Legalism and Government Stand in Black Money Case

Published: 30th October 2014 06:00 AM  |   Last Updated: 30th October 2014 07:49 AM   |  A+A-

The way the Supreme Court slammed the government on October 28 for not disclosing the names of black money holders given by the French government is like the classic case of both eating 100 onions and taking 100 lashes when the option was given to a person to do either of the two.

The short story of this paradox is this. The Supreme Court, moved by a public interest petition filed by Ram Jethmalani in 2009, delivered its judgment in July 2011, directing the government to appoint a Special Investigation Team (SIT). It was to be headed by two former Judges of the Supreme Court and consisted of the enforcement and intelligence agencies to probe the issue and recovery of huge black money suspected to be stashed away by Indians abroad.

The estimate of the rogue money, according to Global Financial Integrity (GFI), was $500 billion till 2008 and still counting. The UPA government, which had received information from Germany about black money account holders in Liechtenstein Bank and from France about such account holders in HSBC Bank in Geneva, was dodging the court’s insistence to disclose the details. It was taking refuge in some provisions of the Double Taxation Avoidance Agreement (DTAA) under which it said it had received the information. This forced the court to direct and get the government to disclose the Liechtenstein Bank details to the SIT. But before the court could direct the government to give details of HSBC account holders, the government filed a review petition asking the court to take back the judgment. After that the matter went into hibernation till it came back alive when the new government took over. The very first act of  Modi Government was to appoint the SIT - which the UPA was stalling - to which all investigations of black money stood transferred under the court’s orders. When everything seemed to be going well, the Finance Ministry filed an application on October 15, asking the court to vary its judgment of July 2011 since the government was advised that the direction of the court to disclose names overriding the DTAA was impeding the government’s efforts to secure an Inter Governmental Agreement (IGA) with the US for exchange of banking information. The IGA had the same provisions regarding disclosure as the DTAA with the US and most other nations.

The government said that since court orders seemed to prevent the government from signing the IGA with restrictions on disclosure, the judgment needed to be recast. Many, particularly Ram Jethmalani and others, who had worked on the black money issue for years, saw in this effort the same stonewalling which the UPA Government was doing to block the black money probe. The government’s October application lacked a sense of timing and ran contrary to the sentiments of its supporters on black money recovery agenda. Hell broke loose. Critics and friends alike began drawing parallels between the UPA and the NDA regimes, and sceptics began to feel that one was not different from the other. The ill-conceived and ill-timed application made everyone feel that this government too wanted to protect the black money holders.

But the facts were the other way round, as the clarification affidavit filed by the Finance Ministry on October 27 revealed. The affidavit unfolded how the government had not only been transparent with the SIT appointed by the court but also had been following its directions. The affidavit asserted that a complete list of cases where information had been obtained from the German and French governments, with the status of the action taken by the government was submitted by the Central Board of Direct Taxes on June 27. It added that the CBDT officials also met and briefed the SIT on the status of the cases, background of the information received, non-sharing of information by Swiss authorities, and constraints faced by the government and alternative methods of securing account details.

Shockingly, his disclosure of how transparent the government had been and how it had parted with the details to the SIT was not mentioned when the Finance Minister briefed the media two days later on October 17, when already its critics and some friends had begun saying that the present government was no different from the UPA.

The Finance Minister’s briefing took the position that the DTAA prohibited the disclosure of information received under its provisions till the prosecution proceedings were started. This was precisely the argument of the UPA, which the Supreme Court in its judgment of July 2009 had overruled. This coupled with not mentioning that the government had already parted with the details to the SIT proved to be a disaster. In the huge negative publicity, the further affidavit of the government, which claimed that the list of names had been given to the SIT was not noticed at all.

In this situation came the application filed by the government asking for modification of the July 2011 judgment. The Attorney General did not sense the mood of the court and the nation, of course, and set out on legalism to justify the application, which the AG himself had personally approved. The fact that the government had already given the details was lost in the din. The court ordered the government to give the details in a sealed envelope to the court on October 29.

Did the AG tell the court that the details are already with the SIT? Even if he had, it was lost in the legalistic arguments on how justified the application for modification was. The result was bad imaging of the government in the court and in the public domain. Result, the government, which had already disclosed the details to the SIT, got a drubbing for not disclosing it - precisely like eating 100 onions and taking 100 lashes instead of either.

But even the AG’s legalism seems to be wrong. The hard fact is that the DTAA with France does not prohibit disclosure of information on the account holders in HSBC received from France in public court proceedings. The DTAA with France disciplines the disclosure of information received by India under it thus: One, the information shall have the same confidentiality as under India’s domestic law, that is the Income Tax Act and the Right To Information Act read together.

Two, if originally the information was secret in the hands of France (the sender) it shall be kept secret by India (the receiver). Apply the two norms now. First, the Income Tax and the RTI law permit disclosure and so no secrecy attaches to the HSBC details under the Indian law.

Next, the French got stolen information about bank account holders in HSBC in Switzerland. It is therefore not a secret in sender France’s hands. It is secret only in Switzerland. So under both the norms disclosure of HSBC information cannot be denied. And there is an overriding third norm.

The DTAA with France permits disclosure in public court proceedings in addition to disclosure in tax proceedings. It means when a court - the highest court in this case - directs the disclosure the government is empowered to disclose under the DTAA. Move further. The DTAA with the US is on identical terms as with France and the proposed IGA with the US is identical to the DTAA with the US on the disclosure of information. Consequently, the application of the government to the Supreme Court that the judgment prohibits disclosure of information is clearly misconceived, if not unnecessary. It is all confusion compounded at every stage.

How then should the government move forward now? The government should consult the SIT appointed by the Supreme Court whenever it has any doubt on how to go forward. It is the SIT that should ask the court for directions. The Supreme Court has already made it clear: the SIT will handle the investigation on black money. Will the government heed?

Post Script: After all the strong words from the Supreme Court, which ordered the government forthwith to give to it the list of black money holders and critics saying that this government is no different from its predecessor, the SIT chief quietly confirmed last evening(on Tuesday) that the list handed to the court yesterday morning(on Tuesday) was the same as the list given to the SIT by the government four months ago, on June 27, 2014! Means what? The government has concealed nothing from the SIT or the court. But the court rapped the government despite the government’s affidavit day before saying it has given all the names months ago. Neither the court nor the media is going to take back the strong comments. The damage is done. But morally, the Modi Government has won.

S Gurumurthy is a well-known commentator on political and economic issues.

Email: comment@gurumurthy.net

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