The dictionary definition of the term “victim” is a person, who is put to death or subjected to torture by another; one who suffers severely in body or property through cruel or oppressive treatment; one who is reduced or destined to suffer under some oppressive or destructive agency. The UN Declaration of Basic Principles of Justice for Victims of Crime and Abuse of Power defines the term Victims as a “persons who, individually or collectively, have suffered harm, including physical or mental injury, emotional suffering, economic loss or substantial impairment of their fundamental rights, through acts or omissions that are in violation of criminal laws operative within Member States, including those laws proscribing criminal abuse of power”.
Section 2 (wa) of the Criminal Procedure Code, 1973 defines the term ‘victim’ as a person who has suffered any loss or injury caused by reason of the act or omission for which the accused person has been charged; and the expression victim includes his or her guardian or legal heirs. Thus, in a nutshell, the term victim means a person who has suffered injuries, physical or financial, tangible or intangible as a result of the wrong committed by the accused.
Victim-Centric Provisions in Criminal Law
Section 357 of the Criminal Procedure Code, 1973: It is the basic provision dealing with the power of the court to order compensation. Clause 2 Sub-Section 1 of Section 357 of the Criminal Procedure Code (CrPC), 1973 provides that when a Court imposes a sentence of fine or a sentence (including a sentence of death) of which fine forms a part, the Court may, when passing judgment, order the whole or any part of the fine recovered to be applied in the payment of any person of compensation for any loss or injury caused by the offence, when compensation is, in the opinion of the court, recoverable by such person in civil court. Though the principle underlying Section 357 of the (CrPC) is salutary, yet it is limited in its scope. The Section will apply only when the accused is convicted that is to say that proving the guilt of the accused beyond reasonable doubt is pre-requisite for the Section to come into play. Further, it also depends upon the recovery of fine from the accused, when fine form part of the sentence. If the fine is not imposed, the magistrate may order any amount to be paid by way of compensation which he considers just in the circumstances of the case. It is generally seen that either Section 357 is not invoked or even if it is invoked, the compensation amount is highly inadequate as compared to the sufferings and pain of the victim. Sometime, the financial capacity of the accused is taken into account and this further reduces the quantum of compensation as most of the accused are from lower socio-economic background. Further, given the low rate of conviction in India, Section 357 had remained almost dormant for very long.
Section 357A of Criminal Procedure Code, 1973: The most recent and important legal provision in the direction of victim compensation is Victim Compensation Scheme under Section 357A of the Criminal Procedure Code, 1973 inserted by Criminal Law Amendment Act, 2008( Act no 5 of 2009), Clause (1) of Section 357A provides that every state government in coordination with the Central Government shall prepare a scheme for providing funds for the purpose of compensation to the victim or his dependents who have suffered loss or injury as a result of the crime and who require rehabilitation.
Clause (2) provides that whenever a recommendation is made by the Court for compensation, the District Legal Service Authority or State Legal Service Authority, as the case may be, shall decide the quantum of compensation to be awarded under the scheme. It further says that where the offender is not traced or identified, but the victim is identified and where no trial takes place, the victim or his dependents may make an application to the state or the District Legal Services Authority for award of compensation and the Authority shall after due enquiry award adequate compensation. Another salutary provision is that the Authority may order the immediate first aid facility or medical benefits to be made available free of cost or any other interim relief as appropriate.
Section 5 of the Probation of Offenders Act, 1958: This provision has also empowered the courts to require released offenders to pay the restitution and costs as under: The Section says that:
1. The court directing the release of an offender under Section 3 or Section 4 may, if it thinks fit, make at the same time a further order directing him to pay:
a. Such restitution as the court thinks reasonable for loss or injury caused to any person by the commission of the offence; and
b. Such cost of the proceeding as the court thinks reasonable.
2. The amount ordered to be paid under subsection (1) may be recovered as a fine in accordance with the provisions of Sections 357 and 358 of the Code.
3. A civil court trying any suit out of the same manner for which the off ender is prescribed, shall take into account “any amount paid or recovered as restitution under subsection (1) in awarding damages.
Section 163 of the Motor Vehicles Act, 1988: In ‘Hit & Run’ cases, accident victims are eligible for compensation through a Special Fund called ‘Solatium Fund’. The amount of Compensation is `25,000/- in the event of death and `12,500/- for grievous injuries. A portion of the Gross Written Premium is contributed towards this Fund every year by both Public and Private Insurers. However, in case the vehicle is without insurance, the victim/dependents have the right to claim compensation from the owner/ driver under Motor Vehicles Act, 1988.
Compensatory Jurisprudence: Supreme Court
The Supreme Court of India has played a significant role in evolving compensatory jurisprudence for the victims. Some of the landmark cases in Supreme Court provided compensation to the victim includes Chairman, Railway Board and Others v Mrs. Chandrima Das, in which court ordered compensation to the rape victim, who was a Bangladeshi national, by the Government for the rape committed in the Yatri Niwas managed by the Indian Railways at Howrah Station. Then again, in Nilabati Behara v State of Orissa, the court ordered compensation for custodial killing of the victim by the police in the State of Orissa. In both the cases, the court held that victims’ fundamental rights under Article 21 were violated. In Rudal Shah v State of Bihar, the Supreme Court made it categorically clear that the higher judiciary has the power to award compensation for violation of fundamental rights through the exercise of writ jurisdiction and evolved the principle of compensatory justice in the annals of human rights jurisprudence. Following this case, the Supreme Court awarded compensation in several cases. In the subsequent early cases in which this remedy was considered, the Court held that compensation would be awarded only in ‘appropriate cases’ which seemed to primarily involve life and liberty rights and were mostly cases relating to illegal detention and unlawful deaths. Nonetheless in later cases, it became clear that the scope had become significantly wider. Since economic and social rights are often considered by the Supreme Court under the ambit of Article 21 of the Constitution (the right to life which is a fundamental right), compensation as a constitutional remedy may be available for violations of these rights Thus, the role of the Supreme Court in this direction is laudable. The only thing required is the assistance of the legislature in the form of comprehensive law on victims’ compensation and rehabilitation and executive assistance in the form of better implementation of the law.
The movement for victim assistance will have to go a long way before any tangible result can be produced. The endeavour must be to make the victim an integral entity of the malefactor Justice administration from the present status position of forgotten entity in the criminal justice administration. It is to be remembered that no sound criminal justice administration can afford to ignore the rights and plights of the victim’s plight of the victim of the ever-increasing number of crimes.
The victims should have a say at investigation stage, at evidence stage, at the stage of deciding the question of bail, at the stage of imposition of quantum and character of sentence on the accused and also at the stage of granting parole to the accused post-conviction.
