Does India need so many tribunals?
Often, tribunals can be a chaotic labyrinth functioning under the thumb of the opposite party, reflecting the worst kind of conflict of interest 
 
Notwithstanding the repeated red-flagging by the Supreme Court, excessive Tribunalisation, with the eagerness of the executive to give it impetus, slowly and surely threatens the judicial fabric of our democracy with the creation of parallel extra-judicial super courts. These are now dangerously hovering over the citizenry with a life of their own without being effectively amenable to the regular judicial set-up of the Westminster model.  
 
The recent statement of Prime Minister Narendra Modi over functioning of Tribunals vis-a-vis regular Courts rightly created a lot of buzz and was reflective of the concerns of jurists, lawyers, litigants and bar associations over the functioning of Tribunals. The Tribunals in their present form do not inspire confidence of stakeholders and end up as post-retirement sinecures or a case of ‘dangling carrots’ rather than the noble aim of rendering justice in the form of public service to the community. 
 
To take a few examples, many Tribunals function under those very ministries against whom they have to pass orders. The Debt Recovery Tribunal (DRT) and the Debt Recovery Appellate Tribunal (DRAT) function under the Ministry of Finance, the Armed Forces Tribunal (AFT) functions under the Ministry of Defence while the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) functions under the Ministry of Communications and Information Technology (IT). These Ministries not only control Tribunals with invisible strings but also with tangibles such as infrastructure, finance, salaries and staff along with the rule-making power. 
 
Secretaries of the same Ministries (the opposite parties in litigation) sit in the selection, reappointment and inquiry panels of Adjudicating Members of the Tribunals. Continual directions by even Constitution Benches of the SC to place the control of Tribunals under the Ministry of Law & Justice have not yielded any positive change. Ministries refuse to part with their fiefdoms, a situation diametrically opposite not only to our Constitutional norm of separation of power but also against the concept of judicial independence recorded in Article 14 of the International Covenant on Civil and Political Rights. It therefore comes as no surprise that Courts in many nations have resisted the encroachment of judicial functions by executive-controlled bodies- in the US (Northern Pipleline case, 1982), Canada (Residential Tenancies Act case, 1981), Australia (Harry Brandy case, 1995) and even in Pakistan (Riaz-ul-Haq case, 2012). 
 
It should concern all of us that while our fiercely independent Constitutional High Courts have steadfastly protected the rights of citizens from official tyranny, the shape of Tribunalisation is stealthily being moulded in a manner to blunt out the power of our HCs conferred by Articles 226 and 227 of the Constitution. For many Tribunals, illusory and non-vested appeals are being provided directly to the SC by circumventing HCs to ensure that the latter do not maintain a check on the functioning of such Tribunals by keeping them within the confines of law. 
 
Even provisions of direct appeals to the SC are designed in such a fashion that they are not maintainable in most cases. Some Tribunals, such as the Armed Forces Tribunal, have become the first and the last court for litigants and all-pervasive bodies neither amenable to HCs nor to the SC and without a vested right of judicial review since a direct appeal has been provided to the SC only in limited cases where there is the exceptional involvement of a “point of law of general public importance”. Hence, contrary to what is projected, some Tribunals have left litigants remediless and justice made so inaccessible and unaffordable that affected parties are expected to rush to the highest Court of the land in Delhi even for petty and routine matters. Both lawmakers and law-interpreters need to ponder over such deleterious consequences. 
 
The PM’s cue should have ideally generated a call for strengthening of our real Courts and reducing the length and breadth of Tribunalisation except in highly technical matters involving precise expertise. Reduction of burden on Courts cannot be at the cost of independence of judicial functioning by creating an analogous quasi-judicial hierarchy functioning under the executive. 
 
So what can be the way out? In order to restore public faith, the following steps appear worthy:
 
Though best avoided, if a pressing need is felt then Tribunals may only be retained as replacement of the jurisdiction of Courts of first instance in specialised subjects and fully amenable to the writ jurisdiction of High Courts on lines of the Central Administrative Tribunal. 
 
The correct function of Tribunals should remain to supplant and filter out cases for the superior judiciary and not to replace it. Other than highly technical matters, Tribunals can at best function as fact-returning bodies of experts leaving adjudication of disputes to regular Courts. 
 
