Reassessment after the Finance Act, 2021: from "reason to believe" to jurisdictional gates

by Laveesh Bhandari, Prashant Narang and Aryan Pandey.

Tax statutes globally provide for reassessment power to an Assessing Officer (AO) enabling them to relook at a filed assessment. Reassessment powers are contested because they strike at the heart of finality and certainty which assessees desire. In India, reassessment is primarily dealt with in sections 147- 153 of the Income Tax Act, 1961.

For a long time, AOs could reopen an assessment if they had “reason to believe” that income had escaped assessment. The Finance Act, 2021 marked a shift in this standard, requiring the AO to instead possess “information suggesting escapement of income.” A zoomed out view indicates that the shift is about pairing a redefined trigger with rule-bound, record-verifiable jurisdictional gates that determine whether reopening can proceed at all.

Owing to the broad nature of the “reason to believe” standard, courts naturally stepped in to tighten the procedural and substantive boundaries of reassessment proceedings conducted under this standard. The paper discusses this in detail in section 2.1. A pattern emerged where the majority of reassessments were quashed by the courts on grounds such as non-application of mind, lack of tangible material, mere change of opinion etc. Each of these grounds questioned the AO’s formation of belief and sought a rational connection between the material relied on and the belief formed.

Seen in this light, the Finance Act, 2021 was a significant redesign of the framework. It inserted procedural safeguards which now introduce a mandatory pre-notice process. This provides the assessee with all the relevant information on the basis of which the reassessment was initiated. It also limited the timelines for opening a reassessment by making them shorter. It also revised the approval hierarchy under section 151. The Finance Minister’s budget speech also highlighted the fact that this was done so that taxpayers don’t have to remain under uncertainty for a long time.

Five years on, in this working paper, we ask what the redesign has actually done in practice at the Income-tax Appellate Tribunal (ITAT) level.

What we did

We undertook a doctrinal analysis of the reassessment provisions under the Income Tax Act, 1961. We combined this with a structured review of the ITAT decisions on reassessments that were available on Manupatra. We compared two periods: 2019, which represented how the practice was during the pre-amendment regime and 2025, which represented the post-amendment regime at a greater adjudicatory maturity.

A single ITAT order often deals with notices sent to the assessee for several assessment years, and the reasons on which the reassessment gets decided can differ for different assessment years. This resulted in 136 assessment years arising out of 101 orders in 2019 and 217 assessment years arising out of 178 decisions in 2025. The object of the exercise was to identify which statutory provision was getting litigated and what that revealed about how the reassessment architecture has changed after the Finance Act, 2021.

Outcome

Reassessment Outcome	2019 (n=136) %	2025 (n=217) %
Upheld	20.58	1.84
Quashed	72.79	80.64
Remanded	2.94	13.36
Miscellaneous	3.67	4.14

We observed that quashing rates in fact increased in the post-amendment regime; this indicates that more assessments are being struck down at the ITAT level. The sharpest decline is in the upheld rate and a necessary extension of that is that the revenue faces a direct loss of projected collection. This also means increased litigation cost for the department with no recovery.

Grounds

We also coded the dataset on the grounds for quashing, mapping the reason for quashing to the section it relates to. Again, because a single quashing may rest on multiple statutory grounds, each coded separately, the denominators here differ: 103 recorded grounds in 2019 and 187 in 2025.

Section	2019 instances (of 103)	2019 %	2025 instances (of 187)	2025 %
147	73	70.87	2	1.07
148	11	10.67	23	12.30
148A	—	—	2	1.07
149	5	4.85	59	31.55
151	14	13.59	64	34.22
151A	—	—	37	19.79

We noted that in 2019 quashings were largely done questioning the reasoning of AO’s assessment or a default in the notice (these two account for nearly 81% of the cases). However, by 2025, we see that grounds for invalidations lean towards procedural checks like time limit, sanctioning authority. The paper notes that some of this can be attributed to the combined impact of two landmark Supreme Court judgements in Ashish Agarwal and Rajeev Bansal.

Section 151A which accounts for 20% of the cases in 2025 is a result of impetuous drafting of law. A scheme titled ‘e-Assessment of Income Escaping Assessment Scheme’ was introduced by CBDT for enhancing transparency and objectivity in the reassessment regime. The scheme allowed automated allocation of S.148 notices routed through NFAC; however, Sections 148 and 148A continued to vest the power to issue notice in the ‘Assessing Officer,’ without excluding the Jurisdictional Assessing Officer (JAO). The legislative intent was thus not clear and it led the courts to guess what the lawmakers meant, leading to contradictory jurisprudence across High Courts. The Finance Act, 2026 has inserted a clarificatory provision in the form of Section 147A with retrospective effect from 1 April 2021.

What this means

The 2021 design shift moves reassessment from a broad standard to a rule. Rules have both pros and cons, on one side they lower decision costs and provide more certainty, on the other hand they don’t fare well in edge cases. Early numbers suggest that the shift from standards to rules is working for the assessee as fewer numbers of reassessments are getting upheld. For the revenue’s side, the paper points out that tax administration is a principal-agent relationship and when reassessments fail on procedural grounds at ITAT level, the cost falls on the exchequer, with no consequences for the department.

The paper ends with flagging that discretion has not been eliminated totally and rather it has moved upstream. What counts as “information suggesting escapement” is contingent on CBDT’s risk management strategy which is an algorithmic screening framework. The authors do not address the effects of upstream discretion or the patterns it might generate, suggesting these issues be explored in future empirical research.

The paper is available on the TrustBridge website, and the dataset is publicly available here.

Laveesh Bhandari is President and a Senior Fellow at CSEP. Prashant Narang and Aryan Pandey are researchers at TrustBridge Rule of Law Foundation.

Author: Prashant Narang

Prashant Narang is a researcher at TrustBridge Rule of Law Foundation.

On this blog:

• Reassessment after the Finance Act, 2021: from "reason to believe" to jurisdictional gates, 26 August 2026.
• When remedies become regulation: The Karnataka High Court's intervention in food licensing and street vending, 9 June 2026.
• What happens when arbitration deadlines are missed, 2 April 2026.
• From Statute to Zero-Cost: Section 31A and the Bombay High Court's Zero-Cost Culture, 18 November 2025.
• How Indians rank their rights: what 26 interviews tell us about Article 19 and property, 30 October 2025.
• Evaluating India's Customs Authority for Advance Rulings (CAAR) and charting a path for reform, 11 March 2025.
• The Blind Spot in Indian Arbitration: Fees, Power, and Structural Oversights, 27 February 2025.
• Executive discretion in regulating private schools in India: Evidence from Delhi, 19 February 2020.

When remedies become regulation: The Karnataka High Court's intervention in food licensing and street vending

by Prashant Narang, Aryan Pandey and Indira Unninayar.

I. When public health litigation expands into regulatory governance

On 19 September 2025, the Karnataka High Court delivered its decision in Karnataka Pradesh Hotel & Restaurants Association v. Union of India. The case began as a routine industry challenge to the Food Safety and Standards Act, 2006. The judgment oversteps statutory adjudication to engineer regulatory design. It answers a real public-health worry. But litigation like this rarely stays within the parties before the court. The Court encroached into the executive territory with no consideration of whether the state is actually capable of implementing what it now directs. Such directions tend to produce selective enforcement and compliance costs that fall hardest on those least able to bear them.

