Dialogue October-December, 2011, Volume 13 No. 2
Combating Corruption: the Indian Experience
Arun Prosad Mukherjee*
This article seeks to unfold several discernible turning points in India’s experience with corruption. To begin with, it would appear that, historically, acts of corruption in Indian society were viewed as aberrations on the part of individuals or small groups of people (for example, some traders and public functionaries). Their deviant behaviour was not sanctioned by society or by the rulers in most cases. Nor did corruption assume proportions serious enough to subvert the prevailing regime of governance. However, World War II marked a distinct change both in the spread of corruption and in the emergence of a relatively tolerant popular attitude towards corruption. Then followed two notable developments in the post-independence era: the emergence of political corruption in high positions of public trust, followed by some anti-corruption initiatives by the government of India.
Drawing on case studies, we will identify a particularly pernicious malaise affecting our economy and our polity, namely, the growth of a politician-bureaucrat-businessman nexus, which is associated with widespread financial lawlessness. This has given rise to serious high-level economic offences, with which India’s criminal justice and enforcement systems are incapable of dealing promptly and severely. Finally, we will present proposals for drastic forensic surgery, with appropriate enforcement mechanisms, as part of a holistic approach to combating corruption by persons holding high positions of public trust, both in government and in the private sector.
Perceptions of corruption
There does not appear to be a precise legal definition of corruption applicable to all countries. The definition advanced by Transparency International (TI) in constructing its Corruption Perceptions Index (CPI) speaks of corruption as ‘abuse of public office for private gain’. It may be argued, however, that though such a definition throws light on one important area of corruption, it is too narrow in its ambit to encompass the reality in most countries. It is widely acknowledged that corruption is not confined to the public or governmental sector in any country. On the contrary, the corporate private sector (domestic and multinational) in conjunction with the financial sector, within or outside the governmental sphere, has been indulging increasingly in financial fraud and other forms of corrupt practice in most countries, including India. This is admitted by TI chairman Peter Eigen himself :
‘While it is easy to point the finger of blame at corrupt public officials, no less at fault are business people from highly developed industrial states whose thirst for export orders leads them to flout the laws of the developing countries.’ (Eigen 2000:24).
Restricting the purview of corruption to the public sector would thus give an incomplete picture. Consequently, this chapter will take the Concise Oxford Dictionary’s simple, straightforward and fairly comprehensive definition of corruption, as ‘a dishonest act in return for money or personal gain’.
Corruption in the Indian milieu: a synoptic view
That corruption, as a worthy rival of the oldest profession, is said to be universal. History records that at some stages of their existence, unchecked corruption ultimately undermined the foundations of the ancient Egyptian, Babylonian, Hebrew, Chinese, Greek and Roman civilizations, leading to their decay. In the Indian context, too, it would be naïve to assume that the ancient Hindu civilization was free from this malaise, and unhistorical to propound, as some scholars have tended to do, that the strong spirituality of Hindu philosophy succeeded in stopping the rot through its non-materialistic attitude to life. Hindu scriptures show that Hinduism never underestimated the importance and benefits of wealth. Thus, Kuber (the mythological lord of wealth and one of the eight Vedic gods) and Lakshmi (the goddess of prosperity) even now continue to be worshipped by a large number of Hindus in different parts of India. However, Hinduism did not sanctify unbridled lust for wealth irrespective of the means for its acquisition. On the contrary, it enjoined a person who had led a full life of worldly bliss to reach a still higher level of existence through renunciation.
A ruler during ancient times was expected to tread the path of dharma (righteousness) and protect all his subjects, irrespective of their caste or economic status, so long as they too were righteous. The oldest available Indian treatise on statecraft, and the rulers’ guide to good administration, Kautilya’s Arthashashtra contains a realistic picture of social and economic life of the period (2300 BC) and is viewed even now as containing guidelines for good governance. It prescribed how the ruler should screen his ministers and state officials so that they were not easily susceptible to intrigue, temptation and greed, and not prone to being oppressive towards the subjects of the ruler. Kautilya alerted the king to about forty different modus operandi for embezzlement from the treasury and manipulation of accounts by state officials. He further described in detail other kinds of corruption and economic offences like forgery, counterfeiting, adulteration, smuggling, hoarding and profiteering, and prescribed the manner in which the ruler was to deal with such malpractices. In other words, Kautilya’s treatise is a testimony both to the prevalence of various forms of corruption in the contemporary society and also to the duty incumbent upon the ruler to deal firmly with such evils. It is believed that Kautilya’s diktats carried considerable weight with the then Hindu ruler, Chandraguupta Maurya, whom he helped in establishing his kingdom. It might be presumed, however, that with the vast expansion of the Mauryan Empire (321 BC-185 BC), there must have been considerable proliferation of bureaucracy and corresponding weakening of the control of corruption.
