Based on data computed as of June last year, India ranks ahead of only of Timor-Leste, Bangladesh and Angola

Yet another Doing Business survey from the World Bank Group presents yet again a telling story of the state of affairs with the process of contract enforcement in India. The Doing Business 2015 survey places India fourth from the bottom (rank 186 out of 189 countries) in ease of enforcing contracts. The study of ease of enforcing a violated contract is an assessment of how efficiently the judicial system functions after a commercial sale of goods goes wrong.

The study tracks the time, cost and number of procedures involved from the initiation of a suit until payment is actually received. The methodology involves computation of the number of steps required, and the time required, to file and serve the suit, the steps involved in trial and judgment and in enforcement of the judgment rendered. The costs for these procedures in terms of costs of lawyers, costs of the court and costs of enforcement are also studied and compared.

Based on data computed as of June last year, India ranks ahead of only of Timor-Leste, Bangladesh and Angola – in that order. That ranking is a result of the study being made across 17 Indian cities ranging from large ones such as the four metro cities to smaller ones such as Guwahati and Indore. Within India, Hyderabad ranks the first with a timing of 770 days (about two years), costs of 17.8 per cent of the disputed claim, with 46 procedural steps. The commercial capital Mumbai ranks the worst, with the study projecting that it would take 1,420 days (about four years) to enforce a contract, with 39.6 per cent costs, with the same number of procedural steps.

The assumption in this study is that the loser of the dispute does not challenge the judgement and that enforcement of the judgment begins right after the time limit for an appeal expires. In reality, this is hardly the case. Worse, even against interim orders and process decisions, appeals go up routinely and get entertained without infliction of costs on parties that waste court time.

Appeal courts intervene, or take time to determine that they should not intervene, which adds to the burden. Appeals also go up all the way to the Supreme Court, which routinely acts as the last court of justice rather than as the last court of law – the overriding objective of rendering justice often results in cases being almost re-heard in the apex court. The net result is that the sad picture of ranking 186 out of 189 countries is based on data assumptions that in fact make this grim picture not reflect even worse reality.

India has a fiercely independent judiciary – clearly the Republic’s strength. However, the administration of the conduct of day-to-day business of the judiciary has hardly kept up with times.

Attempts to “digitise” filings have been ineffective due to absence of common standards across the food chain of litigation from the lowest court to the highest court. A lot of digitisation projects have resulted in physical documents being scanned into images (the documents’ contents thereby being incapable of being electronically searched and processed).

Every court has its own systems and processes. High Courts have their own rules over and above the general law on procedure.

Within a court, different judges adopt different processes on how to handle their work. Some allow cases to be “mentioned” for out-of-turn consideration on grounds of urgency while others lay down norms that would make counsel shudder to attempt an out-of-turn engagement. Not all of these approaches are reduced to writing, necessitating physical checking with court staff on how the judge would approach matters. On any given day, hundreds of cases are listed. At times, the “mentioned” matters upstage the cause list for a few hours. Most matters on the cause list are merely posted to another day, on which day, a similar routine would ensue.

It is time for surgical intervention – a lot of which can inflict short-term pain. The business processes of justice administration ought to be handled by an autonomous, professional and independent body corporate that develops uniform systems and processes across the country.

There is no reason for a dispute in Hyderabad to be handled differently from a dispute in Mumbai. Three critical administrative elements – real estate, non-judicial human resources and information technology – are areas that judges should not have to waste time with. They are standard resource requirements across all courts.

The professional corporate could be “demutualised” and owned by a consortium of governments. A chief executive officer overseen by a board of directors independent of shareholders, with representation from the judiciary and the ministries of finance and law, could run the show. Other jurisdictions have such organisations in place. Her Majesty’s Courts and Tribunals Service, an executive agency sponsored by the Ministry of Justice in the United Kingdom is a classic example.

Even while India struggles to get her act together, disputes involving Indian law are being resolved outside India by retired Indian judges acting as arbitrators, hearing arguments from Indian lawyers.

The only loser is the Indian justice delivery system. Judicial systems across the globe are competing for market share offering effective and timely resolution. Such arbitrage coupled with speedy tribal justice from khap panchayats, could render the official local justice delivery system practically redundant. Time to heed the wake up call.

