# • [2011) 8 S.C.R. 725 RAM JETHMALANI AND ORS v. UNION OF INDlA AND ORS

- **Citation:** [2011] 8 S.C.R. 725
- **Court:** Supreme Court of India
- **Decided:** 2011-07-04
- **Bench:** B. Sudershan Reddy, Surinder Singh Nijjar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/2011-8-s-c-r-725-ram-jethmalani-and-ors-v-union-of-indla-and-ors-27863
- **Pages:** 49

## Headnote

Administrative law:
Writ petition filed by former Union law minister -
Allegation regarding transfers and accumulation of
unaccounted monies by many individuals and other legal
entities in foreign banks - Petition specifically named Hassan
A
B
c
Ali and Tapurias as party to such illegal activities - Supreme
D
Court expressed its concern 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 also expressed worries also with regard to the
nature of activities that such monies may engender, both in
E
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 - Union of India did not
give satisfactory explanation for slowness of the pace of F
investigation -
It was only upon the insistence and
intervention of Supreme Court that the Enforcement
Directorate initiated and secured custodial interrogation over
Hassan Ali Khan - Union of India explicitly acknowledged that
there was much desired with the manner in which the
investigation had proceeded prior to the intervention of the
G
Court - Union of India, on account of its more recent efforts
to conduct the investigation with seriousness led to the
securing of additional information, and leads, which could aid
in further investigation - During the continuing interrogation
725
H
726
SUPREME COURT REPORTS
[2011] 8 S.C.R.
A of Hassan Ali Khan and the Tapurias, undertaken at the
behest of the Supreme Court, many names of important
persons, including leaders of some corporate giants,
politically powerful people, and international arms dealers
cropped up - Supreme Court proposed to the Union of India
B that the High Level Committee constituted by it be converted
into a Special Investigation Team, headed by two retired
judges of the Supreme Court of India - Union of India to issue
appropriate notification and publish the same forthwith.
Concept of a "soft state" - Held: Is a broad based
C 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 - The issue of
D 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
E 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."
Public function - Responsibilities of State - Discussed.
F
Fragmentation of administration - Effect of - Discussed.
Double Taxation Avoidance Agreement:
Writ petition - Allegation regarding transfers of monies,
G and accumulation of monies, which are unaccounted for by
many individuals and other legal entities in the country, in
foreign banks - Disclosure sought by the petitioners of certain
documents relied upon by the Government - Supreme Court
strongly disapproved the stand taken by the Government that
H the names of the tax evaders was a "secret" and could not be
•
•
RAM JETHMALANI AND ORS. v. UNION OF INDIA
727
AND ORS.
revealed under the lndo German Double Taxation Avoidance A
Agreement - The said agreement, by itself, did not proscribe
the disclosure of the relevant documents and details of the
same, including the names of various bank account holders
in Liechtenstein -
The agreement between Germany and
India is with regard to various issues that crop up with respect
B
to German and Indian citizens' liability to pay taxes to
Germany and/or India - It does not even remotely touch upon
informati

## Text

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•
[2011) 8 S.C.R. 725
RAM JETHMALANI AND ORS.
v.
UNION OF INDlA AND ORS.
(Writ Petition (Civil) No. 176 of 2009.)
JULY 04, 2011
[B. SUDERSHAN REDDY AND SURINDER SINGH
NIJJAR, JJ.]
Administrative law:
Writ petition filed by former Union law minister -
Allegation regarding transfers and accumulation of
unaccounted monies by many individuals and other legal
entities in foreign banks - Petition specifically named Hassan
A
B
c
Ali and Tapurias as party to such illegal activities - Supreme
D
Court expressed its concern 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 also expressed worries also with regard to the
nature of activities that such monies may engender, both in
E
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 - Union of India did not
give satisfactory explanation for slowness of the pace of F
investigation -
It was only upon the insistence and
intervention of Supreme Court that the Enforcement
Directorate initiated and secured custodial interrogation over
Hassan Ali Khan - Union of India explicitly acknowledged that
there was much desired with the manner in which the
investigation had proceeded prior to the intervention of the
G
Court - Union of India, on account of its more recent efforts
to conduct the investigation with seriousness led to the
securing of additional information, and leads, which could aid
in further investigation - During the continuing interrogation
725
H
726
SUPREME COURT REPORTS
[2011] 8 S.C.R.