According to many scholars, the emphasis on dharma (ethics) including raja-dharma (duty imposed on a king by the precepts of righteousness), considered the basis of a ruler’s moral authority, could have prevented many of the Hindu kings from degenerating to the level of their Roman counterparts. Nevertheless, normative concepts could be effective only up to a point. Hence erosion of both the moral and temporal authority of the Hindu rulers, though slow in its onset, could not prevent a substantial weakening of core values and a corresponding decline in their authority; this was evidenced during subsequent invasions by the Huns, Mongols, Mughals and other invaders, especially from the eighth century AD onwards.
Then followed a regime of important functionaries and vassals ‘offering’ gifts and presents to the rulers, which were known as shukrana (thanksgiving), jabrana (levies - virtual exactions) etc. The rulers, and their subordinates too, came to expect to be given dastoor (customary gifts), mamool (expected normal presents in cash or kind) and hafta (weekly levies). Such practices continued not only until the arrival of the European trading groups (the East India Company and others) in the seventeenth century but also thereafter, as groups competed for the new trade. The nomenclatures changed, but not the extortionist practices. As Macaulay wrote, the ambition of a British East India Company employee was to quickly make his fortune and then ‘return home before his constitution suffered from the heat, to marry a peer’s daughter, buy a rotten borough in Cornwall and give balls at St. James’ Square’ (Smith 1958).
The arrival of Lord Cornwallis in India as governor general in 1786 brought a turning point in the Company’s rules and practices. Himself an honest and dynamic person, he initiated a number of steps to curb corruption and streamline administration of land revenue collection (the Company’s principal concern) and commercial activities; he also introduced many innovative measures to ensure a relatively effective policing and administrative system. This trend continued (with periodic aberrations) during the next hundred years or so under successive governors general like Bentinck, Wellesley, Dalhousie and Curzon.
The impact of social reform movements from the late nineteenth century and the independence movement in the twentieth century
One of the significant contributions of British rule in India was a fairly streamlined and efficient administrative structure which could ensure a substantial check on corruption by public functionaries. This was augmented by two significant developments between the late nineteenth century and India’s independence on 15 August 1947, namely, a strong social reform movement accompanied by emerging renaissance in Bengal, with ripples elsewhere in the country, and, secondly, the unprecedented surge of swadeshi (preference for indigenous products and a boycott of foreign goods) which commenced as a protest against Lord Curzon’s ‘Partition of Bengal’ in 1904. The latter brought in its train a strong nationalist upsurge, leading to militant anti-Partition agitation in Bengal which later took the shape of swaraj (self-rule), the spark which eventually ignited the independence movement all over India.
These developments had a significant impact not only in the social and political spheres but equally importantly on the people’s concern for ethical values. People by and large were infused with a hitherto unknown spirit of self-respect, nationalism and aversion to corrupt practices in all spheres of life, which was apparent in politics, education and the professions; even otherwise self-seeking businessmen and traders realized that they had to mend their profit-making behaviour. This trend continued after independence and formation of the central government under Jawaharlal Nehru, who was himself a forward-looking ‘modern’ man of unquestioned personal integrity (though, unfortunately, this was not wholly true of some of his associates in the Indian National Congress or in his government).
The impact of World War II on corrupt practices
The Second World War in India was a turning point in regard to administrative probity and the spread of corruption. For the British, the war was a struggle for survival and norms of administration receded into the background. The urgent need for quick delivery of war supplies, construction of roads, army barracks and aerodromes, and the build-up of buffer stocks of essential commodities at strategic points all over India, led to the delegation of extensive financial and other powers, relaxation of rules and procedures, and awarding of contracts involving huge amounts of money without due care and caution. All these led inevitably to the spread of corruption even among some at the highest levels of administration, not to mention the natural urge of contractors and businessmen to make as much money as they could, irrespective of the means adopted. The situation was aggravated by numerous restrictive regulatory measures adopted during the war years, such as the introduction of licences and permits, and the rationing of foodgrains and other essential commodities. The strong popular aversion towards corrupt practices noticeable earlier was gradually eroded, with far-reaching consequences for Indian society and administration.