The victimology movement which has emerged in many parts of the world insists on making victims an integral part of the criminal justice administration by giving them opportunities to be heard at various stages of criminal justice so that proper justice is done to them. Our Criminal justice system needs a system which is more sensitive to the plights of the victims
Advocate Siddhant Mishra practices at the Lucknow Bench of the Allahabad High Court.
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PATIENTS OVER PATENTS
Imagine! How beautiful that world would have in which the professionals would have been more anxious about public health rather than their own gains. what if they had suspended their intellectual property rights in an emergency for the sake of humanity? Not so many lives would have been seen agonizing on the roads. But unfortunately, in this unfortunate situation of global pandemic the patentees are more concerned of their own profits than the public health.
The intellectuals are divided on the contentious issue of the suspension of Intellectual property rights and the protection of Public health. India and South Africa have floated an idea in the World Trade Organization of a patent waiver, overriding patent rules, allowing generic or other manufacturers to make vaccines and drugs till the people develop “herd immunity” and the pandemic is declared over. Hundreds of countries have come out in favour of India and South Africa. Many noble laureates, health advocates and human rights bodies also advocated for the patent waiver. However, the rich countries. Although USA and Europe have indicated that they are considering to support India, are reluctant to vote for the same because of their vaccine hoardings or vaccine nationalism and the plea to revoke intellectual property rights have so far been ineffective.
Consequently, disturbing figures are coming out about the disparity in vaccination. To vaccinate about 70% of the total population, the world needs more or less 11 billion doses of the vaccine. presuming two doses per capita. Extraordinarily, more than 8.6 billion orders have been corroborated. But around 6 billion of these vaccines will go to rich countries, and the rest to the poor countries from where 80% of the population belong to.
The People vaccine alliance reported that only 1 of the 10 people are likely to get vaccinated till the end of this year in 70 developing countries, while the Global North which accounts only 14% of the worlds’ population, has procured 3 times more vaccines than they require and has acquired more than half i.e. 53% of the total anticipated vaccines. A Country like Canada has reserved enough vaccine to vaccinate its citizen 5 times over, and no one knows about what has been written in kismets of 67 poor countries.
THE PREVALENCE OF PUBLIC HEALTH OVER PRIVATE PATENT IN THE LEGAL
E. Gold identifies three broad approaches to conceptualising the relationship between patent rights and human rights:
• The “Integrated approach,” which positions patents as a human right.
• The “Coexistence approach,” which contends that while patent law and human rights law are distinct, they share a fundamental concern in determining the optimal amount of patent protection needed to incentivize and practise socially useful innovation.
• The “Subjugation approach,” which states that human rights considerations should prevail over patent law when patent rights and human rights conflicts
The “Subjugation approach” seems to be a perfect way to determine the confrontational relationship of patents and public health. The aforesaid approach never means to abolish or obliterate all the patent rights; rather it establishes the necessity and the essentiality of the public health when it is confronted with patents. Unsurprisingly, this is the same thing the laws endorse for.
There are many provisions in different conventions and declarations which confirm that the public health is always to be given priority when it is needed and indeed having an upper hand.
Article 12 of The International Covenant on Economic, Social and Cultural Rights (ICESCR) recognises “the right to the highest standard of physical and mental health and makes it a necessity for the state parties to prevent, to treat and to control epidemic, endemic, occupational, and other diseases.” While the Article 25 of the Universal Declaration of Human Rights (UDHR) declares “a standard of living adequate for the health and well-being of himself and of his family” to be a human right.
The Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement itself states in its Article 7 that the protection of intellectual property rights should go hand in hand with the socio-economic welfare. And a balance of rights and duties must be maintained.”And Article 8.1 of the same agreement references the same thing in a more lucid and strong manner giving all the rights the TRIPS members to take every step which as long as is for the protection of public health and is in accordance with the terms and condition of TRIPS agreement.
The WTO ministerial conference also known as Doha declaration proved all the arguments of public health and private patents outlandish. And “Conclusively remarked”that intellectual property rights are undoubtedly crucial for the acceleration of the drugs and medicines. But its effects on the prices cannot be unforeseen. Which are undeniably an obstacle for the developing countries as the patents and the high medicine prices are correlated. The Doha declaration then recognized the issue of public health and private patent and declared that the TRIPS agreement cannot restrict the signatories from taking measures to protect public health. And the agreement should be enforced in a manner that the public health could be protected along with access to medicine for all.
It prioritised the considerations of public health and clarified that it does not only apply to certain selected provisions of TRIPS but extends over the whole of TRIPS agreement. The phrase “measures to protect public health”applies not only to medications, but also to vaccines, diagnostics, and other health resources required to make these items easier to use. Thus, the primacy of the public health can clearly be seen over private patent.
People’s Vaccine: The Suggestion, The Solution.
People’s Vaccine is critical for bringing the Covid-19 pandemic to an end. Because it can be mass-produced, distributed fairly, and made available to all people regardless of their status in all the countries. It can also enable the production of billions of additional doses in the shortest amount of time, ensuring availability and accessibility everywhere round the globe.
To enforce People’s Vaccine, the government of all around the world should endeavour to
• Support the idea put forward by India and South Africa to waive off some patent rules of the Trade-Related Aspects of Intellectual Property Rights (TRIPS)
• Protect public health by preventing monopolies on vaccine while making sure the sharing of “Know-How” and all the relevant information about the same
• Allocate the vaccines fairly to both developing and developed countries. As the discriminatory distribution of the same has already created a blatant gap and hundreds of people are dying every day
• Ensure the transparency in the process
• Provide the vaccine for free or for a price that could be affordable by the very last member of the society
The pharmaceutical companies argue that the suspension of intellectual property rights would put the kibosh on innovation and technology because they spend billions in the process of vaccine-making and take substantial risk. However, this is not the truth.
First of all, suspending the intellectual property rights does not mean bulldozing the companies into loss. But to avail the vaccine at a Reasonable price considering the investments the companies have made. Now please don’t tell me that making an 80% profit margin is reasonable. Second, vaccine like Oxford-AstraZeneca is 97% publicly funded. And the governments have spent 93 billion. Which is people’s money, on corona vaccines. Thus, it is indeed a People’s Vaccine.
While addressing the World Health Assembly, Geneva. Mrs Indira Gandhi rightly delivered that “My idea of a better-ordered world is one in which medical discoveries would be free of patents and there would be no profiteering from life or death”. The monopolization of the vaccines has done nothing but subsequent denied drugs to poor people.
