Saturday, May 31, 2014

UPA AND GONGRESS FAVORING NDTV'S SHENANIGANS

Moneylife » Why NDTV did not disclose Rs450 crore tax notice to exchanges
Why NDTV did not disclose Rs450 crore tax notice to exchanges
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MONEYLIFE DIGITAL TEAM | 30/05/2014 05:11 PM |   
NDTV has argued that the matter was “sub-judice” and that it has received a stay. Other listed companies, including Infosys, however, time and again have disclosed such information to the bourses
 
Prannoy Roy-led New Delhi Television Ltd (NDTV), was served a Rs450 crore demand notice by income tax (I-T) in February this year. However, NDTV did not inform the BSE or National Stock Exchange (NSE) about this, which it is a alleged violation of listingnorms. When BSE and NSE asked NDTV about this, the company argued that the demand notice was "without any basis or justification and contrary to provisions of Income Tax Act, 1961 and had resulted only due to erroneous and incorrect view taken by the tax department". Hence NDTV saw it fit not to disclose anything about it. 
 
Although all listed companies are mandated to provide every piece of  information relating with them through regulatory filings, NDTV says, "it was felt that the disclosure of theseevents in isolation, without any reference to the steps proposed to be taken by the Company, was not desirable. In the event of ongoing proceedings before Income Tax Appellate Tribunal (ITAT), where a stay has been granted by ITAT, the claim made by the tax department cannot be deemed as an enforceable tax demand against NDTV due and payable by it. The demand has resulted only due to erroneous and incorrect view taken by the tax department."
 
Earlier in February 2014, in a major crackdown against listed companies not complying with regulatory disclosure norms, NSE and BSE imposed fines or suspended trading in over 1,100 cases of non-compliance, involving nearly 600 companies. After finding hundreds of companies of not adhering to various provisions of listing agreement, market regulator Securities and Exchange Board of India (SEBI) had asked the stock exchanges to put a stronger mechanism in place to ensure compliance. 
 
In March 2014, Vardhman Textiles Ltd, a listed company, also received a Rs97.64 crore demand notice from the I-T department and it conveyed the same to the bourses. Similarly, when Redington (India) Ltd received a Rs138 crore demand notice from I-T dept, it also informed the BSE.
 
Even, Infosys, the country's second largest IT company, was slapped with a Rs582 crore demand notice. This was in addition to the tax demands of Rs1,175 crore for FY2005 to FY2008, the company was contesting. Infosys in its regulatory filing informed the bourses about the tax notice and also its position to contest it.
 
The question then is why NDTV did not think it fit and proper to give the relevant information to the bourses? This non-disclosure of information prompted NSE and BSE to seek clarification from the company. While BSE has mentioned the notices it sent to NDTV, there are no details available at NSE. NSE just says that it sought clarification from NDTV based on a complaint. 
 
When NDTV failed to provide specific response to its query, BSE again sent an email on 27th May to the company asking it to give point-wise reply. In its reply, NDTV said, "...we have clarified our position with respect to the queries of exchange on various disclosures under listing agreement vide Company's letters dated 16 May 2014 and 22 May 2014, wherein the company categorically explained the position as to how the company has not violated the provisions of clause 36 of the listing agreement."
 
Here are the specific queries sent by BSE and the replies provided by NDTV...
 
1) Non-Disclosure of the tax demand of Rs450 crore raised vide the Assessment order dated 21 February 2014 at the time the same was raised.
 
NDTV Response: As stated in our earlier submissions, the matter relates to tax demand of Rs450 crore raised vide the Assessment order dated 21 February 2014 issued by the tax department for the assessment year 2009-10 (Financial Year 2008-09). The aforesaid tax demand has resulted due to erroneous and incorrect view taken by the tax department that the transaction vide which an investment of $150 Million was made by NBC Universal Inc and Universal Studios International BV in an overseas subsidiary of NDTV, is a 'sham' transaction.
 
NDTV submits that the said transaction was indeed a bonafide and genuine transaction, where funds were transferred from Universal Studios International BV, which was a GE Company at that time, an organization of international prestige and repute, for subscription of shares in overseas subsidiary of NDTV. The funds were raised with the involvement of intermediaries like law firms and bankers on the end of both the parties. The funds were transferred through normal banking channels and all the required compliances made in respect thereof. Further, the documents and confirmations required by the tax department during the course of assessment and investigation proceedings were provided to the tax department, including an apostilled copy of the confirmation from Universal Studios International BV to the effect that the investment of $150 Million was made by Universal Studios International BV, for subscription of shares in overseas subsidiary of NDTV.
 
It has also been highlighted by the Company earlier that the complainant Mr Sanjay Dutt, of Quantum Securities Pvt Ltd, has raised various matters with the Stock Exchanges and the income tax department, which also include the demand made by the tax department against NDTV. This demand has resulted from an investment made by NBC Universal Inc (NBCU) and Universal Studios International BV in an overseas subsidiary of NDTV. It may be noted that at that time, Mr Dutt headed, negotiated and closed various activities for the aforesaid investment, including negotiations on behalf of NDTV with the management and officers of NBCU. Further, the company had made the required disclosures with the Stock Exchanges and in its financial statements, with respect to the aforesaid investment made by NBC Universal and Universal Studios International BV.
 
In view of the above, it was concluded that the said demand was without any basis or justification and contrary to provisions of Income Tax Act, 1961 and had resulted only due to erroneous and incorrect view taken by the tax department. Based on the advise from external counsels, the Company is confident of a favourable outcome in the proceedings before Income Tax Appellate Tribunal (ITAT) challenging the aforesaid Assessment order. The Company filed an appeal before the ITAT challenging the aforesaid Assessment Order. The understanding of the Company was affirmed when the ITAT passed a stay order on the said demand in favor of the Company. Further, it may be noted that the challenge of the said claim, made by NDTV, is pending final determination before the ITAT and is currently sub-judice. 
 
Therefore, it was felt that the disclosure of these events in isolation, without any reference to the steps proposed to be taken by the Company, was not desirable. Such a disclosure would also be against the spirit of the Listing Agreement as an issue which is sub-judice, would lead to an incomplete representation of the matter to be made to the shareholders, before the relevant forum before whom the matter is pending has given its decision. Therefore, the Company was of the view that no disclosure was required in the matter, the same being sub-judice. It was deemed appropriate that a disclosure of the matter be made at a time when a decision has been taken by ITAT. 
 
2) Non-Disclosure of Company payment of Rs5 crore to the Income Tax Authorities pursuant to tax demand of Rs450 crore raised vide the Assessment order dated 21 February 2014 at the time of payment thereof.
 
NDTV Response: It may be noted that the Company didn't make any payment when the tax demand notice of Rs450 crore raised vide the Assessment order dated 21 February 2014 was received. Instead, as mentioned earlier, the Company filed an appeal before ITAT against the aforesaid Assessment order vide which the demand was made. In the course of the proceedings before ITAT, a stay order was passed by the ITAT (order dated 26 March 2014 and 21 April 2014), vide which an interim stay has been granted on the demand made by the tax department. It may be noted that in the present case, ITAT allowed the demand to be stayed on payment of an amount of Rs5 crore only. 
 
As highlighted earlier, the challenge of the said claim, made by NDTV, is pending final determination before the ITAT and is currently sub-judice. 
 
Therefore, in our opinion there was no requirement of a disclosure in this case.
 
