Corruption Challenges – Lokpal, POCA, etc
Section 107 of the BNSS
Note4Students
From UPSC perspective, the following things are important :
Prelims level: BNSS, Section 107
Why in the News?
- The Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023 introduced Section 107, which focuses on properties classified as “proceeds of crime”.
- Previously, this term was associated with laws like the Prevention of Money Laundering Act (PMLA), 2002 or within the Code of Criminal Procedure (CrPC) under provisions for attachment and forfeiture.
About Section 107 of the BNSS
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Its significance
- Empowers Law Enforcement: It allows attachment of property during investigations, preventing criminals from hiding or transferring assets.
- Faster Relief for Victims: It enables quick distribution of proceeds of crime to affected persons even before the trial concludes.
- Stronger Deterrence: It acts as a deterrent by allowing the forfeiture of criminally acquired assets, impacting offenders financially.
- State-Level Enforcement: It empowers State governments to manage proceeds of crime, providing more localized control.
PYQ:[2021] Discuss how emerging technologies and globalisation contribute to money laundering. Elaborate measures to tackle the problem of money laundering both at national and international levels. |
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Corruption Challenges – Lokpal, POCA, etc
Supreme Court to review PMLA verdict
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Prevention of Money Laundering Act, 2002 (PMLA);
Mains level: Review power of Supreme Court;
Why in the news?
The Supreme Court has postponed its review of the decision to uphold key provisions of the Prevention of Money Laundering Act, 2002 (PMLA) to August 28.
Prevention of Money Laundering Act, 2002 (PMLA)
- The Prevention of Money Laundering Act, 2002 (PMLA) is a crucial legislative framework in India aimed at combating money laundering and related financial crimes.
- The PMLA was enacted by the Parliament of India and came into force on July 1, 2005. It was introduced to prevent money laundering and provide for the confiscation of property derived from or involved in money laundering.
- The main objectives of the PMLA are:
-
- To prevent and control money laundering.
- To confiscate and seize property obtained from laundered money.
- To address issues connected with money laundering in India.
What is the Case?
- On July 27, 2022, the Supreme Court upheld key provisions of the Prevention of Money Laundering Act, 2002 (PMLA) in the case of “Vijay Madanlal Choudhary v. Union of India”.
- The 540-page ruling accepted the government’s arguments on all challenged aspects, including reversing the presumption of innocence for bail, passing amendments as a Money Bill, and defining the Enforcement Directorate’s (ED) powers.
- On August 25, 2022, a different three-judge bench agreed to hear a review petition filed by Congress MP Karti Chidambaram. The petition raised concerns about at least two issues from the Madanlal decision.
What are the Grounds for Review?
- The Supreme Court’s verdict in Madanlal upheld stringent bail conditions for economic offences, imposing a reverse burden of proof on the accused.
- Petitioners argue that, without essential documents like an FIR, charge sheet, case diary, and prosecution documents, an accused cannot adequately present their case.
- The Madanlal verdict upheld Section 50 of the PMLA, allowing ED officials to record statements under oath, admissible in court. It distinguished ED officers from police officers, classifying their investigations as “inquiries.” Petitioners argue that the verdict overlooked provisions granting penal powers to the ED.
How is a Judgment Reviewed?
- The Supreme Court can review its judgments or orders under Article 137 of the Constitution.
- A review petition must be filed within 30 days of the judgment. Typically, review petitions are heard through written submissions (“circulation”) by the same judges who passed the original verdict, rather than in open court.
- Reviews are granted on narrow grounds to correct grave errors causing a miscarriage of justice. One common ground is “a mistake apparent on the face of the record,” which must be glaring and obvious, such as reliance on invalid case law.
Way forward:
- Enhanced Transparency and Documentation: To address concerns about the adequacy of case presentation by the accused, there should be a mandate for providing all essential documents such as FIRs, charge sheets, case diaries, and prosecution documents to ensure a fair trial process.
- Clarification of ED’s Powers and Procedures: Amendments to the PMLA should clearly define the scope and limits of the Enforcement Directorate’s powers, ensuring that ED officers are given appropriate procedural guidelines and oversight mechanisms to prevent misuse of penal powers and uphold due process.
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Corruption Challenges – Lokpal, POCA, etc
Why Centre filed an application to modify 2G spectrum scam judgement
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Spectrum
Mains level: What is the 2G scam case?
Why in the news?
Attorney General R Venkataramani, on April 22, mentioned an application filed by the Centre to modify the Supreme Court’s 2012 judgement in the 2G spectrum scam case.
What is the 2G scam case?
- In 2008, under then Telecom Minister A Raja, the Department of Telecommunications (DoT) issued 2G spectrum licenses to specific telecom operators on a first-cum-first-serve basis.
- In 2009 ,the Central Vigilance Commission directed the CBI to investigate claims that there were illegalities in the allocation of licenses, following which the CBI filed a first information report against unknown officers of the DoT, private persons and companies.
- In the meantime, the Centre for Public Interest Litigation and Subramanian Swamy filed petitions at the Supreme Court alleging a Rs 70,000 crore scam in the grant of telecom licenses in 2008.
- In 2010, the Comptroller and Auditor General of India (CAG) filed a report claiming that the allocation had caused a loss of Rs 1.76 lakh crores to the public exchequer. Raja resigned shortly after.
- In 2011 the CBI filed its first chargesheet, in which Raja was an accused.
- In February 2012, the Supreme Court cancelled the 122 licenses granted during Raja’s tenure. The court found that Raja had allocated licenses in 2008 based on 2001 prices in order to benefit specific private telecom operators.
Why is the Centre seeking a modification of the apex court’s decision?
- Need for Non-commercial Use: The Centre highlights that spectrum allocation is essential not only for commercial telecommunication services but also for public interest functions such as security, safety, and disaster preparedness. These functions may not always align with the profit-oriented nature of auction processes.
- Situational Preferences: The Centre argues that there are situations where auctions are not technically or economically preferred or optimal. This could include scenarios where there is a one-time or sporadic use of spectrum, which may not justify the complexities and costs associated with conducting auctions.
- Court’s Clarification on Auctions: The Centre refers to the Supreme Court’s clarification in September 2012, stating that the auction method prescribed in 2012 was not a constitutional principle and not an absolute or blanket statement applicable across all natural resources. The Court expressed respect for the executive’s discretion in such matters.
- Seeking Clarity for Administrative Process: In light of the Court’s clarification, the Centre seeks clarity on whether it can allocate 2G spectrum in the future through an administrative process if determined through due process and in accordance with the law. This indicates a desire for flexibility in spectrum allocation methods based on situational considerations and public interest needs.
Conclusion:
Need to implement transparent processes for the allocation of public resources such as spectrum. Clearly outline the criteria, procedures, and timelines for allocation, and ensure that these are accessible to all stakeholders.Establish independent oversight bodies or regulatory agencies to monitor and audit the allocation process.
Mains PYQ:
Q What is mean by public interest? What are the principles and procedures to be followed by the civil servants in public interest? (UPSC IAS/2018)
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Corruption Challenges – Lokpal, POCA, etc
Adjudication Process under the Prevention of Money Laundering Act (PMLA)
Note4Students
From UPSC perspective, the following things are important :
Prelims level: PMLA, 2002; Adjudication Process under PMLA, ED, FIU
Mains level: NA
Why in the news?
- The Adjudicating Authority under the Prevention of Money Laundering Act, 2002 (PMLA) has confirmed the attachment of assets worth Rs 751.9 crore linked to a politician family.
- The Enforcement Directorate (ED) had provisionally attached these properties in PMLA case.
About Prevention of Money Laundering Act (PMLA), 2002
| Details | |
| Precursor | Enacted to fulfill India’s global commitments to combat money laundering, aligning with international conventions such as:
|
| What is it? |
|
| Amendments | Amended in the year 2005, 2009 and 2012. |
| Objectives |
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| Regulating Authorities |
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| Salient Features |
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In news: Adjudicating Authority under PMLA
- The ED, empowered by Section 5 of the PMLA, provisionally attaches assets suspected to be acquired through criminal proceeds.
- These provisional orders, valid for 180 days, require confirmation by the Adjudicating Authority within the stipulated period to maintain legal validity.
- Role of the Adjudicating Authority:
- The Adjudicating Authority, appointed by the central government, reviews the attachment orders to ensure compliance with legal standards and procedural requirements.
- Failure to confirm the attachment within the prescribed timeline results in automatic release of the attached property.
- Legal Ramifications Post-Confirmation:
- Once confirmed, the accused retains the right to challenge the order within 45 days at the PMLA’s Appellate Tribunal.
- If the order is upheld, the accused may pursue further legal avenues, while the attached property remains inaccessible until the conclusion of legal proceedings.
- Impact on Property Owners and Enforcement Agencies:
- Confirmed attachments may lead to the ED taking possession of residential properties, compelling owners to evacuate.
- Attached properties, including vehicles, may deteriorate over time as legal battles prolong, with significant financial implications for both parties.
PYQ:
[2013] Money laundering poses a serious security threat to a country’s economic sovereignty. What is its significance for India and what steps are required to be taken to control this menace?
[2019] Consider the following statements: 1. The United Nations Convention against Corruption (UNCAC) has a ‘Protocol against the Smuggling of Migrants by Land, Sea and Air’. 2. The UNCAC is the ever-first legally binding global anti-corruption instrument. 3. A highlight of the United Nations Convention against Transnational Organized Crime (UNTOC) is the inclusion of a specific chapter aimed at returning assets to their rightful owners from whom they had been taken illicitly. 4. The United Nations Office on Drugs and Crime (UNODC) is mandated by its member States to assist in the implementation of both UNCAC and UNTOC. Which of the statements given above are correct? (a) 1 and 3 only (b) 2, 3 and 4 only (c) 2 and 4 only (d) 1, 2, 3, and 4 |
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Corruption Challenges – Lokpal, POCA, etc
Corruption has risen over the past five years, say 55% of respondents
Note4Students
From UPSC perspective, the following things are important :
Prelims level: NA
Mains level: ARC report;
Why in the news?
In the run-up to elections, political parties make allegations of corruption against their rivals to reach out to voters and influence voting patterns. So, let’s see about the corruption trend in India.
What is Corruption?Corruption refers to dishonest or unethical conduct by individuals or institutions, often involving the misuse of entrusted power or resources for personal gain. It can take various forms, including bribery, embezzlement, fraud, nepotism, cronyism, and favoritism. Corruption undermines the principles of fairness, integrity, and accountability in both public and private sectors. |
Corruption in India (Pre-poll survey of 2024 compared with 2019 Survey):
- Increase in Corruption: According to a pre-poll survey, more than half (55%) of respondents believe that corruption has increased in the past five years.
- The proportion of respondents believing that corruption has decreased has declined significantly, from 37% in 2019 to 19% in 2024.
- Causes for Corruption in India: A majority of respondents (56%) hold both Union and State governments responsible for the increase in corruption, with a higher proportion blaming the Union government specifically.
- Across Spatial Consistency: Regardless of whether respondents live in villages, towns, or cities, the perception of increased corruption is widespread.
- Opinion of Respondents: Both rich and poor respondents largely agree that corruption has increased, though there is a slight increase in the perception of decreased corruption among richer respondents.
What does the 2nd Administrative Reforms Commission (ARC) report say?
- Lack of Transparency: The opacity of government processes and decision-making provides opportunities for corruption.
- Regulatory Environment: Cumbersome and complex regulations create opportunities for rent-seeking behavior by officials and bureaucrats.
- Political Interference: Politicization of administrative processes and appointments leads to patronage networks and favoritism, fostering corruption.
- Lack of Whistleblower Protection: The absence of robust mechanisms to protect whistleblowers discourages individuals from reporting corruption. Fear of retaliation and inadequate legal safeguards inhibit the exposure of corrupt practices.
- Weak Enforcement Mechanisms: Inadequate enforcement of laws and regulations allows corrupt practices to thrive.
Conclusion: To combat rising corruption in India, comprehensive measures including enhancing transparency, simplifying regulations, strengthening enforcement, depoliticizing administration, and implementing robust whistleblower protection are imperative for fostering integrity and accountability in governance.
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Corruption Challenges – Lokpal, POCA, etc
The legal issues surrounding Arvind Kejriwal’s arrest | Explained
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Prevention of Money-Laundering Act, 2002 Act
Mains level: Application of Prevention of Money-Laundering Act, 2002 Act
Why in the news?
A Delhi Court on Thursday extended the Enforcement Directorate’s (ED) custody of Delhi Chief Minister Arvind Kejriwal till April 1 in the money laundering case
Context
Mr Kejriwal was arrested on March 21, hours after his plea for interim protection from arrest was rejected by the Delhi High Court. This is the first instance of a Chief Minister in India being put behind bars while still in office.
ED’s allegations against the Chief Minister
- Influence on Elections: The ED contends that Money received by AAP leaders from operators of alcohol businesses were used to influence the 2022 Assembly elections in Punjab and Goa.
- Favours to South Group: The excise policy was allegedly drafted with the intention of granting favors to the South Group
Legal issues
- Potential Involvement of AAP: If Kejriwal’s vicarious liability (This principle holds a person responsible for the actions of others, based on the concept of agency) is established, AAP could be impleaded as an accused in the case. This could lead to the attachment or confiscation of the party’s assets under the provisions of the Prevention of Money Laundering Act, 2002 (PMLA).
- Application of Section 70 of the PMLA: This section is often invoked to investigate companies involved in money laundering offenses. It holds individuals responsible if they were in charge or responsible for the company at the time of the offense. However, individuals may not be prosecuted if they can prove lack of knowledge or due diligence to prevent the offense.
- Definition of “Company”: Explanation 1 of Section 70 of the PMLA defines “company” broadly to include any body corporate, firm, or association of individuals. This could potentially encompass a political party under the definition, as per the Representation of the People Act, 1951.
What is (PML) Prevention of Money-Laundering Act, 2002 Act?
An Act to prevent money-laundering and to provide for confiscation of property derived from, or involved in, money-laundering and for matters connected therewith or incidental thereto.
Reliance on approver’s testimony
- Definition of an Approver testimony: An approver is someone who has been charged with a crime but later confesses and agrees to testify for the prosecution.
- Potential Consequences of False Deposition: An approver who provides false testimony can be retried for the offense for which the pardon was granted, according to Section 308 of the CrPC. This provision acts as a deterrent against perjury by the approver.
- Caution in Reliance: Courts exercise caution when relying on the testimony of an approver due to its inherently suspect nature. The testimony of an accomplice is considered tainted, and courts are wary of potential biases or falsehoods.
- Corroboration Requirement: To ensure the reliability of the approver’s testimony, corroboration from independent evidence is typically required.
- Judicial Precedents: The Supreme Court, in cases like Mrinal Das and Ors. v. State of Tripura (2011), has emphasized the importance of corroborative evidence in convicting the accused based on the testimony of an approver.
- Judicial Scrutiny: Courts meticulously scrutinize the testimony of an approver and assess its credibility in light of corroborative evidence and other factors.
Conclusion
Arvind Kejriwal’s arrest in a money laundering case raises legal complexities, including potential involvement of AAP, application of PMLA, and reliance on approver’s testimony, necessitating cautious judicial scrutiny.
Mains PYQ
Q Money laundering poses a serious security threat to a country’s economic sovereignty. What is its significance for India and what steps are required to be taken to control this menace? (UPSC IAS/2013)
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Corruption Challenges – Lokpal, POCA, etc
Section 120B of the Indian Penal Code (IPC)
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Prevention of Money Laundering Act (PMLA), 2002
Mains level: NA
Why in the news?
- The Supreme Court has rejected review petitions challenging its ruling on the initiation of proceedings under the Prevention of Money Laundering Act (PMLA).
- The judgment clarified that Section 120B of the Indian Penal Code cannot be invoked for PMLA proceedings unless the alleged conspiracy pertains to a scheduled offence.
Prevention of Money Laundering Act (PMLA), 2002
Penalties under PMLA:
Authorities for investigation under PMLA:
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What is Article 120 of Indian Penal Code (IPC)?
- Section 120 of the Indian Penal Code (IPC) deals with the concept of “Conspiracy to commit an offense”.
- It states that when two or more persons agree to do, or cause to be done, an illegal act, or an act which is not illegal by illegal means, such an agreement is designated a criminal conspiracy.
- Section 120A defines “criminal conspiracy” as when two or more persons agree to do, or cause to be done, an illegal act or an act which is not illegal by illegal means.
