Process Reforms: Fixing the Nuts-and-Bolts

Sanjeev Sanyal and Aakanksha Arora

November 2023

Sanjeev Sanyal
Chairman, Advisory Committee DSPPG
Full Time Member PM Economic Advisory Council.
Government of India
Email: sanjeev.sanyal@gov.in

Aakanksha Arora
Joint Director, Economic Advisory Council to PM
Email: aakanksha.arora20@gmail.com

Cite as: Sanyal, Sanjeev and Arora, Aakanksha (2023). Process Reforms: Fixing the Nuts-and-Bolts.
Policy Paper No.8 http://dsppg.du.ac.in/our-publications/

Disclaimer: The opinions expressed in this paper are that of the author/s. The opinions
expressed here do not reflect the views of the Economic Advisory Council to PM, the
Government or DSPPG and the IOE.

©Author/s

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 Process Reforms: Fixing the Nuts-and-Bolts
Sanjeev Sanyal and Aakanksha Arora1

Abstract

Discussions about economic reforms tend to focus almost entirely on large-scale structural reforms aimed at
reshaping the fundamental framework of an economy. Structural reforms in India began with economic
liberalization in 1991. Over the years, various other structural reforms were undertaken including opening
of sectors to private investment, establishment of regulators, introduction of GST, an inflation-targeting
framework, and the implementation of the Insolvency and Bankruptcy Code, among others. However, there
is another category of reforms that mostly goes unnoticed called ‘process reforms’. They are missing from the
economic literature and this paper attempts to remedy this gap.

What are process reforms? Process reforms are the nuts-and-bolts reforms, often microeconomic in nature,
with a specific focus on an individual sector or issue. Their core objective is to simplify and streamline
operational processes and enhance the efficiency of a particular activity. Implementing such reforms tend to
involve a series of small changes. These are different from structural reforms in that they do not normally
attempt to alter the overall architecture of the economy but to make the existing system work better. This is
not to suggest that these small changes, often improved with feedback-loops, do not have high impact. Indeed,
as this paper illustrates, process reforms can lead to significant improvements in economic performance.

The mechanics of process reform can vary depending on the specific circumstances. In this paper, we discuss
five types of process reforms and illustrate each with a case study. The first type, which is the simplest of all,
requires administrative streamlining of existing processes, as we illustrate with the example of voluntary
liquidation of companies. The second type of process reforms requires changes in regulations under the
existing law, as illustrated in the case of telecom regulations for the IT-BPO sector. The third type requires
amendments to the legislation. We illustrate this with the case of decriminalisation of various offences under
the legal meteorology law. The fourth type requires adding capacity at some level of the government, as
illustrated by the expansion of India’s Intellectual Property Rights ecosystem. Finally, the fifth type of
process reforms involve removing of a state mandated activity as in the case of compulsory mediation before
litigation. All of these types can be used in different permutations and combinations to bring about change.

Key Words: Process Reforms, Structural Reforms, Feedback-loop, Administrative

Processes, Regulation

1
Sanyal is Member, Economic Advisory Council to PM and Arora is Joint Director, Economic Advisory Council
to PM. Views are personal and do not reflect the opinion of the Economic Advisory Council to PM or the
Government.

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I. Introduction
Since 1991, India has been systematically reforming its economy. Most of the attention and
discussion, however, has almost entirely focused on “structural reforms”. Structural
reforms are a class of reforms that alter the overall architecture of an economy – the
framework in which economic entities operate. The country has now witnessed more than
three decades of various structural reforms: the ending of industrial licensing, privatization,
establishment of sectoral regulators and so on. Recent years have also seen the
implementation of structural changes such as the Goods and Services Tax (GST),
introduction of an inflation-targeting monetary policy framework, and the Insolvency and
Bankruptcy Code (IBC), among others.

Almost all of the economic literature focuses on such structural reforms. It should not be
surprising as these are visible, large-scale changes. However, there is another class of
economic reforms, called ‘process reforms’, that have largely remained unnoticed in the
economic literature. This paper is an attempt to remedy the gap.

