Brother killed India ex-minister

The brother of a senior leader of India’s main opposition Bharatiya Janata Party has been found guilty of killing him last year.

A court in the western city of Mumbai said Praveen Mahajan had shot and killed his brother Pramod Mahajan, a former federal minister.

Mr Mahajan is likely to be sentenced on Tuesday, reports say.

Pramod Mahajan died 12 days after being shot at his home in Mumbai in April last year.

Reports say his brother fired three shots at him from a licensed revolver from close range because of a family dispute.

Technocrat

After initially confessing to murdering his brother, Mr Mahajan later denied it in the courts.

Pramod Mahajan, 56, was one of the most recognised political figures in India.

Although he lacked a political base, he was an influential figure in the BJP where he was part of the party’s Generation Next – a group of savvy and relatively younger “technocrat” leaders.

A former telecommunications minister, he is credited with bringing about a revolution in the industry.

Judge SP Davre told a crowded courtroom that eye witness accounts from the dead man’s wife – who heard her husband ask “what did I do, that I was killed by my brother?” – as he was rushed to hospital could be accepted as evidence.

Correspondents say that Praveen Mahajan is likely to receive a life sentence or the death penalty on Tuesday – even though such sentences are rarely carried out in India.

The prosecution said that after murdering Pramod, Praveen then went to the nearest police station and allegedly confessed to his crime. He has been in custody since then.

Story from BBC NEWS:

Published: 2007/12/17 12:44:26 GMT

Thieves cut off Hindu sadhu’s ‘holy leg’

By Omer Farooq
BBC News, Hyderabad

Police in southern India are hunting for two men who attacked a Hindu holy man, cut off his right leg and then made off with it.

The 80-year-old holy man, Yanadi Kondaiah, claimed to have healing powers in the leg.

He is now recovering from his ordeal in hospital in the city of Tirupati in the state of Andhra Pradesh.

Local people believed they could be healed of spiritual and physical problems if they touched his leg.

They also believed in Mr Kondaiah’s predictions of the future.

Police say the incident happened 550 km north of the state capital, Hyderabad.

‘Brutal manner’

Police say that the self-styled ‘Godman’ – who lives in a village near the city of Tirupati – was approached a few days ago by two strangers who came to seek his advice over a medical problem.

They say that the pair returned to the old man on Tuesday ostensibly to thank him for his help.

“As the old man had the weakness of drinking, he accepted their invitation to have drinks with them,” said local police Sub-Inspector Pendakanti Dastgiri.

“They took him to a deserted spot in the outskirts of the village.

“After the old man had passed out under the influence of liquor, they cut off his right leg from the knee,” he said.

Mr Dastgiri said that the amputation was carried out in a very “brutal manner” and that police are still looking for the leg and the men who so cruelly took it.

He said that the assailants used a sharp hunting knife, and left the old man alone and bleeding slowly to death.

Local people who found him unconscious alerted the police, who rushed him to hospital in Tirupati.

After regaining consciousness Mr Kondaiah said that he had no idea why he was targeted in such a manner, and did not understand the motive of the miscreants in taking away his leg.

“I have always been good to others and helped who ever came to me. Then why has this been done to me?” he asked amid his tears.

Police say the reason for the attack could be because Mr Kondaiah told too many people of the alleged magical powers of his right leg.

“This might have motivated some people to take away his leg hoping to benefit from it,” a police spokesman said.

“But it is difficult to say that this was the only motive. It could also be a case of a revenge attack.”

Story from BBC NEWS:

Hindu gods get summons from court

By Amarnath Tewary,Patna

A judge in India has summoned two Hindu gods, Ram and Hanuman, to help resolve a property dispute.

Judge Sunil Kumar Singh in the eastern state of Jharkhand has issued adverts in newspapers asking the gods to “appear before the court personally”.

The gods have been asked to appear before the court on Tuesday, after the judge said that letters addressed to them had gone unanswered.

Ram and Hanuman are among the most popular Indian Hindu gods.

Judge Singh presides in a “fast track” court – designed to resolve disputes quickly – in the city of Dhanbad.

The dispute is now 20 years old and revolves around the ownership of a 1.4 acre plot of land housing two temples.

You failed to appear in the court despite notices sent by a peon and post

Judge Sunil Kumar Singh in letter to Lord Ram and Hanuman

The deities of Ram and Hanuman, the monkey god, are worshipped at the two temples on the land.

Temple priest Manmohan Pathak claims the land belongs to him. Locals say it belongs to the two deities.

The two sides first went to court in 1987.

A few years ago, the dispute was settled in favour of the locals. Then Mr Pathak challenged the verdict in a fast track court.

Gift

Judge Singh sent out two notices to the deities, but they were returned as the addresses were found to be “incomplete”.

This prompted him to put out adverts in local newspapers summoning the gods.