(The author is a partner of JSA, Advocates & Solicitors. The views expressed herein are his own.somasekhar@jsalaw.com)

(This piece was published in the April 27, 2015 edition of Business Standard)

Twitter: @SomasekharS


Insider trading regulations are all about prohibiting someone with asymmetrical access to inside information

The new insider trading regulations notified by the Securities and Exchange Board of India (Sebi) took effect last weekend. While the regulations are largely based on draft regulations made by the N K Sodhi Committee, they do deviate on some material issues. (Disclosure: the author was a part of the Sodhi Committee and any critique should be taken with a pinch of salt.) This column will not dwell on the deviations in what is covered by the regulations but would pick up one element of something that has been left out.

One of the recommendations in the draft regulations was to treat “any person who is a public servant or occupies a statutory position that allows such person access” to unpublished price sensitive information of companies (colloquially, “inside information”), as a “connected person”. This was an explicit definition that would have brought this category of persons within the ambit of “insiders”. This element has been dropped. It is argued by some that such language is unnecessary because the definition of the term “insider” covers apart from “connected persons”, any person who has access to inside information. Clearly, that would not be a complete answer.

Insider trading regulations are all about prohibiting someone with asymmetrical access to inside information of an issuer of securities from monetising the access ahead of the rest of the market. The access to the workings of the business and the financial position of the issuer would enable access to information that could impact price discovery of such securities but is not generally available. Therefore, it necessarily has to emanate from inside the issuer, which it is even necessary to define a connection as one to the insides of an issuer. For example, a chief financial officer of a company that is listed on the stock market is clearly privy to the draft financial statements way before the information becomes generally available.

On the other hand, take a judge who is writing a judgement on a material tax dispute. All the information presented to him is generally available – anyone sitting in the court room would see exactly what is being argued before him. Now, his decision on which way to rule in the dispute is price-sensitive information, will impact the price of securities of the company involved in the dispute, but would be known only to him because it is he who would take the decision and until he makes the decision public, no one would know which way the fortunes of the price of those securities is headed. The staff in his office, his fellow judges who may get wind of which way his decision is headed, and his relatives who may discern his views from his views on the dining table, would all be “outsiders” and not “insiders”. The information relating to the final decision in the judgment would emerge from outside the company and not from inside.

Such persons would be connected to the outsider judge and not to those inside the company who would be eagerly awaiting the outcome themselves. If they were to trade ahead of the market, there would be no legal basis for treating such “outsiders” to listed companies as “insiders”. Unless, of course, there is an explicit definitional coverage of such a person as a “connected person”, which is precisely what has been deleted. Replace the judge with a bureaucrat who determines government policy that can have an impact on price discovery for securities in the market, and the picture remains the same. Replace the bureaucrat with a lawmaker in Parliament who gets to decide on policy and the effect would be the same. Indeed one could argue that an income-tax official who gets to see advance tax data filed by various listed companies or an investigator, who conducts a search and seizure into a listed company and gets access to inside information, would be covered as a recipient of information from an insider. The information they would get, would not be information that they generate but information generated from the insides of the company they are assessing or raiding. Trades by them when being privy to such information could indeed be covered by the regulations since they were recipients of information from insiders.

Given the stakes involved – of whom the law would protect against rather than who would be protected – this is not an easy piece of reform to implement. Every piece of law protects someone from someone else. It is not surprising that this piece of reform did not come through.

(The author is a partner of JSA, Advocates & Solicitors. The views expressed herein are his own.)
(This piece was published in the May 18, 2015 edition of Business Standard)


By Somasekhar Sundaresan

The recent ruling on same-sex marriage in the US shows that Supreme Courts are necessarily always right because they are final. They are not final because they are always right. There is no other way to oversee a society’s evolution.

Never before has the role of a Supreme Court come under such scathing attack in any country – from within and without. The United States, a society rooted in deep-seated traditional Christian morality woke up towards the end of last week to find that its Supreme Court had ruled that samesex marriage deserved equality of the law across the country (not all states in the US recognised such marriages). The court also ruled that refusal by any state to recognise same-sex marriages lawfully performed and recognised in another state constituted a deprivation of life and liberty.

