The number of legal disputes involving property, contract, labour, tax and corporate laws is bound to increase with an expanding economy.
But the judiciary doesn’t seem to fully appreciate the economic consequences of its judgments and its implications on the people.
What are some high impact judgments that are controversial?
Court pronouncements have consequences not only for disputants but also for the larger public both directly and indirectly.
The judgements might directly affect individuals, and entities like banks, businesses and also indirectly alter their decision making rationale.
Banckruptcy - Allahabad High Court has ruled that only ‘wilful loan default’ will enable starting of bankruptcy proceedings against power companies.
But wilful dealt is hard to prove and is open to interpretation.
Uddar Gagan Properties case - 280 acres of land was acquired by the Haryana government in 2005, and was later transferred illegally to developers.
While the supreme court did decipher the fardulent practice involved, it still decided to hand over the land to the state government (a partner in crime).
Consequently, farmers were forced to accept a paltry compensations for parting with their land.
Developer State Nexus - The Haryana government issued an acquisition notification in 2007 to acquire 688 acres of land.
As soon as the notification was issued, developers approached the original land owners to buy their land.
Since the official compensation was slated to be meagre, many owners sold their land at throwaway prices to the approaching builders.
But after 100’s of acres were sold by land owners to builders, the government decided to suspend acquision plans.
Subsequently, with utter disregard for rules, the state authorities not only approved these land deals but also granted regulatory approval for builders.
Unsurprisingly, the Supreme Court held the State’s actions constituted fraud due to a clear case of an unholy nexus between officials and builders.
But even in this case, instead of returning the land to its orginal oweners (as the sale was unconscionable), the court handed it to the steat government.
What are the implications of such judgements?
Land Cases - Through irrational judgments, rather than protecting the rights of real owners, the judiciary actively denies economic justice to the masses.
Moreover, the court has transferred land (precious economic resource), from those who need and use it, to governments which clearly don’t need it.
Notably, it is due various such judgments, government agencies abuse laws and are sitting on a massive stock of unused land.
Infra projects - Several infrastructure projects are being held up due to judicial interventions in the bidding process.
Courts usually don’t seem to realise that the quality of infrastructure assets and the technical capability of contractors to deliver them are serious issues.
Mere difference in bid price may or may not be a decisive factor in contract allocation and litigations in this context needs to be scrutinised for prudence.
Contraryly, court’s intervention can delay projects, and escalate costs far more than any possible gains from ruling in favour of the lowest price bidder.
What is the way ahead?
Dynamic Monitoring - Contract manipulation is a challenging domain where the courts need to get innovative in their judgements.
Rather than strictly laying down clauses regarding operational and accessory finances, judgements could consider commissioning monitoring mechanisms.
Courts should also exercise prudence so that contracts don’t get too diluted due to excessive judicial intervention (as it will discourage investments).
Also, strengthening our pre-trial arbitration mechanisms can help in clarifying laws, reducing legal uncertainty and disputes.
Economic Consideration - In cases that are squarely open, judges are to make pronouncements that will avoid adverse effects on employment, economic growth, and state revenue.
Some judgements like in the “Shivashakti Sugars Ltd (2017) case”, saw prudent economic reasoning, an aspect that needs to be widely adoped.
Signficantly, the same judgement also pushed for an inter-disciplinary (law & economics) approach for better litigational outcomes.
Caution - In its quest for economic prudence, courts should ensure that things don’t go overboard and any such foray must be restricted to genuine public purposes.
Adjudication of cases requires a cost-benefit analysis of a different kind and infringement of individual rights is to be done only when absolutely necessary.
Moreover, the degree of infringement should be minimum to realise the purpose and the social benefit driven from it must be commensurate enough.
