India’s initiatives to curb and unearth black money and tax evasion: A Press Release of the Ministry of Finance

The Ministry of Finance in India has issued a Press Release dated 10 August 2012 (can be found on the PIB website and has been appended to this post; the formatting is a little uneven) on the Initiatives Taken by the Government for Unearthing and Curbing Black Money: A Fact Sheet. This clearly shows a positive effort by the Indian government.

As we may know the problem of black money has plagued India  in recent times, with the Supreme Court even going to the extent of ordering a Special Investigative Team to look into the black money issue in the Ram Jethmalani case. Let’s hope the government and other countries involved continue their fight against tax evasion and black money.

Press Information Bureau
Government of India
Ministry of Finance

10-August-2012 16:1 IST
Initiatives Taken by the Government for Unearthing and Curbing Black Money: A Fact Sheet

 

Initiatives taken by the Investigation Division of Central Board of Direct Taxes (CBDT) for unearthing black money :

 

  1. The Government of India has commissioned a study on unaccounted income/ wealth both inside and outside the country bringing out the nature of activities engendering money laundering and its ramifications on national security. The study is being conducted by three national institutes viz. National Council of Applied Economic Research (NCAER), National Institute of Public Finance & Policy (NIPFP) and National Institute of Financial Management (NIFM), with inputs from various ministries/departments. The study will be completed by the end of 2012.

 

II.                A  Directorate of Criminal Investigation (DCI) has been created as an attached office of the Central Board of Direct Taxes (CBDT) to track financial transactions relating to illegal / criminal activities, including illicit cross-border transactions, from the direct tax angle and bring such activities to justice. Creation of DCI is also in line with FATF recommendations to exclusively deal with tax crimes, including direct taxes.

 

  1. CBDT is coordinating with the Election Commission of India (ECI) for controlling political expenditure and verification of affidavits filed by candidates of political parties.

 

IV.            In order to strengthen the existing laws relating to black money, the Government constituted a Committee under the Chairman, CBDT to examine the measures to strengthen the existing legal and administrative framework to deal with the menace of generation of black money through illegal means including, inter alia,

 

a) Declaring wealth generated illegally as national asset;

b) Enacting / amending laws to confiscate and recover such assets; and

c) Providing for exemplary punishment against its perpetrators.

 

The Committee submitted its report to the Government on 29th March 2012. The report has been sent to different Ministries / Organisations and State Governments for necessary action.

 

V.               Information received under DTAA – Information from Germany & France has been investigated. Tax evasion of more than Rs.600 crore detected and taxes of Rs.200 crore has already been realized. Prosecution proceedings have been launched in 17 cases pertaining to LGT Bank accounts. Assessment proceedings have been initiated in cases relating to HSBC accounts. Further information from outside the country is awaited in several cases. Information received from different countries under the automatic exchange of information arrangement is appropriately utilized for the purpose of investigation and assessment.

 

VI.            Search & Seizure, Surveys – In the last three financial years, the Investigation wing of the CBDT has detected undisclosed income of over Rs.32,000 crore besides seizing undisclosed assets valued at over Rs.2,600 crore. The Income Tax Department (ITD) has further detected undisclosed income of Rs.17,325 crore in surveys conducted at business premises.

 

VII.         Tax Prosecutions – Out of 1,548 prosecution cases disposed of during the last three financial years, the ITD has obtained conviction in 97 cases besides fiscal compounding in 771 cases of admitted tax evasion, leading to a success rate of 56.1 percent.

 

          Beside above, the Government has also taken the following steps to deal with the problem of Black Money under a five pronged strategy in last 3 years:

 

  1. 1.                 Creating an appropriate Legislative Framework
  • In 2009,  we had 78 Double Taxation Avoidance Agreements (DTAAs) in force. 75 of these DTAAs did not have specific provisions for exchange of banking information and information without domestic interest. Renegotiation of these DTAAs was started to broaden the scope of Article concerning Exchange of Information. Till date we have completed renegotiation in 29 cases; and renegotiation in remaining cases are under progress. In addition we have finalised negotiation of 19 new DTAAs and 17 new Tax Information Exchange Agreements (TIEAs). It may be clarified that as on today we have 84 DTAAs. TIEAs are concluded with countries with which we do not want to have DTAAs at this stage. Further, FM has approved negotiations for TIEAs with 25 countries/jurisdictions on 31st December, 2011. Hence, as on date, we have completed negotiation with 65 countries/jurisdictions (29 existing DTAA, 19 new DTAAs and 17 TIEAs). 33 treaties (21 DTAAs/ 12 TIEAs) have been signed.

