Widen the scope of investigation into black money, SC tells govt

The central government today agreed to explain the action it had taken to bring back black money parked in foreign banks after a grilling by Supreme Court judges. The court pointed out that stashed away money linked to terrorism, arms deals or narcotics is a “serious” matter. 

A bench, consisting of Justices Sudershan Reddy and S S Nijjar, told Solicitor General Gopal Subramanium that “you know their names and their accounts. They are amenable to Indian law. When a person deposits so much money in foreign banks, the government must ask how he could earn so much. Is it from arms deals, terrorism links or narcotics? These are serious questions”. 

They told the solicitor general that the government knows the identity of the Indian account holders, as does the court. The serious point is what the government had done in the past years to trace the source of money. 

The judges said that the government should not confine its enquiry to tax evasion, but explore other angles to the money deposited abroad. They emphasised that the issue is not merely one of tax evasion, which is covered by double taxation avoidance agreements between India and other countries; there are several cases “which involved graver issues. That is the most dangerous part of the story”, the judges observed. 

The court was hearing a petition moved by former law minister and criminal lawyer Ram Jethmalani, pointing to the government’s inaction in bringing back huge amounts stashed in foreign banks. The solicitor general said the government is aware of the seriousness of the issue and that a special team of experts is analysing information received from abroad. 

Counsel said that because of the terms of double taxation avoidance agreements with 79 countries, recently expanded to 23 more, the account holders’ names cannot be disclosed. Moreover, such disclosure would harm further investigation and amount to breach of agreement. However, he agreed to disclose whatever steps the government has taken to bring back black money.

On behalf of Jethmalani, senior counsel Anil Divan said that the agreements with other countries referred to tax avoidance. But in this case, what is involved is “illicit, dirty money accumulated by criminal conduct”, which is not covered by any treaty.

Counsel pointed out that the German authorities had obtained details of account holders in LGT Bank in Liechtenstein and were willing to share it. But the government has not asked for it. The government “maliciously” asked for information under the tax treaty to avoid the right answers from Germany. Tax avoidance was mentioned deliberately as a “smokescreen” to avoid correct and relevant answers.

The court issued notice to Reserve Bank of India, the finance ministry, the central vigilance commission and others on a petition by Julio Riberio seeking direction to the government to ratify a UN convention on corruption, which would facilitate bringing back black money from foreign banks. Though even the Swiss government has signed the convention, the Indian government has not ratified it.

The court also asked the government to find out whether Hasan Ali Khan, who is on the list of account holders, is present in the country or has left it.