“You failed to appear in court despite notices sent by a peon and later through registered post. You are herby directed to appear before the court personally”, Judge Singh’s notice said.

The two Hindu gods have been summoned as the defence claimed that they were owners of the disputed land.

“Since the land has been donated to the gods, it is necessary to make them a party to the case,” local lawyer Bijan Rawani said.

Mr Pathak said the land was given to his grandfather by a former local king.

Story from BBC NEWS:

Published: 2007/12/07 09:08:32 GMT

Untouchables’ left behind in booming nation

DALLIPUR, India — The hip young Indians working inside this country’s multinational call centers have one thing in common: Almost all hail from India’s upper and middle castes, elites in this highly stratified society.

India may be booming, but not for those who occupy the lowest rung of society. The Dalits, once known as untouchables, continue to live in grinding poverty and suffer discrimination in education, jobs, and healthcare. For them, status and often occupation are still predetermined in the womb.

While some Indians had hoped urbanization and growth would crumble ideas about caste, observers say tradition and prejudice have ultimately prevailed.

“There’s talk of a modern India. But the truth is India can’t truly move ahead with caste in place,” said Chandra Bhan Prasad, a Dalit writer and specialist on India’s caste system. “In all ways, it’s worse than the Jim Crow laws were in the American South because it’s completely sanctioned by religion. Despite so many reforms, the idea of untouchability is still very much a part of Indian life.”

As India’s economy surges, one of the country’s most serious and stubborn challenges is how to combat entrenched caste prejudice. Dalits, along with other “backward” castes, make up the majority of India’s 1.1 billion people, and social scientists worry that these groups are being left behind.

The contrast between the gleaming call centers of rising India and the abject poverty that is the reality for many Dalits is all too obvious in Dallipur, an impoverished village on the outskirts of Varanasi in Uttar Pradesh state.

Without electricity, paved roads or running water, the hamlet is home to landless Mushars, the lowest social stratum of Dalits, who work as shoe shiners, trash pickers, toilet cleaners, and street sweepers.

Amid the straw and mud villages, two children died of starvation last year — not for lack of food in the area, but as a result of prejudice.

Chandrika, a 24-year-old Dalit mother, recalled carrying her crying 2-year-old son and her weak 20-month-old daughter to a nearby health center. There, she pleaded for a card that would allow her malnourished children to receive free milk.

But before the nurses could examine her children, she was mocked and shooed away by doctors, who told the young mother to go beg in the market.

“They said again and again, ‘We don’t want to see you Dalits here bothering us,’ ” said Chandrika, a thin, dark-skinned woman who wept as she recounted how her children died. “My milk had dried up from stress. There was no work for me. There was no one to hear my plight.”

Local government leaders who came to investigate her children’s deaths insisted that the shy mother and her fellow villagers build a raised concrete stage — Dalits could be addressed by upper castes only from a higher platform, Chandrika and other villagers were told. The 3-foot-tall dais remains in Dallipur today, the only outcome of the investigation.

By virtue of birth, some castes inherit wealth; the Dalits inherit debt.

Caste often determines Indians’ spouses, friends, residence and, most important, occupation — part of a Hindu belief that people inherit their stations in life based on the sins and good deeds of past lives.

Some Indians believe that the spread of capitalism in urban areas has in some ways dissolved caste by creating new occupations and eliminating obsolete ones. For instance, with the growing use of flush toilets in Indian cities, the disposal of human waste, once a job for Dalits, is now done with a simple pull of a lever.

In booming evening bazaars in Mumbai and New Delhi, lower castes sell cellphones, leather tennis shoes, and grooming kits from small shops and curbside pushcarts alongside higher castes, with everyone “in a capitalist rush to make money,” said Prasad, the writer. “A lower-caste businessman may even enjoy an evening cigarette with a higher caste, completely taboo even 50 years ago.”

Prime Minister Manmohan Singh recently compared India’s caste system to apartheid in South Africa, calling it not just prejudice but “a blot on humanity.”

Critics say that such statements are simply meant to garner votes from lower castes and that any gains made by Dalits have been marginal.

“India is not a true democracy,” said Anup Srivastava, a researcher with the People’s Vigilance Commission on Human Rights in Varanasi who is investigating complaints filed by Dalits about discrimination among neighbors, in schools, at hospitals and at work. “The country is independent. But the people aren’t. How can there be a democracy when there are still people known as untouchables who face daily discrimination?”

Copyright 2007 Globe Newspaper Company.

Emily Wax, Washington Post July 5, 2007

The false pride of the National Human Rights Commission of India

Indians take pride in several issues ranging from democracy to unity in diversity. Most of this “pride speech” is often by India’s middle class and neo-rich that are sometimes completely disconnected from reality. The government and its various agencies often reflect similar pride.