The petition arose from a 2012 directive on licensing enforcement. The judgment was delivered nearly a decade and a half later by which time, the regulatory landscape and the affected ecosystem had evolved substantially. Street vending, food delivery and the law on informal work had all changed and all bore directly on what the Court now ordered.

II. What the petition sought, and what the Court ultimately directed

Hotel and restaurant associations had challenged orders to enforce the FSS Act and its regulations. The trigger was a letter dated 13 March 2012 issued by the State Food Safety Commissioner, acting on the Union instructions, requiring all States to enforce the Food Safety and Standards Authority of India's (FSSAI) licensing and registration regime. Every Food Business Operator' ("FBOs") had to obtain a licence or registration as a condition for continuing their business.

The petitioners contended that this requirement was impractical and arbitrary, especially applied uniformly to establishments of vastly different scale and capacity. The burden, they said, fell hardest on smaller operators. They went further, asking the Court to strike down swathes of the Act and its regulations as unconstitutional.

The Court rejected these constitutional challenges in their entirety and upheld the validity of both the Act and the Regulations, noting that the Supreme Court had already affirmed the Act. It restated food safety as a public-health aim and accepted the State's claim that the rules rested on scientific and international standards.

It then issued two directions with implications beyond the immediate dispute.

1. It directed the Union Government to classify restaurants into small, medium, and large categories and to enact separate laws or frame separate guidelines for each, observing that reliance on turnover-based thresholds alone, was impractical and insufficiently responsive to differences in size and operational capacity.
2. The Court directed the State government to introduce health and safety rules specifically for street vendors and food trucks, and to establish a mechanism to ensure strict oversight of their implementation.

These directions are what give the judgment its broader regulatory significance.

III. Expanded prescriptions sans diagnosis risk over-regulation, arbitrary discretion, and regulatory incoherence.

A. New rules directed without a policy diagnosis -

The judgment's biggest gap is that it never finds that existing regulation has failed. Nor does it explain why new, vendor-specific rules are required, and whether existing processes for licensing, inspection, and enforcement have failed. It even concedes that the licensing rules already impose hygiene standards on every operator.

The FSS Act already establishes a comprehensive enforcement architecture. Section 30 vests primary responsibility in the State Commissioner of Food Safety, while Sections 36 and 38 operationalise enforcement through prescribed methods and designated officers at the district level within municipal and local jurisdictions.

The Court should have asked two questions: were existing standards inadequate, and had enforcement failed? However, the judgment neither raises nor answers these questions.

The reasoning moves from a general observation about the informality of street vending directly to remedial directions that materially reshape regulatory obligations. It does so without identifying any institutional deficiency that might have justified such an expansive remedy.

B. The Street Vendors Act framework was overlooked entirely -

The Court acts as if street vendors operate in a regulatory vacuum. They do not.

The Street Vendors (Protection of Livelihood and Regulation of Street Vending) Act, 2014 ("SVA") was specifically enacted to balance livelihoods against congestion, public health and urban order. It overrides inconsistent municipal laws and works through town vending committees ("TVCs"), surveys, and certificates of vending. The SVA is not merely a procedural architecture; it embodies a considered normative choice by Parliament, that street vendors are rights-holders, entitled to livelihood protection, meaningful participation through TVCs, and procedural safeguards before any restriction on their vending.

By directing new health and safety rules for vendors without engaging with this framework, the Court implicitly undoes that normative settlement. It treats vendors not as participants with protected rights but as subjects of fresh regulation – inverting the very premise of the statute Parliament enacted for them.

The result is regulatory incoherence and it is worth being specific about what that means in practice. Under the SVA, a vendor acquires a certificate of vending through a TVC process that must include vendor representation; this certificate is her legal entitlement to occupy a designated vending zone. Under the FSS Act, she must separately obtain a licence or registration from FSSAI, subject to turnover thresholds and hygiene standards. The Court's direction would now superimpose a third layer: vendor-specific health and safety rules with a fresh enforcement mechanism. Each of these three regimes carries its own authority, its own compliance requirements, and its own enforcement officer.

C. The Court's directions assume state capacity that does not exist -

As far back as 2020, only 47% of town vending committees had any vendor representation; seven states had not notified schemes under the SVA, and in four states no compliant TVC had been constituted at all (Narang et al., 2020).

The enforcement machinery under the FSS Act tells a similar story. As of 2021, there were only 2,531 Food Safety Officers nationally for roughly one crore street vendors, with vacancy rates between 33% and 90% across states (Mishra & Khattar, 2025). Between 2018 and 2021, fewer than 1% of food adulteration cases ended in conviction. None of this means enforcement has stopped. It means enforcement has changed. When an inspector cannot police everyone, he polices whomever he likes – and scarcity only raises the price of his goodwill.

Piling fresh directions onto this will not help; it will hurt. Pritchett, Woolcock and Andrews (2010) examined three well-funded reforms (schooling in India, budgeting in Mozambique, land titling in Cambodia) that all failed for one reason: each demanded transaction-intensive implementation, millions of scattered discretionary acts no centre can supervise. Street-food safety is the same kind of task. It is transaction-intensive (a crore of vendors, countless daily sales), discretionary (each inspector judges hygiene on the spot), high-stakes (a failed check can end a livelihood) and opaque (the encounter leaves no record). On all four counts, the very dimensions Kelkar and Shah (2022) name as the hardest for any state to master, it scores about as badly as a task can.

The sequencing is backwards, too. Early state-building, Kelkar and Shah argue, should begin with low-stakes, high-visibility tasks, short feedback loops, correctable errors – and reach for hard ones only once capacity exists. The order to keep "strict vigil" over vendors does the opposite: it escalates coercion before building the institutions that would restrain it.

This dynamic has become characteristic of the Indian regulatory ecosystem. Shah's account of the history of Indian finance documents a pattern of regulatory agencies consistently engaging in micro-management whilst lacking the state capacity to enforce their own frameworks.

High discretion combined with low capacity does not produce zero enforcement; it produces selective, rent-seeking enforcement. When inspectors are too few to visit every vendor, they must choose whom to visit and a shortage of inspectors does not dilute that discretionary power, it concentrates and rations it. The fewer the officers relative to a crore of vendors, the more valuable each discretionary decision becomes, and the higher the payment it can command.

As Rai and Shah (2015) observe, the Indian state is too often strong as in scary but not strong as in capable: it commands coercive reach without the institutional depth to convert that reach into governance outcomes. Ordering strict vigil onto a system with 90% officer vacancies in some states therefore does not produce better public-health outcomes; it produces more rent-seeking. Inspectors arrive not on a fixed schedule but whenever they are short of cash, and vague, subjective standards give them the pretext to do so (The Seen and the Unseen, Ep 18). The Court's directions thus simply widen the regulatory perimeter within which this behaviour can operate.

D. Cross-jurisdiction comparisons are persuasive only when capacity is comparable-

The judgment leans hard on foreign examples to justify a strong licensing and enforcement regime. It cites international norms to rebut the claim that the regime is impractical.

But it ignores the conditions that make those systems work. Licensing does not work in the abstract. It needs capacity, trained inspectors, predictable procedure and firm limits on discretion.

The judgment itself notes that regulators such as the United States Food and Drug Administration recognise wide variation in the size and capacity of food establishments, and that enforcement is typically carried out by local health authorities. These details matter. They determine whether regulation produces overall compliance or its very opposite by way of uneven and discretionary enforcement.

