Governance Deficit = Judicial Activism Surplus?
Ordinarily, we cover issues that impact the operating environment of companies. But we have sometimes broken from tradition - last year in December, The Firm ran a series on public interest issues - regulatory reform, legitimizing lobbying, anti-corruption and the Lokpal Bill- much before it became a fashionable slogan. This week we break from tradition again to focus on recent political events!
This week, the Supreme Court ordered a Special Investigative Team (SIT) to look into the black money issue - the SIT has been given a very broad scope. Is this one more instance of the Supreme Court stepping on the toes of the Executive and Legislature? Has the governance deficit led to a surplus in judicial activism? And while that may be soothing in the short-term, what impact will it have if it becomes a long-term trend? Senior Advocates of the Supreme Court - Harish Salve and Dushyant Dave debate just that and to offer a business point of view, we have Harsh Mariwala, Chairman and Managing Director - Marico Industries and President FICCI.
Doshi: If I may point out what the SC judgment says- it not only tasks the SIT to investigate the case of Hasan Ali and the Tapurias but it also says it can investigate “all other investigations already commenced or are pending or are awaiting to be initiated with respect to any other known instances of the stashing of unaccounted monies in foreign bank accounts by Indians or other entities operating in India.” So that is virtually saying all black money issues. It also says that the SIT should ensure, investigate, proceed as well as prosecutions are conducted with regard to criminality and then it goes on to say, the “SITs should also be charged with the responsibility of preparing a comprehensive action plan, including the creation of necessary institutional structures that can enable and strengthen the country’s battle against generation of unaccounted monies.”
Now, I know that you have, over the last several weeks, been batting for the SC on national television but even you will grant that this is a very broad scope for the SIT and in a sense asks for the SIT to do things that otherwise the government would have to do?
Dave: I don’t think it is sweeping in any sense; I don’t think this is judicial activism. I think what the SC is doing is discharging its constitutional obligations and if it were not to do this, I think it would be failing in its duties. Let me give you an example- over last sixty years, government or parliament has enacted more than 50-60-70 or 100 legislations to overcome judgment’s of the SC. Parliament has done it because it felt that the SC judgment on certain issues were wrong- maybe income tax act, maybe some other law- all kinds of situations. What I am trying to point out is that in our Constitutional scheme, separation of power demands that judiciary, executive and the legislature perform their functions as best as possible. If anyone of them transgress it or if anyone of them omits to discharge its functions, the other one has to fill in the gap and that is what is known as the judicial review of administrative action. That, to my mind, is in the core of our Constitution.
Doshi: This is not filling the gap. This is going much beyond the gap that has been created by an inactive, inept government- if you want to call it so- or a legislature that may not be terribly concerned about these issues. This is not filling a gap, this is a very wide ambit and it may, in some sense, enforce the argument that we are seeing a peak in the age of judicial activism.
Dave: Let me put it this way, the Constituent assembly comprising of some of India’s best minds debated Constitution of India for about three and a half years. At the end of that, when the Draft was ready, there was a very interesting anecdote. Dr Ambedkar was asked by Pandit Jawaharlal Nehru in the last session, “What provision of this Constitution to your mind is most important or most sacrosanct?” Dr Ambedkar said and that is very important in the context of what SC is doing that, “If I had to put my finger on a single article, it would be Article 32 of the Constitution of India which is the power of the SC to enforce fundamental rights.” Fundamental rights can be enforced individually at the request of a petitioner or in India, fortunately for us, through a PIL collectively on behalf of all those who are affected or likely to be affected by government’s action or inaction. So it is an extremely beautiful development of law and I don’t think we should be saying that the courts are transgressing their limits or are assuming sweeping powers. Let us look at it this way- are the governments not forgetting their duties universally which would compel any person to step in. I will give you an example- Italy, when the mafias became extremely powerful, it was the Magistracy in Italy which stepped into the shoes of the government and it was the Magistracy which issued widespread arrest warrants against the mafias and that is the reason why the mafias are under control somewhat in Italy today.
