Everyone should read the detailed order dated 4 July 2011 passed by the Supreme Court of India in the pending black money case.
ITEM NO.63(PH) COURT NO.9 SECTION PIL
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
WRIT PETITION (CIVIL) NO(s). 176 OF 2009
RAM JETHMALANI & ORS. Petitioner(s)
VERSUS
UNION OF INDIA & ORS. Respondent(s)
(With appln(s) for directions and permission to file additional
documents)
WITH SLP(C) NO. 11032 of 2009 (PH)
(With prayer for interim relief)
W.P(C) NO. 37 of 2010 (PH)
W.P.(C) No. 136 of 2011
(With office report)
Date: 04/07/2011 These Petitions were called on for hearing today.
CORAM :
HON'BLE MR. JUSTICE B. SUDERSHAN REDDY
HON'BLE MR. JUSTICE SURINDER SINGH NIJJAR
For the appearing parties :
Mr. Anil Divan, Sr.Adv.
Ms. Lata Krishnamurthi, Adv.
Mr. R.N. Karanjawala, adv.
Ms. Manik Karanjawala, Adv.
Mr. Sandeep Kapur, adv.
Mr. Ranvir Singh, Adv.
Mr. Ravi Sharma, Adv.
Mr. Pranav Diesh, Adv.
Mr. Karan Kalia, Adv.
Mr. Arjun Mahajan, Adv.
for M/S. Karanjawala & Co.,Adv.
Mr. Rajindra Sachchar, Sr.Adv.
Mr. Gaurav Jain, Adv.
Ms. Abha Jain, Adv.
For Intervenor
K.V.M.PAI Mr. Krishnan Venugopal, Sr.adv.
Mrs. Anuradha Mutatkar, Adv.
Mrs. Anagha S. Desai, Adv.
Mr. Shyamohan, Adv.
Ms. Meenakshi Arora, Adv.
-2-
For UOI Mr. Gopal Subramanium, SG
Mr. H.P. Raval, ASG
Mr. Devansh Mohta, Adv.
Mr. T.A. Khan, Adv.
Mr. Arijit Prasad, Adv.
Mr. Kunal Bahri, Adv.
Mr. B.V. Balaram Das,Adv.
Mr. B. Krishna Prasad, Adv.
Mr. Mukul Rohatgi, Sr.Adv.
Mr. Rajiv Nanda, Adv.
For RR-3 (SEBI) Mr. Pratap Venugopal, Adv.
Ms. Surekha Raman, Adv.
Mr. Dileep Poolakkit, Adv.
Ms. Namrata Sood, Adv.
Mr. Anuj Sarma, Adv.
for M/S. K.J. John & Co. ,Adv
Mr. Kuldeep S. Parihar, Adv.
Mr. H.S. Parihar, Adv.
Mr. Sanjay Kharde, Adv.
Ms. Asha Gopalan Nair, Adv.
Mr. P.P. Malhotra, ASG
Mr. J.S. Attri, Sr.Adv.
Ms. Sadhana Sandhu, Adv.
Ms. Anil Katiyar, Adv.
Mr. Samir Ali Khan, Adv.
Mr. Rajiv Mohiti, Sr.Adv.
Mr. I.P. Bagadia, Sr.Adv.
Mr. Santosh Paul, adv.
Mr. B.V. Reddy, Adv.
Mr. Arvind Gupta, Adv.
Ms. Arti Singh, Adv.
Ms. Mohita Bagati, Adv.
Mr. Ashok Kumar Gupta-I, Adv.
UPON hearing counsel the Court made the following
O R D E R
W.P.(C) No. 176 of 2009
For the reasons given in the reportable order
compliance report shall be filed by the respondents with
-3-
respect of all the orders issued by this Court today.
List this matter for further directions in the week
following the Independence Day, August 15, 2011.
The status reports and other documents furnished
from time to time shall be kept in the safe custody of the
Registrar (Judicial).
The Registry is directed to forthwith despatch
copies of this order to the Chief Secretaries of all the
State Governments and the Union Territories for
compliance.
I.A. No.7 application for intervention is
dismissed.
SLP(C) No. 11032 of 2009
W.P.(C) No.37 of 2010
W.P.(C) No.136 of 2011
List these matters on 5th July, 2011 at the end of
the Board.
(Sukhbir Paul Kaur) (Renuka Sadana)
Court Master Court Master
(Signed Reportable order is placed on the file)
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
WRIT PETITION (CIVIL) NO. 176 OF 2009
RAM JETHMALANI & ORS. ...PETITIONERS
VERSUS
UNION OF INDIA & ORS. ...RESPONDENTS
WITH
I.A.NO.1 OF 2009
O R D E R
I
"Follow the money" was the short and simple advice given by
the secret informant, within the American Government, to Bob
Woodward, the journalist from Washington Post, in aid of his
investigations of the Watergate Hotel break in. Money has
often been claimed, by economists, to only be a veil that
covers the real value and the economy. As a medium of
exchange, money is vital for the smooth functioning of
exchange in the market place. However, increasing
monetization of most social transactions has been viewed as
potentially problematic for the social order, in as much as
it signifies a move to evaluating value, and ethical
desirability, of most areas of social interaction only in
terms of price obtained in the market place.
2. Price based notions of value and values, as propounded
by some extreme neo-liberal doctrines, implies that the
values that ought to be promoted, in societies, are the
ones for which people are willing to pay a price for.
Values, and social actions, for which an effective
demand is not expressed in the market, are neglected,
even if lip service is paid to their essentiality.
However, it cannot be denied that not everything that
can be, and is transacted, in the market for a price is
necessarily good, and enhances social welfare. Moreover,
some activities, even if costly and without being
directly measurable in terms of exchange value, are to
be rightly viewed as essential. It is a well established
proposition, of political economy, and of statecraft,
that the State has a necessary interest in determining,
and influencing, the kinds of transactions, and social
actions, that occur within a legal order. From
prevention of certain kinds of harmful activities, that
may range from outright crimes, to regulating or
controlling, and consequently mitigating, socially
harmful modes of social and economic production, to
promotion of activities that are deemed to be of higher
priority, than other activities which may have a lower
priority, howsoever evaluated in terms of social
utility, are all the responsibilities of the State.
Whether such activities by the State result in directly
measurable benefits or not is often not the most
important factor in determining their desirability;
their absence, or their substantial evisceration, are to
be viewed as socially destructive.
3. The scrutiny, and control, of activities, whether in the
economic, social or political contexts, by the State, in
the public interest as posited by modern
constitutionalism, is substantially effectuated by the
State "following the money." In modern societies very
little gets accomplished without transfer of money. The
incidence of crime, petty and grand, like any other
social phenomena is often linked to transfers of monies,
small or large. Money, in that sense, can both power,
and also reward, crime. As noted by many scholars, with
increasing globalization, an ideological and social
construct, in which transactions across borders are
accomplished with little or no control over the quantum,
and mode of transfers of money in exchange for various
services and value rendered, both legal and illegal,
nation-states also have begun to confront complex
problems of cross-border crimes of all kinds. Whether
this complex web of flows of funds, instantaneously, and
in large sums is good or bad, from the perspective of
lawful and desired transactions is not at issue in the
context of the matters before this Court.
4. The worries of this Court that arise, in the context of
the matters placed before us, are with respect to
transfers of monies, and accumulation of monies, which
are unaccounted for by many individuals and other legal
entities in the country, in foreign banks. The worries
of this Court relate not merely to the quantum of monies
said to have been secreted away in foreign banks, but
also the manner in which they may have been taken away
from the country, and with the nature of activities that
may have engendered the accumulation of such monies. The
worries of this Court are also with regard to the nature
of activities that such monies may engender, both in
terms of the concentration of economic power, and also
the fact that such monies may be transferred to groups
and individuals who may use them for unlawful activities
that are extremely dangerous to the nation, including
actions against the State. The worries of this Court
also relate to whether the activities of engendering
such unaccounted monies, transferring them abroad, and
the routing them back to India may not actually be
creating a culture that extols the virtue of such
cycles, and the activities that engender such cycles are
viewed as desirable modes of individual and group
action. The worries of this court also relate to the
manner, and the extent to which such cycles are damaging
to both national and international attempts to combat
the extent, nature and intensity of cross-border
criminal activity. Finally, the worries of this Court
are also with respect to the extent of incapacities,
system wide, in terms of institutional resources,
skills, and knowledge, as well as about incapacities of
ethical nature, in keeping an account of the monies
generated by various facets of social action in the
country, and thereby developing effective mechanisms of
control. These incapacities go to the very heart of
constitutional imperatives of governance. Whether such
incapacities are on account of not having devoted enough
resources towards building such capacities, or on
account of a broader culture of venality in the wider
spheres of social and political action, they run afoul
of constitutional imperatives.
5. Large amounts of unaccounted monies, stashed away in
banks located in jurisdictions that thrive on strong
privacy laws protecting bearers of those accounts to
avoid scrutiny, raise each and every worry delineated
above. First and foremost, such large monies stashed
abroad, and unaccounted for by individuals and entities
of a country, would suggest the necessity of suspecting
that they have been generated in activities that have
been deemed to be unlawful. In addition, such large
amounts of unaccounted monies would also lead to a
natural suspicion that they have been transferred out of
the country in order to evade payment of taxes, thereby
depleting the capacity of the nation to undertake many
tasks that are in public interest.
6. Many schools of thought exist with regard to the primary
functions of the State, and the normative expectations
of what the role of the State ought to be. The questions
regarding which of those schools provide the absolutely
correct view cannot be the criteria to choose or reject
any specific school of thought as an aid in
constitutional adjudication. Charged with the
responsibility of having to make decisions in the
present, within the constraints of epistemic frailties
of human knowledge, constitutional adjudicators willy-
nilly are compelled to choose those that seem to provide
a reasoned basis for framing of questions relevant, both
with respect to law, and to facts. Institutional
economics gives one such perspective which may be a
useful guide for us here. Viewed from a functional
perspective, the State, and governments, may be seen as
coming into existence in order to solve, what
institutional economists have come to refer to as, the
coordination problems in providing public goods, and
prevent the disutility that emerges from the moral
hazard of a short run utility maximizer, who may desire
the benefits of goods and services that are to be
provided in common to the public, and yet have the
interest of not paying for their production.
7. Security of the nation, infrastructure of governance,
including those that relate to law making and law
keeping functions, crime prevention, detection and
punishment, coordination of the economy, and ensuring
minimal levels of material, and cultural goods for those
who may not be in a position to fend for themselves or
who have been left by the wayside by the operation of
the economy and society, may all be cited as some
examples of the kinds of public goods that the State is
expected to provide for, or enable the provision of. In
as much as the market is primarily expected to cater to
purely self centered activities of individuals and
groups, markets and the domain of purely private social
action significantly fail to provide such goods.
Consequently, the State, and government, emerges to
rectify the coordination problem, and provide the public
goods.
8. Unaccounted monies, especially large sums held by
nationals and entities with a legal presence in the
nation, in banks abroad, especially in tax havens or in
jurisdictions with a known history of silence about
sources of monies, clearly indicate a compromise of the
ability of the State to manage its affairs in consonance
with what is required from a constitutional perspective.
This is so in two respects. The quantum of such monies
by itself, along with the numbers of individuals or
other legal entities who hold such monies, may indicate
in the first instance that a large volume of activities,
in the social and the economic spheres within the
country are unlawful and causing great social damage,
both at the individual and the collective levels.
Secondly, large quanta of monies stashed abroad, would
also indicate a substantial weakness in the capacity of
the State in collection of taxes on incomes generated by
individuals and other legal entities within the country.
The generation of such revenues is essential for the
State to undertake the various public goods and services
that it is constitutionally mandated, and normatively
expected by its citizenry, to provide. A substantial
degree of incapacity, in the above respect, would be an
indicia of the degree of failure of the State; and
beyond a particular point, the State may spin into a
vicious cycle of declining moral authority, thereby
causing the incidence of unlawful activities in which
wealth is sought to be generated, as well as instances
of tax evasion, to increase in volume and in intensity.
9. Consequently, the issue of unaccounted monies held by
nationals, and other legal entities, in foreign banks,
is of primordial importance to the welfare of the
citizens. The quantum of such monies may be rough
indicators of the weakness of the State, in terms of
both crime prevention, and also of tax collection.
Depending on the volume of such monies, and the number
of incidents through which such monies are generated and
secreted away, it may very well reveal the degree of
"softness of the State."
10.The concept of a "soft state" was famously articulated
by the Nobel Laureate, Gunnar Myrdal. It is a broad
based assessment of the degree to which the State, and
its machinery, is equipped to deal with its
responsibilities of governance. The more soft the State
is, greater the likelihood that there is an unholy nexus
between the law maker, the law keeper, and the law
breaker.
11.When a catchall word like "crimes" is used, it is common
for people, and the popular culture to assume that it is
"petty crime," or crimes of passion committed by
individuals. That would be a gross mischaracterization
of the seriousness of the issues involved. Far more
dangerous are the crimes that threaten national
security, and national interest. For instance, with
globalization, nation states are also confronted by the
dark worlds of international arms dealers, drug
peddlers, and various kinds of criminal networks,
including networks of terror. International criminal
networks that extend support to home-grown terror or
extremist groups, or those that have been nurtured and
sustained in hostile countries, depend on networks of
formal and informal, lawful and unlawful mechanisms of
transfer of monies across boundaries of nation-states.
They work in the interstices of the micro-structures of
financial transfers across the globe, and thrive in the
lacunae, the gaps in law and of effort. The loosening of
control over those mechanisms of transfers, guided by an
extreme neo-liberal thirst to create a global market
that is free of the friction of law and its enforcement,
by nation-states, may have also contributed to an
increase in the volume, extent and intensity of
activities by criminal and terror networks across the
globe.
12.Increasingly, on account of "greed is good" culture that
has been promoted by neo-liberal ideologues, many
countries face the situation where the model of
capitalism that the State is compelled to institute, and
the markets it spawns, is predatory in nature. From
mining mafias to political operators who, all too
willingly, bend policies of the State to suit particular
individuals or groups in the social and economic sphere,
the raison d'etre for weakening the capacities and
intent to enforce the laws is the lure of the lucre.
Even as the State provides violent support to those who
benefit from such predatory capitalism, often violating
the human rights of its citizens, particularly it's
poor, the market begins to function like a bureaucratic
machine dominated by big business; and the State begins
to function like the market, where everything is
available for sale at a price.
13.The paradigm of governance that has emerged, over the
past three decades, prioritizes the market, and its
natural course, over any degree of control of it by the
State. The role for the State is visualized by votaries
of the neo-liberal paradigm as that of a night watchman;
and moreover it is also expected to take its hands out
of the till of the wealth generating machinery. Based on
the theories of Arthur Laffer, and pushed by the
Washington Consensus, the prevailing wisdom of the
elite, and of the policy makers, is that reduction of
tax rates, thereby making tax regimes regressive, would
incentivise the supposed genius of entrepreneurial souls
of individuals, actuated by pursuit of self-interest and
desire to accumulate great economic power. It was
expected that this would enable the generation of more
wealth, at a more rapid pace, thereby enabling the State
to generate appropriate tax revenues even with lowered
tax rates. Further, benefits were also expected in moral
terms that the lowering of tax rates would reduce the
incentives of wealth generators to hide their monies,
thereby saving them from the guilt of tax evasion.
Whether that is an appropriate model of social
organization or not, and from the perspective of
constitutional adjudication, whether it meets the
requirements of constitutionalism as embedded in the
texts of various constitutions, is not a question that
we want to enter in this matter.
14.Nevertheless, it would be necessary to note that there
is a fly in the ointment of the above story of friction
free markets that would always clear, and always work to
the benefit of the society. The strength of tax
collection machinery can, and ought to be, expected to
have a direct bearing on the revenues collected by the
State. If the machinery is weak, understaffed,
ideologically motivated to look the other way, or the
agents motivated by not so salubrious motives, the
amount of revenue collected by the State would decline,
stagnate, or may not generate the revenue for the State
that is consonant with its responsibilities. From within
the neo-liberal paradigm, also emerged the under-girding
current of thought that revenues for the State implies a
big government, and hence a strong tax collecting
machinery itself would be undesirable. Where the elite
lose out in democratic politics of achieving ever
decreasing tax rates, it would appear that state
machineries in the hands of the executive, all too
willing to promote the extreme versions of the neo-
liberal paradigm and co-opt itself in the enterprises of
the elite, may also become all too willing to not
develop substantial capacities to monitor and follow the
money, collect the lawfully mandated taxes, and even
look the other way. The results, as may be expected,
have been disastrous across many nations.
15.In addition, it would also appear that in this miasmic
cultural environment in which greed is extolled,
conspicuous consumption viewed as both necessary and
socially valuable, and the wealthy viewed as demi-gods,
the agents of the State may have also succumbed to the
notions of the neo-liberal paradigm that the role of the
State ought to only be an enabling one, and not exercise
significant control. This attitude would have a
significant impact on exercise of discretion, especially
in the context of regulating economic activities,
including keeping an account of the monies generated in
various activities, both legal and illegal. Carried away
by the ideology of neo-liberalism, it is entirely
possible that the agents of the State entrusted with the
task of supervising the economic and social activities
may err more on the side of extreme caution, whereby
signals of wrong doing may be ignored even when they are
strong. Instances of the powers that be ignoring
publicly visible stock market scams, or turning a blind
eye to large scale illegal mining have become all too
familiar, and may be readily cited. That such activities
are allowed to continue to occur, with weak, or non-
existent, responses from the State may, at best, be
charitably ascribed to this broader culture of
permissibility of all manner of private activities in
search of ever more lucre. Ethical compromises, by the
elite those who wield the powers of the state, and
those who fatten themselves in an ever more exploitative
economic sphere- can be expected to thrive in an
environment marked by such a permissive attitude, of
weakened laws, and of weakened law enforcement
machineries and attitudes.
16.To the above, we must also add the fragmentation of
administration. Even as the range of economic, and
social activities have expanded, and their
sophistication increased by leaps and bounds, the
response in terms of administration by the State has
been to create ever more specialized agencies, and
departments. To some degree this has been unavoidable.
