How did Gauhati HC declare CBI invalid? All you need to know

FP Staff Nov 9, 2013

An unprecedented judgement by the Gauhati High Court has sent the Union government in to a tizzy. In its verdict on Thursday, the bench quashed the resolution based on which the CBI was constituted and ruled that the body cannot be treated as a ‘police force’.

The government has meanwhile The Centre will move the Supreme Court on Saturday to challenge the Gauhati High Court order which declared the Central Bureau of Investigation unconstitutional by ruling that the government of India’s order which led to the setting up of the CBI in 1964 is not a legally valid one.

“While we decline to hold and declare that the DSPE (Delhi Special Police Establishment) Act, 1946, is not a valid piece of legislation, we do hold that the CBI is neither an organ nor a part of the DSPE and the CBI cannot be treated as a ‘police force’ constituted under the DSPE Act, 1946,” said Justice Iqbal Ahmed Ansari and Justice Indira Shah of Guwahati High Court in their judgment on Wednesday.

According to a report on The Times of India: Minister of state for personnel V Narayanaswamy met attorney general G E Vahanvati on Friday to fathom the legal basis of the HC judgment and both agreed that an appeal should be filed in the SC by Saturday, pointing out the errors apparent in the verdict.

The report also points out that even if the appeal is made on Saturday, it will only come up in the court on Monday. Meanwhile, the Centre intends request the SC to stay the HC judgment so that the premier investigative agency can keep working.But what did the HC judgement really say? Here is a quick summary:

What the petitioner in the case said:

First, there is no co-relation between the DSPE Act and CBI. In DSPE Act, the word ‘CBI’ is, nowhere, mentioned, even though the DSPE Act has undergone several amendments.

This apart, even the Executive Order, dated 1 April, 1963, does not disclose that the CBI has been constituted under DSPE Act. Second, the plea, that the CBI is merely a change of name of the DSPE, does not have legal standing as the DSPE Act, 1946. The Act specifically mentions, that the police force, constituted under the DSPE Act, shall be called “Delhi Special Police Establishment”.

Hence, when the Act itself defines the name of the force, the argument that the CBI is merely a change of name of the DSPE cannot hold water.

Had it been so, the name of the DSPE should have been changed in the Act itself, but this wasn’t done despite many amendments having been made to the Act. He argued that the creation of the CBI was not backed by any legislation. Even if the CBI is considered to be a valid constituted body, it cannot function in the manner as is done by the police.

The CBI, so constituted, can, at best, collect information by making ‘enquiries’ to assist any investigation carried out by a local police.

What the amicus curiae told the court:

N Dutta, amicus curiae, submitted that the CBI and the DSPE are not one and the same thing, but everybody appears to have proceeded on the basis that the CBI and DSPE are one and the same thing.

He pointed out that while the DSPE was established under the DSPE Act, 1946, the CBI has been constituted by a mere executive fiat. Dutta further submitted that though the CBI has been empowered to ‘investigate’ crimes, no power has been specifically provided for ‘prosecution’ of offenders by the CBI.

The DSPE can merely ‘investigate’ a case and lay charge-sheet and, hence, the CBI’s role shall come to an end once ‘investigation’ is complete, he argued.

What CBI, the respondent, told the court:

Resisting the writ petition, the Additional Solicitor General, appearing on behalf of the CBI, said the CBI derives its power to ‘investigate’, like a police force, and is only a change of the name of the DSPE. As per the DSPE Act, the Centre may extend the powers and jurisdiction of the members of Delhi Police Establishment to investigate an offence beyond the territorial limits of Delhi and the members of the Delhi Police Establishment can exercise powers and jurisdiction in any area of any other State with the consent of the state government.

What the court finally ruled:

The bench noted the amicus curiae had been correct in his submission that the Centre has constituted a body called ‘CBI’ but the investigating agency does not have any legal sanction till date.

The bench said it was satisfied that the petitioner has been able to make out a case that there has been interference with the resolution by which the CBI was formed and also with the prosecution against him on the basis of the chargesheet, which has been filed by the CBI.