- Section 120B prescribes the punishment for criminal conspiracy, with death, imprisonment for life, or rigorous imprisonment for a term of two years or upwards, shall be punished in the same manner as if he had abetted such offense.
Punishment for Criminal Conspiracy
- Nature of Conspiracy: IPC 120B categorizes conspiracy based on the gravity of the offense and prescribes punishments accordingly.
- Serious Offenses: Conspiracy to commit serious crimes punishable by death, life imprisonment, or rigorous imprisonment for 2 years or more warrants severe punishment equivalent to the offense committed.
- Other Offenses: Conspiracy for illegal acts not falling under the serious category incurs imprisonment for up to six months, a fine, or both, as per Section 120B.
Practice MCQ:Which of the following statements are correct regarding ‘Prevention of Money Laundering Act 2002 (PMLA)’? 1. Enforcement Directorate (ED) is responsible for investigating offences under the PMLA 2. The Act enables government authorities to confiscate property earned through money laundering. Select the correct answer using the code given below: (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 |
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Corruption Challenges – Lokpal, POCA, etc
SC ends Immunity for Legislators taking Bribes
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Parliamentary Privileges
Mains level: Vote for cash issue
In the news
- A seven-judge Constitution Bench of the Supreme Court, headed by Chief Justice of India DY Chandrachud, delivered a significant judgment regarding parliamentary privilege and criminal prosecution.
- The verdict overturned a 1998 ruling in PV Narasimha Rao Case that granted immunity to lawmakers accepting bribes if they subsequently voted or spoke in the House
Also read:
What are Parliamentary Privileges?
| Details | |
| Definition | Special rights, immunities, and exemptions enjoyed by Parliament, its committees, and members.
Defined in Article 105 of the Indian Constitution. |
| Scope | Applies to Parliament, committees, and members. |
| Freedom of Speech | Guaranteed under Article 105(1).
Subject to rules and procedures of Parliament (Article 118). |
| Limitations to Free Speech | Speech must comply with constitutional provisions.
Cannot discuss judges’ conduct (Article 121), except for motions for their removal. |
| Freedom from Arrest | Immunity from arrest in civil cases 40 days before and after sessions.
House permission needed for arrest within Parliament limits. |
| Notification of Arrest | Chairman/Speaker must be informed of any member’s arrest. |
| Right to Prohibit Publication | No liability for publishing reports, discussions under member’s authority (Article 105(2)). |
| Right to Exclude Strangers | Members have power to exclude non-members from proceedings. |
Immunity against Bribe: Constitutional Provisions Examined
- Article 105(2): This article grants immunity to members of Parliament from court proceedings concerning their actions (speech or votes) in Parliament.
- Article 194(2): Similarly, this article extends immunity to members of state assemblies.
Court’s Review and Interpretation
- PV Narasimha Rao Case: In 1998, the Supreme Court ruled with a 3:2 majority that MPs and MLAs were immune from prosecution in bribery cases as long as they fulfilled their end of the bargain.
- Judicial Scrutiny of Privilege: The Court revisited the interpretation of Articles 105(2) and 194(2), challenging the traditional understanding of absolute immunity for lawmakers.
- Historical Context: It noted that India’s parliamentary privileges stem from statutory and constitutional sources, unlike the UK’s House of Commons, which has ancient and undoubted rights.
Key Findings and Interpretations
- Necessity Test Applied: The Court applied a “necessity test” to determine the legitimacy of claims to parliamentary privilege, emphasizing that accepting bribes cannot be deemed necessary for lawmakers to discharge their duties.
- Emphasis on Probity: The ruling underscored the importance of probity in public life, highlighting the corrosive impact of corruption on democratic ideals.
- Interpretation of Offense: It clarified that the act of accepting a bribe constitutes an offense, regardless of subsequent actions by the lawmaker in the House.
Conclusion
- The Supreme Court’s ruling represents a significant departure from past precedent, affirming the principle that no individual, including legislators, is above the law.
- By asserting the judiciary’s role in scrutinizing claims of parliamentary privilege, the Court reaffirmed the primacy of constitutional values and accountability in governance.
- This landmark judgment underscores the judiciary’s commitment to upholding the rule of law and combating corruption, thereby bolstering India’s democratic foundations.
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Corruption Challenges – Lokpal, POCA, etc
Legislators Immunity against Criminal Prosecution
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Articles 194(2) (for MLAs) and 105(2) (MPs)
Mains level: Vote for cash issue
In the news
- The Supreme Court is set to decide if legislators (MPs and MLAs) enjoy immunity from bribery charges in connection with votes made in Parliament and Legislative Assemblies.
Legislators Immunity: Background and Context
- Constitutional Provisions: Articles 194(2) (for MLAs) and 105(2) (MPs) of the Constitution grant legislators immunity from legal proceedings concerning their speeches and votes in Parliament and Legislative Assemblies.
- P.V. Narasimha Case: In 1998, the Supreme Court upheld this immunity in the case of P.V. Narasimha Rao v State (CBI/SPE), ruling that legislators are shielded from criminal prosecution for bribery linked to their parliamentary actions.
Reasons for Reconsideration
- Sita Soren’s Case: The appeal by JMM MLA Sita Soren, accused of accepting bribes during Rajya Sabha elections, prompted a reevaluation of the Narasimha verdict.
- Interpretation Issues: Concerns were raised about the broad interpretation of immunity and its implications for combating bribery in legislative bodies.
Arguments Supporting Immunity
- Absolute Protection: Advocates contend that legislators enjoy complete immunity from legal action under constitutional provisions. They argue that the Speaker holds authority to address moral infractions through expulsion.
- Interpretation of Articles: The dissenting opinion in Narasimha sought to narrow the scope of immunity, but proponents stress adherence to the literal interpretation of constitutional language.
Arguments against
- Completion of Offence: Critics argue that the offence of bribery is consummated upon acceptance of the bribe, irrespective of subsequent actions. They advocate holding legislators accountable from the moment the bribe is accepted.
- Legitimate Legislative Actions: Distinguishing between legitimate and illegitimate actions, advocates assert that actions stemming from criminal conduct, such as vote-buying, should not be shielded by immunity.
Legal Interpretation and Statutory Compliance
- Prevention of Corruption Act, 1988: Critics highlight inconsistencies between the Narasimha ruling and the provisions of the PCA, emphasizing the need for alignment with anti-corruption legislation.
- Intent and Performance: Solicitor General Mehta underscored the disconnect between the Narasimha verdict and the intent of the Prevention of Corruption Act, particularly regarding the timing of criminal liability.
P.V. Narasimha Case (1998) AnalogyJudgement protects bribe-takers after there is “performance” (a speech or vote is given based on the bribe), even though Section 7 of the PCA specifically punishes public servants who accept bribes “to” or “as a reward for” performing their public duty improperly or dishonestly. |
Way Forward
- Balancing Integrity and Immunity: The court’s ruling will determine the delicate balance between upholding legislative immunity and ensuring accountability for criminal acts.
- Interpretative Scrutiny: A nuanced interpretation of constitutional provisions is essential to address the evolving complexities of legislative conduct and accountability.
Conclusion
- The Supreme Court’s forthcoming decision on legislators’ immunity from bribery charges holds significant ramifications for India’s legal landscape.
- Balancing constitutional provisions, legislative intent, and anti-corruption imperatives, the court’s ruling will shape the accountability framework for lawmakers and the integrity of the legislative process.
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Corruption Challenges – Lokpal, POCA, etc
Ex-SC Judge Justice A M Khanwilkar appointed Lokpal Chairperson
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Lokpal: Powers, Functions, Exceptions
Mains level: NA
In the news
- Former Supreme Court judge Justice Ajay Manikrao Khanwilkar has been appointed as the chairperson of Lokpal, the anti-corruption ombudsman of India.
- Justice Khanwilkar retired from the Supreme Court in July 2022, bringing a wealth of judicial experience to his new role.
About Lokpal
- Establishment: Lokpal is a statutory body established under the Lokpal and Lokayuktas Act of 2013.
- Mandate: It is tasked with investigating allegations of corruption against certain public functionaries and related matters.
- Organisational Structure:
- The Lokpal comprises a chairperson and a maximum of 8 members.
- The chairperson must be a former Chief Justice of India, a former Supreme Court judge, or an eminent person meeting eligibility criteria.
- Half of the members must be judicial members, either former Supreme Court judges or former Chief Justices of High Courts.
- At least 50% members must be from SC / ST / OBC / Minorities and women.
- Members serve a term of 5 years or until they turn 70, whichever is earlier.
- Perks and Benefits: The salary, allowances, and other conditions of service for the chairperson are equivalent to those of the CJI, while members receive benefits similar to Supreme Court judges.
Appointment Process:
- The President of India appoints the chairperson and members based on the recommendation of a selection committee.
- The selection committee includes the PM as Chairperson, the Speaker of Lok Sabha, the Leader of Opposition in Lok Sabha, the Chief Justice of India or a nominated judge, and one eminent jurist.
Jurisdiction:
- Lokpal has jurisdiction to investigate allegations of corruption against Prime Ministers, Union Ministers, Members of Parliament, and officials of the Union Government.
- It extends to individuals associated with government-funded entities and those receiving substantial foreign contributions.
Exceptions for Prime Minister:
- Lokpal cannot probe allegations against the PM related to certain sensitive areas like international relations, security, public order, atomic energy, and space without the approval of at least 2/3rds of its members.
- A full Lokpal bench must consider initiating inquiries into complaints against the PM.
Powers of Lokpal:
- Lokpal exercises superintendence over and provides directions to the Central Bureau of Investigation (CBI) in corruption cases.
- It can authorize the CBI for search and seizure operations linked to such cases.
- The Lokpal’s Inquiry Wing possesses powers akin to a civil court.
- It can recommend the transfer or suspension of public servants implicated in corruption allegations.
- Lokpal is empowered to prevent the destruction of records during preliminary inquiries and confiscate assets obtained through corruption.
Reporting and Accountability
- Annually, Lokpal submits a report on its activities to the President, which is then presented to both Houses of Parliament for scrutiny.
Try this PYQ from CS Mains 2013
Q.‘A national Lokpal, however strong it may be, cannot resolve the problems of immorality in public affairs’. Discuss.
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Corruption Challenges – Lokpal, POCA, etc
India ranks 93 out of 180 countries in Corruption Perceptions Index 2023
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Corruption Perception Index
Mains level: Not Much
Introduction
- Transparency International has released its Corruption Perceptions Index for 2023, ranking countries based on their perceived levels of corruption in the public sector.
- India’s position in the ranking has shifted, but the change is minimal.
About Corruption Perceptions Index (CPI)
| Details | |
| Introduction | Introduced by Transparency International in 1995. |
| Frequency | Published annually. |
| Purpose | Ranks countries based on perceived corruption. |
| Data Sources | Expert assessments and surveys of business leaders and residents. |
| Global Impact | Widely recognized and used by governments, policymakers, businesses, and researchers. |
| Data Focus | Primarily assesses perceived corruption within government and bureaucracy. |
India’s Corruption Scorecard
- India’s Global Rank: In the 2023 index, India is placed 93rd out of 180 countries, a small decline from its 85th position in 2022.
- Corruption Score: India’s overall corruption score for 2023 is 39, down slightly from the 40 it scored in 2022.
- Limited Change: The report highlights that India’s score fluctuations are minor, making it challenging to draw definitive conclusions about any significant changes. However, it points out that there have been actions narrowing civic space in India, including the passage of a telecommunications bill that could threaten fundamental rights.
South Asia’s Corruption Landscape
- Pakistan and Sri Lanka: In South Asia, Pakistan (133) and Sri Lanka (115) are grappling with debt burdens and political instability. Still, strong judicial oversight in these countries helps keep the government accountable. Pakistan’s Supreme Court expanded citizens’ right to information, while Sri Lanka continues to face a crackdown on the press.
- Bangladesh: As Bangladesh (149) moves away from its least developed country status and experiences economic growth, it faces challenges in providing public sector information due to a crackdown on the press.
Regional Insights
- China’s Anti-Corruption Efforts: China (76) has made headlines for its aggressive anti-corruption campaign, resulting in punishments for millions of public officials over the last decade. However, doubts linger about the long-term effectiveness of these measures, which heavily rely on punishment rather than institutional checks.
- Asia Pacific Region: The report notes that the Asia Pacific region is gearing up for a significant election year in 2024, with several countries holding elections. However, the 2023 CPI suggests little to no meaningful progress in curbing corruption in the region.
Top and Bottom Performers
- Top-Scoring Countries: Nations like New Zealand (3) and Singapore (5) maintain their positions at the top of the index due to robust corruption control mechanisms. Other countries in the region with strong control measures include Australia (14), Hong Kong (14), Japan (16), Bhutan (26), Taiwan (28), and South Korea (32).
- Struggling States: The lower end of the index includes fragile states with authoritarian regimes, such as North Korea (172) and Myanmar (162). Afghanistan (162) continues to grapple with one of the worst humanitarian crises in history.
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Corruption Challenges – Lokpal, POCA, etc
FATF Mutual Evaluation of India
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Financial Action Task Force (FATF)
Mains level: Not Much
Central Idea
- A team from the Financial Action Task Force (FATF) is currently conducting a mutual evaluation in India.
- India’s mutual evaluation report is expected to be discussed during the FATF plenary meeting in June 2024.
About Financial Action Task Force (FATF)
- Foundation: FATF was founded in 1989 through the initiative of the G7 nations.
- Secretariat: The FATF Secretariat is headquartered at the OECD headquarters in Paris, France.
- Plenary Meetings: FATF conducts three Plenary meetings during each of its 12-month rotating presidencies.
- Membership: As of 2019, FATF consists of 37 member jurisdictions.
India’s Engagement with FATF
- Observer Status: India became an Observer at FATF in 2006, marking the beginning of its association with the organization.
- Full Membership: On June 25, 2010, India officially became the 34th country to attain full membership in FATF, signifying its active participation and commitment to the organization’s objectives.
Understanding the Mutual Evaluation Process
- Review Framework: The mutual evaluation process is an essential mechanism through which FATF assesses a country’s legal and institutional framework to combat money laundering and terrorist financing. It also evaluates the country’s implementation of measures to prevent these financial crimes.
- Compliance Assessment: During this process, FATF scrutinizes a country’s adherence to its 40 recommendations regarding anti-money laundering and counter-terrorism financing. It also evaluates the practical effectiveness of these measures.
- Outcome and Rating: The outcome of the mutual evaluation is documented in a report. This report highlights the country’s strengths, identifies weaknesses, and suggests areas for improvement. A rating is assigned based on the level of compliance and effectiveness.
FATF’s Evaluation of India
- Comprehensive Assessment: FATF’s evaluation of India encompasses various aspects, including the nation’s legal framework, regulatory system, law enforcement efforts, and international collaboration.
- Alignment with Global Standards: Central agencies in India have been actively working to ensure that the country’s anti-money laundering and counter-terrorism financing laws align with international standards and that their practical implementation is effective.
Significance of FATF Evaluation
- Report Impact: The evaluation results in a comprehensive report detailing India’s strengths, weaknesses, and areas requiring improvement. This report includes a rating based on compliance and effectiveness.
- Global Anti-Financial Crime Efforts: The mutual evaluation process is a crucial tool in the worldwide fight against money laundering and terrorist financing.
- Financial Implications: The outcome can significantly affect a country’s access to international financial markets and its standing in the global community.
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Corruption Challenges – Lokpal, POCA, etc
Money Laundering Probe against a Political Party
Note4Students
From UPSC perspective, the following things are important :
Prelims level: PMLA
Mains level: Money Laundering
Central Idea
- The Enforcement Directorate (ED) is contemplating adding a political party as an accused in a money laundering probe linked to the now-defunct Excise Policy of the Delhi government.
Booking a Political Party for Money Laundering
- Applicable Law: Section 70 of the Prevention of Money Laundering Act (PMLA) addresses offences by companies, and it can be invoked in this case.
- Definition of “Company”: While a political party isn’t a ‘company’ under the Companies Act, the PMLA includes an explanation that broadens the scope to include ‘associations of individuals,’ potentially encompassing political parties.
Precedent for such Cases
- If pursued, this action could set a significant precedent in India’s legal landscape.
- Previously, political parties have been investigated under the Income Tax Act.
- Trusts and NGOs are already within the purview of the PMLA, as per a notification by the Finance Ministry.
Connection between Charges and Political Party
- The central allegation by the ED is that the political party received the proceeds of crime in the excise scam.
- An additional explanation in Section 70 of the PMLA specifies that a “company may be prosecuted, notwithstanding whether the prosecution or conviction of any legal juridical person shall be contingent on the prosecution or conviction of any individual.”