We could stop up the pandemic way earlier. But the Patent on drugs and related products put up a Price Tag on human life right from the very beginning. Rapid Testing Kit’s patent took a very difficult test from the people in these testing times and made the pandemic last longer. The patent on the N95 mask made it difficult to take breath. I am frightened to hear the vaccine 1, Vaccine 2 and Vaccine 3 just like Covid wave 1, Covid wave 2 and so on……If all the people do not get vaccinated rapidly, quickly and speedily. The playing field is open to new strains that would continue to arise and would elude our current vaccines. Therefore, it’s time for a new approach. This is important to realize our social and moral duty towards the society. The pharmaceutical companies must share their knowledge. Which is not really a new concept or something extremely out of the box. But this is how the flu vaccines are being dosed to the world by “Open Science” through the WHO’s Global Influenza Surveillance and Response System (GISRS) from the last 50 years. Same goes with Polio Vaccine, which was not patented by its inventor, Jonas Salk. In an interview when he was asked about the reason behind it. he replied. “Well, the people, I would say. There is no patent. Could you patent the sun?” The answer is NO
MEDICAL NEGLIGENCE IN THE TIME OF COVID-19
It has been almost fourteen months since the COVID-19 was declared as a pandemic by the World Health Organization. The second wave of the novel coronavirus has significantly stressed the public healthcare system in India as the new cases are skyrocketing every day. This pandemic on one side has forced our Corona-Warriors, Doctors, into a challenging situation where they are overburdened with the caseload. On the other hand, the instances of medical negligence and patients being denied medical assistance are rampant. Due to the unprecedented rise in death toll due to COVID-19, the medical negligence litigation is expected to rise in the future. Let us first understand the concept of medical negligence in the light of decided case laws and the medico-legal issues that may arise in COVID-era.
WHAT AMOUNTS TO MEDICAL NEGLIGENCE?
The primary ingredients constituting negligence in normal sense are duty of care, breach of duty and resultant injury. Medical Negligence means any act or omission by a medical professional that deviates from the accepted medical standard of care. In case of medical negligence, a very high degree of culpability is required to hold a medical professional liable. The victim has the option of bringing a civil action or criminal action or both against the medical professional, as the circumstances of the case may require. Under civil law, negligence is punishable under law of torts or under Consumer Protection Act, 1986. Under the criminal law, if death is caused by “gross negligence” of the doctor, charges under Section 304A of the Indian Penal Code, 1860 can be framed. The Delhi High Court laid down three degrees of negligence: lata culpa (gross neglect); levis culpa (ordinary neglect) and levissima culpa (slight neglect). Slight neglect being too trivial is not punishable and ordinary neglect, as the name suggests, is not something unusual, hence it also ought not to be punished. It is gross negligence which is punishable, however, the degree of negligence and remedy shall depend upon the facts and circumstances of each case.
The burden of proof generally lies on the complainant to prove that the doctor acted grossly negligently. In certain situations, the Courts have invoked that the principle of Res ispa loquitur (things speaks for itself) in cases where the patient suffers a complication which is not contemplated normally. It is no more res integra that medical negligence cannot be attributed to a doctor so long as he performs his duties with reasonable skill and competence. Merely because a doctor chooses one course of action in preference to the other one available, he would not be liable if the course of action chosen by him was acceptable to the medical profession. Indian Courts have adopted the United Kingdom’s Bolam Test of Medical Negligence and has been using it to adjudicate cases of medical negligence. The Bolam’s Test as laid down in Bolam v. Friern Hospital Management Committee, gives more emphasis on what medical practice ‘is’ rather than what the practice ‘should be’. As per the Bolam’s Rule, the following criteria’s that have to be fulfilled to fix the culpability of the medical professional-
1. It must be proved that the there is a usual and normal practice;
2. It must be proved that the defender has not adopted that practice;
3. It must be established that the course the doctor adopted is one which no professional man of ordinary skill would have taken if he had been acting with ordinary care
Hence, to prosecute a medical professional for negligence as per this test, it must be shown that the medical professional did something or failed to do something which in the given facts and circumstances no medical professional in his ordinary senses and prudence would have done or failed to do. In nutshell, to ascertain the culpability it needs to be proved that the doctor made a mistake which no careful and skillful medical practitioner would have made in the given facts and circumstances. The Supreme Court of India while protecting the rights of medical professionals, in a recent order categorically held, “Wrong Diagnosis is not a ground for Medical negligence and the medical professionals should not be dragged into criminal proceedings unless negligence of a high order is shown.”
GUIDELINES GOVERNING THE PROSECUTION OF DOCTORS UNDER 304B IPC
Considering that the medical profession renders noble service to the society, the Apex Court Jacob Mathew v. State of Punjab (2005), laid down the following guidelines governing the prosecution of doctors for the offence of criminal negligence to protect them from unjust and frivolous prosecutions
1. A private complaint may not be entertained unless the complainant produces prima facie evidence before the Court in the form of a credible opinion given by another competent doctor to support the charge negligence.
2. The investigating officer should, before proceeding against the doctor accused of negligence, obtain an independent and competent medical opinion, preferably from a doctor in government service qualified in that branch of medical practice.
3. A doctor accused of negligence should not be arrested in a routine manner unless, his arrest is necessary for furthering the investigation or unless there is a flight risk.
It was further held that to prosecute the medical professionals for criminal medical negligence, something more than mere negligence had to be proved. The Court added that, “Medical professionals deal with patients and they are expected to take the best decisions in the circumstances of the case. Sometimes, the decision may not be correct, and that would not mean that the medical professional is guilty of criminal negligence.”
In the case of Indian Medical Association v. Shantha, Supreme Court held that the patients aggrieved by the deficiency in treatment, from both private clinics and Govt. hospitals, are entitled to seek damages under the Consumer Protection Act, 1986. Furthermore, in Mohan Dai Oswal Cancer Treatment & Research Foundation case (2019), NCDRC held the Doctor vicariously liable for the acts of his team which assisted the doctor in every sphere in rendering treatment to the patient. The onus is on the hospital and doctor to explain the exact line of treatment rendered which resulted in the incident.
MEDICO-LEGAL ISSUES IN COVID ERA
Steps taken by the Government by deploying final-year medical and nursing students to offer services in COVID patient management are undoubtedly commendable and in good-faith but it follows certain legal implications. For instance, if a patient dies due to a trainee doctor’s inexperience or lack of knowledge of a particular symptom or medication, what will be the culpability of the trainee doctor? As per the settled legal principles, it is presumed that a professional entering into a particular profession professes a reasonable level of skill which shall be exercised with reasonable degree of care and caution. The law doesn’t expect an extra-ordinary knowledge or skill, but rather a reasonable degree of skill and knowledge. Another legal issue that may arise in future is, in an extraordinary situation like this, where rapidly rising cases have resulted in the number of intensive care patients exceeding the healthcare capacity, will the same medical “standard of care” apply in ascertaining the medical negligence? The major issue with this health crisis is confusion about its pathogenesis and unidentified treatment. The Indian Council of Medical Research in consultation with the Ministry of Health & Family Welfare has issued various guidelines on Clinical Management of COVID-19 depending upon the severity of patients. While determining the “standard of care”, the Courts may take into consideration such guidelines, clinical protocols and best practices in COVID-19 management issued by the appropriate authority, and decide on case-to-case basis, if a case of medical negligence is made out. The authors strongly recommend that comprehensive guidelines for adjudicating medical negligence cases should be formulated by the Judicial Officers and Medical Council of India. There should a set minimum standard of care that should be devised to balance the interests of the patients, doctors and nation, as a whole. The legislature may also consider extending limited protection to Doctors under Section 73 of Disaster Management Act and Section 4 of Epidemic Diseases Act. The actions of Doctors and Hospitals taken in good-faith during this health emergency may be given certain immunities by carving out cases of gross-negligence and malpractices’ as exceptions.