Tribunals may not be allowed to be seen as post-retirement sinecures. An orientation capsule should be introduced for non-Judicial members. 
 
Tribunals should be placed under an independent body or commission, and till that ideal objective is achieved, under the Ministry of Law & Justice as an interim measure, on the lines of the Income Tax Appellate Tribunal, and may not be allowed to function under parent Ministries. Bureaucrats of the said Ministries should never be made a part of selection process for Members of Tribunals.
 
Members of Tribunals should be provided the best possible facilities but not from the Ministries against which they have to pass orders. Members should be given the security of tenure but without the system of reappointment. 
 
Since “reduction of burden” on Courts and “quicker dispensation of justice” was ostensibly the aim of Tribunalisation, a stringent provision for time-bound redressal must be incorporated in all statutes dealing with Tribunals. 
 
The striking down of National Tax Tribunal (NTT) last year has raised hopes that any attempt to undermine the independence of judicial functioning would not be allowed to prevail in our democracy. While stakeholders hope that the PM’s sentiments get translated into actual action, the system needs to wake up to the reality that a litigant has more faith in independent adjudicating Courts with an expedient cost-effective mechanism of judicial review with Constitutional Courts rather than being stuck in a chaotic labyrinth functioning under the thumb of the opposite party reflecting the worst kind of conflict of interest, a peril we must fervidly resist. 
 
(Major Navdeep Singh (retd) is a practicing Advocate in the Punjab & Haryana High Court and the Armed Forces Tribunal. He was also the founding President of the Armed Forces Tribunal Bar Association. He is a Member of the International Society for Military Law and the Law of War at Brussels)
 
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COMMENTS

B. Yerram Raju

4 years ago

Tribunals should be quasi-judiciary bodies functioning under the Ministry of Law and Justice - Agreed, if the Tribunals have professional experts on the bench of the Tribunal so that the cases would be adjudicated with knowledge base of the subject and not a technical application of Law. It is equally important that once the Tribunal gives the verdict, an appeal should lie only with the Appellate Tribunal where it existed. This in effect should be uncontestable. There is nothing wrong in having a large number of Tribunals if these are well equipped to handle cases with the needed expedition. No case with the Tribunal should be lying for more than six months.

Dharmesh Sampat

4 years ago

I read a very good and sensible article on legal system after a long time ! It indeee mention a very valid point which is hardly known to public or even discussed.
It was for such stories that I always read Moneylife.
The author of story has put across his views very rightly

vishal

4 years ago

The tribunals are a source of wasting tax payers money and more useful for politicians to settle their disputes with public. But the tribunals employee lot of people and it will be difficult to find a place for them if the tribunals were to go.

India Inc. lax on steps against sexual harassment: Survey
Nearly a third of the companies operating in India are yet to constitute the mandatory panel against sexual harassment at workplace, with the incidence of non-compliance higher among domestic entities, reveals a survey.
 
The Ernst and Young survey reveals that 40 percent of the respondents were yet to train the members of their internal complaints committees even though it is mandatory under the law that came into force in December 2013.
 
The survey was conducted between January and April 2015 through an online questionnaire hosted on EY’s website in India. It received 129 responses from the survey, the consultancy said.
 
Another finding: 44 percent the respondents did not display the penal consequences at a conspicuous places, as also required under the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013.
 
What is more, the lack of awareness about constituting the panel was 67 percent among electronics and telecom firms, 59 percent in banking and financial services firms, and 40 percent each in IT, and advertising, media and entertainment companies.
 
The nature of complaints: 47 percent for physical contact and advances, 13 percent over demand or request for sexual favours, 37 percent over sexually colored remarks, and four percent over display of pornographic content.
 
"The government’s intent is to put a brake on such cases," said Arpinder Singh, partner and national leader of fraud investigation and dispute services with Ernst and Young.
 
Sexual harassment as per law includes unwelcome acts or behaviour - whether directly or by implication - such as physical contact and advance, a demand or request for sexual favours, making sexually colored remarks, showing pornography, etc.
 
The study also quoted data compiled by the National Commission for Women that showed noticeable rise in sexual harassment at the workplace: From 170 cases in 2011, to 167 in 2012, 249 in 2013, and 336 in 2014.
 