- This implies that even if cases involving party members fail, the party can still be prosecuted for money laundering separately.
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Corruption Challenges – Lokpal, POCA, etc
UAPA invoked against Media agency
Note4Students
From UPSC perspective, the following things are important :
Prelims level: UAPA
Mains level: Read the attached story
Central Idea
- Allegations against NewsClick: The FIR against NewsClick alleges illegal funding from China, routed through the United States.
- UAPA Provisions: The FIR invokes various sections of the Unlawful Activities (Prevention) Act (UAPA), with a primary focus on Section 16, which deals with punishment for terrorist acts.
Understanding UAPA Provisions
*Section 15 – Definition of “Terrorist Act”
- Section 15 of the UAPA defines “terrorist act” and prescribes imprisonment for at least five years to life. In cases where the act results in death, the punishment is either death or imprisonment for life.
- This section encompasses serious and violent acts with the potential to threaten India’s unity, integrity, security, economic security, or sovereignty.
- It includes actions such as the use of explosives, causing death or damage to property, disruption of essential services, and damaging monetary stability through counterfeiting.
Other UAPA Provisions Invoked
- Section 13 – Unlawful Activities: This section deals with unlawful activities and their consequences.
- Section 17 – Raising Funds for Terrorist Acts: It addresses raising funds for terrorist activities.
- Section 18 – Conspiracy: This section covers conspiracy related to terrorist acts.
- Section 22 (C) – Offences by Companies, Trusts: This provision pertains to offenses committed by companies and trusts.
- IPC Sections Invoked: Additionally, the FIR includes IPC sections 153 A (promoting enmity between different groups) and 120B (criminal conspiracy).
Understanding the UAPA Framework
- Unique Criminal Law Framework: The UAPA provides an alternative criminal law framework that differs from the general principles of criminal law.
- Enhanced State Powers: Compared to the Indian Penal Code (IPC), the UAPA grants the state greater powers.
- Bail Provisions: The UAPA has stringent conditions for bail and relaxes timelines for the state to file chargesheets.
- Denying Bail: To deny bail under the UAPA, the court must establish a “prima facie” case against the accused.
- Prima Facie Definition: In 2019, the Supreme Court defined “prima facie” narrowly, meaning that the court must not analyze evidence or circumstances but must consider the “totality of the case” presented by the state.
- Section 43D(5): This section specifies that a person accused of an offense under Chapters IV and VI of the UAPA shall not be released on bail or their own bond if the Public Prosecutor hasn’t been heard on the application for release.
- Court’s Opinion: The court may deny bail if it finds reasonable grounds to believe that the accusation against the accused is prima facie true.
Conclusion
- The FIR against NewsClick under the UAPA underscores the seriousness of the allegations and the complex legal framework surrounding such cases.
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Corruption Challenges – Lokpal, POCA, etc
Explained: Immunity of Legislators from Bribery Charges
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Parliamentary Immunities
Mains level: Read the attached story
Central Idea
- Important Question: The Supreme Court of India is trying to answer a significant question: Can lawmakers be prosecuted in criminal courts for taking or offering bribes despite the legal protection they enjoy under Articles 105(2) and 194(2) of the Constitution?
- Background: This question arises from a need to re-evaluate a past Supreme Court ruling in the 1998 PV Narasimha Rao vs. State case, which said that lawmakers can’t be prosecuted for bribery related to their speeches or votes in Parliament.
Understanding Lawmaker Immunity
- Constitutional Safeguard: Constitution provides special protection for lawmakers through Articles 105(2) and 194(2). These articles deal with the powers and privileges of Parliament and state legislatures, and they say that lawmakers can’t be taken to court for anything they say or vote on in these bodies.
- What It Means: This means lawmakers are safe from legal action for their words and actions inside the Parliament or state legislatures. For example, they can’t be sued for defamation for something they say during a debate.
Current Case in the Supreme Court
- How It Started: This matter began when, a member of Jharkhand politician, was accused of taking a bribe in exchange for her vote in the 2012 Rajya Sabha elections.
- Legal Journey: Soren asked for her case to be dropped, saying she was protected by Article 194(2). But the Jharkhand High Court disagreed in 2014. So, she approached the Supreme Court.
- Referral to a Bigger Panel: During the case, it was clear that the issue was very important. In 2019, a Supreme Court Bench suggested that it should be heard by more judges (a larger Bench) because it relates to the 1998 Narasimha Rao decision.
- What the Supreme Court Just Did: On September 20, 2023, a five-judge Bench, led by Chief Justice DY Chandrachud, decided to send this issue to a seven-judge Bench for a fresh look. They said it’s vital to reconsider the PV Narasimha Rao ruling because it impacts our country’s politics.
Why Lawmaker Immunity Matters
- Protecting Lawmakers: Articles 105(2) and 194(2) aim to make sure lawmakers can speak and vote freely in Parliament and state legislatures without worrying about legal trouble.
- Not a Get-Out-Of-Jail Card: But remember, these rules don’t mean lawmakers are above the regular laws of our country. They just make sure lawmakers can do their job without fear.
Reviewing the 1998 PV Narasimha Rao Decision
- The Big Case: The PV Narasimha Rao case is all about the 1993 JMM bribery scandal. The politician, who is related to the petitioner in this case, and some MPs were accused of taking money to vote against a no-confidence motion.
- Different Opinions: Some judges thought immunity shouldn’t cover bribery cases. But most judges thought lawmakers should be protected to make sure they can talk and vote freely.
- What Happened: The 1998 ruling in the Narasimha Rao case made it hard to prosecute lawmakers for bribery linked to their work in Parliament.
Conclusion
- Big Legal Question: The Supreme Court’s decision to send this issue to a seven-judge Bench shows how important it is. They want to decide if lawmakers can be prosecuted for bribery without affecting their ability to do their job.
- Keeping Democracy Running: Articles 105(2) and 194(2) are here to make sure our Parliament and state legislatures work smoothly. They let lawmakers speak without fear, but they don’t mean lawmakers can break the law.
- Balancing Act: What the bigger Bench decides will shape how lawmakers can be prosecuted for bribery, a matter that’s incredibly important for India’s democracy.
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Corruption Challenges – Lokpal, POCA, etc
$1.8 billion recovered under Fugitive Economic Offenders Act
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Fugitive Economic Offenders Act, 2018
Mains level: Not Much
Central Idea
- Assets worth over $12 billion have been attached since 2014 under the Prevention of Money Laundering Act (PMLA).
- Additionally, assets exceeding $1.8 billion have been recovered in the past four years under the Fugitive Economic Offenders Act (FEOA), 2018.
About the Fugitive Economic Offenders Act, 2018
- The FEOA is a significant legal instrument designed to address the issue of economic offenders who flee the country to evade criminal prosecution or refuse to return to face charges.
- This act empowers authorities to confiscate the ill-gotten gains of these individuals and bar them from filing or defending civil claims, among other provisions.
Key Provisions of the Fugitive Economic Offenders Act:
(1) Definition of Fugitive Economic Offender:
- A “fugitive economic offender” is an individual against whom an arrest warrant has been issued for committing an offense listed in the Act, and the value of the offense is at least Rs. 100 crore.
- Offenses listed in the act include counterfeiting government stamps or currency, cheque dishonor, money laundering, and transactions defrauding creditors.
(2) Declaration of a FEO:
- After considering an application, a special court (designated under the Prevention of Money Laundering Act, 2002) may declare an individual as a fugitive economic offender.
- The court may confiscate properties that are proceeds of crime, benami properties, or any other property, whether in India or abroad.
- Upon confiscation, all rights and titles of the property vest in the central government, free from encumbrances.
- The central government may appoint an administrator to manage and dispose of these properties.
(3) Bar on Filing or Defending Civil Claims:
- The Act allows any civil court or tribunal to prohibit a declared fugitive economic offender from filing or defending any civil claim.
- Furthermore, any company or limited liability partnership where such an individual is a majority shareholder, promoter, or a key managerial person may also be barred from filing or defending civil claims.
- Authorities may provisionally attach properties of an accused while the application is pending before the Special Court.
(4) Powers:
- The authorities under the Prevention of Money Laundering Act, 2002, will exercise powers conferred upon them by the Fugitive Economic Offenders Act.
- These powers are akin to those of a civil court and include the search of persons in possession of records or proceeds of crime, the search of premises upon belief that a person is a fugitive economic offender, and the seizure of documents.
Other laws related to FEOs
- The existing laws under which such fugitive economic offenders are tried include:
- Recovery of Debts Due to Banks and Financial Institutions Act (RDDBFI),
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (SARFESI) and
- Insolvency and Bankruptcy Code (IBC).
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Corruption Challenges – Lokpal, POCA, etc
Independence of Constitutional Authorities Is An Important Issue
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Constitutional bodies
Mains level: Independence of Constitutional bodies and independent appointments
Central Idea
- The recent comments made by the Supreme Court regarding the independence of constitutional authorities in India is an important issue. The need for independent institutions and a system of checks and balances is essential to prevent the arbitrary use of power by the government. The appointment process of key constitutional positions needs to be safeguarded from the whims of the executive.
Need for Independent Institutions
- Executive interference: The Constituent Assembly of India had recognized the need for independent institutions to regulate sectors of national importance without any executive interference.
- Constitutional bodies: Various constitutional authorities such as the Public Service Commission, the Comptroller and Auditor General of India (CAG), the Election Commission of India (ECI), the Finance Commission, and the National Commissions for Scheduled Castes (SC), Scheduled Tribes (ST) and Backward Classes (BC) have been set up for this purpose.
- Need complete independence: Such constitutional bodies must be provided complete independence to enable them to function without fear or favor and in the larger interests of the nation.
Appointment Process for Constitutional Authorities
- Appointments are critical for independence: The appointment of individuals heading these institutions is critical to ensuring their independence.
- Safeguarded from the whims of the executive: While empowering the President of India to appoint all constitutional authorities, the Constitution-makers had kept in mind those institutions whose independence is of paramount importance to the country and the manner in which the independence of these authorities could be safeguarded from the whims of the executive
Appointment of Judges and Other Constitutional Positions
- The Constitution provides for certain conditions to be fulfilled by those who may be considered for such appointments.
- Role of governors: The appointment of Judges of the Supreme Court and the High Court, the CAG of India, and Governors are to be kept free from political or executive pressure.
- For instance, appointment of the CAG:
- In the draft Constitution, the article for the appointment of the CAG had provided that, there shall be an Auditor General who shall be appointed by the President. The Constituent Assembly further discussed that The Auditor-General should be always independent of either the legislature or the executive.
- The process of selecting a person to be appointed as the CAG of India should begin by appointing a committee consisting of the Speaker of the Lok Sabha, the Chief Justice of India, and the Chairman of the Public Accounts Committee to shortlist names to be considered for appointment as the CAG of India; and a panel of three names should be forwarded to the President for him to make the final selection as in Article 148 of the Constitution of India.
Supreme court on appointment of CEC, EC’s and Governor
- Appointment of CEC and EC’s: The Supreme Court has taken an important step in ensuring the independence of the Election Commission of India by divesting the executive of its sole discretion in appointing the Chief Election Commissioner (CEC) and Election Commissioners (ECs) by forming a committee to suggest suitable names to man these constitutional posts.
- Appointment of Governors: The Court expressed serious concern over the active role being played by Governors in State politics, observing that Governors becoming part of political processes is disconcerting. The appointment process for Governors needs to be unrestricted and unfettered to ensure that the President is free from the influence of the Legislature.
Conclusion
- It is necessary to ensure the independence of constitutional authorities to enable them to function without fear or favor and in the larger interests of the nation. The appointment process for key constitutional positions must be safeguarded from the whims of the executive. The recent comments of the Supreme Court regarding the independence of constitutional authorities in India are a reminder of the need to ensure that the appointment process for such positions is free from political or executive pressure.
Mains Question
Q. The issues over the independence of constitutional authorities in India is often in the headlines. In this light discuss why is it necessary to ensure the independence of constitutional authorities, and what are the implications of failing to do so?
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Corruption Challenges – Lokpal, POCA, etc
SC to examine if Electoral Bond pleas need to be referred to Constitution Bench
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Electoral Bond Scheme
Mains level: Transparency in election funding
The Supreme Court will examine whether petitions challenging the validity of the electoral bonds scheme need to be referred to a Constitution Bench.
What is a Constitution Bench?
Constitution benches are set up when the following circumstances exist:
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What are Electoral Bonds?
- Electoral bonds are banking instruments that can be purchased by any citizen or company to make donations to political parties, without the donor’s identity being disclosed.
- It is like a promissory note that can be bought by any Indian citizen or company incorporated in India from select branches of State Bank of India.
- The citizen or corporate can then donate the same to any eligible political party of his/her choice.
- An individual or party will be allowed to purchase these bonds digitally or through cheque.
About the scheme
- A citizen of India or a body incorporated in India will be eligible to purchase the bond
- Such bonds can be purchased for any value in multiples of ₹1,000, ₹10,000, ₹10 lakh, and ₹1 crore from any of the specified branches of the State Bank of India
- The purchaser will be allowed to buy electoral bonds only on due fulfillment of all the extant KYC norms and by making payment from a bank account
- The bonds will have a life of 15 days (15 days time has been prescribed for the bonds to ensure that they do not become a parallel currency).
- Donors who contribute less than ₹20,000 to political parties through purchase of electoral bonds need not provide their identity details, such as Permanent Account Number (PAN).
Objective of the scheme
- Transparency in political funding: To ensure that the funds being collected by the political parties is accounted money or clean money.
Who can redeem such bonds?
- The Electoral Bonds shall be encashed by an eligible Political Party only through a Bank account with the Authorized Bank.
- Only the Political Parties registered under Section 29A of the Representation of the People Act, 1951 (43 of 1951) and which secured not less than one per cent of the votes polled in the last General Election to the Lok Sabha or the State Legislative Assembly, shall be eligible to receive the Electoral Bonds.
Restrictions that are done away
- Earlier, no foreign company could donate to any political party under the Companies Act
- A firm could donate a maximum of 7.5 per cent of its average three year net profit as political donations according to Section 182 of the Companies Act.
- As per the same section of the Act, companies had to disclose details of their political donations in their annual statement of accounts.
- The government moved an amendment in the Finance Bill to ensure that this proviso would not be applicable to companies in case of electoral bonds.
- Thus, Indian, foreign and even shell companies can now donate to political parties without having to inform anyone of the contribution.
Issues with the Scheme
- Opaque funding: While the identity of the donor is captured, it is not revealed to the party or public. So transparency is not enhanced for the voter.
- No IT break: Also income tax breaks may not be available for donations through electoral bonds. This pushes the donor to choose between remaining anonymous and saving on taxes.
- No anonymity for donors: The privacy of the donor is compromised as the bank will know their identity.
- Differential benefits: These bonds will help any party that is in power because the government can know who donated what money and to whom.
- Unlimited donations: The electoral bonds scheme and amendments in the Finance Act of 2017 allows for “unlimited donations from individuals and foreign companies to political parties without any record of the sources of funding”.
Way ahead
- The worries over the electoral bond scheme, however, go beyond its patent unconstitutionality.
- The concern about the possibility of misuse of funds is very pertinent.
- The EC has been demanding that a law be passed to make political parties liable to get their accounts audited by an auditor from a panel suggested by the CAG or EC. This should get prominence.
- Another feasible option is to establish a National Election Fund to which all donations could be directed.
- This would take care of the imaginary fear of political reprisal of the donors.
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Corruption Challenges – Lokpal, POCA, etc
Government amends KYC to add non-profit organisations, ‘politically exposed persons’
Note4Students
From UPSC perspective, the following things are important :
Prelims level: PMLA, PEPs, FATF
Mains level: Recent changes in PMLA
Central idea: The Finance Ministry has amended the Prevention of Money Laundering (Maintenance of Records) Rules for widening the scope of Know your Customer (KYC) norms to include Politically Exposed Persons (PEPs), non-profit organisations (NPOs) and those dealing in virtual digital assets (VDA) as reporting entities.
Who are Politically Exposed Persons (PEP)?
- According to the modified PML Rules, the Finance Ministry has defined PEPs as-
- Individuals who have been entrusted with prominent public functions by a foreign country
- Includes heads of states or governments, senior politicians, senior government or judicial or military officers, senior executives of state-owned corporations, and important political party officials.
- Banks and financial institutions must maintain records of financial transactions of PEPs and share them with the Enforcement Directorate as and when sought.
