Legal cell for every ministry mooted to cut litigation costs

According to an office memorandum dated 4 April titled “Directive for the efficient and effective management of litigation by the government of India", the ministry has also planned to create a new data portal for arbitration matters where the government is a party, based on the existing National Judicial Data Grid (NJDG) for court cases.

The NJDG provides a count of pending and resolved cases in Indian courts. The data is compiled by the government from individual courts.

The law ministry stated that new legal cells are to be created in ministries and departments within three months. These legal cells may be designed as per the case load of the ministry or department in question, the law ministry's memo said.

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The law ministry also asked for a nodal officer not below the rank of a joint secretary to be appointed to oversee litigation matters. This officer should also have expertise in the legal domain, and reasonable experience for the position, the law ministry memo said.

The memo also called for young legal professionals to be to be engaged on contractual basis, wherever necessary. It also called for an independent litigation review of new policies that are to be implemented in the future.

The law ministry has also supported the June 2024 advisory by the finance ministry to reduce the government's reliance on arbitration owing to its high expenses and long timeframes for resolutions.

The memo published by the department of legal affairs stated that the objectives of the directive are to reduce recurrent litigation, reduce issues in orders and notification issued by the government, reduce unnecessary appeals against Court rulings, and focus on out-of-court dispute resolution methods such as mediation.

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The memo highlighted that most ministries and departments in the central government have not laid down any standard operating procedures for handling litigation. 

"Most ministries and departments do not have a dedicated legal Cell, and cases are being handled by the administrative or technical divisions overseeing the relevant subject matter," the memo said about capacity constraints for handling legal matters in the central government.

The law ministry also analysed litigation data across ministries and found that most issues are recurring. These issues are linked to service or pensions, land acquisitions and compensation disputes, commercial disputes, intellectual property disputes, fundamental rights violations and public interest litigations (PIL), as well as interpretation of tax laws, the ministry said.

The ministry also highlighted that litigation of the government with its contractual partners and concessionaires arises out of basic contractual disputes where one party does not adhere to contractual agreements, and said there needs to be greater co-ordination among ministries to resolve legal issues.

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Engaging in capacity building maneuvers in ministries to reduce government litigation is not likely to help the problem completely, said Alok Prasanna, co-founder, Vidhi Centre of Legal Policy (VCLP). "The fundamental problem, and one which even these guidelines don't address, is the lack of consequences for filing frivolous cases," he said.

The problem Prasanna referred to is the government extending legal challenges frivolously, since no government official wants to bear the consequences of losing a case. "When an individual files frivolous cases the consequences are usually on them personally whereas for governments, it's the taxpayer who shells out the costs. Very rarely do courts impose personal costs on government servants for filing frivolous cases," said Prasanna.

Not filing appeals in lost cases is considered unacceptable for government officials, and receives harsh comments from the office of the Comptroller and Auditor General (CAG), he added.

Arbitration and mediation service providers also agreed that a fundamental change in mindset is necessary, and that capacity building is only the beginning of the solution.

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"The government, which has a massive exposure to litigation, needs a shift in its approach towards legal matters. If an officer in the legal department is always going to work with the intention to litigate and challenge, then capacity building will not be the solution," said Krunal Modi, founding partner and manager for strategy and innovation, Presolv360.

"If more officers tried to focus on resolution instead of litigation, the government could not only significantly reduce the burden on its limited resources but also bring down its contribution to the pendency of cases," he added.

The government should also minimise adjournments and if a government body requests over two adjournments, then the reason for the same should be conveyed to the legal cell of the ministry or department.

While the government has pushed for mediation as a method of resolving government lawsuits, it has clearly shied away from arbitration as a method of dispute resolution. The law ministry memo has stated that dispute resolution by arbitration should be decided on a case-by-case basis.

With the new government arbitration data portal entering the fray soon, the government is likely to seek arbitration data from two places, either from arbitration institutions, or from individual ministries.

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Since 2017, after the Justice B.N. Srikrishna-led high-level committee report pushing for institutional arbitration over ad-hoc arbitration, the government has batted for the same. But seeking data from arbitration institutions may be a challenge, with ad-hoc arbitration still being the preferred method of dispute resolution in the country, and the government not recognising any arbitration institution officially.

But, the law ministry memo asked ministries to do a periodic review of all arbitration cases, whether domestic or international, and communicate the findings of the review to the department of legal affairs.

"The vast bulk of contracts entered into have standard clauses on arbitration and they generally do not mention institutional arbitration. Gathering data is first step but the contract terms will have to change to mandate institutional over ad hoc arbitration," said Prasanna of VCLP.

But India's arbitration is slowly moving towards institutions, away from ad hoc practices. "Institutional arbitration has been the preferred choice recently and we have seen the inclination towards it in the recent times," said Gauhar Mirza, partner, Cyril Amarchand Mangaldas.

"With the Government itself setting up institutions for arbitration and specially some institutions like the Delhi International Arbitration Centre, we can see the clear trend," he said.

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