3) Non-Disclosure of Rs450 crore as a Contingent Liability pursuant to the income tax demand of Rs450 crore raised vide the Assessment order dated 21 February 2014 when the company submitted its Audited Financial Results for the year ended 31 March 2014. 
 
NDTV Response: As already highlighted, the matter is presently sub-judice before the ITAT and based on the view of the external counsels, NDTV has a strong case on merits. In the event of ongoing proceedings before ITAT, where a stay has been granted by ITAT, the claim made by the tax department cannot be deemed as an enforceable tax demand against NDTV due and payable by it. The demand has resulted only due to erroneous and incorrect view taken by the tax department.
 
Further, according to a Senior counsel who has opined on the matter, the issues before the ITAT are presently pending final adjudication and NDTV has a strong arguable case, and in all likelihood the issues involved deserve to be decided in NDTV's favour.
 
Therefore no disclosure was applicable in this case. 
 
In view of the foregoing submissions, the contention of the Complainant that a violation of clause 36 of the listing agreement has been committed by NDTV, is baseless and without merit as the demand was levied on erroneous and incorrect view taken by the tax department . Further, it is reiterated that no violation of provisions of the Listing Agreement has been committed by NDTV as alleged by the Complainant or at all.
 
In June 2013, Moneylife wrote how Sanjay Dutt, director of Quantum Securities, has levelled a series of allegations about wrong practices and poor governance at NDTV. He made these charges in writing to almost every regulatory authority in India – the Ministry of Corporate Affairs, the Securities & Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and other institutional investors. See our report: Allegations of NDTV’s Many Shenanigans.
 
Following our article, on 27 June 2013, NDTV sent a legal notice to Quantum Securities, Sanjay Dutt and directors of the company, through its law firm Amarchand Mangaldas accusing him of making defamatory statements, writing to various regulators and ‘launching a tirade’ against NDTV because he bears a ‘grudge’ against the broadcaster. This is probably the first time that charges by a significant shareholder have been termed ‘defamatory’ by a company, mainly because he was a ‘remunerated consultant’ sometime in the past. Mr Dutt and his firm Quantum Securities hold a significant stake in NDTV.
 
NDTV got listed on May 2004. Its first trade was at Rs100, a substantial premium over its issue price of Rs70 for its initial public offering (IPO). At that time, the NDTV IPO was oversubscribed within 15 minutes of opening the books. After hitting an all time high of Rs511.75 in 2008, NDTV shares are trading below its IPO price 2011 onwards. In fact, during 2011, NDTV recorded its all time low of Rs24.75 on the BSE.
 
In August 2011, Moneylife wrote: “NDTV got listed in 2004 and was trading below its listed price after seven years. It had given a negative return of 19% compounded in the past five years and a total shareholder return (TSR) of negative 66% for the same period. Its viewership claims, like those of all TV channels, are impossible to verify. Its credibility is at a nadir (after the phone-tapping controversy) and its finances are in a mess. NDTV has rarely made money from operations. For the past few years, its consolidated operations have been making cash losses and it has been running on money made by selling loss-making subsidiaries to strategic investors.”
 
We further pointed out how marquee institutional investors always line up to acquire this loss-making company’s bits and pieces and exit at a loss at regular intervals, only to make way for other big name investors! The latest was DE Shaw, which provided an exit to Goldman Sachs in 2011 by acquiring a 14.2% stake. After this, NDTV acquired a significant investor—Abhay Oswal, who owns nearly 15% of its equity but seems to have no presence on NDTV’s board of directors. Mr Oswal happens to be the father-in-law of Navin Jindal, an industrialist and Congress Member of Parliament.
 
In all these years, no investor has complained, or uttered a word of public criticism, about the losses and operations of this strange company. Then last year in June, Mr Dutt, in an email to Moneylife, made some startling allegations about NDTV’s capital structure. He alleged that chairman Prannoy Roy received irregular promoter funding to the tune of a massive Rs375 crore by pledging NDTV shares which, according to him, is against the Reserve Bank of India (RBI) rules. The loan was made to a company called RRPR Holdings Private Limited in October 2008 against the pledge of NDTV shares. (Read moreAllegations of NDTV’s Many Shenanigans)
 
As per the listing agreement, companies are required to submit documents like annual reports, shareholding pattern data, quarterly and full-year financial results, as also corporate governance compliance reports within stipulated time periods. The question is now, will NSE and BSE, the first line of regulators would initiate any action against NDTV, similar to the one the bourses took on several companies for failing to disclose the information on tax notice? In addition, will market regulator SEBI also probe NDTV and its apparent violation of listing norms?


Moneylife » Companies & Sectors » Company News & Trends » Allegations of NDTV’s Many Shenanigans
Allegations of NDTV’s Many Shenanigans
SUCHETA DALAL | 24/06/2013 11:13 AM |   
NDTV,Parliament,Shenanigans,Goldman Sachs, Parliament, investor,Mr Dutt,Prannoy Roy,
Sanjay Dutt, director of Quantum Securities and a long-term shareholder of NDTV has alleged that chairman Prannoy Roy received irregular promoter funding of Rs375 crore by pledging NDTV shares which, according to him, is against the RBI rules

In August 2011, Moneylife wrote: “NDTV got listed in 2004 and is trading below its listedprice after seven years. It has given a negative return of 19% compounded in the past five years and a total shareholder return (TSR) of negative 66% for the same period. Its viewership claims, like those of all TV channels, are impossible to verify. Its credibility is at a nadir (after the recent phone-tapping controversy) and its finances are in a mess. NDTV has rarely made money from operations. For the past few years, its consolidated operations have been making cash losses and it has been running on money made by selling loss-making subsidiaries to strategic investors.”

We further pointed out how marquee institutional investors always line up to acquire this loss-making company’s bits and pieces and exit at a loss at regular intervals, only to make way for other big name investors! The latest was DE Shaw which provided an exit to Goldman Sachs in 2011 by acquiring a 14.2% stake. After this, NDTV acquired a significant investor—Abhay Oswal, who owns nearly 15% of its equity but seems to have no presence on NDTV’s board of directors. Mr Oswal happens to be the father-in-law of Navin Jindal, an industrialist and Congress Member of Parliament.

In all these years, no investor has complained, or uttered a word of public criticism, about the losses and operations of this strange company. But, a few weeks ago, Moneylife received an email from Sanjay Dutt, director of Quantum Securities P Ltd, a name familiar to all those who watch the business TV regularly. Mr Dutt said that his firm is a long-term shareholder of NDTV and holds over 1% of its equity capital. He also disclosed that he had worked as a consultant with the group from 2006 to 2008 and has been a personal friend of the current CEO for over 15 years. But, more about that later. Mr Dutt was writing to make some startling allegations about NDTV’s capital structure.

He alleges that chairman Prannoy Roy received irregular promoter funding to the tune of a massive Rs375 crore by pledging NDTV shares which, according to him, is against the Reserve Bank of India (RBI) rules. The loan was made to a company called RRPR Holdings Private Limited in October 2008 against the pledge of NDTV shares.








RRPR Holdings has a capital of only Rs1 lakh and is 100% owned by Prannoy and Radhika Roy, says Mr Dutt in a letter to Dr KC Chakrabarty, RBI deputy governor, in April 2013. RRPR Holdings’ only asset and business is the 29% equity holding of NDTV. He further alleges that the loan to RRPR Holdings was made without even a mandatory haircut and, at times, in excess of the company’s market value. Of course, the loan was backed by the personal guarantee of a director.