Nevertheless, it would also appear that there is a need
to build internal capacities to share information across
such departments, lessen the informational asymmetries
between, and friction to flow of information across the
boundaries of departments and agencies, and reduce the
levels of consequent problems in achieving coordination.
Life, and social action within which human life becomes
possible, do not proceed on the basis of specialized
fiefdoms of expertise. They cut across the boundaries
erected as a consequence of an inherent tendency of
experts to specialize. The result, often, is a system
wide blindness, while yet being lured by the dazzle of
ever greater specialization. Many dots of information,
now collected in ever increasing volume by development
of sophisticated information technologies, get ignored
on account of lack of coordination across agencies, and
departments, and tendency within bureaucracy to
jealously guard their own turfs. In some instances, the
failure to properly investigate, or to prevent, unlawful
activities could be the result of such over-
specialization, frictions in sharing of information, and
coordination across departmental and specialized agency
boundaries.
17.If the State is soft to a large extent, especially in
terms of the unholy nexus between the law makers, the
law keepers, and the law breakers, the moral authority,
and also the moral incentives, to exercise suitable
control over the economy and the society would vanish.
Large unaccounted monies are generally an indication of
that. In a recent book, Prof. Rotberg states, after
evaluating many failed and collapsed states over the
past few decades:
"Failed states offer unparalleled economic opportunity but
only for a privileged few. Those around the ruler or ruling
oligarchy grow richer while their less fortunate brethren
starve. Immense profits are available from an awareness of
regulatory advantages and currency speculation and arbitrage.
But the privilege of making real money when everything else
is deteriorating is confined to clients of the ruling elite....
The nation-state's responsibility to maximize the well-being
and prosperity of all its citizens is conspicuously absent,
if it ever existed.... Corruption flourishes in many states,
but in failed states it often does so on an unusually
destructive scale. There is widespread petty or lubricating
corruption as a matter of course, but escalating levels of
venal corruption mark failed states." 1
18.India finds itself in a peculiar situation. Often
celebrated, in popular culture, as an emerging economy
that is rapidly growing, and expected to be a future
1 "The Failure and Collapse of Nation-States Breakdown, Prevention and Repair" in "WHEN STATES FAIL:
CAUSES AND CONSEQUENCES", Rotberg, Robert I., Ed. Princeton University Press (2004).
economic and political giant on the global stage, it is
also popularly perceived, and apparently even in some
responsible and scholarly circles, and official
quarters, that some of its nationals and other legal
entities have stashed the largest quantum of unaccounted
monies in foreign banks, especially in tax havens, and
in other jurisdictions with strong laws of secrecy.
There are also apparently reports, and analyses,
generated by Government of India itself, which place the
amounts of such unaccounted monies at astronomical
levels.
19.We do not wish to engage in any speculation as to what
such analyses, reports, and factuality imply with
respect to the state of the nation. The citizens of our
country can make, and ought to be making, rational
assessments of the situation. We fervently hope that it
leads to responsible, reasoned and reasonable debate,
thereby exerting the appropriate democratic pressure on
the State, and its agents, within the constitutional
framework, to bring about the necessary changes without
sacrificing cherished, and inherently invaluable social
goals and values enshrined in the Constitution. The
failures are discernible when viewed against the vision
of the constitutional project, and as forewarned by Dr.
Ambedkar, have been on account of the fact that man has
been vile, and not the defects of a Constitution forged
in the fires of wisdom gathered over eons of human
experience. If the politico-bureaucratic, power
wielding, and business classes bear a large part of the
blame, at least some part of blame ought to be
apportioned to those portions of the citizenry that is
well informed, or is expected to be informed. Much of
that citizenry has disengaged itself with the political
process, and with the masses. Informed by contempt for
the poor and the downtrodden, the elite classes that
have benefited the most, or expects to benefit
substantially from the neo-liberal policies that would
wish away the hordes, has also chosen to forget that
constitutional mandate is as much the responsibility of
the citizenry, and through their constant vigilance, of
all the organs of the state, and national institutions
including political parties. To not be engaged in the
process, is to ensure the evisceration of constitutional
content. Knee jerk reactions, and ill advised tinkering
with the constitutional framework are not the solutions.
The road is always long, and needs the constant march of
the citizenry on it. There is no other way. To expect
instant solutions, because this law or that body is
formed, without striving to solve system wide, and
systemic, problems that have emerged is to not
understand the demands of a responsible citizenry in
modern constitutional republican democracies.
20.These matters before us relate to issues of large sums
of unaccounted monies, allegedly held by certain named
individuals, and loose associations of them;
consequently we have to express our serious concerns
from a constitutional perspective. The amount of
unaccounted monies, as alleged by the Government of
India itself is massive. The show cause notices were
issued a substantial length of time ago. The named
individuals were very much present in the country. Yet,
for unknown, and possibly unknowable, though easily
surmisable, reasons the investigations into the matter
proceeded at a laggardly pace. Even the named
individuals had not yet been questioned with any degree
of seriousness. These are serious lapses, especially
when viewed from the perspective of larger issues of
security, both internal and external, of the country.
21.It is in light of the above, that we heard some
significant elements of the instant writ petitions filed
in this Court, and at this stage it is necessary that
appropriate orders be issued. There are two issues we
deal with below: (i) the appointment of a Special
Investigation Team; and (ii) disclosure, to the
Petitioners, of certain documents relied upon by the
Union of India in its response.
II
22.The instant writ petition was filed, in 2009, by Shri.
Ram Jethmalani, Shri. Gopal Sharman, Smt. Jalbala
Vaidya, Shri. K.P.S. Gill, Prof. B.B. Dutta, and Shri.
Subhash Kashyap, all well known professionals, social
activists, former bureaucrats or those who have held
responsible positions in the society. They have also
formed an organization called Citizen India, the stated
objective of which is said to be to bring about changes
and betterment in the quality of governance, and
functioning of all public institutions.
23.The Petitioners state that there have been a slew of
reports, in the media, and also in scholarly
publications that various individuals, mostly citizens,
but may also include non-citizens, and other entities
with presence in India, have generated, and secreted
away large sums of monies, through their activities in
India or relating to India, in various foreign banks,
especially in tax havens, and jurisdictions that have
strong secrecy laws with respect to the contents of bank
accounts and the identities of individuals holding such
accounts. The Petitioners allege that most of such
monies are unaccounted, and in all probability have been
generated through unlawful activities, whether in India
or outside India, but relating to India. Further, the
Petitioners also allege that a large part of such monies
may have been generated within India, and have been
taken away from India, breaking various laws, including
but not limited to evasion of taxes.
24.The Petitioners contend: (i) that the sheer volume of
such monies points to grave weaknesses in the governance
of the nation, because they indicate a significant lack
of control over unlawful activities through which such
monies are generated, evasion of taxes, and use of
unlawful means of transfer of funds; (ii) that these
funds are then laundered and brought back into India, to
be used in both legal and illegal activities; (iii) that
the use of various unlawful modes of transfer of funds
across borders, gives support to such unlawful networks
of international finance; and (iv) that in as much as
such unlawful networks are widely acknowledged to also
effectuate transfer of funds across borders in aid of
various crimes committed against persons and the State,
including but not limited to activities that may be
classifiable as terrorist, extremist, or unlawful
narcotic trade, the prevailing situation also has very
serious connotations for the security and integrity of
India.
25.The Petitioners also further contend that a significant
part of such large unaccounted monies include the monies
of powerful persons in India, including leaders of many
political parties. It was also contended that the
Government of India, and its agencies, have been very
lax in terms of keeping an eye on the various unlawful
activities generating unaccounted monies, the consequent
tax evasion; and that such laxity extends to efforts to
curtail the flow of such funds out, and into, India.
Further, the Petitioners also contend that the efforts
to prosecute the individuals, and other entities, who
have secreted such monies in foreign banks, have been
weak or non-existent. It was strongly argued that the
efforts at identification of such monies in various bank
accounts in many jurisdictions across the globe,
attempts to bring back such monies, and efforts to
strengthen the governance framework to prevent further
outflows of such funds, have been sorely lacking.
26.The Petitioners also made allegations about certain
specific incidents and patterns of dereliction of duty,
wherein the Government of India, and its various
agencies, even though in possession of specific
knowledge about the monies in certain bank accounts, and
having estimated that such monies run into many scores
of thousands of crores, and upon issuance of show cause
notices to the said individual, surprisingly have not
proceeded to initiate, and carry out suitable
investigations, and prosecute the individuals. The
individual specifically named is one Hassan Ali Khan.
The Petitioners also contended that Kashinath Tapuria,
and his wife Chandrika Tapuria, are also party to the
illegal activities of Hassan Ali Khan.
27.Specifically, it was alleged that Hassan Ali Khan was
served with an income tax demand for Rs. 40,000.00
Crores (Rupees Forty Thousand Crores), and that the
Tapurias were served an income tax demand notice of Rs.
20,580.00 Crores (Rupees Twenty Thousand and Five
Hundred and Eighty Crores). The Enforcement Directorate,
in 2007, disclosed that Hassan Ali Khan had "dealings
amounting to 1.6 billion US dollars" in the period 2001-
2005. In January 2007, upon raiding Hassan Ali's
residence in Pune, certain documents and evidence had
been discovered regarding deposits of 8.04 billion
dollars with UBS bank in Zurich. It is the contention of
the Petitioners that, even though such evidence was
secured nearly four and half years ago, (i) a proper
investigation had not been launched to obtain the right
facts from abroad; (ii) the individuals concerned,
though present in India, and subject to its
jurisdiction, and easily available for its exercise, had
not even been interrogated appropriately; (iii) that the
Union of India, and its various departments, had even
been refusing to divulge the details and information
that would reveal the actual status of the
investigation, whether in fact it was being conducted at
all, or with any degree of seriousness; (iv) given the
magnitude of amounts in question, especially of the
demand notice of income tax, the laxity of investigation
indicates multiple problems of serious non-governance,
and weaknesses in the system, including pressure from
political quarters to hinder, or scuttle, the
investigation, prosecution, and ultimately securing the
return of such monies; and (v) given the broadly
accepted fact that within the political class corruption
is rampant, ill-begotten wealth has begun to be amassed
in massive quantities by many members in that class, it
may be reasonable to suspect, or even conclude, that
investigation was being deliberately hindered because
Hassan Ali Khan, and the Tapurias, had or were
continuing to handle the monies of such a class. The
fact that both Income Tax department, and the
Enforcement Directorate routinely, and with alacrity,
seek the powers for long stretches of custodial
interrogation of even those suspected of having engaged
in money laundering, or evaded taxes, with respect to
very small amounts, ought to raise the reasonable
suspicion that inaction in the matters concerning Hassan
Ali Khan, and Tapurias, was deliberately engineered, for
nefarious reasons.
28.In addition, the Petitioners also state that in as much
as the bank in which the monies had been stashed by
Hassan Ali Khan was UBS Zurich, the needle of suspicion
has to inexorably turn to high level political
interference and hindrance to the investigations. The
said bank, it was submitted, is the biggest or one of
the biggest wealth management companies in the world.
The Petitioners also narrated the mode, and the manner,
in which the United States had dealt with UBS, with
respect to monies of American citizens secreted away
with the said bank. It was also alleged that UBS had not
cooperated with the U.S. authorities. Contrasting the
relative alacrity, and vigour, with which the United
States government had pursued the matters, the
Petitioners contend the inaction of Union of India is
shocking.
29.The Petitioners further allege that in 2007, the Reserve
Bank of India had obtained some "knowledge of the
dubious character" of UBS Security India Private
Limited, a branch of UBS, and consequently stopped this
bank from extending its business in India by refusing to
approve its takeover of Standard Chartered Mutual Funds
business in India. It was also claimed by the
Petitioners that the SEBI had alleged that UBS played a
role in the stock market crash of 2004. The said UBS
Bank has apparently applied for a retail banking license
in India, which was approved in principle by RBI
initially. In 2008, this license was withheld on the
ground that "investigation of its unsavoury role in the
Hassan Ali Khan case was pending investigation in the
Enforcement Directorate." However, it seems that the RBI
reversed its decision in 2009, and no good reasons seem
to be forthcoming for the reversal of the decision of
2008.
30.The Petitioners contend that such a reversal of decision
could only have been accomplished through high level
intervention, and that it is further evidence of
linkages between members of the political class, and
possibly even members of the bureaucracy, and such
banking operations, and the illegal activities of Hassan
Ali Khan and the Tapurias. Hence, the Petitioners
argued, in the circumstances it would have to be
necessarily concluded that the investigations into the
affairs of Hassan Ali Khan, and the Tapurias, would be
severely compromised if the Court does not intervene,
and monitor the investigative processes by appointing a
special investigation team reporting directly to the
Court.
31.The learned senior counsel for the Petitioners sought
that this Court intervene, order proper investigations,
and monitor continuously, the actions of the Union of
India, and any and all governmental departments and
agencies, in these matters. It was submitted that their
filing of this Writ Petition under Article 32 is proper,
as the inaction of the Union of India, as described
above, violates the fundamental rights to proper
governance, in as much as Article 14 provides for
equality before the law and equal protection of the law,
and Article 21 promises dignity of life to all citizens.
32.We have heard the learned senior counsel for the
Petitioners, Shri. Anil B. Divan, the learned senior
counsel for interveners, Shri. K.K. Venugopal, and the
learned senior counsel for the petitioners in the
connected Writ Petition, Shri. Shanti Bhushan. We have
also heard the learned Solicitor General, Shri. Gopal
Subramaniam, on behalf of the respondents.
33.Shri. Divan, specifically argued that, having regard to
the nature of the investigation, its slow pace so far,
and the non-seriousness on the part of the respondents,
there is a need to constitute a Special Investigation
Team ("SIT") headed by a former judge or two of this
court. However, this particular plea has been
vociferously resisted by the Solicitor General. Relying
on the status reports submitted from time to time, the
learned Solicitor General stated that all possible steps
were being taken to bring back the monies stashed in
foreign banks, and that the investigations in cases
registered were proceeding in an appropriate manner. He
expressed his willingness for a Court monitored
investigation. He also further submitted that the
Respondents, in principle, have no objections whatsoever
against the main submissions of the Petitioners.
34.The real point of controversy is, given above, as to
whether there is a need to constitute a SIT to be headed
by a judge or two, of this court, to supervise the
investigation.
35.We must express our serious reservations about the
responses of the Union of India. In the first instance,
during the earlier phases of hearing before us, the
attempts were clearly evasive, confused, or originating
in the denial mode. It was only upon being repeatedly
pressed by us did the Union of India begin to admit that
indeed the investigation was proceeding very slowly. It
also became clear to us that in fact the investigation
had completely stalled, in as much as custodial
interrogation of Hassan Ali Khan had not even been
sought for, even though he was very much resident in
India. Further, it also now appears that even though his
passport had been impounded, he was able to secure
another passport from the RPO in Patna, possibly with
the help or aid of a politician.
36.During the course of the hearings the Union of India
repeatedly insisted that the matter involves many
jurisdictions, across the globe, and a proper
investigation could be accomplished only through the
concerted efforts by different law enforcement agencies,
both within the Central Government, and also various
State governments. However, the absence of any
satisfactory explanation of the slowness of the pace of
investigation, and lack of any credible answers as to
why the respondents did not act with respect to those
actions that were feasible, and within the ambit of
powers of the Enforcement Directorate itself, such as
custodial investigation, leads us to conclude that the
lack of seriousness in the efforts of the respondents
are contrary to the requirements of laws and
constitutional obligations of the Union of India. It was
only upon the insistence and intervention of this Court
has the Enforcement Directorate initiated and secured
custodial interrogation over Hassan Ali Khan. The Union
of India has explicitly acknowledged that there was much
to be desired with the manner in which the investigation
had proceeded prior to the intervention of this court.
From the more recent reports, it would appear that the
Union of India, on account of its more recent efforts to
conduct the investigation with seriousness, on account
of the gravitas brought by this Court, has led to the
securing of additional information, and leads, which
could aid in further investigation. For instance, during
the continuing interrogation of Hassan Ali Khan and the
Tapurias, undertaken for the first time at the behest of
this Court, many names of important persons, including
leaders of some corporate giants, politically powerful
people, and international arms dealers have cropped up.
So far, no significant attempt has been made to
investigate and verify the same. This is a further cause
for the grave concerns of this Court, and points to the
need for continued, effective and day to day monitoring
by a SIT constituted by this Court, and acting on
behalf, behest and direction of this Court.
37.In light of the fact that the issues are complex,
requiring expertise and knowledge of different
departments, and the necessity of coordination of
efforts across various agencies and departments, it was
submitted to us that the Union of India has recently
formed a High Level Committee, under the aegis of the
Department of Revenue in the Ministry of Finance, which
is the nodal agency responsible for all economic
offences. The composition of the High Level Committee
("HLC") is said to be as follows: (i) Secretary,
Department of Revenue, as the Chairman; (ii) Deputy
Governor, Reserve Bank of India; (iii) Director (IB);
(iv) Director, Enforcement; (v) Director, CBI; (vi)
Chairman, CBDT; (vii) DG, Narcotics Control Bureau;
(vii) DG, Revenue Intelligence; (ix) Director, Financial
Intelligence Unit; and (x) JS (FT & TR-I), CBDT. It was
also submitted that the HLC may co-opt, as necessary,
representation not below the rank of Joint Secretary
from the Home Secretary, Foreign Secretary, Defense
Secretary and the Secretary, Cabinet Secretariat. The
Union of India claims that such a multi-disciplinary
group and committee would now enable the conducting of
an efficient and a systematic investigation into the
matters concerning allegations against Hassan Ali Khan
and the Tapurias; and further that such a committee
would also enable the taking of appropriate steps to
bring back the monies stashed in foreign banks, for
which purposes a need may arise to register further
cases. The Union of India also claims that the formation
of such a committee indicates the seriousness with which
it is viewing the entire matter.
