The Cost of Litigation – What Alternatives Do We Have?

The Legal Services Authorities Act, 1987 provides for a system of legal aid to weaker sections of the society in order to ensure that justice is not denied to any person due to socio-economic reasons. Although establishing a system of legal aid is without a doubt essential in order to make justice accessible, what is often forgotten is that layer of the population which falls above the economic eligibility threshold[1] for legal aid but yet do not possess the economic means to pursue a claim in the courts.

While it can be said that people outside the economic eligibility threshold would always have the means to afford to participate in the litigation process as our country has advocates who provide services which can cost anywhere between ₹100 and ₹10,00,000 or more per hearing, the question then comes down to whether the current system, as a whole, provides sufficient economic accessibility to the judicial system. While the fees paid to an advocate is one factor in considering economic accessibility, two other factors that must be considered are the costs incurred in attending a hearing at court and the costs incurred due to loss of pay/business for attending a court hearing. Our studies have revealed that the average cost (other than fees of lawyers) incurred by a litigant is ₹1,039 per case per day and the average cost incurred due to loss of pay/business is ₹1,746 per case per day. While the number of hearings in a case can vary and affect costs accordingly, it nonetheless adds to the cost of litigation. In such a situation, what options lay before persons who earn above ₹1,25,000 p.a. but cannot afford the triune expense of advocate fees + daily costs + loss of pay and a possible additional payout in the event they lose their case?

For cases before the Supreme Court, the Supreme Court has set up a ‘Middle Income Group Scheme’ via the Supreme Court Middle Income Group Legal Aid Society and provides a form of legal aid to citizens whose gross income does not exceed ₹60,000/- per month or ₹7,50,000/- per annum.[2] In terms of this scheme, persons who wish to obtain the services of an empaneled advocate are required to submit an application form along with relevant documents; on receipt of the documents, the advocate on record shall examine them and if he is satisfied that it is a fit case to be proceeded with, the secretary will draw up a schedule of the fees to be paid by the applicant. The person will then be assigned an empaneled advocate who will be paid fees that will be in accordance with the schedule appended to the scheme and consists of subsidized rates.

While such an option can help bolster the costs incurred for cases before the Supreme Court[3], what alternatives can be made available for cases before any of the lower courts, given that there are 59,595 cases pending before the Supreme Court whereas there are 3,15,43,994 cases pending before the High Courts, district courts and subordinate courts?[4]

Countries such as England, Canada and Germany provide a complementary mechanism to legal aid in the form of legal expenses insurance[5]. These insurance schemes can assist the middle class in society who fall outside the ambit of legal aid but also find the judicial system out of their economic reach. Depending on the terms of the policy, such insurance schemes typically provide insurance cover to a family for specific types of disputes such as discrimination at the workplace, land disputes, consumer complaints, etc. and the policies cover expenses related to legal advice, legal representation and costs to be paid to the opposite party as directed by the court (within a prescribed limit) in the event the insured person loses the case. Under such policies, when a person approaches the insurance company with a claim, the insurance company generally assigns the case to a lawyer and assesses the ‘reasonable prospects of success’; if the lawyer feels that the insured person has a chance of winning, they will support their case under the policy. The lawyer then appointed for the insured person is typically from the company’s panel of lawyers, however some policies exempt situations wherein legal proceedings have been issued or there is a conflict of interest, and in such cases the insured person is permitted to choose their own lawyer and such lawyer would be paid an amount as indicated in the policy. Further, for persons who may have multiple disputes, some policies do not place a limit on the number of claims within an insurance period and permit the insured person to claim the prescribed amount for each dispute.

While the extent to which such insurance policies can be replicated in the Indian scenario will be a challenge for the insurance sector, it may prove useful for India to explore the option of customizing legal expenses insurance for certain specific types of disputes to Indian needs as a means to promote economic accessibility of the judicial system in India.

[1] In terms of Section 12(h) of the Legal Services Authorities Act, 1987, the economic threshold prescribed for obtaining legal aid is, “[a person] in receipt of annual income less than rupees nine thousand or such other higher amount as may be prescribed by the State Government, if the case is before a court other than the Supreme Court, and less than rupees twelve thousand or such other higher amount as may be prescribed by the Central Government, if the case is before the Supreme Court”.

In terms of Rule 7 of the Supreme Court Legal Services Committee Rules, 2000, the threshold has been increased to ₹1,25,000 per annum for cases before the Supreme Court. Similarly, the threshold is said to have been increased to ₹1,00,000 per annum for cases before any court other than the Supreme Court, as per a conversation with NALSA authorities.

[2] http://supremecourtofindia.nic.in/mig.htm

[3] We also understand that similar middle income group schemes have been established for cases at the High Courts of Punjab and Haryana (http://highcourtchd.gov.in/sub_pages/left_menu/middle_income_aid/miglas.pdf), Chhattisgarh (http://highcourt.cg.gov.in/migs/index.html), Jharkhand (http://www.jhalsa.org/pdfs/pam_jhcmiglas.pdf) and Madhya Pradesh (http://mpslsa.nic.in/HCMIG%20Legal%20Aid%20Society%20Scheme.pdf).

[4] Statistics are of pending cases as on March 31, 2016, available at http://supremecourtofindia.nic.in/courtnews/2016_issue_1.pdf.

[5] https://www.das.co.uk/family-legal-expenses-insurance; http://das.ca/Group-amp;-Association-Programs/Products-Services/DAS-em-group-Personal-em.aspx

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