In addition to DTAAs and TIEAs, the Government of India has also signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters on 26 January 2012. These Multilateral Conventions have been ratified which contain provisions for automatic exchange of information, exchange of past information and assistance in collection of tax claims. This has come into force on 1st June, 2012.

 

NOTE: Status of DTAAs/TIEAs negotiations as on 1st August 2012 is given at the end as Annexure-I.

 

  • Enacted legislation incorporating counter measure against non-cooperative   jurisdiction (Section 94 A in Finance Act 2011).
  • PMLA was amended on 01.06.2009 to increase list of scheduled offenses.
  • Commissioned study to estimate quantum of Black Money both inside and outside the country in March, 2011.
  • 30 of our existing 84 DTAA also contain article for assistance in collection of taxes including taking measures of conservancy. Government is trying to have this Article in other treaties as well.
  1. 2.                 Setting-up institutions to deal with illicit funds:
  • 8 more Income Tax Overseas Units are being set-up (In addition to existing two overseas units). Proposal has been sent to MEA for setting up 14 more such units.
  • Computerized Exchange of Information unit (EOI Unit) has been set up.
  • Directorate of criminal investigations has been set up.

 

  1. 3.                 Developing systems for implementation:
  • New policy for deployment of manpower to Directorate of Transfer Pricing and International Taxation is implemented.
  • Manpower of FT&TR Division is doubled.
    • Directorate of Enforcement is strengthened by creating additional posts.

 

  1. 4.                 Imparting skills to the manpower for effective action:
  • More than 100 officers were imparted specialized training abroad in field of International Taxation and Transfer Pricing in F.Y. 2010-11 and 2011-12.
  • High level international seminar on transfer pricing was held in India in month of June 2011.
  1. 5.                 Joining the Global crusade against Black Money:
  • Issues of tax evasion, end of banking secrecy, past banking information, automatic Exchange of Information have been raised by India in various G 20 meetings like in London, Paris, Washington, Cannes, etc.
  • India is playing a key role in Global Forum on Transfer Pricing and Exchange of Information for tax purpose as Vice Chairman of Peer Review Group.
  • In June 2010 India became the 34th member of Financial Action Task Force, responsible for enforcement of anti-money laundering (AML) and combating financing of terrorism (CFT) regime. In December 2010 it became 9thmember of Eurasia group. India has also jointed Task Force on financial integrity and Economic Development.
  • India is actively participating in policy groups of OECD and UN on Exchange of Information, International Taxation and Transfer Pricing as observer and member respectively.
  • ITD Global Conference was held in India in the month of December, 2011 to discuss ways to address growing inequality due to tax evasion and generation of black money

Result Achieved

(a)     Huge network of amended DTAA (84) and TIEA with tax havens (9).

(b)     Specific requests made by tax authorities have increased significantly

(c)      More than 12,500 pieces of Information regarding details of asset and payments received by Indian citizen in several countries have been obtained which are now under different stages of processing and investigation.

(d)     30,765 pieces of domestic information about suspicious transactions   has been obtained by FIU which are under investigation by respective agencies.

(e)      Directorate of Transfer Pricing has detected mispricing of Rs. 67,768 crore in last financial year and in the current financial year (Rs 43,531 crore in F.Y. 2011-12). This has prevented shifting of equivalent profit out of the country.

(f)      Directorate of International Taxation has collected taxes of Rs. 48,951 crore from cross broader transactions in last two financial years.

(g)     Investigation wing of CBDT has detected concealed income of Rs. 19,938 crore in last two financial years. Focused searches have been conducted in a number of cases in the current year on the basis of information received from foreign jurisdictions under the provisions of Double Taxation Avoidance Agreements.