The Economic Survey of 2020-21 had discussed the idea of process reforms. The Survey
argued that over-regulation and opacity in Indian administrative and legal processes stem
from an emphasis on exhaustive regulations accounting for every possible scenario,
culminating in complex procedures. Thus, it advocated the merits of simpler regulations
and smoother processes. In this paper, we will expand on this line of thought.

So, what exactly are process reforms? Process reforms refer to the nuts-and-bolts reforms
that are done to simplify regulations or processes related to a particular activity or sector.
These changes are targeted changes, often microeconomic in nature, with an emphasis on
a specific issue. They often require no more than a series of small tweaks, but can have
significant overall impact. These are different from the overarching structural reforms
mentioned earlier in that they do not attempt to alter the overall architecture of the
economy. This has the additional advantage that feed-back loops can be easily used to make
repeated adjustments.

While process reforms can have significant impact, they have largely escaped the attention
of economists. Individual changes may be discussed but they are not studied as a class.
This is unfortunate as these reforms can be very impactful and, in several cases, prove
essential for the success of structural reforms. There are many such examples. For instance,
a major structural reform like GST, requires ongoing refinements to its processes to keep
it functional. As Sanyal and Dikshit (2022) demonstrated, the effective functioning of the
GST has happened due to continuous improvements through a feedback-based system.

Another example of iterative process reforms that were needed to implement a structural
reform relates to the Insolvency and Bankruptcy Code (IBC). The Code, a very significant

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structural reform, has witnessed various legislative interventions and amendments to
regulatory framework since its enactment to deal with the emerging market realities. In
fact, the Ministry of Corporate Affairs had constituted the Insolvency Law Committee to
monitor the progress and implementation of the Code, consider issues raised by various
stakeholders, identify gaps and bottlenecks, and recommend corrective measures for
optimal functioning of the Code. This again shows the importance of feedback loops and
iteration in policy making.

Process reforms can take various forms, tailored to the specific context. In this paper, we
illustrate that they can be of at least five broad types:

• Type 1: Streamlining of the existing administrative processes: We illustrate

this type of process reforms using the case of voluntary liquidation of corporates.
The voluntary liquidation of companies used to take inordinate amount of time in
India. There are two main methods of voluntary liquidation in India- Section 248
of the Companies Act, 2013 and IBC, out of which the former is by far the more
important. We discuss how simple streamlining of administrative processes under
both routes have shown significant results.
• Type 2: Changes in regulations: This relates to changes in rules and regulations
without changing existing laws. The case that is discussed in the paper to illustrate
this type of process reform is the telecom regulations for Information Technology
(IT)- Business Process Outsourcing (BPO) sector. The IT-BPO sector suffered
from many outdated regulations with onerous compliance requirements till recently.
Recognising these issues, Government undertook a reform of liberalizing the
Telecom regulations for Other Service Providers. This has had far-reaching impact
on the ease-of-doing-business.
• Type 3: Changes in the legislation: This relates to process reforms where
underlying laws need to be changed. We illustrate this type with the case of excessive
criminalisation of offences under the Legal Meteorology Act 2009. Given the
hardship imposed by the criminalisation of second and subsequent offences under
this Act, the balance between empowering the legal metrology inspector and
protection of legitimate entrepreneurs had got distorted. Process reforms in this
case required legislative changes. To address this issue, the government has
decriminalized several provisions of the 2009 Act under the Jan Vishwas Bill 2022
which was recently passed by the parliament. However, many provisions accounting
for a very large share of cases are still criminalised. Hence, more needs to be done.
• Type 4: Adding capacity in some level of government: This relates to expanding
capacity where a bottle-neck is developing in a necessary government activity. For
is the case of Intellectual Property Right ecosystem, it was found that one of the
major reasons that India lags behind its peers is that the manpower in the Indian

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 Patent Office is too little to handle the workload. In this case, hiring and additional
resources need to be added in targeted way to the process pipeline.
• Type 5: Removing requirement or a state-mandated activity: This type relates
to getting rid of a requirement or mandatory activity that is not adding enough value
to a process. We illustrate this in case of mandatory mediation required before going
for commercial litigation. The Mediation Bill 2021, when first introduced had a
provision to make pre-litigation mediation mandatory for all civil cases. However,
based on feedback from stakeholders and report of the Parliamentary Standing
Committee, this provision was dropped in the Mediation Act passed in August
2023, thereby making pre-litigation mediation voluntary for civil cases. However, it
still remains mandatory for commercial cases. The available evidence strongly
suggests that the mandating of mediation is clearly not working in commercial cases.
Hence, there is a need to remove the condition of mandatory mediation in
commercial cases as well.