A of Hassan Ali Khan and the Tapurias, undertaken at the
behest of the Supreme Court, many names of important
persons, including leaders of some corporate giants,
politically powerful people, and international arms dealers
cropped up - Supreme Court proposed to the Union of India
B that the High Level Committee constituted by it be converted
into a Special Investigation Team, headed by two retired
judges of the Supreme Court of India - Union of India to issue
appropriate notification and publish the same forthwith.
Concept of a "soft state" - Held: Is a broad based
C 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 - The issue of
D 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
E 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."
Public function - Responsibilities of State - Discussed.
F
Fragmentation of administration - Effect of - Discussed.
Double Taxation Avoidance Agreement:
Writ petition - Allegation regarding transfers of monies,
G and accumulation of monies, which are unaccounted for by
many individuals and other legal entities in the country, in
foreign banks - Disclosure sought by the petitioners of certain
documents relied upon by the Government - Supreme Court
strongly disapproved the stand taken by the Government that
H the names of the tax evaders was a "secret" and could not be
•
•
RAM JETHMALANI AND ORS. v. UNION OF INDIA
727
AND ORS.
revealed under the lndo German Double Taxation Avoidance A
Agreement - The said agreement, by itself, did not proscribe
the disclosure of the relevant documents and details of the
same, including the names of various bank account holders
in Liechtenstein -
The agreement between Germany and
India is with regard to various issues that crop up with respect
B
to German and Indian citizens' liability to pay taxes to
Germany and/or India - It does not even remotely touch upon
information regarding Indian citizens' bank accounts in
Liechtenstein that Germany secures and shares that have no
bearing upon the matters that are covered by the double c
taxation agreement between the two countries - In fact, the
"information" that is referred to in Article 26 is that which is
"necessary for carrying out the purposes of the lndo-German
DTAA - Instead the agreement specifically provides that the
information may be disclosed in public court proceedings,
0
which the instant proceedings are - The proceedings in the
instant matter relate both to the issue of tax collection with
respect to unaccounted monies deposited into foreign bank
accounts, as well as with issues relating to the manner in
which such monies were generated, which may include
activities that are criminal in nature also - Therefore, the
E
information sought does not faff within the ambit of this
provision - It is disingenuous for the Union of India, under
these circumstances, to repeatedly claim that it is unable to
reveal the documents and names as sought by the petitioners
on the ground that the same is proscribed by the said F
agreement.
Vienna Convention of the Law of Treaties, 1969:
Article 31 - Interpretation of treaties - General Rule of
Interpretation - Held: It provides that a treaty shall be
G
interpreted in good faith in accordance with the ordinary
meaning to be given to the terms of the treaty in their context
and in the light of its object and purpose - While India is not
a party to the Vienna Convention, it contains many principles
of customary international law, and the principle of H
728
SUPREME COURT REPORTS
[2011) 8 S.C.R.
A interpretation, of Article 31 provides a broad guideline as to
what could be an appropriate manner of interpreting a treaty
in the Indian context also.
B
Constitution of India, 1950:
Article 32 - Writ petition - In the writ proceeding,
petitioner seeking certain documents referenced by the Union
of India - Held: Constitution guarantees the right, pursuant
to Clause (1) of Article 32, to petition Supreme Court on the
ground that the rights guaranteed under Part Ill of the
C Constitution have been violated - This provision is a part of
the basic structure of the Constitution - Clause (2) of Article
32 empowers the Supreme Court to issue "directions or orders
or writs, including writs in the nature of habeas corpus,
mandamus, prohibition, quo warranto and certiorari, whichever
D may be appropriate for the enforcement of any of the rights
conferred by" Part Ill - This is also a part of the basic structure
of the Constitution - In order that the right guaranteed by
Clause (1) of Article 32 be meaningful, and particularly
because such petitions seek the protection of fundamental
E rights, it is imperative that in such proceedings the petitioners
are not denied the information necessary for them to properly
articulate the case and be heard, especially where such
information is in the possession of the State - To deny
access to such information, without citing any constitutional
F principle or enumerated grounds of constitutional prohibition,
would be to thwart the right granted by Clause (1) of Article
32 - Burden of asserting, and proving, by relevant evidence
a claim in judicial proceedings would ordinarily be placed
upon the proponent of such a claim, however, the burden of
G protection of fundamental rights is primarily the duty of the
State - Consequently, unless constitutional grounds exist, the
State may not act in a manner that hinders the Supreme
Court from rendering complete justice in such proceedings
- The State has the duty, generally, to reveal all the facts and
H information in its possession to the Court, and also provide
0
•
•
RAM JETHMALANI AND ORS. v. UNION OF INDIA
729
AND ORS.
the same to the petitioners -
This is so, because the A
petitioners would also then be enabled to bring to light facts
and the law that may be relevant for the Court in rendering
its decision - However, 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 B
rights to privacy - Details of bank accounts can be used by
those who want to harass, or otherwise cause damage, to
individuals - No conclusion can be drawn as to whether those
who have not been investigated, or only partially investigated
and proceedings not initiated have committed any wrong c
doing - There is no presumption that every account holder
in banks of Liechtenstein has acted unlawfully - In these
circumstances, it would be inappropriate to order disclosure
of such names, even in the context of proceedings under
Clause (1) of Article 32.