Mr Dutt has obtained certified information from the Registrar of Companies (ROC) to back his allegation and written a formal complaint to RBI’s department of banking supervision at the end of April, with copies of his findings. All these documents are also available with Moneylife. Mr Dutt further alleges that the pledge of promoter holding has not been made public, as mandated by the listing agreement of stock exchanges.

I wrote to NDTV’s CEO, Vikram Chandra, seeking a response to Mr Dutt’s allegations. Within a couple of hours, I received a 1,600-word response from KVL Narayan Rao, executive vice chairperson of the NDTV group. Curiously, the letter did not answer Mr Dutt’s simple allegation about promoter funding in violation of RBI norms. Mr Rao wanted a couple of days to respond to those. Instead, he wrote about how Quantum Securities, a brokerage firm, was an active trader in NDTV shares. Mr Rao called Sanjay Dutt a ‘stock market manipulator’ who had settled charges with the Securities & Exchange Board of India (SEBI) by paying Rs53.41 lakh under a consent order.

According to Mr Rao, the company had yet to receive a response from Mr Dutt about whether he had indulged in similar trading in NDTV shares. The SEBI order of January2013, which is on the regulator’s website, shows that Quantum Securities was accused of synchronised and circular trading in GHCL shares and paid Rs33.41 lakh in a consent deal, while Sanjay Dutt and Prenita Dutt, together, paid Rs15 lakh to settle charges against them.

Mr Rao then goes on to tell us that Sanjay Dutt was aconsultant with NDTV and that he was paid a hefty Rs2.6 crore for his services over less than two years. This included several foreign trips to structure overseas subsidiaries for its foray into ‘non-news areas’. He was also given some shares in subsidiary companies which he had to forfeit when he left the company in 2008, allegedly because he could not get along with people.

Mr Rao says that Mr Dutt holds a ‘grudge’ against NDTV and has ‘misused’ and ‘distorted’ confidential information obtained as a consultant to level charges against the company in letters to various regulators as well as to NDTV’s board of directors.

In fact, according to him, Sanjay Dutt’s actions do not fall in the realm of ‘shareholder activism’ but are ‘blackmail, extortion and defamation’ which ‘amount to criminal offences under Indian Penal Code’. 

This then raises another question. Why has NDTV not initiated action against Mr Dutt so far? Clearly, neither side is telling us the whole truth. Mr Dutt is clearly not your usual activist investor; but it is also hard to imagine that a mere ‘grudge’ would motivate him to start a war against an extremely powerful media house like NDTV. As a person who has been in the organisation, Mr Dutt is also fully aware of NDTV’s phenomenal reach and connections in the Congress government.

On the other hand, what is holding NDTV back? Why has it not initiated action against Mr Dutt, if it is fully aware of his allegedly ‘defamatory’ letters to multiple regulators? Is it far more convenient for NDTV to simply use its clout to silence the regulators? Have any of them asked NDTV raised these issues about the frequent changes in its equity capital and Mr Dutt’s allegations?

Since Mr Rao says that Sanjay Dutt has written to NDTV’s board of directors, have the independent directors raised these issues? Surely, all of NDTV is not scared of what Narayan Rao calls Mr Dutt’s ‘bouts of uncontrollable rage and anger’?

Incidentally, Mr Dutt studied at the Doon School, is a chartered accountant, like Prannoy Roy, and is an IIM-Ahmedabad alumnus. The Quantum Securities’ website says that he was with the firm since 1994, but does not mention why he gave it up to act as a consultantto NDTV for the two peak years of the most ferocious bull market that India has seen.

An earlier version of the website listed the economist Dr Surjit Bhalla as a third member of the Quantum Securities management team. Dr Bhalla’s Oxus Fund Management was adivision of Quantum. Dr Bhalla is on several SEBI and government committees and used to be close to NDTV, but is now independent.

Ironically, Quantum’s website, at one time, had listed among its ‘prominent’ clients Dr Prannoy Roy. Is there more to this unravelling story than meets the eye so
far?

Here is the detailed letter we received from Mr Rao, after sending this article for printing...


And here is the response from Mr Dutt on Mr Rao's letter...



Sucheta Dalal is the managing editor of Moneylife. She was awarded the Padma Shri in 2006 for her outstanding contribution to journalism. She can be reached atsucheta@moneylife.in

MODI'S MO-GOVERNANCE: MAXIMUM GOVERNANCE MINIMUM GOVERNMENT MEANS FULL RESPONSIBILITY FOR CABINET CONSTRUCTION WITH CONCENTRATED CONTROL OVER POLICIES

Cabinet under construction

Narendra Modi's Cabinet under construction: PM hits the ground running, but his government is still taking shape
Sandeep Unnithan and Jayant Sriram  New Delhi, May 30, 2014 | UPDATED 14:19 IST
 

(from left) <a href="http://indiatoday.intoday.in/people/narendra-modi/17737.html">Narendra Modi</a>, Rajnath Singh, <a href="http://indiatoday.intoday.in/people/sushma-swaraj/17946.html">Sushma Swaraj</a>, Arun Jaitley, M. Venkaiah Naidu and Nitin Gadkari at Rashtrapati Bhavan during the swearing-in ceremony. Panorama by Rohit Chawla
(from left) Narendra Modi, Rajnath Singh, Sushma Swaraj, Arun Jaitley, M. Venkaiah Naidu and Nitin Gadkari at Rashtrapati Bhavan during the swearing-in ceremony. Panorama by Rohit Chawla
Narendra Modi's first day at the Prime Minister's Office (PMO) in South Block was also Jawaharlal Nehru's 50th death anniversary. Soon after he drove to the PMO in a convoy of shark-like black armoured 7 series BMWs and an SPG bodyguard detail with enough firepower to stop a tank in its tracks, Modi tweeted his homage to India's longest serving PM. He then began a series of back-to-back meetings with heads of state or representatives from all seven SAARC countries and Mauritius, including a crucial summit meeting with another chief minister-turned-PM, Pakistan Prime Minister Nawaz Sharif. Modi later presided over his first Cabinet meeting, found time to call on former prime mister Manmohan Singh and his wife, and meet his key officials.
As the sun set over Raisina Hill and Modi packed more into a day than others would in a month, he had subtly emphasised the primacy of PMO, an office that had not just withered away during the UPA decade but whose key bureaucrats came under the CBI scrutiny.
The blistering pace Modi had set, continued. On Day Two, an ordinance cleared the appointment of Nripendra Misra, a retired 1967-batch IAS officer, as principal secretary to Modi to override a clause which stood in the way of his joining the Central government.
On Day Three, Modi, who rises at 6 a.m. in his second floor suite in Gujarat Bhawan to an hour of yoga and pranayam, directed his ministers to set their 100-day goals. At least three of the 10 priorities he set for the NDA Government relate to the bureaucracy, making it clear who will be doing the heavy lifting in his Government. The agenda emphasises building confidence in the bureaucracy and giving them the freedom to work and encouraging out-of-the-box ideas.
Modi has signalled he will continue as he began. In the official list of Cabinet ministers released on May 27, he added a single line to his list of portfolios. "All important policy issues".
This ambiguously worded line makes it unambiguously clear who the boss is in a Cabinet of heavyweights-External Affairs Minister Sushma Swaraj, the first woman since Indira Gandhi in India's Pentagon, the Cabinet Committee on Security; Home Minister Rajnath Singh and Arun Jaitley, who juggles three critical ministries of finance, defence and corporate affairs. They were sworn in along with 42 other ministers in a grand public ceremony, the closest New Delhi has come to an Americanstyle public inauguration.
Modi and his ministers, the Capital's new power elite, held centre stage near the football-field sized forecourt of the Rashtrapati Bhavan, before over 5,000 invitees. Heads of SAARC countries, billionaires, bureaucrats, politicians, diplomats and movie stars fanned themselves with invitation cards in the searing Delhi heat. The air crackled with anticipation that the Modi machine would deliver on his poll promises of good governance and economic revival. "I got a call from a Dubai-based NRI three days ago asking where he could immediately invest $100 million (Rs.600 crore)," says Mumbai-based real estate tycoon Niranjan Hiranandani, an invitee to the function.
CABINET FOR CHANGE
Modi ran a presidential-style campaign and now there is expectation that he will run a presidential style of government. The Cabinet to meet this expectation was crafted after 10 days of hectic consultations in Delhi's new power triangle-Keshav Kunj, the RSS office in Jhandewalan; the BJP headquarters on Ashoka Road; and Gujarat Bhawan in Delhi (he moves into 7, Race Course Road after minor renovation by May-end). The expectations of a lean, mean Modi machine were met, but only to an extent. UPA 2 had 29 cabinet ministers. Team Modi has only 23 ministers.
With a total of 45 ministers, it is the exact size of the Atal Bihari Vajpayee's 1998 cabinet. Under UPA, 68 ministers looked after 51 ministries; in Modi's Government, 45 ministers will handle 52 departments. Two new ministries have been created-the Ministry of Skill Development, Entrepreneurship headed by Assam's Sarbananda Sonowal and the Water Resources, River Development and Ganga Rejuvenation Ministry headed by Uma Bharti. Veterans like L.K. Advani and Murli Manohar Joshi sulked after they fell afoul of Modi's age ceiling of 75 for ministerial berths.
Modi
Modi's twin pillars