Other key changes introduced
Recording of financial transactions of NPOs/NGOs
- The financial institutions must register the details of their NGO clients on the Darpan portal of the Niti Aayog.
- They are required to maintain the record for five years after the business relationship between a client and a reporting entity has ended or the account has been closed, whichever is later.
Tightening of the definition of beneficial owners
- The amendment to the PMLA rules includes the tightening of the definition of beneficial owners under the anti-money laundering law.
- As per the amendments, any individual or group holding 10 per cent ownership in the client of a ‘reporting entity’ will now be considered a beneficial owner against the ownership threshold of 25 per cent applicable earlier.
- The reporting entities include banks and financial institutions, firms engaged in real estate and jewellery sectors, intermediaries in casinos and crypto or virtual digital assets.
Collection of information from clients
- Reporting entities such as banks and crypto platforms are mandated to collect information from their clients under the anti-money laundering law.
- So far, these entities were required to maintain KYC details or records of documents evidencing the identity of their clients, as well as account files and business correspondence relating to clients.
- They will now have to also collect the details of the registered office address and principal place of business of their clients.
- Additionally, they are required to maintain a record of all transactions, including the record of all cash transactions of more than Rs 10 lakh.
Why such move?
- FATF assessment: The amendments assume significance ahead of India’s proposed FATF assessment, which is expected to be undertaken later this year.
- Risk-management: In one of its 40 recommendations, FATF recommends that financial institutions have risk-management systems to identify domestic and international PEPs.
- Remove ambiguities: The broader objective is to bring in legal uniformity and remove ambiguities before the FATF assessment.
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Corruption Challenges – Lokpal, POCA, etc
SC raps govt on plea on ED chief’s term
Note4Students
From UPSC perspective, the following things are important :
Prelims level: ED
Mains level: Issues with working of ED
The Supreme Court has sharply reacted over tenure extensions granted to Enforcement Directorate Director by the government to subvert ongoing investigations against their leaders.
What is Enforcement Directorate (ED)?
- ED was formed in 1957 to look into cases of foreign exchange-related violations, a civil provision.
- It goes back to May 1, 1956, when an ‘Enforcement Unit’ was formed in the Department of Economic Affairs.
- Now, the ED falls under the finance ministry’s Department of Revenue.
- But in 2002, after the introduction of the PMLA, it started taking up cases of financial fraud and money laundering, which were of criminal nature.
- It was then tasked for handling Exchange Control Laws violations under the Foreign Exchange Regulation Act (FERA).
- Today, it is a multi-dimensional organisation investigating economic offences under the:
- Prevention of Money Laundering Act (PMLA)
- Fugitive Economic Offenders Act
- Foreign Exchange Management Act
- Foreign Exchange Regulation Act (FERA)
Its establishment
- When proceeds of crime (property/money) are generated, the best way to save that money is by parking it somewhere, so one is not answerable to anyone in the country.
- Therefore, there was a need to control and prevent the laundering of money.
- The PMLA was brought in for this exact reason in 2002, but was enacted only in 2005.
- The objective was to prevent parking of the money outside India and to trace out the layering and the trail of money.
- So as per the Act, the ED got its power to investigate under Sections 48 (authorities under act) and 49 (appointment and powers of authorities and other officers).
At what stage does the ED step in when a crime is committed?
- Whenever any offence is registered by a local police station, which has generated proceeds of crime over and above ₹1 crore, the investigating police officer forwards the details to the ED.
- Alternately, if the offence comes under the knowledge of the Central agency, they can then call for the First Information Report (FIR) or the chargesheet if it has been filed directly by police officials.
- This will be done to find out if any laundering has taken place.
What differentiates the probe between the local police and officers of the ED?
Case study:
- If a theft has been committed in a nationalised bank, the local police station will first investigate the crime.
- If it is learnt that the founder of the bank took all the money and kept it in his house, without being spent or used, then the crime is only theft and the ED won’t interfere because the amount has already been seized.
- But if the amount which has been stolen is used after four years to purchase some properties, then the ill-gotten money is brought back in the market.
- Or if the money is given to someone else to buy properties in different parts of the country, then there is ‘laundering’ of money.
- Hence the ED will need to step in and look into the layering and attachment of properties to recover the money.
- If jewellery costing ₹1 crore is stolen, police officers will investigate the theft. The ED, however, will attach assets of the accused to recover the amount of ₹1 crore.
Roles and functions of the ED
- Summon, Search and seizure: The ED carries out search (property) and seizure (money/documents) after it has decided that the money has been laundered, under Section 16 (power of survey) and Section 17 (search and seizure) of the PMLA.
- Arrest and detentions: On the basis of that, the authorities will decide if an arrest is needed as per Section 19 (power of arrest).
- Attachment of property: Under Section 50, the ED can also directly carry out search and seizure without calling the person for questioning. It is not necessary to summon the person first and then start with the search and seizure.
- Filing of chargesheet: If the person is arrested, the ED gets 60 days to file the prosecution complaint (chargesheet) as the punishment under PMLA doesn’t go beyond seven years.
Centrestage of our debate: Over-reach by Investigation Agencies
Why is ED comes to pictures frequently?
Ans. Money laundering
- Money laundering is the process of making significant amounts of money obtained through criminal activities, such as drug trafficking or terrorist funding, appear to have come from a legitimate source.
- As a result, it provides an incentive for money launderers to “legitimize” their ill-gotten gains through money laundering.
- The money generated is referred to as ‘dirty money,’ and money laundering is the act of converting ‘dirty money’ into ‘legitimate’ money.
Why ED mostly grips Politicians?
- Exposing rampant corruption: It is not always ironic to say that most politicians are never corrupt. We have a very inglorious past of political corruption.
- Selective witch-hunt: The ED has often been attacked for initiating investigations, raiding and questioning leaders of opposition parties, be it under the current regime or under past governments.
Issues with PMLA
- Misuse of central agencies: PMLA is being pulled into the investigation of even ordinary crimes by the Enforcement Directorate.
- Seizing of assets: Assets of genuine victims have been attached. The ED could just walk into anybody’s house.
- Politically motivated raids: In all this, the fundamental purpose of PMLA to investigate the conversion of “illegitimate money into legitimate money” was lost.
- Opacity of charges: Petitioners pointed out that even the Enforcement Case Information Report (ECIR) – an equivalent of the FIR – is considered an “internal document” and not given to the accused.
- Vagueness over evidence: The accused is called upon to make statements that are treated as admissible in evidence.
- Harassment: The ED begins to summon accused persons and seeks details of all their financial transactions and of their family members.
- Against individual liberty: The initiation of an investigation by the ED has consequences that have the potential of curtailing the liberty of an individual.
Allegations against ED
- Huge discretions: The ED is the only Central agency in the country that does not require permission from the government to summon or prosecute politicians or government functionaries for committing economic offences like money laundering.
- Used for petty crimes: PMLA is pulled into the investigation of even “ordinary” crimes and assets of genuine victims have been attached.
- Actual purpose denigrated: PMLA was a comprehensive penal statute to counter the threat of money laundering, specifically stemming from the trade in narcotics.
- Violations of Rights: PMLA was enacted in response to India’s global commitment to combat the menace of money laundering. Instead, rights have been “cribbed, cabined and confined”.
- Functional opacity: There is also a lack of clarity about ED’s selection of cases to investigate. We often see ED raiding houses of opposition parties suddenly.
- Poor rate of conviction: We have hardly read the conclusion of cases by ED. Meantime media-trial tears off the accused person’s credibility which is the most desired intent.
- Under-trials and slower prosecution: ED has been focusing on keeping the accused in custody rather than actually proving the charges against them.
Challenges to ED
- ED being dragged to court: The petitions against the ED had the effect of slowing down the investigations, as officers have to defend themselves in court.
- Foul crying politicians: There are attempts to cover up unexplained, high-value transactions that fall within the PMLA’s ambit
- Investigation of foreign transactions: Getting information on accounts and money stashed abroad to establish a trail is the biggest challenge they face.
Way forward
- The fight against corruption is intimately linked with the reform of the investigations.
- Therefore the adjudicating authorities must work in cooperation and ensure the highest standards of transparency and fairness.
- ED has been walking a tightrope to safeguard its integrity by speeding up investigations and court procedures.
- The need of the hour could be systemic fixes—and not shrill calls to throw the baby out with the bathwater.
- It is unlikely that corruption can be substantially reduced without modifying the way government agencies operate.
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Corruption Challenges – Lokpal, POCA, etc
Central agencies gear up for FATF mutual evaluations
Note4Students
From UPSC perspective, the following things are important :
Prelims level: FATF
Mains level: Not Much
Central agencies, including the Financial Intelligence Unit (FIU) and the Directorate of Revenue Intelligence (DRI), have begun preparations for the Financial Action Task Force’s (FATF) mutual evaluation process of India.
What is the news?
- India is due to undergo the mutual evaluation process in the second half of 2022, which will assess the country’s compliance with international anti-money laundering and counter-terror financing standards.
What is FATF?
- FATF is an intergovernmental organization founded in 1989 on the initiative of the G7 to develop policies to combat money laundering.
- The FATF Secretariat is housed at the OECD headquarters in Paris.
- It holds three Plenary meetings in the course of each of its 12-month rotating presidencies.
- As of 2019, FATF consisted of 37 member jurisdictions.
India’s say in FATF
- India became an Observer at FATF in 2006. Since then, it had been working towards full-fledged membership.
- On June 25, 2010, India was taken in as the 34th country member of FATF.
What is FATF’s mutual evaluation process?
- The mutual evaluation process is a review of a country’s legal and institutional framework to combat money laundering and terrorist financing, as well as its implementation of measures to prevent these crimes.
- During the process, the FATF assesses a country’s compliance with its 40 recommendations on anti-money laundering and counter-terror financing, as well as the level of effectiveness of these measures in practice.
- The outcome of the mutual evaluation is a report that highlights a country’s strengths, weaknesses, and areas for improvement, and assigns a rating based on the level of compliance and effectiveness.
How will FATF evaluate India?
- The FATF’s evaluation will cover a wide range of areas, including India’s legal framework, regulatory system, law enforcement efforts, and international cooperation.
- Central agencies have been working to ensure that India’s anti-money laundering and counter-terror financing laws are in line with international standards, and that their implementation is effective.
Significance of this evaluation
- The outcome of the evaluation will be a report that highlights India’s strengths, weaknesses, and areas for improvement, and assigns a rating based on the level of compliance and effectiveness.
- The mutual evaluation process is an important tool in the global fight against money laundering and terrorist financing.
- Its outcome can have significant implications for a country’s access to international financial markets and its reputation in the global community.
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Corruption Challenges – Lokpal, POCA, etc
What is FCRA and its recent amendments?
Note4Students
From UPSC perspective, the following things are important :
Prelims level: FCRA
Mains level: Money laundering
Recently, the Ministry of Home Affairs amended certain provisions of the Foreign Contribution (Regulation) Act (FCRA).
- The Ministry had made the FCRA rules tougher in November 2020, making it clear that NGOs (Non-Government Organizations) which may not be directly linked to a political party but engage in political action like bandhs, strike or road blockades will be considered of political nature if they participate in active politics or party politics. According to the law, all NGOs receiving funds have to registered under the FCRA.
- The move comes after the government enhanced the import duty on gold import from 7.5 % to 12.5 % in a bid to discourage import of gold that leads to increase in trade deficit and puts pressure on the currency and forex reserves.
- An increase in import duty on gold will lead to increase in cost of import and discourage its import and consumption.
What is the FCRA?
- About:
- The FCRA was enacted during the Emergency in 1976 in an atmosphere of apprehension that foreign powers were interfering in India’s affairs by pumping in funds through independent organisations.
- These concerns had been expressed in Parliament as early as in 1969.
- The law sought to regulate foreign donations to individuals and associations so that they functioned “in a manner consistent with the values of a sovereign democratic republic”.
- The FCRA was enacted during the Emergency in 1976 in an atmosphere of apprehension that foreign powers were interfering in India’s affairs by pumping in funds through independent organisations.
- Objectives:
- It requires every person or NGO wishing to receive foreign donations to be registered under the Act, to open a bank account for the receipt of the foreign funds and to utilise those funds only for the purpose for which they have been received and as stipulated in the Act.
- The Act prohibits receipt of foreign funds by candidates for elections, journalists or newspaper and media broadcast companies, judges and government servants, members of legislature and political parties or their office-bearers, and organisations of a political nature.
- Amendments:
- It was amended in 2010 to “consolidate the law” on utilisation of foreign funds, and “to prohibit” their use for “any activities detrimental to national interest”
- The law was amended again by the current government in 2020, giving the government tighter control and scrutiny over the receipt and utilisation of foreign funds by NGOs.
What are the Key Changes?
- It allows Indians to receive up to Rs 10 lakh annually from their relatives abroad under FCRA.
- The limit earlier was Rs 1 lakh.
- If the amount exceeds, the individuals will now have 90 days to inform the government instead of 30 days earlier.
- It has given individuals and organisations or NGOs 45 days for the application of obtaining ‘registration’ or ‘prior permission‘ under the FCRA to receive funds.
- Earlier it was 30 days.
- Organisations receiving foreign funds will not be able to use more than 20 % of such funds for administrative purposes.
- This limit was 50 % before 2020.
- Made five more offences under the FCRA “compoundable”, making 12, instead of directly prosecuting the organisations or individuals.
- Earlier, only seven offences under the FCRA were compoundable.
What are Compoundable Offences?
- Compoundable offences are those offences where, the complainant (one who has filed the case, i.e., the victim), enter into a compromise, and agrees to have the charges dropped against the accused. However, such a compromise should be a “Bonafide,” and not for any consideration to which the complainant is not entitled to.
- The FCRA violations which have become compoundable now include failure to intimate about receipt of foreign funds, opening of bank accounts, failure to place information on website, etc.
What is the Significance of the Move?
- Enhances Remittances:
- It will curb the outflow of funds and on the other hand enhancing inward Remittances.
- Stabilise forex Reserves:
- It will lead to an increase in inflow of funds into India which will stabilise the forex reserves and also the currency.
- Similarly, an increase in import duty on gold from 7.5 % to 12.5 % will discourage gold import as it will result in an increase in the price of gold in India.
- Reduces Trade Deficit:
- An increase in inflow of funds and reduction in outflow of funds on account of gold imports will help reduce the trade deficit.
- The trade deficit in the month of April and May 2022 stood at a high of USD 20.1 billion and USD 24.6 billion respectively making an aggregate of USD 44.7 billion in two months.
- By comparison the trade deficit in April and May 2021 stood at USD 21.8 billion.
- An increase in inflow of funds and reduction in outflow of funds on account of gold imports will help reduce the trade deficit.
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Corruption Challenges – Lokpal, POCA, etc
Private: Enforcement Directorate
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Enforcement Directorate (ED)
Mains level: Read the attached story
Since the advent of the Modi government, the ED – Enforcement Directorate has gone after politicians/celebrities suspected of corruption with far greater prowess than other central law enforcement agencies.
What is Enforcement Directorate (ED)?
- It goes back to May 1, 1956, when an ‘Enforcement Unit’ was formed in the Department of Economic Affairs.
- It then aimed for handling Exchange Control Laws violations under the Foreign Exchange Regulation Act (FERA).
- The ED today is a multi-dimensional organisation investigating economic offences under the Prevention of Money Laundering Act (PMLA), Fugitive Economic Offenders Act, Foreign Exchange Management Act and FERA.
From where does the ED get its powers?
- When proceeds of crime (property/money) are generated, the best way to save that money is by parking it somewhere, so one is not answerable to anyone in the country.
- Therefore, there was a need to control and prevent the laundering of money.
- The PMLA was brought in for this exact reason in 2002, but was enacted only in 2005.
- The objective was to prevent parking of the money outside India and to trace out the layering and the trail of money.
- So as per the Act, the ED got its power to investigate under Sections 48 (authorities under act) and 49 (appointment and powers of authorities and other officers).
Roles and functions of the ED
- Summon, Search and seizure: The ED carries out search (property) and seizure (money/documents) after it has decided that the money has been laundered, under Section 16 (power of survey) and Section 17 (search and seizure) of the PMLA.
- Arrest and detentions: On the basis of that, the authorities will decide if an arrest is needed as per Section 19 (power of arrest).
- Attachment of property: Under Section 50, the ED can also directly carry out search and seizure without calling the person for questioning. It is not necessary to summon the person first and then start with the search and seizure.
