Day 10 – Q 2.How does lack of adequate number of forums for dispute resolution affect ease of doing business in India? Analyse. What measures can be taken to address this problem? Suggest.
2. How does lack of adequate number of forums for dispute resolution affect ease of doing business in India? Analyse. What measures can be taken to address this problem? Suggest.
विवाद समाधान के लिए पर्याप्त संख्या में मंचों की कमी से भारत में व्यापार करने में आसानी कैसे प्रभावित होती है? विश्लेषण करें। इस समस्या के समाधान के लिए क्या उपाय किए जा सकते हैं? सुझाव दें।
Economic survey 2016-17 gave a report on economic costs due to delays in dispute resolution which accounts as much as 5-6% of GDP. The delay, as world bank suggest is as much as 4-5 yrs causing serious lapses in ease of doing business. Pending commercial disputes in Indian courts have multiplied 123% between 2015 and 2017.
Lack of forums:
Business involves several parameters which decides the ease of running it and inadequate forums for dispute resolutions in these would affect the business.
- A recent survey by FICCI enlisted bureaucratic delays, corruption, tax terrorism (e.g. angel tax) act as major hurdle for start-ups. However, there is still no dedicated dispute resolution forum for start-ups. Because of this, venture and angel investors are reluctant to invest in India and take to countries like Singapore, USA where there is a separate start up dispute resolution forum.
- Construction permit: a multiplicity of forums can be seen and there is a lack of coordination among them. A single dispute resolution forum to look into the applications of permits is missing. This causes delays in starting business making India unattractive for investors.
- Property registration: due to inadequate property record details in digital form brings dispute and a pan India land dispute resolution forum is absent. This causes cost and time overrun for business and hence causes constraint in ease of doing business.
- Paying taxes: up until recently, there were multiple indirect taxes causing litigations with very few tax dispute resolution forums to adjudicate the same. This caused judicial delays and caused a form of tax terrorism.
- Trade across borders: A mutually consensual trade dispute resolution forum is absent with many of our neighbors. This let trade dispute in international forums like WTO and affects Indian credibility in international markets. This affects business investment and rising public shares (domestic and foreign).
- Enforcing contracts: Instead of a separate dispute resolution forum, most of the cases is pending with High court or supreme court. This creates uncertainty in Indian economy and adversely affects investors.
- Insolvency resolution: only recently IBC was passed. Before that, the successful arbitration was less. Also, the teething problems of industries seen as failure and stopping credit is de-motivating for any investors.
Measures that can be taken:
- Arbitration mechanism promotion: like the recent passage of New Delhi International Arbitration Centre Bil etc.,
- Real estate Regulation authority: as adjudication authority in construction permit, property registration within a municipal area etc.,
- Judiciary must only look into the political philosophy and constitutionality without entertaining appeals involving technical nature.
- Bilateral and multilateral investment treaties to prevent or handle the cross-border trade disputes. A multilateral dispute resolution body can be established.
- Digitisation: use of IT brings in efficiency, speedy permit grants, avoids physical contact of authorities avoiding corruption and thus bringing down the number of disputes.
- Penalise litigation culture: government must try to discourage parties wanting to opt for the litigation process by making the litigation process more expensive than ADR. This would prompt parties to approach ADR institutes as the first mode or step of conflict resolution.
Thus, a healthy environment for ease of doing business involve an optimal number of dispute resolution forums. A well-established Alternative Dispute Resolution is a prerequisite as well. Even the Urjit patel committee suggested to rationalize the number of forums and bring reforms in National litigation policy. With above measure, the aim of ease of doing business ranking can be achieved.