The court set aside the earlier judgement and order against the petitioner. While it declined to hold and declare that the DSPE Act, 1946, was not valid, it held that the CBI is neither an organ nor a part of the DSPE and the CBI cannot be treated as a ‘police force’ constituted under the DSPE Act.

It also set aside and quashed the resolution whereby the CBI had been constituted. It further set aside and quashed the chargesheet, submitted by the CBI, against the appellant and as a result of which the trial, which was based on the chargesheet, also stands quashed. 

The bench, however, made it clear that quashing of the proceedings, pending in the CBI court, would not be a bar to any further investigation by police having jurisdiction over the subject-matter.

Gauhati HC order Impact ;Anti-Sikh riots: Sajjan Kumar now wants CBI probe declared illegal

PTI & FP :Nov 9, 2013 

Chief Justice of India P Sathasivam will now 

hear the matter at 4.30 pm this evening at his residence.

New Delhi: Congress leader Sajjan Kumar on Friday sought to declare as “illegal” the probe and charge sheets filed by the CBI in a 1984 anti Sikh riots case against him in the wake of Gauhati High Court’s judgement holding the setting up of the investigating agency as “unconstitutional”.

Kumar’s counsel mentioned before District Judge JR Aryan high court’s Thursday’s verdict and said if CBI itself is unconstitutional, its probe and charge sheets are also illegal.

Congress leader Sajjan Kumar. AP

The judge, however, said the effect of this judgement is not clear at this stage as it is too early and asked the counsel to proceed with the case.

The court also asked the defence counsel to advance his arguments on the two applications filed by Kumar and other accused in the case.

The court posted the matter for 15 November for arguments on the applications after Kumar’s counsel sought adjournment on the ground that some other advocate is not well and is not present.

In its judgement, the High Court has struck down the 1963 resolution through which CBI was set up and held all its actions “unconstitutional”.

The court had earlier framed various charges including murder and rioting against Kumar, Brahmanand Gupta, Peru, Khushal Singh and Ved Prakash in connection with killing of a man in Sultanpuri area in the riots that had occurred after the assassination of the then Prime Minister Indira Gandhi on October 31, 1984. Accused Khushal Singh has died.

The CBI had earlier said though the charge sheet pertains to killing of six persons but it was only restricting to the charge relating to murder of Surjit Singh and not of other deceased in respect of whom the trial had already taken place.

Gauhati HC order on CBI will impact over 9000 trials: Centre

PTI & FP :Nov 9, 2013 few mts back

New Delhi: The Centre on Saturday moved the Supreme Court against the Gauhati High Court verdict holding the setting up of CBI as unconstitutional.

The Centre also filed an application seeking a stay on the high court order and an urgent hearing of its petition. 

Chief Justice of India P Sathasivam will now hear the matter at 4.30 pm this evening at his residence.

Stating that the Gauhati High Court erred in holding that the constitution of CBI was illegal, the Centre, in its petition, told the Supreme Court that the order passed by the Gauhati HC will have widespread ramifications.

“Gauhati HC verdict would directly impact 9,000 trials and 1,000 investigations which are being done by CBI,” Centre told the apex court.

Meanwhile, a caveat has also been filed by Narendra Kumar, on whose petition the Gauhati high court ruling had come, that he be heard before any order is passed on the Centre’s plea.

A division bench of Gauhati high court had struck down the resolution through which the CBI was set up and held all its actions as “unconstitutional”.

The bench comprising justices I A Ansari and Indira Shah had passed the verdict on a writ petition filed by Kumar challenging an order by a single judge of the High Court in 2007 on the resolution through which CBI was set up.

“We hereby…set aside and quash the impugned Resolution, dated 01.04.1963, whereby CBI has been constituted…. We do hold that the CBI is neither an organ nor a part of the Delhi Special Police Establishment (DSPE) and the CBI cannot be treated as a ‘police force’ constituted under the DSPE Act, 1946,” the court had said.

“Situated thus, the actions of the CBI, in registering a case, arresting a person as an offender, conducting search and seizure, prosecuting an accused, etc., offend Article 21 of the Constitution and are, therefore, liable to be struck down as unconstitutional,” the judgement said.

