The genesis of all lawsuits lies in a cost-benefit analysis. Fighting a case would rationally only make sense if the end result was to result in a net benefit to the litigant. Usually, said determination is made on the basis of opinions formulated using traditional tools of research. Legal research, as we know it today, struggles with three big problems, especially in a country as litigation-happy as India –
Legal analytics presents a common solution to the above-mentioned problems.
Opinions can be subjective, numbers are not. As highlighted above, traditional tools of research are ill-equipped to enable a researcher to effectively comb through the entire data set. As a result, there is a possibility that certain data points may not be highlighted to a user, even though they may have a substantial bearing on the opinion formulated at the end of the research.
To take a very quick example, if say a particular ITAT has shown a marked trend to remand cases, then the research must take into account and make note of all the factors that may result in their case being remanded.
Legal analytics makes arriving at such insights a much simpler task. Data processing ensures that a huge quantity of data can be presented in a much more consumable format, with the ability to breakdown user requirement into specific baskets. At the same time, categorisation and segregation of data result in the ability to map out long term trends, as well as offering the ability to glean insights based on macro-level data. This becomes indispensable in decision making as it alerts the researcher statistically to potential areas of concern or highlights unique key strengths of a case.
Case Study – Vivad se Vishwas
To demonstrate how legal analytics can add a critical dimension to legal decision making, let’s take the example of the recently announced Vivad se Vishwas (VsV) direct tax settlement scheme. This scheme allows assessees against whom litigation is pending to settle all matters by paying 100% of the tax demand in case of assessee appeals and 50% of the tax demand in case of revenue appeals. Assessees can also settle only penalty proceedings against them by paying 25% of the penalty or interest amount in question. Once the case is settled, the assessee gets full immunity and no further proceedings can be initiated against them in the matter.
Also check: Vivad se vishwas Decision support
While every case involves a lot of variables, the following factors can be considered to be important in determining whether one should settle a case –
- Expected Duration of the case: There is a direct correlation between the duration of the case and the cost of litigation associated with it. Over and above the mounting legal fees, the assessee faces the loss of income and potential cash flow problems from any deposit made by them to the court.
- Possible Outcome of case: One would be less inclined to settle a case where the probability of the outcome being in your favour is greater. Outcome trends can be very helpful for analysing specific jurisdictions as courts tend to follow jurisdictional precedents while deciding cases.
- The appellant in the Case: The Vivad se Vishwas scheme is implemented differently for appeals filed by revenue and those filed by assessees. Moreover, outcome trends vary significantly between assessee and revenue appeals. Courts usually tend to uphold assessee favouring decisions by the lower forum, making the appellant a key marker in more accurately projecting outcome trends.
Knowing the average duration of a case can help a person put an estimate on the cost of litigation that could be involved with the case. However, the average duration paints a slightly incomplete picture of the life cycle of a case. A truer representation comes forth when duration data is plotted on a timeline.
The adjacent timeline gives a breakdown of duration in terms of frequency. The box represents the duration span of 50% of all cases. This would indicate the most likely time span in which a person’s case gets decided.
The black lines extending outward from the boxes signify standard deviation, representing the remaining 25% each of the cases. These effectively show the known minimum and maximum duration of any case.
Having a breakdown of duration in an aforesaid manner can be of immense utility while making a decision about ongoing litigation.
If a person’s case has gone past the average duration mark, the timeline would help them get a sense of the range to which it can further extend while at the time allowing them to compare the jurisdictional trend with the nationwide average.
As can be seen in the graphs above, ITAT Indore is considerably quicker than the national trend in disposing of cases that have gone past their average duration.
As highlighted earlier, since jurisdictional precedents hold the most weight in front of the court, an outcome trend can give a person a prima facie idea about the likelihood of success in his case.
In addition, outcome trends can also flag any peculiar trends that a person may need to watch out for while strategising about their case.
For instance, in the above graph, while ITAT Ahmedabad seems to be as assessee friendly as the rest of the country in general, for a certain specific issue, the assessee win percentage is noticeably lower. In addition, the rate of remand for the same issue is higher than normal at the forum. In the context of the VsV scheme, this would tell the assessee that their chances of a positive outcome are slightly below average and there is a high possibility of extended litigation as the matter could be remanded.
For ongoing litigation, a combination of outcome trends and duration gives the user more pointed insight into their chances of success.
At ITAT Mumbai, as can be seen in the graph alongside, the assessee’s chances of winning constantly go down as the case pendency crosses the 2-year mark. At the same time, the likelihood of the case being remanded goes consistently up. In such a scenario, a person would be more likely to settle a case that has been pending for long as opposed to one which has just been filed.
The outcome trend at the appellate forum is also a factor that needs to be taken into consideration while deciding whether to settle or continuing litigation as approximately 33 per cent of all tax cases gets appealed to the higher appellate forum.
For deciding whether to continue litigation at ITAT Mumbai, a person would like to know the chances of success at Bombay HC. The outcome trend above would tell them that they have an even chance of winning a case at the said forum. However, there is a further hidden nuance to the claim.
The above outcome percentage does not hold true if we consider only assessee appeals, that is to say, the likely outcome if the assessee were to lose their case at ITAT Mumbai.
As can be seen alongside, in case the assessee loses at the ITAT level, their chance of reversing the verdict at the HC Bombay level is a sliver over 20%, considerably below the average jurisdictional outcome trend. So if a person were likely to lose a case at the ITAT, it would be in their interest to settle since it isn’t likely that they’d get a favourable outcome at the High Court either.
As seen above, who filed the case has a direct bearing on the likely outcome of it. The courts show a noticeable trend for reaffirming lower court decisions. This is truer when the lower court decision is in favour of the assessee. When the revenue wins at the CIT level, ITATs are more measured in affirming such decisions. However, High Courts show more reluctance in overturning ITAT verdicts favouring the revenue.
Projecting data from ITAT Delhi shows results conforming to this trend. In cases where the assessee obtained a favourable ruling at the CIT Level (Revenue Appeals), the assessee wins a whopping 70% cases.
Albeit, where they lose at the CIT level, assessee’s go on and successfully manage to get the verdict overturned only 28% of the time.
For something like a VsV Scheme, the appellant analytics becomes even more crucial, since the settlement amount has been set at different thresholds for assessee appeals and revenue appeals. While one only has to pay 50% to settle a revenue appeal, it must also be kept in mind that there is a greater overall chance of success when revenue is appealing a case.
The Bottom Line
Availability of data in and of itself is not useful unless one is able to distil out the relevant substance of the data. Introducing analytics into legal research enables a researcher to approach a problem of plenty with scalpel precision using varied insights. Structured data makes it easier to spot trends and patterns, allowing a person to make more accurate judgment calls with respect to litigation strategies. They can spot risks better, project more accurate timelines for a case and, perhaps most importantly, determine with greater certainty their chance of success in any litigation.
The expertise that a practitioner provides is indispensable in arriving at a solution to a legal problem. However, legal analytics augments this expertise by adding a statistical nuance which lends credence to their opinion on the strength of numbers.
Siddharth Priyadarshi Sharma, Senior Product Manager- Legal @ Riverus