Primacy of constitutional rights vs judicial overreach

T. C. A. RAMANUJAM | Updated on March 12, 2018


No government or treaty can bind India in a manner that derogates from Constitutional provisions, values and imperatives.

The case of Hassan Ali and his cohorts holding secret accounts with Liechtenstein Bank in Germany is becoming curioser and curioser. The government of India had obtained information about the Indian accountholders in the bank. Mr Ram Jethmalani claimed that the matter of Indian citizens having secret accounts abroad is too serious to be left to the Executive alone and that we in India have a right to know about the actions taken in the case which has been dragging on for three years.

The government claimed that it is proscribed by the Double Taxation agreement with Germany from disclosing such information. The Supreme Court examined the question whether the Union of India can claim exemption from providing such information and also with respect to issues of right to privacy of individuals holding such accounts.

The proceedings in the matter related to the issue of tax collection with respect to unaccounted moneys deposited into foreign bank accounts, as well as with issues relating to the manner in which such moneys were generated, which may include activities that are criminal in nature also.

Article 26 of the Indo-German double taxation treaty lays down that information received by the contracting state 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 the Agreement.

No bar of secrecy

The Supreme Court pointed out that as per this clause, 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. No evidence was provided about any request from Germany not to reveal the details with respect to the Indian accounts in the Liechtenstein Bank.

No doubt, treaties are often drafted by diplomats, and not lawyers, leading to sloppiness in drafting. But no government can bind India in a manner that derogates from Constitutional provisions, values and imperatives.

Organs created by a Constitution cannot change the identity of the Constitution itself. The right to petition the Court under Article 32 of the Constitution is a part of the basic structure and the court is empowered to issue proper directions.

It is imperative that those who approach the Court are not denied information necessary for them to properly articulate the case. To deny access to such information would be to thwart the right granted under Article 32. In the task of upholding fundamental rights, the State cannot be an adversary. It has a duty to reveal all the information in its possession to the Court.

After examining the issue at great length, the Supreme Court observed: “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”.

Taking note of the right to privacy of the account holders, the Supreme Court ultimately decided that the Union of India shall forthwith disclose to the petitioners all the information and documents secured from Germany subject to the condition that such disclosure will relate to such accountholders in whose cases investigations have been concluded either partially or wholly and Show-Cause Notices issued. The matter of investigation will be taken over by the Special Investigation Team constituted by the Court.

Why the obstinacy

The government is upset. It has gone for review before Supreme Court. Why this obstinacy in the matter of disclosure of names even when the highest court in the land has cleared such disclosure? Is it because the Court commented on “the unholy nexus between the law maker, the law keeper and the law breaker which makes the moral authority of the State to vanish”? Should the State provide vibrant support to those who benefit from predatory capitalism?

The Court also commented on failed states offering unparalleled economic opportunities, but only for a private few. It posed the question whether the task of bringing foreign funds into India overrides all other constitutional concerns and obligations.

None of the named individuals have any known and lawful sources for such huge quantities of money. The matter seriously compromised national security and led to arms peddling, drug trafficking, money laundering and of course, tax evasion.

Incidental observations of the Court explained how the Laffer theory and the Washington consensus made for regressive tax regimes leading to accumulations of economic power by individuals and groups.

“Follow the money” was the advice given by the secret informant within the government to Bob Woodward of Washington Post at the beginning of the Watergate scandal. Our Supreme Court quoted this advice and sought compliance with the Orders by August 15, 2011. It will be interesting to watch out the further ramifications of the case.

(The author is a former Chief Commissioner of Income-Tax.)

Published on July 23, 2011

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