to create the case load at the courts.

Consider a supplier of spare parts to a certain manufacturer, who has not been paid her dues. Her lawyer advises her of multiple legal remedies that she can use to recover her dues, from filing a money suit before a civil court to pursuing arbitration proceedings outside a court to initiating insolvency proceedings against the manufacturing company. How would she decide which legal remedy to pursue? More generally, litigants make four classes of decisions: Should one sue? Should one appeal? When faced with a certain proffer, should one settle? When alternative forums are available, which one to prefer? Flaws in a litigant's decision making when faced with such decisions reshape the case flow of courts. In the Indian legal system reform discussion, it is important to think about the incentives and the decision-making of litigants.

At present, litigants make these decisions based on their own, generally limited, prior experience. They are advised by lawyers who specialise in a certain forum. However, lawyers tend to be specialists in one forum or another, and often know impressions rather than systematic evidence. Further, lawyers have an interest in the litigant's decision. Under these conditions, the decisions of litigants might sometimes be sub-optimal.

First steps in measurement

All the four types of litigant decisions - to sue, to appeal, to settle and to choose a forum - involve forecasting the time taken in the legal process, and associated expenses. In an ideal world, litigant decision making would be supported by statistical systems that forecast these two numbers.

In this article, we develop a legal system measurement that can produce such insights for litigants, who are litigating on a narrow class of problems. We do this for three Bombay courts, as a proof of concept of a simple analysis that can help litigants.

The narrow class of problems that we focus on are debt dispute resolutions. Several laws in India allow the enforcement of debt contracts in different forms, which provides us a unique opportunity to compare their relative performance in providing redress for debt default. There are also multiple courts and tribunals that adjudicate disputes on debt contracts in different ways. We choose three in Bombay to study:

1. The Bombay High Court which has original jurisdiction to adjudicate high value contractual matters.

2. The Mumbai bench of the Debt Recovery Tribunal (or DRT), which is a specialised tribunal that has been adjudicating recovery of debts due to banks and financial institutions since 1993.

3. The Mumbai bench of the National Companies Law Tribunal (or NCLT), which is a specialised tribunal adjudicating insolvency petitions against companies.

We build on earlier work that points out that litigants are found to care about the access, efficiency, effectiveness, independence, and predictability of judgements (Manivannan et al, 2023). It is known that secondary data (such as those from court websites) have constraints: (a) it can be used to measure only a subset of these aspects; and (b) even this subset cannot be necessarily computed for all the comparable courts. Assuming that access is not a constraint, Manivannan et al (2023) suggest that the litigant can get an estimate of what she can expect of the amount of time in the court, for each of these courts. They point out that it is possible to get an estimate of what she can expect of costs she will incur, through the expected number of hearings at a given court, where each hearing induces a certain unit cost.

In this article, we move towards three new questions in the field of litigant decision making:

1. How likely is it to get a first hearing in the first year from filing the case in the court?
2. How likely is it that the matter will get disposed in the first year from the filing of the case?
3. How many hearings are most likely to take place in the first year from the filing of the case?

While the first two questions help to address the efficiency in terms of time expected in a court, the third can be used as a proxy for the kind of costs that a litigant can expect from a given court, since every hearing requires the time of (and fees charged by) legal counsel.

Data description

We collect and analyse sample data of cases involving debt disputes, which were listed and heard at three courts in Bombay for the period from September 2021 to December 2022 ('sample period'). The websites of these fora record cases filed across different timelines and do not archive case life cycles of historical cases. This sample period allows us to compare cases that have been filed at the same time and therefore have comparable life cycles.

• In the case of the Bombay HC, the selected matters include suits, summary suits, commercial suits and commercial summary suits, filed under its original jurisdiction.

• For the DRT, we extract cases arising under the Recovery of Debts Due to Banks and Financial Institutions (RDDBFI) Act, 1993, and the Securitization & Reconstruction of Financial Assets & Enforcement of Security Interest (SARFAESI) Act, 2002.