The government was perturbed at such rapid spread of corrupt practices, even among its senior functionaries, and hurriedly set up in 1941 a small investigative organization called the Delhi Special Police Establishment (DSPE), under a deputy inspector general of police, to detect cases of corruption among public servants relating to war supplies. So as to vest some special investigative and legal powers in this organization, a Delhi Special Police Establishment Act was passed in 1946. In 1963 the DSPE was renamed the Central Bureau of Investigation (CBI); in due course, the CBI became the premier anti-corruption investigation agency at the central level.
One of the most difficult things for any mortal is to take on power, in any form, without misusing or abusing it. Persons who seem incapable of corrupt practices may be found wanting when they are vested with power. This is what happened when some of the well-known freedom-fighters became ministers in 1937 with the formation of elected provincial governments under the Government of India Act, 1935. The experiment lasted only two years, but in this time quite a few ministers and other legislators were reported to be indulging in unethical and corrupt practices, giving rise to a new genre of corruption: political corruption.
It should not have come as a big surprise, therefore, when allegations of corruption began surfacing against well-known political personalities who became ministers at central or state level after independence in 1947.
The case of Sardar Pratap Singh Kairon, acknowledged father of modern Punjab, provides an illustration. He became chief minister of the state in 1956. Soon after, there were allegations of corruption against him and members of his family, but these were dismissed by Prime Minister Nehru as ‘fantastic, frivolous and absurd’. The matter was then taken up by the opposition group of Akali leaders, who submitted a memorandum to the president of India containing twenty charges against the chief minister and his family. The media too took up the issue vigorously and the matter was debated in parliament. Eventually, the central government had to set up in 1963 a commission of inquiry under Justice S.R. Das, a retired chief justice of India’s Supreme Court. The gist of the charges was that Kairon had knowingly allowed his wife, son and other relatives to acquire considerable wealth by abusing his official position. The commission found several charges substantiated, and said that such acts were ‘unbecoming of a person holding the high and responsible office of the chief minister of a state’. The questionable transactions were estimated to amount to around Rs.1 crore (about Rs.18 crore at 1997 prices), a very large amount in those days. It also transpired that when Kairon became chief minister, he owned only a few acres of land and his wife had to work as a school teacher to augment the family income. The commission’s report was submitted in June 1964 but Kairon refused to resign, quitting only after Nehru’s successor, Prime Minister Lal Bahadur Sashtri, made the report public.
India was soon to discover another kind of corruption in high places – an unholy politician-businessman-bureaucrat nexus which cost the public exchequer. This was revealed during the early 1960s in a case involving Finance minister T.T. Krishnamachari, principal Finance secretary ICS, H.M. Patel, and Haridas Mundhra, a street-smart wheeler-dealer businessman. Faced with a serious financial crisis, Mundhra persuaded the Finance minister and the principal secretary to bail him out. The two most powerful persons in the Finance ministry did so through an extraordinary maneuvre: they pressured the Life Insurance Corporation of India (LIC), a public sector organization, to buy shares of the Mundhra companies worth about Rs.1 crore 27 lakhs (equivalent to Rs.20 crores at 1997 prices). This was the largest transaction the LIC had ever made till then, and the first case of a public sector undertaking being involved in such a transaction.
Mundhra not only failed to provide the requisite number of shares, but the share price fell sharply following the LIC’s acquisition, resulting in a heavy drain on the fund. In the face of severe criticism in the media and in parliament, resulting in the appointment of a commission of inquiry, Krishnamachari had to resign from the cabinet. But no penal action was taken against him or his principal secretary even though a substantial amount of public funds had disappeared as a result of their shady deal with Mundhra.