Ernst and Young said there was hope yet. "It is not impossible for corporate India to provide a safe place of work for their women employees," it said. Its prescription:
 
- Constitute internal committees
 
- Ensure the presiding officer is a woman at a senior level
 
- Not less than two members from employees committed to the women's cause
 
- One member from non-governmental organisations
 
- Formulate and disseminate internal policy listing all aspects including remedy
 
- Drive awareness through online and off-line training
 
- Investigate complaints and take strict action against perpetrators
 
- Monitor timely submission of reports by panels to the government
 
- Treat sexual harassment as misconduct under service rules
 
- Initiate action for such misconduct.

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Estimating illicit funds in global tax havens

The total “development finance” loss – counting both revenues and reinvested earnings – is estimated in the range of $250 to $300 billion. This prevents developing countries from stopping the outflow of money, which thus bleeds them of essential resources
 
The financial crisis of 2008 had an interesting collateral benefit for many emerging economies. Developed countries like Germany, France and US have begun to look at closely the illicit tax avoided funds kept by their citizens in various tax havens. This is because there was a clamour among their citizens about black money kept abroad by the rich when the economy was having major unemployment and recession.
 
As early as February 2008- German authorities have collected information about illegal money kept by citizens of various countries in the Lichtenstein bank. The German Finance Minister offered to provide the names to any Government interested in the list. The United Progressive Alliance (UPA-I) Government unfortunately did not act for many months and after much prodding by opposition, asked for the list in late 2008.
 
Germany’s intelligence agency seems to have paid an unnamed informer more than $6 million for confidential and secret data about clients of 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 in the world. The Lichtenstein leaders were furious and have focused all their ire at the theft of the data rather than on the facts of the case. The German Government has announced that it would share information on accounts held in the tax haven with any Government that wanted it.
 
They had a list of 1,400 clients of whom only 600 were Germans. The spokesperson for the German Finance ministry Thorstein Albig had indicated (in March 2008) that they would respond to requests without charging any fees for the information. Finland, Sweden, and Norway obtained the data from Germany. This is perhaps the first time a sovereign Government stole data from a bank of a tax haven to expose tax evaders. There are in all more than 70 tax havens and we will elaborate on these later.
 
Similarly, France purchased stolen data from Hong Kong & Shanghai Bank Corp (HSBC)’s Geneva branch. Additionally, US was waging a running battle with Union Bank of Switzerland (UBS) about the illicit funds kept by its citizens in the Swiss bank.
 
These illustrations show how the economic crisis of 2008 was a catalyst for going after tax havens by developed economies.
 

What is the Size of the problem globally?

 

The estimates pertain to total amount hoarded in these tax havens on a global basis and that of individual countries including India. Then there are estimates of India’s illicit money in Switzerland since that country has been a long time favorite of Indians.
 
In reply to a question on how to stop people from parking money outside, Raghuram Rajan, the governor of Reserve Bank of India (RBI) observes that, “No one knows how much black money is stashed outside the country, as there are many speculations doing the rounds.”
 
As another measure to curtail generation of black money, Rajan said, “We need to cut the black money at source and make it difficult for them to hide their ill-gotten wealth”, in a report from Times of India. He should know better but there are different types of estimates, which are inferred and available about the nature of the problem. Of course, by definition, it is black money and so it will be difficult to have an exact estimate regarding the same.
 
Measuring the size of the offshore economy is an exercise in night vision. It is hard to define it; it is fragmented and messy, and it is swathed in secrecy. Official international efforts to measure the various aspects of the phenomenon have been inadequate. We are concerned above with financial flows that are harmful and abusive, whether or not illegality is involved. So we are concerned with tax avoidance, for example, as well as with phenomena such as tax competition.
 
Mostly individual countries’ data is analyzed for “trade mis-pricing” as a major source of generation of illicit funds. This mechanism and implications we will discuss later.
Listed below are some of the Global estimates followed by other regional estimates.
 

Estimate of Global illicit funds

 
1 IMF estimates global black money
– excluding Switzerland, China, Taiwan and Oil exporting economies — at $18 trillion; and that is still an underestimate, says IMF.
 