• For the NCLT, we extract all cases listed under the Insolvency and Bankruptcy Code (IBC). We understand that cases involving debt enforcement will be covered under these case-types at the relevant court.

Table 1 shows the number of cases in the data set for all the three courts. We additionally include the status of these cases as pending or disposed. A case is categorised as disposed of by the courts where the disposal is by way of a decree passed by the court, or if it is settled, or it is has been withdrawn for any reason.

Table 1: Distribution of cases

Court	Total	Disposed	Pending
Bombay HC	1243	159	1084
DRT	843	125	718
NCLT	2645	897	1748

Thus, for the same period of time, there have been a different number of applications in the matter of debt dispute resolution in these three courts.

While, this can be used to calculate the 'disposal rate' of matters in each court, these measures suffer from two limitations. It does not take into consideration the duration of the pending cases. Further, it does not take into account that the amounts involved and the complexity are different in the cases handled at different courts. An approach that takes these aspects into account is the survival analysis modelling approach.

Statistical analysis

'Survival analysis' is a method for modelling the time to an event of interest. If the event of interest is the time to disposal, the model will yield the estimated probability of a case being completed between any two timepoints t1 and t2.

Survival analysis models have been previously employed to study judicial delays including at the Income Tax Tribunals (Datta et al, 2017) and at the NCLTs (Shah and Thomas 2018, Bhatia et al, 2019). In this article, we draw on the intuition of survival analysis and offer simple estimates of two quantities (for each of the three courts):

• What is the probability of a case being being heard atleast once within one year? The first hearing is generally an important milestone for a litigant to know the possibility of getting interim relief. How likely it is that this will happen within the very first year?
• What is the probability that the case is disposed of in the first year?

These probabilities are estimated for each of the three chosen courts separately on matters of debt dispute resolution. Much of the earlier research have computed and presented sample means of completed cases only, without taking into account cases that have not been completed. The standard techniques of survival analysis fare well on harnessing information using observations of cases that have not completed as well.

Q1: Chances of getting a first hearing in the first year from filing of a case

Figure 1 presents a graph of the survivor function for a matter getting a first hearing across the Bombay HC, the DRT and the NCLT. Here, time to first hearing is on the x-axis. We pull up the probability of getting to the first hearing within a year from these curves for the three courts and present this in Table 2.

Table 2: Chance of first hearing within the first year at Bombay HC, DRT, NCLT

	(in %)
Bombay HC	36.6
DRT	94.0
NCLT	99.8

A case at the NCLT has the highest chance (of nearly 100%) of being heard with the first year from its filing. There is nearly a similar probability of a first hearing at the DRT within the first year, with a 94% chance. At the Bombay HC, on the other hand, there is a less than 40% chance that a similar matter will get a first hearing within a year of being filed.

Using this approach, we could similarly estimate the probability of a case being heard atleast once within say, the first three months of filing. Our analysis finds that for a litigant at the NCLT, there is an 86% chance of getting atleast one hearing within the first three months of filing a case. The corresponding probabilities for the DRT and the Bom HC are 74% and 5% respectively.

Q2: Chances of getting a case disposed in the first year from filing of a case

Figure 2: the survivor function for disposal for three courts

Figure 2 shows the litigant the chances of a debt dispute resolution matter getting disposed, within one year of it being filed in each of these three courts. This presents a very different picture than for the survivor function for the chances of getting a first hearing that we see in Figure 1. The chances of disposal are (logically) much lower at any given point in time. Table 3 presents the chances of disposal of case within the first year of being filed. The NCLT has the highest chance of disposal at nearly 40%. Between the Bombay HC and the DRT, the DRT has a higher chance at 17.3%. But the Bombay HC has a similar chance at 16.3% of the case being disposed within the first year.

Table 3: Chance of disposal within the first year at Bombay HC, DRT, NCLT

	(in %)
Bombay HC	16.1
DRT	17.0
NCLT	39.3

Q3: Expected number of hearings in the first year from the filing

So far, we have focused on the time to completion, which matters greatly through its impact upon the net present value of the moneys recovered. We now turn to the question of the costs of ligitation. We compute the expected number of hearings within the year and present these in Table 4. We recognise that there is a sharp distinction between substantial hearings and infructuous hearings, but in the present state of the research, we treat both alike.