38.While it would appear, from the Status Reports submitted
to this Court, that the Enforcement Directorate has
moved in some small measure, the actual facts are not
comforting to an appropriate extent. In fact we are not
convinced that the situation has changed to the extent
that it ought to so as to accept that the investigation
would now be conducted with the degree of seriousness
that is warranted. According to the Union of India the
HLC was formed in order to take charge of and direct the
entire investigation, and subsequently, the prosecution.
In the meanwhile a charge sheet has been filed against
Hassan Ali Khan. Upon inquiry by us as to whether the
charge-sheet had been vetted by the HLC, and its inputs
secured, the counsel for Union of India were flummoxed.
The fact was that the charge-sheet had not been given
even for the perusal of the HLC, let alone securing
its inputs, guidance and direction. We are not satisfied
by the explanation offered by the Directorate of
Enforcement by way of affidavit after the orders were
reserved. Be it noted that a nodal agency was set up,
pursuant to directions of this Court in Vineet Narain
case given many years ago. Yet the same was not involved
and these matters were never placed before it. Why?
39.From the status reports, it is clear that the problem is
extremely complex, and many agencies and departments
spread across the country have not responded with the
alacrity, and urgency, that one would desire. Moreover,
the Union of India has been unable to answer any of the
questions regarding its past actions, and their
implications, such as the slowness of the investigation,
or about grant of license to conduct retail banking by
UBS, by reversing the decision taken earlier to withhold
such a license on the grounds that the said bank's
credentials were suspect. To this latter query, the
stance of the Union of India has been that entry of UBS
would facilitate flow of foreign investments into India.
The question that arises is whether the task of bringing
foreign funds into India override all other
constitutional concerns and obligations?
40.The predominant theme in the responses of Union of India
before this court has been that it is doing all that it
can to bring back the unaccounted monies stashed in
various banks abroad. To this is added the qualifier
that it is an extremely complex problem, requiring the
cooperation of many different jurisdictions, and an
internationally coordinated effort. Indeed they are
complex. We do not wish to go into the details of
arguments about whether the Union of India is, or is
not, doing necessary things to achieve such goals. That
is not necessary for the matters at hand.
41.What is important is that the Union of India had
obtained knowledge, documents and information that
indicated possible connections between Hassan Ali Khan,
and his alleged co-conspirators and known international
arms dealers. Further, the Union of India was also in
possession of information that suggested that because
the international arms dealing network, and a very
prominent dealer in it, could not open a bank account
even in a jurisdiction that is generally acknowledged to
lay great emphasis on not asking sources of money being
deposited into its banks, Hassan Ali Khan may have
played a crucial role in opening an account with the
branch of the same bank in another jurisdiction. The
volume of alleged income taxes owed to the country, as
demanded by the Union of India itself, and the volume of
monies, by some accounts US $8.04 billion, and some
other accounts in excess of Rs. 70,000 crores, that are
said to have been routed through various bank accounts
of Hassan Ali Khan, and Tapurias. Further, from all
accounts it has been acknowledged that none of the named
individuals have any known and lawful sources for such
huge quantities of monies. All of these factors, either
individually or combined, ought to have immediately
raised questions regarding the sources being unlawful
activities, national security, and transfer of funds
into India for other illegal activities, including acts
against the State. It was only at the repeated
insistence by us that such matters have equal, if not
even greater importance than issues of tax collection,
has the Union of India belatedly concluded that such
aspects also ought to be investigated with thoroughness.
However, there is still no evidence of a really serious
investigation into these other matters from the national
security perspective.
42.The fact remains that the Union of India has struggled
in conducting a proper investigation into the affairs of
Hassan Ali Khan and the Tapurias. While some
individuals, whose names have come to the adverse
knowledge of the Union of India, through the more recent
investigations, have been interrogated, many more are
yet to be investigated. This highly complex
investigation has in fact just begun. It is still too
early to conclude that the Union of India has indeed
placed all the necessary machinery to conduct a proper
investigation. The formation of the HLC was a necessary
step, and may even be characterized as a welcome step.
Nevertheless, it is an insufficient step.
43.In light of the above, we had proposed to the Union of
India that the same HLC constituted by it be converted
into a Special Investigation Team, headed by two retired
judges of the Supreme Court of India. The Union of India
opposes the same, but provides no principle as to why
that would be undesirable, especially in light of the
many lapses and lacunae in its actions in these matters
spread over the past four years.
44.We are of the firm opinion that in these matters
fragmentation of government, and expertise and
knowledge, across many departments, agencies and across
various jurisdictions, both within the country, and
across the globe, is a serious impediment to the conduct
of a proper investigation. We hold that it is in fact
necessary to create a body that coordinates, directs,
and where necessary orders timely and urgent action by
various institutions of the State. We also hold that the
continued involvement of this Court in these matters, in
a broad oversight capacity, is necessary for upholding
the rule of law, and achievement of constitutional
values. However, it would be impossible for this Court
to be involved in day to day investigations, or to
constantly monitor each and every aspect of the
investigation.
45.The resources of this court are scarce, and it is over-
burdened with the task of rendering justice in well over
a lakh of cases every year. Nevertheless, this Court is
bound to uphold the Constitution, and its own burdens,
excessive as they already are, cannot become an excuse
for it to not perform that task. In a country where most
of its people are uneducated and illiterate, suffering
from hunger and squalor, the retraction of the
monitoring of these matters by this Court would be
unconscionable.
46.The issue is not merely whether the Union of India is
making the necessary effort to bring back all or some
significant part of the alleged monies. The fact that
there is some information and knowledge that such vast
amounts may have been stashed away in foreign banks,
implies that the State has the primordial
responsibility, under the Constitution, to make every
effort to trace the sources of such monies, punish the
guilty where such monies have been generated and/or
taken abroad through unlawful activities, and bring back
the monies owed to the Country. We do recognize that the
degree of success, measured in terms of the amounts of
monies brought back, is dependent on a number of
factors, including aspects that relate to international
political economy and relations, which may or may not be
under our control. The fact remains that with respect to
those factors that were within the powers of the Union
of India, such as investigation of possible criminal
nexus, threats to national security etc., were not even
attempted. Fealty to the Constitution is not a matter of
mere material success; but, and probably more
importantly from the perspective of the moral authority
of the State, a matter of integrity of effort on all the
dimensions that inform a problem that threatens the
constitutional projects. Further, the degree of
seriousness with which efforts are made with respect to
those various dimensions can also be expected to bear
fruit in terms of building capacities, and the
development of necessary attitudes to take the law
enforcement part of accounting or following the money
seriously in the future.
47.The merits of vigour of investigations, and attempts at
law enforcement, cannot be measured merely on the scale
of what we accomplish with respect to what has happened
in the past. It would necessarily also have to be
appreciated from the benefits that are likely to accrue
to the country in preventing such activities in the
future. Our people may be poor, and may be suffering
from all manner of deprivation. However, the same poor
and suffering masses are rich, morally and from a
humanistic point of view. Their forbearance of the many
foibles and failures of those who wield power, no less
in their name and behalf than of the rich and the
empowered, is itself indicative of their great
qualities, of humanity, trust and tolerance. That
greatness can only be matched by exercise of every
sinew, and every resource, in the broad goal of our
constitutional project of bringing to their lives
dignity. The efforts that this Court makes in this
regard, and will make in this respect and these matters,
can only be conceived as a small and minor, though
nevertheless necessary, part. Ultimately the protection
of the Constitution and striving to promote its vision
and values is an elemental mode of service to our
people.
48. We note that in many instances, in the past, when issues
referred to the Court have been very complex in nature,
and yet required the intervention of the Court, Special
Investigation Teams have been ordered and constituted in
order to enable the Court, and the Union of India and/or
other organs of the State, to fulfill their
constitutional obligations. The following instances may
be noted: Vineet Narain v Union of India1, NHRC v State
of Gujarat2, Sanjiv Kumar v State of Haryana3, and Centre
for PIL v Union of India4.
49.In light of the above we herewith order:
(i) That the High Level Committee constituted by the
Union of India, comprising of (i) Secretary,
Department of Revenue; (ii) Deputy Governor,
Reserve Bank of India; (iii) Director (IB); (iv)
Director, Enforcement; (v) Director, CBI; (vi)
Chairman, CBDT; (vii) DG, Narcotics Control
Bureau; (vii) DG, Revenue Intelligence; (ix)
Director, Financial Intelligence Unit; and (x) JS
(FT & TR-I), CBDT be forthwith appointed with
immediate effect as a Special Investigation Team;
(ii) That the Special Investigation Team, so
constituted, also include Director, Research and
Analysis Wing;
(iii) That the above Special Investigation Team, so
constituted, be headed by and include the
1 (1996) 2 SCC 199
2 (2004) 8 SCC 610
3 (2005) 5 SCC 517
4 (2011) 1 SCC 560.
following former eminent judges of this Court:
(a) Hon'ble Mr. Justice B.P. Jeevan Reddy as
Chairman; and (b) Hon'ble Mr. Justice M.B. Shah
as Vice-Chairman; and that the Special
Investigation Team function under their guidance
and direction;
(iv) That the Special Investigation Team, so
constituted, shall be charged with the
responsibilities and duties of investigation,
initiation of proceedings, and prosecution,
whether in the context of appropriate criminal or
civil proceedings of: (a) all issues relating to
the matters concerning and arising from
unaccounted monies of Hassan Ali Khan and the
Tapurias; (b) all other investigations already
commenced and are pending, or awaiting to be
initiated, with respect to any other known
instances of the stashing of unaccounted monies
in foreign bank accounts by Indians or other
entities operating in India; and (c) all other
matters with respect to unaccounted monies being
stashed in foreign banks by Indians or other
entities operating in India that may arise in the
course of such investigations and proceedings. It
is clarified here that within the ambit of
responsibilities described above, also lie the
responsibilities to ensure that the matters are
also investigated, proceedings initiated and
prosecutions conducted with regard to criminality
and/or unlawfulness of activities that may have
been the source for such monies, as well as the
criminal and/or unlawful means that are used to
take such unaccounted monies out of and/or bring
such monies back into the country, and use of
such monies in India or abroad. The Special
Investigation Team shall also be charged with the
responsibility of preparing a comprehensive
action plan, including the creation of necessary
institutional structures that can enable and
strengthen the country's battle against
generation of unaccounted monies, and their
stashing away in foreign banks or in various
forms domestically.
(v) That the Special Investigation Team so
constituted report and be responsible to this
Court, and that it shall be charged with the duty
to keep this Court informed of all major
developments by the filing of periodic status
reports, and following of any special orders that
this Court may issue from time to time;
(vi) That all organs, agencies, departments and agents
of the State, whether at the level of the Union
of India, or the State Government, including but
not limited to all statutorily formed individual
bodies, and other constitutional bodies, extend
all the cooperation necessary for the Special
Investigation Team so constituted and
functioning;
(vii) That the Union of India, and where needed even
the State Governments, are directed to facilitate
the conduct of the investigations, in their
fullest measure, by the Special Investigation
Team so constituted and functioning, by extending
all the necessary financial, material, legal,
diplomatic and intelligence resources, whether
such investigations or portions of such
investigations occur inside the country or
abroad.
(viii) That the Special Investigation Team also be
empowered to further investigate even where
charge-sheets have been previously filed; and
that the Special Investigation Team may register
further cases, and conduct appropriate
investigations and initiate proceedings, for the
purpose of bringing back unaccounted monies
unlawfully kept in bank accounts abroad.
50.We accordingly direct the Union of India to issue
appropriate notification and publish the same forthwith.
It is needless to clarify that the former judges of this
Court so appointed to supervise the Special
Investigation Team are entitled to their remuneration,
allowances, perks, facilities as that of the judges of
the Supreme Court. The Ministry of Finance, Union of
India, shall be responsible for creating the appropriate
infrastructure and other facilities for proper and
effective functioning of the Special Investigation Team
at once.
III
51.We now turn our attention to the matter of disclosure of
various documents referenced by the Union of India, as
sought by the Petitioners. These documents, including
names and bank particulars, relate to various bank
accounts, of Indian citizens, in the Principality of
Liechtenstein ("Liechtenstein"), a small landlocked
sovereign nation-state in Europe. It is generally
acknowledged that Liechtenstein is a tax haven.
52.Apparently, as alleged by the Petitioners, a former
employee of a bank or banks in Liechtenstein secured the
names of some 1400 bank account holders, along with the
particulars of such accounts, and offered the
information to various entities. The same was secured by
the Federal Republic of Germany ("Germany"), which in
turn, apart from initiating tax proceedings against some
600 individuals, also offered the information regarding
nationals and citizens of other countries to such
countries. It is the contention of the Petitioners that
even though the Union of India was informed about the
presence of the names of a large number of Indian
citizens in the list of names revealed by the former
bank employee, the Union of India never made a serious
attempt to secure such information and proceed to
investigate such individuals. It is the contention of
the Petitioners that such names include the identities
of prominent and powerful Indians, or the identities of
individuals, who may or may not be Indian citizens, but
who could lead to information about various powerful
Indians holding unaccounted monies in bank accounts
abroad. It is also the contention of the Petitioners
that, even though they had sought the information under
the Right to Information Act (2005), the Respondents had
not revealed the names nor divulged the relevant
documents. The Petitioners argue that such a reluctance
is only on account of the Union of India not having
initiated suitable steps to recover such monies, and
punish the named individuals, and also because
revelation of names of individuals on the list would
lead to discovery of powerful persons engaged in various
unlawful activities, both in generation of unlawful and
unaccounted monies, and their stashing away in banks
abroad.
53.It was also alleged by the Petitioners that in fact
Germany had offered such information, freely and
generally to any country that requests the same, and did
not specify that the names and other information
pertaining to such names ought to be requested only
pursuant to any double taxation agreements it has with
other countries. The Petitioners also alleged that Union
of India has chosen to proceed under the assumption that
it could have requested such information only pursuant
to the double taxation agreement it has with Germany.
The Petitioners contend that the Government of India
took such a step primarily to conceal the information
from public gaze.
54.The response of the Union of India may be summed up
briefly: (i) that they secured the names of individuals
with bank accounts in banks in Liechtenstein, and other
details with respect to such bank accounts, pursuant to
an agreement of India with Germany for avoidance of
double taxation and prevention of fiscal evasion; (ii)
that the said agreement proscribes the Union of India
from disclosing such names, and other documents and
information with respect to such bank accounts, to the
Petitioners, even in the context of these ongoing
proceedings before this court; (iii) that the disclosure
of such names, and other documents and information,
secured from Germany, would jeopardize the relations of
India with a foreign state; (iv) that the disclosure of
such names, and other documents and information, would
violate the right to privacy of those individuals who
may have only deposited monies in a lawful manner; (v)
that disclosure of names, and other documents and
information can be made with respect to those
individuals with regard to whom investigations are
completed, and proceedings initiated; and (vi) that
contrary to assertions by the Petitioners, it was
Germany which had asked the Union of India to seek the
information under double taxation agreement, and that
this was in response to an earlier request by Union of
India for the said information.
55.For the purposes of the instant order, the issue of
whether the Union of India could have sought and secured
the names, and other documents and information, without
having to take recourse to the double taxation agreement
is not relevant. For the purposes of determining whether
Union of India is obligated to disclose the information
that it obtained, from Germany, with respect to accounts
of Indian citizens in a bank in the Principality of
Liechtenstein, we need only examine the claims of the
Union of India as to whether it is proscribed by the
double taxation agreement with Germany from disclosing
such information. Further, and most importantly, we
would also have to examine whether in the context of
Article 32 proceedings before this court, wherein this
court has exercised jurisdiction, the Union of India can
claim exemption from providing such information to the
Petitioners, and also with respect to issues of right to
privacy of individuals who hold such accounts, and with
respect of whom no investigations have yet been
commenced, or only partially conducted, so that the
State has not yet issued a show cause and initiated
proceedings.
56.We have perused the said agreement with Germany. We are
convinced that the said agreement, by itself, does not
proscribe the disclosure of the relevant documents and
details of the same, including the names of various bank
account holders in Liechtenstein. In the first instance,
we note that the names of the individuals are with
respect to bank accounts in the Liechtenstein, which
though populated by largely German speaking people, is
an independent and sovereign nation-state. The agreement
between Germany and India is with regard to various
issues that crop up with respect to German and Indian
citizens' liability to pay taxes to Germany and/or
India. It does not even remotely touch upon information
regarding Indian citizens' bank accounts in
Liechtenstein that Germany secures and shares that have
no bearing upon the matters that are covered by the
double taxation agreement between the two countries. In
fact, the "information" that is referred to in Article
26 is that which is "necessary for carrying out the
purposes of this agreement", i.e. the Indo-German DTAA.
Therefore, the information sought does not fall within
the ambit of this provision. It is disingenuous for the
Union of India, under these circumstances, to repeatedly
claim that it is unable to reveal the documents and
names as sought by the Petitioners on the ground that
the same is proscribed by the said agreement. It does
not matter that Germany itself may have asked India to
treat the information shared as being subject to the
confidentiality and secrecy clause of the double
taxation agreement. It is for the Union of India, and
the courts, in appropriate proceedings, to determine
whether such information concerns matters that are
covered by the double taxation agreement or not. In any
event, we also proceed to examine the provisions of the
double taxation agreement below, to also examine whether
they proscribe the disclosure of such names, and other
documents and information, even in the context of these
instant proceedings.
57.Relevant portions of Article 26 of the double taxation
agreement with Germany, a copy of which was submitted by
Union of India, reads as follows:
"1. The competent authorities of the Contracting States shall
exchange such information as is necessary for carrying out
the purposes of this Agreement. Any information received by a
Contracting State shall be treated as secret in the same
manner as information obtained under the domestic laws of
that State and shall be disclosed only to persons or
authorities (including courts and administrative bodies)
involved in the assessment or collection of, the enforcement
or prosecution in respect of, or the determination of appeals
in relation to, the taxes covered by this Agreement. They may
disclose the information in public court proceedings or in
judicial proceedings.
