“Alternative and speedier forms of dispute resolution like mediation and arbitration, though popular in other countries, are yet to become viable options in India.”

The World Bank’s Doing Business Report 2018 ranks India at 100 out of the 190 countries surveyed. While the 30-place jump over last year’s ranking is a welcome relief, India continues to rank as low as 164 in enforcing contracts, indicating the difficulties businesses face when it comes to the timely resolution of contractual disputes. While statistics are never the best yardstick to measure the effect of delays, the fact is it takes almost four to five years on an average to enforce contracts through our courts.

Judicial Process
The judicial process is so long drawn out - with appeals going all the way up to the Supreme Court, that laws evolve and legislations change over the time it takes to resolve matters in our courts. The Indian Supreme Court hears more matters in one session than the US Supreme Court hears in a full year. With a backlog of over three crore cases pending before various courts and more cases being filed each year, reducing pendency becomes a Sisyphean task. As against the Law Commission recommended norm of 50 judges per one million population, India has less than 20. And with the large number of vacancies, this puts an enormous strain on the judiciary which is one of the causes for the growing pendency of cases. Inadequate infrastructure and lack of technological innovation makes the entire process of justice delivery inefficient.

Alternative and speedier forms of dispute resolution like mediation and arbitration, though popular in other countries, are yet to become viable options in India. It is only now after the recent amendments to the Arbitration and Conciliation Act and with time limits and arbitrators’ fees being statutorily prescribed and with the Supreme Court upholding the autonomy of arbitration proceedings, that arbitrations are finding favour. But more needs to be done. Arbitration, which is largely ad hoc, is yet to develop as an efficacious alternative. As a result, Indian businesses prefer to use arbitration forums in Singapore like the ICC or the SIAC rather than local forums like the ICA.

Contracts need to be respected
Written contracts are the lifeblood of business transactions. Unwarranted “walk outs” from contracts dilute faith in commercial integrity. The absence of effective and speedy dispute resolution emboldens unscrupulous businessmen to chance their luck in lengthy litigation in the hope that this will tire out the honest litigant. Breach of a contractual obligation must be frowned upon by the courts and recourse to damages for breach provided at the earliest. Not only will this recompense the party suffering the breach but also warn potential defaulters of the consequences for dishonoring contractual obligations. The saying “justice delayed is justice denied” may be trite, but in commercial transactions, it holds good.

Effective enforcement of commercial contracts boosts business
Efficient contract enforcement is essential to economic development and sustained business growth. Investors are happy to invest in countries with well entrenched legal systems, a respect for law and effective enforcement of contractual provisions. Economies with a robust judiciary, in which courts can effectively enforce contractual obligations, have more developed credit markets, a buoyant business climate and tend to attract more foreign direct investment.

What can be done
There is much the Government has done to address this growing concern through the institution of commercial divisions in all High Courts, major changes in the arbitration law, the new Insolvency and Bankruptcy law and the recent amendment to the Specific Relief Act.

These are significant developments which if implemented well can have a positive impact on enforceability of contracts. However, the larger issue of delays in the litigation process requires a long-term strategic approach and substantial investment in infrastructure and modern technology. The enormous backlog of cases has to be reduced on a war footing. Among others, the time taken to hear cases must be curtailed, the tendency to grant adjournments for flimsy reasons must be curbed, the scheduling of cases must be streamlined, appeals against judgements must become the exception rather than the norm, frivolous litigation must invite punitive costs.

Without a transformational change in the litigation ecosystem, India’s ranking is unlikely to register a dramatic improvement in the near future.

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