The government of India has spared no venue to boast about itself whenever and wherever it has had a chance. This attitude was reflected in the interventions and representations made by the Indian government’s delegation during the fifth session of the United Nations Human Rights Council in Geneva. Quite surprisingly, the interventions made by the representative of the National Human Rights Commission (NHRC) of India, in the same session were also similar in tone.

The NHRC made oral interventions during the session, much of it praising itself and claiming that it was successful in promoting, protecting and fulfilling human rights and human values in India. The oral interventions made by its representative was evident that it was serving more as a backbench supporter of the government than a independent agency monitoring human rights in India. It appeared to be the victim of its own false pride.

The NHRC’s intervention at the council was also to show off its pride as an effective, authoritative and independent agency committed to rooting out human rights violations in India. However, to date, its work and that of its state subsidiaries proves contrary to this claim. The NHRC and its state bodies lack precisely two elements–independence and authority.

The government at its convenience and pleasure makes appointments to the NHRC and state human rights commissions. In most state human rights commissions, the appointment of the chairperson is at the whims and fancies of the particular state government. For example, despite legally challenging the appointment of the chairperson of the Kerala State Human Rights Commission on allegations of nepotism and corrupt practices, the person continues to serve the commission.

Regarding effective redress for victims, the human rights commissions at both the national and state level are not considered as replacements for the courts. The role of the commission at all levels, among other duties, is to recommend to the government actions required by the government in cases involving human rights violations. The question is whether the government adheres to these recommendations.

The representation made by the NHRC of India to the U.N. Human Rights Council was as if the government follows all its recommendations. A well-worded statement was made to the council to indicate that the government adheres to the recommendations of the commission and that the commission does have some influence upon the government and its actions and polices pertaining to human rights. Both statements are wrong and highly exaggerated.

The state human rights commissions, as well as the NHRC in India, do not have enough resources for effectively investigating a case brought to its notice. Instead, the commissions usually refer cases to the respective state police to investigate. The commissions function in a make-believe world when the complaint is against the police and expect it to be effectively investigated by the same police department.

The NHRC also made a false claim to the council by saying that “100,000,000 Indian rupees [US$2.47 million] had been recommended and also distributed to the victims or next of kin.” Though the recommendations were true, it lacked compliance. Hundreds of victims have not received any compensation awarded by the commission leaving one to wonder where all the money went. The recommendations of the commission seemingly end in a black hole within the government; they are just not implemented.

If the government fails to comply with the recommendations of the commission, the aggrieved party, which includes the commission, can approach the court where one has to wait decades for the verdict. Consequently, why is a person not able to go straight to the court instead of approaching the commission to save time?

If the commission enjoyed a privileged position with the government of India, as claimed at the U.N. Human Rights Council, why has the government not fulfilled the commission’s request for more resources for investigating cases? If the government had provided the commission with the necessary physical and human resources to function effectively, the victims would have had a better chance for redress from the commission.

What was evident during the U.N. Human Rights Council session was a failed attempt of the NHRC of India to show itself as a body respected by the government and its functionaries, though no one believes that the NHRC as an agency is well respected and fully supported by the Indian government.

Forums like the United Nations with their limited opportunities must be utilized by agencies like the NHRC to present facts, not fiction. This is required because one of the roles of agencies like the NHRC is to provide redress to victims and to make recommendations to the government. However, when agencies like the NHRC reduce themselves to blind supporter’s of the government due to their false pride and acts of self-deceit, what is suppressed is the possibility for victims to make their voice’s heard, and, in the process, human rights suffers.

(Bijo Francis is a human rights lawyer currently working with the Asian Legal Resource Center in Hong Kong. He is responsible for the South Asia desk at the center. Mr. Francis has practiced law for more than a decade and holds an advanced master’s degree in human rights law.)

By BIJO FRANCIS, UPIASIA , HONG KONG, Jun. 19,2007

India needs 124 years for clearing pending cases in its courts

Backlog of cases has become a big problem for the judiciary — from the Supreme Court to the subordinate courts. At the current speed, the lower courts, may take 124 years for clearing 2.5 lakh cases.

In the last seven years, the disposal rate has increased by 48 per cent in the high courts and by 28 per cent in the subordinate courts, but the pendency has increased. Thus, it is the system (and not the judges) which is at fault. Unless the disposal rate improves, the backlog will keep mounting. To make rule of law a reality, the arrears will have to be reduced.

Speedy justice is an assurance extended to a citizen under the right to life guaranteed by the Constitution. Right to speedy trial is an important right in the UK and US. The Sixth Amendment to the US Constitution guarantees all persons accused of criminal wrongdoing the right to a speedy trial.

The US had enacted the Speedy Trial Act of 1974 which had fixed standard time requirements for timely prosecution and disposal of criminal cases in district courts. In 1990, the US Congress enacted another legislation that directs each district court to devise and adopt a civil expense and delay reduction plan. Similar laws need to be enacted in India.