2. In no case shall the provisions of paragraph 1 be
construed so as to impose on a Contracting State the
obligation:
(a) to carry out administrative measures at
variance with the laws and administrative
practice of that or of the other
Contracting State;
(b) to supply information which is not
obtainable under the laws or in the
normal course of the administration of
that or of the other Contracting State;
(c) to supply information which would
disclose any trade, business, industrial,
commercial or professional secret or
trade process, or information, the
disclosure of which would be contrary to
public policy (order public)"
58.The above clause in the relevant agreement with Germany
would indicate that, contrary to the assertions of Union
of India, there is no absolute bar of secrecy. Instead
the agreement specifically provides that the information
may be disclosed in public court proceedings, which the
instant proceedings are. The proceedings in this matter
before this court, relate both to the issue of tax
collection with respect to unaccounted monies deposited
into foreign bank accounts, as well as with issues
relating to the manner in which such monies were
generated, which may include activities that are
criminal in nature also. Comity of nations cannot be
predicated upon clauses of secrecy that could hinder
constitutional proceedings such as these, or criminal
proceedings.
59.The claim of Union of India is that the phrase "public
court proceedings", in the last sentence in Article
26(1) of the double taxation agreement only relates to
proceedings relating to tax matters. The Union of India
claims that such an understanding comports with how it
is understood internationally. In this regard Union of
India cites a few treatises. However, the Union of India
did not provide any evidence that Germany specifically
requested it to not reveal the details with respect to
accounts in the Liechtenstein even in the context of
proceedings before this court.
60.Article 31, "General Rule of Interpretation", of the
Vienna Convention of the Law of Treaties, 1969 provides
that a "treaty shall be interpreted in good faith in
accordance with the ordinary meaning to be given to the
terms of the treaty in their context and in the light of
its object and purpose." While India is not a party to
the Vienna Convention, it contains many principles of
customary international law, and the principle of
interpretation, of Article 31 of the Vienna Convention,
provides a broad guideline as to what could be an
appropriate manner of interpreting a treaty in the
Indian context also.
61. This Court in Union of India v. Azadi Bachao Andolan,1
approvingly noted Frank Bennion's observations that a
treaty is really an indirect enactment, instead of a
substantive legislation, and that drafting of treaties
is notoriously sloppy, whereby inconveniences obtain. In
this regard this Court further noted the dictum of Lord
Widgery, C.J. that the words "are to be given their
general meaning, general to lawyer and layman alike....
The meaning of the diplomat rather than the lawyer." The
broad principle of interpretation, with respect to
treaties, and provisions therein, would be that ordinary
meanings of words be given effect to, unless the context
requires or otherwise. However, the fact that such
treaties are drafted by diplomats, and not lawyers,
leading to sloppiness in drafting also implies that care
has to be taken to not render any word, phrase, or
sentence redundant, especially where rendering of such
word, phrase or sentence redundant would lead to a
manifestly absurd situation, particularly from a
constitutional perspective. The government cannot bind
India in a manner that derogates from Constitutional
provisions, values and imperatives.
62.The last sentence of Article 26(1) of the double
taxation agreement with Germany, "[T]hey may disclose
this information in public court proceedings or in
judicial decisions," is revelatory in this regard. It
stands out as an additional aspect or provision, and an
exception, to the preceding portion of the said article.
It is located after the specification that information
shared between contracting parties may be revealed only
to "persons or authorities (including courts and
administrative bodies) involved in the assessment or
collection of, the enforcement or prosecution in respect
of, or the determination of appeals in relation to taxes
covered by this Agreement." Consequently, it has to be
1 (2004) 10 SCC 1
understood that the phrase "public court proceedings"
specified in the last sentence in Article 26(1) of the
double taxation agreement with Germany refers to court
proceedings other than those in connection with tax
assessment, enforcement, prosecution etc., with respect
to tax matters. If it were otherwise, as argued by Union
of India, then there would have been no need to have
that last sentence in Article 26(1) of the double
taxation agreement at all. The last sentence would
become redundant if the interpretation pressed by Union
of India is accepted. Thus, notwithstanding the alleged
convention of interpreting the last sentence only as
referring to proceedings in tax matters, the rubric of
common law jurisprudence, and fealty to its principles,
leads us inexorably to the conclusion that the language
in this specific treaty, and under these circumstances
cannot be interpreted in the manner sought by Union of
India.
63.While we agree that the language could have been
tighter, and may be deemed to be sloppy, to use Frank
Bennion's characterization, negotiation of such treaties
are conducted and secured at very high levels of
government, with awareness of general principles of
interpretation used in various jurisdictions. It is
fairly well known, at least in Common Law jurisdictions,
that legal instruments and statutes are interpreted in a
manner whereby redundancy of expressions and phrases is
sought to be avoided. Germany would have been well aware
of it.
64.The redundancy that would have to be ascribed to the
said last sentence of Article 26(1) of the double
taxation agreement with Germany, if the position of
Union of India were to be accepted, also leads to a
manifest absurdity, in the context of the Indian
Constitution. Such a redundancy would mean that
constitutional imperatives themselves are to be set
aside. Modern constitutionalism, to which Germany is a
major contributor too, especially in terms of the basic
structure doctrine, specifies that powers vested in any
organ of the State have to be exercised within the four
corners of the Constitution, and further that organs
created by a constitution cannot change the identity of
the constitution itself.
65.The basic structure of the Constitution cannot be
amended even by the amending power of the legislature.
Our Constitution guarantees the right, pursuant to
Clause (1) of Article 32, to petition this Court on the
ground that the rights guaranteed under Part III of the
Constitution have been violated. This provision is a
part of the basic structure of the Constitution. Clause
(2) of Article 32 empowers this Court to issue
"directions or orders or writs, including writs in the
nature of habeas corpus, mandamus, prohibition, quo
warranto and certiorari, whichever may be appropriate
for the enforcement of any of the rights conferred by"
Part III. This is also a part of the basic structure of
the Constitution.
66.In order that the right guaranteed by Clause (1) of
Article 32 be meaningful, and particularly because such
petitions seek the protection of fundamental rights, it
is imperative that in such proceedings the petitioners
are not denied the information necessary for them to
properly articulate the case and be heard, especially
where such information is in the possession of the
State. To deny access to such information, without
citing any constitutional principle or enumerated
grounds of constitutional prohibition, would be to
thwart the right granted by Clause (1) of Article 32.
67.Further, in as much as, by history and tradition of
common law, judicial proceedings are substantively,
though not necessarily fully, adversarial, both parties
bear the responsibility of placing all the relevant
information, analyses, and facts before this court as
completely as possible. In most situations, it is the
State which may have more comprehensive information that
is relevant to the matters at hand in such proceedings.
However, some agents of the State may perceive that
because these proceedings are adversarial in nature, the
duty and burden to furnish all the necessary information
rests upon the Petitioners, and hence the State has no
obligation to fully furnish such information. Some
agents of the State may also seek to cast the events and
facts in a light that is favourable to the government in
the immediate context of the proceedings, even though
such actions do not lead to rendering of complete
justice in the task of protection of fundamental rights.
To that extent, both the petitioners and this Court
would be handicapped in proceedings under Clause (1) of
Article 32.
68.It is necessary for us to note that the burden of
asserting, and proving, by relevant evidence a claim in
judicial proceedings would ordinarily be placed upon the
proponent of such a claim; however, the burden of
protection of fundamental rights is primarily the duty
of the State. Consequently, unless constitutional
grounds exist, the State may not act in a manner that
hinders this Court from rendering complete justice in
such proceedings. Withholding of information from the
petitioners, or seeking to cast the relevant events and
facts in a light favourable to the State in the context
of the proceedings, even though ultimately detrimental
to the essential task of protecting fundamental rights,
would be destructive to the guarantee in Clause (1) of
Article 32, and substantially eviscerate the capacity of
this Court in exercising its powers contained in clause
(2) of Article 32, and those traceable to other
provisions of the Constitution and broader jurisprudence
of constitutionalism, in upholding fundamental rights
enshrined in Part III. In the task of upholding of
fundamental rights, the State cannot be an adversary.
The State has the duty, generally, to reveal all the
facts and information in its possession to the Court,
and also provide the same to the petitioners. This is
so, because the petitioners would also then be enabled
to bring to light facts and the law that may be relevant
for the Court in rendering its decision. In proceedings
such as those under Article 32, both the petitioner and
the State, have to necessarily be the eyes and ears of
the Court. Blinding the petitioner would substantially
detract from the integrity of the process of judicial
decision making in Article 32 proceedings, especially
where the issue is of upholding of fundamental rights.
69.Furthermore, we hold that there is a special
relationship between Clause (1) of Article 32 and Sub-
Clause (a) of Clause (1) of Article 19, which guarantees
citizens the freedom of speech and expression. The very
genesis, and the normative desirability of such a
freedom, lies in historical experiences of the entire
humanity: unless accountable, the State would turn
tyrannical. A proceeding under Clause (1) of Article 32,
and invocation of the powers granted by Clause (2) of
Article 32, is a primordial constitutional feature of
ensuring such accountability. The very promise, and
existence, of a constitutional democracy rests
substantially on such proceedings.
70.Withholding of information from the petitioners by the
State, thereby constraining their freedom of speech and
expression before this Court, may be premised only on
the exceptions carved out, in Clause (2) of Article 19,
"in the interests of sovereignty and integrity of India,
security of the State, friendly relations with foreign
States, public order, decency or morality, or in
relation to contempt of court, defamation or incitement
to an offence" or by law that demarcate exceptions,
provided that such a law comports with the enumerated
grounds in Clause (2) of Article 19, or that may be
provided for elsewhere in the Constitution.
71.It is now a well recognized proposition that we are
increasingly being entwined in a global network of
events and social action. Considerable care has to be
exercised in this process, particularly where
governments which come into being on account of a
constitutive document, enter into treaties. The actions
of governments can only be lawful when exercised within
the four corners of constitutional permissibility. No
treaty can be entered into, or interpreted, such that
constitutional fealty is derogated from. The redundancy,
that the Union of India presses, with respect to the
last sentence of Article 26(1) of the double taxation
agreement with Germany, necessarily transgresses upon
the boundaries erected by our Constitution. It cannot be
permitted.
72.We have perused the documents in question, and heard the
arguments of Union of India with respect to the double
taxation agreement with Germany as an obstacle to
disclosure. We do not find merit in its arguments
flowing from the provisions of double taxation agreement
with Germany. However, one major constitutional issue,
and concern remains. This is with regard to whether the
names of individuals, and details of their bank
accounts, with respect to whom there has been no
completed investigations that reveal wrong doing and
proceedings initiated, and there is no other credible
information and evidence currently available with the
Petitioners that there has been any wrong doing, may be
disclosed to the Petitioners.
73.Right to privacy is an integral part of right to life.
This is a cherished constitutional value, and it is
important that human beings be allowed domains of
freedom that are free of public scrutiny unless they act
in an unlawful manner. We understand and appreciate the
fact that the situation with respect to unaccounted
monies is extremely grave. Nevertheless, as
constitutional adjudicators we always have to be mindful
of preserving the sanctity of constitutional values, and
hasty steps that derogate from fundamental rights,
whether urged by governments or private citizens,
howsoever well meaning they may be, have to be
necessarily very carefully scrutinised. The solution for
the problem of abrogation of one zone of constitutional
values cannot be the creation of another zone of
abrogation of constitutional values. The rights of
citizens, to effectively seek the protection of
fundamental rights, under Clause (1) of Article 32 have
to be balanced against the rights of citizens and
persons under Article 21. The latter cannot be
sacrificed on the anvil of fervid desire to find
instantaneous solutions to systemic problems such as
unaccounted monies, for it would lead to dangerous
circumstances, in which vigilante investigations,
inquisitions and rabble rousing, by masses of other
citizens could become the order of the day. The right of
citizens to petition this Court for upholding of
fundamental rights is granted in order that citizens,
inter-alia, are ever vigilant about the functioning of
the State in order to protect the constitutional
project. That right cannot be extended to being
inquisitors of fellow citizens. An inquisitorial order,
where citizens' fundamental right to privacy is breached
by fellow citizens is destructive of social order. The
notion of fundamental rights, such as a right to privacy
as part of right to life, is not merely that the State
is enjoined from derogating from them. It also includes
the responsibility of the State to uphold them against
the actions of others in the society, even in the
context of exercise of fundamental rights by those
others.
74.An argument can be made that this Court can make
exceptions under the peculiar circumstances of this
case, wherein the State has acknowledged that it has not
acted with the requisite speed and vigour in the case of
large volumes of suspected unaccounted monies of certain
individuals. There is an inherent danger in making
exceptions to fundamental principles and rights on the
fly. Those exceptions, bit by bit, would then eviscerate
the content of the main right itself. Undesirable lapses
in upholding of fundamental rights by the legislature,
or the executive, can be rectified by assertion of
constitutional principles by this Court. However, a
decision by this Court that an exception could be carved
out remains permanently as a part of judicial canon, and
becomes a part of the constitutional interpretation
itself. It can be used in the future in a manner and
form that may far exceed what this Court intended or
what the Constitutional text and values can bear. We are
not proposing that Constitutions cannot be interpreted
in a manner that allows the nation-state to tackle the
problems it faces. The principle is that exceptions
cannot be carved out willy-nilly, and without
forethought as to the damage they may cause.
75.One of the chief dangers of making exceptions to
principles that have become a part of constitutional
law, through aeons of human experience, is that the
logic, and ease of seeing exceptions, would become
entrenched as a part of the constitutional order. Such
logic would then lead to seeking exceptions, from
protective walls of all fundamental rights, on grounds
of expediency and claims that there are no solutions to
problems that the society is confronting without the
evisceration of fundamental rights. That same logic
could then be used by the State in demanding exceptions
to a slew of other fundamental rights, leading to
violation of human rights of citizens on a massive
scale.
76.It is indeed true that the information shared by
Germany, with regard to certain bank accounts in
Liechtenstein, also contains names of individuals who
appear to be Indians. The Petitioners have also claimed
that names of all the individuals have been made public
by certain segments of the media. However, while some of
the accounts, and the individuals holding those
accounts, are claimed to have been investigated, others
have not been. No conclusion can be drawn as to whether
those who have not been investigated, or only partially
investigated and proceedings not initiated have
committed any wrong doing. There is no presumption that
every account holder in banks of Liechtenstein has acted
unlawfully. In these circumstances, it would be
inappropriate for this Court to order the disclosure of
such names, even in the context of proceedings under
Clause (1) of Article 32.
77.The revelation of details of bank accounts of
individuals, without establishment of prima facie
grounds to accuse them of wrong doing, would be a
violation of their rights to privacy. Details of bank
accounts can be used by those who want to harass, or
otherwise cause damage, to individuals. We cannot remain
blind to such possibilities, and indeed experience
reveals that public dissemination of banking details, or
availability to unauthorized persons, has led to abuse.
The mere fact that a citizen has a bank account in a
bank located in a particular jurisdiction cannot be a
ground for revelation of details of his or her account
that the State has acquired. Innocent citizens,
including those actively working towards the betterment
of the society and the nation, could fall prey to the
machinations of those who might wish to damage the
prospects of smooth functioning of society. Whether the
State itself can access details of citizens bank
accounts is a separate matter. However, the State cannot
compel citizens to reveal, or itself reveal details of
their bank accounts to the public at large, either to
receive benefits from the State or to facilitate
investigations, and prosecutions of such individuals,
unless the State itself has, through properly conducted
investigations, within the four corners of
constitutional permissibility, been able to establish
prima facie grounds to accuse the individuals of wrong
doing. It is only after the State has been able to
arrive at a prima facie conclusion of wrong doing, based
on material evidence, would the rights of others in the
nation to be informed, enter the picture. In the event
citizens, other persons and entities have credible
information that a wrong doing could be associated with
a bank account, it is needless to state that they have
the right, and in fact the moral duty, to inform the
State, and consequently the State would have the
obligation to investigate the same, within the
boundaries of constitutional permissibility. If the
State fails to do so, the appropriate courts can always
intervene.
78.The major problem, in the matters before us, has been
the inaction of the State. This is so, both with regard
to the specific instances of Hassan Ali Khan and the
Tapurias, and also with respect to the issues regarding
parallel economy, generation of black money etc. The
failure is not of the Constitutional values or of the
powers available to the State; the failure has been of
human agency. The response cannot be the promotion of
vigilantism, and thereby violate other constitutional
values. The response has to necessarily be a more
emphatic assertion of those values, both in terms of
protection of an individual's right to privacy and also
the protection of individual's right to petition this
Court, under Clause (1) of Article 32, to protect
fundamental rights from evisceration of content because
of failures of the State. The balancing leads only to
one conclusion: strengthening of the machinery of
investigations, and vigil by broader citizenry in
ensuring that the agents of State do not weaken such
machinery.
79.In light of the above we order that:
(i) The Union of India shall forthwith disclose to the
Petitioners all those documents and information
which they have secured from Germany, in connection
with the matters discussed above, subject to the
conditions specified in (ii) below;
(ii) That the Union of India is exempted from revealing
the names of those individuals who have accounts in
banks of Liechtenstein, and revealed to it by
Germany, with respect of who
investigations/enquiries are still in progress and
no information or evidence of wrongdoing is yet
available;
(iii) That the names of those individuals with bank
accounts in Liechtenstein, as revealed by Germany,
with respect of whom investigations have been
concluded, either partially or wholly, and show
cause notices issued and proceedings initiated may
be disclosed; and
(iv) That the Special Investigation Team, constituted
pursuant to the orders of today by this Court,
shall take over the matter of investigation of the
individuals whose names have been disclosed by
Germany as having accounts in banks in
Liechtenstein, and expeditiously conduct the same.
The Special Investigation Team shall review the
concluded matters also in this regard to assess
whether investigations have been thoroughly and
properly conducted or not, and on coming to the
conclusion that there is a need for further
investigation shall proceed further in the matter.
After conclusion of such investigations by the
Special Investigation Team, the Respondents may
disclose the names with regard to whom show cause
notices have been issued and proceedings initiated.
80. Compliance reports shall be filed by Respondents, with
respect of all the orders issued by this Court today. List
for further directions in the week following the Independence
Day, August 15, of 2011.
Ordered accordingly.
................................................J.
(B. SUDERSHAN REDDY)
NEW DELHI, ................................................J.