Doshi: Mr. Salve would you agree with Mr Dave or would you say that the broad scope that this SIT has been given by the SC only strengthens the arguments of those who say that we are now seeing a peak in judicial activism in this country?
Salve: First of all I am a little uncomfortable when you get into sweeping expressions like judicial activism. So let us speak of the order because it does raise some concerns as far as I am concerned.
Yes, there is a complete deficit today in the credibility of the government and that is the root cause of all this judgment. The problem which this governance deficit is creating, the problem which this credibility deficit is creating is that we are now experimenting with institutions, which may not possibly be designed to deal with the kind of problem which it is confronting. Black money is a very complex problem, black money has very different sources and I am afraid a reading of the order suggests that the one-to-one correlation means if there is money in a foreign bank account, therefore it reflects untaxed money and therefore it reflects this and therefore it reflects that- this may not entirely be correct.
The second thing is where an institution fails, we have to rebuild that institution. Now creating an SIT to do what is essentially a police function is in a bit of a problem and the third, with my experience which I have of international taxation, that it is I think little simplistic to assume that information about foreign deposits and foreign bank accounts will be forthcoming. It is one thing where governments like Germany, which have got this data have come out with that amnesty scheme and told people for voluntary compliance and then they will try and enforce but let me tell you even the United States, which is today arguably the most powerful nation in free countries, when they ask for information, they get information in a slow halting manner. To think that one letter from the government from the Government of India will elicit a similar response is, I think, being a little optimistic. To think, therefore, that by constituting such a committee we will get to the bottom of all this, we will get the evidence and to think therefore that failure to get this evidence necessarily means dishonesty on the part of the investigation- I don’t think is a justified assumption.
Doshi: To be fair, the judgment also prohibits the public disclosure of the account holders in the Lichtenstein simply on the grounds that just because there is black money or just because there is money in a foreign account, it is not black money but I am going to leave that point there and come to you Mr Mariwala. You are listening to what Mr Salve and Mr Dave have to say with regards to the judiciary stepping now into roles that maybe it doesn’t have the full wherewithal to fulfill or using instruments like the SIT to do so. In an environment that is already clouded with uncertainty, what does this mean for business?
Mariwala: First, I would like to make a larger point that we are taking the India growth for granted. I think that there is the fallacy in that. We need reform to drive GDP growth in the country and I think for that the government has to be active. As earlier mentioned by Mr Salve, there is a governance deficit and reforms have to continue. I think partly because of this vacuum, which is created by the government, the judiciary has become little more active than what they should have done and it is having its own implication in terms of some degree of de-motivation at the bureaucracy level, at the ministerial level.
The second point I want to make is to what extent do they have the knowledge of the subject to give a judgment and if they have to be active, should they also be interacting with…(Interrupted by Anchor)
Doshi: Which is exactly the point Mr Salve made and so therefore, can I say that this is simply adding to the clouded uncertainty of this environment right now for business even though in the short-term civil society and ordinary citizens like me feel a little more comfortable or assured that the SC is stepping in to fill the gaps; one is not sure what the long-term implications of this are?
Mariwala: I think there is a certain degree of danger in this because they may not understand the subject and if they have to give a certain verdict on that, it is a danger. If they have to step in, they have to rope in some experts and get some expert feedback before giving a judgment
Doshi: Over the past few years, thanks to an increasing spate of PIL, the Supreme Court has intervened in all kinds of matters- road safety, monkey menace, food grain distribution. Harish Salve, you said judicial activism is a very sweeping term, but you will agree that increasingly the Supreme Court seems to be playing a bigger and bigger role in the running of this country?