While new cases in the high courts exceeded 16 lakh cases in 2006, the disposal rate was 15 lakh. Thus, new cases exceeded the actual disposal of cases. For the first time in past eight years, disposal of criminal cases by high courts exceeded. Pendency in subordinate courts had increased from 2.04 lakh in 1999 to 2.57 lakh in 2005. In 2006, the figure has slightly come down to 2.49 lakh. In all, 40,243 cases are pending in the Supreme Court as on Jan 31, 2007.

The executive and the judiciary have taken many corrective measures for speedy disposal of cases. The Centre has been extending the judge strength from time to time, but not to the extent of the recommendations of the Law Commission. Due to these efforts, the disposal rate has risen by 48 per cent in the high courts and by 28 per cent in the subordinate courts. But then, pendency has also increased due to more fresh filing of cases.

Delay is an issue in the US courts too, but it is not to the extent of decades as in India. In the US, numerous reasons for delay have been assigned most of which are outside a court’s control. Judges have many duties. In addition to trial, judges conduct sentencing, pretrial conferences, settlement conferences, motion hearings, write orders and opinions, and consider other court matters both in the courtroom and in their chambers. Attorneys and/or litigants may be responsible for delays.

Cases may be delayed because settlement negotiations are in progress. Some courts also experience shortage of judges or available courtrooms. The number of judges in a court is decided by dividing the average institution of main cases during the last five years by the national average, or the average rate of disposal of main cases per judge per year in that high court, whichever is higher.

The ratio of judges per million population in this country is the lowest in the world. The population and judges ratio in India is 13.5 judges per 10 lakh people as compared to 135 to 150 per 10 lakh people in advanced countries. The ratio of judges per million of population is about 58 judges in Australia, 75 in Canada, 51 in the UK and 107 in the US. Due to this low judge-population ratio, the courts are lacking requisite strength of judges to decide the cases.

The average disposal per judge is about 1300 cases in subordinate courts if calculated on the basis of disposal and working strength of judges in 2006. The average disposal of all Indian high courts is about 2400 cases per year. The national average of disposal of cases per judge per year in major high courts is: Kerala, 3,103; Madras, 2,979; Calcutta, 2,919; Punjab and Haryana, 2,900; Karnataka 2,817 and Andhra Pradesh, 2,625.

The national Indian average is 188 cases disposed of among 21 high courts everyday. The Madras High Court leads in terms of speedy disposal of 648 cases, on an average, each day. Tamil Nadu is followed by Uttar Pradesh where the Allahabad High Court (Lucknow and Kanpur benches put together) dispose of 445 cases everyday. Applying the national average of 2400 cases per judge per year, the time for disposal of backlog of cases can be calculated by any one.

The Punjab and Haryana High Court had been successful in increasing the disposal of cases due to special efforts of the judges. The average disposal of cases in this High Court is 2900 as against the national average of 2400 per year. The number of cases pending in this High Court is around 2.60 lakh and old cases over the age of two years are 1.70 lakh.

In the same period, the number of pending cases in the subordinate courts is around 11.8 lakh. This means on an average every thirteenth person of Punjab and Haryana is affected by litigation.

Plaintiffs in most European courts must also pay the legal costs for the defendant if they lose the case. This ‘loser pays costs system’, which is in vogue in nearly every common law jurisdiction outside the US, cuts down on many cases without merit by forcing a claimant to hesitate before filing a questionable lawsuit. But the litigation cost in terms of court fee and award of costs is very low in India and this is the main reason for frivolous litigation.

The advocate fee and other costs have increased many times in the last 50 years, but the court fee is hardly realistic to generate more revenue for creating infrastructure and appointing more judges to strengthen the legal system. There was a time in India when in all civil proceedings costs were invariably awarded or reasons for not awarding costs were given. But nowadays costs are rarely awarded.

The inadequate judge strength, low court fee and not awarding costs against the loser resulting in frivolous litigation are three major causes of delay in the disposal of cases. Owing to the shortage of judges, even if judges work beyond their normal capacity, the arrears are bound to increase. The total number of judges is not adequate to clear the backlog of cases. It is not possible even to dispose of the actual fresh institution.

Clearly, the backlog cannot be cleared without additional strength. To tackle the problem of backlog within a timeframe, we need to allocate additional funds for employing additional judges. Later, as the backlog comes down, these judges would be crucial in keeping the fast pace of the judicial system.

The Tribune, May 20, 2007, Chandigarh, India The writer, Advocate, Supreme Court, is based at Chandigarh

Judicial nepotism rampant in India

In the first step in the fight against judicial nepotism, the Law Ministry wrote to the Bar Council of India last month asking it to ensure that lawyers don’t appear in cases before judges who are close relatives. However, it appears to have ignored the wider problem of what is called Son Stroke or Uncle Judge, where judges have close relatives practising in the same court.

