In my years of practice, I have not come across a judgment which has such a great opening gambit, as does the Supreme Court with Deep Throats’ famous line “follow the money”. The ruling is a scathing indictment of the inadequacies of our systems. The genesis lies in the Hassan Ali Case - the Public Interest Litigation (PIL) filed by Ram Jethmalani in 2009, invoking Article 32 read with Article 14 - right to proper governance, alleging that certain high worth individuals were stashing away large sums of money generated in India in various foreign banks, particularly in tax havens and jurisdictions with strong secrecy laws. Allegations were made against political leaders and governmental agencies for lack of vigilance and dereliction of duty in cross border movement of monies.
The concern of the Court, rightly so, is focussed on the transfer and accumulation of unaccounted money in foreign banks -routing of such funds, activities underlying the generation of such monies, and the upshot, the damage to national interest. But a large part of the introductory observations are dedicated to the evils of ‘neo-liberalisation’, ‘predatory markets’, ‘the lure of the lucre’ the ‘greed is good culture’, comparing the soft State’s role to that of a night watchman, which is perhaps not entirely warranted. Possibly the Judges wanted to vent their anguish and limitations of their power in these scam ridden times in what is reiterated in para 45, of its resources ‘being scarce and overburdened’.
Hasan Ali’s flamboyant life style, hyped by the media as being straight out of a Bollywood film, declared the country’s highest defaulter, the high profile Petitioner, the sheer magnitude of money allegedly involved, the claim that written evidence of Al’s investment of USD 8.4 billion in UBS, Zurich had been recovered in an Income-tax raid at his residence, the case is unique. Efforts in obtaining information on the status of the investigation were evasive, and created a perception that the prosecution was being scuttled. UBS dida not corroborate the findings and RBI’s decision to renew UBS retail licence in India was reversed.
The Court has not mincaed words in expressing its reservations on the Union of India’s (UOI) response, going to the extent of recording that there was an admission that the investigation’s progress was desultory, and also while Ali’s passport had been impounded, he was able to have another one issued! A high level Government Committee formed during the pendency of the case was not even provided the charge sheet copy. Deprecating the conduct, the Court in this context has empowered the existing Special Committee by appointing two former eminent judges of the Apex Court to head it.
Beyond this point, the Court has not intervened, except on the question of whether the Double Taxation Treaties (DTTA) between Germany and India proscribe disclosure of information obtained on the foreign bank accounts. The Court on review of the relevant provisions of Article 26 of the DTTA has arrived at a ‘revelatory’ conclusion, that UOI’s claim that it could not disclose such information is nowhere so proscribed, and that Germany’s concurrence was not required as in any case under Article 26 names and details of Bank Accounts do not amount to ‘Information exchanged’. With due respect, under bank secrecy laws, which are prevalent in various countries, disclosure to other jurisdictions and governments is permitted in extraordinary specific instances. Even in the present case, the details were obtained from Germany under the Indo-German Tax Treaty as India has no tax treaty with Liechenstein, the situs of the accounts. On a plain reading, paragraph 1 of Clause 26, which the Court treats as revelatory has to be interpreted in the context of the entire treaty. It provides that further disclosure by the recipient State is restricted to authorities, including Courts and administrative bodies involved in tax prosecution issues - and goes on to say that “they may be disclosed in public court proceedings and judicial decisions. UOI not only disclosed information to the Bench by way of status reports, but also in the course of the hearing had submitted in writing that the information could be disclosed in prosecution or any other public proceedings emanating from assessments, but not in a ‘case of this kind’ i.e. PIL instituted by persons having rival political affiliations.
The Court has rejected UOI’s submission that this amplification relates to tax matters only. Instead the Court held that the last sentence would be redundant, if given the above meaning and goes on to add that the redundancy interpretation “is fairly well known, at least in common Law jurisdictions. Germany would have been well aware of it.”
The UOI has been directed to disclose to the petitioners all the information pertaining to the Liechtenstein Bank accounts, except the names in these cases where investigations are ongoing.
Bottom-line - the sanctity of DTTAs is under a shadow; the disclosure to the Petitioners was not necessary. Lets await the outcome of the Review Petition.
Kumkum Sen is a partner at Bharucha & Partners Delhj Office and can be reached at kumkum.sen@bharucha.in
