REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
WRIT PETITION (CIVIL) NO. 176 OF 2009
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.
2
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
3
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,
4
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
5
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
6
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
7
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
8
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.
9
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
1
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
1
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
1
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
1
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
1
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
1
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:
1
"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
1
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
1
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
2
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
2
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
2
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.
2
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
2
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
2
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)