NDTV discovered that this trend, where two judges or a group of judges have children practising in each other’s courts, is widespread. While not everyone takes advantage of what has been described as a mutual cooperative society, many of them do. This problem first surfaced in 2003, when the Bar Council of India demanded the transfer of all judges whose relatives practised in the same courts.

A year later, BK Roy, then Chief Justice of the Punjab and Haryana High Court, issued an administrative order barring a group of 10-12 judges from hearing any case pleaded by each other’s relatives.

He quoted eminent jurist HM Seervai: “Experience shows that an impression is created in the public, however unjustified it may be, that it would be advantageous to engage a judge’s son as an advocate.”

“It was generally believed that A, B, C and D (all judges) constituted a mutual co-operative society, in the sense was believed that each of the four judges (A, B, C and D) would protect the sons of the three other judges.”

The order sparked off a protest by judges in Punjab who took mass leave. Justice BK Roy was subsequently transferred, and since then, the order has been ignored.

“Some relatives misuse their connections more blatantly than others, but the problem remains in principle. An especially acute feature of problem of nepotism as it exists here is that apart from relatives of high court judges, children of sitting Supreme Court judges from this region also practise here at Chandigarh.”

“The advantages, the benefits that accrue to them from their connections is well known to all and is fully exploited,” said Anupam Gupta, Senior Advocate, Punjab & Haryana High Court.

Recently an MP raised the issue of judicial nepotism again and claimed that out of 490 judges of the various High Courts and the Supreme Court, relatives of 131 judges are practising in the same court.

Limited directive

Finally, four long years after the issue was first raised by the Bar Council, the Law Ministry issued a directive. But it was confined to saying that no lawyer shall plead a case before a judge who is a close relative.

It completely skirts the issue of close relatives of a judge practising in the same court – the Uncle Judge or Son Stroke syndrome.

“There are complaints from all over the country that judges’ children are practising in the same high court and that is causing grave problem in regard to handling of cases and the judges favouring and one judges son appearing before another judge,” said M N Krishnamany, President, SC Bar Association.

Judges are, in fact, expected to follow a code of conduct which points out that: “Close association with individual members of the Bar, particularly with those who practise in the same court, shall be eschewed.”

But is this distance really possible?

“If your son, brother or sister is practising in the same court, you can’t eschew close association with your son, daughter or brother.”

“Therefore, you should not be a judge in the same court; you should opt to be transferred to some other court where a close relative is not practising,” said Prashant Bhushan, Member, Committee on Judicial Accountability.

However, as figures show, this is clearly not the trend.

In the Punjab & Haryana High Court, the relatives of eight sitting judges plead cases, while in Delhi High Court, the close relatives of nine sitting judges are practising lawyers.

Also senior lawyers feel that the children of judges are often favoured.

“That instances have come that a relation of a judge having joined only three four years in the practise suddenly his briefs are huge in number so that is what it is under scrutiny because he takes advantage of his position,” said Jaganath Patnaik, President, Bar Council of India.

“It is very clear also as I know personally so many judges in the High Courts their children are practising and are being pampered also,” said M N Krishnamani, President, SC Bar Association.

The public impression is that in order to get a favourable order, it’s better to hire a close relative of a judge to plead your case.

Now the questions that remain to be answered are can the Bar Councils keep a check on this practise and is the Law Ministry seriously concerned about ending nepotism?

Ajmer Singh, Wednesday, April 11, 2007 (New Delhi), NDTV.COM

Caste system is racial discrimination: UN rights panel

GENEVA: UN Human Rights Committee for the Elimination of Racial Discrimination (CERD) has controverted India’s stand at its recent Geneva hearings that the caste system is not racial discrimination based on descent.

In its concluding observations, CERD, which consists of reputed international experts in international law, academics, sociologists and diplomacy, arrived at the conclusion that India’s denial is not correct, and that there is alarming discrimination in practice against Dalits and Scheduled Tribes, as well as minorities who have converted from Hinduism to Christianity or Islam to avoid discrimination.

CERD, however, complimented the Union government for its legislation and constitution to counter whatever discrimination there is, and the efforts made by the Indian delegation to explain its stand in its 35-page report on racial discrimination, submitted after a 7-year wait.

India’s stand in the report is that its caste discrimination falls within the scope of article 1 of the convention on racial discrimination. Indian laws ban discrimination of any kind. Despite the exchange of views with the Indian delegation, CERD maintained that “discrimination based on ‘descent’ includes discrimination against members of communities based on forms of social stratification such as caste and analogous systems of inherited status which nullify or impair their equal enjoyment of human rights.” Discrimination based on the ground of caste is therefore fully covered by the convention.

Some comments to the Indian delegation by experts was one by Prof Sicilianos the India rapporteur: “The reason why we are talking about caste all the time is that it is difficult to know why India refuses to discuss this.” He questioned: “If India is really committed to social cohesion is it not conceivable that you may use every single instrument at your disposal to assist you?