But the Modi machine is a work in progress and missing a critical component, the defence minister. Finance Minister Arun Jaitley indicated he was only a temporary occupant in the defence ministry till any "alternative arrangements" were made. The promised Cabinet expansion, presumably, will be made before the burden of expectations weighs on Jaitley's shoulders as he presents the Government's first Budget in late July. There was also no sign of the promised technocrats who would be inducted into the ministry. Another notable omission from the Cabinet was Arun Shourie, who had served as minister for disinvestment, communication and information technology in the Vajpayee government.
Yet, as it stands today, Modi's Cabinet has fulfilled the promise of "maximum governance, minimum government" while accommodating RSS nominees, state satraps in election-bounded states and allies. The Cabinet restructuring is a massive break from UPA 2. Seventeen related ministries have been combined into seven different groups with major changes to heavyweight ministries. The Ministry of Overseas Indian Affairs has been put back under Sushma Swaraj's Ministry of External Affairs.
Corporate affairs, a ministry held by Sachin Pilot in UPA 2, is back under the finance ministry. In the infrastructure sector, one of Modi's key thrust areas, road transport and highways and shipping and ports have been combined under a single ministry. Similarly, power, coal and new and renewable energy have been brought under a single ministry though petroleum remains a standalone ministry. The related ministries of urban development, housing and poverty alleviation have also been placed under a single charge while rural development, Panchayat Raj and drinking water and sanitation have been grouped together. The ministerial clusters may silently kill a UPA dinosaur called the Groups of Ministers and Empowered Group of Ministers, of which 82 were formed. Set up by UPA to accelerate inter-ministerial coordination, they actually added another layer of decision- making. "If a single minister is in charge of multiple subjects, decision making could be definitely quickened," says former Cabinet secretary K.M. Chandrasekhar.
Modi's slogan of 'minimum government' is part of a significant systemic change. Top bureaucrats say his measures should not be seen in isolation but as part of a comprehensive overhauling of governance systems. The grouping of ministries is only the first step. According to Chandrasekhar, a strong system of delegation and decentralisation will also have to be simultaneously introduced so that a minister is not inundated with work.
This would also give bureaucrats more responsibility for running the ministries. This suits Modi's style of governance centred around bureaucrats. In Gujarat, he is known not to allow his ministers to choose their bureaucrats. He always values hardworking, low-profile bureaucrats of impeccable integrity. "If he feels a joint secretary is more efficient that a secretary, he will deal directly with the junior officer," says a bureaucrat.
Swift decision-making is already a buzzword in the sandstone corridors of North and South Blocks. The Cabinet's first decision was to set up an Special Investigation Team headed by retired Supreme Court judge M.B. Shah to bring back Indian black money stashed abroad-a 2010 study by the US-based nonprofit Global Financial Integrity estimated that Indians have spirited away $500 billion overseas.
Bureaucrats from various ministries have begun queuing up outside Modi's office with 20-slide PowerPoint presentations on the 'low-hanging fruit', decisions the Government could push through and end the inertia that rang the UPA regime's death knell.
MAPPING THE ROAD
The Modi PMO, which will steer the Government, is also a work in progress. The appointment of Misra, who heads the PMO, is the first. Another closely watched appointment is that of the new Cabinet secretary, the country's most senior civil servant who heads the Cabinet secretariat and implements key Cabinet decisions and also reports to the PM. The current incumbent, Ajit Seth, retires on June 14. Front-runners to replace him include P.K. Sinha, a 1977-batch officer of the Madhya Pradesh cadre officer who is currently power secretary, and Petroleum Secretary Saurabh Chandra, a 1978-batch officer of the Uttar Pradesh cadre officer.
The question remains whether Modi can cut-paste his governance style from Gandhinagar onto New Delhi. Former Union secretary EAS Sarma says the effectiveness of the Government will depend more on a clear demarcation of responsibilities of the Cabinet Secretary and PMO on one hand and delegation of authority within the Government on the other. "Many matters of lesser importance need not be referred to the finance ministry. Ministry of Finance representatives, that is, the financial advisers in different ministries, could be given a greater authority to clear proposals," he says.
Work is worship
Work is worship

Modi has increased the workload of his junior ministers. Each of the ministers with independent charge has, on an average, been given 2.8 portfolios. It was barely 1.3 portfolios under the UPA 2. There are 10 ministers of state with independent charge. Some like former army chief General V.K. Singh have been given three portfolios-independent charge of the department of northeastern affairs and the junior minister to Sushma Swaraj in the Overseas Indian Affairs and External Affairs. Modi has also created synergies among his ministries. Piyush Goyal, for instance, has independent charge of three ministries-Power, Coal and New and Renewable Energy. In the UPA, these portfolios were held by three heavyweights-Jyotiraditya Scindia, Sriprakash Jaiswal and Farooq Abdullah. Gopinath Munde, the Cabinet minister for Rural Development, Panchayati Raj, Drinking Water and Sanitation, handles ministries held by Jairam Ramesh, Salman Khurshid, Bharatsinh Solanki during UPA 2.
The convergence of related ministries has been tried before and recent history shows that it is an exercise attempted only by a powerful prime minister. Under Indira Gandhi in 1981, for example, the ministries of coal, power and petroleum were combined into a super ministry for energy with one cabinet minister and ministers of state handling each sector. However, according to Pramod Deo, a former Central Regulatory Commission chairman, the coordination between the various sectors came only at the ministerial level while the bureaucrats in various departments tried to protect their own turf.
"Combining coal and power is a good step now as more than 80 per cent of coal is used by the power sector. It's important to also bring petroleum under this umbrella but that would require a high level of coordination. As far back as 2006, the government approved the integrated energy policy submitted by the Planning Commission but no steps have been taken to implement it," Deo explains. Similarly, the Rajiv Gandhi government brought together the Department of Railways, Shipping and Civil Aviation under a combined Ministry of Transport. His government also brought together education, culture and women and child development under the first-ever Ministry of Human Resource Development. While civil aviation was later bifurcated, surface transport and shipping were later combined under the P.V. Narasimha Rao government.
Face of the new government
Face of the new government