Article 21 - Right to privacy is an integral part of right to
life - The rights of citizens, to effectively seek the protection
of fundamental rights, under Clause (1) of Article 32 have to
D
be balanced against the rights of citizens and persons under
Article 21 - The notion of fundamental rights, such as a right
E
to privacy as part of right to life, is not merely that the State is
enjoined from derogating from them - It also includes the
responsibility of the State to uphold them against the actions
of others in the society, even in the context of exercise of
fundamental rights by those others - The revelation of details
F
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 - No conclusion can be drawn as to
G
whether those who have not been investigated, or only partially
investigated and proceedings not initiated have committed
any wrong doing.
Treaties: Governments entering into treaties - Held:
H
730
SUPREME COURT REPORTS
[2011] 8 S.C.R.
A Such act of governments can only be lawful when exercised
within the four corners of constitutional permissibility - No
treaty can be entered into, or interpreted, such that
constitutional fealty is derogated from.
B
Vineet Narain v Union of India (1996) 2 SCC 199:
1996(1) SeR 1053; NHRC v. State of Gujarat (2004) 8 sec
610; Sanjiv Kumar v State of Haryana (2005) 5 SCC 517;
Centre for PIL v Union of India (2011) 1 SCC 560; Union of
India v. Azadi Bachao Ando/an (2004) 10 SCC 1 - referred
C to.
Case Law Reference:
1996(1) SCR 1053
referred to
Para 48
(2004) 8 sec 610
referred to
Para 48
D
(2005) 5 sec 517
referred to
Para 48
(2004) 10 sec 1
referred to
Para 48
CIVIL ORIGINAL JURISDICTION : Writ Petition (Civil) No.
E 176 of 2009 etc.
F
With
SLP (C) No. 11032 of 2009.
W.P. (C) Nos. 37 of 2010 & 136 of 2011.
Gopal Subramanium, S.G., H.P. Raval, P.P. Malhotra,
ASG. Anil Divan, Rajinder Sachchar, Krishnan Venugopal,
Mukul Rohtagi, Rajiv Mohiti, l.P. Bagadia, J.S. Attri, Lata,
Krishnamurthi, R.N. Karanjawala, Manik Karanjawala, Sandeep
G Kapur, Ranvir Singh, Ravi Sharma, Pranav Diesh, Karan Kalia,
Arjun Mahajan (for Karanjawala & Co.), Gaurav Jain, Abha
Jain, Anuradha Mutatkar, Anagha S. Desai, Shyamohan,
Meenakshi Arora, Devansh Mohta, T.A. Khan, Arijit Prasad,
Kunal Bahri, B.V. Balaram Das, B. Krishna Prasad, Rajiv
H Nanda, Pratap Venugopal, Surekha Raman, Dileep Poolakkit,
RAM JETHMALANI AND ORS. v. UNION OF INDIA
731
AND ORS.
Namrta Sood, Anuj Sarma (for K.J. John & Co.) Kuldeep S.
A
Parihar, H.S. Parihar, Sanjay Kharde, Asha Gopalan Nair,
Sadhana Sandhu, Anil Katiyar, Samir Ali Khan, Santosh Paul,
B.V. Reddy, Arvind Gupta, Arti Singh, Mohita Bagati, Ashok
Kumar Gupta-I for the appearing parties.
The following Order of the Court was delivered
ORDER
!
B
c
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 Hotel break in. Money
has often been claimed, by economists, to only be a veil that
0
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
E
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 neo-liberal doctrines, implies
F
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
G
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,
H
732
SUPREME COURT REPORTS
[2011] 8 S.C.R.