The ingenuity of political corruption was further demonstrated in the case of Abdul Rehman Antulay, who became chief minister of the state of Maharashtra in June 1980. Antulay decided to take authority for final decisions on the allotment of cement quotas and the supply and sale of industrial alcohol (both then being controlled items), as well as control of the liquor trade, cooperatives (the proverbial goose that laid the golden eggs), and administration of land ceiling legislation and restrictions on floor space index for buildings. Between October 1980 and March 1981, Antulay floated seven trusts, the first and most important being the Indira Gandhi Pratibha Pratishthan (IGPP). During this period, the trusts accumulated Rs.30 crores, all through donations by cheque in lieu of his exercise of the state’s discretionary powers. In the event, despite media attention, heated discussions in the state and central legislatures and a couple of ‘social interest’ criminal cases, no action of consequence was taken against Antulay. He resigned as the chief minister in January 1982, and was appointed chairman of the state’s Irrigation Board. A futile court battle continued for another four years, going from trial court to High Court to Supreme Court, but with no finality of verdict and no punishment for political corruption at the highest level in a state.
The dilatoriness of the higher judiciary in this series of cases, and its failure to take an unequivocal stand on such a critical matter, caused considerable consternation. In delivering his judgment for the majority of the seven-judge bench, Justice Mukharji lamented the unconscionable delay in dispensing ‘justice’:
It is unfortunate, unfortunate for the people of the state, unfortunate for the country as a whole, unfortunate for the future working of democracy in India that delay has occurred due to procedural wrangles (A.R. Antulay v. R.S.Nayak, 1988,2 SCC 602).
The so-called ‘procedural wrangles’ reflected the failure of the criminal justice administration, and this did not serve the country well, then or later.
The impact of the post-liberalization era on corruption in India
Unfortunately for India, the new era of liberalization and globalization from 1991 did not auger well with respect to developments in corruption. The rationale behind the adopted policy was four-fold: first, to accelerate the rate of economic growth; secondly, to provide greater thrust for economic development leading to reduction in unemployment and poverty; thirdly, to drastically reduce the levels of corruption; and, finally, to strengthen the democratic system and foster a healthier and more vibrant civil society. It is widely believed that these objectives and expectations have remained largely unfulfilled, and that despite some economic improvement, the benefits have not percolated down to the lower levels of society where they were most needed.
To the contrary, from the beginning of the liberalization process in 1991 to the present, India has been witnessing escalating levels of corruption and serious economic offences in most sectors of governance and the economy, including large-scale defrauding of public funds and the growth of a black economy (Kabra 1982). This has highlighted the inadequacy of the existing laws, their enforcement agencies and the criminal justice system in effectively dealing with high-level corruption and serious economic offences, as expected by society.
Thus the era of one digit (Rs.1 crore in the Kairon case) or two digit (Rs.30 crore in the Antulay case) corruption gave way to multi-digit financial scandals. It started with the stock market scam (popularly known as the 1992 securities scam) engineered by the ‘big bull of the Bombay stock market’, Harshad Mehta. Fuelled with an almost unlimited supply of funds from various nationalized banks and other financial institutions, he started buying up shares in many blue-chip companies when the market was relatively sluggish, leading to an unprecedented rise in the prices of those shares, and then dumped them when the prices peaked. Thus, for example, ACC share prices shot up from Rs.500 to Rs.10,000 and the price of Reliance shares from Rs.285 to Rs.400 within a week. Mehta borrowed from one bank to pay off the loan from another, and made a quick killing on the stock market. At the time, this was the biggest stock market scam and banking fraud in India, and the three oversight bodies concerned, the Banking Division of the Finance Ministry, the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI), remained passive spectators. When the inevitable stock market crash took place in early 1992, millions of investors were left in the lurch and thousands of crores worth of public funds disappeared.
The facile explanation offered by the Finance Ministry was that it was a ‘systems failure’ and that urgent corrective measures were under way. A Joint Parliamentary Committee (JPC) was constituted to probe the matter, but many saw this as a charade and perhaps a cover-up. One of the members of this JPC, a known crusader for firm action against financial scams and corruption in high places, wrote:
The multi-billion rupees securities scandal dogging India for the past two years is unprecedented not only in India but perhaps globally.… Wealthy societies of America and Japan are hit with major corporate crimes, but for a country haunted by scarce resources, going around the world with a beggar’s bowl to have the vaults of government-owned banks opened up for speculators whose dubious transactions ran into Rs.13,00,000 crores is quite a different matter (Das Gupta 1993:v).
