Courting Controversy: Judgments cannot be blamed for India’s Economic ills

Courting Controversy: Judgments cannot be blamed for India’s Economic ills

Bar & Bench

Nakul Dewan

The recent outcry against judgments of the Supreme Court being one of the causes for the downward economic spiral comes as a bit of a surprise. It is surprising not because the end result of the Court’s substantive decisions has dented the economic prowess of industrial sectors that have been affected by its decisions, but because none of them have considered whether the real reason is the actual substantive decision or the time taken to reach it. 

Consider the recent judgment of the Supreme Court in Union of India v Association of Unified Telecom Service Providers of India, where the Court rejected the narrow interpretation on the definition of adjusted gross revenue (AGR) which was propounded by the mobile telephone operators in order to reduce the license fee they were liable to pay the government. 

No doubt, the decision has led to a cumulative amount of INR 92,000 crore being due and payable by telecom operators to the exchequer, of which nearly half is interest and one third the penalty. But bear in mind that the telecom operators challenged the demands raised by the Department of Telecom in 2003, and played a game of snakes and ladders which resulted in a final decision only coming out in 2019. The colossal amount now due and payable represents a cumulative liability which has been a result of 16 years of litigation. 

Naturally, like any other fee, if a final decision on this issue had been taken in a year from the time the dispute had arisen, there would have been a pass through effect on the consumers, whose impact would have been miniscule. What the telecom companies now seek to do is to pass on costs in a manner which is quite likely to result in a sharp rise in tariff because of the quantum of loss they need to recover.

While the story in the coal scam and the 2G cases, where the Supreme Court’s decisions in Manohar Lal Sharma v Principal Secretary and Natural Resources Allocation resulted in the cancellation of coal blocks and 2G spectrum licenses is not as exacerbated in its delays as the AGR ruling, they were both decisions which were made after substantial investment had been undertaken by both domestic and international companies. 

The coal blocks were allocated between 1993 and 2010, and while litigation in the Supreme Court only commenced in 2012 and ended by 2014, a number of cancelled licenses were those where investments had been made for a decade. Similarly in 2G, while the allocation of licenses was in 2007, their cancellation 5 years later in  2012 was not only after monies had been invested, but also when India was ready to roll out 3G services in major cities.  

It then begs the question whether it is the actual decision of the Court or the time taken in the rendering of the decision that can be criticised as being a catalyst for India’s flagging economy. Naturally, if final judgments had been rendered shortly after these issues surfaced and well before the investment losses had ballooned to the proportion that they did, it would have been hard to criticise the decisions.

In fact, Courts would have been lauded for their intolerance to corporate corruption, and as protectors of the economy ruling against corporates who skirted their obligations to the exchequer by drawing narrow meanings to fiscal statutes in the hope of depriving the exchequer its due. It would be quite unlikely if courts in the United States would be criticised for causing a downward economic spiral to the US economy if they uphold New Jersey’s $649 million tax demand raised against the popular taxi app Uber on November 14, 2019, if it eventually emerges that the courts consider the State’s demand to be legitimate. 

Delays in India’s litigation system initially only impacted individual criminal and civil cases and rarely had far reaching impact on major sectors of the Indian economy. That has now changed. While, in both criminal and civil cases, and more so criminal cases, the Supreme Court has lamented delays and equated them with a violation of basic human rights, there is no existence of jurisprudence on the rights which are affected when decisions of the Court impact an entire industry and adversely impact the economy. 

Given the commercial nature of this problem, it is unlikely for such jurisprudence to evolve, even though an impact theory – where Courts in exercise of administrative law jurisprudence look at the economic impact of their decision – will be useful to set out. That is because the reality is that people prosper when commerce prospers and commerce is hampered from prospering in a system which allows for slow decision making.  That is where the government needs to step in and create a new ecosystem that takes care of these problems, as opposed to having people simply blame the Court for its substantive decisions.

The author is a Senior Advocate practising at the Supreme Court of India.

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