The move to club two transport ministries together is not new. As recently as March 1 this year, the India Transport Report submitted by the National Transport Development Policy Committee recommended all transport ministries, including railways and civil aviation, be brought under a single ministry. This was done in China last year.
One reason for the inconsistencies in the Modi Cabinet was because Modi had to meet regional, caste and community quotas while reflecting his party's pan-Indian sweep. Uttar Pradesh, which forms the BJP's core of 71 seats, was rewarded with eight ministerial berths: Four Cabinet ministers, two ministers of state (MoS) with independent charge and two ministers of state. Najma Heptulla, 74, the Cabinet's sole Muslim face, was given charge of the minority affairs ministry. Kalraj Mishra, 73, the party's Brahmin face from Uttar Pradesh, was given the cabinet berth of micro, small and medium enterprises. Sanjeev Balyan, a Jat MP from Muzaffarnagar, western UP, was accused of playing a role in the September 2013 riots in the area. He was sworn in as MoS for agriculture and food processing only at the behest of Amit Shah, the BJP's in-charge for Uttar Pradesh.

Modi
Modi's super six
In certain cases, Modi factored in the utility of a leader, their previous role within the party and his poll campaign. He has preferred leaders who stood by his vision and backed him when others tried to sabotage his chance of becoming the PM candidate, and workers who reported directly to him in Mission 272-plus. "He knows how to differentiate between a loyalist and opportunist," says a Bihar BJP leader. That could explain why Giriraj Singh, who asked Modi's opponents to leave for Pakistan, is not in the Cabinet, while Smriti Irani, who had spoken out against Modi for the 2002 Gujarat riots a decade ago but later became a strong supporter, is the youngest cabinet minister. Yet it was not enough. Her inclusion has angered many in RSS. "Speaking skills and efficiency cannot replace scholarship, experience and ideological commitment," says an RSS leader. The raging controversy over Irani's inconsistent poll affidavits-she claimed two different graduate courses in 2004 and 2014-has proven to be the new Government's first major embarrassment.
Other leaders, however, say they were disappointed by the Cabinet. "The PM has placed a tremendous burden on his shoulders," says a senior BJP leader not in the reckoning for a post. "This cannot be the line-up that will deliver results in five years." Home Minister Rajnath Singh successfully resisted a move to create a new internal security division under Modi's PMO, comprising the Intelligence Bureau and the National Investigation Agency. The move, Rajnath successfully argued, would reduce the ministry to one that was unworthy of a Cabinet number two.
Beneath the smiles and the football fan chants of 'Modi, Modi' at Rashtrapati Bhavan, lay discontent and power play. Former party chief Nitin Gadkari who, as state minister in the 1990s, built flyovers and the Mumbai-Pune highways as a state minister in the 1990s, advised Modi on a new infrastructure super-ministry clubbing together railways, ports, roads and civil aviation. The former BJP president was in for a shock. Modi turned down his proposal, too much responsibility for one man, he is believed to have said. He was left with ports and roads.
NEW TEAM, OLD GROUSE 
The allotment of portfolios to relative lightweights may have reinforced notions of an imbalanced Cabinet. "In the decade we were out of power, we have produced only TV spokespersons, not experienced leaders," a BJP leader says. Of the three spokespersons given ministerial berths-Ravi Shankar Prasad, Nirmala Sitharaman and Prakash Javadekar-only Prasad has been a minister before. At least two ministries, agriculture and food processingindustries, have no ministerial experience. Balyan is MoS in the agriculture ministry where the cabinet minister, Radha Mohan Singh, is a first-timer, and MoS in the food processing industries ministry where cabinet minister Harsimrat Kaur Badal is also a first-timer.
Jaitley's stamp on the Modi Cabinet is discernible. While Modi has kept out parliamentarians considered close to Swaraj, those close to Jaitley have bagged prized portfolios: Piyush Goyal and Sitharaman have got independent charge of crucial ministries; Goyal heads power, coal, new and renewable energy while Sitharaman has independent charge of commerce and industry while she is attached to Jaitley for finance and corporate affairs. Sitharaman is not even an MP yet. That she has had differences with Swaraj in the past only makes things difficult for the latter rather than the junior minister. Those considered close to Swaraj, such as S.S. Ahluwalia and Rajiv Pratap Rudy, have been left out despite multiple terms in Parliament. "Appointing ministers is the prerogative of the PM. I will continue to serve my constituency," Ahluwalia told India Today.
Modi has won the battle for Delhi. His mopping up operation against the Congress will continue through the year. Jagat Prakash Nadda-a former minister from Himachal Pradesh-is a name is doing the rounds as front-runner for BJP party president. He will lead the charge in Haryana and Maharashtra later this year. These states are not just the last sizeable bastions of Congress influence, but also the Grand Old Party's funding lifelines.
BJP victories here could leave the Congress as a regional party confined to Kerala, Karnataka and rumps in northern and north-eastern India. This momentum will power the Government towards the 2019 General Election, for which at least one BJP leader has a slogan ready: 'Phir Ek Baar Modi Sarkar'.
- With Jatin Gandhi Follow the writers on Twitter @SandeepUnnithan and @jayantsriram
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OUTSPOKEN FORTHRIGHT AND HONEST FATHER OF THE CONSTITUTION OF INDIA, DR. B. R. AMBEDKAR VIEWS SHEIKH ABDULLAH TREACHEROUS AND ARTICLE 370 ANTI-INDIAN ACT







UPA GOVERNMENT WAS THROWING DUST IN THE EYES OF INDIAN CITIZENS WHEN IT PRETENDED TO BRING BACK BLACK WEALTH STASHED IN FOREIGN BANKS

ECONOMY 1 min ago

SIT on black money: If there is political will, it should go for gold and a big haul