II. Types of Process Reforms

Type 1: Administrative Streamlining: Illustrated by process of voluntary liquidation

The first type of process reforms are the simplest which merely require streamlining of
administrative processes. It does not require any changes in the legislation or adding of any
resources or capacity by the government. We illustrate this using the changes done in
voluntary liquidation process.

The concept of ease of doing business extends beyond commencing and managing a
business; it also encompasses the ease of exiting. The issue of ease-of-exit in India is not
new2. Liquidation can be involuntary as in the case of insolvency or bankruptcy. However,
companies do not always close involuntarily, it is routine for owners to shut down a solvent
company voluntarily due to personal reasons, change in technology or consumer
behaviour, restructuring of group companies, regulatory changes and so on. Since its
implementation, IBC overhauled the involuntary liquation process of companies.
However, the voluntary liquidation processes still needed to be relooked at. The Economic
Survey for two years (2020-21 and 2021-22) pointed out that the voluntary liquidation of
companies takes inordinate amount of time in India. Sanyal & Arora (2021) also identify
the issues in the process of voluntary liquidation leading to delays.

There are two main methods of voluntary liquidation in India: Section 248 of the
Companies Act, 2013 and Section 59 of IBC.

2 https://www.indiabudget.gov.in/budget2016-2017/es2015-16/echapvol1-02.pdf

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Section 248 is by far the more important route as it is used by many more companies. This
is used by companies that have exhausted all their assets and liabilities, and have no
outstanding litigation. After the company files a STK-2 form with the respective Registrar
of Companies (RoC) along with the declaration of no dues towards any government
department, the RoC has to issue a public notice in a prescribed manner on (i) MCA
website; (ii) Official Gazette; (iii) Largest circulating newspaper, one in English and other
one in vernacular language. RoC provides a 30 days’ notice time. After expiry of notice
period, RoC may strike off companies’ name and publish dissolution notice in Official
Gazette.

This is considered to be a faster route. However, in practice, the process was found to be
very time consuming. Some of the key reasons leading to the delays were the lack of any
strict timeline for RoCs to follow, inordinate time taken by RoCs to publish the final notice
of strike off in newspapers, no standard format of affidavit to be submitted to RoCs and
so on. Consequently, as of June 2021, there were 28,536 pending cases. Out of these nearly
10% were pending from more than 1000 days and 54% were pending for more than one
year.

Once the issues were identified in 2021, efforts were made to clear the backlog of
applications and fast track this process by making simple administrative changes, for
instance publishing the note of winding up of companies by RoCs in a newspaper quickly.
This may sound trivial but was a major cause of delay. Speeding up newspaper notices did
not need any legislative changes, and was achieved by merely smoothening the
administrative process. The result of the changes is visible in faster processing of
applications. As of July 2023, not only have the pending cases reduced to 8,820 (from
28,536 in June 2021), only about 12% (down from 54% in June 2021) are pending for more
than a year. This is a substantial improvement in a span of two years.

In May 2023, the government created a one-stop window, Centre for Processing
Accelerated Corporate Exit (C-PACE), for companies applying for voluntary liquidation
under this section to further centralize and expedite the process. This will further
streamline not just the application uploading, but also its processing.

Under the second route, Section 59 of IBC, liquidator files the resolution to Insolvency
and Bankruptcy Board of India (IBBI) and RoC and then makes public announcement (in
English and Regional Newspapers) calling stakeholders to submit claims within fixed
timelines prescribed under the act. After opening a designated bank account, they apply
for a No Objection Certificate in Income tax, GST, PF/EPFO departments and sectoral
regulators etc. After giving the final remittances, liquidator submits the final report to
shareholders, RoC, IBBI and National Country Law Tribunal (NCLT). Then the NCLT
passes an order and RoCs strikes off the name of the company.