JULY 4, 2011. (SURINDER SINGH NIJJAR)
ITEM NO.63(PH) COURT NO.9 SECTION PIL
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
WRIT PETITION (CIVIL) NO(s). 176 OF 2009
RAM JETHMALANI & ORS. Petitioner(s)
VERSUS
UNION OF INDIA & ORS. Respondent(s)
(With appln(s) for directions and permission to file additional
documents)
WITH SLP(C) NO. 11032 of 2009 (PH)
(With prayer for interim relief)
W.P(C) NO. 37 of 2010 (PH)
W.P.(C) No. 136 of 2011
(With office report)
Date: 04/07/2011 These Petitions were called on for hearing today.
CORAM :
HON'BLE MR. JUSTICE B. SUDERSHAN REDDY
HON'BLE MR. JUSTICE SURINDER SINGH NIJJAR
For the appearing parties :
Mr. Anil Divan, Sr.Adv.
Ms. Lata Krishnamurthi, Adv.
Mr. R.N. Karanjawala, adv.
Ms. Manik Karanjawala, Adv.
Mr. Sandeep Kapur, adv.
Mr. Ranvir Singh, Adv.
Mr. Ravi Sharma, Adv.
Mr. Pranav Diesh, Adv.
Mr. Karan Kalia, Adv.
Mr. Arjun Mahajan, Adv.
for M/S. Karanjawala & Co.,Adv.
Mr. Rajindra Sachchar, Sr.Adv.
Mr. Gaurav Jain, Adv.
Ms. Abha Jain, Adv.
For Intervenor
K.V.M.PAI Mr. Krishnan Venugopal, Sr.adv.
Mrs. Anuradha Mutatkar, Adv.
Mrs. Anagha S. Desai, Adv.
Mr. Shyamohan, Adv.
Ms. Meenakshi Arora, Adv.
-2-
For UOI Mr. Gopal Subramanium, SG
Mr. H.P. Raval, ASG
Mr. Devansh Mohta, Adv.
Mr. T.A. Khan, Adv.
Mr. Arijit Prasad, Adv.
Mr. Kunal Bahri, Adv.
Mr. B.V. Balaram Das,Adv.
Mr. B. Krishna Prasad, Adv.
Mr. Mukul Rohatgi, Sr.Adv.
Mr. Rajiv Nanda, Adv.
For RR-3 (SEBI) Mr. Pratap Venugopal, Adv.
Ms. Surekha Raman, Adv.
Mr. Dileep Poolakkit, Adv.
Ms. Namrata Sood, Adv.
Mr. Anuj Sarma, Adv.
for M/S. K.J. John & Co. ,Adv
Mr. Kuldeep S. Parihar, Adv.
Mr. H.S. Parihar, Adv.
Mr. Sanjay Kharde, Adv.
Ms. Asha Gopalan Nair, Adv.
Mr. P.P. Malhotra, ASG
Mr. J.S. Attri, Sr.Adv.
Ms. Sadhana Sandhu, Adv.
Ms. Anil Katiyar, Adv.
Mr. Samir Ali Khan, Adv.
Mr. Rajiv Mohiti, Sr.Adv.
Mr. I.P. Bagadia, Sr.Adv.
Mr. Santosh Paul, adv.
Mr. B.V. Reddy, Adv.
Mr. Arvind Gupta, Adv.
Ms. Arti Singh, Adv.
Ms. Mohita Bagati, Adv.
Mr. Ashok Kumar Gupta-I, Adv.
UPON hearing counsel the Court made the following
O R D E R
W.P.(C) No. 176 of 2009
For the reasons given in the reportable order
compliance report shall be filed by the respondents with
-3-
respect of all the orders issued by this Court today.
List this matter for further directions in the week
following the Independence Day, August 15, 2011.
The status reports and other documents furnished
from time to time shall be kept in the safe custody of the
Registrar (Judicial).
The Registry is directed to forthwith despatch
copies of this order to the Chief Secretaries of all the
State Governments and the Union Territories for
compliance.
I.A. No.7 application for intervention is
dismissed.
SLP(C) No. 11032 of 2009
W.P.(C) No.37 of 2010
W.P.(C) No.136 of 2011
List these matters on 5th July, 2011 at the end of
the Board.
(Sukhbir Paul Kaur) (Renuka Sadana)
Court Master Court Master
(Signed Reportable order is placed on the file)
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
WRIT PETITION (CIVIL) NO. 176 OF 2009
RAM JETHMALANI & ORS. ...PETITIONERS
VERSUS
UNION OF INDIA & ORS. ...RESPONDENTS
WITH
I.A.NO.1 OF 2009
O R D E R
I
"Follow the money" was the short and simple advice given by
the secret informant, within the American Government, to Bob
Woodward, the journalist from Washington Post, in aid of his
investigations of the Watergate Hotel break in. Money has
often been claimed, by economists, to only be a veil that
covers the real value and the economy. As a medium of
exchange, money is vital for the smooth functioning of
exchange in the market place. However, increasing
monetization of most social transactions has been viewed as
potentially problematic for the social order, in as much as
it signifies a move to evaluating value, and ethical
desirability, of most areas of social interaction only in
terms of price obtained in the market place.
2. Price based notions of value and values, as propounded
by some extreme neo-liberal doctrines, implies that the
values that ought to be promoted, in societies, are the
ones for which people are willing to pay a price for.
Values, and social actions, for which an effective
demand is not expressed in the market, are neglected,
even if lip service is paid to their essentiality.
However, it cannot be denied that not everything that
can be, and is transacted, in the market for a price is
necessarily good, and enhances social welfare. Moreover,
some activities, even if costly and without being
directly measurable in terms of exchange value, are to
be rightly viewed as essential. It is a well established
proposition, of political economy, and of statecraft,
that the State has a necessary interest in determining,
and influencing, the kinds of transactions, and social
actions, that occur within a legal order. From
prevention of certain kinds of harmful activities, that
may range from outright crimes, to regulating or
controlling, and consequently mitigating, socially
harmful modes of social and economic production, to
promotion of activities that are deemed to be of higher
priority, than other activities which may have a lower
priority, howsoever evaluated in terms of social
utility, are all the responsibilities of the State.
Whether such activities by the State result in directly
measurable benefits or not is often not the most
important factor in determining their desirability;
their absence, or their substantial evisceration, are to
be viewed as socially destructive.
3. The scrutiny, and control, of activities, whether in the
economic, social or political contexts, by the State, in
the public interest as posited by modern
constitutionalism, is substantially effectuated by the
State "following the money." In modern societies very
little gets accomplished without transfer of money. The
incidence of crime, petty and grand, like any other
social phenomena is often linked to transfers of monies,
small or large. Money, in that sense, can both power,
and also reward, crime. As noted by many scholars, with
increasing globalization, an ideological and social
construct, in which transactions across borders are
accomplished with little or no control over the quantum,
and mode of transfers of money in exchange for various
services and value rendered, both legal and illegal,
nation-states also have begun to confront complex
problems of cross-border crimes of all kinds. Whether
this complex web of flows of funds, instantaneously, and
in large sums is good or bad, from the perspective of
lawful and desired transactions is not at issue in the
context of the matters before this Court.
4. The worries of this Court that arise, in the context of
the matters placed before us, are with respect to
transfers of monies, and accumulation of monies, which
are unaccounted for by many individuals and other legal
entities in the country, in foreign banks. The worries
of this Court relate not merely to the quantum of monies
said to have been secreted away in foreign banks, but
also the manner in which they may have been taken away
from the country, and with the nature of activities that
may have engendered the accumulation of such monies. The
worries of this Court are also with regard to the nature
of activities that such monies may engender, both in
terms of the concentration of economic power, and also
the fact that such monies may be transferred to groups
and individuals who may use them for unlawful activities
that are extremely dangerous to the nation, including
actions against the State. The worries of this Court
also relate to whether the activities of engendering
such unaccounted monies, transferring them abroad, and
the routing them back to India may not actually be
creating a culture that extols the virtue of such
cycles, and the activities that engender such cycles are
viewed as desirable modes of individual and group
action. The worries of this court also relate to the
manner, and the extent to which such cycles are damaging
to both national and international attempts to combat
the extent, nature and intensity of cross-border
criminal activity. Finally, the worries of this Court
are also with respect to the extent of incapacities,
system wide, in terms of institutional resources,
skills, and knowledge, as well as about incapacities of
ethical nature, in keeping an account of the monies
generated by various facets of social action in the
country, and thereby developing effective mechanisms of
control. These incapacities go to the very heart of
constitutional imperatives of governance. Whether such
incapacities are on account of not having devoted enough
resources towards building such capacities, or on
account of a broader culture of venality in the wider
spheres of social and political action, they run afoul
of constitutional imperatives.
5. Large amounts of unaccounted monies, stashed away in
banks located in jurisdictions that thrive on strong
privacy laws protecting bearers of those accounts to
avoid scrutiny, raise each and every worry delineated
above. First and foremost, such large monies stashed
abroad, and unaccounted for by individuals and entities
of a country, would suggest the necessity of suspecting
that they have been generated in activities that have
been deemed to be unlawful. In addition, such large
amounts of unaccounted monies would also lead to a
natural suspicion that they have been transferred out of
the country in order to evade payment of taxes, thereby
depleting the capacity of the nation to undertake many
tasks that are in public interest.
6. Many schools of thought exist with regard to the primary
functions of the State, and the normative expectations
of what the role of the State ought to be. The questions
regarding which of those schools provide the absolutely
correct view cannot be the criteria to choose or reject
any specific school of thought as an aid in
constitutional adjudication. Charged with the
responsibility of having to make decisions in the
present, within the constraints of epistemic frailties
of human knowledge, constitutional adjudicators willy-
nilly are compelled to choose those that seem to provide
a reasoned basis for framing of questions relevant, both
with respect to law, and to facts. Institutional
economics gives one such perspective which may be a
useful guide for us here. Viewed from a functional
perspective, the State, and governments, may be seen as
coming into existence in order to solve, what
institutional economists have come to refer to as, the
coordination problems in providing public goods, and
prevent the disutility that emerges from the moral
hazard of a short run utility maximizer, who may desire
the benefits of goods and services that are to be
provided in common to the public, and yet have the
interest of not paying for their production.
7. Security of the nation, infrastructure of governance,
including those that relate to law making and law
keeping functions, crime prevention, detection and
punishment, coordination of the economy, and ensuring
minimal levels of material, and cultural goods for those
who may not be in a position to fend for themselves or
who have been left by the wayside by the operation of
the economy and society, may all be cited as some
examples of the kinds of public goods that the State is
expected to provide for, or enable the provision of. In
as much as the market is primarily expected to cater to
purely self centered activities of individuals and
groups, markets and the domain of purely private social
action significantly fail to provide such goods.
Consequently, the State, and government, emerges to
rectify the coordination problem, and provide the public
goods.
8. Unaccounted monies, especially large sums held by
nationals and entities with a legal presence in the
nation, in banks abroad, especially in tax havens or in
jurisdictions with a known history of silence about
sources of monies, clearly indicate a compromise of the
ability of the State to manage its affairs in consonance
with what is required from a constitutional perspective.
This is so in two respects. The quantum of such monies
by itself, along with the numbers of individuals or
other legal entities who hold such monies, may indicate
in the first instance that a large volume of activities,
in the social and the economic spheres within the
country are unlawful and causing great social damage,
both at the individual and the collective levels.
Secondly, large quanta of monies stashed abroad, would
also indicate a substantial weakness in the capacity of
the State in collection of taxes on incomes generated by
individuals and other legal entities within the country.
The generation of such revenues is essential for the
State to undertake the various public goods and services
that it is constitutionally mandated, and normatively
expected by its citizenry, to provide. A substantial
degree of incapacity, in the above respect, would be an
indicia of the degree of failure of the State; and
beyond a particular point, the State may spin into a
vicious cycle of declining moral authority, thereby
causing the incidence of unlawful activities in which
wealth is sought to be generated, as well as instances
of tax evasion, to increase in volume and in intensity.
9. Consequently, the issue of unaccounted monies held by
nationals, and other legal entities, in foreign banks,
is of primordial importance to the welfare of the
citizens. The quantum of such monies may be rough
indicators of the weakness of the State, in terms of
both crime prevention, and also of tax collection.
Depending on the volume of such monies, and the number
of incidents through which such monies are generated and
secreted away, it may very well reveal the degree of
"softness of the State."
10.The concept of a "soft state" was famously articulated
by the Nobel Laureate, Gunnar Myrdal. It is a broad
based assessment of the degree to which the State, and
its machinery, is equipped to deal with its
responsibilities of governance. The more soft the State
is, greater the likelihood that there is an unholy nexus
between the law maker, the law keeper, and the law
breaker.
11.When a catchall word like "crimes" is used, it is common
for people, and the popular culture to assume that it is
"petty crime," or crimes of passion committed by
individuals. That would be a gross mischaracterization
of the seriousness of the issues involved. Far more
dangerous are the crimes that threaten national
security, and national interest. For instance, with
globalization, nation states are also confronted by the
dark worlds of international arms dealers, drug
peddlers, and various kinds of criminal networks,
including networks of terror. International criminal
networks that extend support to home-grown terror or
extremist groups, or those that have been nurtured and
sustained in hostile countries, depend on networks of
formal and informal, lawful and unlawful mechanisms of
transfer of monies across boundaries of nation-states.
They work in the interstices of the micro-structures of
financial transfers across the globe, and thrive in the
lacunae, the gaps in law and of effort. The loosening of
control over those mechanisms of transfers, guided by an
extreme neo-liberal thirst to create a global market
that is free of the friction of law and its enforcement,
by nation-states, may have also contributed to an
increase in the volume, extent and intensity of
activities by criminal and terror networks across the
globe.
12.Increasingly, on account of "greed is good" culture that
has been promoted by neo-liberal ideologues, many
countries face the situation where the model of
capitalism that the State is compelled to institute, and
the markets it spawns, is predatory in nature. From
mining mafias to political operators who, all too
willingly, bend policies of the State to suit particular
individuals or groups in the social and economic sphere,
the raison d'etre for weakening the capacities and
intent to enforce the laws is the lure of the lucre.
Even as the State provides violent support to those who
benefit from such predatory capitalism, often violating
the human rights of its citizens, particularly it's
poor, the market begins to function like a bureaucratic
machine dominated by big business; and the State begins
to function like the market, where everything is
available for sale at a price.
13.The paradigm of governance that has emerged, over the
past three decades, prioritizes the market, and its
natural course, over any degree of control of it by the
State. The role for the State is visualized by votaries
of the neo-liberal paradigm as that of a night watchman;
and moreover it is also expected to take its hands out
of the till of the wealth generating machinery. Based on
the theories of Arthur Laffer, and pushed by the
Washington Consensus, the prevailing wisdom of the
elite, and of the policy makers, is that reduction of
tax rates, thereby making tax regimes regressive, would
incentivise the supposed genius of entrepreneurial souls
of individuals, actuated by pursuit of self-interest and
desire to accumulate great economic power. It was
expected that this would enable the generation of more
wealth, at a more rapid pace, thereby enabling the State
to generate appropriate tax revenues even with lowered
tax rates. Further, benefits were also expected in moral
terms that the lowering of tax rates would reduce the
incentives of wealth generators to hide their monies,
thereby saving them from the guilt of tax evasion.
Whether that is an appropriate model of social
organization or not, and from the perspective of
constitutional adjudication, whether it meets the
requirements of constitutionalism as embedded in the
texts of various constitutions, is not a question that
we want to enter in this matter.
14.Nevertheless, it would be necessary to note that there
is a fly in the ointment of the above story of friction
free markets that would always clear, and always work to
the benefit of the society. The strength of tax
collection machinery can, and ought to be, expected to
have a direct bearing on the revenues collected by the
State. If the machinery is weak, understaffed,
ideologically motivated to look the other way, or the
agents motivated by not so salubrious motives, the
amount of revenue collected by the State would decline,
stagnate, or may not generate the revenue for the State
that is consonant with its responsibilities. From within
the neo-liberal paradigm, also emerged the under-girding
current of thought that revenues for the State implies a
big government, and hence a strong tax collecting
machinery itself would be undesirable. Where the elite
lose out in democratic politics of achieving ever
decreasing tax rates, it would appear that state
machineries in the hands of the executive, all too
willing to promote the extreme versions of the neo-
liberal paradigm and co-opt itself in the enterprises of
the elite, may also become all too willing to not
develop substantial capacities to monitor and follow the
money, collect the lawfully mandated taxes, and even
look the other way. The results, as may be expected,
have been disastrous across many nations.
15.In addition, it would also appear that in this miasmic
cultural environment in which greed is extolled,
conspicuous consumption viewed as both necessary and
socially valuable, and the wealthy viewed as demi-gods,
the agents of the State may have also succumbed to the
notions of the neo-liberal paradigm that the role of the
State ought to only be an enabling one, and not exercise
significant control. This attitude would have a
significant impact on exercise of discretion, especially
in the context of regulating economic activities,
including keeping an account of the monies generated in
various activities, both legal and illegal. Carried away
by the ideology of neo-liberalism, it is entirely
possible that the agents of the State entrusted with the
task of supervising the economic and social activities
may err more on the side of extreme caution, whereby
signals of wrong doing may be ignored even when they are
strong. Instances of the powers that be ignoring
publicly visible stock market scams, or turning a blind
eye to large scale illegal mining have become all too
familiar, and may be readily cited. That such activities
are allowed to continue to occur, with weak, or non-
existent, responses from the State may, at best, be
charitably ascribed to this broader culture of
permissibility of all manner of private activities in
search of ever more lucre. Ethical compromises, by the
elite those who wield the powers of the state, and
those who fatten themselves in an ever more exploitative
economic sphere- can be expected to thrive in an
environment marked by such a permissive attitude, of
weakened laws, and of weakened law enforcement
machineries and attitudes.
16.To the above, we must also add the fragmentation of
administration. Even as the range of economic, and
social activities have expanded, and their
sophistication increased by leaps and bounds, the
response in terms of administration by the State has
been to create ever more specialized agencies, and
departments. To some degree this has been unavoidable.
