Any promise to act against corrupt politicians, bureaucrats, dubious businessmen and others who misappropriate precious resources is always welcome by the people. This was an overarching factor that catapulted Narendra Modi (he made grandiose promise to eliminate corruption and scams) to the seat of power in 2014 and for a second term in 2019. In case however, the required action is missing, they feel cheated; the pain is even more when the country is hard pressed for resources as during the current year.
In an affidavit filed in the Supreme Court (SC) on July 6, 2020, the Union government has suggested ‘there was a trend of people accused in high-value economic offences approaching the SC directly – instead of an appropriate court – to get protection from arrest, and that in 44 such cases, the court had granted relief, significantly affecting the ability of investigative agencies to go about their probes’.
It wants the court to ‘address the issue, vacate the interim relief orders, and ask the petitioners to follow the prescribed legal route by appearing before the appropriate lower courts’.
The affidavit was filed in a matter pertaining to Bhushan Steel Ltd (BSL), involving the company’s former chief financial officer (CFO) Nittin Johari. The list of cases appended in the affidavit concern scams involving tens of thousand crore and includes BSL (this case alone involves a staggering amount of Rs 20,000 crore). The Chief Justice of India (CJI), SA Bobde has asked for a list of such cases heard by different benches and listed the matter “along with other similar matters” for hearing on July 24, 2020.
How will the apex court respond to the petition by the union government? Will it vacate the interim stays granted so far? Will its order pave the way for completion of proceedings in such cases on fast track? Or, will it be business as usual?
The answer to these questions will be known in due course. Meanwhile, it is necessary to look at the pros and cons of granting interim relief and its impact on the investigation and progress of cases under judicial scrutiny.
At the outset, we need to recognize that most of these frauds involve siphoning off funds from legitimate business activity and laundering these through a web of shell companies (an acronym for entities which exist merely on paper showing transactions for which there is no corresponding activity in reality) whose beneficial owners are none other than the fraudsters themselves. Even as this adds to the personal riches of the fraudster – as also all those who collaborate with him in ensuring success of his game plan – the firms/entities (widely held companies, banks, public sector enterprises or other agencies of the state) from where the funds are siphoned off lose.
These being economic offences and involve money laundering, the prosecution of offenders happens under special legislation such as the Companies Act, GST (Goods and Services Tax) Act, Prevention of Money Laundering Act (PMLA) etc and the investigating agency viz. Enforcement Directorate (ED) registers a report in its records but no FIR is registered. In cases, where frauds also entail misuse of the official position in exchange for favor (or quid pro quo as it is understood in legal jargon), hence, corruption is involved, prosecution happens under Prevention of Corruption Act (PCA) as well and FIR is registered by Central Bureau of Investigation (CBI).
The rationale behind not registering FIR in economic offences is: if the agency lets the accused know at very beginning (natural, when the FIR is registered), given the very nature of the crime, he can temper with the evidence and investigation will be jeopardized. The prosecution would have lost the race even before it begins. Therefore, ED puts it all on records but does not share till the probe is completed. While, this is bound to be resisted by the accused as the agency suddenly knocks at his door with an arrest warrant, but, that is the way to go – this being a prerequisite for an effective probe.
Having committed an offence (albeit economic) which impacts the life of tens of thousands (think of the plight of depositors who lose their hard earned savings in a bank scam), the accused should be prepared to face the consequences. If, he feels he has done nothing wrong (very unlikely though as the agency would go after him only when it has prepared a fool proof case), he gets full opportunity to defend himself and prove his innocence in the court.
Yet, the offenders take strong exception to the action taken by the agency. Faced with imminent arrest, they are suddenly reminded of their fundamental right and promptly use the most suitable provision available under the constitution (Article 32) to petition the SC seeking protection from arrest which is readily granted. While, doing so, they are brazenly unmindful of how through their actions, they trampled the fundamental rights of other citizens. Perhaps, even the apex court is oblivious or else why would it grant them interim bail so easily.
Why do they approach the SC directly? Why don’t they take recourse to the remedy available under the law — applying to the court of sessions or high court for bail – under the relevant section (438) of the CrPC (criminal procedure code) or other applicable laws?
There is an orchestrated game plan in directly approaching the top court. An order coming from the highest level in the judicial hierarchy carries enormous weight, even if it pertains to a mundane issue of granting interim bail. If, to this one adds that the issues connect with substantive questions of law that the top court is looking into, then the impact is even greater.
When, the competent court (sessions or high court) are confronted with an order saying that ‘the SC has granted bail to the accused’ in the matter, it comes under pressure more so because the SC order also mentions ‘no coercive steps to be taken’. As a result, in many cases, proceedings before these courts are stayed and probe come to a standstill for the reason that the SC has granted interim relief.
An observation ‘no coercive steps to be taken’ is only intended to signal that no arrest or any other harsh steps be taken. It can’t be stretched to a point whereby the courts bring the proceedings to a grinding halt. Surely, this is can’t be the intent of the top court. Yet, if the lower courts are staying the proceedings, this is not good omen.
But, the more important question is: why is the SC giving interim relief in the very first place? On a close look, it turns out that the offenders pray for it on the ground that constitutional validity of some or the other provisions of the special laws viz. Companies Act and CGST Act are under challenge. And, the apex court accepts their logic. This is anomalous.
How could the SC grant a major relief to the accused merely on the basis that a certain provision of the law is under challenge? A law is enacted by the parliament after due deliberations. True, this is subject to judicial scrutiny and the apex court has the constitutional obligation to examine if it is challenged. But, the scrutiny has to be comprehensively gone through and verdict delivered. Till then, the SC should refrain from passing from any order even if it relates to granting bail all the more when, such order has the effect of helping the economic offenders escape action under the law.
To sum up, the economic offenders have resorted to all sorts of tactics (including challenge to the constitutional validity of the special legislation) to somehow manage interim relief from the top court and stymie the probe and judicial proceedings. Having got it, they sit complacent enjoying immunity from arrest.
This not delays the process of recovering funds siphoned-off/looted from public institutions viz. banks, PSEs, firms (where millions of investors put in their hard earned) or no recovery if the delay is inordinate but also, sends a wrong signal. It gives a message to potential fraudsters to indulge in such loot as they know for sure that they will escape being punished.
Hence, there is dire need for the SC to correct the course and make way for timely action against the offenders.