Bitten by the litigation bug

Courts have repeatedly denounced filing futile appeals by public authorities

While the government tends to blame the judiciary for passing orders that take a severe toll on economy, as the Economic Survey put it last week, the voice of the courts are not heard as they are buried in law reports. The government should read some of the judgments of recent weeks indicting it, as it is the largest litigant in the country, with 1.4 million cases involving it, or an estimated 46 per cent of the total.

The Supreme Court and high courts have repeatedly faulted government entities and public sector undertakings for abusing the process of the court and carrying on appeals on trifling matters up to the apex court. There were three such denunciations within the last fortnight.

In its judgment in Maharashtra State Distribution Co vs Datar Switchgear Ltd, the Supreme Court noted that the repeated appeals by the government company against a 2004 arbitration award was “only an attempt to re-argue the matter afresh which is impermissible”. In Union of India vs Susaka Ltd, the court rapped the railways for raising new and technical arguments before it to avoid payment of a 2002 arbitration award. “The government, while dealing with a citizen, must act like an honest person,” the judgment said.

Yet another: “Public sector institutions should not enter into prolonged litigation and spend considerable sums of public money in cases which should have been adjusted by conciliatory and wise attitudes,” the Supreme Court reiterated in its judgment in Misra & Co vs  Damodar Valley Corporation. In this case, an application for arbitration was moved in 1986 and the award was made in 1991, but the corporation did not pay the due amount; instead went on raising objections for several years.

The high courts have also used harsh words against government corporations. The Delhi high court stated in an appeal of the National Highways Authority of India (NHAI): “We find this court to be inundated by challenges against arbitral awards by PSUs seeking re-appreciation of the findings of the arbitrator. Such litigation defeats the very purpose for which the Arbitration Act was conceived… and basically seeks to convert this court into a court of appeal over the decision of the arbitral tribunal.” The court imposed a fine on the NHAI for filing “untenable objections”.

Despite this earlier admonition, the NHAI invited more opprobrium last week in another case when the high court remarked that successive appeals against the award of arbitration tribunals, especially by public sector undertakings, “have effectively reduced the exercise of arbitration to a civil trial”. The public authorities have contributed a great deal to the menace of “docket explosion”, consuming valuable time which could be used for settling more important disputes.

Income tax authorities were also in the firing line when the Delhi high court quashed four reassessment notices issued to S C Johnson Products calling it a “fishing expedition”. It said that there was absolutely no tangible material which compelled reassessment after several years. 

The Bombay high court imposed a fine of Rs 100,000 last month on the central excise authorities which was told to “accept with grace” the verdict of the appellate tribunals instead of raising technical issues in appeals (CCE vs Mahindra & Mahindra). The revenue authorities filed frivolous appeals, well beyond the limitation period and wasted judicial time — that conduct must be punished, the court said.

Another practice which refuses to go away despite denunciations of the Supreme Court and efforts by the government is the fratricidal war between government corporations. In a judgment involving Northern Coalfields Ltd and Heavy Engineering Corporation, the court lamented the tenacity with which the two fought litigation for years. 

Recently, the Central Board of Excise & Customs and the Department of Revenue had set monetary limits like Rs 2 million for filing appeals before high courts. Such measures have made only a dent in the mass of futile litigation. It is not just the proverbial lethargy in the legal departments which leads to this state of affairs. One could smell a money trail which could be traced to law firms engaged in such cases. Common people often meet ambulance chasers in the legal profession. But when big fat sums of public money are involved, the litigation bug chases government corporations.