6
The actual time taken in this process used to be much more than the stipulated timelines.
As on September 2021, 1042 cases had been initiated, final reports had been submitted for
483, out of which 257 had been dissolved. The remaining 549 cases were still ongoing, out
of which 35% were then more than 2 years old.3

The most important issue which used to prolong the process was identified as the practise
of seeking multiple No Objection Certificates (NOC) from the various departments by
liquidators, even though the Code and Regulations did not mandate them. Further issues
were there were no clear Standard Operating Procedures (SoPs) with the departments and
NCLTs to deal with the voluntary liquidation process etc.

To address these issues, a clarification4 was issued stating that there is no requirement of
NOC from the Income Tax Department. Moreover, Voluntary Liquidation Regulations
were amended (in April 20225 and September 20226) with various changes. One such
change was that the applicants were required to submit a compliance certificate, essentially
like a checklist along with the final report. This is to facilitate the Adjudicating Authority
to adjudicate the applications expeditiously. In this case, a change in regulation was also
required alongwith the administrative changes, illustrating that in order to address issues in
some sectors, process reforms of more than one type may be needed.

Some impact of these changes has already started showing. As on June 2023, 1607
corporate persons had initiated voluntary liquidation under IBC, out of which final reports
had been submitted for 1104 cases (69% cases). However, we found that so far only 571
cases had been closed by dissolution, and the rest were ongoing7. Out of the remaining 486
cases that were ongoing, 37% were ongoing from more than 2 years, 19% were between 1
to 2 years old. In other words, the pipeline has become smoother but the final disposal rate
did not seem to have improved proportionately. This suggests that the NCLT stage still
needs improvement, but identifying the exact point of blockage is an important first step.

As can be seen, simple administrative changes have the potential for bringing about
significant change, in this case improving the ease-of-exit for businesses.

Type 2: Changes in Regulations: Illustrated by Other Service Provider reforms in

IT-BPO sector

The Information Technology (IT)- Business Process Outsourcing (BPO) sector is such a
prominent part of the “India” story. Yet, the sector suffered from many outdated
regulations till recently. Before the recent changes in the regulations of the sector, IT and

3 Quarterly newsletter of Insolvency and Bankruptcy Board of India July-September 2021

4 https://ibbi.gov.in/uploads/legalframwork/cc881169aad7ee239aea7954505a76ab.pdf
5 https://ibbi.gov.in//uploads/legalframwork/e488bdc6b6fd043c9afdac1256ae8b81.pdf
6 https://ibbi.gov.in//uploads/legalframwork/502221417edc8c995e6971fad60d3184.pdf
7 Quarterly newsletter of Insolvency and Bankruptcy Board of India April-June 2023

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IT enabled service companies carrying out services like tele-medicine, e-commerce, call
centre, network operation centre and other IT Enabled Services, by using services provided
by Authorised Telecom Service Providers were required to be registered as Other Service
Provider (OSP). They were regulated under the ‘Revised Terms and Conditions- Other Service
Provider 2008’ leading to several key issues:
• Lack of clarity on definition of OSPs: OSP regulation defines, ‘Applications Services’
as providing services like tele-banking, tele medicine, tele-education, tele-trading, e-
commerce, call centre, network operation centre and other IT Enabled Services, by
using Telecom Resources provided by Authorised Telecom Service Providers.
• Local infrastructure requirement: Regulations insisted on use of a local Electronic
Private Automatic Branch Exchange (EPABX), thus disallowing global cloud based
systems whereas most BPOs/ international logistics companies/ airlines etc. have
moved to cloud based systems. India was the only major country placing such a
requirement on companies.
• Separate Registration for each OSP: The regulation stated that, “The registration is
location specific, so a Company may have more than one registration. Any change in
the location of OSP Centre shall require amendment in the original registration.” This
was a completely outdated regulation in the age of Work from Home.
• Restrictive infrastructure sharing: Infrastructure sharing between domestic and
international OSPs was not allowed and international OSP operations could not service
domestic customers.
These requirements not only wasted lot of time of the management, it led to high
compliance and financial costs to the company. Recognising these issues, Government liberalized
the Telecom regulations for these Other Service Providers. New revised and simplified OSP guidelines were
first issued in November 20208 and further in June 20219. The revised guidelines simplify the
regulations and processes. Some of the key changes that were made in the regulations are:
• Clear definition of OSP: The applicability of new guidelines is limited to entities that
provide "Voice based BPO services" to its customers. Voice based BPO services is now
defined to mean call center services.
• Removal of registration requirement: No registration certificate will be required for
OSP centres in India.
• Removal of distinction between domestic and international OSPs: The
categorization of OSPs has been done away with and one single OSP category has been
introduced regardless of their domestic/ international business operations.
• Work from home and remote locations allowed: The agents at home/anywhere
shall be treated as remote agents of the OSP centre. The interconnection between
remote agents is permitted using any technology including broadband over

