DHANUSHREE.N, IV- B.A.LL.B., GOVERNMENT LAW COLLEGE, CHENGALPATTU
SYNOPSIS
The huge scam in history, Hawala involved national bureaucrats and leading politicians and it has been the significant contributor for anonymous financing of the terrorist and illegal activities, has been a threat to major economies of the world for decades. The 1991 incident was a political scandal in India that involved payments that were purportedly received by politicians via the Jain Brothers, who acted as hawala brokers. This brought hawala transactions to limelight and a matter of discussion is the widely known Hawala Scam or the Jain Diaries case. This case took the term “hawala” to every nook and corner of India. This matter is significant because though the Indian history has seen several financial scams by private persons for their self-interest earlier, this was one of the leading political financial scams.
This term “continuing mandamus” was coined and the necessity of it was elaborately observed by the apex court. The Supreme Court in its verdict ensured the independent and fair conduct of government agencies to uphold justice.
KEYWORDS: Hawala, Continuing mandamus, corruption
INTRODUCTION
The word “scam” refers to dishonest practices that are tantamount to disrespect towards lawfully, morally, and ethically grounded social norms that manifest as laws. Hawala is a type of banking where the owner system and interpersonal interactions govern the flow of money. The fund transfer happens quickly, securely, and safely. Taxation is evaded and adequate traces are absent. Criminals typically employ hawala to evade money tracking, and the agents that carry out the transactions are known as hawaladars.
FACTS OF THE CASE
A raid on hawala brokers in 1991, following an arrest connected to militants in Kashmir, exposed proof of massive payments to politicians. After being apprehended in Delhi, Ashfak Hussain Lone, an official of the terrorist group Hizbul Mujahideen, found out that his group received funding through hawala, using Surendra Kumar Jain and his family as middlemen. During raids on Jain’s property, the Central Bureau of Investigation (CBI) confiscated diaries, note books, and foreign and Indian currency. The note books showed meticulous records of large-scale payments made to bureaucrats and politicians at high positions.
The case persisted in garnering media attention, and in October 1993, writ petitions were sent to the Indian Supreme Court, contending that government entities had neglected their official responsibilities and legal duties.
Claims arose regarding the failure of governmental institutions, which included the CBI and revenue officials, to investigate and prosecute individuals responsible for the seizure of the Jain diaries in the scam. A connection among politicians, bureaucrats, and criminals who got funding from illegal sources was made clear by the scandal. In an attempt to safeguard influential and prominent people, the CBI and other authorities were reluctant to inquire into and punish everyone associated. The Hawala system infringes FERA restrictions and is an illicit means of doing foreign exchange transactions. There were politicians from several political parties engaged in the scam, and the sums involved ranged from Rs. 50,000 to Rs. 7.5 crore. The Central Vigilance Commission was given supervisory authority over the CBI by the Supreme Court of India.
Based on Vineet Narayan’s complaint, Surindra Kumar Jain was taken into custody and an official report was written. The CBI was directed by the court to conceal any data regarding the investigations from politicians or higher-ranking officials. The Prime Minister faced accusations of swaying the investigation by Vineet Narayan, and as a result, the court ordered the CBI not to disclose any information. The Indian prime minister at the time, Narsimha Rao, refused to back down and believed that everyone who had been accused were innocent unless and until they proven to the contrary.
ISSUES FOR CONSIDERATION
1. The primary issue was the necessity of protecting investigating agencies from any external influence so as to maintain independent functioning.
2. Has the CBI fell short in its duty to conduct investigations into charges of public corruption?
LEGAL PROVISIONS INVOLVED
The incriminated politicians were charged under Section 120-B of IPC for being part and abetting a criminal conspiracy and, Section 7 and Section 13(1)(d) of Prevention of Corruption Act, 1988.
Apart from these, as on date hawala scam is also violative of section 3 of the Foreign Exchange Management Act, 1999 which prohibits foreign transactions through unauthorized persons. Under the Prevention of Money Laundering Act, 2002, hawala is illegal if the proceeds of such transactions are used in money laundering.
CONTENTIONS OF THE APPELLANT
The appellant argued that the CBI failed to investigate the hawala scam due to the influence of high-ranking politicians and bureaucrats. It was alleged that the government agencies failed to act fairly in conducting the investigation of the case. They demanded a remedial structure to prevent future issues and urged the court to uncover the scam and prosecute the accused if found guilty, as the politico-bureaucrat-criminal nexus continues to hinder the agencies’ duties.
Further the appellants prayed that directions be given so that such evil actions on the part of the investigating agencies and their political superiors are not repeated in future. The matter has also disclosed a nexus between crime and corruption at high places of nation and it poses a serious threat to the integrity, security, and economy of the nation.
Abiding to the principles of rule of law and democracy, every government agency has to perform its duties as per the law and without bias and favouritism.