It had further said the aforementioned Home Ministry resolution was “not the decision of the Union Cabinet nor were these executive instructions assented to by the President”.

The high court had also said that as per the records the Resolution, in question, cannot even be termed as the decision of the Government of India.

The bench had said the Union Home Ministry was working on the assumption that there is already provision in the Constitution for creation of the CBI.

CBI - What does the Gauhati HC order mean

 

 BS Nikhil Inamdar  |  Mumbai  

November 9, 2013 Last Updated at 14:11 IST

Explaining the CBI's existential crisis

What does the Gauhati HC order mean and could we have avoided this situation

It is indeed the theatre of the absurd! The Central Bureau of Investigation, the body that’s probing some of the biggest scams in the country is an illegal entity, according to a ruling by the Gauhati High Court this week. Why? What ramifications could this ruling have? And could this situation have been avoided?

Here’s a quick look–

What exactly has the Gauhati High Court said?

The Gauhati High Court has declared the CBI an unconstitutional body, saying: “We decline to hold and declare that the DSPE (Delhi Special Police Establishment) Act, 1946, is not a valid piece of legislation, we do hold that the CBI is neither an organ nor a part of the DSPE and the CBI cannot be treated as a 'police force' constituted under the DSPE Act, 1946…We hereby also set aside and quash the impugned Resolution, dated 01.04.1963, whereby CBI has been constituted."

In a nutshell the court has quashed the resolution based on which the CBI was constituted…but WHY!!??

The court acted on a writ petition filed by one Navendra Kumar, who challenged an order by a single judge of the High Court in 2007 on the resolution through which CBI was set up after a case was registered against him by the investigating agency under 2 sections of the IPC. The petitioner said there was no correlation between the CBI and DSPE Act (which have been considered as one and the same for so long) as the word ‘CBI’ found no mention in the act, nor did the executive order of 1963 by the Home Ministry disclose that the CBI has been constituted under the DSPE Act. The court ruled that the Home Ministry resolution was "not the decision of the Union Cabinet” nor were “executive instructions assented to by the President". It felt the “impugned Resolution” at best, be regarded as “departmental instructions, which cannot be termed as 'law'”.

What does this effectively mean?

That the CBI no longer has the power to investigate offences, arrest accused or file chargesheets and cannot be treated as a ‘police force’ constituted under the DSPE Act. The SC apex court will either need to stay or set aside the high court ruling before the CBI can start functioning normally again.

How has the government reacted and what next?

The judgment has been described as "totally erroneous" by Additional Solicitor General P P Malhotra, who said the CBI has been held valid by the Supreme Court by its number of judgments. 

The government has on Saturday moved the Supreme Court, contesting the Gauhati High Court's verdict. 

The hearing is likely to take place in the evening itself as the centre moved an application for an urgent hearing. "The CBI has been functioning effectively and has a staff of about 6,000 people all of whom are engaged in the investigation and prosecution of various cases. The said judgment is thus likely to have serious and severe consequences and it is absolutely necessary in the interests of justice and convenience that immediate ad-interim orders be granted staying the said judgment," the Centre's petition in the SC says, according to NDTV.   

What has been the immediate fallout of the Gauhati HC verdict?

Chief accused in the 2G spectrum scam - former telecom minister A Raja as well as Congress leader Sajjan Kumar, who has been named by the CBI in a 1984 anti-Sikh riots case sought a stay on the probes against them.

Could this crisis have been avoided?

A draft CBI Act drawn up by the agency in 2010 accessed by the Economic Times shows that the crisis could have been avoided if the legislation had not been rejected in 2011. 

Congress Minister Manish Tewari had raised doubts on the constitutional validity of the CBI saying, "the CBI has no independence standing in law… Simply put, it is a piece of legal fiction whose underpinnings in law are tenuous to say the least." 

But in response to Tiwari’s query, the government had maintained that the agency had sufficient powers under the DSPE Act.  

The government had rejected the draft CBI Act, which was to replace the DPSE Act despite a committee urging the government to give the CBI statutory backing on the lines of the NIA. The crisis could definitely have been averted.

