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TMI Blog2011 (7) TMI 844X X X X Extracts X X X X X X X X Extracts X X X X ..... undamental rights-to proper governance, inasmuch 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 - 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 and State Governments - 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 - 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 - the Union of India has chosen to proceed under the assumption that it could have requested such information only pursuant to the double taxation avoidance 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. Held that :- the Union of India shall dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 its 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 neoliberal 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sary and socially valuable, and the wealthy viewed as demi-gods, the agents of the State may have also succumbed to the notions of the neoliberal 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 a 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 sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nparalleled 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 nationstate'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."* 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 the 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 : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies ; 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 the 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 inasmuch 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 mana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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, inasmuch 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 ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the light of the fact that the issues are complex, requiring expertise and knowledge of different departments, and the necessity of co-ordination of efforts across various ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the directions of this court in Vineet Narain's 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 licence to conduct retail banking by UBS, by reversing the decision taken earlier to withhold such a licence 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 obligatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spective. 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 the 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 the 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 fragmentati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocuments 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 avoidance agreement, and that this was in response to an earlier request by the 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 avoidance agreement is not relevant. For the purposes of determining whether the 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Avoidance Agreement or not. In any event, we also proceed to examine the provisions of the Double Taxation Avoidance 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. The relevant portions of article 26 of the Double Taxation Avoidance Agreement with Germany, a copy of which was submitted by the Union of India, reads as follows (see page 152 of 223 ITR) : "1. The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions 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. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 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 [2003] 263 ITR 706 ; [2004] 10 SCC 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 the provisions therein, would be that the ordinary meanings of words be given effect to, unless the context requires or otherwise. How-ever, 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal 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 Avoidance Agreement with Germany, if the position of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty 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 the 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 proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tution. It cannot be permitted. 72. We have perused the documents in question, and heard the arguments of the Union of India with respect to the Double Taxation Avoidance Agreement with Germany as an obstacle to disclosure. We do not find merit in its arguments flowing from the provisions of the Double Taxation Avoidance 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 alw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xception 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 valu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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