This is where the comparison breaks down. The FSLRC (2013) treats foreign models as inputs to adapt, warning against any bid to "mechanically transplant ideas from elsewhere". International standards inform; they do not, on their own, justify a domestic enforcement regime. The court inverted this. It used the FDA comparison as the justification itself, without asking whether the administrative architecture that makes those powers function exists here.

Pritchett, Woolcock and Andrews (2010) show why that architecture cannot simply be assumed to exist. As per them when governments copy institutional forms from higher-capacity settings, the laws, the agencies, the enforcement powers, without first building the administrative foundations that make those forms function, the result is the appearance of reform without its substance. It is, in their words, no reform at all.

The FDA comparison does not establish that India's enforcement regime should be intensified. It shows only that the FDA works within machinery that makes its powers function. Transplant the powers without that architecture and you import the coercion while leaving behind the restraint.

E. Non-parties bear the burden of directions issued without participation -

The High Court has not abided by one of the basic principles of natural justice, audi alteram partem – the 'right to be heard' before any orders are passed against a person, as it has not 'impleaded' and 'heard' street vendors and pliers of food trucks, before proceeding to pass directions concerning them. Yet it ordered the State to write new health-and-safety rules for them and to keep 'strict vigil' over them, without studying who they are or what they face.

The regulatory burden falls on informal workers operating under constrained economic conditions. The court treats informality as a regulatory gap to be closed, vendors operate outside the system, so the system must be extended to capture them. Shah (2026) inverts this reading. Where the state's enforcement is slow and unreliable, operating informally is not evasion of good rules but a rational adaptation to bad institutions. Vendors build workarounds precisely because formal compliance offers little protection and predictable harassment. The state then misreads the adaptation as defiance and tightens the rules, which raises the cost of formality further and entrenches the informality it set out to cure. A direction to bring a crore of vendors under "strict vigil" is the next turn of exactly this cycle.

IV. Food safety is a compelling goal, but cannot justify prescription without basis

The strongest defence of the Court's approach lies in the public interest at stake. Food safety directly impacts public health and the FSS Act itself emphasises risk management, consumer protection, and preventive regulation. The Court did not draft rules itself; it told the executive to. . Read this way, the judgment can perhaps be seen as an attempt to prompt more effective implementation of an existing legal framework.

However, that defence, has limited force if any, as the Court does not explain the reasons why such directions pertaining to street vendors and food trucks were required in the first place, and how the existing enforcement mechanisms under the FSS Act were inadequate. Without a demonstrated failure, intervention at the level of design has little to stand on.

The promise of later consultation cures nothing. Consultation after an order to make rules is not consultation about whether the rules are needed at all. Once the outcome is predetermined, the space for meaningful policy deliberation is confined to that predetermined outcome.

The Court unfortunately moved too quickly from concern to prescription, and in doing so, blurred the line between ensuring lawful administration and reshaping the regulatory architecture itself.

V. Conclusion: Prescriptions must stay focused and relevant

The judgment reflects a growing tendency: courts shifting from reviewing validity to supervising regulation, especially under the banner of public health or public interest. Such interventions may be well-intentioned. But good intentions do not substitute for institutional competence. In this case, the Court's directions go beyond correcting unlawful administration to enter the terrain of regulatory design, without any demonstrated failure of the existing framework and without hearing those most affected by the outcome.

This tendency is not confined to any single domain. As Jain and Reddy T (2025) observe, reform through judicial diktat characteristically bypasses public consultation on questions that carry complex second-order effects. The adversarial courtroom is not designed for the stakeholder deliberation that sound policymaking requires. When it substitutes for that process, the people most affected, here, street vendors and food truck operators, bear consequences that were never examined.

Lon Fuller, in The Forms and Limits of Adjudication (1978), offers a useful framework for understanding why. Fuller identified a class of problems he termed "polycentric", those where the disposition of any single issue carries implications for every other, such that pulling one strand "will distribute tensions after a complicated pattern throughout the web as a whole". In such contexts, he argued, adjudication becomes institutionally incapable, because the affected party's participation through proofs and reasoned arguments loses all meaning when no advocate "could possibly present to the tribunal the grounds that must be taken into account in the decision".

The Karnataka High Court's directions bear precisely this character. A judicial mandate to introduce new health and safety rules for street vendors does not resolve a discrete regulatory question, it simultaneously displaces an existing framework under the Street Vendors Act, imposes fresh compliance burdens on informal workers already operating at the economic margin, adds enforcement obligations to a system strained by Food Safety Officer vacancy rates and multiplies points of regulatory contact where discretion can be monetised. Each of these consequences shapes the others, and that interdependence is exactly what Fuller's framework identifies as lying beyond the proper limits of adjudication.

The cost is not only procedural. Compliance burdens imposed without the capacity to administer them do not produce better governance; they tax the everyday enterprise of people operating at the margin and dampen the very economic activity the state should want to encourage. As Shah (2026) puts it, this is the "effervescence of creativity and invention that a poor country cannot afford to extinguish."

The lesson is that remedial ambition must be matched by remedial discipline. Prescription without diagnosis, and supervision without capacity, do not produce better governance. They produce the illusion of it.

References

Bedi J. and Narang P., 2020. Progress Report 2020: Implementing the Street Vendors Act. Centre for Civil Society.

Mishra G. and Khattar J., 2025. FSS Act: Need for enforcement and accountability in India's food safety regime. Bar and Bench. 26 June 2025.

Pritchett L., Woolcock M. and Andrews M., 2010. Capability Traps? The Mechanisms of Persistent Implementation Failure. Center for Global Development.

Kelkar V. and Shah A., 2022. In Service of the Republic: The Art and Science of Economic Policy. Penguin Allen Lane.

Varma A. and Menon M., 2017. Restaurant Regulations in India. The Seen and the Unseen. 15 May 2017.

Financial Sector Legislative Reforms Commission, 2013. Report of the Financial Sector Legislative Reforms Commission. Ministry of Finance, Government of India. 22 March 2013.

Jain C. and Reddy T P., 2025. Why reform through judicial diktat is fraught with perils. Times of India. 8 November 2025.

Fuller L. and Winston K I., 1978. The Forms and Limits of Adjudication. Harvard Law Review, Vol. 92, No. 2.

Rai S. and Shah A., 2015. Going from strong as in scary to strong as in capable. The Leap Blog. 25 February 2015.

Shah A. and Varma A., 2026. Why Freedom Matters | Episode 10 | Everything is Everything. Everything is Everything. 1 September 2026.

Ahluwalia R. and Shah A., 2026. Why Firms Build Economies Ft. Ajay Shah | Growth is Good | Ep 25. Foundation for Economic Development. 27 March 2026.

Prashant Narang and Aryan Pandey are researchers at TrustBridge Rule of Law Foundation. Indira Unninayar is an Advocate-on-Record, Supreme Court of India.

What happens when arbitration deadlines are missed

by Prashant Narang and Renuka Sane.

Section 29A of the Arbitration and Conciliation Act 1996 was introduced to deal with delays in arbitration. It sets a time limit for making an award. If that time runs out, parties have to go to court to extend it. The court can also impose consequences for delay, such as reducing fees, awarding costs, or replacing the arbitrator.

Our new working paper studies how this works in practice. It looks at 202 reported orders of the Delhi High Court between 2015 and 2024.