(h)     Under the EOI Article of DTAA with France, India has received information regarding Indians having bank accounts in this financial year. In 219 cases, the department has detected undisclosed income totalling Rs 565 crore and taxes amounting to Rs 181 crore has already been realized so far.

 

 

  1. 6.     Appraisal of Indian Efforts by International Organizations:

 

(a) Mr. Jeffrey Owens, head CTPA, OECD said on 12th December, 2011 that India has made remarkable progress in tackling the issues of tax evasion and illicit money in the last two years by negotiating TIEAs and it should be patient to see their effective implementation. He added that India is playing a major role in G20 deliberations for combating tax evasion, black money and money laundering, which are all correlated, and for better cooperation in tax information exchange. It is also urging other countries to share past information, which is a technical and legal issue.

(b)     Mr. Pascal saint Amans, Head of the Global Forum on Tax Transparency, In December, 2011, rated India among the first three, if not the first, in terms of promoting the global standards on transparency, fighting tax evasion and having the international community lining up.

(c)      Global Financial Integrity supported India’s stand in G20 Summit in Cannes in November, 2011, on Automatic Exchange of Information becoming part of International Standards.

(d)     The Task Force on Financial Integrity and Economic Development in a statement dated 17th October, 2011 stated that India is playing a major role in the global crusade against tax crimes and is rapidly expanding its tax agreement network.

7.       Amendments made through the Finance Act, 2012 to deal with the Menace of Black Money:

Some of the amendments made through the Finance Act, 2012 to deal with the menace of Black Money and to deter the generation and use of unaccounted money are summarized as under:

(a)     Introduction of General Anti Avoidance Rules to counter Aggressive Tax Avoidance Schemes

(b)     Introduction of compulsory reporting requirement in case of assets held abroad.

(c)      Allowing for reopening of assessment upto 16 years in relation to assets held abroad.

(d)     Tax collection at source on purchase in cash of bullion or jewellery in certain cases.

(e)      Tax collection at source on trading in coal, lignite and iron ore.

(f)      Increasing the onus of proof on closely held companies for funds received from shareholders as well as taxing share premium in excess of fair market value.

(g)     Taxation of unexplained money, credits, investments, expenditures etc., at the highest rate of 30 per cent irrespective of the slab of income.

(f)      Introduction of a reporting mechanism for assets and bank accounts in a foreign country.

 

Annexure-I

 

Status of DTAA/TIEA negotiations as on 1st August 2012 is as follows:

  1. 1.     Status of old DTAAs

 

No of countries with whom DTAAs were in force in 2009.

 

No of countries with whom we are negotiating article allowing for exchange of banking information along with names No of countries with whom these renegotiations are finalised and signed along with names No of the countries with which revised agreement signed and entered into force
Total 78(see the list attached). Out of these, 3 DTAAs already had specific provision for exchange of banking information

 

 

Total 75 (In the list of 78 countries, three countries, i.e. Iceland, Tajikistan and Myanmar already have the specific provision and hence, remaining 75 countries were taken up for renegotiation Negotiation finalized: 29

Armenia, Australia,Bangladesh, Brazil, Finland, France, Indonesia, Kenya, Luxembourg, Malaysia, Malta, Morocco,  Nepal, Netherlands, Norway, Poland, Romania, Singapore, Sri Lanka, South Africa, Spain, Sweden, Switzerland, Tanzania, Thailand, UK, UAE, Uzbekistan, Zambia

 

Signed (11):Australia, Finland, Malaysia, Nepal, Netherlands, Norway, Singapore, Switzerland, Tanzania, UAE and Uzbekistan

 

Entered into force(5): Finland, Luxembourg, Nepal, Singapore, Switzerland

 

Status of New DTAAs since 2009

 

No of countries with whom negotiation for new DTAAs have been completed

 

No of new DTAAs signed No of new DTAAs entered into force
Total 19

Albania, Bhutan, Chile, Croatia, Colombia, Estonia, Ethiopia, Fiji Georgia, Hong Kong, Iran, Latvia, Lithuania, Mexico, Mozambique, Senegal, Taiwan, Uruguay, Venezuela,

 

Signed(9):Colombia, Estonia, Ethiopia, Georgia, Mexico, Mozambique, Lithuania, Taiwan, Uruguay

 