The trials of tribunals

 B S :M J Antony  |  New Delhi  

October 8, 2013 Last Updated at 21:48 IST

Two tough laws have not speeded up the recovery of debts due to banks and have disappointed both the lender and the borrower

There has been a trend to set up tribunals in every sector in recent years, led by the hope that they will deliver decisions cheaper and faster, untrammelled by the procedural tangles of the civil courts. 

But they are showing the same symptoms of full-fledged courts, such as massive arrears, hundreds of vacancies, inadequate infrastructure and poor funding. Several jurists now feel that tribunalisation is an experiment that failed. 

When it comes to debt recovery this could weaken banks and financial institutions. Courts have been lamenting this situation in several judgments; the latest coming from the Supreme Court.

In an eight-year-old dispute over a home-loan recovery, the court threw a slew of rhetoric questions such as: "To what extent the defaulters be given protection in the name of balancing the stringent powers vested on the banks and the statutory safeguards prescribed in favour of the loanees? Even assuming there are legal lapses and abuses, how long the statutory tribunals take to put the controversy to rest being oblivious of the fact that the concept of flexibility is insegragably associated with valuation of asset?" In a desperate vein the court cited the Bhagavad Gita, "Awake, arise, O, Partha!" (Standard Chartered Bank vs Dharminder).

In January this year, the Supreme Court devoted ample time to the plight of the debt recovery tribunals (DRT) and delivered a judgment with instructions to the government on remedying the situation (Union of India vs DRT Bar Association). 

However, the new judgment shows that the directions have not been followed and there has been little improvement on the ground. In fact, the current slowdown in the economy is supposed to have increased the pendency of cases by 70 per cent. 

Some 43,000 cases in 33 DRTs across the country have tied up Rs 1.43 lakh crore this financial year. Three DRTs in the Mumbai region alone have a total pendency of 3,632 cases involving Rs 43,401.37 crore, according to finance ministry data.

It was with high hopes that two stringent laws were passed to wipe out non-performing assets. The working of the Recovery of Debt Due to Banks and Financial Institutions Act, 1993 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, have since disappointed both the lender and the borrower. The latest judgment involving Standard Chartered Bank is a telltale example. 

The appellate tribunal took nearly five years to dispose of the case. "It has totally forgotten the obligation cast on it by the Act," the judgment said and added that it was "perplexing" to note that the tribunal kept on granting adjournments without reason and disposed it of with a "laconic" order.

In the 2010 judgment, United Bank of India vs Satyawati, the court had remarked that "tribunals have become synonymous with those of the regular courts and the lawyers use every possible mechanism and dilatory tactics to impede expeditious adjudication of cases. The flawed appointment procedure greatly contributes to the malaise of delay." In Transcore vs Union of India, the court pointed out the effect of inflation on the original claims and counterclaims before the tribunals.

It has been 10 months since the Supreme Court passed a series of directions to improve the working of the DRTs. 

It is pertinent to recall some of the directions so that the government might wake up (though it is difficult to waken someone who pretends to slumber). Dealing with the tribunals working in cramped tenanted buildings, the court stated that if sufficient space is available in a government building, space from the concerned department will be allotted on a permanent basis. 

If space is not available in government buildings but sufficient space is available in public sector undertakings' buildings, the DRTs may move there on a permanent lease/rental basis. If neither is possible, suitable land may be purchased for construction of a building, or a suitably constructed building may be purchased from public authorities.

Other important suggestions: Fill all anticipated vacancies for the posts of senior officers as and when they arise, implement the "e-DRT Project" to automate and improve DRT services by building information technology systems as expeditiously as possible, streamline recruitment and promotions.

 The central government had initiated some of these ideas and had consented to the court suggestions. 

The court had stated that if its suggestions are not complied with the matter it could be brought before it again. In the event, there has neither been any little step towards implementation nor a reminder to the court about the continuing plight of the tribunals. 

Though the high courts have been empowered to superintend the tribunals, they have also not been able to do much, assuming they are aware of the judgment and directions. With legal remedies turning into a nightmare, the lender and the borrower will start looking at each other with deep suspicion, affecting economic growth.