It finds that the Court almost always grants extensions and almost never imposes sanctions.

What the data shows

Out of 202 cases, the court granted extensions in 198 (98%). Only 4 cases were dismissed, and those were on technical grounds. Sanctions were rarely imposed.

• Fee reduction: 0 out of 202 cases
• Adverse costs: 6 out of 202 cases (about 3%)
• Replacement of arbitrators: 4 out of 202 cases (about 2%)

Repeat extensions are not unusual. There are 30 cases where parties came back for a second or later extension. The court granted 29 of them (96.7%). There are no sanctions in these repeat cases.

These petitions also move quickly.

• Median time to decide: 3 days
• Median number of hearings: 1
• About 63% of cases are decided in a single hearing

So the delay is not in the court process. Courts dispose of these matters quickly. But they usually extend time without imposing any consequence.

Why extensions are common

Part of the answer lies in how Section 29A is structured.

For the Court, giving an extension is easy if both parties agree. The court can dispose of the case quickly.

Imposing a penalty is harder as the Court has to find out who caused the delay. It may have to look at the record in detail. It also has to hear the arbitrator before cutting fees. All this is likely to take more time and effort.

It is not surprising that consensual extensions are more common.

What this means for the law

Over time, this pattern shapes how the law works.

Section 29A was meant to push arbitrations to finish on time. It often works as a way to formally extend time after the deadline has passed.

If parties expect that extensions will be granted without much difficulty, the deadline may lose its force.

This does not mean the provision has no value. But it suggests that deadlines work best when consequences are easy to apply.

Looking ahead

If deadlines are not backed by predictable consequences, do they change behaviour?

The paper does not answer this fully. It focuses on what courts do once parties come for an extension. But the pattern is clear. Extensions are routine and sanctions are exceptional.

That may matter for how arbitration timelines are taken in practice.

You can read the working paper here.

The authors are researchers at TrustBridge Rule of Law Foundation.

From Statute to Zero-Cost: Section 31A and the Bombay High Court's Zero-Cost Culture

by Prashant Narang and Vishnu Suresh.

Why this matters now

In 2015, Parliament rewrote Section 31A of the Arbitration and Conciliation Act to make loser-pays the default i.e., compensate the winner and deter abuse. A decade on, our mixed-methods study of the Bombay High Court's arbitration docket(2023-24) shows a stark gap between that legislative design and courtroom reality. Out of 102 decisions under Sections 11 (appointment) and 34 (set-aside), costs were imposed in only four (3.9%). Even then, costs were framed as exceptional sanctions for egregious conduct - not as routine reimbursement that follows the event.

Parliament's 2015 insertion of Section 31A followed the 246th Law Commission Report (2014), which condemned India's token-costs culture under the Code of Civil Procedure and urged a structured, outcome-linked "costs-follow-the-event" rule for arbitration. Section 31A sought to import the English loser-pays norm to ensure both indemnity and deterrence. Yet, a decade later, the provision functions largely as a dead letter.

This reluctance is not harmless. When weak Section 11 or Section 34 petitions carry no real downside, the expected cost of delay collapses onto the opponent and the taxpayer. The result is a deterrence gap: fewer incentives to screen out speculative filings, more tactical adjournments, and a credibility problem for India's "arbitration-friendly" promise.

In our new paper (publicly available), we build the first mixed-methods baseline for any Indian High Court on post-2015 costs in arbitration-related litigation. We combine a complete corpus of BHC decisions in 2023-24 with 22 confidential stakeholder interviews (judges, arbitrators, and counsel) to explain the pattern and to propose targeted reforms.

What we did

Prior commentary (and court exhortations in Salem and Uflex) diagnosed India’s token-cost culture but largely at the Supreme Court or in international arbitration. So, we chose to focus on a major High Court post-2015. We identified every Bombay High Court decision under Sections 11, 34 (and related Section 37 appeals where relevant) in calendar years 2023–24; after deduplication and exclusions, 102 reasoned decisions remained (54 in 2023; 48 in 2024). We coded each decision for whether costs were awarded, quantum, reasons, and whether judges engaged with Section 31A’s statutory factors. Interviews (22 conducted) supplied explanatory mechanisms behind judicial practice.

What we find

3.9% of decisions imposed costs; 96.1% did not. Where imposed, costs were justified as punishment for delay/illegality - not as routine indemnity. In 60 decisions, the court itself recorded conduct that maps onto Section 31A triggers. Costs were imposed in 4; in the remaining 56, no cost order followed. This selective enforcement blunts deterrence. With no articulated scale or factors applied, lawyers cannot advise clients on realistic exposure.

Why the default drifts to "zero-cost"

One, Section 31A(1) gives courts/tribunals discretion to determine costs. Section 31A(2) supplies a loser-pays presumption, but only if the decision-maker chooses to engage. Written reasons are required for departing from the presumption - not for declining to consider costs at all. This creates a one-way gate.

Two, interviewees repeatedly flagged a cultural aversion to "appearing punitive". For judges approaching retirement, the post-retirement arbitration market sharpens this caution: visible toughness on costs can be perceived as party-unfriendly, potentially affecting future appointments. That behavioural preference often persists into arbitral roles.

Third, Section 31A lists factors but lacks practical scales. In our four cost-imposing cases, sums ranged from Rs. 1 lakh to Rs. 40 lakh - with thin links to documented outlay. Practitioners consequently cannot price risk ex ante; costs become a lottery, not a calculable exposure.

How reasons are (not) written

Most orders end with a formulaic "no order as to costs", even when the judgment itself records behaviour that Section 31A treats as cost-triggering: obstruction, delay, frivolous claims, wasted hearings, or refusal of reasonable settlement.

Two of the four cost-imposing judgments offer only a one-line figure; two provide a brief narrative (e.g., "taking a chance") and sometimes cite one cost figure from the record, but none works through Section 31A's checklist or ties quantum to documented expense and deterrence. The resulting spread (Rs. 1-40 lakh) looks unanchored. For users, this reads like gesture, not governance.

What needs to be done

Our proposal aligns with the 246th Law Commission (2014) and the T.K.V. Committee (2024). One, create a rebuttable default: award reasonable, receipted costs to the successful party. Require brief reasons (even 1-2 sentences) when withholding costs. This small change collapses the one-way gate that currently rewards inaction. Two, keep indemnity as the baseline and add calibrated uplifts for documented delay tactics, non-disclosure, wasted hearings, or unreasonably rejected settlement offers - all already listed in Section 31A(3). Three, consider importing a narrow, high-threshold wasted-costs power (on the UK model) against improper or negligent conduct that needlessly increases expense. This targets the source of delay when it lies with representatives rather than clients.

Limitations

We included only one jurisdiction (Bombay), a two-year window, and interviews that exclude sitting judges and in-house counsel. Arbitral awards and proceedings were out of scope (confidentiality), though interviews illuminate arbitral practice.

Conclusion

Section 31A promised efficient, fair, and predictable cost allocation. In the Bombay High Court's arbitration-related litigation, it has largely delivered neither indemnity nor deterrence - except at the margins of overt misconduct. A rebuttable default in favour of reasonable costs, brief reasons for exceptions, receipt-anchored scales, and conduct-linked uplifts would realign daily practice with Parliament's indemnificatory intent and close the deterrence gap that now fuels speculative petitions.