Salve: I don't see anything wrong in that. See please understand, the Supreme Court of India which is a Constitutional court/ is not just a tribunal for resolving disputes between parties. It is a Constitutional court. It's a wing of government. It's a wing of Constitutional government. Wherever there is a failure to implement rights of citizens, the court must step in. The rights can be a right to a clean environment or rights can be a right to public safety. There are also cases where there is the rule of law, which is at question, where offences are not properly investigated, the court steps in once in a while, although that itself is fraught with difficulties, but then when left with no recourse, the court steps in. The trouble is, in certain areas, in complex areas such as investigation of black money- yes, there is a serious problem about black money. The real issue is lost sight of - why have we created this regime that there is so much black money. Today, property in India is the single biggest destination for black money and property in India is so heavily overpriced - because of dishonest government policies dealing with real estate- you first create a scarcity and then prices are driven up. All these are created because of bad government policies, which when challenged - the courts have upheld. It is for the first time the Supreme Court has struck down a land acquisition. So therefore to suggest neo-liberalism is creating black money is wrong.
Doshi: But you are only talking of the black money. I am talking about the Supreme Court's decision over the recent many years that encompass several issues. I understand there are tasks that need to be taken for protecting fundamental rights. But it has entered almost every aspect of governance or society, I am not saying it's bad, I am just wondering if it has long-term negative implications?
Salve: Yes, it does. I will tell you, it does. Ultimately regulating the environment is more an administrative job than a judicial job. Judiciary can step in where there are complex laws of environment and once in a while to lay down broad paradigms of the legal principals on which environment has to be regulated. But unfortunately, at times, Court has had to do the work of the executive. It has to put the executive back on its feet. So yes, this is not a long-term sustainable model. The court can step in for a while to fill in a deficit. Unfortunately, what seems to be happening is the deficit is not being filled in. The deficit is only becoming bigger and this doesn't augur well for a democracy.
Doshi: And let me tack on to that, the point of an increasing number of public interest litigations. Dushyant Dave, I think that if the deficit is only widening and the role of the Supreme Court is becoming bigger, then you will admit that will all these PIL’s that we are facing, were making the environment for business even more uncertain?
Dave: I wouldn’t say that it is making it uncertain. Let's understand one thing- today take for example 2G - let us begin as an example. If the government, as a policy, was to take a decision that we are going to give 2G licenses on first come first basis but we will pick up the best in the field, it's a different situation. But if you start giving these licenses to fly-by-night operators or some real estate developers, it is not really good for the country. No, we are not talking about… (Interrupted by Anchor).
Doshi: Currently under the aegis of the 2G investigation, we are now investigating, rightly so maybe, but we are still investigating policy that goes all the way back to the late 90s. Several bureaucrats from 5-10 years ago have been questioned. Now my point to you is this- that business has gone about doing their business based on a certain set of policies that were put out by the government. 12-15 years later, if those policies are found to be bad in law or corrupt, how is business ever going to get any kind of certainly and I am expressing the point of view of several business leaders who talk to me and say we appreciate what the Supreme Court is doing but we don't know how to go about doing business?
Dave: No, let me tell you one thing. There is one principle, which is universally accepted and it must be accepted by any civilized society and any democracy for it to survive. Fraud unravels everything. If you have got your licenses in a fraudulent manner, you have no right to now make complaints about it. Everybody is not a Harsh Mariwala in industry in India today or Azim Premji or Infosys. People in this country have got used to doing business in a rather unacceptable manner. In the last 30 years you see the industry giants- they have really become giants because of patronage from the government and the patronage is always by not following the law which is apparently for corrupt consideration. Do we want that business model to succeed?
Doshi: Harsh Mariwala, would you agree with that?
Mariwala: You are putting me in a spot but I think what Dushyant is saying that a lot of businessmen have become wealthy by using the government's connection. I won't know much about it because in our kind of an industry we don't need it.
Doshi: Let's go back 20-30 years and examine the License Raj- my point is simply this, hold people accountable, but do it within a timeframe because everyone I talk to in business says this is becoming a witch-hunt?
