Ram Jethmalani & Ors. v. Union of India2011

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B. SUDERSHAN REDDY, J. 1. 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
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. 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 neoliberal 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 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, 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 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 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 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 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. 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 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 neoliberal 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 neoliberal 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 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 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 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 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 spherecan 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 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:
    “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.”
    
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, 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 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.

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 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 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 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.
23. 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 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. 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 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.
24. 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 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.
25. 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.
26. The Petitioners contend that such a reversal of decision could only have been
    accomplished through high level 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.
27. 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 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.
28. 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.
29. 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.
30. 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 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 continued, effective and day to day monitoring by a SIT constituted by this
    Court, and acting on behalf, behest and direction of this Court.
31. 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 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 chargesheet 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 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?
    
32. 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?
33. 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 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.
34. 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, 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.
    
35. 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 was a
    necessary step, and may even be characterized as a welcome step. Nevertheless, it is
    an insufficient step.
36. 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.
37. 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.
38. 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.
39. 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 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.
40. 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
    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.
41. In light of the above we herewith order:
    (i) That the High Level Committee constituted by the Union of India, comprising of
    (i) Secretary, 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 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 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;
    (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.
42. 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 for creating the
    appropriate infrastructure and other facilities for proper and effective functioning of
    the Special Investigation Team at once.
    III
43. 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 citizen‟s 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 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.
44. 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 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.
45. 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, 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.