Why see the convention as a threat instead of assisting you in achieving social cohesion?” The committee pointed out with appreciation the declaration of Prime Minister Manmohan Singh, where he likened the practice of untouchability to apartheid in South Africa, at the Dalit minority international conference in December 2006.

The observations were made after detailed perusal of India’s report, and a two-day interaction with the members of the Indian delegation, which were mostly cordial and illuminatory, but unfortunately marred by word-sparring and confusing statements by a member of the Indian delegation on customs in the caste system — that the Indian society is not constructed around and does not function on the basis of caste and that poverty and other social problems affected many castes; that those who are born in a caste are proud to be part of that caste; and that children of inter-caste marriages are casteless “unlike race when black marries white.”

CERD has observed that there is de facto discrimination against the Dalits and Scheduled Tribes, who cannot defend themselves, and who are disadvantaged in practice in jobs, education, affirmative action (despite legislation), elections, political participation and compensation. Their lands tend to be appropriated by upper caste neighbours, while they don’t get any protection from the police, and they are even sexually exploited, some CERD observers felt.

CERD says that there is “social acceptance of caste-based discrimination and racial and ethnic prejudice” particularly in rural areas. CERD calls for its eradication by intensifying public education and awareness-raising campaigns, incorporating educational objectives of inter-caste tolerance and respect for other ethnicities, as well as instruction of the culture of scheduled castes and scheduled and other tribes, in the National Curriculum framework, and ensuring adequate media representation of issues concerning scheduled castes, tribes and ethnic minorities, with a view to achieving true social cohesion among all ethnic groups, castes and tribes of India.

SHEILA MATHRANI, TIMES NEWS NETWORK  MARCH 30, 2007

How Indians cheat their own Country?

Mauritius as a Tax Haven

Mauritius-based front companies of foreign speculators evade paying taxes in India amounting to thousands of crores of rupees with the help of loopholes in a bilateral agreement on double taxation, with the connivance of the Indian government.

THE logic of a liberal economic regime can result in apparent paradoxes. Mauritius, a tiny speck in the Indian Ocean, with a population of 1.2 million and an economy one-hundredth the size of the Indian economy, is the biggest exporter of capital to India.

The use of Mauritius as a gateway to funnel foreign investments into India has always been controversial. The island nation’s financial regime, endowed with the key characteristics of a quasi tax haven, has facilitated this. Curiously, successive Indian governments, which have cried themselves hoarse about a runaway fiscal deficit and a resource crunch, have indulged in self-denial and have refused to tax the earnings of these foreign entities. But the issue is much more than lost revenues. The question is of equity. Can ordinary citizens be asked to pay taxes even as a small body of foreign-based entities are not even asked to pay a fraction of their earnings made through speculation on Indian soil? Although the Supreme Court on October 7 quelled the legal challenge to the government’s refusal to clamp down on the Mauritius gateway, the controversy refuses to die.

The key to the apparent paradox lies in the provisions of a two-decade-old bilateral agreement, the Double Taxation Avoidance Convention (DTAC). Foreign entities have set up paper companies in Mauritius, claiming to be Mauritian residents. These companies, masquerading as Mauritian companies, have invested in India. And, taking advantage of the DTAC they avoid paying any taxes in India. They pay no taxes in Mauritius too.

Mauritius is the single biggest source of foreign direct investment (FDI) in India – amounting to $534 million in 2002-03 (about one-third of all FDI). But that is not all. Mauritius-based foreign institutional investors (FII) are also believed to be major players in the Indian bourses. FII investment in Indian stock markets between April and October this year amounted to almost $5 billion – almost ten times what they invested in the whole of the last financial year. Indeed, they are believed to be the ones leading the current boom in the stock markets. But the Mauritius angle does not end there. Reports in the financial media indicate that a substantial part of FII investment is believed to be coming from Non-resident Indians (NRIs) bringing back funds to participate in the ongoing speculative orgy in the Indian stock markets, much of which is said to be routed through Mauritius-based paper companies.

Mauritius is also reportedly the base of much of the hedge funds that are reported to be active in the current boom. Hedge funds, which deploy large volumes of funds in thin arbitrage deals made for very short-term gains, account for at least 30 per cent of the FII activity in the ongoing boom in the bourses. These entities, using the device of Participatory Notes, and dealing through the sub-accounts of the FIIs, which need not be registered with regulatory agencies such as the Securities and Exchange Board of India (SEBI) or the Reserve Bank of India (RBI), constitute the core of the speculative excess that is currently on.

This bout of speculation is not confined to the stock markets. In fact, from an economic perspective, this boom is far more dangerous than previous episodes because these players are betting simultaneously in several markets. While bringing in dollar denominated funds and thereby adding to the burgeoning foreign exchange reserves, currently amounting to over $90 billion, they are betting in stocks, the Indian currency and also speculating on the interest rates, all at the same time. That Mauritius is a home base for all this is common knowledge. The lack of regulatory oversight means that one is unable to quantify the funds coming in from the tax haven.