Table 4: Expected number of hearings within the first year at Bombay HC, DRT, NCLT

	Number
Bombay HC	0.4
DRT	2.7
NCLT	4.0

The NCLT has the highest expected number of hearings within the first year of filing at 4 hearings, while the Bombay HC has the least (not even one hearing may happen within the first year of filing).

Using these estimates, a litigant can estimate her legal costs for the first year. For example, we now know that a litigant will face 4 hearings, on average, in the first year after filing at the NCLT. If the legal fees that she is charged by her legal team are Rs.100,000 per hearing, on average, this implies that she can expect to pay Rs.400,000 in the first year from filing.

Discussion

Better decisions by litigants are not only valuable for the litigants, but will also improve the working of the Indian legal system. We have shown simple statistical results about delay and costs at three alternate venues for one narrow class of matters. These results point out the differences that exist among three courts, in terms of the kinds of legal remedies they offer, their administrative processes and their capacity. Litigants would have to weigh those considerations also in their thinking.

These results have many interesting implications. For instance, if a bank strategically prefers an early first hearing, it might be better off instituting proceedings at the NCLT compared to the DRT, even if the latter is a forum dedicated to banks and financial institutions. On the other hand, if a bank prefers disposal within fewer hearings compared to an earlier first hearing, the analysis indicates that it is better to approach the DRT.

We recognize that there may be other considerations that weigh with the litigant in making her decisions. For example, Mannivannan et al, 2021 find that litigants also care about the fairness of a judge and the effectiveness of the remedy. But our analysis in this article focuses on metrics that can be evaluated with secondary data from courts. Another consideration is that the analysis does not consider the nature of the legal remedies offered by the three courts. While litigants may approach the Bom HC and the DRT for debt recovery, the NCLT offers a remedy of insolvency resolution. But creditors in India find it optimal to use both recovery and resolution processes to recover their dues. Finally, it is not that the litigant prefers one forum over another, but that important metrics such as the probability of disposal within a given time frame allows the litigant to choose one among multiple choices of forum.

We believe that the comparative approach in this article can be extended in, at least, three ways. First, these measures can be calculated for locations other than Bombay. A comparative exercise of this kind can potentially help understand benches with bottlenecks and potential areas of improvement. Second, within this class of matters, statistical modelling can permit these estimates to vary with case characteristics. Finally, these measures needs to be calculated beyond this narrow class of matters. For example, such an approach could offer more clarity to litigants involved in involuntary litigation, such as criminal litigation.

The data used for this analysis can be found here. The dataset can be cited as Manivannan, Pavithra and Thomas, Susan and Zaveri-Shah, Bhargavi (2023), "Helping litigants make informed choices in resolving debt disputes".

If you're interested in seeing other WIP applications of this framework, XKDR Forum is organizing a roundtable in Mumbai on the 17th of June (Saturday).

References:

Bhatia, S., Singh, M., & Zaveri, B. (2019). Time to resolve insolvencies in India. The Leap Blog, March 11, 2019.

Datta, Pratik & Surya Prakash B. S. & Sane, Renuka, (2017), Understanding Judicial Delay at the Income Tax Appellate Tribunal in India, Working Papers 17/208, National Institute of Public Finance and Policy.

Manivannan, Pavithra and Thomas, Susan and Zaveri, Bhargavi, Evaluating Contract Enforcement by Courts in India: A Litigant's Lens (November 26, 2022). Also available at SSRN: https://ssrn.com/abstract=4286562.

Shah, A., & Thomas, S. (2018). The Indian bankruptcy reform: The state of the art, 2018. The Leap Blog, December 22, 2018.