By R Vaidyanathan  
SIT on black money: If there is political will, it should go for gold and a big haul
Reuters
More than six years ago, in February 2008, the German authorities had collected information about illegal money stashed away by citizens of various countries in a Liechtenstein bank. The German Finance Minister offered to share the names of these account-holders with any government interested in them. The UPA-1 government, unfortunately, did not act for many months and, after much prodding by the Opposition, asked for the list in late 2008.
A German intelligence agency appears to have paid an unnamed informer more than $6 million for this confidential and secret data about clients of the LGT group, a bank owned by the Liechtenstein Prince’s family. The revelations have already led to the resignation of the head of Deutsche Post, which is currently the world’s largest logistics company. Liechtenstein leaders were furious and have focused all their ire on the theft of the data rather than on the facts of the case.
The German list contained the names of 1,400 clients of the Liechtenstein bank, of whom 600 were Germans. A spokesman for the German finance ministry, Thorstein Albig, had said in March 2008 that information on the other accounts would be shared without charging any fees. Finland, Sweden, and Norway quickly obtained the data, but  our government began pussyfooting around this issue. If it had genuinely wanted to act against black money, it should have immediately despatched senior officials/ministers to get the names. Pushed and prodded by the Opposition and the media, when the government finally moved, it got nearly 100 Indian names – but those names have been kept a secret.
This writer, who has been studying tax havens for more than a decade, wrote in April 2009 (in the journalEternal India, published by India First Foundation) about the need to get back the illegal deposits kept by Indians in various tax havens, including Liechtenstein. A public interest litigation was then filed by Ram Jethmalani and others in the Supreme Court, to which the government responded that it was taking steps to recover such amounts. It had also mentioned that the German government had given a list of people who had kept money in the LGT Bank of Liechtenstein (May 2009). The government's response also said that steps were being taken in the case of Hasan Ali Khan, a Pune horse-breeder, who was alleged to have indulged in several illegal transactions through the UBS Bank of Switzerland.
In the meanwhile, the then Leader of the Opposition in the Lok Sabha, LK Advani, had constituted a committee consisting of S Gurumurthy, well-known Chartered Accountant, Ajit Doval, the current National Security Advisor, lawyer Mahesh Jethmalani, and this writer. The report of the committee was also used by Ram Jethmalani in his PIL filed with the Supreme Court.
The government maintained that it cannot reveal the names received from Germany since it had obtained the same under the double taxation avoidance treaty. The point is: why did the government ask for information under the double-tax treaty with Germany when the issue – stolen data from the Liechtenstein bank by Germany – was unconnected to the treaty? Where is the issue of confidentiality vis-a-vis criminals? Actually, it is wealth kept illegally in the bank in Liechtenstein, and the money does not even concern Germany.
The double-tax treaty generally prevents the use of information supplied under the treaty for any purpose other than the levy and recovery of tax. It is doubtful whether the income tax department can share the details it has secured under the treaty with the Enforcement Directorate or the National Investigation Agency which tracks terror cases, or the NSA. That is why the Supreme Court had refused to regard it purely an issue of tax evasion.
The finance ministry says it has the names but will not reveal them. But is this right? The accounts are those of international crooks who have deprived our land of huge financial resources through capital flight. It is an unpatriotic act which can be equated to financial terrorism. Domestic black money (that is untaxed income) is merely a no-confidence motion against the government's tax policies, but black money in tax havens abroad amounts to no-confidence against the country - which is akin to treason.
A report in The Economic Times dated 4 June 2009 said that of the 50 Indians who have stashed funds in LGT Bank, 25 belong to Mumbai. The tax authorities have reopened assessments of these 25 tax evaders under section 148 of the Income Tax Act. This implies that the government is treating it as tax evasion and not capital flight and a crime against the country. But on 19 January 2011 – after two years of waiting - the Supreme Court made a historic observation about this shameful phenomenon of Indian funds being kept illegally abroad and the obstructionist attitude of the central government in unravelling the truth.
A report in The Hindu quoted the court as saying that black money stashed abroad by Indians was “pure and simple theft of national money.” The court “questioned the Centre's approach to tackling this menace and retrieving the huge amounts kept in foreign banks. When Solicitor-General Gopal Subramaniam furnished in a sealed cover a list of 26 names who had accounts with (the) Liechtenstein Bank, a bench of Justices B Sudershan Reddy and SS Nijjar was not convinced of the steps taken by the government for getting back black money. Justice Reddy, after perusing the list, told the SG: ‘This is all the information you have or you have something more? We are talking about huge money. It is a plunder of the nation. It is pure and simple theft of national money. We are talking about mind-boggling crime. We are not on (the) niceties of various treaties.”
The court then insisted on the formation of a special investigation team (SIT) with ex-Supreme Court judge Jeevan Reddy as Chairman, assisted by Justice MB Shah, and asked the government to share details about the Liechtenstein list. The UPA government dilly-dallied and used every ruse in the legal book to buy time. But the Supreme Court was very upset and told the government that it can be hauled up for contempt of court. The court, in its order of 1 May 2014, had given the government three weeks' time to issue a notification for setting up an SIT to be presided over by Justice MB Shah (since Justice Jeevan Reddy had declined to head it for personal reasons), with retired Justice Arijit Pasayat as vice-chairman, to guide and direct the investigation.
The three weeks ended on 22 May and extended to 27 May due to a change in the government. Hence, the first decision of the new government was about the SIT. It was a decision pushed down the throat of the government of India by the court due to the sustained efforts of Ram Jethmalani, represented by Anil Dhavan, and armed with reports of this writer. The SIT will consist of the Chief of the Financial Intelligence Unit, the Chief Commissioner of Income Tax, a Deputy Governor of the RBI, the IB Director, the Narcotics Bureau chief, and the head of the Enforcement Directorate. The group will also have access to the accounts of HSBC Bank, Geneva, details of which were given by the French government.
The SIT is essentially a group of bureaucrats with varying degrees of expertise about tax havens. This is mainly for illicit money kept abroad and not for domestic black money. Most of the double tax treaties which the UPA-2 entered into are prospective in nature and the task of looking into past illegal funds is complicated.
The group should distinguish between pure tax evasion (let us call it vegetarian black money) and funds connected to terror/arms smuggling/narcotics (say, non-veg black money). The former is easy to focus on and can be dealt with through penalties. A recent Supreme Court judgment, which says that “that Indian resident beneficiaries shall not be taxed on the income of an offshore discretionary trust as long as the trustees do not distribute income to the beneficiaries,” may help many in the first category.
The best way to proceed is to have a joint sitting of Parliament and pass a resolution stating that “any funds abroad held by Indian nationals belong to the Republic of India” unless they have been kept abroad under legal rules and regulations. Armed with such a resolution and recent agreements entered into by Switzerland and Singapore with OECD countries, the SIT can go for gold! Actually, the SIT should be willing to use the concept of sama/dhana/bheda/dhanda in achieving its task - many secretive jurisdictions, including Switzerland, can and should be arm-twisted to part with information. After all they have huge investments in India
It is also necessary to consider the gold/diamonds/precious items kept by Indians in the lockers of banks in tax havens abroad. The road ahead for the recovery of illegal money stashed abroad is full of pot holes and craters, but we Indians have a way of navigating such impediments. What is needed is the political will for the same.
(The author is finance professor, IIM Bangalore. These views are personal)



By R Vaidyanathan May 31, 2014SIT on black money: If there is political will, it should go  for gold and a big haul

