2017 (11) TMI 617 - SC - Indian Laws

PIL - Direction to the CBI to conduct an investigation/inquiry against the Indian offshore bank account holders, revealed in Panama Papers and to file their report before this Hon ble Court - Direction has also been sought to register FIR and conduct investigation against the Securities and Exchange Board of India (SEBI) Chairman, his associate directors, share brokers and companies - Held that - Public Interest Litigation is a mechanism by which this Court can initiate action for protection of rights of public on account of inaction of any public authority or to oversee any abuse of power by the public authority. At the same time, the PIL weapon is to be used with great caution keeping in mind the fact that governance is the basic function of the Executive. Unless there is a clear abuse of power or failure of governance, the Court may not interfere. In the present case, SIT has already been constituted under the orders of this Court which comprises of two former judges of this Court. The terms of reference of the SIT covers the subject matter of this petition also which is clear from the notification dated 29th May, 2014 issued by the Ministry of Finance . The Government of India, Department of Revenue vide Office Memorandum dated 4th April, 2016, has constituted Multi Agency Group to go into the issues arising out of Panama Papers . The reports of MAG are being submitted for consideration by the SIT constituted by this Court. We record the submission made on behalf of learned counsel for the respondents that further reports of the MAG will also be submitted to the SIT and MAG will carry out any direction which SIT may give or this Court may give in pending writ petition. In view of the above, we do not consider it necessary to give any further direction as the concern expressed in the writ petition stands addressed.

Summary

Issues:
1. Direction sought for CBI investigation against Indian offshore bank account holders revealed in "Panama Papers" and SEBI officials.
2. Allegations of inaction by SEBI leading to financial losses and protection of black money hoarders.
3. Role of Multi Agency Group (MAG) in investigating cases related to "Panama Papers".
4. Recommendations by the Committee on Rationalization of Investment Routes and Monitoring of Foreign Portfolio Investments.
5. Use of Public Interest Litigation (PIL) to address governance issues and abuse of power.
6. Examination of the constitution of the Special Investigation Team (SIT) and its responsibilities.

Analysis:
1. The petition requested the CBI to investigate Indian offshore bank account holders mentioned in the "Panama Papers" and SEBI officials. Allegations included tax evasion, manipulation of the capital market, and failure of SEBI in regulatory functions. Concerns were raised about the circulation of funds from offshore accounts in the Indian stock market through participatory notes, highlighting risks like terrorism, money laundering, and corruption.

2. The Ministry of Finance and Economic Affairs detailed the establishment of the Multi Agency Group (MAG) to investigate individuals named in the "Panama Papers". The MAG, comprising officers from various agencies, was tasked with coordinating investigations and submitting reports. The SEBI filed an affidavit outlining its regulatory framework under the Prevention of Money Laundering Act and other relevant regulations to combat financial crimes.

3. The Department of Economic Affairs provided insights into the ongoing investigations regarding foreign assets hidden through shell companies/trusts. Information was obtained through tax treaties and MLAT, with the Income Tax Department initiating necessary actions. The SEBI emphasized compliance with anti-money laundering regulations and guidelines for entities in the securities market.

4. The Committee on Rationalization of Investment Routes and Monitoring of Foreign Portfolio Investments recommended categorizing Foreign Portfolio Investors based on risk profiling in alignment with FATF recommendations. Categories (I), (II), and (III) were proposed to enhance monitoring and compliance with international standards.

5. The judgment highlighted the importance of Public Interest Litigation (PIL) as a tool for addressing governance issues and potential abuse of power by public authorities. It stressed the need for caution in utilizing PIL to ensure proper governance and intervention only in cases of clear abuse or failure of governance.

6. The judgment examined the constitution and responsibilities of the Special Investigation Team (SIT) established under the court's orders. The SIT's terms of reference covered investigations related to unaccounted monies, offshore bank accounts, and unlawful activities associated with such funds. The court acknowledged the efforts of the SIT and MAG in addressing the concerns raised in the petition, leading to the disposal of the case without further directions.