How did the COVID-19 lockdown affect the functioning of the NCLT? A quantitative analysis

What is the impact of the lockdown on case volume and disposal? How is it likely to add to the pendency in the next few months?
How did the COVID-19 lockdown affect the functioning of the NCLT? A quantitative analysis
NCLT

Most of the discourse on the functioning of courts and tribunals in India during the pandemic has focused on the system of virtual hearings, its hazards and advantages. Empirical evidence on the impact of the lockdown on court functioning and workload, is largely absent.

What is the impact of the lockdown on case volume and disposal? How is it likely to add to the pendency in the next few months? What kinds of matters are and should be prioritised as courts resume full fledged operations?

An extended disruption in court functioning can adversely affect the enforcement of civil liberties, property rights and contracts. This can have a debilitating effect on the rule of law. Answers to these questions are therefore critical. More importantly, they must be supported with data-backed evidence.

In this article, we summarise the key findings of our study on the impact of the COVID-19 lockdown on one of India's largest commercial tribunals, the National Company Law Tribunal (NCLT).

In order to study the impact of the lockdown on the functioning of the NCLT, we constructed a novel data-set, drawing upon the daily causelists published by the NCLT.

Data and methodology

We used causelsts for the period between February 1 to June 30 for our analysis. In India, the lockdown started from March 25 and was subsequently extended till the end of May. However, from April. 20, a range of conditional relaxations began to be introduced. On May 30, the Central government effectively allowed a phase-wise opening of economic activity outside containment zones with effect from June 1.

In line with this timeline, we divide our analysis into three phases: pre-lockdown, lockdown and unlock (Table 2). The pre-lockdown phase allows us to observe the regular functioning of the NCLT. The lockdown and the unlock phases allow us to observe court functioning in the post-COVID world.

Study Period
Study Period

The NCLT Registry issued several circulars and practice directions with regard to its functioning during the lockdown period. The first of such circulars, issued on March 23, suspended the functioning of the NCLT till March 31. The suspension was subsequently extended until the end of the lockdown. During this time, all benches of the NCLT were directed to schedule hearings for 'urgent matters' through video-conferencing on designated days of the week.

For our analysis period, from the NCLT website, we got data for 22 bench-court combinations. We use 18 of these, namely 6 courtrooms of the NCLT bench at New Delhi (including the Principal Bench), 5 courtrooms of the NCLT bench at Mumbai, 2 courtrooms for the bench at Kolkata, and one each for the benches at Bengaluru, Chandigarh, Cuttack, Guwahati and Jaipur. We exclude 4 bench-court combinations - 2 for Chennai, and one each for Allahabad and Kochi - due to sparse causelist availability. The Ahmedabad bench is excluded as no data is available.

Findings

Volume of hearings scheduled

We find a sharp drop in the average number of daily hearings conducted by the NCLT during the lockdown period (Figure 1). In the pre-lockdown world, across all benches in our study, an average of 588 hearings were scheduled per day. This declined to 30 hearings per day during the lockdown period, a 95% decline. In the unlock period, the total hearings per day marginally increased from 30 to 41 per day. However, even this was a 93% decline from pre-lockdown levels.

Figure 1: Volume of hearings
Figure 1: Volume of hearings

Figure 2 shows the location-wise variation in the number of hearings scheduled. For each location graph, the red dotted line indicates the start of the lockdown period and the green dotted line indicates the start of the unlock period. The numbers on the top indicate the average daily hearings scheduled in each period.

Figure 2: Volume of hearings across benches
Figure 2: Volume of hearings across benches

Several findings emerge. First, the bulk of the hearings during the lockdown period were conducted by benches in three locations, namely Mumbai, New Delhi and Chandigarh. Second, there is time variation as to when courts started functioning during the lockdown. We observe that while courtrooms in Mumbai started scheduling hearings from April 22, the courtrooms in New Delhi started from May 5 onwards. Third, the Mumbai, New Delhi and Chandigarh benches are also the ones that managed to ramp up capacity during the unlock period. Other benches had not, even till June 30, built up a steady pattern of scheduling hearings.

The reason for variation in the volume of hearings across the locations remains a puzzle. While the e-filing facility was available across some of the benches, with time, the litigants before the other benches were instructed to file their proceedings through e-mail to the Registrar. The availibility of the e-filing facility does not explain the volume of hearings post lockdown. For instance, the Chandigarh bench, which was hearing cases all through this period, implemented e-filing only towards the later half of June. With Mumbai and New Delhi being the worst affected by the pandemic, the variation in volumes also cannot be attributed to the severity of the pandemic at a location. It is unclear then as to what has caused this location-based variation and why some benches were able to resume functioning as early as mid-April while others could not do so even towards the end of June.