Read the full working paper "From Statute to Zero-Cost: Section 31A and the High Court's Zero-Cost Culture", here.

The authors are researchers affiliated with TrustBridge Rule of Law Foundation.

How Indians rank their rights: what 26 interviews tell us about Article 19 and property

by Prashant Narang.

Citizens treat property as the material anchor that makes other freedoms meaningful; livelihood-enabling freedoms are prioritised, while free speech is cherished but policed asymmetrically.

In 1978, the Forty-Fourth Amendment removed the right to property from the Constitution's catalogue of fundamental rights. Lawyers and economists have debated the implications ever since. But do ordinary citizens internalise that demotion? This post introduces our Socio-Legal Review note - co-authored by Sehar Abdullah, Keerthana Satheesh, and Prashant Narang- which steps outside the courtroom to ask a simple question with big policy consequences: which rights do people treat as most important in their daily lives - and why? Drawing on 26 in-depth interviews across professions that are especially sensitive to rights restrictions (journalists, migrants, MSME owners, cab drivers, farmers, artists, street performers and more), we map how citizens rank the Article 19(1) freedoms alongside the right to property. The top-line finding: people continue to see property as foundational - often the precondition that makes other freedoms meaningful.

What we did

We used purposive and snowball sampling to reach respondents aged 19-65 whose livelihoods could be directly affected by limits on speech, association, movement, residence, profession, or on property. Most interviews were conducted in Delhi, with additional remote interviews in Kerala, Chennai, and Bengaluru. We piloted the instrument, then ran a three-part interview: background and demographics; general views on freedoms and "reasonable restrictions"; and case studies with graded constraints (for example, permits and bans; "public order" versus epidemic) to elicit trade-offs. Transcripts were thematically coded. This is qualitative research; insights are directional, not population estimates.

What we heard: the lived hierarchy

• Property as cornerstone - Across backgrounds, respondents described property as livelihood, security, and autonomy "a means to earn a living", as one farmer put it. People resisted permissions on buying and selling land and were most animated by compulsory acquisition scenarios. Support for acquisition often hinged on compensation: market-linked and predictable when the purpose was clearly public (for example, a metro), with sharper bargaining when it looked commercial (for example, a mall). The underlying intuition is economic: when property underwrites household security, the perceived risk of under-compensation looms large.
• Economic freedom as a gateway - Freedoms that enable livelihood - movement and residence for migrants (Article 19(1)(d) and (e)) and choice of occupation (Article 19(1)(g))- were consistently prioritised. A photojournalist linked movement directly to earning; an activist framed profession and property as part of a single "socio-economic" relationship that the state should ease rather than police. This fits a law-and-economics intuition: secure property and open markets reduce dependence and expand feasible choices, which then support speech and association.
• The free-speech asymmetry - Respondents valorised free expression for themselves - journalism as "the fourth pillar", bans as "the end of democracy" - but many were readier to restrict others, often using elastic notions of "harm" or "extremism". In short: pro-speech for me, pro-restriction for you. That asymmetry is a legitimacy warning: broad, vague grounds for curbing speech match the public's weakest intuitions and risk becoming catch-alls.
• Residence as identity - The right to reside and settle anywhere (Article 19(1)(e)) surfaced as a surprising anchor of national belonging. Several interviewees described the ability to live anywhere as central to Indian diversity - inking mobility to both opportunity and citizenship.

Why this matters for policy design

• Compensation design - Where acquisition feels commercial, citizens bargain harder and distrust adequacy; where purpose is plainly public, opposition is more about predictability than principle. Legislatures and agencies should therefore tighten "public purpose" definitions and commit to clear, market-linked compensation formulas (benchmarks, indexation, relocation assistance) and process timelines that reduce uncertainty rents and litigation.
• Targeted deregulation for livelihood rights -Frictions on movement, residence, and small-enterprise activity (permits, zoning that criminalises street vending, opaque lease and tenancy formalities) bite hardest on those who use these rights to earn. Policy wins lie in simplifying titles and transfers, digitising and time-bounding consents, rationalising vending, parking, and market rules, and reducing compliance steps for micro-businesses - exactly where our respondents located day-to-day pain points.
• Speech rules that travel well - The asymmetry we observed - tolerant for self, restrictive for others - suggests two drafting heuristics: (i) avoid vague grounds like "offence" without a tight harm standard, and (ii) pair restrictions with necessity-and-proportionality tests that officials must evidence ex ante. Narrow tailoring not only protects rights but also matches citizens' strongest defence of speech (for themselves) while tempering expansive instincts to curb others.

What this does not claim

This is a qualitative, urban-skewed sample. We do not estimate a numeric hierarchy or claim causal links between income and preferences. Our aim is to surface design hypotheses and legitimacy risks that can be tested at scale and used now for better drafting and implementation. Rural and longitudinal work are obvious next steps.

The big picture

Constitutional amendments can change a right's formal rank without changing its everyday salience. In our interviews, property remains the backbone of autonomy and a hedge against shocks; livelihood-enabling freedoms are the everyday workhorses; and speech is cherished but policed asymmetrically. For policymakers and drafters, the take-away is practical: align legal categories and procedures with how citizens actually use and trade off rights. That means predictable compensation and acquisition processes; frictions-down reforms for movement, residence, and micro-enterprise; and narrowly tailored, evidence-based limits on expression. This is the path to a constitutional order that people recognise in their daily choices - not just in the statute book.

Read the paper

Rights in the Eyes of the Beholder: The Lived Hierarchy of Rights in India's Democracy - Socio-Legal Review, 21(1), 2025. Authors: Sehar Abdullah, Keerthana Satheesh, and Prashant Narang.

Prashant Narang is a researcher at TrustBridge Rule of Law Foundation.

Evaluating India's Customs Authority for Advance Rulings (CAAR) and charting a path for reform

by Vijay Singh Chauhan, Prashant Narang, and Monika Yadav.

Advance rulings are critical for trade facilitation - they offer clarity on tariff classifications, customs duties, and valuation, enabling importers and exporters to navigate complex regulatory environments with confidence.

India's journey with advance rulings began in 1999 with the establishment of the Authority for Advance Rulings (AAR), which handled both direct and indirect tax matters. However, the AAR faced severe criticism for its procedural inefficiencies and delays. As one senior customs consultant quoted in the paper noted, "We had cases pending for 4-5 years, forcing many businesses to abandon their plans entirely." The centralised structure, with its single Delhi office, created substantial logistical challenges for businesses across India.

In response to these shortcomings, the Customs Authority for Advance Rulings (CAAR) was introduced in 2018 under Chapter VB of the Customs Act, transforming India's framework from a judicial model to a quasi-judicial one led by senior customs officers. This reform aimed to leverage domain-specific expertise and decentralise operations with benches in Delhi and Mumbai.

However, has CAAR succeeded in delivering timely and consistent rulings, and how does its performance measure up against international benchmarks?

In our recent paper, “Decoding CAAR: Insights, Challenges, and Pathways for Reforms”, we critically assess CAAR's performance between January 2021 and August 2024. Our mixed-methods analysis combining stakeholder interviews with quantitative evaluation of 414 advance rulings uncovers systemic inefficiencies impeding CAAR's effectiveness, notably delays beyond the statutory 90-day timeframe and inconsistencies from limited nationwide applicability.

