A tale of two friends: How performance audit complements judicial review

Court-mandated performance audits act akin to judicial review in kick-starting necessary legislative reform to address gaps in certain statutes, writes Vaishnav M.

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AROUND a month ago, the Supreme Court of India metaphorically sparked a friendship, the tale of which is narrated in the following paragraphs.

In Yash Developers versus The Harihar Krupa Co-operative Housing Society Ltd., a division Bench of the Supreme Court consisting of Justices P.S. Narasimha and Aravind Kumar directed the High Court of Bombay to conduct a 'performance audit' (PA) of the Maharashtra Slum Areas Act (1971), a legislation that has been the subject of years of litigation.

A performance audit involves an independent and objective study of the effectiveness of a piece of legislation at the ground level and the possible improvements to it— the aim of the audit is not to see whether the text of the law is pertinent, but whether the law is delivering the promised results.

Relying on performance audits in cases where judicial review does not bring any succour in the long term is an idea that warrants a close analysis— since it is an idea that has not entered the academic conversation yet.

This piece posits that though the instrument of performance audit falls outside the judicial review framework, it closely complements the judicial review powers of the constitutional courts by ensuring that the legislations that pass the review are also practically sound.

As I delve into the inquiry, it also becomes clear how performance audits might help the courts in resolving contentious issues without overstepping their constitutional powers.

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By contextualising the concept of performance audit in relation to the framework of judicial review, this piece hopes to facilitate broader academic conversations on performance audits as a potential judicial tool.

What the court said in Yash Developers

The Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act (1971) was enacted with the objective of redeveloping slum areas and protecting the occupiers from arbitrary evictions.

However, this statute has been subjected to multiple rounds of litigation, despite which there appears to be a recurring problem in its implementation.

The current case was between Yash Developers and Harihar Krupa Co-operative Housing. The respondent, which is a housing society of slum-dwellers, had appointed the appellant to redevelop their slum area.

Despite being appointed in 2003, there was no initiative from the side of the appellant to redevelop the land, and the status quo continued for a staggering 18 years until the Apex Grievance Redressal Committee (AGRC) terminated the agreement in 2021.

The appellant challenged the Order of the AGRC before the Bombay High Court, but the court dismissed the petition. On appeal, the Supreme Court not only upheld the decision of the high court and the Order of the AGRC but also requested the high court to review the statute and conduct an audit of the Act.

Even with the voluminous litigation on the subject and multiple rulings on the Act, there was no material improvement with regard to compliance with the statute. As highlighted by the court, despite the recognition of the statutory duty of the AGRC, the exercise of judicial review has not been able to enforce accountability in that regard.

This experience of reviewing the statute over a period of time has led to the development of what the court describes as 'institutional memory' regarding the working of the statute. The court continues, "[this institutional memory] is of immense value for auditing the working of the legislation. It enables the court to assess whether the purpose and object of the Act is being achieved or not".

The profundity of the court is coupled with an expansive power of judicial review, a power that has been growing organically over the years. Here, the reader might have already caught the train of thought of the court and presumed the conclusion. However, much to the amusement of the reader, the court takes a swerve towards the other end.

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The court notes: "There is yet another role [other than review] which the judiciary can and ought to perform— that of a facilitator of access to justice and effective functioning of constitutional bodies.

"In this role, the judiciary does not review executive and legislative actions, but only nudges and provides impetus to systemic reforms."

Instead of basing performance audits on its judicial review powers, the court decided to invoke its role as a facilitator of justice to advance an audit of the statute. From that, the court moves with a visibly self-restraining tone.

While the court notes that it has the duty to direct the executive to review and audit statutes, it cannot compel legislative reforms based on such audits. By suggesting to the high court that it may consider directing the government to set up a performance audit committee, the judgment ends on an even feebler tone. Also, reforming the statute based on the audit findings would be left to the legislature, and out of the scope of the judiciary's intervention.

By and large, the decision underscores the inability of judicial review to effect better enforcement of laws in certain cases and throws open the possibility of performance audits as a complementary tool in closing this gap.

The promise of performance audits

The idea of court-directed performance audits of poorly functioning or implemented statutes is intriguing. Performance audit is simply a tool for governmental introspection, a process which is often talked about and advocated for but never really carried out.

In Yash Developers, when the government failed to review and study the effectiveness of their law, the court modestly pitched in and called for a statutory audit.

The instrument of performance audits can be leveraged to address multiple issues that we are facing today as a result of ineffective statutory implementation, issues that vary from gender justice to urban planning.

One might argue that the promise of a performance audit is limited in praxis due to its persuasive nature. The judiciary can only direct the executive to conduct an audit; it cannot bind it to reform the law based on such an audit. In other words, the government may simply ignore the findings of the audit and continue with the current statute if it wishes to do so. This is conceptually true.

