Government Response to the Black Money Demand

Recovery of Black Money

There is a legal framework regulated by the Reserve Bank of India for the opening of bank accounts overseas by Indian residents and for outward or inward remission of funds through authorized channels. The existing legal framework for dealing with illicitly generated funds transferred overseas and measures for the attachment and repatriation of such illegal assets to India and provision for penalties for offenders are:

A. Under the Prevention of Money Laundering Act, 2002 (PMLA), money laundered out of predicate scheduled offences can be attached and seized and individuals and other legal entities found to have indulged in money laundering can be prosecuted. PMLA provides for imprisonment of minimum of 3 years (which can be extended up to 7 years) and a fine of up to Rs.5 lakh and the tainted proceeds parked overseas can be recovered through Mutual Legal Assistance Treaties. India has such treaties with 26 countries.

B. Under the Foreign Exchange Management Act, 1999 (FEMA), cases relating to contravention in foreign exchange transactions by Indian residents can be adjudicated with penalty up to a maximum of 3 times the amount involved. Further, FEMA empowers the confiscation of the amounts lying abroad and directing their repatriation.

C. Under both statutes (FEMA and PMLA), investigation is taken up against specific persons, both natural and legal, and on the basis of specific information.

D. Section 105A of the Cr. PC provides for reciprocal arrangement and procedure for attachment and forfeiture of properties generated from the commission of an offence. Where such properties are situated overseas and treaty arrangements exist between Government of India and the other country, Letter Rogatories can be issued to a court / authority of the other country for execution of such an order.

E. Under the Income Tax Act also, income earned and not disclosed is taxable and also subject to penalty and interest, as well as prosecution. The amount recovered may even exceed the entire undisclosed income. This is in effect confiscation of such income / property.

Actions at hand

I. India has negotiated / renegotiated Double Tax Avoidance Agreements and finalized Tax Information Exchange Agreements with 44 countries so as to strengthen the exchange of information relating to tax evasion, money laundering and other criminal / illicit activities.

II. Agencies enforcing these laws have been strengthened and action is being taken in all cases where credible information is available. In the last two years, over Rs 33,000 crore of mispricing has been detected in international trade and over Rs 30,000 crore of tax evasion detected domestically.

III. Government has commissioned a study, to be completed within 18 months, by three national-level institutes to assess the extent of black money inside and outside the country and its impact on national security. The study will also indicate the sectors and mode of generation of black money and recommend measures for its prevention and control.

IV. The Direct Taxes Code Bill, as introduced in Parliament, contains provisions for mandatory declaration of assets held abroad by taxpayers in India. It also contains provisions such as General Anti Avoidance and Thin Capitalization Rules to combat illicit transfer of money and assets abroad through complex financial arrangements and instruments.

V. A Directorate of Criminal Investigation has been created in the Central Board of Direct Taxes as a dedicated unit to track financial transactions relating to illegal / criminal activities and bring such activities to justice.

VI. A High Level Committee has been constituted under the Revenue Secretary for effective sharing of information among Law Enforcement Agencies for coordinated investigation / prosecution of economic offences.
Mauritius Treaty

1. A Joint Working Group (JWG) was constituted in 2006 for the purpose of renegotiating the Direct Taxation Avoidance Convention with Mauritius and its last meeting was held in 2008. Thereafter, India has successfully used the mechanism of the Peer Review Group (PRG) of the Global Forum for Transparency and Exchange of Information for Tax Purposes – of which India is Vice Chair – to leverage arguments with the Mauritian side to be more open in furnishing tax related information to India.

2. Recently, during the visit of President of Mauritius in end-April, an indication was received that Mauritius would resume the Joint Working Group dialogue on the DTAC. Further, Foreign Minister of Mauritius has conveyed that his government will give a fresh mandate for the resumed negotiations to their experts. This position has been further confirmed by the Prime Minister of Mauritius to the Indian Minister of State for External Affairs on 16th May 2011 during her visit to Mauritius.