Nevertheless, it would also appear that there is a need
to build internal capacities to share information across
such departments, lessen the informational asymmetries
between, and friction to flow of information across the
boundaries of departments and agencies, and reduce the
levels of consequent problems in achieving coordination.
Life, and social action within which human life becomes
possible, do not proceed on the basis of specialized
fiefdoms of expertise. They cut across the boundaries
erected as a consequence of an inherent tendency of
experts to specialize. The result, often, is a system
wide blindness, while yet being lured by the dazzle of
ever greater specialization. Many dots of information,
now collected in ever increasing volume by development
of sophisticated information technologies, get ignored
on account of lack of coordination across agencies, and
departments, and tendency within bureaucracy to
jealously guard their own turfs. In some instances, the
failure to properly investigate, or to prevent, unlawful
activities could be the result of such over-
specialization, frictions in sharing of information, and
coordination across departmental and specialized agency
boundaries.
17.If the State is soft to a large extent, especially in
terms of the unholy nexus between the law makers, the
law keepers, and the law breakers, the moral authority,
and also the moral incentives, to exercise suitable
control over the economy and the society would vanish.
Large unaccounted monies are generally an indication of
that. In a recent book, Prof. Rotberg states, after
evaluating many failed and collapsed states over the
past few decades:
"Failed states offer unparalleled economic opportunity but
only for a privileged few. Those around the ruler or ruling
oligarchy grow richer while their less fortunate brethren
starve. Immense profits are available from an awareness of
regulatory advantages and currency speculation and arbitrage.
But the privilege of making real money when everything else
is deteriorating is confined to clients of the ruling elite....
The nation-state's responsibility to maximize the well-being
and prosperity of all its citizens is conspicuously absent,
if it ever existed.... Corruption flourishes in many states,
but in failed states it often does so on an unusually
destructive scale. There is widespread petty or lubricating
corruption as a matter of course, but escalating levels of
venal corruption mark failed states." 1
18.India finds itself in a peculiar situation. Often
celebrated, in popular culture, as an emerging economy
that is rapidly growing, and expected to be a future
1 "The Failure and Collapse of Nation-States Breakdown, Prevention and Repair" in "WHEN STATES FAIL:
CAUSES AND CONSEQUENCES", Rotberg, Robert I., Ed. Princeton University Press (2004).
economic and political giant on the global stage, it is
also popularly perceived, and apparently even in some
responsible and scholarly circles, and official
quarters, that some of its nationals and other legal
entities have stashed the largest quantum of unaccounted
monies in foreign banks, especially in tax havens, and
in other jurisdictions with strong laws of secrecy.
There are also apparently reports, and analyses,
generated by Government of India itself, which place the
amounts of such unaccounted monies at astronomical
levels.
19.We do not wish to engage in any speculation as to what
such analyses, reports, and factuality imply with
respect to the state of the nation. The citizens of our
country can make, and ought to be making, rational
assessments of the situation. We fervently hope that it
leads to responsible, reasoned and reasonable debate,
thereby exerting the appropriate democratic pressure on
the State, and its agents, within the constitutional
framework, to bring about the necessary changes without
sacrificing cherished, and inherently invaluable social
goals and values enshrined in the Constitution. The
failures are discernible when viewed against the vision
of the constitutional project, and as forewarned by Dr.
Ambedkar, have been on account of the fact that man has
been vile, and not the defects of a Constitution forged
in the fires of wisdom gathered over eons of human
experience. If the politico-bureaucratic, power
wielding, and business classes bear a large part of the
blame, at least some part of blame ought to be
apportioned to those portions of the citizenry that is
well informed, or is expected to be informed. Much of
that citizenry has disengaged itself with the political
process, and with the masses. Informed by contempt for
the poor and the downtrodden, the elite classes that
have benefited the most, or expects to benefit
substantially from the neo-liberal policies that would
wish away the hordes, has also chosen to forget that
constitutional mandate is as much the responsibility of
the citizenry, and through their constant vigilance, of
all the organs of the state, and national institutions
including political parties. To not be engaged in the
process, is to ensure the evisceration of constitutional
content. Knee jerk reactions, and ill advised tinkering
with the constitutional framework are not the solutions.
The road is always long, and needs the constant march of
the citizenry on it. There is no other way. To expect
instant solutions, because this law or that body is
formed, without striving to solve system wide, and
systemic, problems that have emerged is to not
understand the demands of a responsible citizenry in
modern constitutional republican democracies.
20.These matters before us relate to issues of large sums
of unaccounted monies, allegedly held by certain named
individuals, and loose associations of them;
consequently we have to express our serious concerns
from a constitutional perspective. The amount of
unaccounted monies, as alleged by the Government of
India itself is massive. The show cause notices were
issued a substantial length of time ago. The named
individuals were very much present in the country. Yet,
for unknown, and possibly unknowable, though easily
surmisable, reasons the investigations into the matter
proceeded at a laggardly pace. Even the named
individuals had not yet been questioned with any degree
of seriousness. These are serious lapses, especially
when viewed from the perspective of larger issues of
security, both internal and external, of the country.
21.It is in light of the above, that we heard some
significant elements of the instant writ petitions filed
in this Court, and at this stage it is necessary that
appropriate orders be issued. There are two issues we
deal with below: (i) the appointment of a Special
Investigation Team; and (ii) disclosure, to the
Petitioners, of certain documents relied upon by the
Union of India in its response.
II
22.The instant writ petition was filed, in 2009, by Shri.
Ram Jethmalani, Shri. Gopal Sharman, Smt. Jalbala
Vaidya, Shri. K.P.S. Gill, Prof. B.B. Dutta, and Shri.
Subhash Kashyap, all well known professionals, social
activists, former bureaucrats or those who have held
responsible positions in the society. They have also
formed an organization called Citizen India, the stated
objective of which is said to be to bring about changes
and betterment in the quality of governance, and
functioning of all public institutions.
23.The Petitioners state that there have been a slew of
reports, in the media, and also in scholarly
publications that various individuals, mostly citizens,
but may also include non-citizens, and other entities
with presence in India, have generated, and secreted
away large sums of monies, through their activities in
India or relating to India, in various foreign banks,
especially in tax havens, and jurisdictions that have
strong secrecy laws with respect to the contents of bank
accounts and the identities of individuals holding such
accounts. The Petitioners allege that most of such
monies are unaccounted, and in all probability have been
generated through unlawful activities, whether in India
or outside India, but relating to India. Further, the
Petitioners also allege that a large part of such monies
may have been generated within India, and have been
taken away from India, breaking various laws, including
but not limited to evasion of taxes.
24.The Petitioners contend: (i) that the sheer volume of
such monies points to grave weaknesses in the governance
of the nation, because they indicate a significant lack
of control over unlawful activities through which such
monies are generated, evasion of taxes, and use of
unlawful means of transfer of funds; (ii) that these
funds are then laundered and brought back into India, to
be used in both legal and illegal activities; (iii) that
the use of various unlawful modes of transfer of funds
across borders, gives support to such unlawful networks
of international finance; and (iv) that in as much as
such unlawful networks are widely acknowledged to also
effectuate transfer of funds across borders in aid of
various crimes committed against persons and the State,
including but not limited to activities that may be
classifiable as terrorist, extremist, or unlawful
narcotic trade, the prevailing situation also has very
serious connotations for the security and integrity of
India.
25.The Petitioners also further contend that a significant
part of such large unaccounted monies include the monies
of powerful persons in India, including leaders of many
political parties. It was also contended that the
Government of India, and its agencies, have been very
lax in terms of keeping an eye on the various unlawful
activities generating unaccounted monies, the consequent
tax evasion; and that such laxity extends to efforts to
curtail the flow of such funds out, and into, India.
Further, the Petitioners also contend that the efforts
to prosecute the individuals, and other entities, who
have secreted such monies in foreign banks, have been
weak or non-existent. It was strongly argued that the
efforts at identification of such monies in various bank
accounts in many jurisdictions across the globe,
attempts to bring back such monies, and efforts to
strengthen the governance framework to prevent further
outflows of such funds, have been sorely lacking.
26.The Petitioners also made allegations about certain
specific incidents and patterns of dereliction of duty,
wherein the Government of India, and its various
agencies, even though in possession of specific
knowledge about the monies in certain bank accounts, and
having estimated that such monies run into many scores
of thousands of crores, and upon issuance of show cause
notices to the said individual, surprisingly have not
proceeded to initiate, and carry out suitable
investigations, and prosecute the individuals. The
individual specifically named is one Hassan Ali Khan.
The Petitioners also contended that Kashinath Tapuria,
and his wife Chandrika Tapuria, are also party to the
illegal activities of Hassan Ali Khan.
27.Specifically, it was alleged that Hassan Ali Khan was
served with an income tax demand for Rs. 40,000.00
Crores (Rupees Forty Thousand Crores), and that the
Tapurias were served an income tax demand notice of Rs.
20,580.00 Crores (Rupees Twenty Thousand and Five
Hundred and Eighty Crores). The Enforcement Directorate,
in 2007, disclosed that Hassan Ali Khan had "dealings
amounting to 1.6 billion US dollars" in the period 2001-
2005. In January 2007, upon raiding Hassan Ali's
residence in Pune, certain documents and evidence had
been discovered regarding deposits of 8.04 billion
dollars with UBS bank in Zurich. It is the contention of
the Petitioners that, even though such evidence was
secured nearly four and half years ago, (i) a proper
investigation had not been launched to obtain the right
facts from abroad; (ii) the individuals concerned,
though present in India, and subject to its
jurisdiction, and easily available for its exercise, had
not even been interrogated appropriately; (iii) that the
Union of India, and its various departments, had even
been refusing to divulge the details and information
that would reveal the actual status of the
investigation, whether in fact it was being conducted at
all, or with any degree of seriousness; (iv) given the
magnitude of amounts in question, especially of the
demand notice of income tax, the laxity of investigation
indicates multiple problems of serious non-governance,
and weaknesses in the system, including pressure from
political quarters to hinder, or scuttle, the
investigation, prosecution, and ultimately securing the
return of such monies; and (v) given the broadly
accepted fact that within the political class corruption
is rampant, ill-begotten wealth has begun to be amassed
in massive quantities by many members in that class, it
may be reasonable to suspect, or even conclude, that
investigation was being deliberately hindered because
Hassan Ali Khan, and the Tapurias, had or were
continuing to handle the monies of such a class. The
fact that both Income Tax department, and the
Enforcement Directorate routinely, and with alacrity,
seek the powers for long stretches of custodial
interrogation of even those suspected of having engaged
in money laundering, or evaded taxes, with respect to
very small amounts, ought to raise the reasonable
suspicion that inaction in the matters concerning Hassan
Ali Khan, and Tapurias, was deliberately engineered, for
nefarious reasons.
28.In addition, the Petitioners also state that in as much
as the bank in which the monies had been stashed by
Hassan Ali Khan was UBS Zurich, the needle of suspicion
has to inexorably turn to high level political
interference and hindrance to the investigations. The
said bank, it was submitted, is the biggest or one of
the biggest wealth management companies in the world.
The Petitioners also narrated the mode, and the manner,
in which the United States had dealt with UBS, with
respect to monies of American citizens secreted away
with the said bank. It was also alleged that UBS had not
cooperated with the U.S. authorities. Contrasting the
relative alacrity, and vigour, with which the United
States government had pursued the matters, the
Petitioners contend the inaction of Union of India is
shocking.
29.The Petitioners further allege that in 2007, the Reserve
Bank of India had obtained some "knowledge of the
dubious character" of UBS Security India Private
Limited, a branch of UBS, and consequently stopped this
bank from extending its business in India by refusing to
approve its takeover of Standard Chartered Mutual Funds
business in India. It was also claimed by the
Petitioners that the SEBI had alleged that UBS played a
role in the stock market crash of 2004. The said UBS
Bank has apparently applied for a retail banking license
in India, which was approved in principle by RBI
initially. In 2008, this license was withheld on the
ground that "investigation of its unsavoury role in the
Hassan Ali Khan case was pending investigation in the
Enforcement Directorate." However, it seems that the RBI
reversed its decision in 2009, and no good reasons seem
to be forthcoming for the reversal of the decision of
2008.
30.The Petitioners contend that such a reversal of decision
could only have been accomplished through high level
intervention, and that it is further evidence of
linkages between members of the political class, and
possibly even members of the bureaucracy, and such
banking operations, and the illegal activities of Hassan
Ali Khan and the Tapurias. Hence, the Petitioners
argued, in the circumstances it would have to be
necessarily concluded that the investigations into the
affairs of Hassan Ali Khan, and the Tapurias, would be
severely compromised if the Court does not intervene,
and monitor the investigative processes by appointing a
special investigation team reporting directly to the
Court.
31.The learned senior counsel for the Petitioners sought
that this Court intervene, order proper investigations,
and monitor continuously, the actions of the Union of
India, and any and all governmental departments and
agencies, in these matters. It was submitted that their
filing of this Writ Petition under Article 32 is proper,
as the inaction of the Union of India, as described
above, violates the fundamental rights to proper
governance, in as much as Article 14 provides for
equality before the law and equal protection of the law,
and Article 21 promises dignity of life to all citizens.
32.We have heard the learned senior counsel for the
Petitioners, Shri. Anil B. Divan, the learned senior
counsel for interveners, Shri. K.K. Venugopal, and the
learned senior counsel for the petitioners in the
connected Writ Petition, Shri. Shanti Bhushan. We have
also heard the learned Solicitor General, Shri. Gopal
Subramaniam, on behalf of the respondents.
33.Shri. Divan, specifically argued that, having regard to
the nature of the investigation, its slow pace so far,
and the non-seriousness on the part of the respondents,
there is a need to constitute a Special Investigation
Team ("SIT") headed by a former judge or two of this
court. However, this particular plea has been
vociferously resisted by the Solicitor General. Relying
on the status reports submitted from time to time, the
learned Solicitor General stated that all possible steps
were being taken to bring back the monies stashed in
foreign banks, and that the investigations in cases
registered were proceeding in an appropriate manner. He
expressed his willingness for a Court monitored
investigation. He also further submitted that the
Respondents, in principle, have no objections whatsoever
against the main submissions of the Petitioners.
34.The real point of controversy is, given above, as to
whether there is a need to constitute a SIT to be headed
by a judge or two, of this court, to supervise the
investigation.
35.We must express our serious reservations about the
responses of the Union of India. In the first instance,
during the earlier phases of hearing before us, the
attempts were clearly evasive, confused, or originating
in the denial mode. It was only upon being repeatedly
pressed by us did the Union of India begin to admit that
indeed the investigation was proceeding very slowly. It
also became clear to us that in fact the investigation
had completely stalled, in as much as custodial
interrogation of Hassan Ali Khan had not even been
sought for, even though he was very much resident in
India. Further, it also now appears that even though his
passport had been impounded, he was able to secure
another passport from the RPO in Patna, possibly with
the help or aid of a politician.
36.During the course of the hearings the Union of India
repeatedly insisted that the matter involves many
jurisdictions, across the globe, and a proper
investigation could be accomplished only through the
concerted efforts by different law enforcement agencies,
both within the Central Government, and also various
State governments. However, the absence of any
satisfactory explanation of the slowness of the pace of
investigation, and lack of any credible answers as to
why the respondents did not act with respect to those
actions that were feasible, and within the ambit of
powers of the Enforcement Directorate itself, such as
custodial investigation, leads us to conclude that the
lack of seriousness in the efforts of the respondents
are contrary to the requirements of laws and
constitutional obligations of the Union of India. It was
only upon the insistence and intervention of this Court
has the Enforcement Directorate initiated and secured
custodial interrogation over Hassan Ali Khan. The Union
of India has explicitly acknowledged that there was much
to be desired with the manner in which the investigation
had proceeded prior to the intervention of this court.
From the more recent reports, it would appear that the
Union of India, on account of its more recent efforts to
conduct the investigation with seriousness, on account
of the gravitas brought by this Court, has led to the
securing of additional information, and leads, which
could aid in further investigation. For instance, during
the continuing interrogation of Hassan Ali Khan and the
Tapurias, undertaken for the first time at the behest of
this Court, many names of important persons, including
leaders of some corporate giants, politically powerful
people, and international arms dealers have cropped up.
So far, no significant attempt has been made to
investigate and verify the same. This is a further cause
for the grave concerns of this Court, and points to the
need for continued, effective and day to day monitoring
by a SIT constituted by this Court, and acting on
behalf, behest and direction of this Court.
37.In light of the fact that the issues are complex,
requiring expertise and knowledge of different
departments, and the necessity of coordination of
efforts across various agencies and departments, it was
submitted to us that the Union of India has recently
formed a High Level Committee, under the aegis of the
Department of Revenue in the Ministry of Finance, which
is the nodal agency responsible for all economic
offences. The composition of the High Level Committee
("HLC") is said to be as follows: (i) Secretary,
Department of Revenue, as the Chairman; (ii) Deputy
Governor, Reserve Bank of India; (iii) Director (IB);
(iv) Director, Enforcement; (v) Director, CBI; (vi)
Chairman, CBDT; (vii) DG, Narcotics Control Bureau;
(vii) DG, Revenue Intelligence; (ix) Director, Financial
Intelligence Unit; and (x) JS (FT & TR-I), CBDT. It was
also submitted that the HLC may co-opt, as necessary,
representation not below the rank of Joint Secretary
from the Home Secretary, Foreign Secretary, Defense
Secretary and the Secretary, Cabinet Secretariat. The
Union of India claims that such a multi-disciplinary
group and committee would now enable the conducting of
an efficient and a systematic investigation into the
matters concerning allegations against Hassan Ali Khan
and the Tapurias; and further that such a committee
would also enable the taking of appropriate steps to
bring back the monies stashed in foreign banks, for
which purposes a need may arise to register further
cases. The Union of India also claims that the formation
of such a committee indicates the seriousness with which
it is viewing the entire matter.
38.While it would appear, from the Status Reports submitted
to this Court, that the Enforcement Directorate has
moved in some small measure, the actual facts are not
comforting to an appropriate extent. In fact we are not
convinced that the situation has changed to the extent
that it ought to so as to accept that the investigation
would now be conducted with the degree of seriousness
that is warranted. According to the Union of India the
HLC was formed in order to take charge of and direct the
entire investigation, and subsequently, the prosecution.