Entered into force(6): Estonia, Lithuania, Georgia, Mexico, Mozambique, Taiwan

 

  1. 2.     Total DTAAs in force as on today

 

It may be clarified that as on today we have 84 DTAAs, 78 above plus six more new DTAAs (with Estonia, Georgia, Lithuania, Mexico, Mozambique and Taiwan)

 

  1. 3.     Status of New TIEAs since 2009

 

No of countries with whom negotiations for TIEAs commenced in 2009 with names No of countries with whom TIEA negotiations are finalised along with names No of countries with whom TIEA have been signed along with names
Total 22 (Argentina, Bahrain, Bermuda, Bahamas, British Virgin Islands, Cayman Islands, Congo, Costa Rica, Gibraltar, Guernsey, Isle of Man, Jersey, Liberia, Liechtenstein, Macau, Maldives, Marshall Islands, Monaco, Netherland Antilles, Panama, Saint Kitts & Nevis, Seychelles) Total 17 (Argentina, Bahamas, Bahrain, Bermuda, British Virgin Islands, Cayman Islands, Congo, Costa Rica, Gibraltar, Guernsey, Isle of Man, Jersey, Liberia, Macau, Marshall Islands, Monaco, Saint Kitts & Nevis) Signed (12):Argentina, Bahamas, Bahrain, Bermuda, British Virgin Islands, Cayman Islands Isle of Man, Guernsey, Jersey, Liberia, Macau and Monaco

Entered into force(9):

Bahamas, Bermuda, British Virgin Islands, Cayman Islands Isle of Man, Jersey, Guernsey Liberia and Macau

 

  1. In 2012, negotiations for TIEAs commenced with 25 more countries/jurisdictions as under:

 

  1. Andorra
  2. Anguilla
  3. Antigua and Barbuda
  4. Aruba
  5. Barbados
  6. Belize
  7. Brunei Darussalam
  8. Cook Islands
  9. Curacao
  10. Dominica
  11. Dominican Republic
  12. Faroe Islands
  13. Greenland
  14. Grenada
  15. Honduras
  16. Jamaica
  17. Montserrat
  18. Peru
  19. Saint Lucia
  20. Saint Vincent and the Grenadines
  21. Samoa
  22. San Marino
  23. Saint Maarten
  24. Turks and Caicos
  25. Vanuatu

 

  1. 5.     In addition to DTAAs and TIEAs, the Government of India has also signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters on 26 January 2012 which has come into effect on 1stJune, 2012.

 

  1. 6.     List of DTAA countries as on 2009 (78)

Sr. No.

Country with which India has DTAA

Whether under renegotiation

Armenia Yes
Australia Yes
Austria Yes
Bangladesh Yes
Belarus Yes
Belgium Yes
Botswana Yes
Brazil Yes
Bulgaria Yes
Canada Yes
China Yes
Cyprus Yes
Czech Republic Yes
Denmark Yes
Egypt Yes
Finland Yes
France Yes
Germany Yes
Greece Yes
Hungary Yes
Iceland Already have provision for exchange of banking information
Indonesia Yes
Ireland Yes
Israel Yes
Italy Yes
Japan Yes
Jordon Yes
Kazakstan Yes
Kenya Yes,
Korea Yes
Kuwait Yes
Kyrgyz Republic Yes
Libya Yes
Luxembourg Yes
Malaysia Yes
Malta Yes
Mauritius Yes
Mongolia Yes
Montenegro Yes
Morocco Yes
Myanmar Already have provision for exchange of banking information
Namibia Yes
Nepal Yes
Netherlands Yes
New Zealand Yes
Norway Yes
Oman Yes
Philippines Yes
Poland Yes
Portuguese Republic Yes
Qatar Yes
Romania Yes
Russia Yes
Saudi Arabia Yes
Serbia Yes
Singapore Yes
Slovenia Yes
South Africa Yes
Spain Yes
Sri Lanka Yes
Sudan Yes
Sweden Yes
Swiss Confederation Yes
Syria Yes
Tajikistan Already have provision for exchange of banking information
Tanzania Yes
Thailand Yes
Trinidad and Tobago Yes
Turkey Yes
Turkmenistan Yes
UAE Yes
Uganda Yes
UK Yes
Ukraine Yes
USA Yes
Uzbekistan Yes
Vietnam Yes
Zambia Yes

 

Note 1:    The three countries, i.e. Iceland, Tajikistan and Myanmar already have the specific provision and hence, remaining 75 countries were taken up for renegotiation.

