Negotiable Instruments: Exhaustive Coverage by Adv Roma Bhagat. Register Now!
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It is nearly impossible not to be experienced as a litigant if you are businessman in India for some time. In fact, chances are that in the very first year of operation, you will start having appeals with sales tax and excise authorities which will expand to income tax department couple of years later, to be invariably followed with contract enforcement suits in course of business.

Since business interests do not seem to be in harmony with public interest in India, most grey areas are invariably decided against the business making it impossible to avoid litigation with the government which works on the policy of expanding its jurisdiction if it is to curb the business in any way, and to narrow it down considerably if it is to pass on any relief to it. Babus love to exercise power if it is to hurt business, but when it comes to some condonation or passing relief, they interpret their powers to be so narrow that it could not be done and has to be taken to their higher authorities. Sometimes, sections of act need to be read to them to convince them that they are empowered to take up an application but they remain reserved understandably.

Enforcement of contractual rights is still tougher, given that India ranks at 186 (out of 189 countries) on this criterion on ease of doing business index of World Bank. The reason is extremely simple in fact. It is cheaper to go into litigation or force the other party to go into litigation and defer one’s liability than having to draw from bank and pay it today! As simple as that!

For instance, if one pays his liability today, he has to withdraw from his cash credit account which will charge him 12-14% interest to be compounded monthly. He will have to go through other hassles of availing credit like annual renewal, maintenance of stocks for adequate drawing power, stock audits and so on. But if he simply avoids to pay, his creditor will have to move court which means he will not bother you with his calls and visits for next 10 years. Then, courts are likely to allow 6 to 12% simple interest in their decrees which will need to be enforced through yet another decree execution suit, often in a different court of jurisdiction on the debtor. Even if a decree ultimately gets enforced (the probability is less than 50% which means there is 50% chance that this money will never need to be paid), one could easily defer the liability for at least 10 years!

For a Rs 100,000 liability deferred like this for 10 years, he would have paid Rs 230,000/- to bank @ 12% compound interest whereas the courts will ultimately force him to pay only Rs 120,000 with the decree. Clean savings of Rs 110,000/- against which some legal costs which are still lower than these savings, and make it extremely attractive if one considers 50% probability of never having to pay.

So, our judicial system provides an irresistible incentive to avoid compliance with our contractual obligations and force the other party to move court instead. More cases in court means more delays, which means more time for ultimate payment. Thus, delays in courts are welcome to these people.

That the situation is only worsening and could ultimately threaten our civilization (simply because if people cannot get justice in court in time, the only recourse to them will be to go to underworld Dons or carry guns – like Indian pan masala king went to underworld in Karachi to resolve his dispute with his partner a few years ago) does not seem to worry our policy makers who cannot think beyond setting up special courts every time the issue comes up. But solution can only come when one understands the problem properly. Do they understand the problem? I doubt. They do not even understand that criminals in this country are not afraid of law/police which is reflected in unabated rapes/assaults on women even in capital city. Our policy makers want to respond with increasing sentence, as if 7 year sentence is not deterrent for a potential rapist but 10 year sentence would be.

We need to understand problems in our judicial system first. As a litigant, I have experienced that our legal system is ineffective and overburdened because of the followings:-

1. It does not punish lies spoken directly or indirectly in courts

2. It protects right to litigate rather than right to justice, and does not encourage compliance with law/decrees

3. Lot of cases are filed because it takes infinite time, in order to keep the opponent occupied and harassed

4. Discretion in matters of grave importance like property cases, bail in criminal cases etc leading to injustice, delays and corruption

5. Inefficient practices quite often, contrary to legal requirements, and finally

6. No accountability whether of govt officers or judicial officers

It does not punish lies spoken directly or indirectly in courts

It seems sec 193 of IPC is about the only one in our legal system that seeks to punish false evidence/lies in courts. As far as I know, this provision is rarely invoked despite this happening in almost every suit in every court, directly or indirectly. Fortunately, courts see through these tactics, and their decisions do not suffer from these lies, but the weaker party has still achieved its aim of keeping the other party occupied for long long time, and in the process, wasting courts’ time unnecessarily. And got away with the lies easily, to encourage others to follow suit.

Solution is mandatory invocation of sec 193 no sooner a party makes an application of any false statement/evidence/lies by another party, directly or indirectly, and must charge lawyer as well.