In the meanwhile a charge sheet has been filed against
Hassan Ali Khan. Upon inquiry by us as to whether the
charge-sheet had been vetted by the HLC, and its inputs
secured, the counsel for Union of India were flummoxed.
The fact was that the charge-sheet had not been given
even for the perusal of the HLC, let alone securing
its inputs, guidance and direction. We are not satisfied
by the explanation offered by the Directorate of
Enforcement by way of affidavit after the orders were
reserved. Be it noted that a nodal agency was set up,
pursuant to directions of this Court in Vineet Narain
case given many years ago. Yet the same was not involved
and these matters were never placed before it. Why?
39.From the status reports, it is clear that the problem is
extremely complex, and many agencies and departments
spread across the country have not responded with the
alacrity, and urgency, that one would desire. Moreover,
the Union of India has been unable to answer any of the
questions regarding its past actions, and their
implications, such as the slowness of the investigation,
or about grant of license to conduct retail banking by
UBS, by reversing the decision taken earlier to withhold
such a license on the grounds that the said bank's
credentials were suspect. To this latter query, the
stance of the Union of India has been that entry of UBS
would facilitate flow of foreign investments into India.
The question that arises is whether the task of bringing
foreign funds into India override all other
constitutional concerns and obligations?
40.The predominant theme in the responses of Union of India
before this court has been that it is doing all that it
can to bring back the unaccounted monies stashed in
various banks abroad. To this is added the qualifier
that it is an extremely complex problem, requiring the
cooperation of many different jurisdictions, and an
internationally coordinated effort. Indeed they are
complex. We do not wish to go into the details of
arguments about whether the Union of India is, or is
not, doing necessary things to achieve such goals. That
is not necessary for the matters at hand.
41.What is important is that the Union of India had
obtained knowledge, documents and information that
indicated possible connections between Hassan Ali Khan,
and his alleged co-conspirators and known international
arms dealers. Further, the Union of India was also in
possession of information that suggested that because
the international arms dealing network, and a very
prominent dealer in it, could not open a bank account
even in a jurisdiction that is generally acknowledged to
lay great emphasis on not asking sources of money being
deposited into its banks, Hassan Ali Khan may have
played a crucial role in opening an account with the
branch of the same bank in another jurisdiction. The
volume of alleged income taxes owed to the country, as
demanded by the Union of India itself, and the volume of
monies, by some accounts US $8.04 billion, and some
other accounts in excess of Rs. 70,000 crores, that are
said to have been routed through various bank accounts
of Hassan Ali Khan, and Tapurias. Further, from all
accounts it has been acknowledged that none of the named
individuals have any known and lawful sources for such
huge quantities of monies. All of these factors, either
individually or combined, ought to have immediately
raised questions regarding the sources being unlawful
activities, national security, and transfer of funds
into India for other illegal activities, including acts
against the State. It was only at the repeated
insistence by us that such matters have equal, if not
even greater importance than issues of tax collection,
has the Union of India belatedly concluded that such
aspects also ought to be investigated with thoroughness.
However, there is still no evidence of a really serious
investigation into these other matters from the national
security perspective.
42.The fact remains that the Union of India has struggled
in conducting a proper investigation into the affairs of
Hassan Ali Khan and the Tapurias. While some
individuals, whose names have come to the adverse
knowledge of the Union of India, through the more recent
investigations, have been interrogated, many more are
yet to be investigated. This highly complex
investigation has in fact just begun. It is still too
early to conclude that the Union of India has indeed
placed all the necessary machinery to conduct a proper
investigation. The formation of the HLC was a necessary
step, and may even be characterized as a welcome step.
Nevertheless, it is an insufficient step.
43.In light of the above, we had proposed to the Union of
India that the same HLC constituted by it be converted
into a Special Investigation Team, headed by two retired
judges of the Supreme Court of India. The Union of India
opposes the same, but provides no principle as to why
that would be undesirable, especially in light of the
many lapses and lacunae in its actions in these matters
spread over the past four years.
44.We are of the firm opinion that in these matters
fragmentation of government, and expertise and
knowledge, across many departments, agencies and across
various jurisdictions, both within the country, and
across the globe, is a serious impediment to the conduct
of a proper investigation. We hold that it is in fact
necessary to create a body that coordinates, directs,
and where necessary orders timely and urgent action by
various institutions of the State. We also hold that the
continued involvement of this Court in these matters, in
a broad oversight capacity, is necessary for upholding
the rule of law, and achievement of constitutional
values. However, it would be impossible for this Court
to be involved in day to day investigations, or to
constantly monitor each and every aspect of the
investigation.
45.The resources of this court are scarce, and it is over-
burdened with the task of rendering justice in well over
a lakh of cases every year. Nevertheless, this Court is
bound to uphold the Constitution, and its own burdens,
excessive as they already are, cannot become an excuse
for it to not perform that task. In a country where most
of its people are uneducated and illiterate, suffering
from hunger and squalor, the retraction of the
monitoring of these matters by this Court would be
unconscionable.
46.The issue is not merely whether the Union of India is
making the necessary effort to bring back all or some
significant part of the alleged monies. The fact that
there is some information and knowledge that such vast
amounts may have been stashed away in foreign banks,
implies that the State has the primordial
responsibility, under the Constitution, to make every
effort to trace the sources of such monies, punish the
guilty where such monies have been generated and/or
taken abroad through unlawful activities, and bring back
the monies owed to the Country. We do recognize that the
degree of success, measured in terms of the amounts of
monies brought back, is dependent on a number of
factors, including aspects that relate to international
political economy and relations, which may or may not be
under our control. The fact remains that with respect to
those factors that were within the powers of the Union
of India, such as investigation of possible criminal
nexus, threats to national security etc., were not even
attempted. Fealty to the Constitution is not a matter of
mere material success; but, and probably more
importantly from the perspective of the moral authority
of the State, a matter of integrity of effort on all the
dimensions that inform a problem that threatens the
constitutional projects. Further, the degree of
seriousness with which efforts are made with respect to
those various dimensions can also be expected to bear
fruit in terms of building capacities, and the
development of necessary attitudes to take the law
enforcement part of accounting or following the money
seriously in the future.
47.The merits of vigour of investigations, and attempts at
law enforcement, cannot be measured merely on the scale
of what we accomplish with respect to what has happened
in the past. It would necessarily also have to be
appreciated from the benefits that are likely to accrue
to the country in preventing such activities in the
future. Our people may be poor, and may be suffering
from all manner of deprivation. However, the same poor
and suffering masses are rich, morally and from a
humanistic point of view. Their forbearance of the many
foibles and failures of those who wield power, no less
in their name and behalf than of the rich and the
empowered, is itself indicative of their great
qualities, of humanity, trust and tolerance. That
greatness can only be matched by exercise of every
sinew, and every resource, in the broad goal of our
constitutional project of bringing to their lives
dignity. The efforts that this Court makes in this
regard, and will make in this respect and these matters,
can only be conceived as a small and minor, though
nevertheless necessary, part. Ultimately the protection
of the Constitution and striving to promote its vision
and values is an elemental mode of service to our
people.
48. We note that in many instances, in the past, when issues
referred to the Court have been very complex in nature,
and yet required the intervention of the Court, Special
Investigation Teams have been ordered and constituted in
order to enable the Court, and the Union of India and/or
other organs of the State, to fulfill their
constitutional obligations. The following instances may
be noted: Vineet Narain v Union of India1, NHRC v State
of Gujarat2, Sanjiv Kumar v State of Haryana3, and Centre
for PIL v Union of India4.
49.In light of the above we herewith order:
(i) That the High Level Committee constituted by the
Union of India, comprising of (i) Secretary,
Department of Revenue; (ii) Deputy Governor,
Reserve Bank of India; (iii) Director (IB); (iv)
Director, Enforcement; (v) Director, CBI; (vi)
Chairman, CBDT; (vii) DG, Narcotics Control
Bureau; (vii) DG, Revenue Intelligence; (ix)
Director, Financial Intelligence Unit; and (x) JS
(FT & TR-I), CBDT be forthwith appointed with
immediate effect as a Special Investigation Team;
(ii) That the Special Investigation Team, so
constituted, also include Director, Research and
Analysis Wing;
(iii) That the above Special Investigation Team, so
constituted, be headed by and include the
1 (1996) 2 SCC 199
2 (2004) 8 SCC 610
3 (2005) 5 SCC 517
4 (2011) 1 SCC 560.
following former eminent judges of this Court:
(a) Hon'ble Mr. Justice B.P. Jeevan Reddy as
Chairman; and (b) Hon'ble Mr. Justice M.B. Shah
as Vice-Chairman; and that the Special
Investigation Team function under their guidance
and direction;
(iv) That the Special Investigation Team, so
constituted, shall be charged with the
responsibilities and duties of investigation,
initiation of proceedings, and prosecution,
whether in the context of appropriate criminal or
civil proceedings of: (a) all issues relating to
the matters concerning and arising from
unaccounted monies of Hassan Ali Khan and the
Tapurias; (b) all other investigations already
commenced and are pending, or awaiting to be
initiated, with respect to any other known
instances of the stashing of unaccounted monies
in foreign bank accounts by Indians or other
entities operating in India; and (c) all other
matters with respect to unaccounted monies being
stashed in foreign banks by Indians or other
entities operating in India that may arise in the
course of such investigations and proceedings. It
is clarified here that within the ambit of
responsibilities described above, also lie the
responsibilities to ensure that the matters are
also investigated, proceedings initiated and
prosecutions conducted with regard to criminality
and/or unlawfulness of activities that may have
been the source for such monies, as well as the
criminal and/or unlawful means that are used to
take such unaccounted monies out of and/or bring
such monies back into the country, and use of
such monies in India or abroad. The Special
Investigation Team shall also be charged with the
responsibility of preparing a comprehensive
action plan, including the creation of necessary
institutional structures that can enable and
strengthen the country's battle against
generation of unaccounted monies, and their
stashing away in foreign banks or in various
forms domestically.
(v) That the Special Investigation Team so
constituted report and be responsible to this
Court, and that it shall be charged with the duty
to keep this Court informed of all major
developments by the filing of periodic status
reports, and following of any special orders that
this Court may issue from time to time;
(vi) That all organs, agencies, departments and agents
of the State, whether at the level of the Union
of India, or the State Government, including but
not limited to all statutorily formed individual
bodies, and other constitutional bodies, extend
all the cooperation necessary for the Special
Investigation Team so constituted and
functioning;
(vii) That the Union of India, and where needed even
the State Governments, are directed to facilitate
the conduct of the investigations, in their
fullest measure, by the Special Investigation
Team so constituted and functioning, by extending
all the necessary financial, material, legal,
diplomatic and intelligence resources, whether
such investigations or portions of such
investigations occur inside the country or
abroad.
(viii) That the Special Investigation Team also be
empowered to further investigate even where
charge-sheets have been previously filed; and
that the Special Investigation Team may register
further cases, and conduct appropriate
investigations and initiate proceedings, for the
purpose of bringing back unaccounted monies
unlawfully kept in bank accounts abroad.
50.We accordingly direct the Union of India to issue
appropriate notification and publish the same forthwith.
It is needless to clarify that the former judges of this
Court so appointed to supervise the Special
Investigation Team are entitled to their remuneration,
allowances, perks, facilities as that of the judges of
the Supreme Court. The Ministry of Finance, Union of
India, shall be responsible for creating the appropriate
infrastructure and other facilities for proper and
effective functioning of the Special Investigation Team
at once.
III
51.We now turn our attention to the matter of disclosure of
various documents referenced by the Union of India, as
sought by the Petitioners. These documents, including
names and bank particulars, relate to various bank
accounts, of Indian citizens, in the Principality of
Liechtenstein ("Liechtenstein"), a small landlocked
sovereign nation-state in Europe. It is generally
acknowledged that Liechtenstein is a tax haven.
52.Apparently, as alleged by the Petitioners, a former
employee of a bank or banks in Liechtenstein secured the
names of some 1400 bank account holders, along with the
particulars of such accounts, and offered the
information to various entities. The same was secured by
the Federal Republic of Germany ("Germany"), which in
turn, apart from initiating tax proceedings against some
600 individuals, also offered the information regarding
nationals and citizens of other countries to such
countries. It is the contention of the Petitioners that
even though the Union of India was informed about the
presence of the names of a large number of Indian
citizens in the list of names revealed by the former
bank employee, the Union of India never made a serious
attempt to secure such information and proceed to
investigate such individuals. It is the contention of
the Petitioners that such names include the identities
of prominent and powerful Indians, or the identities of
individuals, who may or may not be Indian citizens, but
who could lead to information about various powerful
Indians holding unaccounted monies in bank accounts
abroad. It is also the contention of the Petitioners
that, even though they had sought the information under
the Right to Information Act (2005), the Respondents had
not revealed the names nor divulged the relevant
documents. The Petitioners argue that such a reluctance
is only on account of the Union of India not having
initiated suitable steps to recover such monies, and
punish the named individuals, and also because
revelation of names of individuals on the list would
lead to discovery of powerful persons engaged in various
unlawful activities, both in generation of unlawful and
unaccounted monies, and their stashing away in banks
abroad.
53.It was also alleged by the Petitioners that in fact
Germany had offered such information, freely and
generally to any country that requests the same, and did
not specify that the names and other information
pertaining to such names ought to be requested only
pursuant to any double taxation agreements it has with
other countries. The Petitioners also alleged that Union
of India has chosen to proceed under the assumption that
it could have requested such information only pursuant
to the double taxation agreement it has with Germany.
The Petitioners contend that the Government of India
took such a step primarily to conceal the information
from public gaze.
54.The response of the Union of India may be summed up
briefly: (i) that they secured the names of individuals
with bank accounts in banks in Liechtenstein, and other
details with respect to such bank accounts, pursuant to
an agreement of India with Germany for avoidance of
double taxation and prevention of fiscal evasion; (ii)
that the said agreement proscribes the Union of India
from disclosing such names, and other documents and
information with respect to such bank accounts, to the
Petitioners, even in the context of these ongoing
proceedings before this court; (iii) that the disclosure
of such names, and other documents and information,
secured from Germany, would jeopardize the relations of
India with a foreign state; (iv) that the disclosure of
such names, and other documents and information, would
violate the right to privacy of those individuals who
may have only deposited monies in a lawful manner; (v)
that disclosure of names, and other documents and
information can be made with respect to those
individuals with regard to whom investigations are
completed, and proceedings initiated; and (vi) that
contrary to assertions by the Petitioners, it was
Germany which had asked the Union of India to seek the
information under double taxation agreement, and that
this was in response to an earlier request by Union of
India for the said information.
55.For the purposes of the instant order, the issue of
whether the Union of India could have sought and secured
the names, and other documents and information, without
having to take recourse to the double taxation agreement
is not relevant. For the purposes of determining whether
Union of India is obligated to disclose the information
that it obtained, from Germany, with respect to accounts
of Indian citizens in a bank in the Principality of
Liechtenstein, we need only examine the claims of the
Union of India as to whether it is proscribed by the
double taxation agreement with Germany from disclosing
such information. Further, and most importantly, we
would also have to examine whether in the context of
Article 32 proceedings before this court, wherein this
court has exercised jurisdiction, the Union of India can
claim exemption from providing such information to the
Petitioners, and also with respect to issues of right to
privacy of individuals who hold such accounts, and with
respect of whom no investigations have yet been
commenced, or only partially conducted, so that the
State has not yet issued a show cause and initiated
proceedings.
56.We have perused the said agreement with Germany. We are
convinced that the said agreement, by itself, does not
proscribe the disclosure of the relevant documents and
details of the same, including the names of various bank
account holders in Liechtenstein. In the first instance,
we note that the names of the individuals are with
respect to bank accounts in the Liechtenstein, which
though populated by largely German speaking people, is
an independent and sovereign nation-state. The agreement
between Germany and India is with regard to various
issues that crop up with respect to German and Indian
citizens' liability to pay taxes to Germany and/or
India. It does not even remotely touch upon information
regarding Indian citizens' bank accounts in
Liechtenstein that Germany secures and shares that have
no bearing upon the matters that are covered by the
double taxation agreement between the two countries. In
fact, the "information" that is referred to in Article
26 is that which is "necessary for carrying out the
purposes of this agreement", i.e. the Indo-German DTAA.
Therefore, the information sought does not fall within
the ambit of this provision. It is disingenuous for the
Union of India, under these circumstances, to repeatedly
claim that it is unable to reveal the documents and
names as sought by the Petitioners on the ground that
the same is proscribed by the said agreement. It does
not matter that Germany itself may have asked India to
treat the information shared as being subject to the
confidentiality and secrecy clause of the double
taxation agreement. It is for the Union of India, and
the courts, in appropriate proceedings, to determine
whether such information concerns matters that are
covered by the double taxation agreement or not. In any
event, we also proceed to examine the provisions of the
double taxation agreement below, to also examine whether
they proscribe the disclosure of such names, and other
documents and information, even in the context of these
instant proceedings.
57.Relevant portions of Article 26 of the double taxation
agreement with Germany, a copy of which was submitted by
Union of India, reads as follows:
"1. The competent authorities of the Contracting States shall
exchange such information as is necessary for carrying out
the purposes of this Agreement. Any information received by a
Contracting State shall be treated as secret in the same
manner as information obtained under the domestic laws of
that State and shall be disclosed only to persons or
authorities (including courts and administrative bodies)
involved in the assessment or collection of, the enforcement
or prosecution in respect of, or the determination of appeals
in relation to, the taxes covered by this Agreement. They may
disclose the information in public court proceedings or in
judicial proceedings.
