Third-Party Litigation Funding: Future Of Litigation In India

While this is essential and required at major places allowing the subject to be governed through state bodies as that allows the proper checks and balance over the subject ensuring equal and unbiased availability of the subject to the every individual living in India, at other occasions it also act as a burden on the Indian Economy wherein despite having ample opportunities to develop an institution which could have not only taken care of the issue but would have also made the governance of the subject a profitable one helping the economy at the bigger picture.

Judiciary which is considered as the third pillar of democracy is a state subject and the entire working capital defined and framed around it are owned and controlled by the state which also includes funding litigation expenses of such marginalised section of the society who cannot afford to contest their cases on their own. To honour such commitment the government of India has passed a law, which is, Legal Services Authority Act, 1987. Chapter IV of this Act which is known as ‘entitlement to legal services’ defines under section 12 as to who all are entitled to avail legal services by approaching the legal services authority established at all the court levels in India by the state. This fulfils the concept of India being a welfare state which was discussed in the case of Lala Ram vs Union of India (2015) 5 SCC 813 and states as “a welfare State denotes a concept of Government, in which the State plays a key role in the protection and promotion of the economic and social well being of all of its citizens, which may include equitable distribution of wealth and equal opportunities and public responsibilities for all those, who are unable to avail for themselves, minimal provisions for a decent life.”

Simultaneously, while further discussing the concept of welfare state the Hon’ble Supreme Court of India narrates, “a welfare State is under an obligation to prepare plans and devise beneficial schemes for the good of the common people. Thus, the fundamental feature of a welfare State is social insurance. Anti-poverty programmes and a system of personal taxation are examples of certain aspects of a welfare State.”

The Hon’ble Supreme Court of India in these lines of their judgment came up with three issues and that are social insurance, anti-poverty programmes and personal taxation. While every individual in this country is subject to direct and indirect taxes and laws like Legal Services Authority Act, 1987 helps combating the issues of anti-poverty at the judicial level, unfortunately we do not see any rules framed in around the concept of social insurance when it comes to judiciary in India.

We all know that disputes are inevitable, and it can come across in anyone’s life at any given point of time for any reason whatsoever, yet having no mechanism to come across the same and to be absolutely dependent on own’s personal funds and resources makes it difficult to such people who are not covered under the law of Legal Services Authority Act, 1987. They in general either go bankrupt in the pursuit of their rights or in most cases tends to lose their rights rather than contesting it before the court of law as they do not have such funds and resources with themselves which is required to contest and protect their rights in the court of law. And that is why India needs to introduce the concept of ‘Third-Party Litigation Funding’ through well-defined laws and framework.

To understand the concept of ‘Third-Party Litigation Funding’ one can, draw parallel to medical insurance (though vaguely) wherein one institute takes certain amount of premiums from a community at large and in return assist in availing the medical services to individuals suffering from major medical ailments which in general would not have been feasible to people at large because of their limited funds and resources.

In the concept of ‘Third-Party Litigation Funding’ the private institution comes as an aid to assist the litigant to contest for their rights without being bothered about their limited funds and resources which otherwise would not have allowed them to contest for their rights. The institutions who act as ‘Third-Party Litigation Funding’ at present in the other parts of the world like Australia (Vannin Capital, Harbour Litigation Funding), Canada (Augusta Finance for Litigation) and USA (IMF Bentham International Litigation Funding, Burford Capital, Citigroup and Legalist) do not collect the premiums from society at large and rather makes their independent evaluation of their own before funding the case for individual or for the class-action suit. In general, the ‘Third-Party Litigation Funding’ is agreed through a contract wherein the institution who act as ‘Third-Party Litigation Funding Institute’ evaluates the risk involved in the case and aids and assist the people accordingly distributing the winning amount or other valuable as agreed in the contract between the institution and the contesting parties. This makes the institution profitable and gives the contesting party a fair chance to contest their case and to protect their right before the court fairly.

Existence of ‘Third-Party Litigation Funding Institute’ in a country like India wherein it is known as to how much of litigation is pending in the courts of law will not only bring the ease of contesting the cases by the people in general but will also creates job opportunities for those who will work in these institutions besides bringing the fairness in the justice delivery system. Institute like this will also aid and assist in the systematising the entire litigation process as they will have their own risk evaluation system which will not allow the derailment of cases which is normally seen in the courts of law for some or the other reason and will ultimately help in reducing the overall lifecycle of any court case which again helps in saving a lot of government funds which they incur in maintaining and processing the records of the case file. These institutions since will function for profit so they will be equally responsible to pay direct and indirect taxes on their profit and services respectively which again helps the Indian Economy to prosper further.

Though the proposal may look futuristic and non-feasible in the current times, but there are some startups who have come across with the similar concept in India and are trying to find a base for themselves in this non-existing market. All it is required is the support from the side of the Government of India by proper laws and regulations aiding and assisting in the development of these institutions in India.