“While doctors who cause death or agony due to medical negligence should certainly be penalized, it must also be remembered that like all professionals doctors too can make errors of judgment but if they are punished for this no doctor can practice his vocation with equanimity”, as held in Martin F D’Souza case (2009). Extraordinary situations require extraordinary measures and there are always chances of collateral and unintended errors. There is no denying that a medical practitioner faced with an emergency situation like COVID-19 tries his best to treat the patient and save his life. It must be remembered that he does not gain anything by acting negligently; therefore, it will be for the complainant to clearly make out a case of gross negligence before a medical practitioner is charged with medical negligence. Under the fear of legal action, a medical professional cannot be expected to perform his best and charging doctors for medical negligence in the absence of well-formulated guidelines in these times would be a disservice to society.
Authors are Advocates practising in Delhi High Court
NEED TO INCREASE WOMEN REPRESENTATION IN THE FIELD OF CYBER SECURITY: JYOTI ARORA
In the last two years, the number of cyber attack incidents has gone up to almost 3 lakhs from 1.5 lakh incidents that took place in the year 2018 and in order to stop these attacks there is a need to diversify the representation in the field of cyberspace, said Jyoti Arora, Special Secretary & Financial Adviser, Ministry of Electronics and Information Technology (MeitY). Govt. of India
Arora mentioned that the digital penetration and people’s dependence on the digital space has gone up multiple folds in the last one year due to the pandemic. “Even in the government service, people are relying more on online means right from getting the vehicle registrations, passport renewals, or even paying taxes. This brings the importance of electronic security,” Arora said at the virtual Awards & Conclave on Women in Cyber – Making a difference organized by The Associated Chambers of Commerce of India (ASSOCHAM).
Arora informed that India has almost 750 million internet users and boasts of having the second largest internet user base in the world. “This interconnectivity has also given the emergence of cyber security threats. The government has taken several steps in this regard as a part of its National Cyber Security Policy which includes setting up of Cyber Swachhta Kendra for detecting botnet infections and malware analysis in India and to notify, enable cleaning and securing systems of end users so as to prevent further infection,” She informed.
Sheenam Ohrie, vice-president, Dell Digital and CIO Leader, APJ, Dell Technologies explained that there is a need to encourage diversity and make the cyber security industry accessible to everyone. “In the last one-year 52 percent of all the domestic companies have seen some or the other form of cyber-attacks. We need to have an army capable of having new ideas and so there is a need to groom diverse talents,” She said.
Ohrie also stated that the cyber space is a male dominated industry and there is a need to bring people from diverse backgrounds and empower women leaders.
Mini Gupta, partner, EY informed that promoting women in the cyber security business can make a huge difference as they bring a different thought process to the table. “Women are known for their multi talking skill sets. Though things are changing, there is a lot more that needs to be done,” She said.
Speaking on the representation in the cyber security space, Gupta explained that there is 30 percent representation at the entry level, 10 percent at the management side and just 1 percent at the top leadership. “In the recent past more and more women have come forward to fill the jobs and even the organizations have noticed the difference that has made in their style of working,” She pointed out.
Santha Subramoni, global head, TCS Cyber Security Practice said that India has a huge IT talent base and has the potential to become the destination for all kinds of cyber security solutions. “In this current pandemic all companies are innovating and running their businesses. It has become a perimeter-less and a boundary- less environment today and so the need to protect their systems becomes all the more important,” She said.
Subramoni also added that the size of the cyber security business globally has gone up to around $250 billion and India has hardly touched a business size of $7.6 billion. “So, in the true sense, we have barely scratched the surface. There is also a lot of business on the periphery which would mean the non-IT business for the analysts and defense personals which India can also tap,” She explained.
Deepak Talwar, National Security Officer, Microsoft & Chairman, ASSOCHAM National Council on Cyber Security stated that diversity drives innovation and market growth. Talent does not need an identity, a gender or bias to prove its worth. Diversity can come from many places and does not require a decade of prior experience. Building diverse team had always been advantageous to solve complex problems.
Talwar explained that there with an estimated shortfall of 3.5 million security professionals by 2021, the current talent gap to be addressed with “a sense of urgency”. To fill this cyber talent gap there should only be one clear way “understand and acknowledge the power of diversity”. Diverse teams need to be working quickly to address the constantly changing cyber security and privacy landscape and there is plethora of opportunities in the field of security, compliance, privacy and many such specialised domains in every sector and every level of jobs to be filled,” he said.
VIOLATIONS OF HUMAN RIGHTS UNDER THE SEMBLANCE OF SOVEREIGN IMMUNITY
WHAT IS SOVEREIGN IMMUNITY?
Sovereign immunity, or state immunity, is a principle of customary international law, by virtue of which one sovereign state cannot be sued before the courts of another sovereign state without its consent. Put in another way, a sovereign state is exempt from the jurisdiction of foreign national courts. Thus, the question of immunity is at the same time a question of jurisdiction: only when the court already has jurisdiction will it become meaningful to speak of immunity or exemption from it. For this reason, sovereign immunity is also referred to as “jurisdictional immunity” or “immunity from jurisdiction.” Because different types of legal proceedings may be brought against foreign states, sometimes courts find it necessary to refer to jurisdictional immunities of states. In history, the words “ex-territoriality” and “extra-territoriality” were also used in this sense. The current law of state immunity has developed predominantly as a result of cases decided by national courts in legal proceedings against foreign states. Doctrinal debates among the scholars are of much later occurrence and consist mainly of comments on decided cases. The fact that the law of state immunity is primarily judge-made law gives judicial decisions a prominent position among the possible sources of international law as contemplated by Article 38 (1) of the Statute of the International Court of Justice; instead of being a “subsidiary means for the determination of rules of law,” they are now a main source of legal rules. This feature of the law also shapes and determines the contours of a research guide on sovereign immunity.