Salve: There is something more fundamental also. There is something which worries me. We run our country the way we run our country. You have created a regime where you insist that there must be an Indian partner in telecom. You then follow some practices by which some people are given licenses. Nobody knows what the hell is going on. Then you allow Foreign Direct Investment. Foreign investors come in; they see somebody holding a license which doesn't carry a brand of fraud written on it. People come and invest billions of dollars in your country. You have to separate the grain from the chaff. If somebody got the license fraudulently, send him to jail. But you can't tell a foreigner- sorry, you choose a bad Indian as a partner and now unless you can show the involvement and I don't think anybody has ever suggested that the Telenors or the Etisalats of the worlds knew that this license has been obtained in this fashion. Nobody knew what was going on in the darkness of the night in Raja's office. So even if all this is said to be true - up till now we had political risk in India. I am sorry; we will reach a stage where we will have to add PIL risk as a risk of investing in India. That fear worries me- what it holds for FDI in India.
Dave: In a short run yes, we may suffer. But in the long run we will gain.
Salve: I don't agree with a short-term and long-term analysis for the simple reason. If the foreign investors feel that in India people do not care to separate the grain from the chaff, it doesn't do well for the country. If generally the impression being painted and partly by the Indian media, the general impression being created is that India is not a safe country, it is still a bloody Banana Republic- please don't think that I am suggesting that in the 2G scam there should be any let up in the investigation. If people have abused the system- it is one very good thing which has come out of the 2G investigation- hopefully it has redefined coalition politics in India. I don't think any majority party in India will again farm out ministries and then turn a blind eye as this government has done.
Doshi: I come back Mr. Salve to the two points that lawyers keep making to me every time I raise this issue of judicial activism and that is that - maybe the founding fathers of our country did, in fact, want the Supreme Court to have a supreme position over both the executive and the legislature and that itself is enshrined both in Article 32 and Article 142 and therefore these complaints or this criticism that maybe we are seeing too much judicial activism is unfounded because this was what was intended to be. Would you agree?
Salve: I don’t agree at all. There is no supremacy in Constitutional institutions. Let’s be very clear. All institutions work in cohesion. Supreme Court is to have the last word in interpreting the law in the Constitution. Wherever legal issues arrive, wherever issue of enforcement of the Constitution arrives- the Supreme Court has the last word. Within the framework of the law, it is the executive who has the last word on how policies are to be framed, how policies are to be implemented. Sometimes when courts get into economic policy and say liberalism is leading to something or we should have socialism back so that these things don’t happen - that is where we are entering into the grey area of trenching on other jurisdictions.
Dave: I have very different view from what Harish says. In fact, let me recognize Harish’s own contribution to two areas where Supreme Court has acted very aggressively in what you would call judicial activism. Environment, for example where Harish has given remarkable assistance to the cause of environment and to the people of India. Another area where Harish really contributed a lot was the Gujarat riot cases. Now all these are cases where there was complete and dismal failure by the governments in implementing the environmental laws or in ensuring that the guilty are punished in Gujarat riots. This is happening now on day to day, hour-to-hour basis. If that continues - you can’t really expect these judges of the High Courts and Supreme Court to sit by idly and to allow this system to be hijacked by few thousand bureaucrats, politicians and vested business people. We all need to be protected. The nation needs to be protected, its people need to be protected from these people who are really marauding and killing this country. I find that they have completely hijacked the system.
Doshi: Mr. Salve - are you in favor of what the Supreme Court, its expanded pile in the recent past or are you saying that this will have negative implications?