- Filing of chargesheet: If the person is arrested, the ED gets 60 days to file the prosecution complaint (chargesheet) as the punishment under PMLA doesn’t go beyond seven years.
At what stage does the ED step in when a crime is committed?
- Whenever any offence is registered by a local police station, which has generated proceeds of crime over and above ₹1 crore, the investigating police officer forwards the details to the ED.
- Alternately, if the offence comes under the knowledge of the Central agency, they can then call for the First Information Report (FIR) or the chargesheet if it has been filed directly by police officials.
- This will be done to find out if any laundering has taken place.
PMLA, the ED’s sword arm
- The ED’s aggression has been largely on leveraging the massive powers bestowed on the agency by the Prevention of Money Laundering Act (PMLA), 2002.
- PMLA, 2002 is an Act of the Parliament of India enacted by the NDA government to prevent money laundering and to provide for the confiscation of property derived from money laundering.
- It was enacted in response to India’s global commitment (including the Vienna Convention) to combat the menace of money laundering.
- PMLA and the Rules notified there under came into force with effect from July 1, 2005.
How is PMLA going increasingly stringent?
The PMLA’s ambit was widened through amendments in 2009, 2013, 2015, and 2019, giving the ED the teeth it now has.
- Broader jurisdiction for investigation: In 2009, ‘criminal conspiracy’ under Section 120B of the Indian Penal Code was added to the PMLA’s schedule among various other offences. This has, over the years, allowed the ED to enter any case where a conspiracy is alleged — even if the principal offence is not part of the PMLA schedule. In 2009, the ED also got international jurisdiction as far as tracking laundered money was concerned.
- Immediate attachment of property: Following amendments in 2015 and 2018, the ED was allowed to attach properties in India equivalent to properties acquired abroad through laundered money. Through certain “explanations” inserted into the PMLA in 2019, the government allowed the ED to attach properties earned directly or indirectly through alleged criminal activity that was even “relatable” to a scheduled offence.
Why ED mostly grips Politicians?
- Exposing rampant corruption: It is not always ironic to say that most politicians are never corrupt. We have a very inglorious past of political corruption.
- Selective witch-hunt: The ED has often been attacked for initiating investigations, raiding and questioning leaders of opposition parties, be it under the current regime or under past governments.
Issues with PMLA
- Misuse of central agencies: PMLA is being pulled into the investigation of even ordinary crimes by the Enforcement Directorate.
- Seizing of assets: Assets of genuine victims have been attached. The ED could just walk into anybody’s house.
- Politically motivated raids: In all this, the fundamental purpose of PMLA to investigate the conversion of “illegitimate money into legitimate money” was lost.
- Opacity of charges: Petitioners pointed out that even the Enforcement Case Information Report (ECIR) – an equivalent of the FIR – is considered an “internal document” and not given to the accused.
- Vagueness over evidence: The accused is called upon to make statements that are treated as admissible in evidence.
- Harassment: The ED begins to summon accused persons and seeks details of all their financial transactions and of their family members.
- Against individual liberty: The initiation of an investigation by the ED has consequences that have the potential of curtailing the liberty of an individual.
Allegations against ED
- Huge discretions: The ED is the only Central agency in the country that does not require permission from the government to summon or prosecute politicians or government functionaries for committing economic offences like money laundering.
- Used for petty crimes: PMLA is pulled into the investigation of even “ordinary” crimes and assets of genuine victims have been attached.
- Actual purpose denigrated: PMLA was a comprehensive penal statute to counter the threat of money laundering, specifically stemming from the trade in narcotics.
- Violations of Rights: PMLA was enacted in response to India’s global commitment to combat the menace of money laundering. Instead, rights have been “cribbed, cabined and confined”.
- Functional opacity: There is also a lack of clarity about ED’s selection of cases to investigate. We often see ED raiding houses of opposition parties suddenly.
- Poor rate of conviction: We have hardly read the conclusion of cases by ED. Meantime media-trial tears off the accused person’s credibility which is the most desired intent.
- Under-trials and slower prosecution: ED has been focusing on keeping the accused in custody rather than actually proving the charges against them.
Challenges to ED
- ED being dragged to court: The petitions against the ED had the effect of slowing down the investigations, as officers have to defend themselves in court.
- Foul crying politicians: There are attempts to cover up unexplained, high-value transactions that fall within the PMLA’s ambit
- Investigation of foreign transactions: Getting information on accounts and money stashed abroad to establish a trail is the biggest challenge they face.
Way forward
- The fight against corruption is intimately linked with the reform of the investigations.
- Therefore the adjudicating authorities must work in cooperation and ensure the highest standards of transparency and fairness.
- ED has been walking a tightrope to safeguard its integrity by speeding up investigations and court procedures.
- The need of the hour could be systemic fixes—and not shrill calls to throw the baby out with the bathwater.
- It is unlikely that corruption can be substantially reduced without modifying the way government agencies operate.
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Corruption Challenges – Lokpal, POCA, etc
Untangling Kerala’s Lokayukta Amendment Controversy
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Lokpal and Lokayukta
Mains level: Read the attached story
The Kerala Legislative Assembly passed the Kerala Lok Ayukta (Amendment) Bill on August 30, amid a boycott.
Who are Lokpal-Lokayuktas?
- The Lokpal-Lokayukta issue has always generated intense debate in the country.
- In fact, this term was first used in a report of the Administrative Reforms Commission headed by Morarji Desai as far back as in 1966.
- Political corruption had become rampant by then and it was thought that a credible system of an ombudsman should be established to redress public grievances against the leaders and public officials.
- The first Bill on Lokpal was introduced in the Lok Sabha in 1968 which lapsed with the dissolution of the House.
- Anna Hazare’s movement and the active involvement of civil society generated a lot of moral pressure on the Government which ultimately led to the passing of the Bill in 2013.
Composition of Lokpal
- The Lokpal is no ordinary investigative body.
- It is headed by the incumbent Chief Justice of India or a retired judge.
- It has eight members, four of whom are judicial members.
- Thus the whole system is studded with judges or judicial men.
- The Lokpal has an inquiry wing and a prosecution wing to deal with investigation and prosecution, respectively.
- The director of prosecution files the case in the special court based on the findings of the Lokpal.
Who falls under the ambit of Lokpal?
- The Lokpal has jurisdiction to inquire into allegations of corruption against the Prime Minister, Ministers, Members of Parliament, Group A, B, C and D officers and officials of the central government.
- After the conclusion of the investigation, the Lokpal may file a case in the special court in case the findings disclose the commission of offence under the Prevention of Corruption Act by the PM, Ministers or MPs.
- However, the Lokpal does not have the power to ask the President to remove the Prime Minister or a Minister from office.
What about the states?
- The Lokpal and Lokayukta Act delegates the power to States to establish by law the Lokayukta to deal with complaints relating to corruption against public functionaries.
- Some States already have established Lokayuktas. For example, Maharashtra in 1971, and Kerala in 1999.
What is the Keralan controversy?
- In order to get a clearer perspective on the Kerala Lokayukta controversy, it is necessary to understand the scheme of the Lokpal and Lokayuktas Act enacted by Parliament.
- The long title of the Act says: “An Act to provide for the establishment of a body of Lokpal for the Union and Lokayukta for States to inquire into allegations of corruption against certain public functionaries….”
- Thus, the Lokpal is conceived of as a body which will inquire into allegations of corruption.
- It is basically an investigative body whose task is to conduct prompt and fair investigation and the prosecution of cases of corruption.
Issues with the Amendment
- The amendments were related to the competent authority to consider Lok Ayukta recommendations.
- In the case of any unfavourable decision from the Lok Ayukta against the CM, the competent authority will now be the Legislative Assembly instead of the Governor as is prescribed in the existing Act.
- The amendment tries to take away at the powers of the Governor.
- The Lokayukta has indirectly expressed its resentment over the attempt to take away some of its powers.
Arguments by Kerala Government
- The Government, on the other hand, claims that through the amendment, a provision in the original Act which is unconstitutional has been excised.
- Earlier it gave power to the Lokayukta to give directions to the Governor to remove a CM or a Minister on being found guilty of corruption.
- This meant that the Lokayukta was to be over and above the office of Governor.
Legal and constitutional implications
Two important points need to be made here:
(A) Overpowering the Lokpal
- One, an investigative body does not have the legal authority to direct the public servant to resign his post on the basis of its findings.
- It can only submit its findings to the competent authority or, as is provided in the Lokpal Act, file a case in the special court.
- The Lokayukta is basically an investigative body with certain powers to carry out an investigation into cases relating to the Prevention of Corruption Act.
- The only special feature of this body is that it is headed by a retired judge of the Supreme Court or a retired Chief Justice of a High Court.
- But that does not alter the basic character of the Lokayukta as an investigative body.
(B) Compulsion on Governor
- The Chief Minister or a Minister holds office during the pleasure of the Governor (Article 164).
- The Constitution of India does not contemplate any external pressure on the Governor to withdraw his pleasure.
- The Sarkaria Commission had suggested that the Governor can dismiss a Chief Minister only when he loses his majority in the Assembly and refuses to step down.
- The Supreme Court has accepted this recommendation of the Sarkaria Commission.
- Another occasion when the Governor could withdraw his pleasure is on account of CM having been convicted in a criminal case and sentenced to not less than two years of imprisonment.
- In other words, a Chief Minister cannot be asked to resign when he enjoys a majority in the House.
- The Governor, being a high constitutional authority, cannot be compelled by a law to act in a particular manner so far as his constitutional duties and functions are concerned.
Other contentious provisions
(1) Undue burden on Political Parties
- There are some other provisions as well which may not stand legal scrutiny.
- For example, this law includes the office bearers of political parties within its definition of ‘public servant’.
- Basically, the Prevention of Corruption Act deals with corruption in the government and allied agencies, statutory bodies, elected bodies, etc.
- The functionaries of political parties do not come within the mischief of this law. So, it is difficult to understand how they can be brought within the sweep of the Lokayukta Act.
(2) Reports of Lokayukta
- Another problematic provision in this law is the one which deals with the reports of Lokayukta (Section 12).
- It says that the Lokayukta shall, on the allegation of corruption being substantiated, send the findings along with recommendation of action to the competent authority who is required to take action as recommended by the Lokayukta.
- It further says that if the Lokayukta is satisfied by the action taken by the competent authority, he shall close the case.
- The question is how the Lokayukta can close a corruption case which is a criminal case and which invites imprisonment for three to seven years.
- The Lokpal files the case in the court after the investigation. There is no provision in the central law under which the Lokpal can close the case before it reaches the court.
- The Lokayukta not being a court does not have the legal capacity to close the corruption case under any circumstances.
Way forward
- The Kerala Lokayukta Act should be re-examined by a committee of the Assembly and should be brought on a par with the Lokpal Act.
- Legislation that seeks to punish corrupt functionaries should be placed above controversies.
Back2Basics: Lokpal Movement
- The Lokpal, the apex body to inquire and investigate graft complaints against public functionaries, came into being with the appointment of its chairperson and members in March 2019.
- In March 2019, former SC judge Justice Pinaki Chandra Ghose was selected as the first head of the Lokpal.
Lokpal and Lokayuktas Act, 2013
- The Lokpal Act 2013 is anti-corruption legislation that seeks to provide for the establishment of the institution of Lokpal.
- It seeks to inquire into allegations of corruption against certain important public functionaries including the PM, cabinet ministers, MPs, Group A officials of the Central Government, etc.
- The Bill was introduced in the parliament following massive public protests led by anti-corruption crusader Anna Hazare and his associates.
- The Bill is one of the most widely discussed and debated Bills in India in recent times.
Its history
- The term Lokpal was coined in 1963 by Laxmi Mall Singhvi, a member of parliament during a parliamentary debate about grievance mechanisms.
- The Administrative Reforms Commission (ARC) headed by Morarji Desai submitted an interim report on “Problems of Redressal of Citizen’s Grievances” in 1966.
- In this report, ARC recommended the creation of two special authorities designated as ‘Lokpal’ and ‘Lokayukta’ for a redress of citizens’ grievances.
- Maharashtra was the first state to introduce Lokayukta through The Maharashtra Lokayukta and Upa-Lokayuktas Act in 1971.
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Corruption Challenges – Lokpal, POCA, etc
Benami Law can’t be applied retrospectively: SC
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Benami Properties
Mains level: Read the attached story
The Supreme Court has declared as “unconstitutional and manifestly arbitrary” the amendments introduced to the Benami Property Transactions Act, 1988 in 2016, which apply retrospectively and can send a person to prison for three years even as it empowers the Centre to confiscate “any property” subject to a benami transaction.
What is Benami Property?
- Benami in Hindi means without name. So, a property bought by an individual not under his or her name is benami property.
- It can include property held in the name of spouse or child for which the amount is paid out of known sources of income.
- A joint property with brother, sister or other relatives for which the amount is paid out of known sources of income also falls under benami property.
- The transaction involved in the same is called benami transaction.
- The benami transactions include buying assets of any kind — movable, immovable, tangible, intangible, any right or interest, or legal documents.
Why do people indulge in such transactions?
- As a usual practice, to evade taxation, people invest their black money in buying benami property.
- The real owner of these properties are hard to trace due to fake names and identities.
What is the Benami Law?
- The first act against benami properties was passed in 1988 as the Prohibition of Benami Property Transactions Act, 1988.
- To block all loopholes, the government in July 2016 decided to amend the original act.
- So after further amendment, Benami Transactions (Prohibition) Amendment Act, 2016 came into force on November 1, 2016.
- The PBPT Act defines benami transactions, prohibits them and further provides that violation of the PBPT Act is punishable with imprisonment and fine.
- The PBPT Act prohibits recovery of the property held benami from benamidar by the real owner.
- Such, properties are liable for confiscation by the Government without payment of compensation.
What amendment is this article talking about?
- The 2016 law amended the original Benami Act of 1988, expanding it to 72 Sections from a mere nine.
- Sections 3(2) and 5 were introduced through the Benami Transactions (Prohibition) Amendment Act, 2016.
- A Bench, led by CJI N.V. Ramana, declared Sections 3(2) and 5 introduced through this amendment as unconstitutional.
Which sections did the Supreme Court declare unconstitutional?
(b) Section 3(2)
- A/c to this, a person can be sent behind bars for a benami transaction entered into 28 years before the Section even came into existence.
- CJI Ramana held that the provision violated Article 20(1) of the Constitution.
- Article 20(1) mandates that no person should be convicted of an offence, which was not in force “at the time of the commission of the act charged as an offence”.
(b) Section 5
- It said that “any benami property shall be liable to be confiscated by the Central Government”.
- The court held that this confiscation provision cannot be applied retrospectively.
- The CJI dismissed the government’s version that forfeiture, acquisition and confiscation of property under the 2016 Act was not in the nature of prosecution and cannot be restricted under Article 20.
What else did the apex court observe?
- The court observed that the 2016 Act condemned not only transactions that were traditionally denominated as benami but also a “new class of fictitious and sham transactions”.
- The court said the intention of Parliament was to condemn property acquired from ill-gotten wealth.
- These proceedings cannot be equated as enforcing civil obligations, the CJI noted.
Why curb benami transactions?
- Inflationary implications: Rather than hoarding the black money in cash, the tax evader invest their accumulated illegal money in buying benami properties.
- Loss of economic activity: The whole process affects the revenue generation of government hampering growth and development of the state.
- Tax evasion: Since the percentage of tax payer in the country is a dismal low, the government fails to successfully implement its policies and schemes due to lack of resources.
- Money laundering: Benami transactions also serves the illicit purpose of money laundering.
Conclusion
- A tough law against benami properties is the need of the hour to check corruption.
- However, due process of law needs to be followed in true letter and spirit.
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Corruption Challenges – Lokpal, POCA, etc
SC uphold PMLA amendments
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Particulars of PMLA , ED.
Mains level: Corruption and transparency
Context
- At least 17 Opposition parties have dubbed as “dangerous” the recent Supreme Court judgement upholding amendments made in 2019 to the Prevention of Money Laundering Act (PMLA), giving more powers to agencies such as the Enforcement Directorate (ED).
What are the concerns for this verdict?
- Violate fundamental rights: Petitions were filed against the amendments, which the challengers claimed would violate personal liberty, procedures of law and the constitutional mandate.
- Complex process: The petitioners included many veteran politicians who all claimed that the “process itself was the punishment”.
- Coercion of ED: There were submissions that the accused’s right against self-incrimination suffered when the ED summoned them and made them sign statements on threats of arrest.
What is PMLA?
- Prevention of Money Laundering Act, 2002 is an Act of the Parliament of India enacted by the government to prevent money-laundering and to provide for confiscation of property derived from money-laundering.