CONTENTIONS OF RESPONDENT
The counsel for respondent argued that as the petitioner is not direct victim of the corruption so he is not having the locus standi to initiate a public interest litigation.
Additionally, it was claimed that the government would not interfere with the CBI because it is an independent and autonomous institution.
Further the respondents contended that without any sufficient evidence court is not having any authority to order investigation, and the investigation was done properly therefore court should not interfere in the present case.
CBI REPORT
Vineet Narayan’s accusation led to the arrest of Surindra Kumar Jain. It was Jain who revealed the entire story and an official report containing almost 120 pages was drafted. Moreover, Vineet Narayan filed a complaint against the prime minister for trying to influence the investigation. Thus, the court directed the CBI to conceal all investigation-related information from any political figures or higher authorities. Although the CBI was directly under the government’s authority, the court deserves commendation for enforcing a stern order against them. The Indian prime minister at the time, Mr. Narsimha Rao alleged that, until the contrary is proven, everyone who was speculated to be connected in the case must be considered innocent and he stubbornly refused to acknowledge that he or any of his associates had ever intervened in the Hawala issue.
SUPREME COURT’S VERDICT
The Supreme Court in this case referred to the Vishaka vs. State case and framed certain guidelines and stated that whenever there is inaction by the appropriate authority then the judiciary must take appropriate action. In this case the honourable supreme court to ensure transparency and fair proceedings and investigation procedure evolved a new concept called the “continuing mandamus”. While mandamus is a kind of writ issued by the honourable court as a direction to the lower courts or any other authority for that case and leaving it for them to follow it, the continuing mandamus includes a series of suck directions that acts as a check on any violation of law or to prevent any misleading acts and favouritism.
Moreover, the apex court struck down the direction issued by the Central Government to the CBI to obtain permission from the central government before carrying out any investigation. And the CBI was replaced under the Central Vigilance Commission from the authority of the executive which is beyond the authority of the government. In its ruling, the Supreme Court mandated steps to protect the CBI director from external intervention and improve transparency in the director’s position. Central Vigilance Commission was given statutory status in 1997.
The measures are as follows:
Regardless of when they become superannuated, CBI directors must serve a minimum of two years in office.
The selection committee must approve the transfer of an incumbent director of the CBI in an extraordinary circumstance, such as when he needs to take on a new job. The Central Vigilance Committee is in charge of ensuring the CBI operates efficiently.
The Supreme Court established these steps in recognition of the necessity of giving organizations like the CBI ongoing protection from outside influences so they can carry out their responsibilities in a way that ensures the rule is implemented correctly.
OTHER CASES OF HAWALA SCAM IN INDIA
Hawala was used as funding for the Dawood Ibrahim crime network, which was responsible for the 1993 Mumbai serial explosions.
Eleven incidents of hawala-routed terrorism funding in India are under investigation by the National Investigation Agency (NIA).
Based on claims of hawala transactions, Indian Income Tax officers and the Enforcement Directorate (ED) raided Hasan Ali’s properties in March 2007.
Mohammad Farooq, one of Mumbai’s biggest Hawala operator was arrested by enforcement agencies in connection with Rs. 2000 crore money laundering case involving his Stelkon Infratel Pvt ltd and network of 160 shell companies from a one room office in Zaveri bazaar.
CONCLUSION
The 1991 scam was a landmark case that brought the corruption and hawala transactions into broad daylight. This case stressed on public accountability by the politicians and public authorities. The laws against the hawala transactions were strengthened. The influence and interference of executive authorities and politicians in the functioning of the government agencies was duly recognised by the Supreme Court and it ensured independent functioning of government agencies.
Public awareness was created through this verdict about hawala transactions and corruption. Another important aspect of this case is the crucial role played by the Public Interest Litigation in such cases and the need for the public to be aware of such legal remedies to prevent corruption and other crimes against humanity.
In order to maintain credibility and ensure the proper abidance to the judgement the need for continuous supervision of the judiciary was felt by the honourable court which led to the establishment of continuing mandamus which also facilitated to independent functioning of the government agencies and to prevent the role of money as a deciding authority rather than justice.
Even after so many decades of this scam it holds a very important and crucial role in the Indian judiciary. This case was first of its kind in the Indian history in which corruption was carried out with the help of technical advancements. Till today, there are no proper measures and law to completely prevent such illegal transaction and as well as corruption. It is the need of the hour to formulate strict laws to prevent such atrocities.
REFERENCES
1. https://main.sci.gov.in/judgment/judis/13548.pdf
2. https://indiankanoon.org/doc/1203995/
4. https://prsindia.org/theprsblog/requirement-of-sanction?page=41&per-page=1
5. https://www.livelaw.in/tags/vineet-narain-vs-union-of-india
6. https://frontline.thehindu.com/cover-story/article25435922.ece