Sovereign immunity always had two dimensions – a national and an international one. So far, the international community has witnessed several attempts to codify the law on sovereign immunity, but until now only the European Convention on State Immunity (ECSI) has entered into force.1 However, even this Convention has received only eight ratifications since 1972, with Germany having been the last state to ratify it in 1990.2 The United Nations have, of course, also worked on the matter – for several decades. Still, since its adoption in December 2004, the UN Convention on Jurisdictional Immunities of States (UNCJIS) has not been ratified by enough states in order to become effective.3
Parallel to these efforts on the international level, some states enacted national legislation on sovereign immunity, most importantly the US Foreign Sovereign Immunity Act (FSIA).4 Other states include the UK, Australia, Canada, and South Africa.5 States, for whatever reason has forgone the opportunity to pass national legislation rely on international custom to determine the scope of immunity which foreign states might claim. In doing so, most states – or, to be more precise, their courts — assume that sovereign immunity serves as the basic rule until the existence of an exception has been proven.6
To conclude, in constitutional monarchies the sovereign is the historical origin of the authority which creates the courts. Thus the courts had no power to compel the sovereign to be bound by them as they were created by the sovereign for the protection of his or her subjects.
DOCTRINE OF SOVEREIGN IMMUNITY IN INDIA
The doctrine of sovereign immunity evolved from common law jurisprudence existed in United Kingdom based on commonly followed notion that ‘King can do no wrong’, the legal maxim for which is ‘rex non potest peccare’. The British rule in India had brought the ideologies, laws and culture of such nature within the country.
There are typically two forms of sovereign immunity- Immunity to Jurisdiction, which implies that one state government’s authority or an official if commits wrong in any other state, the state cannot be tried for that matter, hence, state courts do not have jurisdiction over another state. Another form is Immunity from Execution, wherein it would be improper for one state to seize any property of another state. However, both the immunities can be waived by the State themselves. The judicial trend for doctrine of sovereign immunity could be divided into Pre and Post Constitution era in India.
The doctrine was established for the first time in case of P&O Steam Navigation Company v. Secretary of State (5 Bom HCR App 1), Peacock C.J. classified ‘sovereign’ and ‘non-sovereign’ power and two-fold character of East India Company as sovereign power and trading company and interpreted Government of India Act, 1858. Whereas, in Secretary of State v. Hari Bhanji ( (1882) ILR 5 Mad. 273) the court took contrasting view and denied any distinction of sovereign and non-sovereign functions along with extending non-liability of Government for acts related to public safety. These cases were considered as Precedents, but still there was an ongoing judicial battle on distinction between sovereign and non-sovereign.
INTERSECTION OF CONSTITUTION AND JUDICIAL DECISIONS
Post enactment of constitution, there was resentment and filing of review petitions in courts by aggrieved petitioners for genuine damages, leading with a liberal and constitutional requisite, the Indian courts sway away from the ancient doctrine and narrowed the scope providing rightful justice and damages to the victims.
Article 300 of the Indian Constitution can be considered the torchbearer for eliminating the doctrine of sovereign immunity as it clearly laid down that Government of India as well as State may sue or can be sued along with pertinent description and applicability. In State of Rajasthan v. Vidyawati (AIR 1962 SC 933), the apex court first time dealt with the sovereign immunity post-constitution and laid down that in modern times, the State have social and welfare responsibilities and hence, required to function on constitutional norms and not invoke the defense of old feudal laws. Additionally, in Kasturi Lal Ralia v. State of UP (AIR 1965 SC 1039), SC took a view protecting the State from liability of torts committed by the servants within their statutory power, herein, in our view the court applied sovereign immunity partially to not let State suffer with undue litigations and damages.
INTERPLAY BETWEEN HUMAN RIGHTS AND SOVEREIGN IMMUNITY
In the 1996 case, D.K. Basu v. State of West Bengal, the Supreme Court held, “for the violation of the fundamental right to life or the basic human rights… this Court has taken the view that the defense of sovereign immunity is not available to the State… for the established violation of the rights guaranteed by Article 21 of the Constitution of India.” Compensation awards and determinations that a lawsuit contains a breach of a constitutional right, rendering sovereign immunity inapplicable, are always rulings taken at the discretion of individual judges. “Courts often reject compensation lawsuits in fundamental rights cases,” according to SAHRDC. Apart from the lack of mandatory payments, de facto and de jure protection remains an external hurdle, limiting survivor reparation and allowing human rights violations to occur across India.
Internationally, the concept of sovereign protection has become a significant contributor to the most appalling condition of human rights enforcement. The ICJ ruled that Italy infringed on international law by granting Germany sovereign immunity from domestic sovereignty in the case of Jurisdictional Immunities of the State (Germany v. Italy). Germany has been accused of violating international humanitarian law and fundamental human rights. According to this principle, when a state violates secured human rights norms that are called peremptory international law norms, such as jus cogens, the state’s jurisdictional protection is not protected. The fundamental principles of international humanitarian law, the prohibition of torture and genocide, the right of self-determination, and the prohibition of violence are all examples of jus cogens. The principle argues that international law grants immunity to a state in cases of human rights abuses. According to this theory, sovereign immunity is not a jus cogens norm, and therefore ranks lower in the order than all other jus cogens principles. The International Law Commission (ILC) gave an example of a list on which the prohibition of crimes against humanity was considered a jus cogens. In order to correct human rights abuses, normative hierarchy theory states that the maintenance of jus cogens norms takes precedence over all concepts of international law. In his book Enhancing Global Human Rights, R. Falk mentions that the principle of non-intervention does not apply in situations of violation of human rights norms is well-established rule of law. For example, in Nada v. SSEAs, the Swiss Federal Court recognized fundamental human rights as jus cogens norms. Similarly, All states are required by Article 6 of the International Covenant on Civil and Political Rights (ICCPR) and Article 12 of the International Covenant on Economic, Social, and Cultural Rights (ICESCR) to accept the non-derogable right of everybody to the highest level of health and to take all reasonable precautions to contain and avoid epidemics, endemics, and pandemics. Sovereign immunity is not a protection that prevents the international community from taking civil action against human rights violations. The Soviet Union dropped its claim to exclusive jurisdiction at the Conference on Security and Cooperation in Europe and instead engaged in a meaningful discussion about the issues at hand in Belgrade.
However in Indian context in many a cases it is seen quite in contrast, In an otherwise excellent order by the Allahabad High Court on 1 September 2020, awarded no compensation was given to Dr Kafeel Khan for his unjustified detention. The court granted him bail and declared his detention under the National Security Act as illegal. He was arrested by the Uttar Pradesh government, which said he gave a hate speech inciting people to hate each other and inciting students on the basis of religion. Dr. Khan had instead issued a call for national integrity and reconciliation, as well as a condemnation of terror, according to the ruling. After months in prison for an offence he did not commit, he received no remuneration.
The doctrine is a torch bearer of an ancient principle, the requirement of which has been diminished in the modern contemporary world. The harmonious contrition of international and state laws along with judicial precedents on sovereign immunity have taken into account the essence of social protection by protecting human rights and eliminated the draconian aspect of complete immunity to sovereign states.