It protects right to litigate rather than right to justice and does not encourage compliance with law/decrees

Like government cannot differentiate between a defaulter and a willful defaulter, our legal system does not differentiate between right-to-litigate and right-to-justice. Laws are de facto reversed in case laws with the intention of protecting right-to-litigate. Kindly allow me to cite a few examples:-

One, law says that no suit shall be instituted by an unregistered partnership firm against third party (sec 69). Yet, suits are routinely instituted by unregistered firms, and allowed to go on indefinitely. Case laws have even allowed such defect to be cured subsequently. When plain English says that such suits shall be “instituted only if the firm is registered”, there cannot be a question of any curing of such defect through subsequent registration.

Two, property related cases are under Specific Relief Act are filed even when plaintiff has no case, simply because he can keep the property stuck as “disputed” indefinitely and force the opponent to come to terms with him. Plaintiff is only required to make averment that he was willing and capable of performing his part of the contract. There is no requirement for him to prove it in plaint. Simple averment entitles him the delays of trial which could be decades!

Three, again in property cases, sec 49 of Registration act bars evidencing of unregistered agreements but it also says that [Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877]. My common sense says that this exception died its natural death in 1963 when Specific Relief Act 1877 was repealed and the new act, Specific Relief Act 1963 came into being, yet, I am advised that courts are routinely interpreting this exception to be applied to the new act also. When section says 1877 act, how could it mean, 1963 act?

Four, legislation wanted cheque bounce to be treated as a criminal offence. Quite a lot of cases are awarding punishment of confinement in court room till court rises especially in appeals. Thus the message is, must go into appeal for every order of trial court, and no threats of imprisonment for any cheque dishonour.

Our legal system does not seem to encourage compliance with law and decrees, as is clear from following examples:-

One, courts award 6 to 12% simple interest in decrees whereas the banks charge 13-14% monthly compounding interest in addition to collaterals, credit management hassles like stock-audits, need to maintain sufficient stocks for adequate drawing power etc. Thus, litigation is a cheaper way of avoiding/deferring liability. Then, why wouldn’t anybody ignore the decree until bailiff is on his head to seize his property? Judgment debtor wins in spite of losing case and decree against him.

Two, courts never feel offended with debtor not honouring decrees. There are no strict instructions for him to pay if not stayed in appeal within prescribed time. Decree enforcement means a fresh suit, mostly in a different court of jurisdiction on the debtor. No wonder quite a lot of decrees remain unpaid and unsatisfied, but our legal system probably does not even know about them.

And so on and so forth.   

Lot of cases come to court simply because it takes infinite time, in order to keep the opponent occupied and harassed

I believe that more than half the cases will never be filed in court if decisions are delivered in days and not decades. In fact, litigation is the cheapest method of deferring one’s liabilities!

Avoidable discretion in matters of grave importance like property cases, bail in criminal cases, leading to injustice, delays and corruption

Discretion feels like power in our system while it could easily be avoided by framing clear law or guidelines. It causes huge injustice, adds to delays and makes life miserable for the litigants. Property cases come to court because Specific Relief is discretionary. Likewise, tenancy cases are a nightmare for landlords. Bail is similar issue at its worst.

For example, bail is mechanically denied to accused, say in rape cases, without applying mind to the only relevant factors asto whether the accused is likely to

i. repeat crime if released on bail, or

ii. runaway from receiving sentence if awarded, or

iii. temper with evidence if released on bail.

Nothing else should have mattered for granting bail. Gravity of the crime of which he is accused, is irrelevant if accused is not likely to repeat the crime. Punishment can start only after sentence and bail cannot be refused as punishment but our system operates on assumption of guilt/crime contrary to established principle that an accused is deemed to be innocent until proven guilty. The dictum “bail and not jail” also does not help in practice. Consider how casually bail applications are rejected. Sometimes, courts even put on record that “without going into merits of the case, bail is denied in view of gravity of the crime”. If that is what law wanted, it could simply insert a section in IPC stating that no bail shall be granted to one who is accused of rape, murder and other specified crimes. This would save time and money for our legal system. The accused could promptly settle for long stay in jail, and his family can get used to life without him. We only need to say what we practice!

Discretion results in arrogance and grave subjectivity as well. Few judges develop reputation for simply rejecting bail applications, and lawyers wait for them to be transferred to other benches in order to file bail application. For a fair legal system, why should an application be more likely to be accepted with judge A and not judge B? Very fact that such likelihood exists, is a question mark on objectivity of our legal system.

