Legislative efficacy assessment: A crucial judicial initiative

In a recent landmark decision, the Supreme Court of India underscored the importance of evaluating the impact of legislation. The case, Yash Developers v. Harihar Krupa Co-Operative Housing Society Limited, highlighted the necessity of assessing whether statutes achieve their intended purpose. The Court observed that this assessment "is the implied duty of the executive government," recognising that reviewing and assessing the implementation of a statute is an integral part of the rule of law.

The Court refrained from encroaching on the executive's domain, underlining that the executive branch holds a constitutional responsibility to rigorously monitor the implementation and impact of a statute. The Court further stressed that such oversight must be continuous, with real-time assessments to ensure that the statute's purpose and objectives are effectively realized during its execution.

In a landmark first, the Court observed that while courts cannot review executive and legislative actions, they are empowered to provide necessary “nudges” and “impetus” for “systemic reforms”. Constitutional courts are empowered to give such directions because they are uniquely placed to assess the working of a statute while exercising  the power of judicial review. Courts are in a position to identify fault lines in the implementation of statutes, as they possess “institutional memory” about the working of a statute and its interpretation, which are preserved as precedents. This distinct vantage allows courts to assess whether the purpose and object of a statute is being achieved through “demonstrable judicial data or other cogent material”.

In the peculiar facts of the case, the Supreme Court granted the concerned High Court the discretion to adopt appropriate methods, including possibly initiating suo motu proceedings for reviewing the working of the statute in order to identify the causes of the problems.  The Court also granted the High Court the liberty to take the assistance of specialist senior lawyers as amici curae and to direct the government to constitute a committee for the performance audit of the statute.

In fact, what the judgment proposes is the ideal approach even for enacting and amending legislative amendments. Currently, changes in legislation often stem from calls for reform based on anecdotal evidence, leading to sweeping overhauls that may disrupt established jurisprudence. While such overhauls are sometimes seen as a means to expedite litigation, they can be counterproductive, imposing significant costs on citizens, overburdening the legal system, and necessitating costly and time-consuming litigation.

Legislative reforms should focus on addressing specific ineffective provisions rather than broad revisions. Amendments should follow a detailed legislative audit, and thereafter comprehensive consultations with stakeholders, domain experts and legal professionals, and a rigorous review by standing committees. Even when the Law Commission is considering amendments, such audits would be invaluable. This method ensures that reforms remain responsive to evolving needs without imposing excessive burdens on the judiciary.

Once a statute is enacted, it should undergo periodic reviews by designated committees using data-driven methods to assess its impact. As the Court observes the “purpose of such review is to ensure that a law is working out in practice as it was intended. If not, to understand the reason and address it quickly”. These evaluations should identify any errors, gaps in the statute, and shortcomings in its implementation, as well as analysing its economic impact.

The economic impact of legislation is a crucial consideration. In a somewhat related context, the Supreme Court, in 2017, in Shivashakti Sugars Ltd. v. Shree Renuka Sugar Ltd., emphasized the importance of accounting for economic factors in judicial decisions. The Court drew on principles outlined by Judge Richard Posner in his book, Frontiers of Legal Theory, underscoring the significance of integrating economic analysis into legal reasoning. Such an approach will ensure that legislative reforms are not only necessary but also beneficial, striking a balance between economic development, legal evolution and the preservation of established jurisprudence.

As the Court in Yash Developers has rightly observed that adapting to change is one of the four aspects of achieving justice. Failure to adapt produces injustice and is an abuse of power.

This decision marks a significant milestone and perhaps a new era of judicial activism and a journey toward more effective and responsive legislation.

Payal Chawla is a practising advocate specialising in arbitration and commercial litigation and is the founder of JUSCONTRACTUS.