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SC deplores govt inaction on black money,appoints SIT to monitor probe

The court assailed the government’s efforts in the matter so far,denouncing it as a failure.

Written by Tanu Sharma | New Delhi |
July 5, 2011 3:14:25 am

The Supreme Court today appointed a 13-member special investigation team (SIT) headed by a former judge of the court,with wide powers to help recover unaccounted-for money stashed in foreign bank accounts.

The court assailed the government’s efforts in the matter so far,denouncing it as a failure that goes “to the very heart of constitutional imperatives of governance”.

“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 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,” observed the Bench of Justices B Sudershan Reddy and S S Nijjar.

The failure,the Bench said,“has been of human agency”. Justifying the creation of the SIT,the court said,“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.

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“…It is necessary to create a body that coordinates,directs,and where necessary orders timely and urgent action by various institutions of the state.”

The SIT,the court said,would have the “continued involvement of this court,in a broad oversight capacity”. The order was passed on a petition filed by lawyer Ram Jethmalani and some others seeking the court’s intervention to trace black money stashed abroad and bring it back.

The court deplored the “inaction of the state” in cases like that of Pune tax-evader Hasan Ali Khan and Kolkata businessman Kashinath Tapuria,and ordered that the SIT — to be headed by Justice B P Jeevan Reddy — would carry out investigation,criminal proceedings and prosecution.

The court appointed another retired Supreme Court justice,M B Shah,as vice-chairman of the SIT,and directed that the high-level committee (HLC) constituted by the government recently to look into the issue of black money would “forthwith” be a part of the SIT.

“The formation of the HLC was a necessary step,and may even be characterized as a welcome step,” the court noted. “Nevertheless,it is an insufficient step.”

The court acknowledged that bringing back black money from abroad depends on several factors which may not be under the government’s control,but said that “the fact remains that with respect to those 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.”

It rejected the government’s argument that the double taxation agreement with Germany was “an obstacle to disclosure”. “We do not find merit in its arguments flowing from the provisions of double taxation agreement with Germany. The redundancy,that Union of India presses,with respect to the last sentence of Article 26(1) of the double taxation agreement…,necessarily transgresses upon the boundaries erected by our Constitution. It cannot be permitted,” the court said.

“The last sentence of Article 26(1) of the double taxation treaty with Germany states: ‘[They may disclose this information in public court proceedings or in judicial decisions.’”

The court ordered the government to disclose the names of all individuals who have accounts in Liechtenstein,as revealed by German authorities,against whom investigations have been concluded,“partially or wholly and show cause notices issued and proceedings initiated”.

It,however,upheld the right of privacy of account-holders against whom investigations were “still in progress”,or if “there is no information or evidence of any wrongdoing against them”.

The court directed the government to file compliance reports,and posted the matter for hearing in August.

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