Discretion leads to corruption as well. Police and lawyers encash this situation openly. I have never understood as to why it is not possible for our system to lay down clear guidelines that bail shall necessarily be granted UNLESS the accused

i. is likely to temper with evidence,

ii. run away and not be present to receive sentence if granted upon completion of trial, or

iii. is likely to repeat the crime, if released on bail.

If answer to these three conditions is NO, there is absolutely no reason why bail must not be granted. This will save lot of judicial time and injustice for public at large.

Inefficient practices quite often, contrary to legal requirements

As a litigant, I have found several practices to be inefficient causing delays, viz.,

i. Decree execution is a separate procedure resulting into fresh proceeding, mostly in a different court. We could avoid this by

- Allowing interest at bank lending rate on monthly compound basis, till date of decree, and at penal rate since date of decree till date of payment.

- Making decree automatically enforceable through the same court if injunction is not granted by appellate court within specified time limit.

ii. Necessary ingredients to a suit are not verified at the time of filing suit itself. Our system could ensure that suit is not admitted unless the necessary ingredients are provided with the suit itself, such as

- Proof of registration, if plaintiff is a partnership firm

- Proof that money is not adequate compensation in (immovable) property cases  for specific performance

- Proof that written, adequately stamped and registered agreement exists as concluded contract in (immovable) property cases for specific performance

- Proof that plaintiff has money to discharge his part of obligation, in property cases  for specific performance

iii. During trials, plaintiff files plaint, then again files affidavit and then, repeats them orally in court. This is wastage of time. Plaint could be deemed as affidavit next stage is defendant’s response to be followed by cross examination. This could save lot of time.

iv. Token punishment of confinement in court room for a few hours etc are several other examples of inefficient procedures that encourage litigation and cause delays.

No accountability whether of govt officers or judicial officers

Our govt officers are not accountable, not certainly to the public. They are empowered to do anything in “revenue interest” and aggrieved people can only to into appeals. Unfortunately, judiciary cannot much about it, but it can certainly address the lack of accountability, to a much lesser degree though, in judicial officers whose push almost every case into appeals to higher courts, not just once but many times over. Few examples:

a. Suit filed by an unregistered firm. Defendant’s application (7/11) rejected holding that the fact whether the firm is registered or not would be known only after the trial. This order is pushing me into appeals to high court, means more costs. Besides, this order means any unregistered firm can file suit and complete trial, and only after that the trial court will decide whether it is hit by the bar u/s 69. It means unregistered firm is also entitled to trial!!!

b. Suit filed for specific performance of an “oral” contract for sale of land. Defendant’s application (7/11) is pending for long time despite proving that oral contract cannot be accepted as evidence for sale of property (evidence act, stamp duty and registration act – MP amendment makes registration of every contract for sale of property compulsory to be registered).

And so on. These decisions are contrary to established law, and yet, they force litigant to suffer for several years, and cause avoidable load on legal system, when a competent judicial officer should have decided these issues in the first instance itself. Yes, litigant can appeal against this order, but does it give a licence to the judicial officer to make any decision without applying the law in fair, reasonable and correct manner? This will go on until he is held accountable for his decisions.

Sometimes, serious strictures are passed against junior officers and yet, they go on occupying the position and are left free to hurt more people despite established incompetence.

If we could adopt a system whereby every appeal concludes with finding asto whether there was a fair, reasonable and correct discharge of duties in passing the impugned order. If NO, there be a compulsory demotion. This must apply to all appeals, whether in courts or in government departments like income tax, customs, excise, sales tax etc. This should force an officer to be fair and reasonable while passing orders, and reduce number of appeals drastically.

Morale of the officers, who draw salaries from the taxes that people pay, has been protected for 60 long years. India could now focus on morale of its people as well.

I believe it is easier and less controversial to reform our legal system than to attempt anything else in this country. If S’pore courts can deliver judgments in days, there is no reason why courts in Indore or any other city in India can’t. After all, it is the system which has failed us. Size of the country is irrelevant because courts in one city are not concerned with pendency or population in other cities.

Far too many things need to be done for reforming our legal system. Bulk of that is in the domain of legislation but judiciary could also make a beginning by attempting some reforms by itself. Let anybody start anywhere!!

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