By: Sukumar Mukhopadhyay
The central government has filed a review petition against the Supreme Court judgment in the black money case on the ground that the ruling interferes with the domain of the executive. In the past, the courts have on occasion abstained from ruling on economic or fiscal policies of the government. At other times they have abstained if they felt the policies were made in public interest. On yet other occasions they have passed judgments when they have felt that the concerned economic policies have impinged on fundamental rights. If the current review petition is admitted and goes before a seven- or nine-member bench, the ruling will be greatly anticipated.
The tussle between the executive and the judiciary has never been so intense as it is now. The central government, on 15 July 2011, reportedly moved the Supreme Court for review of the latter's judgment of 4 July 2011 in the case of a public interest litigation (PIL) filed by Ram Jethmalani and Ors, appointing a special investigation team (SIT) under the chairmanship of retired Supreme Court judge B P Jeevan Reddy for unearthing and bringing back the huge amount of black money stashed in foreign tax havens.
The estimates of black money vary but some indication is available from the figures of evasion quoted in the judgment on the demands issued to Hasan Ali Khan and Kashinath Tapuria. The Court rejected the central government's contention that since a high level committee (HLC) has already been set up, there was no need for an SIT.
The government's view in the review petition has mainly four aspects. First, the Supreme Court's order to disclose the names of black money holders goes against the provisions of Double Taxation Avoidance Agreements (DTAAs). Second, the order goes against the sovereign right of the government to make treaties with foreign countries. This right is not subject to judicial review. Third, the order is contrary to the settled principle of separation of powers between the executive, legislature and the judiciary as it takes over the normal function of the executive. The government calls this order judicial overreach since the function of the courts is to see that lawful authority is fully exercised by the executive but not to take over the task entrusted to the executive. Last, the order impinges on the well settled principle that courts do not interfere with economic policy, which is the domain of the executive.
In this article I propose to discuss mainly the last point about the power of the judiciary to interfere in the policy decisions of the executive. This will also incidentally bring in the other three points canvassed by the government. There are numerous judgments of the Supreme Court about the power of the high courts and the Supreme Court to interfere in the economic policy of the executive and even legislature. They are mostly in regard to the excessiveness of the tax burden, that is relating to fiscal policy. The challenge to the high rate of tax is usually presented before the courts not as a case of a more excessive tax but as one which has caused harm and violation of the fundamental right as in Article 19(1)(g) which is "the right to practise any profession or to carry on any occupation, trade or business". All these cases fall under three groups.
Where the Court Cannot Interfere
The first group of cases propounds the thesis that the fiscal policy of the government is not justiciable, that is to say, the courts cannot interfere in policy. The judgments which confirm this view are (1) Navjivan Mills vs Union of India (UOI),1 (2) Sulochana Enterprises vs UOI,2 (3) Black Diamond Beverages vs UOI,3 (4) Hind Plastics vs CC Bombay,4 (5) Pankaj Jain vs UOI 5 amongst others. In the Pankaj Jain case the Supreme Court said that "Mere excessiveness of tax is not violative of Article 19 (g)". These judgments have also said that in order to be justiciable, the tax has to be confiscatory in nature. The Gujarat High Court mentioned in the Navjivan case that,
It is not for the courts to pronounce on the wisdom of the Government policy and to pronounce on the propriety or otherwise of the decision taken in the economic field and therefore while considering the challenge of the impugned notifications, all that we are concerned with is whether the power to issue the impugned notification exists and if there is such power whether the exercise of power is bona fide or mala fide.
If Policy Is in Public Interest
The second group of cases propounds that the courts cannot interfere in policy if the government has devised it in the public interest. If the government has changed a fiscal policy, say, an exemption notification has been withdrawn or a policy of bank interest has been changed by the Reserve Bank of India (RBI) in public interest, the courts cannot intervene. Notable judgments which have enunciated this thesis are (1) Kasinka Trading Co vs UOI6, (2) Srijee Sales Corporation vs UOI7, (3) UOI vs Godwani Brothers8, (4) UOI vs International Trading Co9, (5) R C Tobacco vs UOI.10 In the R C Tobacco judgment the Supreme Court held as constitutional even a retrospective withdrawal of an exemption in the public interest. The courts did not go into the scrutiny of the declared public interest.
Where the Court Can Interfere
The third group of cases comprises those where the Court ruled that it could interfere in the fiscal or economic policy of the government. The most important and the leading judgment in this group is the one in the case of Indian Express Newspapers vs UOI.11 In this case several newspapers approached the Supreme Court challenging the impost of heavy and exorbitant import duty on the ground that the action was against the freedom of the press as enshrined in Article 19(1)(a) of the Constitution which guarantees freedom of speech and expression. The Supreme Court held that there is an "intimate connection of newsprint with freedom of the Press" because "newsprint constitutes the body, if expression happens to be the soul". In view of this the Supreme Court held that a levy on newsprint needs to be tested on stricter grounds. The Supreme Court held,
The tests for determining the vires of a statute taxing newsprint have therefore to be different from the tests usually adopted for testing the vires of other taxing statutes. In the case of ordinary taxing statutes the laws may be questioned only if they are either openly confiscatory or a colourable device to confiscate. On the other hand, in the case of a tax on newsprint, it may be sufficient to show a distinct and noticeable burdensomeness, clearly and directly attributable to the tax. Though tax can be levied on the newspaper industry such levy is subject to review by Courts in the light of the provisions of the Constitution.
