Review Of Government Litigation Policy

Recently, the Supreme Court of India castigated the Centre for repeatedly filing appeals on identical questions of law despite being fined earlier for clogging the justice delivery system with frivolous cases. It has been observed that nearly 46% of all pending cases in judiciary have been filed by Centre and state governments or has state government as one of the party. This problem has been highlighted even in the Economic Survey. The Economic Survey 2018 points out that the massive litigation by government departments and the resulting lower conviction rates has led to the economy suffering a severe toll in terms of stalled projects, mounting legal costs, contested tax revenues and reduced investment.

Reasons for High Government Litigations

A redundant National Litigation Policy 2010
Fear of provisions of Prevention of Corruption Act
The constant shadow of three C’s namely Chief Vigilance Commissioner (CVC), Chief Bureau of Investigation(CBI) and Comptroller and Auditor General(C&AG)
A bureaucracy which is highly risk averse for fear of being seen as aiding in corruption
The threshold limit for filing of appeals by Income Tax authorities was very less until recently
High writ petitions (under Article 226) filed under service, land revenue, land acquisition, education and labour classifications against the government.

Madhya Pradesh Litigation Policy 2018

Madhya Pradesh government recently in its Litigation Policy 2018 put the onus on officials if a case is lost or if officials are found pursuing irrelevant litigation cases. This clause though may act as a deterrent in reducing the litigation cases must be used wisely and not arbitrarily. The need of the hour is to understand it is the prerogative of the Income Tax department to file tax related cases and pursue it in public interest, but it must not cause hindrance in justice delivery for ordinary litigants by delaying the hearing of their cases.

How to Mitigate the Litigation Process

Once a judgement by the Supreme Court or any high court is accepted, an instruction should be issued by the Central Board of Direct Taxes, to withdraw departmental appeals dealing with the same issue
The mechanism for advance ruling should be strengthened.
A pre-dispute consultation mechanism needs to be introduced, especially for high value disputes, which could help in settlement of various issues. Assessment orders should be rolled out only for those disputed issues on which no agreement was reached
India needs to introduce a mechanism of a private letter ruling. It is a written response by the tax administration, which is issued to a taxpayer on his or her request that interprets and applies tax laws to the taxpayer’s represented set of facts.
Departmental representatives who appear on behalf of the tax department should be given regular training on complex issues of international tax and transfer pricing.
Need to have more Commissioners (Appeals), more judges, more specialized benches across all judicial levels
The state needs to put in place a robust internal dispute resolution mechanism within each department which will inspire confidence in its workers as a means to address their grievances against the management.
To reduce incidence of writ petition against land acquisition, the state must either ensure that quasi-judicial authorities are judicially trained or create a separate class of judicial officers to discharge quasi-judicial functions.
Constituting an Independent Panel to decide on further appeals of the tax department

Way Forward

A review of the National Litigation policy is underway, but for it to transform the Indian Government into a “Model Litigant” following critical features are a must:

Laying out clear objectives that can be assessed
Role of different functionaries must be clearly enumerated
Minimum standards for pursuing litigation must be listed out
Fair accountability mechanisms must be established
Consequences for violation of the policy must be provided
Periodic impact assessment programme must be made