Pavithra Manivannan and Susan Thomas are researchers at XKDR Forum. Bhargavi Zaveri-Shah is a doctoral candidate at the National University of Singapore. We thank Ajay Shah for inputs on the survival analysis, Geetika Palta for research and data support, Tushar Anand for helping out with corrections to the data, and participants of the internal seminar series at XKDR Forum for their comments and feedback.

Who is litigating cheque bounce cases?

by Siddarth Raman.

Cheque bounce cases under Section 138 of the Negotiable Instruments Act are an important source of case load at the Indian judiciary. This has inspired many attempts at modifying laws and court procedures so as to reduce the burden. In this journey, empirical evidence about the nature of the litigants is required. In this article, we establish a dataset about these matters, and measure the shares of financial firms, non-financial firms and individuals. We find that in Mumbai, financial firms filed 52% of cases, and that 83% of cases were against individuals. Cases filed by financial firms are likely to be disposed quicker than those filed by individuals. We explore how the cheque is used as a means of credit, and why financial firms accept them as collateral / security. It appears that financial firms are using cheques and Section 138 as a coping mechanism for poor civil remedies. While there is a need for legal system reform in the context of S.138 of the N.I. Act, it would also be useful to find solutions in banking regulation and personal bankruptcy law. We conclude with a recommendation of caution. Just as the amendment in 1988 has led to certain behaviours and industry practices, new solutions will alter the equilibrium, creating new incentives and new behaviours. The patterns seen in Mumbai are not present in regions of lower economic activity like Jhabua-Nimar. We need to be aware of the wide differences across different districts and states of India, and be mindful of complexity, as we proceed on the path to legal system reform.

Introduction

Section 138 of the Negotiable Instruments Act, which was introduced in 1988, creates the possibility of imprisonment for upto two years, a fine upto twice the amount of the cheque, or both, in response to cheque bouncing. The Act prescribes a six month time horizon for disposing these cases. This 1988 amendment is widely used as an example of the need for judicial impact assessment: The legislative action substantially enhanced the load upon the judicial branch, but there was a lack of commensurate operational planning and resourcing to deal with the enhanced case load.

What fraction of the pending cases or the flow of new cases emanates from this? A precise answer to this is not feasible under the present state of legal system data in India, but it is likely to be about 15 per cent (Chapter 3, Law Commission of India, 2014 ^[1] ; Supreme Court in Makwana Mangaldas Tulsidas vs The State Of Gujarat, 2018 ^[2] ; Mahadik D, 2018 ^[3] ). An important paper in this literature, Damle and Gulati, 2022 ^[4] examines 363,720 cases across 8 States and 2 Union Territories and estimates that cheque dishonour cases represent 13.2% of the courts' workload and take 395 days for disposal.

One pathway to legal system reform lies in an 80:20 analysis, in a vertical approach of finding solutions that are specific to certain classes of matters. Many thinkers have proposed making progress on S.138 of the N.I. Act as a component of legal system reform (Law Commission of India, 2008 ^[5] ; Law Commission of India, 2009 ^[6] ). Alongside this is the proposal for decriminalisation of cheque bouncing, broadly drawing on the concept that debtors prisons are not how modern economies operate. All these discussions require more knowledge about the nature of litigants in these matters, which is presently lacking.

This article seeks to fill this gap. In their paper, Damle and Gulati, 2022 ^[4] establish that the impact of Section 138 cases on caseload, pendency and time to disposal varies by State. We ask the questions: Who are the litigants in Section 138 cases? Does the nature of cases vary based on who the participants are? Do these characteristics vary based on location?

Methodology

The e-courts database for district courts was used to build a dataset about pending and disposed cases relating to Section 138 of the Negotiable Instruments Act. This was done for India's most advanced region (Bombay). For a comparison, this was also done for the group of districts (termed "homogeneous region" by CMIE) with the highest share of households in agriculture. This is the "Jhabua-Nimar" homogeneous region, which comprises six districts in Madhya Pradesh - Alirajpur, Barwani, Burhanpur, Dhar, East Nimar (Khandwa), Jhabua, West Nimar (Khargone). These two datasets thus show the full range from the old India to the new India.