3. Hon’ble Supreme Court in the case of Azadi Bachao Andolan Vs Union of India (2003) endorsed the Mauritius route for investments into India for availing of the capital gains tax exemption. Hence, any change in the law relating to Mauritius can only have prospective application and can be in respect of future holdings/accounts/entities in Mauritius.

Proposed Action

In order to strengthen existing laws relating to black money, the government has constituted a Committee to consult all stakeholders and submit its report within a period of six months. The Committee will examine the measures to strengthen the existing legal and administrative framework to deal with the menace of generation of black money through illegal means including, inter alia,

a) Declaring wealth generated illegally as national asset;
b) Enacting / amending laws to confiscate and recover such assets; and
c) Providing for exemplary punishment against its perpetrators.

Any further suggestions in this regard will be duly considered.

Collection of details regarding people who go frequently to ‘tax havens’.

Government proposes to expand its Immigration/Emigration databases and build a database of Indians going frequently to foreign countries considered to be tax havens and returning to India.

Lok Pal Bill

A Joint Drafting Committee, consisting of Government and civil society representatives is already looking into the provisions of the Bill. Government is committed to the widest possible consultation on the Lok Pal Bill before its introduction in Parliament and subsequently until the passage of the Bill. As a first step, State Governments and political parties are being consulted. Further consultations with the public will follow.

Stronger punishment for the corrupt

This is also under consideration of the Joint Drafting Committee. The maximum punishment for cases of corruption would be increased substantially. It may be noted that money secured through corrupt modes can now be confiscated under the Prevention of Money Laundering Act and some cases have already been taken up under these provisions. Besides, the Department of Personnel is also considering the inclusion of a chapter in the Prevention of Corruption Act to provide for confiscation of ill-gotten wealth.

Special Courts for dealing with corruption cases

Government has already decided to set up 71 new special courts for trial of CBI cases. The number of public prosecutors, inspectors, head constables and stenographers for additional special courts has been increased. Government is open to the idea of more special courts to speed up trial of corruption cases.

Public Services Delivery Act

Various initiatives have already been taken by Government, including Citizens’ Charters, Sevottam and the recently introduced performance management & evaluation system. The Central Government is prepared to introduce a Public Services Delivery Bill in Parliament at the earliest and to prepare a Model Bill for adoption by State Governments. The Central Government will encourage State Governments to adopt the Model Bill to improve the quality and timeliness of public service delivery.

Technical Education in Indian Languages

The Commission for Scientific and Technical Terminology has been set up with a mandate of providing more regional language material in technical subjects. The Commission’s work will be strengthened and speeded up. The National Translation Mission under the Central Institute of Indian Languages, Mysore will also be strengthened. It may be noted that the Civil Services Examination is now held in Hindi as well as in regional languages. Similarly, Hindi is a medium for writing the IIT-JEE examination. The All India Engineering Entrance Examination, in which more than 11 lakh students appear each year, also offers Hindi as a medium. NCERT provides text books in Hindi and Urdu. In Tamil Nadu, Tamil is a medium of instructional examination for degree courses for technical education. Similarly, in the States of Rajasthan, Uttar Pradesh, Haryana, Bihar and Madhya Pradesh, the regional language is a medium of instruction and for examination in diploma level courses in technical education.

In addition to all these initiatives, the Ministry of Human Resource Development has asked AICTE, which is charged with the duty of determining and maintaining standards of technical education in the country to constitute a Committee of Experts to draw up a concrete plan for measures to be taken to increase the use of Indian languages in technical education. This Committee will submit its report in 3 months.

Land Acquisition Act

The Act is in the process of amendment and any suggestions regarding its provisions can be considered for inclusion. Government is committed to wide public consultation on the amendments to the Land Acquisition Act.


Government has already initiated several projects for promotion of organic farming and the use of bio-pesticides and bio-fertilizers. This includes the National Project on Organic Farming, National Horticulture Mission and the Rashtriya Krishi Vikas Yojana. As a result, organic farming which only covered 42000 hectares in 2004-05, now covers 10.8 lakh hectares. Nine States have drafted organic farming policies. There has been substantial increase in production of compost, bio-fertilizers and development of vermiculture. To sustain agricultural productivity in the long run and to address soil health issues, Government is giving special thrust to organic farming under the National Mission on Sustainable Agriculture and is promoting farming practices like green manuring, biological pest control and so on. These measures will be further strengthened and outlays increased.

