“The Centre had taken notice of the World Bank’s Doing Business Report 2007, which said that it takes as many as 1,420 days in India to implement a financial contract. The report had given India an overall ranking of 177 in the report, a rank that remained unchanged in 2008.This is not the first time that specialised processes have been set up for enforcement of specific types of contracts. Other examples include the Recovery of Debts Due to Banks & Financial Institutions Act, 1993 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. If precedent is anything to go by, we can only expect the proposed new law to have a long short-title – no pun intended!
Three indicators — the number of procedures, time taken to settle commercial disputes and the cost of litigation — determine how efficient a country’s commercial contract enforcement is. On all three counts, India scored poorly when compared with China and even Pakistan.
The cost of settling a financial dispute between buyers and sellers in a commercial transaction is nearly 40 per cent of the disputed claim, with a large portion of this amount going into paying legal fees.”
Precedent also reveals that such legislations are susceptible to constitutional challenges as we have seen with the previous two. Hence, care must be taken by the lawmakers to ensure that the provisions are designed and drafted in a manner that withstands scrutiny against the backdrop of the Constitution in order to further the legislative goal.