Despite improvements over its predecessor (AAR), CAAR remains burdened by procedural bottlenecks - chiefly, dependence on port commissioners for technical inputs, uneven workload distribution, and outdated manual processes. Drawing comparisons with jurisdictions like the U.S., Canada, and Australia, we propose actionable reforms: establishing dedicated in-house technical expertise, adopting AI-driven case management systems, and ensuring the nationwide and indefinite applicability of rulings.

By identifying critical gaps and presenting pathways for reform, our research seeks to align CAAR with global standards -essential for strengthening India's role as a reliable global trade partner.

Measuring CAAR's performance: The 90-Day challenge

A central finding of the research is that CAAR struggles to meet its statutory obligation to issue rulings within 90 days. The analysis of rulings issued between January 2021 and August 2024 reveals that only 46.2% of decisions were delivered within this mandated timeframe. This compliance rate varies dramatically among officers, with one achieving 86.1% compliance while another managed just 2.2%.

The primary bottleneck identified is CAAR's dependence on port commissioners for technical inputs. Although regulations allow commissioners just two weeks to provide comments, these responses are often delayed, extending the ruling process by months. As one CAAR presiding officer acknowledged in an interview, delays frequently occur when "comments from jurisdictional commissioners are not received on time," leaving officers with "no option but to delay further".

Some CAAR officers have developed informal practices to mitigate these delays, including sending reminders, making personal phone calls, and issuing demi-official letters. However, these efforts reflect systemic inefficiencies rather than sustainable solutions. The research also highlights the CAAR's reluctance to issue ex parte rulings (without port commissioner input), despite having the authority to do so under Regulation 8(8) of the CAAR Regulations, 2021.

Port-specific applicability: A self-imposed limitation

Another significant limitation is the port-specific applicability of rulings. Unlike systems in the United States, Canada, and Australia- where advance rulings apply nationwide - CAAR rulings are binding only at the specific port where they're issued. This creates inconsistent enforcement across India's customs jurisdictions, forcing businesses that import through multiple ports to seek separate rulings for identical goods.

One respondent articulated this frustration: "Rulings should be consistent across all ports. My classification should not fall under X at one port and Y at another". This limitation not only increases administrative burdens but also undermines the predictability that advance rulings are designed to provide.

The temporal restriction of rulings to a three-year validity period further compounds these challenges. Globally, countries adopt more flexible approaches - Australia's rulings remain valid for five years, while those in Canada and the U.S. have indefinite validity unless there are changes in law or circumstances. As one participant noted, "Unless there is a change in the product or technology, limiting advance rulings to three years seems unnecessary".

Workload imbalance: The Mumbai-Delhi divide

The research reveals significant disparities in workload distribution between CAAR's two benches. The Mumbai bench handles substantially more cases (256) than Delhi (158), with Maharashtra alone accounting for approximately 37.11% of Mumbai's workload. This concentration of cases in Mumbai is followed by Tamil Nadu (31 rulings, 12.11%) and Karnataka (27 rulings, 10.55%), with these three states collectively accounting for about 59.77% of Mumbai's workload.

In contrast, Delhi's jurisdiction shows a different distribution pattern, with Delhi (NCT) itself accounting for 54 rulings (34.18%), followed by Haryana (23 rulings, 14.56%) and Uttar Pradesh (9 rulings, 5.70%). These regions together contribute approximately 54.43% of Delhi's total caseload. The Mumbai bench also faces the additional challenge of 75 orders lacking specified applicant addresses, which further complicates case management.

While both benches experience procedural bottlenecks - such as delays in receiving feedback from jurisdictional commissioners - the Mumbai bench appears disproportionately burdened, given its coverage of the economically significant regions of Western and Southern India. The paper acknowledges this workload imbalance but, rather than recommending additional benches, focuses on process-oriented solutions discussed below.

A path forward: Recommendations for reform

The paper proposes several actionable reforms to enhance CAAR's efficiency and alignment with global best practices:

1. Transition to a Technical Unit Model - Establish in-house technical expertise through dedicated classification specialists and valuation analysts, modeled after systems in Australia, Canada, and the U.S. Pilot at one bench first, with performance measured through turnaround times and stakeholder feedback.
2. Digital Process Optimisation - Implement AI-driven case management using Large Language Models (LLMs) to auto-generate case briefs and identify classification issues. Develop long-term AI solutions integrating HS codes, trade agreements, and global tariff jurisprudence.
3. Nationwide Applicability of Rulings - Amend Section 28J(1)(c) of Customs Act to mandate uniform enforcement across all Indian ports, eliminating jurisdiction-specific inconsistencies.
4. Extending Ruling Validity - Introduce auto-renewal mechanism maintaining rulings' validity unless material facts or trade laws change, reducing business compliance burdens.
5. Enhanced Transparency and Accountability - Create real-time performance dashboard tracking case disposal rates, 90-day compliance, appeal rates, and ruling consistency while maintaining necessary confidentiality.

Implications for India's trade ecosystem

The study's findings have significant implications for India's position in global trade networks. While CAAR represents progress compared to its predecessor, systemic inefficiencies continue to hinder its full potential. Addressing these challenges is crucial not only for domestic traders but also for strengthening India's reputation as a reliable trade partner internationally.

The research highlights an encouraging statistic: more than two-thirds of CAAR rulings align with the applicant's proposed position. This suggests that when the system functions effectively, it provides valuable certainty to businesses. However, the procedural bottlenecks identified in the study prevent this benefit from being fully realised.

As global trade regulations evolve and become increasingly complex, ensuring that CAAR remains agile and responsive is critical to sustaining India's economic growth. The reforms proposed in this paper offer a roadmap for enhancing the efficiency and relevance of advance rulings within India's broader trade facilitation framework.

Conclusion

This process audit of India's Customs Authority for Advance Rulings (CAAR) provides a rigorous assessment of its strengths and limitations. The study effectively documents progress since transitioning from AAR while identifying persistent operational inefficiencies, particularly the 90-day timeline compliance challenge, port-specific applicability constraints, and the technical expertise gap compared to global benchmarks.

For policymakers and trade stakeholders, this research offers a clear roadmap to transform CAAR. The evidence-based recommendations target critical friction points in CAAR's workflow: establishing in-house technical expertise to reduce dependence on port commissioners, implementing AI-driven case management, expanding nationwide ruling applicability, and extending validity periods. These practical reforms align with international best practices observed in jurisdictions like the United States, Canada, and Australia.

Here is the link to the paper.

Vijay Singh Chauhan is a Executive Director at Deloitte Touche Tohmatsu India LLP, Prashant Narang and Monika Yadav are researchers at the TrustBridge Rule of Law Foundation.

The Blind Spot in Indian Arbitration: Fees, Power, and Structural Oversights

by Prashant Narang and Vishnu Suresh.

In India, when parties fail to agree on the composition of an arbitral tribunal, courts intervene and appoint retired judges as arbitrators, who unilaterally determine their own fees-without the consent of both parties. This process, known as "ad hoc" arbitration, has led to concerns about excessive charges. While no comprehensive dataset proves a systemic pattern of exorbitant fees, recurring judicial and committee observations suggest that the issue is widespread enough to warrant closer scrutiny. The Indian policy response has been to implement some form of fee regulation for such arbitration.