Litigants were classified into three groups:

• Financial Firms
• Non-Financial Firms
• Individuals

This was done through a process of looking for keywords in the name:

1. Financial Firms typically have the terms bank, finance, invest, loan, and related keywords and variations.
2. Non Financial Firms have terms like ltd, pvt, corporation.
3. Non Financial Firms may contain common nouns from the English Language.
4. Litigants with the term proprietor in the name were categorised as individuals.
5. Those that did not fit these criteria were categorised as individuals.

This classification heuristic requires a standard corpus of English words. We used the NLTK Wordnet corpus and identified all words in the names of litigants that overlapped. A manual cleanup was required as the corpus contained some proper nouns. We assessed the words which made up 95% of the instances of overlap with the corpus and eliminated names and common nouns that could be Indian names ("Rout", "Harsh", "Baby", etc.). In Mumbai, we found 8133 unique words appearing 763,593 times. The 95% filter resulted in 1,165 unique words in Mumbai. For Jhabua-Nimar, we found 1,006 unique words appearing 19,974 times. The 95% filter resulted in 345 unique words.

These heuristics will of course engage in a small rate of misclassification. Some names like Banku and Chitra containing the terms Bank and Chit could be classified incorrectly. We do not account for firms that have common nouns in their name from languages other than English. In many cases, an individual proprietorship may have the term company or finance in their name. The methodology does not take into account spelling errors.

In order to assess the accuracy of the work, it is important to estimate the defect rates associated with these heuristics. We manually analysed a random sample of 100 cases (and 200 litigants) in each district, in order to measure the error rate. We found two errors in our Mumbai analysis. They are:

1. Ms M. D. Vora Co. is a non-financial firm categorized as an individual.
2. Alexander Xavier Dsouza is an individual categorized as a non-financial firm. Alexander is present in the wordnet corpus, and appears 16 time in the dataset which puts it in the bottom 3% of words by frequency, which is why it was excluded in the manual cleanup.

Similarly, we found seven errors in our Jhabua-Nimar analysis. They are:

    Two cases where non-financial firms with names in Hindi were misclassified as individuals:

1. Shri Krishna Prajapati Sakh Sahkari Sanstha Maryadit.
2. Shubhalakshmi Sakh Sahkari Sastha Mrya. Dhamnod By Nitesh Bhawsar.

    Two cases where financial firms with typos were misclassified as individuals:

3. EEASVAM KREDIT KO DVARA VIJAY.
4. BHARATEEY STET BAIANK MUKHY SHANABAG BURAHANAPUR.

    One case of an individual misclassified as a financial firm:

5. Kashish Finance H.U.F Propriter Vijay Rathore.

    Two cases where the State was a party. The State was misclassified as a non-financial firm.

This suggests a defect rate of 1% for Mumbai and 3.5% for Jhabua-Nimar. This gives us a sense of the extent to which the estimates presented ahead should be treated with caution.

Results

In Mumbai, we have a dataset of 417,437 cases. Of these, 317,225 are disposed, and 99,712 cases are pending.

Table 1: Section 138, NI Act cases in Mumbai district courts classified by Type of Litigant

Respondents → Petitioners ↓	Financial firm	Non-financial firm	Individual	Total
Financial firm	0.2%	6.5%	46.2%	52.8%
Non-financial firm	0.1%	7.0%	21.3%	28.4%
Individual	0.2%	4.8%	13.8%	18.8%
Grand Total	0.5%	18.3%	81.2%	100.0%

This yields the facts:

• Finance firms filed 53% of cases, non-financial firms 28%, and individuals 19%.
• 81% of cases were filed against individuals, 18% against non-financial firms and less than 0.5% against financial firms.
• The biggest chunk of cases are financial firms vs individuals - 46%, followed by non-financial vs individuals - 21%.

In Jhabua-Nimar, we have a dataset of 22,564 cases. Of these, 14,130 are disposed, and 8,434 cases are pending.