DISPOSE OF EXECUTION PROCEEDINGS WITHIN SIX MONTHS FROM THE DATE OF FILING: SC ISSUES DIRECTIONS TO REDUCE DELAY
In a suit for payment of money, before settlement of issues, the defendant may be required to disclose his assets on oath, to the extent that he is being made liable in a suit. The court may further, at any stage, in appropriate cases during the pendency of suit, using powers under Section 151 CPC, demand security to ensure satisfaction of any decree.
While taking the right stand, the Supreme Court just recently on April 22, 2021 in a latest, landmark, laudable and learned judgment titled Rahul S Shah vs Jinendra Kumar Gandhi in Civil Appeal Nos. 1659-1660 of 2021 (@ Special Leave To Appeal Nos. 7965-7966/2020) and 2 Other Civil Appeals while issuing directions to reduce delays in the execution proceedings observed that an Executing Court must dispose of the Execution Proceedings within six months from the date of filing which may be extended only by recording reasons in writing for such delay. It must be mentioned here that the Bench of Apex Court headed by former CJI SA Bobde asked the High Courts to reconsider and update all the Rules relating to Execution of Decrees made under exercise of its powers under Article 227 of the Constitution of India and Section 122 of CPC, within one year of this order. The Bench also comprising of Justices L Nageswara Rao and S Ravindra Bhat observed that, “These directions are in exercise of our jurisdiction under Article 142 read with Article 141 and Article 144 of the Constitution of India in larger public interest sub-serve the process of justice so as to bring to an end the unnecessary ordeal of litigation faced by parties awaiting fruits of decree and in larger perspective affecting the faith of the litigants in the process of law.”
To start with, the ball is set rolling in para 2 wherein it is put forth that, “The present appeals arise out of the common judgment and order dated 16th January, 2020 of the Karnataka High Court which dismissed several Writ Petitions. The course of the litigation highlights the malaise of constant abuse of procedural provisions which defeats justice, i.e. frivolous attempts by unsuccessful litigants to putting up spurious objections and setting up third parties, to object, delay and obstruct the execution of a decree.”
While elaborating in detail, the Bench then observes in para 3 that, “The third respondent (hereafter referred to as ‘Narayanamma’) had purchased a property measuring 1 Acre (Survey No. 15/2) of Deevatige Ramanahalli, Mysore Road, Bengaluru (hereafter referred to as ‘suit property’) under the sale deed dated 17.03.1960. The suit land was converted and got merged in the municipal limits of Bengaluru and was assigned with Municipal Corporation No. 327 and 328, Mysore Road, Bengaluru. Narayanamma sold 1908 square yard of the suit property in Municipal Corporation (Survey No. 327) to 2nd and 3rd respondents (hereafter referred to ‘Jitendra’ and `Urmila’) under a sale deed dated 13.05.1986. This was demarcated with the sketch annexed to the sale deed. The adjacent portion of property, Survey No. 327 was sold to Shri Moolendra Kumar Gandhi and Smt. Baby Gandhi by another sale deed dated 13.05.1986. This property was also demarcated in the sketch and clearly shows its dimensions and boundaries annexed to the sale deed. Therefore, the first two respondents, Shri Moolendra Kumar Gandhi and Smt. Baby Gandhi became absolute owners of the suit property with the totally admeasuring of 3871 square yards. Thus, Narayanamma had sold about 34,839 square feet of the property out of 1 Acre land (43,860 square feet) owned by her. Subsequently, after the sale of the major portion of the said property to the first two respondents and their brother, Narayanamma who is the mother of A. Ramachandra Reddy the fourth respondent (hereafter called “the vendors”) filed a suit1 for declaration that the two sale deeds in favour of the first two respondents (also called “purchasers” or “decree-holders”) as well as against Shri Moolendra Kumar Gandhi etc. were void. The vendors and Shri Anjan Reddy (deceased respondent no. 8) on 25.03.1991 executed a registered partition deed. This document did not advert to the sale deed executed in favour of the purchasers and Shri Moolendar Kumar Gandhi and Smt. Baby Kumari Gandhi. The purchasers were restrained by an injunction from entering the property which Narayanamma claimed was hers.”
To put things in perspective, the Bench then points out in para 4 that, “During the pendency of the suit for declaration, the first purchasers filed two suits (O.S. Nos. 9077/ 1996 and 9078/1996) against the vendors for possession. During the pendency of these suits on 11.02.2000 by two separate sale deeds Shri Dhanji Bhai Patel and Shri Govind Dhanji Patel purchased 7489 square feet and 7650 square feet respectively, out of the residue of the property owned by Narayanamma. While so, during the pendency of the suits instituted by the purchasers, the vendors again sold the suit property i.e. the land to the present appellant (Rahul Shah) and three others (Respondents no. 5-7) by four separate sale deeds. (Dated 09.11.2001, 12.12.2001, 05.12.2002 and 20.10.2004) In the possession suits the vendors filed counter claims (dated 18.04.1998). During the pendency of proceedings the purchasers sought for transfer and mutation of property in their names which were declined by the Municipal Corporation; this led to their approaching the High Court in Writ Petition No. 19205/1992 which was disposed of with a direction (Dated 05.11.1998) that after adjudication of the injunction suit (filed by the vendors) the khata be transferred.”
Furthermore, the Bench then states in para 5 that, “The proceedings in the injunction suit filed by the vendors and the other two suits filed by the purchasers were clubbed together. The City Civil Judge, Bangalore by a common judgment dated 21.12.2006 allowed and decreed the suits for possession preferred by the purchasers and dismissed the vendor’s suit for injunction. The decree holders preferred execution proceedings. (Execution Case Nos. 458-459/2007). They filed applications under Order XXI Rule 97 of the Code of Civil Procedure (CPC) since the judgment debtors/vendors had sold the property to the appellant and respondents no. 4 to 7. The appellant i.e. a subsequent purchaser filed objections.”
As it turned out, the Bench then enunciates in para 6 that, “During the pendency of the proceedings the front portion of the suit property bearing Municipal Corporation No. 327, Mysore road, Bangalore became the subject matter of the acquisition for the Bangalore Metro Project. The decree holders (the first two respondents) preferred objections to the proposed acquisition and further claimed the possession. In the meanwhile, aggrieved by the dismissal of the suit and decreeing the suit for possession, Narayanamma filed first appeals in the High Court (R.F.A. No. 661-663/ 2007). In these proceedings it was brought to the notice of the High Court that the suit properties had been sold to the appellant and respondents no. 4 to 7. By an order dated 10.04.2008, the High Court directed the vendors to furnish particulars with respect to the sale, names of the purchaser and area sold etc. By common judgment dated 22.10.2009 the High Court dismissed all the appeals pending before it. The Special Leave Petition preferred by the vendors (S.L.P. (C) Nos. 16349-13651/2010) was also dismissed by this Court on 23.07.2010.”