T R Andhyarujina on “Disturbing trends in judicial activism”

Senior Advocate of the SCI, T R Adhyarujina has recently written (an abridged form of his speech at the Bombay High Court) in the Hindu about the disturbing trends in judicial activism by the Supreme Court of India.

His argument is interesting and I mostly agree with what he is saying about how the court is slowly usurping the role of an elected government in a constitutional democracy. Mr. Andhyarujina is known for his criticism of excessive judicial activism in the country (for example, this article in the Indian Express). It is perhaps the debilitating helplessness with the lack of governance in India that a common person feels when he/she considers repetitive invocation of the SCI’s ‘supervisory’ powers. Also, the fact that the government at least listens (has to listen, fearing contempt proceedings!) to the edicts of the courts adds to the SCI and other courts’ criticism for judicial activism.

I have written previously about how the SCI has been over-enthusiastic in disposing certain matters before it. What is interesting is that certain judges are more predisposed to being activist, and an analysis as to what makes a judge an activist judge is something that requires deeper study.

Employees’ Provident Fund dues of workmen should be paid in priority to all other debts by employer during liquidation: SC of India

In EPF Commissioner v. Official Liquidator of Esskay Pharmaceuticals Ltd., the SCI (G.S. Singhvi and H. L. Dattu, JJ.) examined whether priority given to the dues payable by an employer under Section 11 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (‘EPF Act’) is subject to Section 529A of the Companies Act, 1956 (‘Companies Act’) in terms of which the workmen’s dues and debts due to secured creditors are required to be paid in priority to all other debts.

Relevant extracts from the judgment:

  1. Any EPF contributions made by an employee creates  first charge over the assets of the establishment and should be paid in priority to all other debts: “18. An analysis of Section 11 of the EPF Act shows that it gives statutory priority to the amount payable to the employees over other debts … Section 11(2) contains a non obstante clause and lays down that if any amount is due from an employer whether in respect of the employee’s contribution deducted from the wages of the employees or the employer’s contribution, the same shall be deemed to be the first charge on the assets of the establishment and shall, notwithstanding anything contained in any other law for the time being in force, be paid in priority to all other debts. To put it differently, sub-section (2) of Section 11 not only declares that the amount due from an employer towards contribution payable under the EPF Act shall be treated as the first charge on the assets of the establishment, but also lays down that notwithstanding anything contained in any other law, such dues shall be paid in priority to all other debts.”
  2. Nature of EPF Act: “22. The EPF Act is a social welfare legislation intended to protect the interest of a weaker section of the society, i.e. the workers employed in factories and other establishments, who have made significant contribution in economic growth of the country. The workers and other employees provide services of different kinds and ensure continuous production of goods, which are made available to the society at large. Therefore, a legislation made for their benefit must receive a liberal and purposive interpretation keeping in view the Directive Principles of State Policy contained in Articles 38 and 43 of the Constitution.”
  3. ‘Apparent Conflict’ between and Object of EPF Act and Companies Act amendments regarding workmen’s dues: Subsequently, the Court examined the purport of the creation of a priority payment of dues to workmen in light of both Section 11 of EPF Act and Section 529A of the Companies Act and the conflict in non-obstante clauses in both the provisions. Rejecting the argument that the subsequent legislation having the non-obstanteclause will take precedence over the other, it entered into an interpretative exercise to examine the object behind both the provisions and found that -
    • “36. … the object of the amendment made in the EPF Act was to treat the dues payable by the employer as first charge on the assets of the establishment and to ensure that the same are recovered in priority to other debts. As against this, the amendments made in the Companies Act in 1985 are intended to create a charge pari passu in favour of the workmen on every security available to the secured creditors of the company for recovery of their debts. There is nothing in the language of Section 529A which may give an indication that legislature wanted to create first charge in respect of the workmen’s dues, … and debts due to the secured creditors.
  4. Interpretation when conflict between two special statutes: “38. … if two special enactments contain provisions which give overriding effect to the provisions contained therein, then the Court is required to consider the purpose and the policy underlying the two Acts and the clear intendment conveyed by the language of the relevant provisions.”
  5. Finally, finding that there was no conflict between both the provisions, the Court held that – the provision regarding payment of PF etc. to workmen in priority to all other dues already existed in Companies Act before the amendment to Section 11 of EPF Act, that created a first charge over the employer’s assets for any amount due in favour of employees’ contributions.
    • “43. … However, while inserting Section 529A in the Companies Act … [the] Parliament, in its wisdom, did not declare the workmen’s dues (this expression includes various dues including provident fund) as first charge. The effect of the amendment made in the Companies Act in 1985 is only to expand the scope of the dues of workmen and place them at par with the debts due to secured creditors and there is no reason to interpret this amendment as giving priority to the debts due to secured creditor over the dues of provident fund payable by an employer. Of course, after the amount due from an employer under the EPF Act is paid, the other dues of the workers will be treated at par with the debts due to secured creditors and payment thereof will be regulated by the provisions contained in Section 529(1) read with Section 529(3), 529A and 530 of the Companies Act.”
This judgment clarifies various points of law with regard to interpretation of conflicting provisions in special enactments, and more importantly the preferential payment of workmen’s dues over all other debts during winding up of a company.