This estimate of the responsible financial bodies of the world has shocked the world. The extent of black and unsupervised financial economy in the world is now believed to be almost a third of the global GDP. [Cross–Border Investment in small international Financial Centers by Philip R Lane and Gian Maria Milesi-Ferretti –IMF working Paper -2010]
 
The study reports that there may be as much as $18 trillion of foreign dollars parked in small international financial centers, which does not include Switzerland. This does not exhaust the world economies, particularly those economies, which generate lots of export and cash surplus. Leading, cash-rich economies such as China, Taiwan and many of the oil-exporting countries do not participate in the IMF’s survey. This is only for what are called Small International Financial Centers numbering 32.
 
[Andorra, Anguilla, Antigua and Barbuda, Aruba, Bahamas, The Bahrain, Barbados, Belize, Bermuda, Cayman Islands, Gibraltar, Grenada, Guernsey, Isle of Man, Jersey, Lebanon, Liechtenstein, Macao, China, Mauritius, Monaco, Montserrat, Nauru, Netherlands, Antilles, Palau, Panama, Samoa, St. Kitts, St. Lucia, St. Vincent and the Grenadines, Turks and Caicos, Vanuatu, Virgin Islands (British)]
 
Gian Maria Milesi-Ferretti, an economist for the IMF in Washington, said statistical information on Luxembourg, one of the largest offshore financial centers in Europe, illustrated the extent of the problem. The economist said: “Luxembourg is one of the few offshore centers that disclose detailed statistics on assets and liabilities held in the financial sector, which makes it invaluable to understand cross-border money flows.”
 
The latest available IMF figures show portfolio assets held by foreigners in Luxembourg to be worth $1.5 trillion at the end of 2008. But looking at statistics provided by the Luxembourg Government on portfolio investment liabilities for the country – the mirror image of the asset information held by the IMF – there is a big discrepancy. The investment liabilities in Luxembourg were $2.5 trillion – $1 trillion (€726bn) more than the assets reported.
 
Milesi-Ferretti said: “This is a huge difference, almost 40%, and is unlikely to be entirely accounted for by the fact that some countries do not report their portfolio investments or their destination to the fund.”
 
Richard Murphy, the well-known Economist and accountant and founder of Tax Justice Network, commented: “I admit I can’t resist the temptation to say that some of us have been saying this for a long time. The Tax Justice Network wrote on this in 2005, suggesting there were £11.5 trillion of assets offshore. Time and again this has been attacked by organizations that should have known better and by academics with a right wing axe to grind. But now, like so much else that I and others have argued, it is being validated. And the issue itself, once dismissed as inconsequential is now being considered seriously.
 
The IMF’s $18 trillion number dramatically exceeds previous studies, and even it acknowledges that it probably underestimates the amount of money floating around in tax havens.”
 
2 Christian Aid/ Oxfam estimates
Christian Aid’s False Profits: robbing the poor to keep the rich tax-free estimates that between 2005 and 2007, the total amount of capital flow from bilateral trade mis-pricing into the EU and the US alone from non-EU countries is estimated conservatively at more than US$1.1 trillion (£581.4 billion, €850.1 billion)- Update: March 2009.
 
Oxfam estimates that developing countries miss out on up to $124 billion every year in lost income from offshore assets held in tax havens.–Update: March 2009
 
 
3 Tax Justice Network (TJN) Estimate
According to “Price of offshore revisited” which is thought to be the most detailed and rigorous study ever made of financial assets held in offshore financial centers and secrecy structures  —
 
Global super rich has at least $21 trillion hidden in secret tax havens. Wealthy individuals via tax havens owned at least $21 trillion of unreported private financial wealth at the end of 2010.  This sum is equivalent to the size of the US and Japanese economies combined.
 
There may be as much as $32 trillion of hidden financial assets held offshore by high net worth individuals (HNWIs), according to this Report. We consider these numbers to be conservative.
This is only financial wealth and excludes a welter of real estates, yachts and other non-financial assets owned via offshore structures.
 
4 Other Global estimates
The table below shows estimates of Global Black money compiled from various sources over a period of 5 years…
 
Date Description
December 11, 2013 Illicit Financial Flows from Developing Countries: 2001-2010 – Global Financial Integrity, Dec 2013. Estimating that the developing world lost from 2002 to 2011 developing countries lost US$5.9 trillion to illicit outflows, and $954 billion in 2011 alone.
May 22, 2013 Oxfam: At least $18.5 trillion is hidden by wealthy individuals in tax havens worldwide. Original here.
February 25, 2013 Gabriel Zucman: the Missing Wealth of Nations Estimates that 8% of the global financial wealth of households is in tax havens, 75% of which is unrecorded. (This 'unrecorded' relates to information available to cross-border statistical analysis, rather than to tax authorities.)
July 2012 The Price of Offshore Revisited. TJN's in-depth and unprecedented study into the size of the offshore system. Main report here. Also see:

 

TJN responds to attack on estimates by Jersey Finance, June 2014.