Table 2: Section 138, NI Act cases in Jhabua-Nimar district courts classified by Type of Litigant

Respondents → Petitioners ↓	Financial firm	Non-financial firm	Individual	Total
Financial firm	0.0%	0.2%	12.3%	12.5%
Non-financial firm	0.0%	0.6%	5.2%	5.8%
Individual	0.1%	2.1%	79.5%	81.2%
Grand Total	0.1%	2.9%	97.0%	100.0%

• Individuals filed 82% of cases, finance firms 12%, and non-financial firms 6%.
• 97% of cases were filed against individuals, 3% against non-financial firms.
• The biggest chunk of cases are individuals vs individuals - 80%, followed by finance firms vs individuals - 12%.

At an overall level, disposal rates in Mumbai are close to 90%+ for years before 2015, from where we see a steady decline in share of cases disposed. Thus today's pending cases are largely those that began after 2015.

Figure 1: Total Cases by Year and % of Cases disposed as of April 2023

In Figure 1 above, the blue bars on the chart are the total number of cases filed. The orange line depicts the % of the cases filed in that year which stand disposed as of April 2023 when the data was analysed.

In Mumbai, we see an interesting pattern when we compare the disposal rates of cases filed by financial firms, non-financial firms and cases filed by individuals.

Table 3: Share of cases filed in a specific year that stand disposed as of 2023

Year	Financial Firms	Non-Financial Firms	Individuals
2015	74.0%	65.9%	66.9%
2016	61.1%	60.7%	66.4%
2017	77.8%	50.8%	51.1%
2018	75.9%	47.9%	41.1%
2019	48.8%	42.8%	28.9%
2020	75.3%	35.0%	27.6%
2021	42.2%	25.5%	19.6%

This table shows the share of cases that were filed in Mumbai in a certain year that are now disposed. An important finding here is that cases filed by financial firms have a much higher likelihood of getting disposed in 2-3 years compared with cases filed by individuals.

Figure 2: Cases filed between 2015-2021 by Status and Type of Litigant

In Figure 2 above, we see that Financial Firms account for 60% of the total cases filed, but constitute ~70% of the cases that have been disposed, and account for only 50% of the pending cases.

We see no such patterns in Jhabua-Nimar with disposal rates not being dependent on the nature litigant filing the case.

Discussion

We now have new facts about litigation associated with the S.138 of the NI Act. What have we learned? How does this change our mind? What are the downstream implications of this new knowledge?

Most attempts at reforming Section 138 have focused on on improving the processing speed within courts. Little has been done towards preventing cases emerging in the first place. Our data shows that financial firms are the main petitioners in Mumbai, with a higher disposal rate than individual litigants or non-financial firms. This may reflect greater organisational capability in financial firms. Cases filed by individuals or non-financial firms vary based on the nature of contract entered into by the two parties. We speculate that cases filed by financial firms are mostly related to loans.

Financial firms often use cheques as an alternative form of collateral. This can help individuals with poor credit ratings to access loans. Should there be a loan default, there is the choice of filing a criminal case. This process is expedited by Section 138 that requires petitioners to file a case within 45 days of the cheque bounce. Banking regulations may also be a contributor. In December 2016, the Supreme Court ruled that officers of private banks are to be treated as public servants under the Prevention of Corruption Act. Financial firms have practices to ensure that a debt is indeed irrecoverable before they can classify it as bad debt. The large volume of cases from banks may be a mechanism to check against petty corruption from branch officials and comply with regulatory requirements.

Filing a Section 138, NI Act case not only allows a bank official to demonstrate effort and intent, it also allows the lender access to the coercive power of the State. The police arriving with a non-bailable warrant at your doorstep is a persuasive means of negotiating with a borrower. Petitioners in a Section 138 case are using this to recover dues. Are there better civil alternatives to debt recovery? How does their efficiency in terms of time to disposal compare with those in Section 138 cases? As we think of improving processes, we should consider the possibility that making Section 138 cases more efficient may prevent litigants from considering civil recourse. The combination of slow civil courts and under-developed credit markets make Section 138 cases an attractive proposition for financial firms. Accepting cheques as security may have developed as an industry practice because it allows financial firms to be less diligent when making loans as they can now rely on the criminal justice system to coerce settlement. In addition to court processes and legislative changes, remedies to the burden of Section 138 on the Indian courts may also lie in the realm of banking regulation, credit practices, and personal bankruptcy law.