Das Gupta referred to the involvement of at least four of the major foreign banks operating in India: ‘Of the reported Rs.13,00,000 crores worth of securities transactions, the four foreign banks accounted for 56 per cent. Ten of their branches handled all the business, which landed the entire banking industry, including the foreign banks themselves, in such a mess’ (ibid.:36).
In an ‘action taken report’ (ATR) submitted by the government to parliament along with the JPC report, promises of firm action against the erring public officials and of ‘urgent’ and ‘stringent’ remedial measures were made, but these proved to be hollow. Within less than a decade similar cases occurred. During March-April 2002 a series of media reports detailed an almost copy-book replay of the Harshad Mehta securities scam; only the names of the dramatis personae were different (Ketan Parekh and a host of his relations and their front companies) and the amounts involved were much larger. Banks and other financial institutions, including some of the flag-bearer financial organizations in the public sector (among them, the Unit Trust of India [UTI]), were found to have been generous financiers of the dubious deals. Much greater involvement of foreign banks and overseas corporate bodies in stock market manipulation came to light, and the RBI, SEBI and Ministry of Finance appeared to have been again mesmerized by Ketan Parekh’s antics. The calamity which befell unwary investors in the stock market this time proved even more ruinous for millions of middle class people, salaried and pensioners, who had put their life’s savings in UTI’s Unit-64 Scheme, considered for decades the safest investment with regular returns. Unit-64, the largest and most trusted public fund in India, had to be wound up as a substantial part of its capital, paid out to stock market operators or recklessly invested in shares, had disappeared.
It is widely believed that neither the Harshad Mehta nor the Ketan Parekh scams could have taken place without gross negligence, if not connivance, on the part of persons in high positions of power and authority in the government and the corporate world, domestic and transnational. But apart from a few bank and UTI officials and some stockbrokers, the culprits escaped punishment.
Lack of commitment to curbing corruption
Of the alarming trends of the past decades, perhaps the most obvious and distressing is the lack of political will at the uppermost echelons of governance to come down heavily against high-level corruption. Thus, the government benignly accepted the resignation of Punjab’s Chief Minister Pratap Singh Kairon and did not consider it fit to prosecute him or his family members or to confiscate their ill-gotten wealth; it was the same with Maharashtra Chief Minister A.R. Antulay, and a host of others. In a few cases where the CBI submitted charge-sheets to the courts, the accused persons succeeded in exploiting loopholes in the laws and ponderous judicial processes while they continued to get elected and re-elected, arguing that they were presumed innocent until convicted. This persistent failure of the criminal justice system to provide a deterrent against corruption in high places is a second disturbing phenomenon.
A third cause for concern is the clear lack of accountability at the highest levels of governance and administration which allows corruption to thrive. The securities scams engineered by Harshad Mehta and Ketan Parekh, actively aided and abetted by banks and other financial and corporate bodies, highlight a fourth aspect of the malaise, namely, the lack of transparency in the banks’ operations, coupled with the lack of accountability of regulatory bodies like the RBI and the SEBI. Yet another dimension of this ‘hidden corruption’ is what is euphemistically known as the ‘non-performing assets’ (NPA) of the banks and other financial institutions, chunks of which are quietly written off every year as ‘bad debts’. It is estimated that NPAs, which keep increasing every year, had reached the staggering figure of Rs.1 lakh 70,000 crores at the end of 2004; the defaulters are mostly big businessmen and industrialists. Repeated demands for public disclosure of their names have been thwarted under cover of ‘banking secrecy provisions’, though there is no such legal provision. Recovery of a substantial portion of NPAs could change the face of poverty-stricken rural India.
It is apparent from these case studies that corruption is no longer confined to petty public functionaries. The Krishnamachari-Patel-Mundhra-LIC scandal and the Harshad Mehta and Ketan Parekh securities scams in particular reflect the growing nexus between politicians in power, the bureaucracy, including those in public financial institutions, and persons in the corporate sector. Financial lawlessness seems to have been fuelled by India’s liberalization process and has brought in its train serious economic corruption in government and the corporate sector.
Major anti-corruption initiatives in India
We have noted that the widespread public revulsion against corrupt practices which developed during the freedom movement, was badly eroded in the post-World War II era by a growing moral and ethical laxity in high places. Baser instincts emerged slowly but steadily, especially among the relatively well-off – the nouveau riche. A decade or so after independence, it was this class of people who began entering the mainstream of politics. The contamination of politics and governance became marked from around the mid 1960s.