8 https://dot.gov.in/sites/default/files/2020_11_05%20OSP%20CS.pdf
9 https://dot.gov.in/sites/default/files/Revised%20OSP%20Guidelines.pdf

8
 wireline/wireless. The remote agent can now directly connect to customer EPABX
/centralised EPABX without the need to connect with the OSP centre.
• Interconnectivity and infrastructure sharing between OSPs allowed:
Interconnection between two or more OSP centres of the same or unrelated company
is now permitted. Infrastructure sharing among OSPs is also allowed. The guidelines
allow the use of EPABX at foreign locations.
After these reforms were done, NASSCOM conducted a survey between October to
November 2021 to assess market’s reaction to the reforms 10. The survey found that 92%
of the participants found that the OSP reforms have helped reduce compliance burden.
While 28% of the participants responded that their compliance burden reduced by more
than 50%, 20% of participants acknowledged compliance reduced by 40-50% and 15% of
participants responded that compliance reduction by 30-40%. Further, 83% of the
participants responded that these reforms will help in reducing the financial burden.

This illustrates how the change in processes brought about via changing the regulations
have the potential to give a major impetus to a sector - in this case, the IT-BPO sector.

Type 3: Legislative changes: Illustrated by changes in Legal Metrology Act

In some cases, to improve the process, the related legislation needs to be amended. Here
we illustrate this in case of the Legal Metrology Act 2009 which regulates manufacture and
sale of measuring instruments and trade and commerce in goods which are sold by weight,
measure or number. Uniformity and predictability in measurement of products is the
foundation of all commercial activity in a society. The effective implementation of this law
must strike a balance between safeguarding consumer interests and avoiding undue
burdens on enterprises. This is very important in reducing the cost of conducting business
in the country.

The Legal Metrology Act 2009 has long been subjected to criticism for the provision of
imprisonment as a punishment for offences under it. Sections 25-47 in Chapter V of the
2009 Act enumerate various offenses related to weights and measures. They include use
and manufacture of non-standard weighing and measuring instruments, undertaking
commercial transactions in violation of prescribed standards and transacting in pre-
packaged commodities without requisite declarations on the package.

As per this Act, the first violation of any of the offences under Chapter V by an enterprise
entails a monetary penalty. Upon receiving a notice by the legal metrology officer, the
person concerned may concede their mistake, decide not to contest the charges and pay a
fee to end all legal proceedings. However, upon a second/subsequent offence committed

10 https://www.indiabudget.gov.in/budget2022-23/economicsurvey/doc/eschapter/echap09.pdf

9
under the same provision, the Act provides for imprisonment along with a possible fine.
In the case of companies, a contravention of the provisions of the 2009 Act can make the
nominated director of a company criminally liable for the offence (Sanyal & Mishra, 2023).

The problem was that the criminalisation of second and subsequent offences under this
Act distorted the balance between the legal metrology inspector and legitimate
entrepreneurs. This gives the legal metrology inspector an opportunity to indulge in rent-
seeking by filing a first offence on trivial grounds and then threatening criminal prosecution
for subsequent offences.