ReutersMore than six years ago, in February 2008, the German authorities had collected information about illegal money stashed away by citizens of various countries in a Liechtenstein bank. The German Finance Minister offered to share the names of these account-holders with any government interested in them. The UPA-1 government, unfortunately, did not act for many months and, after much prodding by the Opposition, asked for the list in late 2008.
More than six years ago, in February 2008, the German authorities had collected information about illegal money stashed away by citizens of various countries in a Liechtenstein bank. The German Finance Minister offered to share the names of these account-holders with any government interested in them. The UPA-1 government, unfortunately, did not act for many months and, after much prodding by the Opposition, asked for the list in late 2008.
A German intelligence agency appears to have paid an unnamed informer more than $6 million for this confidential and secret data about clients of the LGT group, a bank owned by the Liechtenstein Prince’s family. The revelations have already led to the resignation of the head of Deutsche Post, which is currently the world’s largest logistics company. Liechtenstein leaders were furious and have focused all their ire on the theft of the data rather than on the facts of the case.
The German list contained the names of 1,400 clients of the Liechtenstein bank, of whom 600 were Germans. A spokesman for the German finance ministry, Thorstein Albig, had said in March 2008 that information on the other accounts would be shared without charging any fees. Finland, Sweden, and Norway quickly obtained the data, but  our government began pussyfooting around this issue. If it had genuinely wanted to act against black money, it should have immediately despatched senior officials/ministers to get the names. Pushed and prodded by the Opposition and the media, when the government finally moved, it got nearly 100 Indian names – but those names have been kept a secret.
This writer, who has been studying tax havens for more than a decade, wrote in April 2009 (in the journalEternal India, published by India First Foundation) about the need to get back the illegal deposits kept by Indians in various tax havens, including Liechtenstein. A public interest litigation was then filed by Ram Jethmalani and others in the Supreme Court, to which the government responded that it was taking steps to recover such amounts. It had also mentioned that the German government had given a list of people who had kept money in the LGT Bank of Liechtenstein (May 2009). The government's response also said that steps were being taken in the case of Hasan Ali Khan, a Pune horse-breeder, who was alleged to have indulged in several illegal transactions through the UBS Bank of Switzerland.
In the meanwhile, the then Leader of the Opposition in the Lok Sabha, LK Advani, had constituted a committee consisting of S Gurumurthy, well-known Chartered Accountant, Ajit Doval, the current National Security Advisor, lawyer Mahesh Jethmalani, and this writer. The report of the committee was also used by Ram Jethmalani in his PIL filed with the Supreme Court.
The government maintained that it cannot reveal the names received from Germany since it had obtained the same under the double taxation avoidance treaty. The point is: why did the government ask for information under the double-tax treaty with Germany when the issue – stolen data from the Liechtenstein bank by Germany – was unconnected to the treaty? Where is the issue of confidentiality vis-a-vis criminals? Actually, it is wealth kept illegally in the bank in Liechtenstein, and the money does not even concern Germany.
The double-tax treaty generally prevents the use of information supplied under the treaty for any purpose other than the levy and recovery of tax. It is doubtful whether the income tax department can share the details it has secured under the treaty with the Enforcement Directorate or the National Investigation Agency which tracks terror cases, or the NSA. That is why the Supreme Court had refused to regard it purely an issue of tax evasion.
The finance ministry says it has the names but will not reveal them. But is this right? The accounts are those of international crooks who have deprived our land of huge financial resources through capital flight. It is an unpatriotic act which can be equated to financial terrorism. Domestic black money (that is untaxed income) is merely a no-confidence motion against the government's tax policies, but black money in tax havens abroad amounts to no-confidence against the country - which is akin to treason.
A report in The Economic Times dated 4 June 2009 said that of the 50 Indians who have stashed funds in LGT Bank, 25 belong to Mumbai. The tax authorities have reopened assessments of these 25 tax evaders under section 148 of the Income Tax Act. This implies that the government is treating it as tax evasion and not capital flight and a crime against the country. But on 19 January 2011 – after two years of waiting - the Supreme Court made a historic observation about this shameful phenomenon of Indian funds being kept illegally abroad and the obstructionist attitude of the central government in unravelling the truth.
A report in The Hindu quoted the court as saying that black money stashed abroad by Indians was “pure and simple theft of national money.” The court “questioned the Centre's approach to tackling this menace and retrieving the huge amounts kept in foreign banks. When Solicitor-General Gopal Subramaniam furnished in a sealed cover a list of 26 names who had accounts with (the) Liechtenstein Bank, a bench of Justices B Sudershan Reddy and SS Nijjar was not convinced of the steps taken by the government for getting back black money. Justice Reddy, after perusing the list, told the SG: ‘This is all the information you have or you have something more? We are talking about huge money. It is a plunder of the nation. It is pure and simple theft of national money. We are talking about mind-boggling crime. We are not on (the) niceties of various treaties.”
The court then insisted on the formation of a special investigation team (SIT) with ex-Supreme Court judge Jeevan Reddy as Chairman, assisted by Justice MB Shah, and asked the government to share details about the Liechtenstein list. The UPA government dilly-dallied and used every ruse in the legal book to buy time. But the Supreme Court was very upset and told the government that it can be hauled up for contempt of court. The court, in its order of 1 May 2014, had given the government three weeks' time to issue a notification for setting up an SIT to be presided over by Justice MB Shah (since Justice Jeevan Reddy had declined to head it for personal reasons), with retired Justice Arijit Pasayat as vice-chairman, to guide and direct the investigation.
The three weeks ended on 22 May and extended to 27 May due to a change in the government. Hence, the first decision of the new government was about the SIT. It was a decision pushed down the throat of the government of India by the court due to the sustained efforts of Ram Jethmalani, represented by Anil Dhavan, and armed with reports of this writer. The SIT will consist of the Chief of the Financial Intelligence Unit, the Chief Commissioner of Income Tax, a Deputy Governor of the RBI, the IB Director, the Narcotics Bureau chief, and the head of the Enforcement Directorate. The group will also have access to the accounts of HSBC Bank, Geneva, details of which were given by the French government.
The SIT is essentially a group of bureaucrats with varying degrees of expertise about tax havens. This is mainly for illicit money kept abroad and not for domestic black money. Most of the double tax treaties which the UPA-2 entered into are prospective in nature and the task of looking into past illegal funds is complicated.
The group should distinguish between pure tax evasion (let us call it vegetarian black money) and funds connected to terror/arms smuggling/narcotics (say, non-veg black money). The former is easy to focus on and can be dealt with through penalties. A recent Supreme Court judgment, which says that “that Indian resident beneficiaries shall not be taxed on the income of an offshore discretionary trust as long as the trustees do not distribute income to the beneficiaries,” may help many in the first category.
The best way to proceed is to have a joint sitting of Parliament and pass a resolution stating that “any funds abroad held by Indian nationals belong to the Republic of India” unless they have been kept abroad under legal rules and regulations. Armed with such a resolution and recent agreements entered into by Switzerland and Singapore with OECD countries, the SIT can go for gold! Actually, the SIT should be willing to use the concept of sama/dhana/bheda/dhanda in achieving its task - many secretive jurisdictions, including Switzerland, can and should be arm-twisted to part with information. After all they have huge investments in India
It is also necessary to consider the gold/diamonds/precious items kept by Indians in the lockers of banks in tax havens abroad. The road ahead for the recovery of illegal money stashed abroad is full of pot holes and craters, but we Indians have a way of navigating such impediments. What is needed is the political will for the same.
(The author is finance professor, IIM Bangalore. These views are personal)
http://www.firstbiz.com/economy/sit-on-black-money-if-there-is-political-will-it-should-go-for-gold-and-a-big-haul-86468.html

--
S. Kalyanaraman
Indian Ocean Community


By R Vaidyanathan May 31, 2014SIT on black money: If there is political will, it should go  for gold and a big haul

