Tuesday, December 15, 2015

Judicial activism gone too far

Regardless of whatever regulatory and legal reforms India undertakes, it is unlikely to achieve its objectives unless its judiciary shows maturity and exercises restraint. Its propensity to interpret stated law in the broadest terms, far beyond its contextual and literal sense, most often transgressing its functional jurisdiction, has been at the cost of other institutions. The latest institution to fall victim is the Competition Commission of India (CCI),
India’s competition regulator has netted a paltry 0.6% of the total amount of fines that it has imposed on companies as lengthy judicial reviews and overturned orders have rendered the anti-trust watchdog almost toothless. Since its inception in 2009, the Competition Commission of India (CCI) has levied Rs.13,900 crore in penalties on companies for violating rules. The regulator’s success rate in recovering the money is, however, alarmingly dismal at Rs.82.1 crore... Judicial appeals have either delayed or blocked CCI from recovering penalty money, making the regulator appear ineffective... 97% of the penalty (approximately) has been stayed by the courts/appellate authority.
For sure, the CCI cannot absolve itself of its share of the blame for the quality of its orders. But it cannot be so bad that 97% of its orders are not only contested but continue to remain under litigation. Does the Ministry of Finance really want the Reserve Bank of India to be the next victim

1 comment:

Pratik Datta said...

Dear Gulzar, I am afraid this is not an example of judicial activism. Judicial activism is shown mainly by SC and HCs in their writ jurisdiction -- like inventing the whole concept of PIL.

This is just a case of inability to collect penalties imposed. The same is the case with SEBI or any other regulator which passes pecuniary penalties. Also, there is a fundamental difference between sectoral regulators (SEBI, IRDAI, RBI etc) and CCI. Sectoral regulator have the power to take away licenses and impose other sanctions; CCI can't impose such non-pecuniary sanctions. Therefore, CCI has to primarily rely on imposition of pecuniary penalties to disincentivise market participants from anti-competitive behaviour. I agree with you that CCI's performance leaves much to be desired. However, most of these problems emanate from the Competition Act, 2002, which is quite poorly drafted. Judicial activism is not the cause here.

Unfortunately, most Indian regulators have been set up under poorly drafted laws including SEBI Act, RBI Act, IRDAI Act etc - trust me these are all very poorly drafted! These should ideally be redrafted following the regulatory governance principles encoded in the Indian Financial Code. Just to clarify, even if FSLRC's regulatory architecture (RBI v. UFA) is not implemented, the Government should seriously consider improving the statutes setting up these regulators by improving the present drafts. That will solve many of today's problems.

PS: For an example of poor drafting in a different context, see here. If the law is like this, one can't really blame the judiciary for taking time in disposing litigations!