Although the losses to the government are difficult to estimate, primarily because it is difficult to ascertain how much comes through the Mauritius route, it is reckoned that the potential losses because of the loophole could run into several thousand crores since 1991, when India opened the floodgates to foreign investment. The government has repeatedly fought shy of taking on foreign investors. Instead, it has restrained its own arm, the Income Tax (I.T.) Department, from investigating the misuse of the bilateral agreement by foreign investors.

FII investiments in India

ALTHOUGH successive governments have refused to plug the loopholes in the DTAC, Indian regulators have always viewed them with suspicion. In late March 2000, officials in the I.T. Department in Mumbai investigated 24 Mauritius-based entities and issued “assessment orders” on them. The officers, racing against time to file their orders before the March 31 deadline, were basically engaged in lifting the corporate veil covering these entities. For instance, the I.T. Department’s assessment of Cox and Kings Overseas Funds (Mauritius), made on March 29, 2000 for the company’s assessment year 1997-98, showed that the company was in fact a subsidiary of Cox and Kings Overseas Fund Incorporated in Luxembourg. The assessment order revealed that the company routed its investment through Mauritius because “it realised that if it directly made investments in India, it will be liable to pay Indian income tax on investment including capital gains”. Aware that if investments were made through a Mauritius-based company it would not have to pay taxes in India, it floated a fully owned subsidiary in the island nation. In 1994, Cox and Kings incorporated the subsidiary in Mauritius. It hired professional consultants, who were readily available for hire in Mauritius, to serve on the subsidiary’s board. The subsidiary’s business of investing funds in India was handled entirely by J. Henry Schroeder Bank AG, based in Switzerland.

The sole business of the subsidiary in Mauritius was to undertake investments outside Mauritius. In fact, Mauritius laws proscribed it from acquiring property or raising funds in the country. In fact it was not allowed to engage in any kind of business activity in Mauritius. Thus, the I.T. Department found that the company’s sole motive for existence as an entity in Mauritius was to enable it to funnel investments overseas, particularly India. On the basis of its investigation, the I.T. Department’s assessment order observed that “the real control of affairs of the Mauritian company is in the hands of the holding company incorporated outside Mauritius”. It also noted that “the Mauritian subsidiary has been created with the main purpose to avoid tax”. On the basis of its investigation of 24 cases, including Cox and Kings, the I.T. Department thus issued show-cause notices to them. It pointed out that they were not eligible for benefits of the DTAC since they were “not bona fide and genuine residents of Mauritius”. The department also alleged that the abuse of the DTAC by entities from third countries amounted to “treaty shopping”.

Soon after the orders were served on the FIIs, all hell broke loose. Amidst the controversy there were also allegations that the then Union Minister for Finance Yashwant Sinha’s daughter-in-law was working for a Mauritius-based FII investing in India. The lobbies went into overdrive and there were dark hints that the stock market would collapse because FIIs would pull out of the Indian markets. On April 13, 2000, the Central Board of Direct Taxes, the apex body governing the Income Tax Department, issued Circular Number 789, which has since then been a subject of fierce litigation. The circular “clarified” that the production of a “certificate of residence” issued by the Mauritius authorities would “constitute sufficient evidence for accepting the status of residence as well as beneficial ownership for applying the DTAC accordingly”. It also clarified that FIIs and other entities based in Mauritius “should not be taxable in India on income from capital gains arising in India”.

The Joint Parliamentary Committee (JPC) probe into the 2001 stock market scam, in which the broker Ketan Parekh was the kingpin, revealed large-scale abuse of Mauritius-based entities. It revealed that Overseas Corporate Bodies (OCB), which are primarily vehicles floated by NRIs but which can act as fronts for other foreign investors, acted in concert with Ketan Parekh to siphon funds out of the country. In fact, there were allegations that Yashwant Sinha kept the Mauritius gate wide open so that speculators could avoid paying taxes in India. In fact, in his written submission to the JPC, after he was no longer Finance Minister, Sinha said that the revenue losses on account of the abuse of the Mauritius route were only “notional”. In fact, he admitted that although he was aware of the abuse of the route, he did not plug the holes in the DTAC because the inflow of foreign investments was considered more important than raising revenue.