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However, the process of an audit can be viewed as a mechanism to churn out data legitimised by the involvement of the branches of the State (the judiciary, which prompts the audit; and the executive, which conducts the audit). This process in toto, along with the resultant data, would take the shape of an authoritative study that may inform and influence public opinion.

Even without any formal binding force, the government would be effectively coaxed to introduce necessary legislative reforms owing to public opinion, and in certain cases, even public backlash.

In other words, performance audits would contribute to what Mark Tushnet describes as the "judicial rhetoric"— that moulds public opinion and facilitates the oppositional forces.

Performance audit and judicial review: Conceptual distinctions

Even if performance audits are practically desirable instruments, are they conceptually viable within the Supreme Court's and high courts' judicial review framework?

In Yash Developers, the court explicitly states that the direction for performance audits was not made under its judicial review powers, but under the mandate of its 'duty' to facilitate justice.

The court was right in separating performance audits from judicial review. Judicial review refers to the duty of the constitutional courts (the Supreme Court and the high courts) under Articles 13, 32 and 226 of the Constitution to review the constitutionality and legality of legislation and executive actions.

The outcome of such a review includes (wholly or partly) striking down the statute, declaring it ultra vires or affirming its constitutionality. The idea of a performance audit cannot be fitted within this framework. The intention behind performance audits is not to test the text or substance of the legislation; rather, the broad purpose of a performance audit is to ensure that a valid piece of legislation is working as it should and is delivering the results that it promised.

Even if a piece of legislation is found to be ineffective by such an audit, the court cannot strike it down. The findings of the audit would instead act as a set of data based on which the legislature can decide to amend or repeal the legislation. In essence, the concept of judicial performance audits has to be seen outside the framework of judicial review.

The friendship between judicial review and performance audit

It is well-known that even if a statute passes the test of constitutionality, it may still fail to deliver the intended results— the 'pure' creation of law does not necessarily prevent its 'impure' implementation.

However, the issues of expediency and effectiveness of a piece of legislation are beyond the scope of the power of judicial review of the courts unless it constitutes a direct violation of the people's rights.

The above-discussed case of the Slum Areas Act is an apt example— despite years of litigation, and multiple rounds of review by the court, it was not able to rectify the systemic issues in the implementation of the Act.

There are various pieces of legislation in India as well as in other countries that require such court-directed performance audits. For example, in India, the law protecting street vendors has not been able to safeguard their livelihood due to the indifference of institutional actors. A performance audit of the statute would gauge the level of public attention on the issue and impose pressure on the government— something that the indigent and helpless street vendors could not achieve on their own.

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On a global scale, one of the long-standing and pertinent examples that show the mismatch between 'good laws' and 'poor implementation' is the laws on women's rights. As portrayed in this study, there are laws across jurisdictions that ensure equal wages, protection against domestic violence, and prevention of workplace sexual harassment, despite which the outcomes on these matters have been depressing. The data could be taken as a waking call for constitutional courts across the globe to contemplate auditing such legislation.

However, the utility of performance audits is not limited to the role of a 'back-up' mechanism for judicial review. Performance audits also have a strategic role. In the past, the Supreme Court has intervened multiple times to ensure regulatory enforcement.

Recent examples include Supreme Court guidelines on environmental regulatory bodies and the decision regarding the standardisation of treatment charges in hospitals.

However, the direct regulatory intervention by the Supreme Court has also been criticised based on the legitimacy of such actions in the scheme of separation of powers. In contentious issues, where direct enforcement actions by the Supreme Court might be perceived as an overreach of its powers, the instrument of performance audit attains significance.

As mentioned before, performance audits indirectly engender legislative reforms or improved enforcement through 'judicial rhetoric', without stepping into executive or legislative duties.

While performance audits might not be appropriate for issues that require immediate resolution, they could still be considered an effective way to nudge legislative or executive actions in certain cases.

Conclusion

The decision in Yash Developers was indeed a significant step that affirmed the courts' position as a facilitator for better democratic governance (here, here and here). The performance audit promises a mechanism to apply the wisdom of the court, or what is termed as the 'institutional memory', to evaluate ineffective legislation and address systemic legislative failures. Such a mechanism gels and complements well with the review power of the judiciary.

However, the success of the performance audit depends on how the courts use it. The courts shall rely on it only when their 'institutional memory' necessitates so, that is, when a judicial review has failed or is likely to be ineffective in solving a particular issue.

Currently, the Bombay HC has initiated suo motu proceedings on the matter and is yet to constitute an audit panel. Hence, the questions regarding the composition of the panel and the timeline of the audit are left for future narration.