The ruling was a sharply divisive one: five “liberal” judges for, and four “conservative” judges against. Unlike India, where there are arguably many supreme courts, with multiple benches comprising two or three judges to hear appeals, in the US Supreme Court, all nine judges hear all appeals jointly and have a say in every case. Each of the four dissenting judges wrote their own dissents. Two judges – Justices Antonin Scalia and Clarence Thomas not only wrote their own dissents but also signed up on every other dissenting judgement.

Justice Anthony Kennedy who wrote the majority decision had also authored the earlier US Supreme Court decision holding that laws banning homosexual intimacy between consenting adults would be unconstitutional. Clearly he and his majority colleagues are giving meaning to the adage about constitutions being living documents, reinventing and evolving their coverage with the changes and evolution of society.

The dissenting judges are biting in their critique of the majority. One has argued that treating the right to marry a person of one’s choice is not a fundamental right. Another has said it is never the state’s obligation to provide dignity. One dissenter has argued that such a decision should rest with the people who may elect representatives to pass laws to this effect. In the same breach another judge has gone into how the judges of the Supreme Court who went to Ivy League colleges and come from the elitist eastern and western coasts of the US are not representative of the aam aadmi’s thinking on the subject.

The peeved minority took the battle straight into the majority camp, arguing that recognition of gay marriages is only a step towards eventual recognition of the right to marry more than one spouse. “Although the majority randomly inserts the adjective ‘two’ in various places, it offers no reason at all why the two-person element of the core definition of marriage may be preserved while the man-woman element may not,” argues Chief Justice John G Roberts. “Indeed, from the standpoint of history and tradition, a leap from opposite sex marriage to same sex marriage is much greater than one from a two-person union to plural unions, which have deep roots in some cultures around the world…It is striking how much of the majority’s reasoning would apply with equal force to the claim of a fundamental right to plural marriage.”

Governor of Louisiana Bobby Jindal, who is hoping to become US President, struck the most strident note. “Marriage between a man and a woman was established by God, and no earthly court can alter that,” he thundered. “The Supreme Court is completely out of control….and has become a public opinion poll instead of a judicial body…If we want to save money, let’s just get rid of the court.”

Supreme Courts administering constitutions often face such critique. When a ruling resonates with a section of society, that segment would applaud. Sections that find the same ruling jarring would allege judicial overreach. The same critic who says the court seeks popularity could argue that the court is not representative of the populace.

Supreme Courts are necessarily always right because they are final. They are not final because they are always right. There is no other way to oversee a society’s evolution. The politicians who look to God and not “earthly courts” should learn from the Vatican’s elected incumbent. Pope Francis not only asked “Who am I to judge” but also recently welcomed and met a delegation of homosexual Catholics. Little wonder the right-wing Christian politicians in the US are facing an existential crisis.

Tweets @somasekhars

(This piece was published in the July 3, 2015 editions of Mumbai Mirror, Bangalore Mirror, Ahmedabad Mirror and Pune Mirror)

Using Ends to Justify Means

Acting contrary to the rule of law may come naturally to the layman in an adverse situation but society has much to worry if the courts adopt that same approach and quote ends to justify means.

In its latest judgement in the Sahara saga, the Supreme Court has dedicated a full paragraph to justify the detention of three individuals for more than 15 months, without support from a single known provision of law. By stating that the detention is a “step taken in good faith” the court has underlined that India’s legal system is riding a tiger here, and that the arrest and continued detention is weighing on the apex court’s conscience.

A human being’s respect for the rule of law is always tested the most when circumstances are most provocative. When you restrain yourself from hitting an adversary physically no matter how badly you may curse him in your mind and wish him dead, you demonstrate respect for the rule of law. You show greater respect for law than for a loved one when you turn her over to the law enforcement agencies when she has violated the law.

Therefore, it is adversity that tests how truly you believe in the rule of law. Besides, the rule of law is primarily tested only when someone is in trouble with the law. If you have not had any problem with the law, you would not approach a court asking to be treated in a legal manner.

Sahara is provocativeness personified. Therefore, how Sahara is treated in our legal system will demonstrate how adherent we are to the rule of law. Sahara claims to have raised monies in cash from millions of small-time investors. The investors cannot be easily traced. This raises serious suspicion of money laundering. India has a law governing money laundering. That law actually enables attachment of assets and bank accounts, and even imprisonment for violators.