Evidence for this behaviour is available in the data released by Press Information Bureau
(PIB) in its May 2022 report11 on the National Workshop on Legal Metrology Act, 2009.
In the year 2021-22, the number of first offences booked under the 2009 Act was 74,721
by states and UTs, however the number of second offences booked by the government’s
own records were just 11, out of which only 7 were files in court of law. The data for 2018-
19, 2019-20 and 2020-21 also show similar trends (Table 1). Over a four-year period from
2018-2022, for an average of approximately 1,00,000 first offences booked per year, only
EIGHT instances of second offences being booked are reported around the country.

Table 1: Number of 1st and 2nd offences

Cases/Years 2018-19 2019-20 2020-21 2021-22
1st Offence
No of cases booked 1,13,745 1,26,409 82,279 74,721
No of cases compounded 97,690 1,24,902 74,230 55,779
2 Offence
nd

No of cases booked 12 5 3 11
No of cases filed in the court of law 4 3 3 7
Source: PIB

Recognising the severity of the problems, the government decriminalized several

provisions of the 2009 Act under the Jan Vishwas Bill 2022 which was recently passed by
the parliament (Lok Sabha on 27th June 2023 and Rajya Sabha on 2nd August 2023)12.

While this is a good beginning, Sanyal and Mishra (2023) point out that this only solves a
part of the problem. The offences under section 30 (penalty for transactions in
contravention of standard weight or measures), section 33 (penalty for use of unverified
weight or measures) and section 36 (penalty for selling of non-standard packages) are
responsible for over 80% of the cases under the 2009 Act. Offences under these three

11 https://pib.gov.in/PressReleasePage.aspx?PRID=1823947
12 https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1945263

10
sections are still criminalised (Figure 1). The government needs to re-examine these
sections. This is an example where the legislation itself needs to change to rectify the issue.

Figure 1: Number of 1st offences

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2018-19 2019-20 2020-21 2021-22

Section 33 Section 36(1) Section 25 Section 30 Others

Source: PIB
Note: Section 33: Penalty for use of unverified weight or measure
Section 36(1): Penalty for selling etc of nonstandard packages
Section 25: Penalty for use of non-standard weight or measure
Section 30: Penalty for transactions in contravention of standard weight or measure

Type 4: Increasing state capacity: Illustrated by case of Intellectual Property Rights

ecosystem

Some areas may require increase in the capacity of Government at various levels in order
to increase efficiency or resolve the issues in the area/sector. One such area is the
Intellectual Property rights (IPR) ecosystem, specifically patents.

Changes ranging from procedural simplification and use of digital technology have been
done in past few years to improve India’s performance in patenting ecosystem which led
to some improvements. The number of patent applications rose from 45,444 in 2016-17
to 82,805 in 2022-23. The patents granted in India has gone up from 9,847 to 34,153 during
the same time period.

Despite these improvements, India lags far behind its global peers. The number of patents
applied and granted in India is still a fraction compared to patents granted in China, USA,
Japan, and Korea. Number of patents granted in India were merely 4.3% of China and
10.5% of USA in 2022 despite recent increases (Table 2).

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 Table 2: Patent applications and grants in China, US and India
Year China United States of America India
Filing Grants Filing Grants Filing Grants
2016 13,38,503 4,04,208 6,05,571 3,03,049 45,444 9,847
2017 13,81,594 4,20,144 6,06,956 3,19,829 47,854 13,045
2018 15,42,002 4,32,147 5,97,141 3,07,759 50,659 15,283
2019 14,00,661 4,52,804 6,21,453 3,54,430 56,284 24,936
2020 14,97,159 5,30,127 5,97,172 3,51,993 56,771 26,361
2021 15,85,663 6,95,946 5,91,473 3,27,307 66,440 30,074
2022 16,19, 000 7,98,000 5,89,155 3,25,445 82,805P 34,153P
(29,51,000*) (28,04,000*)
Source: World Intellectual Property organization (WIPO)
Note: a. Numbers for India are from CGPDTM; Numbers for India are fiscal year wise.
b. For 2022 for numbers for China and USA, annual reports of respective offices;
c. *Utility models (petty patents) filed and granted by china in addition to patents.
d. P = provisional data

Even as the scale of patenting activity small in India, the time taken for processing a patent
application in India is much higher as compared to its global peers. Sanyal and Arora (2022)
in their paper mention that ‘The Global best practice is disposal within 2 to 3 years, whereas
in India, average time taken is just under 5 years and is up to 9 years in some categories like
for biotech and will cross 10 years soon if the shortage of manpower issue is not addressed.’
They elaborate that the major cause of this delay in processing the patent applications is
the shortage of manpower in patent office in India. Manpower employed in Indian patent
office is only around 900, as compared to 13704 of China and 8132 of US.