What is money laundering?
- Money laundering is the process of concealing the origin of money, obtained from illicit activities such as drug trafficking, corruption, embezzlement or gambling, by converting it into a legitimate source.
What is ED?
- The Directorate of Enforcement is a law enforcement agency and economic intelligence agency responsible for enforcing economic laws and fighting economic crime in India. It is part of the Department of Revenue, Ministry of Finance, Government Of India.
What acts it covers?
- Prevention of Money Laundering Act (PMLA)
- Fugitive Economic Offenders Act
- Foreign Exchange Management Act
- Foreign Exchange Regulation Act (FERA)
Roles and functions of the ED
- Summon, Search and seizure: The ED carries out search (property) and seizure (money/documents) after it has decided that the money has been laundered, under Section 16 (power of survey) and Section 17 (search and seizure) of the PMLA.
- Arrest and detentions: On the basis of that, the authorities will decide if an arrest is needed as per Section 19 (power of arrest).
- Attachment of property: Under Section 50, the ED can also directly carry out search and seizure without calling the person for questioning. It is not necessary to summon the person first and then start with the search and seizure.
- Filing of chargesheet: If the person is arrested, the ED gets 60 days to file the prosecution complaint (chargesheet) as the punishment under PMLA doesn’t go beyond seven years.
Why ED is making news?
- Selective witch-hunt: The ED has often been attacked for initiating investigations, raiding and questioning leaders of opposition parties, be it under the current regime or under past governments.
Why ED is on target?
- Huge discretions: The ED is the only Central agency in the country that does not require permission from the government to summon or prosecute politicians or government functionaries for committing economic offences like money laundering.
- Used for petty crimes: PMLA is pulled into the investigation of even “ordinary” crimes and assets of genuine victims have been attached.
- Actual purpose denigrated: PMLA was a comprehensive penal statute to counter the threat of money laundering, specifically stemming from the trade in narcotics.
- Violations of Rights: PMLA was enacted in response to India’s global commitment to combat the menace of money laundering. Instead, rights have been “cribbed, cabined and confined”.
Issues with PMLA
- Misuse of central agencies: PMLA is being pulled into the investigation of even ordinary crimes by the Enforcement Directorate.
- Seizing of assets: Assets of genuine victims have been attached. The ED could just walk into anybody’s house.
- Politically motivated raids: In all this, the fundamental purpose of PMLA to investigate the conversion of “illegitimate money into legitimate money” was lost.
- Opacity of charges: Petitioners pointed out that even the Enforcement Case Information Report (ECIR) – an equivalent of the FIR – is considered an “internal document” and not given to the accused.
- Vagueness over evidence: The accused is called upon to make statements that are treated as admissible in evidence.
- Harassment: The ED begins to summon accused persons and seeks details of all their financial transactions and of their family members.
- Against individual liberty: The initiation of an investigation by the ED has consequences that have the potential of curtailing the liberty of an individual.
Way ahead
- It is unlikely that corruption can be substantially reduced without modifying the way government agencies operate.
- The fight against corruption is intimately linked with the reform of the investigations.
- Therefore the adjudicating authorities must work in cooperation and ensure the highest standards of transparency and fairness.
Mains question
Q. The trust in premier investigating institutions, and their credibility, is at stake. Is the ED a tool to investigate financial skulduggery or a stick to browbeat opposition leaders? Critically examine.
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Panch prans for better India
Note4Students
From UPSC perspective, the following things are important :
Prelims level: NA
Mains level: Challenges of future.
Context
- PM Modi’s Independence Day speech outlined agenda for a radical transformation of society and nation.
What are 5 resolves given by PM?
- Take pride in India’s history.
- The power of unity.
- Duties of citizens, such as those of the PM and CMs.
- Advance with greater conviction and the determination of a developed India.
- Get rid of any signs of slavery.
Detail analysis 5 resolves of pm
(1)First pran: The first pran is about inculcating a culture of thinking big and at scale.
- The first vow is for the country to move ahead with a big resolve. And that big resolution is of a developed India; and now we should not settle for anything less than that. Big resolution!
- Some examples include the world’s largest financial inclusion programme, the largest vaccination drive, the largest health insurance programme and the largest social security schemes.
(2)Second pran: The second Pran is that in no part of our existence, not even in the deepest corners of our mind or habits should there be any ounce of slavery. It should be nipped there itself.
- Now, 100 per cent this slavery of hundreds of years has kept us bound, has forced us to keep our emotions tied up, have developed distorted thinking in us.
- We have to liberate ourselves from the slavery mind set which is visible in innumerable things within and around us. This is our second Pran Shakti.
(3)Third pran: The third Pran is that we should feel proud of our heritage and legacy.
- Since it is this same legacy which had given India its golden period in the past. And it is this legacy that has an innate capability of transforming itself with time.
- It is this rich heritage that transcends tests of tide and times. It embraces the new. And hence we should be proud of this heritage.
(4)Fourth pran: Fourth pran which is equally important is unity and solidarity.
- Amongst 130 million countrymen when there is harmony and bonhomie, unity becomes its strongest virtue.
- “Ek Bharat Shreshtha Bharat” – is one of the unifying initiatives to actuate the dream of the fourth Pran.
(5)Fifth pran: Fifth Pran is the duty of the citizens, in which even the Prime Minister, Chief Minister cannot be an exclusion.
- As they are also responsible citizens and have a duty towards the nation. This virtue is going to be the vital life force if we want to achieve the dreams we have for the next 25 years.
Challenges before India in next 25 years
- Skill development and employment for the future: workforce According to the World Economic Forum’s report “The Future of Jobs 2018”, more than half of Indian workers will require reskilling by 2022 to meet the talent demands of the future. They will each require an extra 100 days of learning, on average.
- Socioeconomic inclusion of rural India: By 2030, 40% of Indians will be urban residents. However, there will also be more than 5,000 small urban towns (50,000-100,000 persons each) and more than 50,000 developed rural towns (5,000-10,000 persons each) with similar income profiles, where aspirations are fast converging with those of urban India.
- A healthy and sustainable future: As India marches forward, it faces new challenges in health and sustainable living, even as it has achieved key health targets such as polio eradication.
Conclusion
- The nation should now only be setting big goals. That big goal is a developed India and nothing less.
Mains question
Q. What are the challenges India will face in next 25 years? Discuss the panch pran resolves of PM showing how they will address these challenges.
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SC upholds powers of arrest raid under PMLA for ED
Note4Students
From UPSC perspective, the following things are important :
Prelims level: ED, PMLA
Mains level: Read the attached story
The Supreme Court upheld the core amendments made to the Prevention of Money Laundering Act (PMLA), which gives the government and the Enforcement Directorate (ED) virtually unbridled powers of summons, arrest, and raids, and makes bail nearly impossible while shifting the burden of proof of innocence on to the accused rather than the prosecution.
Did the judgement say?
- The Supreme Court called the PMLA a law against the “scourge of money laundering” and not a hatchet wielded against rival politicians and dissenters.
- Money laundering is an offence against the sovereignty and integrity of the country. It is no less a heinous offence than the offence of terrorism, the court noted.
Why in news?
- The verdict came on an extensive challenge raised against the amendments introduced in 2002 Act by way of Finance Acts.
- The three-judge Bench said the method of introduction of the amendments through Money Bills would be separately examined by a larger Bench of the top court.
What were the petitions?
- Petitions were filed against the amendments, which the challengers claimed would violate personal liberty, procedures of law and the constitutional mandate.
- The petitioners included many veteran politicians who all claimed that the “process itself was the punishment”.
- There were submissions that the accused’s right against self-incrimination suffered when the ED summoned them and made them sign statements on threats of arrest.
- But the court said these statements were recorded as part of an “inquiry” into the proceeds of crime.
- A person cannot claim right against self-incrimination at a summons stage.
About Enforcement Directorate (ED)
- It goes back to May 1, 1956, when an ‘Enforcement Unit’ was formed in the Department of Economic Affairs.
- It then aimed for handling Exchange Control Laws violations under the Foreign Exchange Regulation Act (FERA).
- The ED today is a multi-dimensional organisation investigating economic offences under the Prevention of Money Laundering Act (PMLA), Fugitive Economic Offenders Act, Foreign Exchange Management Act and FERA.
From where does the ED get its powers?
- When proceeds of crime (property/money) are generated, the best way to save that money is by parking it somewhere, so one is not answerable to anyone in the country.
- Therefore, there was a need to control and prevent the laundering of money.
- The PMLA was brought in for this exact reason in 2002, but was enacted only in 2005.
- The objective was to prevent parking of the money outside India and to trace out the layering and the trail of money.
- So as per the Act, the ED got its power to investigate under Sections 48 (authorities under act) and 49 (appointment and powers of authorities and other officers).
At what stage does the ED step in when a crime is committed?
- Whenever any offence is registered by a local police station, which has generated proceeds of crime over and above ₹1 crore, the investigating police officer forwards the details to the ED.
- Alternately, if the offence comes under the knowledge of the Central agency, they can then call for the First Information Report (FIR) or the chargesheet if it has been filed directly by police officials.
- This will be done to find out if any laundering has taken place.
What differentiates the probe between the local police and officers of the ED?
Case study:
- If a theft has been committed in a nationalised bank, the local police station will first investigate the crime.
- If it is learnt that the founder of the bank took all the money and kept it in his house, without being spent or used, then the crime is only theft and the ED won’t interfere because the amount has already been seized.
- But if the amount which has been stolen is used after four years to purchase some properties, then the ill-gotten money is brought back in the market.
- Or if the money is given to someone else to buy properties in different parts of the country, then there is ‘laundering’ of money.
- Hence the ED will need to step in and look into the layering and attachment of properties to recover the money.
- If jewellery costing ₹1 crore is stolen, police officers will investigate the theft. The ED, however, will attach assets of the accused to recover the amount of ₹1 crore.
What are the other roles and functions of the ED?
- The ED carries out search (property) and seizure (money/documents) after it has decided that the money has been laundered, under Section 16 (power of survey) and Section 17 (search and seizure) of the PMLA.
- On the basis of that, the authorities will decide if arrest is needed as per Section 19 (power of arrest).
- Under Section 50, the ED can also directly carry out search and seizure without calling the person for questioning.
- It is not necessary to summon the person first and then start with the search and seizure.
- If the person is arrested, the ED gets 60 days to file the prosecution complaint (chargesheet) as the punishment under PMLA doesn’t go beyond seven years.
- If no one is arrested and only the property is attached, then the prosecution complaint along with attachment order is to be submitted before the adjudicating authority within 60 days.
Can the ED investigate cases of money laundering retrospectively?
- If an ill-gotten property is acquired before the year 2005 (when the law was brought in) and disposed off, then there is no case under PMLA.
- But if proceeds of the crime were possessed before 2005, kept in storage, and used after 2005 by buying properties, the colour of the money is still black and the person is liable to be prosecuted under PMLA.
Under Section 3 of PMLA, a person shall be guilty of money-laundering, if such person is found to have directly or indirectly attempted to indulge or knowingly assist a party involved in one or more of the following activities:
- Concealment; possession; acquisition; use; or projecting as untainted property; or claiming as untainted property in any manner etc.
Also read:
[Burning Issue] Enforcement Directorate (ED): Dreaded nightmare of Indian Politicians & Businessmen
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What is a Not-for-Profit Company?
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not-for-Profit Company
Mains level: Corruption and money laundering
The Enforcement Directorate (ED) has summoned Rahul Gandhi and Sonia Gandhi following a trial court order in a tax assessment case of his not-for-profit company.
What is the case?
- A case alleged cheating and misappropriation of funds on part of the leaders in acquiring the newspaper.
- The alleged persons acquired it through a Section 25 company — in which they have 86% stake.
What is a Section 25 company?
- It is defined under the Companies Act, 1956.
- It is a not-for-profit charitable company.
- It is formed with the sole object of promoting commerce, art, science, religion, charity, or any other useful object.
- It intends to apply its profits, if any, or other income in promoting its objects, and to prohibit the payment of any dividend to its members
- Section 8 of the Companies Act, 2013 includes other objects such as sports, education, research, social welfare and protection of the environment among others.
Fiscal activities allowed
- While it could be a public or a private company, a Section 25 company is prohibited from payment of any dividend to its members.
- Section 25 states that by its constitution the company is required/ intends to apply its profits, if any, or other income in promoting its objects and is prohibited from paying any dividend to its members.
What are prominent examples of such companies?
- According to details available with the Ministry of Corporate Affairs, a large number of companies have been formed under the Section.
- Among these are Reliance Foundation, Reliance Research Institute, Azim Premji Foundation, Coca Cola India Foundation, and Amazon Academic Foundation.
Why are such companies formed?
- Most people looking to form a charitable entity go for forming a company under Section 25, now Section 8, rather than a Trust structure.
- This is because most foreign donors like to contribute to a company rather than Trust because they are more transparent and provide more disclosures.
- If a company has to be converted into a not-for-profit company, they can’t be converted into a Trust, however, they can be converted into a Section 25/ Section 8 company.
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What is the Xiaomi Scam?
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Enforcement Directorate, PMLA
Mains level: Tax evasion
Last week, the Enforcement Directorate had seized Rs 5551.27 crore ($725 million) from the local bank accounts of the Chinese smartphones company, Xiaomi.
Unfolding the Xiaomi Scam
- Xiaomi faces charges of having made illegal remittances to foreign entities by passing them off as royalty payments.
- It is a charge that Xiaomi has been continuously facing in India.
- The ‘royalty and licence fee’ paid by Xiaomi India were not being added to the transaction value of the goods imported by the company and its contract manufacturers.
- By not adding “royalty and licence fee” into the transaction value, Xiaomi was evading Customs duty.
What is the recent probe?
- The Enforcement Directorate has seized the bank account assets from Xiaomi Technology India, under the provisions of Foreign Exchange Management Act (FEMA.
- The company had remitted over Rs 5500 crore to foreign-based entities, including one Xiaomi group entity, in the guise of royalty payments.
- Such huge amounts in the name of royalties were remitted on the instructions of their Chinese parent group entities.
Xiaomi’s response
- Xiaomi, for its part, said that it is committed to working closely with government authorities to clarify any misunderstandings.
- It argued that the royalty payments and statements to the bank are all legit and truthful and were made for the in-licensed technologies and IPs used in our Indian version products.
- It is a legitimate commercial arrangement for Xiaomi India to make such royalty payments.
- But it is a typical corporate response, something on the lines that Xiaomi did on the previous occasion too.
How has China responded?
- China firmly support its companies in protecting their lawful rights and interests.
- It urged India to provide a fair, just and non-discriminatory business environment for Chinese companies making investment and operating in the country.
- It is visible that China has made a dovish statement as they usually do.
- Xiaomi now has alleged its top executives faced threats of “physical violence” and coercion during questioning by ED.
Indian govt on strong wicket
- Indian governmental authorities have made it clear that the Chinese companies were not being targeted.
- And financial misdemeanours had indeed been committed by these companies.
- The government has also explained the various cases in details and what it has seized so far.
- But the Chinese companies seem to be playing the victim card.
Back2Basics: Directorate of Enforcement (ED)
- ED is a law enforcement agency and economic intelligence agency responsible for enforcing economic laws and fighting economic crime (esp Money Laundering) in India.
- It is part of the Department of Revenue of the Ministry of Finance.
- It is composed of officers from the Indian Revenue Service, Indian Police Service and the Indian Administrative Service as well as promoted officers from its own cadre.
- The total strength of the department is less than 2000 officers out of which around 70% of officials came from deputation from other organizations while ED has its own cadre, too.
- The prime objective of the Enforcement Directorate is the enforcement of two key Acts namely:
- Foreign Exchange Management Act 1999 (FEMA) and
- Prevention of Money Laundering Act 2002 (PMLA)
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What is a Look Out Notice?
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Look Out Notice, ED
Mains level: Corruption and money laundering
Delhi High Court has sought the Enforcement Directorate’s (ED’s) response on a journalist’s challenge to its action of restraining her from leaving the country. She was stopped in Mumbai on Tuesday evening based on a look out circular (LOC) issued by the ED.
Look out notice: What is it, when is it issued?
- An LOC is issued to make sure that an individual who is absconding or wanted by law enforcement agencies is not able to leave the country.
- It is mostly used at immigration checkpoints at international airports and seaports by the immigration branch.
- In certain cases, the police can approach a court asking for the restriction of a person’s movement outside the country, when that person is a suspect and there is an apprehension that they may not join the investigation at a later stage.