Thus we find from this judgment that the Supreme Court has settled the law in this case clearly that if a levy violates a fundamental right, the levy is justiciable.
There is another judgment in the case of Dai-Ichi Kakaria Ltd vs UOI12 in this class of judgments which says that while the court cannot interfere in the government's fiscal policy if the latter is done in public interest, it can bring to scrutiny the very nature of public interest. Once the scrutiny starts, it is tantamount to interference in the policy. In this case the Supreme Court set aside the withdrawal of the exemption because it was not satisfied with the legitimacy of the declared public policy of the government.
The third judgment in this class is in the case of Balco Employees Union vs UOI where the Supreme Court has held that the
Wisdom and advisability of economic policies are ordinarily not amenable to judicial review unless it can be demonstrated that the policy is contrary to any provision or the Constitution. Courts would interfere only if there was a clear violation of constitutional or statutory provisions or non-compliance by the State with its constitutional or statutory duties and none of these contingencies had arisen in this case.
The fourth judgment in this category is in the case of Delhi Jal Board vs National Campaign for Dignity and Rights of Sewerage and Allied Workers, judgment delivered by G S Singhvi and Asok Kumar Ganguly, JJ on 12 July 2011.13 This very recent judgment is squarely in favour of judicial interference and calls it legitimate and not overreach. At para 15 it says the following:
15. The most unfortunate part of the scenario is that whenever one of the three constituents of the State, i e, judiciary, has issued directions for ensuring that the right to equality, life and liberty no longer remains illusory for those who suffer from the handicaps of poverty, illiteracy and ignorance and directions are given for implementation of the laws enacted by the legislature for the benefit of the have-nots, a theoretical debate is started by raising the bogey of judicial activism or judicial overreach and the orders issued for benefit of the weaker sections of the society are invariably subjected to challenge in the higher Courts. In large number of cases, the sole object of this litigative exercise is to tire out those who genuinely espouse the cause of the weak and poor.
The judgment further says in para 24:
In view of the principles laid down in the aforesaid judgments, we do not have any slightest hesitation to reject the argument that by issuing the directions, the High Court has assumed the legislative power of the State.
In all these judgments discussed here one principle comes out clear and loud that while the courts cannot interfere in the policymaking jurisdiction of the executive or legislature, it can do so if any fundamental right is violated. On the touchstone of this criterion, we have to examine the judgment of the Supreme Court in the case of Ram Jethmalani and Ors vs UOI, SLP no 11032 of 2009 decided on 4 July 2011 relating to black money. The appointment of an SIT has to be evaluated on the basis of some of the observations of the Supreme Court in this case, which are reproduced below:
34. The real point of controversy is, given above, as to whether there is a need to constitute a SIT to be headed by a judge or two, of this court, to supervise the investigation.
35. We must express our serious reservations about the responses of the Union of India. …..It also became clear to us that in fact the investigation had completely stalled, inasmuch as custodial interrogation of Hassan Ali Khan had not even been sought for, even though he was very much resident in India. Further, it also now appears that even though his passport had been impounded, he was able to secure another passport from the RPO in Patna, possibly with the help or aid of a politician.... The formation of the HLC was a necessary step, and may even be characterised as a welcome step. Nevertheless, it is an insufficient step...
48. We note that in many instances, in the past.... Special Investigation Teams have been ordered and constituted in order to enable the Court, and the Union of India and/or other organs of the State, to fulfil their constitutional obligations. The following instances may be noted: 1. Vineet Narain v Union of India (1996) 2 SCC 199; 2. NHRC v State of Gujarat (2004) 8 SCC 610; 3. Sanjiv Kumar v State of Haryana (2005) 5 SCC 517, and 4. Centre for PIL v Union of India (2011) 1 SCC 560. The Court has also said that revealing the names to be given by Germany will not be against any treaty. Now the matter is back to the Court for review.
The Supreme Court then has been consistently holding the view that economic policy of the executive and the legislature is not justiciable except when there is a violation of any fundamental right. In the present case of black money, the clear conclusion of the Supreme Court is that by not taking action and by taking a laggardly action the fundamental right of equality, life, liberty (Articles 14 and 21) of citizens are being made a travesty. The Court has taken the action to set up an SIT for upholding these fundamental rights. It depends now upon the Supreme Court to form a bigger bench to decide on the issue in the review petition as to whether these rights have really been violated or not. We have to remember that the Supreme Court decides its own jurisdiction. It is only that the jurisdiction has to be within the four corners of the Constitution. But that too is decided only by the Supreme Court.
The Supreme Court only interprets law if there is a law, but where there is no law, it can make a law as in the case of promissory estoppel. There is a possibility that the review petition might be admitted since some issues of interference in the power of the government in making international treaties have also been canvassed in the petition. On the other hand, the government will be hard put to explain why in four previous cases where the SIT was instituted by the Supreme Court, the government did not object at all. Nevertheless, this is a highly contested issue of great social and legal implication. If the Supreme Court constitutes a seven- or nine-member bench to decide this momentous issue, the whole country will hold its breath in anticipation of the decision.
Sukumar Mukhopadhyay (firstname.lastname@example.org) retired from the Central Board of Excise and Customs as a member.