A few years ago, some manpower was added, mostly at examiner level. This shifted most
of the pendency from first examination at examiner level to the disposal level. As on 31 st
March 2023, there were 1.67 lakh pending applications at the controller level13. This was
also noted by the Parliamentary Standing Committee on Commerce’s Review of
Intellectual Property Rights Regime in India (2021).

As pointed out by Sanyal and Arora (2022), it is evident that there is a need to increase
capacity in the patent office, especially at senior levels. No other reform will have that
effect that this will. Recognising the need for this, the process of increasing the manpower
in the Office of Controller General of patents and trademarks has started. This is a case
where the processes can be improved by simply adding some capacity in a specific point
where a bottle-neck has emerged.

13 Sanyal and Arora (2022) in their paper “Why India Needs to Urgently Invest in its Patent Ecosystem”

12
Type 5: Remove State Mandated Requirement(s): Illustrated by the case of
mandatory mediation
Issues in different sectors have to be addressed in different ways. As seen in the discussion
above, in some cases it requires addition of capacity, but elsewhere it may require simple
removal of one or more requirements, as we illustrate in the case of mandatory mediation
before litigation.

There are a large number of pending cases in courts in India currently. Policy-makers have
two approaches to reduce caseload in India’s courts. On one hand, the cases which are in
the judicial system are sought to be disposed of quickly by expanding the judicial
infrastructure and speeding up the procedural elements of a case. On the other hand,
multiple efforts are made to ensure that the flow of new cases which enter the judicial
system is also minimized. One way to do this to encourage alternative methods of dispute
resolution like arbitration, mediation and conciliation for which providing legal and
institutional support to mediation is crucial.

In order to giving impetus to the mediation process in the country, Mediation bill 2021 was
introduced in December 2021 in Raya Sabha. When the original bill was introduced,
Section 6 had a statutory mandate to compulsorily use mediation for dispute resolution
before going to court. Notably, the provision applied even in cases where the parties chose
not to have a mediation clause in their agreement. Further, Clause 20 of the Mediation Bill
2021 mandated that parties be forced to sit through at least two sessions of mediation
before initiating the litigation process and empowered the court to impose penalty on a
litigant who failed to do so without reasonable cause.

However, the Parliamentary Standing Committee on Personnel, Public Grievances, Law

and Justice in its report submitted July 2022, noted that making pre-litigation mediation
mandatory may actually result in delaying of cases and recommended that the pre-litigation
mediation should not be made compulsory. Taking the feedback of the committee and
other stakeholders into account, the revised Mediation Bill passed in August 2023 and
formalized as Mediation Act 2023 changed the corresponding provision to make pre-
litigation mediation voluntary.

However, as per the current status, pre-litigation mediation in India for commercial
disputes (as mandated under Section 12A of the Commercial Courts Act 2015) is still
compulsory. There is enough evidence to show that mandating mediation has not helped
in early resolution of disputes.

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Manivannan (2023) in his paper by titled ‘Why Mandating Mediation Will Not Be Effective
for Litigants In Commercial Disputes’14 makes the case that mediation has been
unsuccessful in resolving commercial disputes.

The paper presents evidence from the two district level commercial courts in Mumbai
suggests that for the years 2020-2023, between 97-99 percent of the applications for pre-
litigation mediation were non-starter because the parties did not choose to participate in
the proceedings. Even in the cases where mediation was tried, it failed in more than half
of the cases. Sanyal and Mishra (2023a) in their forthcoming paper also find similar results
for the year 2023 (till September). This data confirms shows that mandating pre-litigation
mediation for commercial cases is not working for around 99% of cases.