The contamination of politics had an impact on public servants, with a proliferation of the bureaucracy in the wake of development and social welfare measures introduced under successive 5-year plans, starting with that of 1951-56. Increasing corruption among political masters and public servants caused anxiety even within government. This led to several legislative and administrative initiatives, starting with the passage of the Prevention of Corruption Act, 1947 and the creation of an Administrative Vigilance Division (AVD) in the Home Ministry in 1955 to monitor anti-corruption and vigilance activities in different ministries and agencies, to which vigilance officers were appointed.
The Santhanam Committee on corruption and administrative reforms (1962-63) and some follow-up measures
In response to mounting public criticism and demands within parliament, the government in 1962 set up a high-level committee under K. Santhanam to look into the twin problems of corruption and administrative reform (Santhanam Committee 1962-63). Of the many recommendations of this committee, three follow-up measures deserve special mention.
(1) A one-man Central Vigilance Commission (CVC), independent of ministerial control, was set up as an apex body in 1964. The CVC was given a fairly extensive charter including powers (a) to inquire into any transaction in which a public servant under the Government of India was suspected of having acted for an improper purpose or in a corrupt manner; (b) to cause inquiry or investigation into any complaint that a public servant had exercised or refrained from exercising his powers, for improper or corrupt purposes; (c) to call for reports, returns and statements from all central ministries/departments/ undertakings and thereafter take or initiate suitable actions thereon. On the pattern of the CVC, the state governments were advised to set up state-level vigilance commissions in respect of their employees. Some states did so while others simply set up anti-corruption bureaux as separate entities and not as part of the vigilance commission.
(2) The Prevention of Corruption Act, 1947 was amended to extend the definition of corruption (criminal misconduct) to include possession of assets (movable and/or immovable) disproportionate to the known sources of legitimate income of a public servant. Such assets would be presumed to have been acquired by corrupt and/or illegal means and the onus to disprove this would lie on the suspect public servant. This act was replaced by the Prevention of Corruption Act, 1988 which broadened the definition of ‘public servant’ to include certain categories of legislators and other holders of public office.
(3) The Delhi Special Police Establishment, originally set up in 1941, was converted into the Central Bureau of Investigation (CBI) in 1963, with more extensive powers and responsibilities, as the apex anti-corruption investigation agency at the central level. It contained a specialized Economic Offences Wing. The CBI was to derive its legal status from the DSPE Act of 1946 as amended from time to time. Though administratively placed under the Home Ministry (since 1973 under the prime minister), it continues to enjoy substantial autonomy in its internal administration and operational aspects. It has been further strengthened under a recent order of the Supreme Court, and by new legislation. However, the CBI continues to suffer from legal handicaps; for example, it can investigate certain categories of cases only after the government of India issues a notification under the DSPE Act authorizing it to act, and following another notification under the same act by the concerned state government, permitting CBI investigation within the jurisdiction of that state, on the grounds that police (including investigation with police powers) is a state subject under the Indian constitution.
Overview of existing laws and enforcement agencies
The prime substantive criminal law in India continues to be the Indian Penal Code (IPC) of 1860, as amended from time to time. In addition, there are nearly fifty special and local laws. This maze of laws has proved to be a weakness in the Indian legal system; the laws, in themselves, have quite often been a source of corruption. There is a consequent need for a comprehensive review of legislation.
At the state level, police are the primary agency to detect and investigate offences under most legislation. Our experience suggests that, by and large, police in the states have their own priorities concerning maintenance of law and order, prevention, detection and investigation of IPC crimes (especially the heinous ones), terrorist crimes, protection of various categories of ‘dignitaries’, and so on. Dealing with corruption or economic offences enjoys a relatively low priority. Even in the states with anti-corruption bureaux or special economic offences wings, outcomes have not been very encouraging. Misuse of such agencies for partisan political purposes in quite a few states continues to be a cause for concern.