Salve: Let’s be very clear. What you consider an expanded role is an expanded optic because as Dushyant Dave rightly points out - there is such an abject failure of the government to implement laws in so many different fields. Let’s remember one thing - from time we recognized what is called the power of issuing a writ - one of the oldest writs is the Writ of Mandamus which means directing the government to carry out its statutory duty. So the power of the Constitutional court to enforce the law and to compel the executive to obey the law is a classic function of the court. Then if that is expanding - it is expanding because there is a larger and larger failure of government. That expansion is called for, it’s the constitutional duty and it is not the court widening its jurisdiction. Where we have to be careful and this is where the caveat I mark is in this process it’s a human institution and like all human institutions, we have to be very careful to see you don’t cross the line and get into an area where the court starts framing policy.
Doshi: I am going to quote from a 2007 column by one of your colleagues Anil Diwan- another Senior Advocate of the Supreme Court- where he is talking about judicial activism and how its come to stay in India and will prosper as long as the judiciary is respected and he is not undermined by negative perceptions which have over taken the executive and the legislature. “There is concern amongst the public about lack of transparency in judicial appointments and a sense of increasing unease because of a lack of credible mechanism to deal with the serious complaints against the higher judiciary.” My last point to both of you gentlemen is that if the Chief Justice of the Supreme Court today was not a man of upstanding values and impeccable reputation such as justice SH Kapadia, would you both still feel as comfortable about the kind of activism that we are seeing or the broadening of the scope of the Supreme Court in the recent past?
Salve: Let me tell you and you put your finger on it. When I say you have to watch with caution where the court is heading, it is also underscoring a very important point. Today you have no reason to worry about the constitution of the Supreme Court. But the system has its problems which we are not attending and that again is failure of governance. There has been the need, defined need to set up an institution, in some degree of urgency, like a judicial committee, a judicial accountability commission, which can make sure that the system works well and there again nothing is being done. So there is a problem in any institution. See the failure of government and the failure to implement laws gives that much expanded role to the court to come in and implement the laws. The system is going into imbalance; too much pressure is going onto one institution and every institution is capable of failing. We are putting all our eggs in one basket and ultimately we all come from the same stock, from the same society. All of us, Justice Kapadia included, come from the same Indian society from which members of our political class come. So if there is a problem in Indian society, which is reflecting in the politics of India, it some day may even reflect in the judiciary of India. So that is why institutions have to function as checks and balances and that's where the larger system is failing today which is what is worrisome.
Doshi: Dushyant Dave, would you like to comment on that and before you do - I am going to actually quote to you from a 2007 judgment by Justice’s Mathur and Katju where they speak about judicial restraint and I am told this is a landmark one where it says “judicial restraint is consistent with and complementary to the balance of power amongst the three independent branches of the State.” They go on to explain that “judicial restraint tends to protect the independence of the judiciary because if the judiciary becomes too big - it would then be accompanied by demands of accountability.” Would that eventually lead to calls of - let’s have an elected judiciary. I think elsewhere in the judgment they also point out that we don’t have the infrastructure to be able to go out there and ensure that every aspect of this country is working fine. So I understand you are admirable of what the Supreme Court has done in the recent past but I hope you are cognizant, as several justices have pointed, out that any extreme of this will in fact be counter productive.
Dave: Let me say one thing. Speaking for myself - I think this view by Justice Mathur and Justice Katju is an extremely myopic view of the Constitution of India, the position that Supreme Court enjoys under the Constitution of India. I think it completely ignores the checks and balances which are provided in the Constitution and the duty on the part of the Supreme Court of India. But having said that - let me say one more thing. I do not think an individual really matters. It is the institution which matters. Although under Justice Kapadia today - we have one of the finest judges - a man with impeccable integrity. Yes we had serious problems before and many other Chief Justices in the past. But the question that you really ask, which is being asked against the judiciary about openness and lack of transparency - that problem persists even today under Honorable Chief Justice Kapadia. Because even today we are not open, we are not transparent. We have to do a lot more because we are not making the best of the appointment. But having said that - I think the institutional power of these checks and balances - you call it judicial activism- must prosper.
Salve: Long time back on a debate when I was asked that - do I think the Supreme Court is running the country? I said as citizen Salve - thank God somebody is running the country.