Table 3: Categories of Disposed Cases in Commercial Courts of Mumbai (2020-2023)

Year Disposed Settled Failed Non-Starter % of Non-starter and
Cases Cases Cases Cases Failed Cases
2020 304 3 0 301 99
2021 3555 22 28 3505 99
2022 7717 139 139 7431 98
2023* 3404 114 120 3170 97
Source: Sanyal and Mishra (2023a), forthcoming EAC-PM working paper
Data for 2023 is till September

The evidence clearly shows that mediation has not worked for 99% of cases but adds time
and cost for everyone. Hence, there is a need to make mediation voluntary under Section
12A of the Commercial Courts Act 2015 as well, as has been done in civil cases to simplify
the process of grievance redressal in the country. We have specifically presented it here an
example of how process reforms may sometimes lead to unintended consequences and
need to be rectified using feedback. Indeed, this should be done as a matter of routine so
that processes can be continuously upgraded.

III. CONCLUSIONS
As one can see from the discussion in this paper, process reforms are an important part of
the policy and governance tool-kit. Unfortunately, economic literature has long ignored
this type of reform. There is some scattered literature about individual changes but virtually
no literature on ‘process reforms’ as a class. In this paper we argue that there is a need to
systematically analyse these reforms as a distinct class, thereby making them a routine
subject of both public and academic discourse.

As discussed, there are at least five ways of doing process reforms. However, it is important
to note that they are not always in neat boxes. In some cases, ironing out the issues may

14 https://www.bqprime.com/opinion/why-mandating-mediation-will-not-be-effective-for-litigants-in-commercial-
disputes

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require process reforms of various categories as illustrated in case of voluntary liquidation.
Most of the efficiency in processes were brought out by Type 1 reforms, i.e. by carrying
out simple administrative changes, whereas for a particular thing, Type 2 reforms were also
done (amendment in Voluntary Liquidation Regulations).

Moreover, in some case, one issue could be resolved by different type of process reforms.
For instance, in the case of voluntary liquidation of companies, since there was delays by
RoCs to publish the final notice of strike off in newspapers, Type 1 reform was used, i.e.
effort was made to fast-track publication administratively. This could have been also done
by removing the requirement altogether of publishing it in newspapers and instead publish
it only on a designated website, that would have meant using Type 5 of the reforms. It may
have been found that making simple administrative changes to fastrack this step was
simpler at this stage, whereas in fact with growth of digitization in future, publishing the
notice only on a website may suffice.

In the end, what matters is taking into account feedback and constantly making iterations
as the situation evolves. We hope that greater attention on process reforms will lead to the
constant use of small, targeted iterative changes that improve economic efficiency without
always needing to rely on large-scale structural changes.

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IV. REFERENCES

1) Fixing the GST Process: Five Years of Iterative Problem Solving, Sanjeev Sanyal and
Pankaj Dixit (EAC-PM Working Paper Series EAC-PM/WP/16/2023)
2) Economic Survey 2015-16
3) Economic Survey 2021-22
4) Economic Survey 2020-21
5) IBBI (Voluntary Liquidation Process) Regulations, 2017
6) Simplifying Voluntary Liquidation Process: Improving Ease of Exit in India, Annual
Publication 2021 “Quinquennial of Insolvency and Bankruptcy Code of India”
7) Report of the Weights and Measures (Law Revision) Committee (Maitra Committee)-
Submitted to Government of India on 15 May 1972
8) Legal Metrology Act 2009
9) Reforming the Legal Metrology Regime, Sanjeev Sanyal and Apurv Kumar Mishra
(EAC-PM Working Paper Series EAC-PM/WP/23/2023)
10) Why India Needs to Urgently Invest in its Patent Ecosystem, Sanjeev Sanyal and
Aakanksha Arora (EAC-PM Working Paper Series EAC-PM/WP/2/2022)
11) The Draft Patents (Amendment), Rules, 2023
12) Quarterly newsletters of Insolvency and Bankruptcy Board of India
13) The Case for Making Pre-Litigation Commercial Mediation Voluntary, Sanjeev Sanyal
and Apurv Kumar Mishra (forthcoming EAC-PM Working Paper 2023a)

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