- The subject of an LOC can challenge the circular and get relief from a court.
Who can issue an LOC?
- An LOC can be initiated by a large number of authorised officers, including an officer not below the rank of deputy secretary, an officer not below the rank of joint secretary in the state government, a district magistrate or superintendent of police.
- Also, designated officers of various law enforcing and security agencies, a designated officer of Interpol, an officer not below the rank of additional director in the Serious Fraud Investigation Office, and the Ministry of Corporate Affairs can also issue LOC.
- In 2018, the government also empowered the heads of public sector banks to directly request the authorities to issue an LOC against wilful defaulters to prevent them from leaving the country.
- So now, an officer not below the rank of chairman/managing director/chief executive of any public sector bank can make a request.
- An LOC can be modified/deleted/withdrawn by the Bureau of Immigration only on the specific request of the authorised originator on whose request the LOC was issued.
Does an LOC lead to arrest?
- Not necessarily. LOCs can be of several types.
- They can seek to merely stop a person against whom the circular has been issued from travelling outside the country, to prevent a person from entering the country, or inform the concerned investigation agencies.
- The proforma of the LOC also contains a request to detain the individual at the local police/investigation agency, which generally leads to arrest.
Back2Basics: Directorate of Enforcement (ED)
- ED is a law enforcement agency and economic intelligence agency responsible for enforcing economic laws and fighting economic crime (esp Money Laundering) in India.
- It is part of the Department of Revenue of the Ministry of Finance.
- It is composed of officers from the Indian Revenue Service, Indian Police Service and the Indian Administrative Service as well as promoted officers from its own cadre.
- The total strength of the department is less than 2000 officers out of which around 70% of officials came from deputation from other organizations while ED has its own cadre, too.
- The prime objective of the Enforcement Directorate is the enforcement of two key Acts namely, the Foreign Exchange Management Act 1999 (FEMA) and the Prevention of Money Laundering Act 2002 (PMLA)
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Untangling Kerala’s Lokayukta controversy
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Lokpal and Lokayuktas Act
Mains level: Paper 2- Lokpal Acts of states
Context
The controversy surrounding the amendment to the Lokayukta Act of Kerala — effected through an ordinance —has raised the political temperature in the State.
The background of the Lokayukta
- The term Lokpal was first used in a report of the Administrative Reforms Commission headed by Morarji Desai as far back as in 1966.
- The first Bill on Lokpal was introduced in the Lok Sabha in 1968 which lapsed with the dissolution of the House.
- Finally, after 45 years the Lokpal and Lokayuktas Bill was passed by Parliament in 2013.
- The Lokpal and Lokayukta Act delegates the power to States to establish by law the Lokayukta to deal with complaints relating to corruption against public functionaries.
- The Lokpal has jurisdiction to inquire into allegations of corruption against the Prime Minister, Ministers, Members of Parliament, Group A, B, C and D officers and officials of the central government.
- After the conclusion of the investigation, the Lokpal may file a case in the special court in case the findings disclose the commission of offence under the Prevention of Corruption Act by the Prime Minister, Ministers or Members of Parliament.
- Some States already have established Lokayuktas. For example, Maharashtra in 1971, and Kerala in 1999.
How Lokpal is different from other investigative bodies
- The Lokpal is no ordinary investigative body.
- Connection with judiciary: It is headed by the incumbent Chief Justice of of India or a retired judge.
- It has eight members, four of whom are judicial members.
- The Lokpal has an inquiry wing and a prosecution wing to deal with investigation and prosecution, respectively.
- The director of prosecution files the case in the special court based on the findings of the Lokpal.
Issue in Kerala
- In order to get a clearer perspective on the Kerala Lokayukta controversy, it is necessary to understand the scheme of the Lokpal and Lokayuktas Act enacted by Parliament.
- The long title of the Act says: “An Act to provide for the establishment of a body of Lokpal for the Union and Lokayukta for States to inquire into allegations of corruption against certain public functionaries….”
- Investigative body: Thus, the Lokpal is conceived of as a body which will inquire into allegations of corruption.
- Section 14 of the Lokayukta Act in Kerala which has now been amended said that if the Lokayukta is satisfied on the complaint against the public servant being substantiated that he should not continue to hold the post held by him.
- In other words, if the public servant is the Chief Minister or a Minister, he shall forthwith resign his office.
- It may be noted here that such a provision does not exist in any of the State laws or the Lokpal Act of the Centre.
- An investigative body does not have the legal authority to direct the public servant to resign his post on the basis of its findings.
- The Chief Minister or a Minister holds office during the pleasure of the Governor (Article 164).
- The Constitution of India does not contemplate any external pressure on the Governor to withdraw his pleasure.
- The Sarkaria Commission had suggested that the Governor can dismiss a Chief Minister only when he loses his majority in the Assembly and refuses to step down.
- The Supreme Court has accepted this recommendation of the Sarkaria Commission.
- No agency created by a law made by the Assembly, particularly an investigative body, can declare that its decision be carried out by the Governor.
- It would amount to a violation of the Constitution.
- State law includes the office bearers of political parties within its definition of ‘public servant’.
- The Lokayukta law was enacted to inquire into cases of corruption of public functionaries such as Ministers, legislators, etc. who are covered by the Prevention of Corruption Act.
- This Act does not include office-bearers of political parties in its definition clause.
- Another problematic provision in this law is the one which deals with the reports of Lokayukta (Section 12).
- It says that the Lokayukta shall, on the allegation of corruption being substantiated, send the findings along with recommendation of action to the competent authority who is required to take action as recommended by the Lokayukta.
- It further says that if the Lokayukta is satisfied by the action taken by the competent authority, he shall close the case.
- There is no provision in the central law under which the Lokpal can close the case before it reaches the court.
- The Lokayukta not being a court does not have the legal capacity to close the corruption case under any circumstances.
Conclusion
The Kerala Lokayukta Act should be re-examined by a committee of the Assembly and should be brought on a par with the Lokpal Act. A legislation which seeks to punish corrupt public functionaries should be placed above controversies.
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What are Swiss Banks?
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Swiss Banks
Mains level: Corruption and money laundering
A whistleblower has leaked information on more than $100 billion held in 30,000 accounts of Zurich-headquartered Credit Suisse, one of the world’s most infamous banks which hold black money.
What is the news?
- The investigation refocused attention on Swiss banks and their famous, century-old culture of secrecy.
- This swiss tradition is under pressure as countries around the world try to get their super-rich to pay legitimate taxes on their wealth.
Swiss Banks: Defined by Secrecy
- Since at least the beginning of the 18th century, Geneva had become a favoured destination of French royalty and other European elites seeking discreet havens to stash their wealth.
- In 1713, Swiss government authorities announced laws prohibiting bankers from giving out information about their customers.
- Thus began a powerful culture of silence and secrecy that went on to become the defining feature of Swiss banking.
- In 1934, Switzerland passed the Federal Act on Banks and Savings Banks, commonly known as the Banking Law of 1934 or the Swiss Banking Act.
What’s behind this upmost secrecy?
- Article 47 made it a crime to reveal details or information of customers to almost anyone — including the government — without their consent and in the absence of a criminal complaint.
- Violators can get five years in prison; Article 47 lies at the heart of some of the most stringent banking secrecy laws anywhere.
Why are they favourite destination to park black money?
- As wealth became easily mobile across international borders, the safety and stability of Swiss banks, located in a peaceful country presented an irresistible attraction for the super-rich.
- Switzerland itself is a politically neutral country.
- Swiss bank accounts are attractive to depositors because they combine low levels of risk with very high levels of privacy.
- The Swiss economy is extremely stable, and the banks are run at very high levels of professionalism.
- Almost any adult in the world can open an account in a Swiss bank. Opening an account is not difficult, and requires not much more than basic KYC, including a proof of identity such as a passport.
Question of ‘black money’
- “Black money” allegedly stashed away by Indians in Swiss banks is a political issue in India, and parties and political functionaries have often made promises to “bring it back”.
- Swiss authorities have maintained that they cooperate with the Indian government to fight tax evasion and fraud.
Indian motives and moves
- The two countries have had a system of automatic exchange of information in tax matters since 2018.
- Under this, detailed financial information on all Indian residents with accounts in Swiss financial institutions was provided for the first time to Indian authorities in September 2019.
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Prevention of Money Laundering Act (PMLA)
Note4Students
From UPSC perspective, the following things are important :
Prelims level: PMLA
Mains level: Issues with PMLA
The Supreme Court is looking into allegations of the metamorphosis of the Prevention of Money Laundering Act (PMLA), brought to sniff out drug money, into a potent weapon to raid rivals and deny rights.
What is meant by money laundering?
- Money laundering is the process of making significant amounts of money obtained through criminal activities, such as drug trafficking or terrorist funding, appear to have come from a legitimate source.
- Large profits are made by illegal arms sales, drug trafficking, smuggling and prostitution rings, insider trading, bribery, and computer fraud schemes.
- As a result, it provides an incentive for money launderers to “legitimize” their ill-gotten gains through money laundering.
- The money generated is referred to as ‘dirty money,’ and money laundering is the act of converting ‘dirty money’ into ‘legitimate’ money.
Money Laundering Procedure:
It is a 3-stage process. They are:
- Placement: The first stage involves the injection of crime money into the formal financial system.
- Layering is the second stage, money injected into the system is layered and spread over various transactions in order to conceal the money’s tainted origin.
- Integration: In the third and final stage, money enters the financial system in such a way that the initial association with the crime is sought to be erased, and the money can then be utilized as clean money by the offender.
Some of the most Common Money Laundering Methods:
- Bulk cash smuggling, cash-intensive businesses, round-tripping,trade-based laundering, shell companies and trusts, bank capture, gambling, real estate, black salaries, fictional loans, hawala, and false invoicing
Prevention of Money Laundering Act (PMLA)
- PMLA, 2002 is an Act of the Parliament of India enacted by the NDA government to prevent money laundering and to provide for confiscation of property derived from money laundering.
- It was enacted in response to India’s global commitment (including the Vienna Convention) to combat the menace of money laundering.
- PMLA and the Rules notified there under came into force with effect from July 1, 2005.
- The act was amended in the year 2005, 2009 and 2012.
Objectives of PMLA
The PMLA seeks to combat money laundering in India and has three main objectives:
- To prevent and control money laundering.
- To confiscate and seize the property obtained from the laundered money; and
- To deal with any other issue connected with money laundering in India.
Key definitions
- Payment System: A system that enables payment to be effected between a payer and a beneficiary, involving clearing, payment or settlement service or all of them. It includes the systems enabling credit card, debit card, smart card, money transfer or similar operations.
- Money-laundering: Whosoever directly or indirectly attempts to indulge or assist other person or actually involved in any activity connected with the proceeds of crime and projecting it as untainted property.
- Attachment: Prohibition of transfer, conversion, disposition or movement of property by an appropriate legal order.
- Proceeds of crime: Any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence.
Salient features
- Punishment and Jail term: The Act prescribes that any person found guilty of money laundering shall be punishable with rigorous imprisonment from three years to seven years. The maximum punishment may extend to 10 years instead of 7 years.
- Powers of attachment of tainted property: The Director or officer above the rank of Deputy Director with the authority of the Director, can provisionally attach property believed to be “proceeds of crime”.
- Adjudicating Authority: It is the authority appointed by the central government which decides whether any of the property attached or seized is involved in money laundering.
- Presumption in inter-connected transactions: Where money laundering involves two or more inter-connected transactions. It is presumed that the remaining transactions form part of such inter-connected transactions.
- Burden of proof: A person, who is accused of having committed the offense of money laundering, has to prove that alleged proceeds of crime are in fact lawful property.
- Appellate Tribunal: It is given the power to hear appeals against the orders of the Adjudicating Authority and any other authority under the Act. Its orders are not final and can be challenged.
- Establishment of Special Court: To ensure speedy trial.
Issues with PMLA
- Misuse of central agencies: PMLA is being pulled into the investigation of even ordinary crimes by the Enforcement Directorate.
- Seizing of assets: Assets of genuine victims have been attached. The ED could just walk into anybody’s house.
- Politically motivated raids: In all this, the fundamental purpose of PMLA to investigate the conversion of “illegitimate money into legitimate money” was lost.
- Opacity of charges: Petitioners pointed out that even the Enforcement Case Information Report (ECIR) – an equivalent of the FIR – is considered an “internal document” and not given to the accused.
- Vagueness over evidences: The accused is called upon to make statements that are treated as admissible in evidence.
- Harassment: The ED begins to summon accused persons and seeks details of all their financial transactions and of their family members.
- Against individual liberty: The initiation of an investigation by the ED has consequences that have the potential of curtailing the liberty of an individual.
Way ahead
- It is unlikely that corruption can be substantially reduced without modifying the way government agencies operate.
- The fight against corruption is intimately linked with the reform of the investigations.
- Therefore the adjudicating authorities must work in cooperation and ensure the highest standards of transparency and fairness.
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Corruption Perceptions Index (CPI), 2021
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Corruption Perceptions Index (CPI), 2021
Mains level: Corruption and money laundering
The 2021 Corruption Perception Index by Transparency International places India 85th on a list of 180 countries, one position above last year.
Corruption Perceptions Index (CPI)
- The CPI is an index which ranks countries “by their perceived levels of public sector corruption, as determined by expert assessments and opinion surveys.”
- The CPI generally defines corruption as an “abuse of entrusted power for private gain”.
- The index is published annually by the non-governmental organisation Transparency International since 1995.
- The index ranks 180 countries and territories by their perceived levels of public sector corruption according to experts and business people.
- It uses a scale of 0 to 100 to rank CPI, where 0 is highly corrupt and 100 is very clean.
What kind of corruption does the CPI measure?
The data sources used to compile the CPI specifically cover the following manifestations of public sector corruption:
- Bribery
- Diversion of public funds
- Officials using their public office for private gain without facing consequences
- Ability of governments to contain corruption in the public sector
- Excessive red tape in the public sector which may increase opportunities for corruption
- Nepotistic appointments in the civil service
- Laws ensuring that public officials must disclose their finances and potential conflicts of interest
- Legal protection for people who report cases of bribery and corruption
- State capture by narrow vested interests
- Access to information on public affairs/government activities
The CPI does NOT cover:
- Citizens’ direct perceptions or experience of corruption
- Tax fraud
- Illicit financial flows
- Enablers of corruption (lawyers, accountants, financial advisors etc)
- Money-laundering
- Private sector corruption
- Informal economies and markets
Highlights of the 2021 Report
- The top-performing countries were Denmark, Finland and New Zealand — all having a corruption perceptions score of 88 — followed by Norway, Singapore and Sweden, all of them scoring 85.
- In contrast, the worst-performing countries were South Sudan with a corruption perceptions score of 11, followed by Syria (13), Somalia (13, Venezuela (14) and Afghanistan (16).
India’s performance
- In 2021, India ranked 86th with the same CPI score of 40.
- The report highlighted concerns over the risk to journalists and activists who have been victims of attacks by the police, political militants, criminal gangs and corrupt local officials.
- Civil society organizations that speak up against the government have been targeted with security, defamation, sedition, hate speech and contempt-of-court charges, and with regulations on foreign funding.
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Corruption Challenges – Lokpal, POCA, etc
[pib] Lokpal-Online: Platform for management of complaints
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Online Lokpal
Mains level: Lokpal and Lokayuktas Act, 2013
The (first) Chairperson, Lokpal of India, Justice Pinaki Chandra Ghose has inaugurated’ a digital Platform for Management of Complaints called ‘Lokpal-Online’.
Lokpal-Online
- Lokpal-Online is an end-to-end digital solution for the management of complaints against public servants filed under the Lokpal and Lokayuktas Act, 2013.
- It is a web-based facility, which will quicken the disposal of complaints in an accountable, transparent and efficient manner with benefits to all stakeholders.
- It facilitates handling of complaints during the complete lifecycle of the Complaint, right from its filing to the final disposal.
- It aims to bring more transparency and efficiency to the complaint handling mechanism.
Notable features of Online-Lokpal
- Convenience to complainants for filing complaints online from anywhere anytime
- Information to the complainant about action on the complaint at every stage through e-mails and SMS
- Facility to the complainant to ascertain the status of complaint at anytime
- Identity of the complaint is kept confidential
- The CVC, CBI and other inquiry agencies can upload their reports directly on the ‘Lokpal-Online’ platform.
- Reminders to inquiry agencies through e-mails and SMS
- Generation of analytical reports as per requirement
Back2Basics: Lokpal
- The Lokpal, the apex body to inquire and investigate graft complaints against public functionaries, came into being with the appointment of its chairperson and members in March 2019.