This article presents a history of the Indian policy thinking on arbitrator fees and presents an argument about why fee regulation alone may not remedy the structural inefficiencies in ad hoc arbitrations dominated by retired judges. Judges who design (or are expected to design) and implement arbitration appointment rules often later serve as arbitrators themselves, benefiting from these same rules - or the lack thereof - post-retirement. Even when they do not directly benefit, enforcing such rules against fellow judges, particularly their seniors in the profession, is challenging given the inherently hierarchical nature of the legal fraternity.

The article argues that the current fee regulation approach further entrenches judicial control over arbitration rather than reducing it. By deepening the judicialisation of the arbitration process, it raises further concerns about perpetuating systemic inefficiencies. At the same time, we explore whether a more fundamental shift towards institutional arbitration - centred on dejudicialisation and the decoupling of the judiciary from arbitration - is necessary to create a cost-effective, competitive, and independent arbitration ecosystem in India.

The evolution of the debate on arbitration fees

Concerns about high fees in arbitration were explicitly raised by the Supreme Court in Union of India v M/s Singh Builders Syndicate (2009) 4 SCC 523. The Supreme Court reiterated its concerns in Sanjeev Kumar Jain v Raghubir Saran Charitable Trust (2012) 1 SCC 455, acknowledging that high arbitration costs discouraged parties from opting for arbitration.

This focus on high fees has meant that Indian policy response has also relied on mandating "fee schedules" for tackling the problem. This is consistent with other jurisdictions as well. For example, Germany prohibits arbitrators from unilaterally deciding their own fees on the ground that it violates the prohibition on in rem suam decisions (i.e., ruling in one's own cause). Austria and Switzerland likewise disallow arbitrators to issue binding and enforceable orders regarding their own remuneration. Italy permits arbitrators to fix fees in the absence of explicit party agreement, but these fees only become binding after the parties themselves consent. Singapore, lacking a written fee agreement, lets a disputant seek assessment of fees by the Registrar of the Supreme Court under the Supreme Court of Judicature Act, 1969.

The Indian policy response

The key elements of the Indian response are as follows:

1. The Fourth Schedule under the 2015 Amendment: The 246th Report of the Law Commission of India (2014) recommended a structured fee schedule to bring uniformity to arbitration costs. This led to the introduction of the Fourth Schedule under the Arbitration and Conciliation (Amendment) Act, 2015, which provided a model fee framework for arbitrators in ad hoc arbitrations. In addition, it also inserted a provision empowering high courts to make rules for fee determination in case of domestic ad hoc arbitration.
2. Shifting towards institutional arbitration under the 2019 Amendment: The Arbitration and Conciliation (Amendment) Act, 2019 introduced a framework that shifted appointment powers from courts to arbitral institutions. The amendment required the Supreme Court and High Courts to designate arbitral institutions for making appointments under Section 11, rather than appointing arbitrators directly. The amendment goes a step further and creates a fallback mechanism for jurisdictions where graded arbitral institutions are not available. In such cases, the High Court Chief Justice can maintain a panel of arbitrators who effectively function as an arbitral institution. These empanelled arbitrators must follow the Fourth Schedule's fee structure, creating a hybrid between institutional and ad hoc arbitration. However, this part of the 2019 amendment is not notified yet.
3. Alternative fee arrangements by the TKV Report, 2024: In June 2023, the Ministry of Law and Justice constituted an expert committee, chaired by former Law Secretary T.K. Vishwanathan, to review arbitration costs and propose amendments to the Arbitration and Conciliation Act, 1996. The T.K. Vishwanathan Committee Report, 2024 identified multiple shortcomings in the existing Fourth-Schedule fee framework, most notably the reliance on "claim quantum" as the primary basis for calculating arbitrator fees. Such a simplistic approach, the Report argued, neglected case complexity and procedural variations: for instance, an ostensibly small claim requiring extensive oral evidence or expert testimony can command more arbitrator time than a large claim resolved on documents alone. In response, the TKV Report advocated Alternative Fee Arrangements (AFA), emphasising value-based pricing that accounts for factors like complexity, time, and potential cost savings. Most notably, the TKV Report suggested eliminating Section 11A and the Fourth Schedule entirely, replacing them with a more flexible framework in which the Central Government would prescribe fee structures through rules.
4. The Draft Arbitration and Conciliation (Amendment) Bill, 2024: This draft bill empowers the Arbitration Council of India (ACI) as a proxy for the Union Government to specify arbitrator fees. Under the Bill, the Fourth Schedule would be deleted, and Section 11A would be revised so that the ACI could determine fees, except where parties have explicitly negotiated their own fee arrangement or are using an arbitral institution with its own fee rules. Another significant change is the removal of the Chief Justice's consultative power in the appointment of ACI's governing board, shifting oversight from judicial control to greater executive control of the arbitration regulatory body.

Why the fee regulation approach has fallen short

Before we analyse the reasons for the failure of the 2015 amendment and the Fourth Schedule, it is useful to describe the political economy that confronts any policy change on arbitration: namely, the near-monopolistic environment created by a small group of retired judges who often command premium fees and face minimal accountability. Courts retain the ultimate power to appoint arbitrators under Section 11, and this process frequently involves the same cadre of retired judges who benefit from the laxity of fee caps. The entire appointment and fee determination process is still largely vested in the judiciary. Given that many judges become arbitrators upon retirement, they have little incentive to enforce rigorous fee caps that might constrain their own future earnings. This fundamental public choice problem has been frequently documented, including by the Vice-President's observation that "nowhere in the world is arbitration in such tight fist control as in our country".

The ONGC v Afcons Gunanusa JV (2022) provides a telling example of how court-appointed arbitrators can exploit their position. Despite initially accepting a contractual fee cap of Rs. 10 lakh per arbitrator, the tribunal - composed of retired Supreme Court and High Court judges - unilaterally enhanced their fees multiple times. They first sought adoption of the Fourth Schedule's more generous framework, then further increased their fees citing case complexity, and even attempted to apply these increases retrospectively. When ONGC, a public sector enterprise subject to audit scrutiny, refused to pay the enhanced fees, the arbitrators recused themselves, forcing the matter back to court. The Supreme Court ultimately had to terminate the tribunal's mandate, highlighting how the current system enables arbitrators to leverage their position to demand higher fees with limited accountability.

This reality was not addressed by the 2015 amendment. While the Fourth Schedule was introduced precisely to limit excessive fees, it was neither made mandatory nor accompanied by a robust enforcement mechanism. As a result, it did little to disrupt the underlying political economy that sustains high-cost ad hoc arbitration. In fact, it risked consolidating judicial influence rather than attenuating it, especially since it granted High Courts the discretion to frame their own fee rules, ultimately placing regulatory power over arbitrator remuneration in the hands of those who may later serve as arbitrators themselves.

Moreover, this one-size-fits-all imposition overlooked regional variations and pre-existing institutional successes. The Karnataka Arbitration Centre, for instance, already offered a more economical schedule capped at around Rs. 12 lakhs for disputes above Rs. 20 crores, whereas the Fourth Schedule ceiling reaches Rs. 30 lakhs based on the thresholds set by the Delhi International Arbitration Centre. Rather than drawing on such local expertise and diversity to foster competitive discipline, the reforms proceeded on a centralised model that did little to leverage market discovery or locally tailored fee structures. The Law Commission's proposals were more concerned with containing arbitrator fees than with dismantling the structural conditions (judicial appointments, confined arbitrator pools, discretionary rule-making by courts) that perpetuate high costs.