Output: Disposal rates

Table 3 gives us an overview of the outcome of hearings during the pre-lockdown, lockdown and unlock periods. In the pre-lockdown period, while a large number of hearings were getting scheduled, nearly 82% of these resulted in a next hearing date being given. During the lockdown period, this changed. The disposal rate improved significantly, from 17.9% to 54.5%.

Several factors might explain the improvement in disposal rates in the post-lockdown period. One possibility is that during the lockdown, since the NCLT was hearing urgent matters only, they had to be disposed of. The second is that the pre-lockdown scheduling of nearly 40-50 cases per courtroom per day, was unrealistic. It resulted in a few matters getting actually heard and a next date being given in the remaining. Since the number of hearings getting scheduled during the lockdown period were low, these matters were actually getting the attention of the court, which resulted in an improved disposal rate. Finally, it is also possible that the manner in which courts have dealt with hearings in the lockdown period changed. They were less amenable to allowing re-scheduling.

The pattern of a higher disposal rate during the lockdown period continues in the unlock period. However, there is some decline in the disposal rates for matters scheduled for hearing compared to the lockdown period (from 54.5% to 48.4%).

Outcomes of hearings
Outcomes of hearings

Estimating effective court capacity in the lockdown period

Table 4 brings together the input (hearings scheduled) and output (disposal rate) to give us a sense of the effective court capacity in the three phases. We measure effective court capacity as:

Effective court capacity = Hearings scheduled x Disposal rate

A limitation of this approach is that it does not take into account the quality of the order passed by the NCLT. Our analysis is restricted to the volume of hearings and the number of disposals.

Table 4 shows that court capacity even in the unlock period is around 19% of pre-lockdown capacity. It suggests that the NCLT can adopt a very different mix of hearings and disposal from its pre-lockdown period to increase its overall output. For instance, at a disposal rate of 50%, even scheduling half of the pre-lockdown hearings will result in a higher effective capacity. However, this will require courts to analyse the process learnings from the post-lockdown period which resulted in higher disposal rates and apply them on an ongoing basis.

Effective court capacity across 3 periods
Effective court capacity across 3 periods

Conclusion

It is clear that the lockdown has reduced the output of an already overburdened justice delivery system. The NCLT is one case study that demonstrates this. The functioning of courts during the pandemic is in stark contrast with the functioning of the overall economy during the same time.

By June, most sectors of the economy had resumed operations to a large extent. The manufacturing sector IIP had returned to 80% of its February levels (Source: MOSPI). Railway freight traffic, cargo traffic at ports and air cargo traffic had come back to 88%, 86% and 61% of their February levels respectively. Even a hard hit sector, like airlines, had resumed aircraft traffic to 26% of February levels (Source: CMIE Industry Outlook). By June, employment rate had come back to 95% of its February levels (Source: CMIE Economic Outlook).

Courts have been reasonably quick in transitioning to virtual hearings. The relatively higher disposal rate at the NCLT demonstrates that a combination of the electronic filing system and virtual hearings, is workable. Despite this, we find that the NCLT has not reverted to even 20% of its output in the pre-lockdown period. The output is much lower for a majority of the benches. This is likely to substantially increase the pendency at the tribunal.

While most of the discourse on court capacity in India focuses on the inadequacy of judges, significant gains can be made by process improvements at the NCLT. Several scholars and policymakers have highlighted the need for a deeper focus on the management and business process planning for courts and tribunals in India.

A silver lining to the devastation caused by the pandemic is that it has accelerated some important reforms. Renewed focus on process management at courts is likely to give us maximum bang for the buck.

The authors are researchers at the Finance Research Group, Mumbai.

This is an abridged version of the full study, published here.

References

Regy, Prasanth, and Shubho Roy (2017), Understanding Judicial Delays in Debt Tribunals, NIPFP Working Paper Series, National Institute of Public Finance and Policy, New Delhi, India.

Datta, Pratik, and Ajay Shah. "How to Make Courts Work?" The LEAP Blog, 22 Feb. 2015.

Datta, Pratik, (2016), Towards a Tribunal Services Agency, Indira Gandhi Institute of Development Research, Mumbai Working Papers, Indira Gandhi Institute of Development Research, Mumbai, India.

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