The Adversity of Adverse Possession- a time to re-look at the doctrine? SCI examines.

On 30th September 2011 in State of Haryana v. Mukesh Kumar & Ors., the Supreme Court of India handed down a judgement that could force a re-look at the colonial ‘relic‘ of adverse possession which has the effect of legally (read ‘with authority of law’) vesting the title of a property in a trespasser from a true owner.

The Court held that “the theory of adverse possession is … perceived by the general public as a dishonest way to obtain title to property… mistakes by landowners or negligence on their part should never transfer their property rights to a wrongdoer, who never paid valuable consideration for such an interest.”

Although,the Government can also acquire land by adverse possession, but “fairness dictates and commands that if the government can acquire title to private land through adverse possession, it should be able to lose title under the same circumstances”.

The Court then examined the historical exigencies that led to the creation of a right to title in a property by way of adverse possession. However, it said that position had changed in the U.S. and the U.K., with right to property being elevated to a human right.

In advising the Parliament to take a re-look at the outmoded doctrine, the Court made various important alternative observations:

  1. The Parliament may consider abolishing the law of adverse possession or at least amending and making substantial changes in law in the larger public interest. And especially, if the governmental authorities, like the police try to use their might to acquite land using this doctrine, it is the most tragic – in the Supreme Court’s words – “a testament to the absurdity of the law and a black mark upon the justice system’s legitimacy“. Rather, the government should protect a citizen’s property and not ‘steal’ it.
  2. The Parliament must either require the adverse possessors to compensate the owners at the prevalent market value, or abolish the ‘bad faith’ adverse possession, and maybe increase the period of possession to claim adversely from the current 12 years to 30 or 50 years.
Finally the Court held that:
“Adverse possession allows a trespasser – a person guilty of a tort, or even a crime, in the eyes of law – to gain legal title to land which he has illegally possessed for 12 years. How 12 years of illegality can suddenly be converted to legal title is, logically and morally speaking, baffling. This outmoded law essentially asks the judiciary to place its stamp of approval upon conduct that the ordinary Indian citizen would find reprehensible.

The doctrine of adverse possession has troubled a great many legal minds. We are clearly of the opinion that time has come for change.

If the protectors of law become the grabbers of the property (land and building), then, people will be left with no protection and there would be a total anarchy in the entire country.”

Obama and a diverse United States Judiciary: Lessons for India

Having racial, gender and experiential diversity in the American judicial system were one of Obama’s top priorities when he was elected to the White House. Reports suggest that he may well have succeeded in portraying the true multi-ethnic rubric of the U.S.  through the federal judicial benches, at both the SCOTUS and the Courts of Appeals.

Of the 97 successful nominations made by the Obama administration, almost half were women, a quarter of them were, several openly-gay judges and Asian-Americans too.