The introduction of Section 138 has resulted in some discernable behaviors from financial firms. Future changes to the status quo will invariably alter incentives resulting in different behavioral patterns among litigants. The variation in litigant composition between different regions illustrates that litigation patterns are shaped by local context. The patterns observed in a metro like Mumbai, largely influenced by financial firms, don't find a parallel in areas such as Jhabua-Nimar. Attempts at legal system reform must account for the disparities across the various states and districts of India. We caution against one-size-fits-all solutions and suggest that solutions be crafted keeping in mind the local context.

References

[1] 245th Report On Arrears And Backlog - Law Commission of India, 2014 . Retrieved from 20th Law Commission of India.

[2] Makwana Mangaldas Tulsidas vs The State Of Gujarat , Order dated 5 March, 2020. Retrieved from Supreme Court of India.

[3] Mahadik D, 2018. Analyses of Causes for Pendency in High Courts and Subordinate Courts in Maharashtra. Retrieved from Department of Justice.

[4] Damle D, Gulati K et al. 2022. Characterizing Cheque Dishonor Cases in India: Causes for Delays and Policy Implications. SSRN.

[5] 213th Report on Fast Track Magisterial Courts for Dishonoured Cheque Cases, 2008. Retrieved from 18th Law Commission of India.

[6] 230th Report on Reforms in the Indian Judiciary - Some Suggestions, 2009. Retrieved from 18th Law Commission of India.

Siddarth Raman is a researcher at XKDR Forum.

Announcements

Joint Field Workshop on Public Procurement

Workshop Date: 25^th August 2023
Submission Deadline: 28^th July 2023

We cordially invite you to submit your research papers to be presented at the Joint Field Workshop on Public Procurement, 2023. This workshop, jointly organized by the Chennai Mathematical Institute and XKDR Forum, aims to bring together academics, practitioners and policymakers to share their research findings and discuss the current and challenging issues which surround public procurement in India. The conference will be organized in-person in Mumbai on 25^th August 2023. The workshop will feature the presentation of research papers along with panel discussions.

Topics

We invite you to submit quantitative or qualitative research papers from any discipline which broadly cover any of the following topics:

• design and structure of government contracts;
• legal frameworks and institutions that play a role in the planning-to-payment stages of procurement;
• monitoring and enforcement of government contracts (this includes dispute resolution);
• impacts of inefficient procurement on: public expenditure, the financial health of firms, and the economy in general; and
• issues in sectors where public procurement is undertaken at a large scale (e.g. health, defence, water and sanitation etc.)

Paper submission

We invite your submissions as PDF files, no later than 28^th July 2023, via email to outreach@xkdr.org. Preliminary versions of the paper may be considered provided that the research question is clearly outlined along with preliminary results.

Submitted manuscripts will be peer-reviewed. No submission fee is required. Costs of accommodation in Mumbai and travel within India will be reimbursed. General inquiries regarding the call for papers should be directed to outreach@xkdr.org

Important dates

• Submission deadline: 28^th July 2023
• Notification of review results: 8^th August 2023
• Workshop event: 25^th August 2023

Lost in Translation: Legislative Drafting and Judicial Discretion

by Madhav Goel and Renuka Sane.

Precisely drafted legislation that reflects its objective and boundaries, and judicial discretion that confines itself to legislative intent are critical pillars of a rule of law economy. There are concerns that both are broken in India. In a new paper, Lost in Translation: Legislative Drafting and Judicial Discretion we discuss these issues in the context of the decision of the Supreme Court in Vidarbha Industries Power Ltd. v. Axis Bank Ltd. (Vidarbha) pertaining to the Insolvency and Bankruptcy Code, 2016 (IBC, or Code).