Bad Loans of public sector banks like BoB, BoI & Allahabad Bank shrink on better recoveries

ET 5 Nov 2013

KOLKATA: Three of the seven banks that have declared quarterly results have shown better recoveries from sticky loans, following a government nod to lenders to go after wilful defaulters.

Bank of Baroda, Allahabad Bankand Bank of India saw better recoveries from sticky loans after the government allowed them to publish names of wilful defaulters and auction their collateralised assets. Bank of Baroda's slippages fell to Rs 1,600 crore in the three months to September 30, compared with Rs 1,800 crore in the year-ago quarter. Chairman and managing director SS Mundra said he expects that the worst may be over so far as asset quality is concerned, and that performance would stabilise over the next few years. Bank of India's asset quality improved with gross non-performing assets (NPAs) ratio dipping to 2.93% compared with 3.42% in the September quarter of the previous year. Net NPA improved to 1.85% from 2.04% a year ago. The bank also showed lower slippages and better recoveries sequentially.

The fight against wilful defaulters got a shot in the arm with Reserve Bank governor Raghuram Rajan pushing banks to get bad loans off their books by selling them to asset reconstruction companies.

Allahabad Bank's chairperson Shubhalakshmi Panse attributed the bank's 18% rise in profit mainly to improved recovery performance. The bank recovered Rs 2,573 crore during the second quarter, seven times more than what it had managed a year ago. The bank was also able to contain fresh slippages to Rs 1,200 crore, compared with Rs 1,720 crore last year. It sold written-off assets worth Rs 732 crore to asset reconstruction companies at 50% discount to push up recovery and non-interest income.

Other lenders, including Bank of Maharashtra and Union Ban of India, continued to see spikes in bad loans, but Union Bank chief Debabrata Sarkar said he expects the NPA situation to improve over the next few quarters.

Syndicate Bank and Indian Overseas Bank, however, continued feeling the pains as the economy is still showing some stress.

Top 30 defaulters of PSBs account for one-third of total bad loans: RBI

  

Top 30 loan defaulters of the public sector banks account for one-third of the total gross non-performing assets of state-run lenders, according to the Reserve Bank data.

The gross non-performing assets (GNPA) amount of top 30 accounts of public sector banks (PSBs) stood at Rs 63,671 crore at the end of June 2013.

The total GNPA outstanding of 26 PSBs was Rs 1,82,829 crore. Thus the top 30 accounted for 34.83 per cent of total gross bad loans.

In case of nationalised banks, top 30 defaulters contributed 43.5 per cent to the GNPA with Rs 48,406 crore.

The combined GNPA of 19 nationalised stood at Rs 1,11,209 crore.

The GNPAs of SBI Group, comprising SBI and its five associates, were worth Rs 71,620 crore at the end of first quarter of the current fiscal.

Top 30 loan defaulters of SBI group had a loan outstanding of Rs 15,266 crore or 21.3 per cent of the total loan.

Punjab & Sind Bank tops the chart with 62.53 per cent of GNPA is contributed by top 30 loan defaulters.

Punjab & Sind Bank is followed by State Bank of Hyderabad with 57.50 per cent, Vijaya Bank with 53.64 per cent and Corporation Bank with 53.40 per cent.

Last month, Finance Minister P Chidambaram had said the government is monitoring the top 30 NPA accounts in each PSU bank and asked the lenders to set up separate verticals to recover money.

“We are monitoring the top 30 NPA accounts in each bank, each zone. It is a matter of concern that it is the big borrowers (with loans of over Rs 1 crore) who are defaulting,” Chidambaram had said.

Reserve Bank Governor Raghuram Rajan had last week sent out a clear message that wilful defaulters would be dealt with strongly.

Asserting that the Finance Ministry and the RBI were on the same page when it came to recovery, he had stated that “this is not being said to create an atmosphere of fear or to be vindictive“.

He promised that the central bank will soon take some nuanced measures to get stressed assets back on track.

This article was published on November 4, 2013