The subsequent 2019 amendment intends to reduce judicial intervention and promote institutional arbitration. It revised Section 11 so that courts could "designate" arbitral institutions for appointments. "Fallback" arrangements enable High Court panels of arbitrators - often the same retired judges or those close to the judiciary - to retain effective control over the process, with fee structures mandated by the Fourth Schedule.

Recent developments, including the constitution of a new committee chaired by T.K. Vishwanathan in 2023, reflect growing discontent with the rigid claim-quantum basis that underlies the Fourth Schedule. The TKV Report contends that arbitrator fees should account more flexibly for complexity, time, and the overall resources required. While the proposed reforms contemplate eliminating the Fourth Schedule, transferring fee-setting authority to the Arbitration Council of India, and moving towards executive rather than judicial oversight of arbitration rule-making, they too risk replicating hierarchical models unless accompanied by genuine plurality and transparency in the appointment of arbitrators and the choice of fee structures.

Ultimately, each successive round of reform, from the 2015 amendment and the introduction of the Fourth Schedule to the latest proposals from the TKV Report, has prioritised adjusting fee schedules over reducing systemic reliance on a narrow circle of retired judges. The 2019 amendment and its stillborn promise of institutional appointments is an exception. As a result, what begins as a nominal attempt at "dejudicialisation" typically ends in reaffirming the dominance of court-nominated arbitrators, with little recourse for parties subjected to escalating costs. The persistent gap between nominal regulatory interventions and the practical realities of enforcement serves as a stark reminder that fee caps and model schedules, however laudable, are unlikely to produce fundamental change unless the structural incentives and entrenched hierarchies that govern Indian arbitration are addressed in earnest. Indeed, the recurring inclination to concentrate power - first in the High Courts, now potentially in the central government which is also the largest litigant - overlooks the fundamentally decentralised ethos of arbitration, which thrives on party autonomy and market-driven checks.

The next chapter in arbitration reform: Evidence-based vs. assumption-driven reforms

India's ongoing journey toward arbitration reform reveals a classic illustration of the "knowledge problem" that arises when policymakers attempt top-down interventions without robust, localised information. Observations from courts and committees certainly highlight inefficiencies - especially in court-appointed arbitrations that often lean on retired judges. Yet the absence of systematic, comparative data on whether these inefficiencies truly amount to a widespread market failure should give us pause before imposing sweeping fee controls or rigid schedules.

We must ask: do we need price caps because parties stuck in deadlock are unable to negotiate with court-appointed arbitrators? Or because retirees form a monopoly and pose barriers to entry? Excessive or poorly calibrated regulation can distort incentives and stifle innovation in arbitration services - problems that often follow when market-based processes are replaced by bureaucratic mandates. Fee ceilings, in particular, risk becoming a blunt tool that overrides local knowledge and decentralised experimentation. If parties truly had meaningful alternatives - like institutional forums or specialised arbitrators - they would naturally gravitate toward more cost-effective options, compelling fee discipline through competition rather than imposed caps.

Likewise, the unilateral fee determination by certain court-appointed arbitrators raises critical questions about capture - what might be called a narrowly "clubby" arrangement favouring a select group. But imposing top-down reforms in the absence of clear data on how widespread or severe this dynamic is invites "presumptive regulation". Such policy-by-assumption can inadvertently lead to higher costs, reduced choice, and entrenched favouritism - precisely the path we want to avoid.

By contrast, implementing the 2019 amendments and cultivating robust institutional arbitration offers a more polycentric and evidence-driven approach. This would expand the pool of competent arbitrators, reduce dependence on judge-led ad hoc appointments, and ultimately let competition, reputation, and local knowledge discipline fees. Notably, India's largest litigant - its own government - has already started shifting away from ad hoc arbitration, indicating that when parties sense an overcharge or imbalance, they do respond by seeking out better alternatives.

Before erecting rigid structures such as a universal Fourth Schedule, policymakers should verify that the alleged market failures cannot be resolved through the competitive process. Empirical, comparative research - analysing cost differentials between judge-led ad hoc arbitration and institutional arbitration - would illuminate whether exorbitant fees reflect a systemic shortcoming or isolated pockets of inefficiency. Only when we ground policy in such evidence can we ensure that reforms address real problems and do not accidentally lock in the very system they aim to correct.

Prashant Narang and Vishnu Suresh are researchers at the TrustBridge Rule of Law Foundation. We thank our colleagues Renuka Sane, Bhavin Patel, as well as two anonymous reviewers, for their comments.

Executive discretion in regulating private schools in India: Evidence from Delhi

by Bhuvana Anand, Jayana Bedi, Prashant Narang, Ritika Shah and Tarini Sudhakar.

Students in India are increasingly switching to private schools. For 2017, U-DISE data shows that nearly 40% of students are enrolled in private schools. However, the growth in private schools has been sluggish; between 2012 and 2015, annual growth for private schools hovered around 3% and in 2016, dropped to 1.71% (U-DISE 2016-17).

State education departments play a critical role in the governance of private schools. They write and apply rules, recognise schools, conduct inspections, impose penalties, and resolve disputes. Despite this, there is little to no evidence on how they carry out these functions and their impact on the growth and quality of these schools.

We studied three regulatory touchpoints between the state and private schools -- licensing, inspections and fee regulation -- for Delhi, in a recent paper: Challenges of executive discretion in the regulation of private schools, by Anand et. al., in Anatomy of K-12 governance in India, Centre for Civil Society, 2019.

We used government administrative data, field observations and analysis of the regulatory framework. On close examination, we found instances of excesses in executive discretion. While necessary to an extent, the misuse of discretion can negatively affect public welfare: in this case, school, students and parents.
Discretion in state education departments vis-a-vis private schools appeared in the following forms:

1. Overreach in the making of rules;
2. Ad-hoc and arbitrary rule-making;
3. Poor procedural fidelity and administrative opacity; and
4. Opaque, inconsistent and subjective exercise of punitive measures.

For example, consider the function of inspection. The Private School Branch of the Directorate of Education is supposed to inspect all private schools every year but only 60 schools are inspected in a year. As we reviewed the approach to the few inspections that do happen, we found that the method does not fulfil the spirit of the Delhi School Education Act and Rules (DSEAR) 1973. Rule 192 states that every inspection of a private school should be “as objective as possible”. The inspection proforma, however, is populated with measures and constructs that cannot be measured objectively. One such question is: did the teacher ask “thought-provoking” and “well-distributed” questions? Not surprisingly, the interpretation of these terms and the recorded answers vary across inspectors and schools (Figure 1). Besides, it is not clear how constructs such as “proper blackboard summary” link to the quality of education.

These inspections are also not typically followed by punitive action. DSEAR 1973 allows the Director to take any action against a non-compliant school but no school has been de-recognised in the last five years in Delhi. While officials cited the fear of student displacement, schools pointed out that they often bribe officials.

What drives this subjective/opaque application of punitive measures? What are the standards of quality? Do the standards adequately measure what they intend to do? What is the consequence of this on schools and quality of education? Where does a school go for appeal? Our research raises questions on the functioning of the state department—pertinent to any debate on education reform. We argue that there is a need for administrative reform and that the coercive power of government on private action ought to be within the constraints of law, guided discretion and due process.


The authors are researchers at the Centre from Civil Society. This paper was presented at the APU-NIPFP workshop Strengthening the Republic #1, January 11, 2020.