In India, although the Supreme Court has had a history of wide regional, albeit linguistic and cultural representation, gender diversity has been hard to come by. Till date, only four women (three retired: Justice Fathima Beevi, Justice Sujata V. Manohar, Justice Ruma Pal; and one sitting: Justice Gyan Sudha Misra) have donned the role of a judge of the Supreme Court of India. In wake of the increased representation of women in local municipal governments and the pending legislation on reservation for women in the State and Central Legislatures, the judicial system has to catch up with the true multicultural, multi-ethnic and egalitarian dynamic that India exemplifies.

A Hyperactivist Indian Supreme Court? Wall Street Journal reports.

I have previously posted on the spate of activist decisions by the Indian Supreme Court here and here.

Now, the world media notices it.

Governance in India has reached dismal levels, and in the absence of a proactive Executive and Legislature, have the judges indirectly come to rule our country?

Wall Street Journal reports about a hyperactive judiciary in India and whether it might actually become judicial tyranny.

SEE: http://blogs.wsj.com/law/2011/05/16/indias-hyperactivist-supreme-court/

http://online.wsj.com/article/SB10001424052748703509104576325660087117274.html?mod=WSJ_World_MIDDLENews

Supreme Court dismisses curative review petition of Bhopal gas tragedy

Today a Constitution-bench of the SC of India, in an order (CBI v. Keshub Mahindra) dismissed the Curative Petition filed by the Central Bureau of Investigation to enhance the charges of the accused in the Bhopal criminal cases and also the demand to increase the compensation from to $1.7 billion from the previously awarded damages of $470 million (though the Court did not expressly go into the issue of compensation).

Re-narrating the incidents that led to the Bhopal gas disaster in 1984 and the legal proceedings that ensued, the Court was of the opinion that no strong case or evidence was made out to enhance the charges of the accused to make them subject to harsher punishment under s. 304A of the Indian Penal Code. Noting that none of the constitutional remedies for review, under Article 137, were utilized by the affected parties, the Court restricted itself to the technical issues of the criminal review petition.

The Court also categorically stated that:

No decision by any court, this Court not excluded, can be read in a manner as to nullify the express provisions of an Act or the Code.

Observing that no clear grounds or explanation was provided to file the curative petitions 14 years after the previous 1996 ruling, the Court rejected the Curative Petition. See the Hindu and NY Times articles of the same.

It seems as though the Bhopal victims have nowhere else to look to, now that even the judiciary has rejected their appeals and while social activists were left distraught.

‘Over-Judicial Activism’ by the Indian Supreme Court?

In an ongoing case at the SCI (Supreme Court of India), a division bench, comprising Justices M. Katju and G. S. Misra, better known for their conservative and sometimes controversial decisions, have passed an order, which prima facie seems illegal and beyond their jurisdictional merit and capability.

The case relates to a constitutional challenge of section 36 (4) of the Industrial Disputes Act, 1947 which requires a party to take prior permission of the opposite party and the Labour Court/Industrial or National Tribunal to be represented by a legal practitioner. The matter has come up before the SCI on a Special Leave Petition under Article 136 of the Constitution of India from a decision of the Punjab and Haryana High Court.

Instead of restricting itself to the question of law of the appeal, the Bench went on to expand the scope of the petition, suo motu and without any argument in that regard by either party, to also include a similar provision under section 13 of the Family Courts Act, 1984, which requires leave of the Family Court for legal representation.

In what seems to be an ‘over-judicial activism’ of the SCI, the matter has been posted for hearing on July 12, 2011 after seeking opinions of the Amicus Curiae and the Attorney General.

Two consequences flow out of this ‘suo motu‘ action:

  1. The expansion of the scope of the petition is uncalled for for two reasons. One, the petition has nowhere mentioned that the parallel provision in the Family Courts Act, 1984 should also be considered. And a suo motu action of this kind is unheard of, especially when the constitutionality of a legislation is challenged in a petition. Second, Indian judicial system is based on activation by a person who has been caused any legal injury, of course a Public Interest Litigation is the exception. Therefore, this apparent bravado by the SCI is beyond the scope of what the parties had approached the SCI in the first place.
  2. The SLP as another mode of constitutional remedy has undergone a sea change to include many kinds of legal challenges. From being restrictive and circumspect in its approach in admitting SLPs, the SCI has certainly come a long way in admitting such matters, making SLPs one of the largest routes for petitioners to approach the SC from any order of any tribunal or court in India. Having said that, does that mean that this leeway should be taken so far so as to expand the scope of the petition to include a legislative provision that is a subject of the petition and suo motu include such a provision in a constitutional challenge for validity? Seems very overreaching and the legality of such an action is questionable.
What remains to be seen is how the Court will deal with the jurisdictional arguments in the course of the hearings. Also, the enforceability of any decision as an outcome, whether it can be a binding precedent and a law of the land(Article 141)? It is sure going to draw some criticism in the days to come. The bench has sure become sensationalist, by its reputation!

Read this Hindu article regarding this order.

Split Decisions on Division Benches of the Supreme Court

In the past couple of weeks, two Supreme Court decisions have been ill-fated in that they were rendered meaningless due to split verdicts by 2-judge bench of the Supreme Court of India.

First one was the bail plea of Abdul Nasir Maudany, prime accused in the Bangalore bomb blasts of 2008.

Second was the decision in a PIL regarding an office of profit held by the IPL Chennai Super Kings owner and BCCI Treasurer N. Srinivasan.

There are two consequences of this:

  1. It renders the decision bad in the eye of the law – the precedential value of which having been reduced due to the split verdict.
  2. It creates an additional burden on the already overburdened Indian judiciary as now this incongruous decision will have to be resolved by a higher 3-judge bench.
Jurisprudentially, it is unfavorable to constitute 2-judge benches.  Especially in the higher judiciary as the aftermath of split decisions, not unlikely given the highly opinionated and free judges with a license to independently differ from their colleagues, is likely to affect the justice delivery system. Something that has to be kept in mind by the Chief Justices when constituting benches to hear matters at our High Courts and the Supreme Court.

Honour Killings outlawed by the Indian Supreme Court

In a much needed intervention by the highest court of law, the Supreme Court on April 19, 2011, outlawed the evil practice of of protracted illegal honour killings by Khap Panchayats in India. The responsibility for controlling and eliminating such acts of the rural Khap Panchayats, many of which have a huge following, was placed on the State governments and the SC ruled that heavy penalties would result in the event of non-compliance.

The operative portion of Arumugam Servai & Ors. v. State of Tamil Nadu,

16. We have in recent years heard of `Khap Panchayats’ (known as katta panchayats in Tamil Nadu) which often decree or encourage honour killings or other atrocities in an institutionalized way on boys and girls of different castes and religion, who wish to get married or have been married, or interfere with the personal lives of people. We are of the opinion that this is wholly illegal and has to be ruthlessly stamped out. As already stated in Lata Singh’s case (here), there is nothing honourable in honour killing or other atrocities and, in fact, it is nothing but barbaric and shameful murder. Other atrocities in respect of personal lives of people committed by brutal, feudal minded persons deserve harsh punishment. Only in this way can we stamp out such acts of barbarism and feudal mentality. Moreover, these acts take the law into their own hands, and amount to kangaroo courts, which are wholly illegal.

17. Hence, we direct the administrative and police officials to take strong measures to prevent such atrocious acts. If any such incidents happen, apart from instituting criminal proceedings against those responsible for such atrocities, the State Government is directed to immediately suspend the District Magistrate/Collector and SSP/SPs of the district as well as other officials concerned and chargesheet them and proceed against them departmentally if they do not (1) prevent the incident if it has not already occurred but they have knowledge of it in advance, or (2) if it has occurred, they do not promptly apprehend the culprits and others involved and institute criminal proceedings against them, as in our opinion they will be deemed to be directly or indirectly accountable in this connection.

It was about time that there was some definite stand was taken on these patently illegal acts and in the absence of affirmative governmental action, it looks like the SC has yet again assumed the mantle of governance in India.

As expected, this judgment has not gone down very well with the Khaps.

Providing a fillip to this judgment, the same bench of the SC in Bhagwan Dass v. State of NCT, Delhi, laid down that honour killings satisfy ‘the rarest of the rare’ doctrine so as to attract the death penalty for its perpetrators.

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