2. In no case shall the provisions of paragraph 1 be
construed so as to impose on a Contracting State the
obligation:
(a) to carry out administrative measures at
variance with the laws and administrative
practice of that or of the other
Contracting State;
(b) to supply information which is not
obtainable under the laws or in the
normal course of the administration of
that or of the other Contracting State;
(c) to supply information which would
disclose any trade, business, industrial,
commercial or professional secret or
trade process, or information, the
disclosure of which would be contrary to
public policy (order public)"
58.The above clause in the relevant agreement with Germany
would indicate that, contrary to the assertions of Union
of India, there is no absolute bar of secrecy. Instead
the agreement specifically provides that the information
may be disclosed in public court proceedings, which the
instant proceedings are. The proceedings in this matter
before this court, relate both to the issue of tax
collection with respect to unaccounted monies deposited
into foreign bank accounts, as well as with issues
relating to the manner in which such monies were
generated, which may include activities that are
criminal in nature also. Comity of nations cannot be
predicated upon clauses of secrecy that could hinder
constitutional proceedings such as these, or criminal
proceedings.
59.The claim of Union of India is that the phrase "public
court proceedings", in the last sentence in Article
26(1) of the double taxation agreement only relates to
proceedings relating to tax matters. The Union of India
claims that such an understanding comports with how it
is understood internationally. In this regard Union of
India cites a few treatises. However, the Union of India
did not provide any evidence that Germany specifically
requested it to not reveal the details with respect to
accounts in the Liechtenstein even in the context of
proceedings before this court.
60.Article 31, "General Rule of Interpretation", of the
Vienna Convention of the Law of Treaties, 1969 provides
that a "treaty shall be interpreted in good faith in
accordance with the ordinary meaning to be given to the
terms of the treaty in their context and in the light of
its object and purpose." While India is not a party to
the Vienna Convention, it contains many principles of
customary international law, and the principle of
interpretation, of Article 31 of the Vienna Convention,
provides a broad guideline as to what could be an
appropriate manner of interpreting a treaty in the
Indian context also.
61. This Court in Union of India v. Azadi Bachao Andolan,1
approvingly noted Frank Bennion's observations that a
treaty is really an indirect enactment, instead of a
substantive legislation, and that drafting of treaties
is notoriously sloppy, whereby inconveniences obtain. In
this regard this Court further noted the dictum of Lord
Widgery, C.J. that the words "are to be given their
general meaning, general to lawyer and layman alike....
The meaning of the diplomat rather than the lawyer." The
broad principle of interpretation, with respect to
treaties, and provisions therein, would be that ordinary
meanings of words be given effect to, unless the context
requires or otherwise. However, the fact that such
treaties are drafted by diplomats, and not lawyers,
leading to sloppiness in drafting also implies that care
has to be taken to not render any word, phrase, or
sentence redundant, especially where rendering of such
word, phrase or sentence redundant would lead to a
manifestly absurd situation, particularly from a
constitutional perspective. The government cannot bind
India in a manner that derogates from Constitutional
provisions, values and imperatives.
62.The last sentence of Article 26(1) of the double
taxation agreement with Germany, "[T]hey may disclose
this information in public court proceedings or in
judicial decisions," is revelatory in this regard. It
stands out as an additional aspect or provision, and an
exception, to the preceding portion of the said article.
It is located after the specification that information
shared between contracting parties may be revealed only
to "persons or authorities (including courts and
administrative bodies) involved in the assessment or
collection of, the enforcement or prosecution in respect
of, or the determination of appeals in relation to taxes
covered by this Agreement." Consequently, it has to be
1 (2004) 10 SCC 1
understood that the phrase "public court proceedings"
specified in the last sentence in Article 26(1) of the
double taxation agreement with Germany refers to court
proceedings other than those in connection with tax
assessment, enforcement, prosecution etc., with respect
to tax matters. If it were otherwise, as argued by Union
of India, then there would have been no need to have
that last sentence in Article 26(1) of the double
taxation agreement at all. The last sentence would
become redundant if the interpretation pressed by Union
of India is accepted. Thus, notwithstanding the alleged
convention of interpreting the last sentence only as
referring to proceedings in tax matters, the rubric of
common law jurisprudence, and fealty to its principles,
leads us inexorably to the conclusion that the language
in this specific treaty, and under these circumstances
cannot be interpreted in the manner sought by Union of
India.
63.While we agree that the language could have been
tighter, and may be deemed to be sloppy, to use Frank
Bennion's characterization, negotiation of such treaties
are conducted and secured at very high levels of
government, with awareness of general principles of
interpretation used in various jurisdictions. It is
fairly well known, at least in Common Law jurisdictions,
that legal instruments and statutes are interpreted in a
manner whereby redundancy of expressions and phrases is
sought to be avoided. Germany would have been well aware
of it.
64.The redundancy that would have to be ascribed to the
said last sentence of Article 26(1) of the double
taxation agreement with Germany, if the position of
Union of India were to be accepted, also leads to a
manifest absurdity, in the context of the Indian
Constitution. Such a redundancy would mean that
constitutional imperatives themselves are to be set
aside. Modern constitutionalism, to which Germany is a
major contributor too, especially in terms of the basic
structure doctrine, specifies that powers vested in any
organ of the State have to be exercised within the four
corners of the Constitution, and further that organs
created by a constitution cannot change the identity of
the constitution itself.
65.The basic structure of the Constitution cannot be
amended even by the amending power of the legislature.
Our Constitution guarantees the right, pursuant to
Clause (1) of Article 32, to petition this Court on the
ground that the rights guaranteed under Part III of the
Constitution have been violated. This provision is a
part of the basic structure of the Constitution. Clause
(2) of Article 32 empowers this Court to issue
"directions or orders or writs, including writs in the
nature of habeas corpus, mandamus, prohibition, quo
warranto and certiorari, whichever may be appropriate
for the enforcement of any of the rights conferred by"
Part III. This is also a part of the basic structure of
the Constitution.
66.In order that the right guaranteed by Clause (1) of
Article 32 be meaningful, and particularly because such
petitions seek the protection of fundamental rights, it
is imperative that in such proceedings the petitioners
are not denied the information necessary for them to
properly articulate the case and be heard, especially
where such information is in the possession of the
State. To deny access to such information, without
citing any constitutional principle or enumerated
grounds of constitutional prohibition, would be to
thwart the right granted by Clause (1) of Article 32.
67.Further, in as much as, by history and tradition of
common law, judicial proceedings are substantively,
though not necessarily fully, adversarial, both parties
bear the responsibility of placing all the relevant
information, analyses, and facts before this court as
completely as possible. In most situations, it is the
State which may have more comprehensive information that
is relevant to the matters at hand in such proceedings.
However, some agents of the State may perceive that
because these proceedings are adversarial in nature, the
duty and burden to furnish all the necessary information
rests upon the Petitioners, and hence the State has no
obligation to fully furnish such information. Some
agents of the State may also seek to cast the events and
facts in a light that is favourable to the government in
the immediate context of the proceedings, even though
such actions do not lead to rendering of complete
justice in the task of protection of fundamental rights.
To that extent, both the petitioners and this Court
would be handicapped in proceedings under Clause (1) of
Article 32.
68.It is necessary for us to note that the burden of
asserting, and proving, by relevant evidence a claim in
judicial proceedings would ordinarily be placed upon the
proponent of such a claim; however, the burden of
protection of fundamental rights is primarily the duty
of the State. Consequently, unless constitutional
grounds exist, the State may not act in a manner that
hinders this Court from rendering complete justice in
such proceedings. Withholding of information from the
petitioners, or seeking to cast the relevant events and
facts in a light favourable to the State in the context
of the proceedings, even though ultimately detrimental
to the essential task of protecting fundamental rights,
would be destructive to the guarantee in Clause (1) of
Article 32, and substantially eviscerate the capacity of
this Court in exercising its powers contained in clause
(2) of Article 32, and those traceable to other
provisions of the Constitution and broader jurisprudence
of constitutionalism, in upholding fundamental rights
enshrined in Part III. In the task of upholding of
fundamental rights, the State cannot be an adversary.
The State has the duty, generally, to reveal all the
facts and information in its possession to the Court,
and also provide the same to the petitioners. This is
so, because the petitioners would also then be enabled
to bring to light facts and the law that may be relevant
for the Court in rendering its decision. In proceedings
such as those under Article 32, both the petitioner and
the State, have to necessarily be the eyes and ears of
the Court. Blinding the petitioner would substantially
detract from the integrity of the process of judicial
decision making in Article 32 proceedings, especially
where the issue is of upholding of fundamental rights.
69.Furthermore, we hold that there is a special
relationship between Clause (1) of Article 32 and Sub-
Clause (a) of Clause (1) of Article 19, which guarantees
citizens the freedom of speech and expression. The very
genesis, and the normative desirability of such a
freedom, lies in historical experiences of the entire
humanity: unless accountable, the State would turn
tyrannical. A proceeding under Clause (1) of Article 32,
and invocation of the powers granted by Clause (2) of
Article 32, is a primordial constitutional feature of
ensuring such accountability. The very promise, and
existence, of a constitutional democracy rests
substantially on such proceedings.
70.Withholding of information from the petitioners by the
State, thereby constraining their freedom of speech and
expression before this Court, may be premised only on
the exceptions carved out, in Clause (2) of Article 19,
"in the interests of sovereignty and integrity of India,
security of the State, friendly relations with foreign
States, public order, decency or morality, or in
relation to contempt of court, defamation or incitement
to an offence" or by law that demarcate exceptions,
provided that such a law comports with the enumerated
grounds in Clause (2) of Article 19, or that may be
provided for elsewhere in the Constitution.
71.It is now a well recognized proposition that we are
increasingly being entwined in a global network of
events and social action. Considerable care has to be
exercised in this process, particularly where
governments which come into being on account of a
constitutive document, enter into treaties. The actions
of governments can only be lawful when exercised within
the four corners of constitutional permissibility. No
treaty can be entered into, or interpreted, such that
constitutional fealty is derogated from. The redundancy,
that the Union of India presses, with respect to the
last sentence of Article 26(1) of the double taxation
agreement with Germany, necessarily transgresses upon
the boundaries erected by our Constitution. It cannot be
permitted.
72.We have perused the documents in question, and heard the
arguments of Union of India with respect to the double
taxation agreement with Germany as an obstacle to
disclosure. We do not find merit in its arguments
flowing from the provisions of double taxation agreement
with Germany. However, one major constitutional issue,
and concern remains. This is with regard to whether the
names of individuals, and details of their bank
accounts, with respect to whom there has been no
completed investigations that reveal wrong doing and
proceedings initiated, and there is no other credible
information and evidence currently available with the
Petitioners that there has been any wrong doing, may be
disclosed to the Petitioners.
73.Right to privacy is an integral part of right to life.
This is a cherished constitutional value, and it is
important that human beings be allowed domains of
freedom that are free of public scrutiny unless they act
in an unlawful manner. We understand and appreciate the
fact that the situation with respect to unaccounted
monies is extremely grave. Nevertheless, as
constitutional adjudicators we always have to be mindful
of preserving the sanctity of constitutional values, and
hasty steps that derogate from fundamental rights,
whether urged by governments or private citizens,
howsoever well meaning they may be, have to be
necessarily very carefully scrutinised. The solution for
the problem of abrogation of one zone of constitutional
values cannot be the creation of another zone of
abrogation of constitutional values. The rights of
citizens, to effectively seek the protection of
fundamental rights, under Clause (1) of Article 32 have
to be balanced against the rights of citizens and
persons under Article 21. The latter cannot be
sacrificed on the anvil of fervid desire to find
instantaneous solutions to systemic problems such as
unaccounted monies, for it would lead to dangerous
circumstances, in which vigilante investigations,
inquisitions and rabble rousing, by masses of other
citizens could become the order of the day. The right of
citizens to petition this Court for upholding of
fundamental rights is granted in order that citizens,
inter-alia, are ever vigilant about the functioning of
the State in order to protect the constitutional
project. That right cannot be extended to being
inquisitors of fellow citizens. An inquisitorial order,
where citizens' fundamental right to privacy is breached
by fellow citizens is destructive of social order. The
notion of fundamental rights, such as a right to privacy
as part of right to life, is not merely that the State
is enjoined from derogating from them. It also includes
the responsibility of the State to uphold them against
the actions of others in the society, even in the
context of exercise of fundamental rights by those
others.
74.An argument can be made that this Court can make
exceptions under the peculiar circumstances of this
case, wherein the State has acknowledged that it has not
acted with the requisite speed and vigour in the case of
large volumes of suspected unaccounted monies of certain
individuals. There is an inherent danger in making
exceptions to fundamental principles and rights on the
fly. Those exceptions, bit by bit, would then eviscerate
the content of the main right itself. Undesirable lapses
in upholding of fundamental rights by the legislature,
or the executive, can be rectified by assertion of
constitutional principles by this Court. However, a
decision by this Court that an exception could be carved
out remains permanently as a part of judicial canon, and
becomes a part of the constitutional interpretation
itself. It can be used in the future in a manner and
form that may far exceed what this Court intended or
what the Constitutional text and values can bear. We are
not proposing that Constitutions cannot be interpreted
in a manner that allows the nation-state to tackle the
problems it faces. The principle is that exceptions
cannot be carved out willy-nilly, and without
forethought as to the damage they may cause.
75.One of the chief dangers of making exceptions to
principles that have become a part of constitutional
law, through aeons of human experience, is that the
logic, and ease of seeing exceptions, would become
entrenched as a part of the constitutional order. Such
logic would then lead to seeking exceptions, from
protective walls of all fundamental rights, on grounds
of expediency and claims that there are no solutions to
problems that the society is confronting without the
evisceration of fundamental rights. That same logic
could then be used by the State in demanding exceptions
to a slew of other fundamental rights, leading to
violation of human rights of citizens on a massive
scale.
76.It is indeed true that the information shared by
Germany, with regard to certain bank accounts in
Liechtenstein, also contains names of individuals who
appear to be Indians. The Petitioners have also claimed
that names of all the individuals have been made public
by certain segments of the media. However, while some of
the accounts, and the individuals holding those
accounts, are claimed to have been investigated, others
have not been. No conclusion can be drawn as to whether
those who have not been investigated, or only partially
investigated and proceedings not initiated have
committed any wrong doing. There is no presumption that
every account holder in banks of Liechtenstein has acted
unlawfully. In these circumstances, it would be
inappropriate for this Court to order the disclosure of
such names, even in the context of proceedings under
Clause (1) of Article 32.
77.The revelation of details of bank accounts of
individuals, without establishment of prima facie
grounds to accuse them of wrong doing, would be a
violation of their rights to privacy. Details of bank
accounts can be used by those who want to harass, or
otherwise cause damage, to individuals. We cannot remain
blind to such possibilities, and indeed experience
reveals that public dissemination of banking details, or
availability to unauthorized persons, has led to abuse.
The mere fact that a citizen has a bank account in a
bank located in a particular jurisdiction cannot be a
ground for revelation of details of his or her account
that the State has acquired. Innocent citizens,
including those actively working towards the betterment
of the society and the nation, could fall prey to the
machinations of those who might wish to damage the
prospects of smooth functioning of society. Whether the
State itself can access details of citizens bank
accounts is a separate matter. However, the State cannot
compel citizens to reveal, or itself reveal details of
their bank accounts to the public at large, either to
receive benefits from the State or to facilitate
investigations, and prosecutions of such individuals,
unless the State itself has, through properly conducted
investigations, within the four corners of
constitutional permissibility, been able to establish
prima facie grounds to accuse the individuals of wrong
doing. It is only after the State has been able to
arrive at a prima facie conclusion of wrong doing, based
on material evidence, would the rights of others in the
nation to be informed, enter the picture. In the event
citizens, other persons and entities have credible
information that a wrong doing could be associated with
a bank account, it is needless to state that they have
the right, and in fact the moral duty, to inform the
State, and consequently the State would have the
obligation to investigate the same, within the
boundaries of constitutional permissibility. If the
State fails to do so, the appropriate courts can always
intervene.
78.The major problem, in the matters before us, has been
the inaction of the State. This is so, both with regard
to the specific instances of Hassan Ali Khan and the
Tapurias, and also with respect to the issues regarding
parallel economy, generation of black money etc. The
failure is not of the Constitutional values or of the
powers available to the State; the failure has been of
human agency. The response cannot be the promotion of
vigilantism, and thereby violate other constitutional
values. The response has to necessarily be a more
emphatic assertion of those values, both in terms of
protection of an individual's right to privacy and also
the protection of individual's right to petition this
Court, under Clause (1) of Article 32, to protect
fundamental rights from evisceration of content because
of failures of the State. The balancing leads only to
one conclusion: strengthening of the machinery of
investigations, and vigil by broader citizenry in
ensuring that the agents of State do not weaken such
machinery.
79.In light of the above we order that:
(i) The Union of India shall forthwith disclose to the
Petitioners all those documents and information
which they have secured from Germany, in connection
with the matters discussed above, subject to the
conditions specified in (ii) below;
(ii) That the Union of India is exempted from revealing
the names of those individuals who have accounts in
banks of Liechtenstein, and revealed to it by
Germany, with respect of who
investigations/enquiries are still in progress and
no information or evidence of wrongdoing is yet
available;
(iii) That the names of those individuals with bank
accounts in Liechtenstein, as revealed by Germany,
with respect of whom investigations have been
concluded, either partially or wholly, and show
cause notices issued and proceedings initiated may
be disclosed; and
(iv) That the Special Investigation Team, constituted
pursuant to the orders of today by this Court,
shall take over the matter of investigation of the
individuals whose names have been disclosed by
Germany as having accounts in banks in
Liechtenstein, and expeditiously conduct the same.
The Special Investigation Team shall review the
concluded matters also in this regard to assess
whether investigations have been thoroughly and
properly conducted or not, and on coming to the
conclusion that there is a need for further
investigation shall proceed further in the matter.
After conclusion of such investigations by the
Special Investigation Team, the Respondents may
disclose the names with regard to whom show cause
notices have been issued and proceedings initiated.
80. Compliance reports shall be filed by Respondents, with
respect of all the orders issued by this Court today. List
for further directions in the week following the Independence
Day, August 15, of 2011.
Ordered accordingly.
................................................J.
(B. SUDERSHAN REDDY)
NEW DELHI, ................................................J.
JULY 4, 2011. (SURINDER SINGH NIJJAR)
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