Inexplicably, the anti-money-laundering law is not even being used in the case although the highest court of the land is reviewing the facts. Instead, the capital markets regulator, charged with protecting investors (if only they existed) has found fault with Sahara for not complying with law governing raising money from the public. Sahara was asked to refund the monies to the public.

Sahara claims to have already refunded a large sum in much the same way that it claimed to have raised the funds – in cash. Truckloads of paperwork said to support this claim are not even being opened to see if it is a sham – potentially because the outcome would obviously expose the width of laundering of money made in the country’s vast corruption network. The Supreme Court has not gone into whether the investors exist. Instead, it has ruled that Sahara should repay them. Interest is getting added annually at 15 per cent. Three Sahara officials were sent to jail in a coercive step. The court set coercive bail terms, linking the potential release from jail, to repayments to investors.

The court’s own words are enough to underline how badly the populist arrest tarnishes India’s rule-of-law credentials. “This Court feels concerned with the fact that three persons are deprived of their liberty for the last fifteen months and this situation is quite onerous to them…an unprecedented situation of personal liberty…visa-vis majesty of law…It is this legal realism which has compelled the Court to adopt an approach which sounds more pragmatic. It is ‘doing what comes naturally’ approach to the problem at hand.”

What comes naturally? Faced with grave and sudden provocation, the desire to kill comes naturally. It is said temptation comes naturally to even a saint who sees an open door. Acute hunger makes stealing bread come naturally.

The judgement goes on to say: “This case is a burning example where the true dictate of justice is difficult to discern, and the law needed to come down on the side of practical convenience.” Even more chilling is its articulated view: “The process of reaching a right answer in hard cases obviously differs from the process of reaching the legal answer in easy cases.” Chilling, since this is not a layman talking but the apex court saying that the right answer is not necessarily a legal answer if the case is “not easy”.

Chilling, considering that one layman steadfastly refused to let ends justify means in his moral compass, and went on to be celebrated as father of this nation.

(This article was published in the Mumbai Mirror, Pune Mirror, Ahmedabad Mirror and Bangalore Mirror around June 26, 2015)



By Somasekhar Sundaresan

Bad procedures have come to adversely impact delivery of service by the legislature, the bureaucracy and the judiciary. And an eventual breakdown of these would be a breakdown of state machinery.

Yet another session of Parliament is underway. The usual walk-outs, adjournments and protests are being repeated. When business actually takes place, Parliament barely challenges the government to provide meaningful answers to logical questions. Laws that get passed are mostly those already operational in the form of ordinances. No MP disrupting Parliament is really taken to task. In other words, the administration of the supreme law-making body is a mess.

The administration of the executive government is no different. Most ministers of every government are outsmarted by bureaucrats. Shrewd ministers hoodwink other ministers with the help of loyal bureaucrats who outdo not-so-loyal bureaucrats of other ministries. Governments are able to hoodwink Parliament with vague and confusing answers that can barely scratch the surface even with supplementary questions.

The administration of the third arm of the state – the judiciary – is equally messy. There is hardly any focus on the business process of justice delivery, and much of the attention is expended on judicial appointments. Different high courts across the country have different rules. Even within the same high court, different judges can adopt different and unique processes. For example, some judges allow out-of-turn “mentioning” of urgent cases while others simply disallow it whatever be the emergency. Such varied practices are not always written down and found in a single place – the approach of the judge has to be ascertained from the court’s associates.

In a nutshell, how the law-writer, the law-administrator and the law-enforcer govern their own administration leaves much to be desired. A simple look at the law that governs the conduct of their business by the three pillars of the State would show some common trait. They all smell musty and sound rusted – they are really old and written in an era that does not resemble the current ease and means of living life in Indian society. Amendments made every now and then have indeed led to a patchwork. For example, the Lok Sabha’s procedural rules were adopted in 1952 from what governed the Constituent Assembly that wrote the Constitution of India. The Rajya Sabha adopted rules of procedure in 1964. No serious reform to bring it in sync with current reality has been adopted. For example, today, the Right To Information law enables any citizen to ask the questions MPs alone could ask when these rules were written. But Parliamentary procedures do not reflect this reality.

Likewise, the Government of India’s rules for transaction of business and rules for allocation of business were all written in 1961. Indeed the current government has re-done the allocation of business rules. However, all these rules are mired in a different era. It takes scandals of criminal proportions for innovation and change in government processes – the e-auctions for coal and telecom spectrum are cases in point. What is now necessary is a surgical re-write rather than tinkering of existing outdated rules of conducting business. Another example is most of the serious appointments for running of regulatory agencies are conducted by “selection committees” and not by “search and selection committees”.

