Structure, organization and functioning of the Judiciary
Maintaining the prominence of High Courts
For the framers of our Constitution, high courts, occupied a central position. They were conceived as a forum for adjudicating disputes under the Constitution, Central and State statutes before they moved to the Supreme Court; their jurisdiction was more extensive than the Supreme Court’s. In contrast to the American model of a bifurcated federal and state judiciary, our high courts resolve all disputes. In the initial years, several constitutional issues came to the Supreme Court after high courts grappled with those issues. The First Amendment to the Constitution was triggered by a Patna High Court ruling declaring a land reform law as unconstitutional. Increasingly, the jurisdiction of our 24 High Courts has been subject to relentless attack from Parliament, and, unfortunately, even the Supreme Court.
Parliament has inflicted damage on high courts with rampant tribunalisation. Tribunals have replaced high courts for disputes under the Companies Act, Competition Act, SEBI Act, Electricity Act, Consumer Protection Act among others. Any person aggrieved by an order of an appellate tribunal can directly appeal to the Supreme Court, side-stepping the high court. This raises following institutional concerns:
These tribunals do not enjoy the same constitutional protection as high courts. The appointment process and service conditions of high court judges are not under the control of the executive. The enormous institutional investment to protect the independence of high courts is dispensed with when it comes to tribunals. Many tribunals still owe allegiance to their parent ministries.
Tribunals are also not as accessible as high courts. For example, there are just four benches of the Green Tribunal for the whole country. In comparison, high courts were easily accessible for environmental matters. A shareholder in Kerala or the Northeast would have to travel to the Securities Appellate Tribunal in Mumbai to challenge any order by the Securities and Exchange Board of India. This makes justice expensive and difficult to access.
When retired high court judges invariably preside over every tribunal, the justification of expert adjudication by tribunals disappears.
Conferring a direct right of appeal to the Supreme Court from tribunals has changed the Supreme Court from being a constitutional court to a mere appellate court. It has become a final clearing house for every appeal under every statute. The Supreme Court should be a court of last resort deciding cases of the moment, and not a final forum with an all-embracing jurisdiction over disputes ranging from a custody battle to the scope of a municipal by-law.
The high courts are the training grounds for future Supreme Court judges. When high court judges deal with several cases under a particular area of law, they carry with them the benefit of their experience and insights to the Supreme Court. When high courts are side-stepped in favour of tribunals, Supreme Court judges hearing appeals from tribunals would have to deal with the finer nuances of disputes under specialised areas of law for the very first time. This is not ideal for a court of last resort. The rationale advanced for avoiding high courts is the colossal backlog. This is a problem of the government’s making as it consciously chooses not to appoint judges of the sanctioned strength for each high court.
If high courts were to exercise appellate jurisdiction over orders of tribunals, they would act as filters, enabling the Supreme Court to confine itself to those substantial questions where there is divergence among high courts.
The way ahead lies in the creation of specialised divisions in high courts for tax, company law and environmental disputes.
The jurisdiction of high courts is also undermined by the Supreme Court when it directly entertains various writ petitions. When the Supreme Court exercises original jurisdiction, it deprives the citizen and the state of the right to challenge potentially erroneous orders. A classic instance is the Supreme Court’s ruling in the 2G case. To overcome this ruling, the President had to invoke the advisory jurisdiction of the Supreme Court. The ordinary citizen enjoys no such privilege.
The difficulty becomes even more acute when the Supreme Court takes on a legislative role by framing guidelines in the larger public interest. Neither the individual nor the state has an effective remedy to challenge these norms.
There are several institutional benefits when a case travels from high court to the Supreme Court. The Supreme Court is wiser by a well-considered high court ruling. The Supreme Court is in a better position to resolve a dispute when it is confronted with two conflicting high court rulings on the same issue. In the triple talaq ruling, it benefited from prior high court decisions on the nuances of Muslim personal law. Notably, the U.S. Supreme Court takes up cases where there is a divergence of opinion among the Circuit Courts of Appeal. High courts need to remain in prominence if India’s justice delivery system needs to remain successful.
Connecting the dots:
Tribunalisation is affecting the prominence of high courts in Indian judicial system. Discuss the issues associated with it.
TOPIC: General Studies 3:
Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Comprehensive banking policy reforms needed
The recapitalization of public sector banks has been rightly welcomed by most analysts. The government has decided to spend big money to clean up the banks it owns, despite the obvious risks of moral hazard that bank bailouts across the world have inevitably faced.
Three important policy documents laid the groundwork for banking reforms since the 1991 reforms:
The report of the first Narasimham committee set up in 1991.
the report of the second Narasimham committee set up in 1998.
the report of the Raghuram Rajan committee that was released in 2009.
Not all their ideas were implemented, but they did help in structural transformation of Indian banking. It is now time for a fourth comprehensive look at the issue, as a new set of challenges emerge.
Progress over the years:
Indian banks now have to meet international capital adequacy standards, a smaller portion of their deposits has to be handed over to fund the fiscal deficit, interest rates are determined by the market, branch expansion policies are more liberal and new private sector banks offer competition to the public sectors banks. Despite this undoubted progress away from the days of financial repression, this is the third banking mess (the NPA issue) India has had to deal with over the past three decades.
Lesson from equity market:
Policy reforms in the equity markets have ensured that there has been no systemic crisis even in moments of immense stress.
Banking policy issues:
Autonomy: The need for public sector bank autonomy has been recognized for long. Such autonomy is impossible given the political interests involved. India needs to now shift the needle from autonomy towards privatization. Banking is the only important sector of the economy in which the private sector is dwarfed by the public sector. The share of public sector companies has fallen sharply in most sectors such as airlines. Banking is an exception—and it is time this change.
Three-tier banking structure: The first Narasimham committee had said that India should move towards a three-tier banking structure. Four large lenders were to be developed as global banks, 10 banks were to become nationwide universal banks and local banks would concentrate on specific regions. The underlying issue of banking structure is an important one. The ongoing debates about bank consolidation and differentiated licensing require a framework rather than the current ad hoc statements.
Narrow banking: There is a strong case to convert at least some of the weak banks into narrow banks that use all their deposit money to buy government bonds. They could in effect become large payments banks rather than the more traditional financial intermediaries. Narrow banking is an idea that needs serious attention.
Corporate bond market: India needs to move towards a financial structure in which large companies get mostly funded by the bond markets while smaller firms depend more heavily on banks for their finance. The problem is that the corporate bond market is still illiquid, with most bonds held to maturity by a narrow set of investors. Deepening the corporate bond market is critical.
One of the grand lessons of the global financing crisis is that no country has figured out how to maintain financial stability. Credit booms have inevitably left bad loans in their wake. Bank-led financial systems such as Japan have been in trouble. And so have financial systems such as the US where the bond markets are more important.
Unstable financial systems hurt economic growth and job creation in the long run. The fiscal costs of bailouts can also be staggering. The Indian policy makers needs to decide what financial structure is required if another banking crisis is to be avoided..
Connecting the dots:
Discuss major policy issues faced by public sector reforms. Unless banking policy reforms are carried out we would continue to face banking crisis. Analyze.
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