A 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
B 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
c 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
D economic, social or political contexts, by the State, in the public
interest as posited by modem 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
E 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
F 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
G 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
H
RAM JETHMALANI AND ORS. v. UNION OF INDIA
733
AND ORS.
monies, and accumulation of monies, which are unaccounted
A
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
B
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 c
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 eingendering such unaccounted monies, transferring
. them abroad, and the routing them back to India may not D
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
E
attempts to combat the extent, nature and intensity of crossborder 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
F
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 G
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
H
734
SUPREME COURT REPORTS
(2011] 8 S.C.R.
A 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
B 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
c 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
D cannot be the criteria to choose or reject any specific school
of thought as an aid in constitntional 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
E 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
F 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
G 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,
H
RAM JETHMALANI AND ORS. v. UNION OF INDIA
735
AND ORS.
coordination of the economy, and ensuring minimal levels of A
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
B
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 c
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
D
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
E
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
F
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 mand~ted,
and normatively expected by its citizenry, to provide. A
G
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 $tate 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,
H
736
SUPREME COURT REPORTS
[2011] 8 S.C.R.
A 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
9 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
1
C 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
D machinery, is equipped to deal with its responsibilities of
goiternance. 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.
E
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
F 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
G 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
H in law and of effort. The loosening of control over those
RAM JETHMALANI AND ORS. v. UNION OF INDIA
737
AND ORS.
mechanisms of transfers, guided by an extreme neo-liberal
A
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 neo-liberal ideologues, many
countries face the situation where the model of capitalism that
the State is compelled to institute, and the markets it spawns,
B
is predatory in nature. From mining mafias to political operators
who, all too willingly, bend policies of the State to suit particular
C
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,
D
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
E
for the State is visualized by votaries of the neo-liberal
paradigm as that of a night watchman; and moreover it is also
F
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
G
· 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
H
738
SUPREME COURT REPORTS
[2011] 8 S.C.R.
A 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
B 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
C 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,
D 1deologically motivated to look the other way, or the agents
motivated by not so salubrious motives, the amount of revenue
collected by the State would dedine, stagnate, or may not
generate the revenue for the State that is consonant with its
responsibilities. From within the neo-liberal paradigm, also
E 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
F 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
G 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,
H
RAM JETHMALANI AND ORS. v. UNION OF INDIA
739
AND ORS.
and the wealthy viewed as demi-gods, the agents of the State
A
· may have also succumbed to the notions of the nee-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
8
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,
C
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
D
· 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 sphereE
can 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
F
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
G
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
H
740
SUPREME COURT REPORTS
[2011] 8 S.C.R.
A 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,
8 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,
C 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 overspecialization, frictions in sharing of information, and
coordination across departmental and specialized agency
boundaries.
D
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
E 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:
F
G
H
"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
RAM JEJHMALANI AND ORS. v. UNION OF INDIA
741
AND ORS.
failed states it often does so on an unusually destructive
A1
scale. There is widespread petty or lubricating corruption
. as a matter of course, but escalating levels of venal
corruption mark failed states. '11
18. India finds itself in a peculiar situation. Often celebrated,
8
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
C
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.
D
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.
E
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
F
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
G
gathered over eons of human experience. If the politicobureaucratic, power wielding, and business classes bear ~
large part of the blame, at least some part of blame ought to
1.
"The Failure and collapse of nation-States- Breakdown, prevention and
Repair" in "WHEN STATES FAIL: CAUSES AND CONSEQUENCES",
Rotberg, Robert I., Ed. Preinceton University Press (2004).
H
742
SUPREME COURT REPORTS
[2011] 8 S.C.R.
A 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,
a 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.
c To not be engaged in the process, is to ensure the evisceration
of constitutional content. Knee jerk reactions, and ill advised
tinkering with the constitutional framework are not the solutions.
The road is always long, and needs the constant march of the
citizenry on it. There is no other way. To expect instant solutions,
0
because this law or that body is formed, without striving to
solve system wide, and systemic, problems that have emerged
is to not understand the demands of a responsible citizenry in
modern constitutional republican democracies.
20. These matters before us relate to issues of large
E 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
F 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
G had not yet been questioned with any degree of seriousness.
H
These are serious lapses, especially when viewed from the
perspective of larger issues of security, both internal and
external, ofthe country.
21. It is in light of the above, that we heard some significant
RAM JETHMALANI AND ORS. v. UNION OF INDIA
743
AND ORS.
elements of the instant writ petitions filed in this Court, and at
A .
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.
9
ll
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. 8.8. Dutta, and Shri. Subhash Kashyap,
C
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
D
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 nonE
citizens, and other entities with presence in India, have
generated, a:id 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
F
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
G
been taken away from India, breaking various laws, including
but not limited to evasion of taxes.
-
24.