Achange from the former to the latter should be a no-brainer – most applicants who covet a post are supplicants who would be misfits while those who would fit the bill would also expect to be invited to apply.

The Supreme Court’s rules were recently rewritten to take effect in August last year, but are largely a re-write of the rules first made in 1966. Rules of various high courts are also very old and not homogenous. The civil and criminal procedure codes have barely kept pace with the quality improvements that modern technology could bring upon justice delivery. A World Bank study shows that a suit for enforcement of a small claim across India would involve 46 procedural steps (not counting any appeals). The transaction cost of bringing such a claim in Mumbai stands at 39.6 per cent of the amount claimed.

Clearly, bad procedures have come to adversely impact substantive delivery of service by the three institutions. An eventual breakdown would be a breakdown of the state machinery. That the state machinery “by and large” works can hardly be of solace.

Tweets: @SomasekharS

(This article was published in the Mumbai Mirror, Pune Mirror, Ahmedabad Mirror and Bangalore Mirror on May 8, 2015)


By: Somasekhar Sundaresan

In this day and age, it would be rare not to have experienced a mock fire evacuation drill at least at the work place, but one would most certainly never have had a mock earthquake drill, although it’s quite likely many of us have at least felt a tremor

When it happened, I was in a meeting in a leading five-star hotel in Gurgaon. I felt my chair rumble. A suggestion that we were experiencing tremors and an earthquake was potentially brewing, was duly laughed off. The laughter quietened a bit when the crystal chandeliers, jingling at first, started sounding like chiming puja bells.

But it did not alarm. Some checked the internet and social media to see if there was news about any earthquake, continuing to be seated under the chiming chandeliers. Others sauntered out and got coffee in the corridor. Some felt asking the hotel staff would be a great idea. The chef from the nearby kitchen came to take a look at the chandeliers. Asked if things kept in the kitchen were shaking too, he joked about how there were no chandeliers in his kitchen.

Further down the corridor, one of India’s largest media houses was having an in-house retreat. The journalists were similarly carefree. Some were visiting the toilet, some stood out to get a smoke while others lounged in the corridor of the hotel. When asked if they had any confirmations from their news desks about an earthquake, not many were enthusiastic about finding out.

Overheard voices narrated a wisecrack about PM Modi taking the Delhi Metro, causing the earth to tremble, and “Does not look like anything major here.” The tremor continued for an eerie length. Back in our respective rooms, the second round lasted longer with lesser dramatic impact — although the presentation screen kept shaking like an old movie because the overhead projector hung from the ceiling. “Aftershocks are normal,” said someone, meaning to be helpful.

No alarms went off. No evacuations were ordered. No loudspeakers asked for people to move out of their rooms and assemble at any rescue area. In short, the hotel had no drill to deal with earthquakes. Worse, every single person around seemed to have his own judgement on what was really going on and what was needed to be done. In a nutshell, no one is prepared on how to handle an earthquake even in the best of hotels and among the best of journalists.

The next time you close your hotel door, look for the fire evacuation drill displayed on the inside. Where your room is, where you are supposed to head when there is a fire, what to do and what not to do, would scream at you if only you cared to read. In many hotels, the first television channel advertises features of the hotel while the very next channel would display a continuous spool of how to react in case of fire. But an earthquake? You will find nothing. Not for us, they think. Earthquakes are expected only in places like Japan, Turkey and California. And they must have it all figured out so why bother?

In this day and age, it would be rare not to have experienced a mock fire evacuation drill at least at the work place. It would be extremely rare to have experienced a real fire accident. But it is likely that one would have experienced some mild form of a quake in a lifetime, but one would most certainly never have had a mock earthquake drill.

Earthquakes are considered even more remote than “spotting a black swan”. In human intuition, they are not meant to occur frequently enough to worry about what to do when one hits. At first blush, one would dismiss it as the Indian bravado against nature. But then, I do know that many in my meeting room keenly wear seatbelts in cars as a safety measure while others do so only because their cars annoy them with alarms until the seatbelt is clicked on. Fire brigade authorities conducted fire-preparedness inspections in multi-storied buildings in Mumbai after a recent high-profile fire.