Minimum support prices are even now based on cost calculations. Elaborate studies are conducted by the Commission on Agricultural Costs & Prices each year before Government finalizes the minimum support prices. These cost studies form the basis of the minimum support prices that are announced. The labour put in by the farmers is also part of the costs. Government will facilitate explanation of the methodology followed by the Commission at the technical level.


National Legal E-Library

A representation of the Lion Capital of Ashoka...

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The ‘National Legal E-Library’ project of the Government is to be dedicated o the nation on 15 August 2011. Dr. M Veerappa Moily, the Minister of Law & Justice had proposed the need for the formulation of a ‘National Legal e-library’ for students and practitioners of Law on 6 December 2009, during his meeting with the vice chancellors of Law University and Colleges across India.

The scope of this program is creation and management of the ‘National Legal e-library’ for 933 schools in India, Bar Associations, Government Legal departments etc. and meet the needs of academic librarians, students, faculty and young practitioners. It aims to provide a practitioners view and a comprehensive understanding of core subject areas of law.

Technology tools that make the concept of E-Library indispensable:

EASY ACCESS : Campus wide access using IP Authentication.

RESULTS CLUSTERING : Familiarises new users with different classes of content by providing an instant, multi faceted analysis of distribution of hits in each result set.

FLEXIBLE DISPLAY AND OUTPUT OPTIONS : Inclusion of full featured tools that allow for printing, emailing and saving.

INTEROPERABILITY : Works with systems you use to manage your electronic holdings through e-journals systems, Article linking Federated search/Metasearch & Citation export to Reference Works.

SMARTINDEXING TECHNOLOGY : Helps users reach the information they need by applying controlled vocabulary terms for several different taxonomies.

POWERFUL SOURCE SELECTION : Identify sources by type, language, topic, geography and other facets.

The project is likely to be implemented in three phases. In the first phase two comprehensive research platforms will be implemented across all law schools in India. In the second phase the services of the comprehensive research platform will be extended to the entire practitioner universe. Further, e-filing and Practice Management will be extended for all the courts in India in this phase. The third phase focuses on sustained usability and development of a comprehensive education development platform. This phase aims at creating a robust system of legal skill enhancement and development.

Freedom of the press and journalistic ethics

Justice Markandey Katju  IN THE HINDU

Freedom is important, so is responsibility. In countries like India, the media have a responsibility to fight backward ideas such as casteism and communalism, and help the people fight poverty and other social evils.

Freedom of the press and journalistic ethics is an important topic today in India — with the word ‘press’ encompassing the electronic media also. There should be a serious discussion on the topic. That discussion should include issues of the responsibilities of the press, since the media have become very prominent and very powerful.

In India, freedom of the press has been treated as part of the freedom of speech and expression guaranteed by Article 19(1)(a) of the Constitution, vide Brij Bhushan and Another vs. The State of Delhi, AIR 1950 SC 129 and Sakal Papers (P) Ltd vs. Union of India, AIR 1962 SC 305, among others. However, as mentioned in Article 19(2), reasonable restrictions can be placed on this right, in the interest of the sovereignty and integrity of India, the security of the state, public order, decency or morality, or in relation to contempt of court, defamation or incitement to an offence. Hence, freedom of the media is not an absolute freedom.

The importance of the freedom of the press lies in the fact that for most citizens the prospect of personal familiarity with newsworthy events is unrealistic. In seeking out news, the media therefore act for the public at large. It is the means by which people receive free flow of information and ideas, which is essential to intelligent self-governance, that is, democracy.

For a proper functioning of democracy it is essential that citizens are kept informed about news from various parts of the country and even abroad, because only then can they form rational opinions. A citizen surely cannot be expected personally to gather news to enable him or her to form such opinions. Hence, the media play an important role in a democracy and serve as an agency of the people to gather news for them. It is for this reason that freedom of the press has been emphasised in all democratic countries, while it was not permitted in feudal or totalitarian regimes.