ReutersMore than six years ago, in February 2008, the German authorities had collected information about illegal money stashed away by citizens of various countries in a Liechtenstein bank. The German Finance Minister offered to share the names of these account-holders with any government interested in them. The UPA-1 government, unfortunately, did not act for many months and, after much prodding by the Opposition, asked for the list in late 2008.
More than six years ago, in February 2008, the German authorities had collected information about illegal money stashed away by citizens of various countries in a Liechtenstein bank. The German Finance Minister offered to share the names of these account-holders with any government interested in them. The UPA-1 government, unfortunately, did not act for many months and, after much prodding by the Opposition, asked for the list in late 2008.
A German intelligence agency appears to have paid an unnamed informer more than $6 million for this confidential and secret data about clients of the LGT group, a bank owned by the Liechtenstein Prince’s family. The revelations have already led to the resignation of the head of Deutsche Post, which is currently the world’s largest logistics company. Liechtenstein leaders were furious and have focused all their ire on the theft of the data rather than on the facts of the case.
The German list contained the names of 1,400 clients of the Liechtenstein bank, of whom 600 were Germans. A spokesman for the German finance ministry, Thorstein Albig, had said in March 2008 that information on the other accounts would be shared without charging any fees. Finland, Sweden, and Norway quickly obtained the data, but  our government began pussyfooting around this issue. If it had genuinely wanted to act against black money, it should have immediately despatched senior officials/ministers to get the names. Pushed and prodded by the Opposition and the media, when the government finally moved, it got nearly 100 Indian names – but those names have been kept a secret.
This writer, who has been studying tax havens for more than a decade, wrote in April 2009 (in the journalEternal India, published by India First Foundation) about the need to get back the illegal deposits kept by Indians in various tax havens, including Liechtenstein. A public interest litigation was then filed by Ram Jethmalani and others in the Supreme Court, to which the government responded that it was taking steps to recover such amounts. It had also mentioned that the German government had given a list of people who had kept money in the LGT Bank of Liechtenstein (May 2009). The government's response also said that steps were being taken in the case of Hasan Ali Khan, a Pune horse-breeder, who was alleged to have indulged in several illegal transactions through the UBS Bank of Switzerland.
In the meanwhile, the then Leader of the Opposition in the Lok Sabha, LK Advani, had constituted a committee consisting of S Gurumurthy, well-known Chartered Accountant, Ajit Doval, the current National Security Advisor, lawyer Mahesh Jethmalani, and this writer. The report of the committee was also used by Ram Jethmalani in his PIL filed with the Supreme Court.
The government maintained that it cannot reveal the names received from Germany since it had obtained the same under the double taxation avoidance treaty. The point is: why did the government ask for information under the double-tax treaty with Germany when the issue – stolen data from the Liechtenstein bank by Germany – was unconnected to the treaty? Where is the issue of confidentiality vis-a-vis criminals? Actually, it is wealth kept illegally in the bank in Liechtenstein, and the money does not even concern Germany.
The double-tax treaty generally prevents the use of information supplied under the treaty for any purpose other than the levy and recovery of tax. It is doubtful whether the income tax department can share the details it has secured under the treaty with the Enforcement Directorate or the National Investigation Agency which tracks terror cases, or the NSA. That is why the Supreme Court had refused to regard it purely an issue of tax evasion.
The finance ministry says it has the names but will not reveal them. But is this right? The accounts are those of international crooks who have deprived our land of huge financial resources through capital flight. It is an unpatriotic act which can be equated to financial terrorism. Domestic black money (that is untaxed income) is merely a no-confidence motion against the government's tax policies, but black money in tax havens abroad amounts to no-confidence against the country - which is akin to treason.
A report in The Economic Times dated 4 June 2009 said that of the 50 Indians who have stashed funds in LGT Bank, 25 belong to Mumbai. The tax authorities have reopened assessments of these 25 tax evaders under section 148 of the Income Tax Act. This implies that the government is treating it as tax evasion and not capital flight and a crime against the country. But on 19 January 2011 – after two years of waiting - the Supreme Court made a historic observation about this shameful phenomenon of Indian funds being kept illegally abroad and the obstructionist attitude of the central government in unravelling the truth.
A report in The Hindu quoted the court as saying that black money stashed abroad by Indians was “pure and simple theft of national money.” The court “questioned the Centre's approach to tackling this menace and retrieving the huge amounts kept in foreign banks. When Solicitor-General Gopal Subramaniam furnished in a sealed cover a list of 26 names who had accounts with (the) Liechtenstein Bank, a bench of Justices B Sudershan Reddy and SS Nijjar was not convinced of the steps taken by the government for getting back black money. Justice Reddy, after perusing the list, told the SG: ‘This is all the information you have or you have something more? We are talking about huge money. It is a plunder of the nation. It is pure and simple theft of national money. We are talking about mind-boggling crime. We are not on (the) niceties of various treaties.”
The court then insisted on the formation of a special investigation team (SIT) with ex-Supreme Court judge Jeevan Reddy as Chairman, assisted by Justice MB Shah, and asked the government to share details about the Liechtenstein list. The UPA government dilly-dallied and used every ruse in the legal book to buy time. But the Supreme Court was very upset and told the government that it can be hauled up for contempt of court. The court, in its order of 1 May 2014, had given the government three weeks' time to issue a notification for setting up an SIT to be presided over by Justice MB Shah (since Justice Jeevan Reddy had declined to head it for personal reasons), with retired Justice Arijit Pasayat as vice-chairman, to guide and direct the investigation.
The three weeks ended on 22 May and extended to 27 May due to a change in the government. Hence, the first decision of the new government was about the SIT. It was a decision pushed down the throat of the government of India by the court due to the sustained efforts of Ram Jethmalani, represented by Anil Dhavan, and armed with reports of this writer. The SIT will consist of the Chief of the Financial Intelligence Unit, the Chief Commissioner of Income Tax, a Deputy Governor of the RBI, the IB Director, the Narcotics Bureau chief, and the head of the Enforcement Directorate. The group will also have access to the accounts of HSBC Bank, Geneva, details of which were given by the French government.
The SIT is essentially a group of bureaucrats with varying degrees of expertise about tax havens. This is mainly for illicit money kept abroad and not for domestic black money. Most of the double tax treaties which the UPA-2 entered into are prospective in nature and the task of looking into past illegal funds is complicated.
The group should distinguish between pure tax evasion (let us call it vegetarian black money) and funds connected to terror/arms smuggling/narcotics (say, non-veg black money). The former is easy to focus on and can be dealt with through penalties. A recent Supreme Court judgment, which says that “that Indian resident beneficiaries shall not be taxed on the income of an offshore discretionary trust as long as the trustees do not distribute income to the beneficiaries,” may help many in the first category.
The best way to proceed is to have a joint sitting of Parliament and pass a resolution stating that “any funds abroad held by Indian nationals belong to the Republic of India” unless they have been kept abroad under legal rules and regulations. Armed with such a resolution and recent agreements entered into by Switzerland and Singapore with OECD countries, the SIT can go for gold! Actually, the SIT should be willing to use the concept of sama/dhana/bheda/dhanda in achieving its task - many secretive jurisdictions, including Switzerland, can and should be arm-twisted to part with information. After all they have huge investments in India
It is also necessary to consider the gold/diamonds/precious items kept by Indians in the lockers of banks in tax havens abroad. The road ahead for the recovery of illegal money stashed abroad is full of pot holes and craters, but we Indians have a way of navigating such impediments. What is needed is the political will for the same.
(The author is finance professor, IIM Bangalore. These views are personal)
http://www.firstbiz.com/economy/sit-on-black-money-if-there-is-political-will-it-should-go-for-gold-and-a-big-haul-86468.html

-- 
S. Kalyanaraman