Third-party litigation funding in India is expected to remain unregulated for the foreseeable future, as the central government confirmed that no regulatory framework is currently under consideration.
Additionally, the government clarified that it is not exploring the role of litigation funding in addressing high litigation costs or case pendency.
This information was disclosed in response to a parliamentary question from Trinamool Congress Rajya Sabha MP Mohammed Nadimul Haque. Minister of State (Independent Charge) for Law & Justice, Arjun Ram Meghwal, provided this response.
"At present, there is no proposal under consideration of the Government for establishment of a legal and regulatory framework to facilitate Third Party Funding of litigation in the country and further, no examination of the potential of Third Party Litigation Funding as a means to address high litigation costs and pendency of cases has been carried out by the Government."
Third-party litigation funding refers to the financing of legal costs for a party involved in a case by entities that are not part of the dispute. In return, the funders receive a percentage of the damages or settlement if the case is successful.
Although this practice is relatively new in India, it has existed for several decades in countries like the United Kingdom and Australia.
In 2018, the Supreme Court of India, in the case of Bar Council of India v. AK Balaji, implicitly acknowledged third-party litigation funding. However, there is no specific legislation regulating it as of now, and with the recent government response in Parliament, it seems the practice will continue to operate without clear regulatory oversight.
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