To be sure, the Bench then points out in para 12 that, “All these orders led to initiation of five writ petitions on behalf of the appellant, and the vendors etc. Three First appeals (R.F.A. Nos. 441, 468 and 469/2017) were preferred by obstructers challenging the decision of the Executing Court dated 15.02.2017. By impugned common order all these Writ Petitions and appeals were dismissed.”
Quite remarkably, the Bench then stipulates in para 41 that, “Having regard to the above background, wherein there is urgent need to reduce delays in the execution proceedings we deem it appropriate to issue few directions to do complete justice. These directions are in exercise of our jurisdiction under Article 142 read with Article 141 and Article 144 of the Constitution of India in larger public interest to sub-serve the process of justice so as to bring to an end the unnecessary ordeal of litigation faced by parties awaiting fruits of decree and in larger perspective affecting the faith of the litigants in the process of law.”
Most remarkably, the Bench then in para 42 which forms the cornerstone of this commendable judgment very rightly holds that, “All Courts dealing with suits and execution proceedings shall mandatorily follow the below-mentioned directions:
1. In suits relating to delivery of possession, the court must examine the parties to the suit under Order X in relation to third party interest and further exercise the power under Order XI Rule 14 asking parties to disclose and produce documents, upon oath, which are in possession of the parties including declaration pertaining to third party interest in such properties.
2. In appropriate cases, where the possession is not in dispute and not a question of fact for adjudication before the Court, the Court may appoint Commissioner to assess the accurate description and status of the property.
3. After examination of parties under Order X or production of documents under Order XI or receipt of commission report, the Court must add all necessary or proper parties to the suit, so as to avoid multiplicity of proceedings and also make such joinder of cause of action in the same suit.
4. Under Order XL Rule 1 of CPC, a Court Receiver can be appointed to monitor the status of the property in question as custodia legis for proper adjudication of the matter.
5. The Court must, before passing the decree, pertaining to delivery of possession of a property ensure that the decree is unambiguous so as to not only contain clear description of the property but also having regard to the status of the property.
6. In a money suit, the Court must invariably resort to Order XXI Rule 11, ensuring immediate execution of decree for payment of money on oral application.
7. In a suit for payment of money, before settlement of issues, the defendant may be required to disclose his assets on oath, to the extent that he is being made liable in a suit. The Court may further, at any stage, in appropriate cases during the pendency of suit, using powers under Section 151 CPC, demand security to ensure satisfaction of any decree.
8. The Court exercising jurisdiction under Section 47 or under Order XXI of CPC, must not issue notice on an application of third-party claiming rights in a mechanical manner. Further, the Court should refrain from entertaining any such application(s) that has already been considered by the Court while adjudicating the suit or which raises any such issue which otherwise could have been raised and determined during adjudication of suit if due diligence was exercised by the applicant.
9. The Court should allow taking of evidence during the execution proceedings only in exceptional and rare cases where the question of fact could not be decided by resorting to any other expeditious method like appointment of Commissioner or calling for electronic materials including photographs or video with affidavits.
10. The Court must in appropriate cases where it finds the objection or resistance or claim to be frivolous or mala fide, resort to Sub-rule (2) of Rule 98 of Order XXI as well as grant compensatory costs in accordance with Section 35A.
11. Under section 60 of CPC the term “…in name of the judgment- debtor or by another person in trust for him or on his behalf” should be read liberally to incorporate any other person from whom he may have the ability to derive share, profit or property.
12. The Executing Court must dispose of the Execution Proceedings within six months from the date of filing, which may be extended only by recording reasons in writing for such delay.
13. The Executing Court may on satisfaction of the fact that it is not possible to execute the decree without police assistance, direct the concerned Police Station to provide police assistance to such officials who are working towards execution of the decree. Further, in case an offence against the public servant while discharging his duties is brought to the knowledge of the Court, the same must be dealt stringently in accordance with law.
14. The Judicial Academies must prepare manuals and ensure continuous training through appropriate mediums to the Court personnel/staff executing the warrants, carrying out attachment and sale and any other official duties for executing orders issued by the Executing Courts.”
Going forward, the Bench then observes in para 43 that, “We further direct all the High Courts to reconsider and update all the Rules relating to Execution of Decrees, made under exercise of its powers under Article 227 of the Constitution of India and Section 122 of CPC, within one year of the date of this Order. The High Courts must ensure that the Rules are in consonance with CPC and the above directions, with an endeavour to expedite the process of execution with the use of Information Technology tools. Until such time these Rules are brought into existence, the above directions shall remain enforceable.”
Finally, the Bench then holds in para 44 that, “The appeals stand dismissed.”
In sum, these above mentioned directions laid down by the three Judge Bench of Apex Court headed by former CJI Sharad Arvind Bobde and also comprising of Justice L Nageswara Rao and Justice S Ravindra Bhat must be followed by all courts dealing with suits and execution proceedings. Until the rules are made these directions shall remain enforceable as has been very rightly laid down also. All courts must comply with it accordingly! No denying it!
The writer is an Advocate.
NABFID ACT, 2021: ANALYSING THE CHALLENGES AHEAD
Sine qua non, the banks and other financial institutions must comply with statutory norms and requirements framed by the supervisory authorities. It is imperative to hire external auditors to scrutinise the working of the institution and book members if they indulge in financial malpractices or breach regulatory and statutory code of conduct.
Infrastructure development of any nation plays crucial role in attracting foreign investments and boosts the economic development of the country. Improvement in Infrastructure financing facilitates rapid economic growth. Prime Minister Narendra Modi in his 2019 Independence Day speech laid the foundation of National Infrastructure Pipeline (NIP) for financial year 2019 to financial year 2025 with the purpose of injecting almost Rs100 lakh crore into the social and economic infrastructure projects of the country such as roads, rail, ports, energy, housing, water etc.Presently, around 7,400 projects have been included so far under NIP within more than 30 sub-sectors out of which over 1800 projects have already been sanctioned and are now under the developmental phase.
Infrastructure projects involve high capital investments, high risks and long gestation periods. Owing to large capital investments in these projects, the major focus of lenders is on revenue generation. Before financing such projects the lenders analyse the potential of such projects considering commercial, environmental, regulatory, engineering and financial aspects that would govern the implementation of such projects. With the aim of providing the facility of Infrastructure Financing, the government of India has established a new Development Financial Institution which will go by the name of The National Bank for Financing Infrastructure and Development (hereinafter referred to as NaBFID).