At the central level, there is a number of agencies to deal with corruption and other specific types of economic offences. The CBI is the primary anti-corruption agency at the centre, having jurisdiction over employees of the central government and its agencies, including the nationalized banks. Important criminal cases of major public interest are also often assigned to the CBI either by state governments on public demand or as ordered by the Supreme Court or high courts because of the CBI’s national credibility. The CBI has to deal with far too many cases of a complicated nature (relating to high-level corruption, complex economic offences, terrorist crimes, etc.) on the basis of its own information and verification, or referred to it by the Central Vigilance Commission, ministries, departments or nationalized banks, or ordered by the Supreme Court or the high courts, and it has suffered from an inadequate number of investigating officers of the requisite quality and credibility. The CBI’s capacity to take on additional cases is limited, and it has rightly resisted the temptation to expand its organization at a cost to the quality of its investigations.
Other central agencies, such as those under the Income Tax Department, the Customs and Central Excise Department, the Enforcement Directorate (which deals with foreign exchange violations), the Narcotics Control Bureau, the Company Law Department with its recently set up Serious Fraud Investigation Office (SFIO) – all under the Ministry of Finance – continue to discharge functions within their legally assigned ambits. However, unlike CBI, which enjoys a fairly high degree of administrative and functional autonomy and has a tradition of remaining non-partisan and professional, these other central agencies suffer from strong political pressure, which only some exceptionally bold and upright officers have been able to withstand.
Continuing problems common to the CBI and other central and state agencies, including the police, are archaic Anglo-Saxon legal precepts and laws, and notoriously dilatory court procedures. As a result the high-profile offenders have come to believe that they can get away with their ill-gotten money and that they can buy justice. Quite often they succeed. Many concerned citizens, including academics, serving and retired public servants, and members of judiciary, have therefore come to the view that a drastic forensic surgery is urgently needed, together with an institutional mechanism which can play a catalytic and decisive role in creating a healthy fear in the minds of high-level economic offenders and corrupt people in pivotal positions of public trust and authority. A representative group of such persons held detailed deliberations on this subject at Mumbai, Kolkata and Delhi between March 2002 and April 2004. Many retired and serving officers of central and state agencies, as well as lawyers, bankers, auditors and chartered accountants, took part. On the basis of their deliberations, the West Bengal National University of Juridical Sciences at Kolkata brought out a comprehensive report entitled Economic Offences Code : towards a unified legal framework for effective enforcement of criminal justice in India (Mukherjee 2004). This report, which contains draft legislation - Serious Economic Offences (Prevention, Control, Investigation and Trial) Act, 2004), also made a number of recommendations for urgently needed policy initiatives by the government of India. Copies of the report were submitted to, among others, the prime minister, Home, Finance and Law ministers, the Law Commission, the cabinet secretary and the concerned secretaries in the Ministry of Finance, the Central Vigilance Commissioner, Director, CBI, and the Income Tax and Customs/Central Excise chiefs. Efforts are also continuing to raise public awareness and generate demand for strong legislative, administrative and judicial actions to stop the rot before further damage is caused to the Indian polity.
The proposed law and means to enforce it
It may be useful to briefly outline the main contents of the proposed legislation.
· The ambit of the act includes not only ‘serious economic offences’ but also acts of corruption by ‘any person holding high positions of public trust or public duty in government, public or private undertakings including banks and other financial institutions or other body corporates’.
· The act envisages the creation of a high-powered, quasi-judicial, independent body with all-India jurisdiction, to be known as the Commission for the Control of Serious Economic Offences (CCSEO), to administer, enforce and implement the provisions of the act. The CCSEO will comprise a retired chief justice or judge of the Supreme Court or a retired chief justice of a High Court as its chairperson and four other members of known integrity, credibility and expertise from the fields of economic intelligence gathering, investigation of economic offences, law and prosecution, and the highest level of administrative experience in the government of India. Their selection, terms and conditions of service will be based on those of the National Human Rights Commission, but unlike the Human Rights Commission, the CCSEO will not be a mere advisory body but one with specified powers and functions to ‘administer, enforce and implement’ provisions of the act.
· The CCSEO will take up, at its discretion, only cases of substantial national interest which will have a national impact; other cases will continue to be dealt with by the existing agencies at central and state levels. The CCSEO will have under it four divisions – economic intelligence; inquiry and investigation; legal and prosecution; and administrative and logistics – each headed by a member of the commission and multi-disciplinary in composition.
· The CCSEO may, in exceptional circumstances of public interest (with reasons to be recorded in writing) (i) take over investigation or supervision of case(s) from any central or state agency, or (ii) assign inquiry or investigation to any other agency, or (iii) call for periodic progress reports on investigations by any agency.