THE CBDT circular was challenged in the Delhi High Court by public interest petitions filed by the Azadi Bachao Andolan (represented by Prashanth Bhushan) and a former Chief Commissioner of Income Tax, Shiva Kant Jha. The latter, who is also an advocate with the Supreme Court Bar, argued that the Government of Mauritius, through “reforms” undertaken in the early 1990s, had transformed its legal and financial system into a veritable tax haven (see interview). He said that third-country entities were using the provisions of the DTAC to establish “conduit companies” in Mauritius and using them as vehicles to invest in India with the sole objective of dodging tax in India. Shiva Kant Jha pointed out that the CBDT circular, by asking I.T. officers to accept at face value the “certificate of residence” provided by the Mauritian authorities, effectively curtailed their ability to investigate whether they were really residents of Mauritius. He pointed out that the circular prevented officers from discharging their duties by “investigating the matrix of facts to determine whether a company seeking benefits under the convention was really a Mauritian resident”. Shiva Kant Jha pointed out that the Mauritius-based entities were not paying any capital gains tax either in India or in Mauritius. He said that although Section 90 of the Income Tax Act provided the government with the authority to enter into agreements with other countries, these powers were specifically for entering into agreements on double taxation, that is, the elimination of a similar tax on the same set of entities for identical transactions in two different locations. Jha pointed out that the DTAC was meant to prevent double taxation, not tax evasion or avoidance. He also said that the government had failed to discharge its duties by causing wrongful revenue losses.

In May 2002, the Delhi High Court struck down circular 789. It observed that it was the duty of the I.T. Department to find out whether an assessee was taking shelter under the DTAC to avoid tax. In this, it was well within its right to make every endeavour to lift the corporate veil to find the true intent of these entities. It also observed that the abuse of a treaty or “treaty shopping” to “be illegal and thus necessarily forbidden”.

The government filed an appeal against the High Court order in the Supreme Court in October 2002. A consortium of international investors, represented by the Global Business Institute (GBI), joined the government in filing the appeal. Interestingly, in February 2003, Arun Jaitley, currently Union Minister for Law and Justice and Commerce and Industry, who at that time was not a member of the Cabinet, donned his lawyer’s robes to appear on behalf of the GBI. In its judgment, the Supreme Court ruled that it was the sovereign right of the state to enter into treaties with other countries. By taking a technical approach, the court ruled that Mauritius-based companies were liable to pay tax in Mauritius; it just so happens that they are not levied taxes there. It also ruled that the certificate of residence could not be disputed because as a sovereign state Mauritius had the power to determine who ought to be a resident of that nation. However, the Supreme Court observed that the Indo-Mauritius DTAC was in marked contrast to the Indo-U.S. DTAC. Shiva Kant Jha had pointed out that the Indo-U.S. DTAC provided for credits for taxes paid in either country, but had a specific provision that barred third-country entities from taking advantage of the bilateral treaty.

HOW much has the Indian state lost in revenues? Data are hard to come by to make an accurate estimate. However, one can hazard a guess on the basis of the value of securities sold by FIIs. The long-term capital gains tax, applicable on investments sold after holding them for more than a year, is at the rate of 10 per cent. Short-term rates are applied at the rate of 30 per cent when investments are liquidated. It is well known that the bulk of the FII investments are routed through Mauritius. Applying a uniform rate of 10 per cent capital gains tax on the gross sales made by FIIs would give at the very least a ballpark figure. Although it can be argued that this would overestimate the extent of lost revenue because it would not account for losses that FIIs made when they made sales, the fact that short-term capital gains are not being factored into the estimate offsets this reasonably.

On the basis of the figures presented in the table the losses to the exchequer on account of lost capital gains tax in the last decade would amount to a whopping Rs.28,139 crores. Even if it is an admitted policy of the state to woo foreign capital at any cost, the question is whether losses of this kind are acceptable to the polity at large. The average annual loss to the exchequer amounts to over Rs.2,300 crores. To get some idea of the magnitude of these losses in relation to the Union Budget, these magnitudes amount to roughly 10 per cent of the gross tax revenues of the Union projected for 2003-04. To put it more provocatively, in the context of the ongoing controversy surrounding the privatisation programme, the extent of lost revenues could easily have saved companies such as Balco, VSNL, IPCL and several others from being sold off to private parties; indeed, privatisation as an option would appear irrational if the executive chose not to forgo these taxes.

Tax havens are an important feature of the globalised world of financial speculation. Shiva Kant Jha believes that there is tension between the needs of the globalised system and the sovereignty of nation states. While financial entities want to move funds across a seamless world at will, nation states are finding that their traditionally accepted sovereign right to tax any economic entities active within their frontiers is increasingly coming under pressure from powerful players in the financial world. The rise of Mauritius as a tax haven in the 1990s, specialising in funnelling investments into India, reflects this reality. It is obvious that successive Indian governments have chosen to let this happen while creating two sets of tax payers within India – a privileged set of foreign entities who pay no taxes even as they engage in speculative excesses and ordinary Indians who have to pay taxes. Some would even regard the “notional” tax losses as subsidies paid to the well-heeled.V. SRIDHAR, Front Line, November, 08 – 21, 2003

More to read on the subject

http://indiandiaspora.nic.in/diasporapdf/chapter5.pdf

http://economix.u-paris10.fr/pdf/colloques/2006_India/Hay.pdf 

http://frontlineonnet.com/fl2311/stories/20060616004900900.htm