Black Money Probe – Modi is Right

Modi government’s active cooperation with SC appointed SIT

  • Since 2011, SC has ordered constitution of SIT to investigate any and every case relating to black money menace.
  • The first decision of Modi government was to appoint SIT as per the orders of the Supreme Court.
  • A complete list of cases where information has been obtained from the German and French governments, along with up-dated status of action taken by Income-tax Department was submitted by Central Board of Direct Taxes to SIT on 27.06.2014. Therefore, SIT had all the information that was provided to the SC today. This has been confirmed by Justice MB Shah, the retired SC judge who is heading the SIT, in an interview to a news channel. He said “all facts that were revealed in the black money list were already known to us”.
  • A meeting on 05.08.2014 with Chairman and Vice-Chairman of SIT was held where they were briefed on status of cases in detail, covering main action areas, nature of information received, non-sharing of information by Swiss, problems faced in taking further actions, alternative methods to obtain account details. Therefore, Finance Ministry was regularly briefing SIT on progress.
  • SIT gave certain directions to Finance Ministry officials which are being immediately complied with.
  • Justice MB Shah, who heads the SIT, has also said in the same interview that the government is not trying to protect anyone.

What the UPA did about the SIT

  • When a suggestion was made in 2011 to appoint SIT, UPA’s Solicitor General “vociferously opposed the idea” as per SC. Below is screenshot from SC judgment of 2011 (when UPA was in power)

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  • In November 2013, UPA filed an application in court asking SC to modify its earlier order that appointed SIT. The SIT was asked to investigate the Hasan Ali case and other cases. In other words, UPA, as late as in November 2013, still hoped and tried that the SIT would not be formed. This petition was dismissed by SC.
  • Even on 08.05.2014, UPA, in its last days, filed a review petition, among other things, to cancel important SC orders which constituted the SIT.
  • UPA kept delaying appointment of SIT; eventually, that became Modi government’s first decision in office

What the UPA generally did in its efforts to get back black money

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  • SC agrees that recovery of black money has aspects which may or may not be under our control. But UPA did not even attempt measures which were within its powers.

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Modi government sought clarification on some aspects of SC’s orders and asked for modification if SC felt necessary in view of clarifications sought

  • In 2011 judgment, SC clearly stated that disclosure of names against whom no evidence of wrongdoing was found was an “instantaneous solution to systemic problem” like black money which would “lead to dangerous circumstances in which vigilante investigations, inquisitions and rabble rousing by masses of other citizens could become the order of the day.” SC said that disclosure was a violation of right to privacy. Only after the State arrives as a prima facie conclusion of wrongdoing based on material evidence, only then would the question arise of the right of the public to be informed. [Paras 73-77]
  • However, in an order dated 1.05.2014, SC said names of 8 people against whom investigations were concluded must be given to the Petitioner (i.e., Ram Jethmalani) despite the fact that no evidence of wrongdoing is found against them. There was a contradiction between the two orders.
  • Unfortunately, the 8 names got into the public domain. Germany wrote to India in June 2014 expressing surprise at this revelation and asked India to provide an explanation of how this information got to be disclosed.
  • Moreover, when Germany had provided information of Liechtenstein bank account holders to India in March 2009, it was clearly under the tax treaty which was subject to confidentiality obligations. Germany wrote that this “information is subject to the confidentiality provisions of the above-named Directive and may only be used for the tax purposes specified therein.”
  • Also, there were some differences with SC’s interpretation of confidentiality clause (meaning of ‘public court proceeding’) in the tax treaties between India and other countries such as Germany from how treaties are interpreted internationally. SC’s interpretation is that information received from foreign countries can be used in hearings before the SC as well. This was against the general and international understanding and interpretation of the confidentiality clause in the treaties which states that information received from countries can only be used for tax purposes and tax assessment/enforcement. Even eminent lawyers such as Shri Harish Salve agree.
  • The combined effect of all of this was that foreign countries with which India still doesn’t have any treaty or arrangement to exchange information, or countries which shared some information had cold feet for further cooperation.
  • For example, India is set to sign the Inter-Governmental Agreement with the US for automatic exchange of information. That IGA is also subject to confidentiality clause. But if SC’s interpretation of confidentiality clause remains different from the international interpretation, there may be delays in signing the IGA. This has several implications on Indian financial institutions. US has signed the same draft with almost 100 countries and, therefore, there is no chance of changing the language.
  • Another example is that India was going to sign a Multilateral Competent Authority Agreement in Berlin today. However, for signing the agreement, the Government of India had to give an international commitment that it would follow international standards for the information received. News reports indicate that India was not able to attend that meet today.
  • Note that all countries which have legally shared information with India so far has been under some treaty or agreement which contains confidentiality clause. There is simply no other way to obtain information.

Modi government chose the harder and riskier option

  • Due to the difficulties in onward process in recovering black money, Modi government had two options.
  • One, it could raise its hands in the air and say there’s a deadlock between what SC interprets and what foreign nations demand. We can’t do anything.
  • Or, it could take a huge perception risk and ask SC to reconsider its contradictory and incorrect interpretation so that the judiciary is on the same plane as the executive and the international fora and that further cooperation is obtained without any problems of interpretation of treaties.
  • It chose the latter, riskier and harder option because it didn’t want to give up on its effort to secure black money stashed away in foreign accounts. This latter option required an application to the SC to clarify / modify its earlier orders which were leading to a critical difference in interpretation.
  • Modi government knew it would suffer from bad perception. But, instead of merely quitting this effort due to mismatch between SC’s interpretation and internationally accepted interpretation, Modi government tried all it could so that cooperation from foreign nations doesn’t reduce or stop.
  • Those doubting Modi government – please ask yourself which option UPA would’ve exercised.

Modi government’s efforts with the Swiss authorities

  • The Swiss government was not willing to provide any information on data of foreign accounts in Swiss banks that was leaked because it considered such data ‘stolen data’ which is obtained in breach of Swiss laws.
  • However, due to ongoing efforts of the Modi government, Switzerland has indicated willingness to provide information in cases where our Income Tax Department has carried out investigation independently of the ‘stolen data’. Therefore, the Swiss authorities may offer cooperation with those cases.
  • Swiss tax authorities have also agreed that they would assist India in obtaining confirmation of genuineness of bank documents and swiftly provide information on requests relating to non-banking information.
  • Swiss authorities have also assured that they will commence dialogue with India for entering into an Automatic Exchange of Information Agreement between India and Switzerland. This is the first time Switzerland has agreed to commence discussions on a treaty such as thisThe UPA never bothered to have an automatic exchange of information arrangement with Switzerland. It is Modi government’s persistent efforts that have yielded progress.

 

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Note: The contents of this “Notes and Releases” has been prepared by a BJP research Team.

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