- In March 2019, former SC judge Justice Pinaki Chandra Ghose was selected as the first head of the Lokpal.
Lokpal and Lokayuktas Act, 2013
- The Lokpal Act 2013 is anti-corruption legislation that seeks to provide for the establishment of the institution of Lokpal.
- It seeks to inquire into allegations of corruption against certain important public functionaries including the PM, cabinet ministers, MPs, Group A officials of the Central Government, etc.
- The Bill was introduced in the parliament following massive public protests led by anti-corruption crusader Anna Hazare and his associates.
- The Bill is one of the most widely discussed and debated Bills in India in recent times.
Its history
- The term Lokpal was coined in 1963 by Laxmi Mall Singhvi, a member of parliament during a parliamentary debate about grievance mechanisms.
- The Administrative Reforms Commission (ARC) headed by Morarji Desai submitted an interim report on “Problems of Redressal of Citizen’s Grievances” in 1966.
- In this report, ARC recommended the creation of two special authorities designated as ‘Lokpal’ and ‘Lokayukta’ for a redress of citizens’ grievances.
- Maharashtra was the first state to introduce Lokayukta through The Maharashtra Lokayukta and Upa-Lokayuktas Act in 1971.
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Corruption Challenges – Lokpal, POCA, etc
Pandora Papers on Offshore Financial Trusts
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Trusts and thier establishments
Mains level: Tax evasion
There are at least 380 persons of Indian nationality in the Pandora Papers.
What are the Pandora Papers?
- The Pandora papers are the largest trove of leaked data exposing tax haven secrecy in history.
- They provide a rare window into the hidden world of offshore finance, casting light on the financial secrets of some of the world’s richest people.
- It includes over 11.9 million leaked files from 14 global corporate services firms which set up about 29,000 off-the-shelf companies and private trusts in not just obscure tax jurisdictions.
- These documents relate to the ultimate ownership of assets ‘settled’ (or placed) in private offshore trusts and the investments including cash, shareholding, and real estate properties, held by the offshore entities.
Indians included in these
- There are at least 380 persons of Indian nationality in the Pandora Papers.
- There are almost 60 prominent individuals and companies including the most decorated cricketer of India.
What do these papers reveal?
- They reveal how the rich, the famous and the notorious, many of whom were already on the radar of investigative agencies, set up complex multi-layered trust structures for estate planning.
- This is particularly in jurisdictions that are loosely regulated for tax purposes, but characterized by air-tight secrecy laws.
- The purposes for which trusts are set up are many, and some genuine too.
But a scrutiny of the papers also shows how the objective of many is two-fold:
- Tax Avoidance: to hide their real identities and distance themselves from the offshore entities so that it becomes near impossible for the tax authorities to reach them and,
- Tax Evasion: to safeguard investments — cash, shareholdings, real estate, art, aircraft, and yachts — from creditors and law enforcers.
How is Pandora different from the Panama Papers and Paradise Papers?
- The Panama and Paradise Papers dealt largely with offshore entities set up by individuals and corporates respectively.
- The Pandora Papers investigation shows how businesses disguised as Trusts have created a new normal with rising concerns of money laundering, terrorism funding, and tax evasion.
What is a Trust?
- A trust can be described as a fiduciary arrangement where a third party, referred to as the trustee, holds assets on behalf of individuals or organizations that are to benefit from it.
- It is generally used for estate planning purposes and succession planning.
- It helps large business families to consolidate their assets — financial investments, shareholding, and real estate property.
A trust comprises three key parties:
- Settlor — one who sets up, creates, or authors a trust;
- Trustee — one who holds the assets for the benefit of a set of people named by the ‘settlor’; and
- Beneficiaries — to whom the benefits of the assets are bequeathed.
- A trust is not a separate legal entity, but its legal nature comes from the ‘trustee’.
- At times, the ‘settlor’ appoints a ‘protector’, who has the powers to supervise the trustee, and even remove the trustee and appoint a new one.
Is setting up a trust in India, or one offshore/ outside the country, illegal?
- The Indian Trusts Act, 1882, gives legal basis to the concept of trusts.
- While Indian laws do not see trusts as a legal person/ entity, they do recognise the trust as an obligation of the trustee to manage and use the assets settled in the trust for the benefit of ‘beneficiaries’.
- India also recognises offshore trusts i.e., trusts set up in other tax jurisdictions.
If it’s legal, what’s the investigation about?
- There are legitimate reasons for setting up trusts — and many set them up for genuine estate planning.
- A businessperson can set conditions for ‘beneficiaries’ to draw income being distributed by the trustee or inherit assets after her/ his demise.
- For instance, while allotting shares in the company to say, four siblings, the father promoter set conditions that a sibling can get the dividend from the shares and claim ownership of the shares.
- This could be to ensure ownership of the enterprise within the family.
- But trusts are also used by some as secret vehicles to park ill-gotten money, hide incomes to evade taxes, protect wealth from law enforcers.
Why are trusts set up overseas?
Overseas trusts offer remarkable secrecy because of stringent privacy laws in the jurisdiction they operate in. From the investigation, some key tacit reasons why people set up trusts are:
Maintain a degree of separation: Businesspersons set up private offshore trusts to project a degree of separation from their personal assets.
Hunt for enhanced secrecy: Offshore trusts offer enhanced secrecy to businesspersons, given their complex structures. The Income-Tax Department can get information only with the financial investigation agency or international tax authority.
Avoid tax in the guise of planning: Businesspersons avoid their NRI children being taxed on income from their assets by transferring all the assets to a trust. Further, the tax rates in overseas jurisdictions are much lower than the 30% personal I-T rate in India plus surcharges, including those on the super-rich (those with annual income over Rs 1 crore).
Prepare for estate duty eventuality: There is pervasive fear that estate duty, which was abolished back in 1985 when Rajiv Gandhi was PM, will likely be re-introduced soon. Setting up trusts in advance, business families have been advised, will protect the next generation from paying the death/ inheritance tax, which was as high as 85 per cent.
Flexibility in a capital-controlled economy: India is a capital-controlled economy. Individuals can invest only $250,000 a year under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS). To get over this, businesspersons have turned NRIs, and under FEMA, NRIs can remit $1 million a year in addition to their current annual income, outside India.
The NRI angle: Offshore trusts, as noted earlier, are recognised under Indian laws, but legally, it is the trustees — not the ‘settlor’ or the ‘beneficiaries’ — who are the owners of the properties and income of the trust. An NRI trustee or offshore trustee taking instructions from another overseas ‘protector’ ensures they are taxed in India only on their total income from India.
Can offshore Trusts be seen as resident Indian for tax purposes?
- There are certain grey areas of taxation where the Income-Tax Department is in contestation with offshore trusts.
- After The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, came into existence, resident Indians — if they are ‘settlors’, ‘trustees’, or ‘beneficiaries’ — have to report their foreign financial interests and assets.
- NRIs are not required to do so — even though, as mentioned above, the I-T Department has been sending notices to NRIs in certain cases.
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Corruption Challenges – Lokpal, POCA, etc
Lokpal
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Lokpal and Lokayuktas Act, 2013
Mains level: Read the attached story
More than two years after the Lokpal came into being, the Centre is yet to appoint a director of inquiry for conducting a preliminary inquiry into graft complaints sent by the anti-corruption ombudsman.
Who is ‘Director of Inquiry’?
- According to the Lokpal and Lokayuktas Act, 2013, there shall be a director of inquiry, not below the rank of Joint Secretary to the GoI.
- He/ She shall be appointed by the Central government for conducting preliminary inquiries referred to the Central Vigilance Commission (CVC) by the Lokpal.
About the Lokpal
- The Lokpal, the apex body to inquire and investigate graft complaints against public functionaries, came into being with the appointment of its chairperson and members in March 2019.
- In March 2019, former SC judge Justice Pinaki Chandra Ghose was selected as the first head of the Lokpal.
Lokpal and Lokayuktas Act, 2013
- The Lokpal Act 2013 is anti-corruption legislation that seeks to provide for the establishment of the institution of Lokpal.
- It seeks to inquire into allegations of corruption against certain important public functionaries including the PM, cabinet ministers, MPs, Group A officials of the Central Government etc.
- The Bill was introduced in the parliament following massive public protests led by anti-corruption crusader Anna Hazare and his associates.
- The Bill is one of the most widely discussed and debated Bills in India in recent times.
Its history
- The term Lokpal was coined in 1963 by Laxmi Mall Singhvi, a member of parliament during a parliamentary debate about grievance mechanisms.
- The Administrative Reforms Commission (ARC) headed by Morarji Desai submitted an interim report on “Problems of Redressal of Citizen’s Grievances” in 1966.
- In this report, ARC recommended the creation of two special authorities designated as ‘Lokpal’ and ‘Lokayukta’ for redress of citizens’ grievances.
- Maharashtra was the first state to introduce Lokayukta through The Maharashtra Lokayukta and Upa-Lokayuktas Act in 1971.
Also read:
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Corruption Challenges – Lokpal, POCA, etc
Donation reports of only 3.39% registered unrecognized parties available in public domain
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Political Parties and their types
Mains level: Political Parties in India
The contribution reports of only 78 (3.39%) of the total 2,301 registered unrecognized political parties are available in the public domain for 2018-19 reports the Association For Democratic Reforms (ADR).
Classification of Political Parties in India
(A) National parties
A registered party is recognised as a national party only if it fulfils any one of the three conditions listed below:
- A party should win 2% of seats in the Lok Sabha from at least three different states.
- At a general election to Lok Sabha or Legislative Assembly, the party polls 6% of votes in any four or more states and in addition, it wins four Lok Sabha seats.
- A party gets recognition as a state party in four states.
- A party recognised as a National party can be derecognized if it fails to maintain the criteria.
(B) State parties
A party has to fulfil any of the following conditions for recognition as a state party:
- A party should secure at least 6% of valid votes polled in an election to the state legislative assembly and win at least 2 seats in that state assembly.
- A party should secure at least 6% of valid votes polled in an election to Lok Sabha and win at least 1 seat in Lok Sabha.
- A party should win a minimum of three per cent of the total number of seats or a minimum of three seats in the Legislative Assembly, whichever is higher.
- A party should win at least one seat in the Lok Sabha for every 25 seats or any fraction thereof allotted to that State.
- Under the liberalized criteria, one more clause that it will be eligible for recognition as state party if it secures 8% or more of the total valid votes polled in the state.
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Corruption Challenges – Lokpal, POCA, etc
Highlights of the Corruption Perception Index, 2020
Note4Students
From UPSC perspective, the following things are important :
Prelims level: CPI
Mains level: Prevalence of corruption in India
The Transparency International (TI)’s corruption perception index (CPI) was recently released for 2020.
Another set of useful data in news to be noted by aspirants. Such data are essential and need to be memorized. One must note here. Such data recur every year. So it is not a big task to deal with such numbers along with other critical indices.
About the Corruption Perception Index
- The index ranks 180 countries and territories by their perceived levels of public sector corruption.
- It uses a scale of 0 to 100, where 0 is highly corrupt and 100 is very clean.
Global prospects
- Denmark and New Zealand top the index, with 88 points. Syria, Somalia and South Sudan come last, with 14, 12 and 12 points, respectively.
- Nearly half of countries have been stagnant on the index for almost a decade, indicating stalled government efforts to tackle the root causes of corruption.
- More than two-thirds score below 50.
India’s performance
- The CPI score for India is constant this year as well as the previous year’s score.
- India’s rank is 86 out of 180 nations with a score of 40.
- It was ranked at 80th position out of 180 countries in 2019 with a score of 41.
A comparison with neighbours
- At 40, India’s score is below the average score of the Asia-Pacific region (31 countries) and global average, the CPI 2020 report stated.
- India’s overall score is also two points less than that of China, which docked at 78th position, with a score of 42.
- Pakistan, however, scored just 31 points, falling at the 144th position on the index.
What does it mean for India?
- India is still very low on corruption Index, the report said, noting that experts feel the CPI does not reflect the actual corruption level in any country.
- The integrity score determines the corruption situation of a country.
Recommendations made by TI
To reduce corruption and better respond to future crises, Transparency International recommends that all governments:
- Strengthen oversight institutions to ensure resources reach those most in need. Anti-corruption authorities and oversight institutions must have sufficient funds, resources and independence to perform their duties.
- Ensure open and transparent contracting to combat wrong-doing, identify conflicts of interest and ensure fair pricing.
- Defend democracy and promote civic space to create the enabling conditions to hold governments accountable.
- Publish relevant data and guarantee access to information to ensure the public receives easy, accessible, timely and meaningful information.
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Corruption Challenges – Lokpal, POCA, etc
Six years on, Lokpal is a non-starter
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- Institution of Lokpal is yet prove its efficacy to deal with the corruption. What are the reasons for not starting function as stated in the law.
Context
More than six years after the Lokpal law received the President’s assent, the institution of the Lokpal is yet to play any significant role in tackling corruption in the country.
Delay in appointment
- Five-year delay in appointment: For more than five years, the chairperson and members of the Lokpal were not appointed.
- LoP issue: The government claimed that since no one could be recognised as the Leader of the Opposition (LoP) after the 2014 general election, the committee responsible for selecting members of the Lokpal could not be constituted.
- This malady could have been easily remedied by either recognising the leader of the single largest party in Opposition in the Lok Sabha as the LoP, or by amendment as was done for the selection committee of the CBI Director.
- However, neither recourse was taken.
Truncated appointment committee
- Special invitee: The leader of the largest Opposition party in the Lok Sabha was invited for meetings of the selection committee as a ‘special invitee’.
- Which he declined on grounds that it was mere tokenism.
Non-starter
- More than 10 months later, however, evidence suggests that the Lokpal is a non-starter.
- No rules prescribing the form: Till date, the government has not made rules prescribing the form for filing complaints to the Lokpal.
- No rules regarding asset disclosure: The Central government has also failed to formulate rules regarding asset disclosure by public servants.
- In order to ensure independent and credible action on allegations of corruption, the Lokpal was empowered under the law to set up its own inquiry wing headed by a Director of Inquiry and its own prosecution wing headed by a Director of Prosecution.
- The Inquiry and prosecution wing not set up yet: The inquiry and prosecution wings of the anti-corruption ombudsman are yet to be set up.
- The Lokpal has also not appointed the Director of Inquiry or Prosecution.
- Regulations for inquiry and investigation not made: Regulations which the Lokpal was obligated to make under the law are yet to be made, including those specifying the manner and procedure of conducting preliminary inquiry and investigation.
- Legal veracity of the decisions uncertain: Since necessary procedures to operationalise the law are yet to be put in place, the legal veracity of the decisions of the Lokpal could potentially be challenged in a court of law.
Conclusion
The failure to operationalise the Lokpal in an effective manner lays bare the lack of will of the government. It took nearly half a century for the Lokpal law to be enacted from the time the need for the oversight institution was first articulated. The government must act to have an effective, independent and empowered Lokpal.
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Corruption Challenges – Lokpal, POCA, etc
Corruption Perception Index 2019
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Corruption Perception Index 2019
Mains level: Menace of corruption in India
The Corruption Perception report for 2019 has been released. It has revealed that a majority of countries are showing little to no improvement in tackling corruption.
About CPI
- The CPI is annually released by Transparency International.
- It draws on 13 surveys and expert assessments to measure public sector corruption in 180 countries and territories, giving each a score from zero (highly corrupt) to 100 (very clean).
India’s performance
- India’s ranking in the CPI-2019 has slipped from 78 to 80 compared to the previous year.
- Its score of 41 out of 100 remains the same.
- CPI highlighted that unfair and opaque political financing, undue influence in decision-making and lobbying by powerful corporate interest groups, has resulted in stagnation or decline in the control of corruption.
Global corruption
- In the Asia Pacific region, the average score is 45, after many consecutive years of an average score of 44, which “illustrates general stagnation” across the region.
- China has improved its position from 87 to 80 with a score of 41 out of 100, a two-point jump.
- Despite the presence of high performers like New Zealand (87), Singapore (85), Australia (77), Hong Kong (76) and Japan (73), the Asia Pacific region hasn’t witnessed substantial progress in anti-corruption.
- In addition, low performers like Afghanistan (16), North Korea (17) and Cambodia (20) continue to highlight serious challenges in the region.
- The top ranked countries are New Zealand and Denmark, with scores of 87 each, followed by Finland (86), Singapore (85), Sweden (85) and Switzerland (85).
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