What would it then take to build the same regulatory response to earthquakes? The Nepal Prime Minister projects that the death toll could touch the five-digit mark. Need it take anything more for legislative policy intervention to induce greater attention to safety regulations around earthquakes?

Tweets: @SomasekharS

(This article was published in the Mumbai Mirror, Pune Mirror, Ahmedabad Mirror and Bangalore Mirror on May 1, 2015)


By Somasekhar Sundaresan

One of the indicators which point to the contradictory nature of Indian society is how we possess a high degree of tolerance for pejorative speech while being prickly of comedians who look to poke fun at our cultural stereotypes.

The Parliament is in session again. As lawmakers assemble in Delhi, it is the season for unparliamentary and politically incorrect remarks. Union Minister Giriraj Singh provided a flying start, questioning whether the Congress would have rallied behind Sonia Gandhi had she been black. Speculation about whether he broke into tears unable to handle a dressing down from the Prime Minister is what is making news now.

In the last session of Parliament, Sharad Yadav got mired in controversy talking about how Indian authorities granted permission to Leslee Udwin to interview convicts in prison because she was white. His point that an Indian filmmaker would not have been given the same access resonated with many but his remarks about south Indian women being “saavli” tripped him up and tied him down in knots.

Race and skin colour particularly stand out as sensitivities that the subcontinent is insensitive to. A society obsessed with “fairness creams” – now available for all genders – does not even find it offensive to comment about the colour of the skin. Political correctness in this department is conspicuous by its absence. Kalyan Jewellers, a south Indian merchant, has made an advertisement featuring Aishwarya Rai Bachchan royally lounging on a couch with an emaciated dark skinned child slave holding a larger-than-hissize umbrella over her. Copied from similar portraits of European royalty being served by black slaves, the advertisement has drawn swift and crisp admonition from civil society, publicly requesting Aishwarya to distance herself from slavery and child labour.

She has issued an official statement suggesting that she was not involved in the creative addition of the child slave to her photograph. A statement attributed to her suggests she believes the insertion of the child in the picture to be the “creative” work of her client. It is not yet clear if she took the opportunity of a public platform with Kalyan Jewellers to make a diplomatic point about the issue. Unlikely, since apart from being a skin-colour-obsessed society, “chotus” working as domestic labour is as widespread as domestic violence even among the literate in India.

Apart from race, gender is part of the trail of thorns in political incorrectness in India. One had to only read the transcript of proceedings in Parliament when the post-Nirbhaya amendments to criminal law were being debated. Some MPs said the kind of things that convict Mukesh Singh would later say in India’s Daughter (without the attendant denigration). Sanjay Nirupam, quick to defend attacks on his leader Sonia Gandhi, did not think twice about attacking Smriti Irani’s character with: “Pehle to tum TV par tumke lagati thi. Pata hai tumhara charitra”.

Insensitivity is not the preserve of just the lawmakers. Recently, members of the highest judiciary locked horns. The Chief Justice of India organised a judges’ conference over the long Good Friday weekend. When two colleagues pointed out that Good Friday was an important marker for Christians and one of them said he had plans with his family outside Delhi, the Chief Justice wrote back to him questioning his commitment to the judiciary.

Sikhs get commented on as subjects of humour, mainly due to their different appearance, even in court rooms – a former Bombay High Court judge who became Chief Justice had once remarked about how being a sole Sikh in the court, the lawyer before him deserved to win (indeed, in a lighter vein).

A few years ago, Parliament published a newer version of a handbook of “unparliamentary” words and phrases for the guidance of our lawmakers. Writing rules for how to conduct oneself is a race to the bottom – the approach has yielded a silly checklist – outlawed for use inside Parliament are phrases such as “source of amusement”, “communist” and “ringmaster”. Terming the usage of “communist” as unparliamentary can itself be attacked as being unparliamentary.

Political correctness will take a long time to become second nature in India – potentially, never will. Yet, we can be so thin-skinned that comedians have to pay a heavy price for picking on stereotypes in their gigs. Truly another area where India is a land of contradictions.

Tweets: @SomasekharS

(This article was published in the Mumbai Mirror, Pune Mirror, Ahmedabad Mirror and Bangalore Mirror on April 24, 2015)