Ram Jethmalani & Ors vs Union Of India & Ors

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.

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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

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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,

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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

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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

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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

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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

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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.

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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

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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

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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

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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

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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

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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

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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:

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"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 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,

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).

1

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

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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

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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

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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

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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

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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.

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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

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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

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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

2

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

2

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.

2

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

2

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

3

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

3

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

3

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

3

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,

3

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

3

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.

3

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

3

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

3

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 India2, NHRC v State of Gujarat3, Sanjiv

Kumar v State of Haryana4, and Centre for PIL v Union of

India5.

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,

2 (1996) 2 SCC 199

3 (2004) 8 SCC 610

4 (2005) 5 SCC 517

5 (2011) 1 SCC 560.

3

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

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

4

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

4

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;

4

(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

4

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

4

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

4

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,

4

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

4

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

4

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

4

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,

5

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

5

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,6

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

6 (2004) 10 SCC 1

5

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 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

5

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

5

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

5

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.

5

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

5

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

5

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

5

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

6

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

6

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

6

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.

6

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

6

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

6

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,

6

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.

6

................................................J.

(B. SUDERSHAN REDDY)

NEW DELHI, ................................................J.

JULY 4, 2011. (SURINDER SINGH NIJJAR)