The IBC sought to introduce an objective test for initiating insolvency, providing that as long as a financial creditor files for insolvency and the objective criteria of "debt" and "default" are established, the National Company Law Tribunal (NCLT) is expected to initiate the corporate insolvency resolution process (CIRP). Until 2022, this intent had been respected. However, Vidarbha conferred discretion on the NCLT to not accept an insolvency petition by relying on the use of the word may in the phrase, may admit the petition, in Section 7. This has opened the gates to increased discretion in the admission of IBC petitions, potentially derailing the entire reform process. In fact, in a majority (56%) of the reported cases the NCLT has chosen to not admit the application for initiation of CIRP. These range from instances where the corporate debtor is owed money, to where the Court suspects the intention of the creditor to file for insolvency. Furthermore, there are two instances where the NCLT/NCLAT has exercised the discretion conferred by Vidarbha in respect of applications by operational creditors under Section 9 of the Code. This is despite the fact that the statutory language of Section 9 as well as the decision in Vidarbha nowhere confers such discretionary powers upon the NCLT/NCLAT. By doing so, the NCLT/NCLAT have potentially opened the door to further expansion of the scope of discretion conferred by Vidarbha to extend to applications under Section 9 as well, an outcome fraught with its own issues.

The Vidarbha judgement raises three questions:

1. Quality of drafting: The Bankruptcy Legislative Reform Commission's recommendation on lack of discretion was clear. The legislation, however, provided no rationale for why it chose to ignore the BLRC report and allow for the possibility of discretion by using the word may in Section 7. If it was an inadvertent change in the language of the provision, then that highlights the need to make the drafting process more robust. If the change was deliberate, then the lack of publicly available reasoning is harmful as it not only goes against the fundamental tenet of rule of law that material decisions ought to be accompanied with reasons, but also because the lack of reasoning has led to uncertainty in the law. Interestingly, the Government itself is pushing for a review of the decision in Vidarbha, a situation that could have been avoided if the drafting processes were more robust, transparent, and accompanied with reasons.
2. Legislative intent: The jurisprudence on the treatment of the words "may" and "shall" has been fairly fluid. The rule of thumb is that the former implies conferral of discretion, while the latter implies a mandatory obligation. However, the rule can be dispensed in certain cases, and the courts can interpret "may" as "shall" and "shall" as "may". These are cases where an analysis of the real intention of the legislature points to dispensing with the rule of thumb. In these instances, the Courts have gone beyond the statutory language and treated the legislative intent as its north star in interpreting the words "may" and "shall". That approach was missing in Vidarbha, and it is unclear why.
3. Tests for applying discretion: The Court did not provide guidelines for exercise of this discretion or for determining insolvency. Unchecked discretion eventually leads to abuse of power. In Vidarbha, the Court failed to provide tests for exercise of discretion to admit/not admit an insolvency petition, thus creating a situation that will lead to greater uncertainty of law. Consequent to Vidarbha, NCLTs will devise their own methods to assess whether a corporate debtor is financially healthy and solvent, thus leading to greater uncertainty and lesser consistency of law. This can already be seen from the fact that the NCLT/NCLAT has exercised discretion in 13 cases to dismiss the CIRP initiation applications for myriad reasons, whereas there are at least 10 other cases where the NCLT/NCLAT has expressly declined to exercise the discretion.

The economic effect of unguided discretion and lack of certainty in the law will be that prolonged litigation and delayed timelines will result in erosion of the economic value of the corporate debtor's assets, reducing the chances of it being brought back to life. As a consequence, the Ministry of Corporate Affairs has proposed a series of amendments to the IBC, one of which seeks to clarify the law that it is mandatory for the NCLT to admit petitions under Section 7 once "debt" and "default" are established. While it fixes the obvious mistake in the initial drafting, it does not guarantee that the judiciary will take cognizance of legislative intent. There is therefore a need for deeper reform, both of legislative drafting, and of the way the judiciary interprets economic and commercial laws.

The authors are researchers at TrustBridge.