· The CCSEO will report annually to parliament (through the central government) about its activities, actions taken and results, difficulties faced, and suggestions and recommendations regarding changes in law, functioning of the special courts and other matters pertinent to its terms and reference.
· Only special courts, specified in the act, will try cases of serious economic offences and such courts should not be required to deal with any other case. Each such court will consist of three judges of specified rank to be appointed in consultation with the chief justice of the state’s High Court and cannot be transferred without the written approval of the latter. Trials by special courts will be guided by a special set of rules and procedures incorporated in the act, superseding or supplementing many of the archaic provisions of the 1973 Criminal Procedure Code and the Indian Evidence Act, 1872, to ensure speedy trial.
· Provisions have been made in the act for (a) attachment/forfeiture/confiscation of all property acquired by or through serious economic offences; (b) protection of informant/’whistle-blower’/complainant/victim and crucial witnesses; (c) shifting of the burden of proof onto the suspect; (d) victim’s rights to be represented during trial, including right of compensation; and (e) laying down the maximum and minimum punishments.
The need for a holistic strategy for combating corruption
It is generally admitted that corruption and serious economic offences cannot be curbed either by law or codes of conduct or by sporadic preaching of moral values. A stringent law must be accompanied by a credible institutional mechanism for its enforcement and a proactive judicial process. This is what has been attempted in our draft legislation, to make serious economic offences (including corruption in high places) a high risk and low profit venture. However, we are not unaware of the fate of the Lokpal Bill1); this was first introduced into parliament in 1968 but successive governments have done nothing more than periodically repeat their pious intention of having it passed as a law.
The enormity of the problem of governance in a country like India needs to be placed in proper perspective. On the positive side, let us not forget that this is perhaps the only country in this part of the world, from the fringes of Europe to the islands of Japan, in which democracy has survived for over fifty years. With a vast geographical area, covering 3,287,263 sq.km, and a population exceeding 1000 million and speaking over eighteen languages spread over twenty-eight states and six union territories, and with hundreds of political parties (national and regional) and nearly five million government employees (central and state), the country presents a huge challenge on all fronts: democratic functioning and governance, economic development and eradication of poverty, and illiteracy. India faces divergent pulls and pressures with some areas having fairly high literacy (90-91 per cent in Kerala and Mizoram) and some (like Bihar, 47.5 per cent) low. Economic development is also uneven. The national average density of population (324 per sq.km) does not reflect the situation in many urban areas, whose population density is 4 to 10 times the national average, with attendant problems of housing, sanitation and provision of civic amenities. When views are expressed as to why models of economic development or anti-corruption elsewhere cannot be emulated in India, the relative magnitude and complexity of the problems are often not realized.
The task of organizing any effective anti-corruption initiative in a country like India is daunting. At the same time, there are some encouraging developments which should be utilized by civil society. For example, a resentment of corruption and other forms of political debasement is discernible among a growing number of citizens and NGOs all over India, a phenomenon which was not much in evidence even two or three decades ago. They have taken up issues like electoral reform, and police and criminal justice reforms, measures which could exert pressure against corruption and political debasement. Secondly, the media (print as well as electronic), by and large, has come out in support of civil society’s concerns. Thirdly, in a number of landmark judgments, our higher judiciary has initiated strong measures against some notoriously corrupt or anti-social elements in the political arena or public service. This has sent strong signals that anti-democratic activities may invite stern judicial intervention. Finally, and importantly, there is evidence that a majority of Indians, cutting across the regional, religious and ethnic spectrum and irrespective of literacy levels or economic status, continues to consider corruption as dishonourable or improper conduct. It remains to be seen how best, and how soon, this reservoir of anti-corruption sentiment can be activated to ensure probity in India’s public life.
Even after nearly 43 years (2011), the fate of the Lokpal Bill is still uncertain as has been revealed in the current civil society (led by Anna Hazare) – Government of India imbroglio over the draft of a proposed Bill.
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[ This paper is largely based on the author’s earlier article submitted to the Australian National University (Canberra).]
1 This bill provided for somewhat like a national level ombudsman with jurisdiction over ministers and other senior public functionaries in relation to allegations of misconduct and corrupt practices.
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