INCEPTION OF DFI
The inception of Development Financial Institution (DFI) can be traced back to the time of India’s independence. In the year 1948, India’s first DFI, Industrial Finance Corporation of India (ICFI) was set up. Industrial Credit and Investment Corporation of India Limited (ICICI) — nation’s first DFI in the private sector, was established in 1955. An initiative of the World Bank, ICICI Bank Limited was initially established prior to ICFI in 1944 and it was only in 2000; that both ICICI Limited and ICICI Bank Limited agglutinated into the first Universal bank of India. Industrial Development Bank of India (IDBI) was set up in 1964 under RBI and converted to a universal bank in 2003. All these primary financial institutions were responsible for assisting long-term financing in the industrial sector of the economy of the country.
Some sector- specific Development Banks such as EXIM Bank, National Housing Bank and Housing and Urban Development Corporations followed by State- specific DFIs came up in the 70s and 80s with the objective of providing concessional lending to small and medium enterprises. Yet, in early 1990, the financial reforms drastically compressed and condensed the role of DFIs in financing the industrial sector by drawing out concessional funding through Long Term Operation (LTO) funds from RBI thereby making it impractical and non- sustainable. As a result, ICICI and IDBI were transmuted into Commercial banks and IIBI was shut down.
The idea of DFI was again resuscitated in 2017 by RBI in an attempt to cater long-term financing needs of the economy. Finance Minister Nirmala Sithraman while presenting the Union Budget 2021-22 stated that, India’s Infrastructure needs long term debt financing. A professionally managed Development Financial Institution is necessary to act as a provider, enabler and catalyst for infrastructure financing. Therefore, India will set up a new DFI called the National Bank for Financing Infrastructure and Development.
The National Bank for Financing Infrastructure and Development (hereinafter referred to as NaBFID) bill was introduced in Lok Sabha on 22nd March, 2021 and was passed on 23rd March, 2021. The bill was subsequently passed in Rajya Sabha on 25th March, 2021. This bill states that the institution established by it will be the principal DFI for infrastructure financing. The institution is set up as a corporate body with authorised share capital of one lakh crore rupees. Its shares will be held by:
1. Central Government
2. Multilateral Institutions
4. Sovereign Wealth Fun
5. Pension Funds
6. Financial Institutions
8. Any other institution as the central government prescribes.
The central government will own 100% shares initially but they can in the future be reduced to at least 26%. The Bill establishes NBFID as a company with share capital amounting to one lakh crore rupees. NBFID has been set up with the primary motive of lending, investing or to attract investments for infrastructure projects located wholly or partially in India. This institution will also facilitate the market for bonds and derivatives for development financing.
The Institution will discharge two types of functions: (i) Financial Objective, (ii) Developmental Objective. Financial Objectives include directly or indirectly lending, investing or attracting investments for projects entirely or partly within Indian territory whereas developmental objective facilitates the development of market for bonds, loans and derivatives for infrastructure financing.
Board of Directors will form the governing body of NBFID and the Chairperson will be appointed by the central government in consultation with the Reserve Bank of India. Central Government will constitute a body that will recommend candidates suitable for the post of Managing Directors and Deputy Managing Directors. Independent Directors will be appointed based on the recommendations of the internal committee.
The weakening of growth impulses and subdued credit off-take are playing out, with sporadic credit default events and incidents of frauds exacerbating the reluctance to lend which is starkly evident in the slowdown of flow of resources, both from banks and non-banks to the commercial sector in the first half of 2019-20. Frauds can occur on account of overlooking regulatory guidelines and/ or on lapses in internal risk governance, compliance, and audit functions. In particular, lack of prudent internal control mechanisms and surveillance systems is limiting their ability to prevent frauds. The increased Incidents of forgery and fraud not only result in financial loss to the institutions but additionally disturb the fiduciary relationship which exists between the customer and the institution.
Considering the business shambles like IL&FS, RBI has come up with stringent set of rules for the auditors of financial institutions and banks respectively. As per the reports, the primary function of fraud management, monitoring and investigation must be assigned to the Audit Committee of the Board. Thus, it is clearly evident that auditing process should be free from the other pillar of the government namely the legislature yet under their perusal. The bone of contention of lack of parliamentary oversight of a DFI was raised by members of Parliament while debating on the National Bank for Financing Infrastructure and Development (NaBFID) Bill, 2021.
While referring to Section 26 of the bill, it was contended that DFI would remain outside the purview of Comptroller and Auditor General (CAG), Central Vigilance Commission (CVC) and Central Bureau of Investigation (CBI). Since these development institutions will be expending huge amount of government funds, the inspection by these 3Cs becomes imperative. Opposing these contentions, Finance Minister Nirmala Sitharaman said, “Every year audited accounts (of this bank) will come to each House of Parliament….so Parliament oversight (of the institution) is in-built in the bill.” Section 26 of the Act provides, “The Institution shall furnish to the Central Government and the Reserve Bank within four months from the date on which its accounts are closed and balanced, a copy of its balance-sheet and accounts together with a copy of the auditor’s report and a report of the working of the Institution during the relevant year, and the Central Government shall, as soon as may be after they are received by it, cause the same to be laid before each House of Parliament.”
Section 6 of the Act states the procedure for appointment of board of directors. According to the section, the members of the board will be appointed by the Central Government which means there are chances of political biasness for infrastructure financing. The political party in power may then appoint its own people to the board and may then favour its own people by financing their projects thereby making it politically biased.
Secondly, Section 35 states that before initiating any investigation against the employees of the institution prior sanction of the Central Government is necessary. Prior sanction is mandatory for Courts as well before taking cognizance of the offences under any law against the employees of NBFID. Now, this provision makes the employees of the institution immune from legal proceedings and as has been mentioned under section 6, the government will appoint these employees and prior sanction from the government will lead to defiance of the principles of accountability as then they will not be answerable for their actions. This Section will help such employees evade their responsibilities and consequently there will be no transparency thereby going against public welfare.
Sine qua non, the banks and other financial institutions must comply with statutory norms and requirements framed by the supervisory authorities. It is imperative to hire external auditors to scrutinize the working of the institution and book members if they indulge in financial malpractices or breach regulatory and statutory code of conduct. Thus, there is a need for an independent and efficacious audit system to ensure sound health of these institutions as per the recommendations of the Expert Committee set up by the Reserve Bank (Chairman: Shri Y H Malegam).
India is striving towards becoming a major economic power and in that direction government is taking every possible step to strengthen up the economy. By establishing this DFI the government is trying to improve the infrastructure of the country as any country’s infrastructure development is a litmus test of knowing whether the country is financially sound or not. But the government should also have considered that by only establishing the new institution this objective cannot be achieved as what’s more important is the implementation and the mechanism of the new institution and therefore, on reading of section 6 and section 35 of the Act we can see that there will arise issues on the governance of the institution. The governance of DFIs matters a lot since these are public financial institutions dealing with public money. Therefore, it is of utmost importance that these DFIs should be transparent in their operations and accountable to the public.
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