In India, the media have played a historical role in providing information to the people about social and economic evils. The media have informed the people about the tremendous poverty in the country, the suicide of farmers in various States, the so-called honour killings in many places by Khap panchayats, corruption, and so on. For this, the media in India deserve kudos.

However, the media have a great responsibility also to see that the news they present is accurate and serve the interest of the people. If the media convey false news that may harm the reputation of a person or a section of society, it may do great damage since reputation is a valuable asset for a person. Even if the media subsequently correct a statement, the damage done may be irreparable. Hence, the media should take care to carefully investigate any news item before reporting it.

I know of a case where the photograph of a High Court judge, who was known to be upright, was shown on a TV channel along with that of a known criminal. The allegation against the judge was that he had acquired some land at a low price misusing his office. But my own inquiries (as part of which I met and asked questions to that judge and many others) revealed that he had acquired the land not in any discretionary quota but in the open market at the market price.

Also, sometimes the media present twisted or distorted news that may contain an element of truth but also an element of untruth. This, too, should be avoided because a half-truth can be more dangerous than a total lie. The media should avoid giving any slant to news, and avoid sensationalism and yellow journalism. Only then will they gain the respect of the people and fulfil their true role in a democracy.

Recently, reports were published of paid news — which involves someone paying a newspaper and getting something favourable to him published. If this is correct, it is most improper. Editors should curb this practice.

Media comments on pending cases, especially on criminal cases where the life or liberty of a citizen is involved, are a delicate issue and should be carefully considered. After all, judges are human beings too, and sometimes it may be difficult for them not to be influenced by such news. The British law is that when a case is sub judice, no comment can be made on it, whereas U.S. law permits such comment. In India we may have to take an intermediate view on this issue: while on the one hand we have a written Constitution that guarantees freedom of speech in Article 19(1)(a) — which the unwritten British Constitution does not — the life and liberty of a citizen is a fundamental right guaranteed by Article 21 and should not lightly be jeopardised. Hence, a balanced view has to be taken on this.

Also, often the media publish correct news but place too much emphasis on frivolous news such as those concerning the activities of film stars, models, cricketers and so on, while giving very little prominence to much more important issues that are basically socio-economic in nature.

What do we see on television these days? Some channels show film stars, pop music, disco-dancing and fashion parades (often with scantily clad young women), astrology, or cricket. Is it not a cruel irony and an affront to our poor people that so much time and resources are spent on such things? What have the Indian masses, who are facing terrible economic problems, to do with such things?

Historically, the media have been organs of the people against feudal oppression. In Europe, the media played a major role in transforming a feudal society into a modern one. The print media played a role in preparing for, and during, the British, American and French Revolutions. The print media were used by writers such as Rousseau, Voltaire, Thomas Paine, Junius and John Wilkes in the people’s fight against feudalism and despotism. Everyone knows of the great stir created by Thomas Paine’s pamphlet ‘Common Sense’ during the American Revolution, or of the letters of Junius during the reign of the despotic George III.

The media became powerful tools in the hands of the people then because they could not express themselves through the established organs of power: those organs were in the hands of feudal and despotic rulers. Hence, the people had to create new organs that would serve them. It is for this reason that that the print media became known as the Fourth Estate. In Europe and America, they represented the voice of the future, in contrast to the feudal or despotic organs that wanted to preserve the status quo in society. In the 20th century, other types of media emerged: radio, television and the Internet.

What should be the media’s role? This is a matter of great importance to India as it faces massive problems of poverty, unemployment, corruption, price rise and so on.

To my mind, in underdeveloped countries like India the media have a great responsibility to fight backward ideas such as casteism and communalism, and help the people in their struggle against poverty and other social evils. Since a large section of the people is backward and ignorant, it is all the more necessary that modern ideas are brought to them and their backwardness removed so that they become part of enlightened India. The media have a great responsibility in this respect.

(Markandey Katju is a Judge of the Supreme Court of India. The second part of this article will follow.)