July 2012 Inequality: You don't know the half of it: TJN's assessment of why inequality is much worse than we think, because of offshore secrecy.
November 2011 A Tax Research briefing paper on the $3.1 trillion annual costs of tax evasion worldwide. With country by country breakdown. Original here.
March 2010 New IMF research showing huge discrepancies between portfolio assets and liabilities in selected offshore centres. For instance Luxembourg reports portfolio assets of US$1.5 trillion at end-2008 versus portfolio investment liabilities at US$2.5 trillion. The Cayman Islands reports a $750 billion: $2.2 trillion assets-liability split. Click here for more.
February 2010 Global Financial Integrity estimate that developing countries lose $98 – $106 billion each year due solely to re-invoicing.
May 2008 Death and taxes: the true toll of tax dodging," Christian Aid. Calculating that nearly 1,000 children die every day  just from tax evasion.
   
 

Regional estimates

 
The table below shows estimates of Black money compiled from various sources in specific regions over a period of 5 years…
 
Date Description
May 29, 2013 Illicit Financial Flows from Africa, 1980-2009. Global Financial Integrity. Between 1980 and 2009, the economies of Africa lost between US$597 billion and US$1.4 trillion in net resource transfers away from the continent. Original here.
May 24, 2013 Action aid: Almost half of all investment into developing countries goes through tax havens. Original here.
October 2012 Over $800 billion drained from Sub Saharan Africa. Original here.
October 2012 Over $450 billion drained from North Africa.
March 2009 False Profits: robbing the poor to keep the rich tax-free, Christian Aid. Between 2005 and 2007, total capital flow from bilateral trade mispricing into the EU and the US alone from non-EU countries is more than US$1.1 tn (£581.4 bn, €850.1 bn).
May 2008 Death and Taxes: the true toll of tax dodging, Christian Aid. Estimates corporate tax losses to the developing world at US$160bn a year (£80bn), more than one-and-a-half times the combined aid budgets of the whole rich world.
   
 
World Bank Says: In a Speech by World Bank Managing Director and COO Sri Mulyani Indrawati at Event on Tax Evasion and Development Finance World Bank Managing Director and COO Sri Mulyani Indrawati Washington, D.C., United States 17 April 2015 – says…
 
UNCTAD estimates that more than 60% of global trade occurs within multinational groups. That creates the potential for failing to declare profits and to shift profits from high-tax to low-tax jurisdictions. This is often done through illegal tax evasion.
 
But sometimes it is also done through legal forms of tax avoidance and manipulation – including trade and transfer mispricing; dubious payments between parent companies and their subsidiaries; and profit-shifting mechanisms designed to hide revenues.
A recent UNCTAD study indicates that about $100 billion in annual tax revenue is lost to developing countries in transactions directly linked to offshore hubs. The total “development finance” loss – counting both revenue and reinvested earnings – is estimated in the range of $250 to $300 billion. This prevents developing countries from stopping the outflow of money – which thus bleeds them of essential resources.
This brings us to the larger issue of tax cheating by corporate giants and also annual loss to many jurisdictions. This issue we will be looking at in the next few articles along with the issue of individual countries like India
 
(Views expressed in this article are personal)
 
This article was first published by PerformanceGurus.net
 
(Prof R Vaidyanathan , Professor of Finance and Control, has taught at IIM Bangalore for over three decades and is consistently rated as one of its most popular teachers. Prof Vaidyanathan has coined the term 'India UnInc' for the largest component of the Indian economy comprising small entrepreneurs, households. Prof Vaidyanathan sits on the advisory boards of SEBI and the RBI.)
 
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COMMENTS

B. Yerram Raju

4 years ago

Good consolidation effort. But it is time to calculate how much has come back and how much is likely to get into the treasury in the coming few years under two scenarios;
(1) if the Courts decide the cases in less than 3 months and beyond 3 months after filing suits and (2) if the governments enable setting up legislative actions to bring back the money in such period.

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