Recording its serious worries about the excruciatingly slow pace of action on bringing back black money stashed in foreign banks by Indians and the pace of the probe against India’s biggest alleged tax evader, Hasan Ali Khan, the Supreme Court on Monday set up a 13-member special investigating team to go into the many dimensions of
unaccounted wealth. It also directed the government to disclose the names of those whose secret account details with Liechtenstein’s LGT Bank were supplied by Germany.
The SIT will function under the control of two former judges of the Supreme Court, Justice B.P. Jeevan Reddy (chairman) and Justice M.B. Shah (vice-chairman), a bench comprising Justices B. Sudershan Reddy and S.S. Nijjar said while including the RAW director in the SIT.
The other members of the SIT would be the same as mentioned by the government in a “multi-disciplinary body (MDB)” established earlier. These included the secretary (depart-ment of revenue), the RBI deputy governor, the directors of the Intelligence Bureau, Enforcement Directorate and CBI Director, the chairman of the Central Board of Direct Taxes, the revenue intelligence director-general, the director (financial intelligence unit) and the joint secretary (foreign trade) in CBDT.
The Supreme Court virtually ridiculed the government for its action so far against Hasan Ali, particularly with regard to attachment of his assets, worth `44 crore, when Solicitor-General Gopal Subramaniam informed the top court about it after the verdict. “What happened to so many zeros, gone?” Justice B.S. Reddy asked Mr Subramaniam, making light of the ED action of attachment of Hasan Ali’s assets when the income-tax department had claimed tax liabilities of over `70,000 against him.
In fact, the Supreme Court converted the MDB into an SIT with the addition of the RAW chief, brought it under the control of the two judges and made it directly accountable to the apex court instead of the government. “We accordingly direct the Union of India to issue an appropriate notification and publish the same forthwith,” the bench said.
While the government refrained form making any comment on the Supreme Court order, the main Opposition BJP welcomed it. “We will examine it ... And then we will decide what course of action will be necessary,” finance minister Pranab Mukherjee said.
Home minister P. Chidambaram also expressed identical views, saying the government first would like to study the verdict. “I do not think one should give off-the-cuff reactions on a Supreme Court order. If the Supreme Court has given an order it is final because it is the final court. Let us first read the order,” he said while replying to reporters’ queries.
The BJP described the strongly worded verdict as a “slap in the face” of the UPA government for “failing” to initiate any concrete step to bring back black money stashed in foreign banks. “We welcome the Supreme Court decision to appoint an SIT on the black money issue. This decision has fully exposed the government and the Congress. The government does not want to take any tough and honest measure to check corruption and black money. This decision is a slap in the face of the government,” BJP spokesman Prakash Javadekar said.
The Supreme Court, in its stinging 80-page verdict, said the government was bound by “constitutional obligations” to bring back the unaccounted money stashed abroad illegally by Indians while giving the SIT wide powers to take up any new case, probe the pending cases, file chargesheets and initiate prosecution against offenders.
The government and its departments were directed to extend full cooperation — material, financial and diplomatic — to the SIT to ensure smooth investigation in all aspects of the black money issue and remove any “artificial obstacles” in its way. The finance ministry was specifically directed to meet all financial expenditure of the SIT with regard to the probe within the country and abroad.
On the disclosure of the names of LGT bank secret account holders, the top court rejected the government’s argument that the revelation would violate the double taxation avoidance agreement with Germany, which provided the information under its provisions. “The names of those individuals with bank accounts in Liechtenstein, as revealed by Germany, with respect to whom investigations have been concluded, either partially or wholly and showcause notices issued and proceedings initiated, may be disclosed forthwith,” the top court said.
However, exemption against disclosure was given to those against whom “investigation/inquiry” were still in progress and no information or evidence of wrongdoing was yet available.
“Unaccounted monies, large sums held by (Indian) nationals and entities in banks abroad, especially in tax havens or in jurisdictions with a known history of silence about sources of monies, clearly indicate a compromise of the ability of the state (the government) to manage its affairs in consonance with what is required from a constitutional perspective,” the top court said while expressing total dissatisfaction on the action taken by the government.
The court said allowing the “outflow” of national assets in this manner had two serious consequences: one, generation of a huge amount of illegal wealth, having a direct impact on the country’s economic and social activities, resulting in a “great damage” to the nation’s social fabric, both at the individual and collective levels; and two, “indicating a substantial weakness in the capacity of the state (government) in collection of taxes on income generated by individuals and other legal entities within the country.”
Allowing generation of such wealth would not only have a direct effect on schemes for the welfare of the public, mandated by the Constitution and “expected by citizens”, but would erode the “moral authority” of the government and spin into “unlawful activities” like tax evasion and money laundering with “greater intensity and increased volume,” the apex court said.
Meanwhile, senior advocate Ram Jethmalani, who had filed the main petition on the black money issue, expressed his “gratitude” to the top court for the order, which, he said, would have far-reaching consequences.