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As the year is fizzling down to an economically weak finale, Satyam Computers has found itself in a deep mire, with the Maytas acquisition deal coming under strict scrutiny.  In an unrelated development, the World Bank later announced its intention to snap all business and development ties with Satyam following allegations of data theft in one of the Bank’s projects managed by the latter.

Many might be wondering why this seemingly plain-vanilla private sector transaction is figuring in a blog that addresses larger policy issues. However, the Satyam-Maytas deal throws critical aspects of efficient and ethical corporate governance into relief. Before I venture to speculate on the  Big Picture, here’s a primer on what really happened.

On December 16,  Satyam Computer Services, India’s fourth largest IT services provider, proposed to acquire Maytas Properties and 51 per cent stake in Maytas Infrastructure for a consideration of 8,000 Cr (Approx.). The deal, which surprised analysts and shareholders alike, was held out as a plan to ‘de-risk the core IT Business’ in the face of the ongoing economic downturn. On the other hand, it was no State secret that the Maytas (a palindrome for Satyam!) Group was controlled by the sons of Mr. Ramalinga Raju, Satyam’s Chairman. The proposal and its justification raised many eyebrows as the financial crunch was yet to show a perceivable impact on the software/IT industry.

Well, eyebrows were pretty much the only things raised by this deal, because every other financial index of Satyam plummeted. The next day, the ADR (American Depository Receipts) of Satyam Computer in the NYSE tumbled by over 50 per cent. In India, the scene was less dramatic, but the stock continued to be flat, indicating little interest from the shareholders. Consequently, Satyam was forced to call off the deal, all within a span of 24 hours. Mr. Raju said,

We have been surprised by the market reaction to this decision even though we were quite positive about the merits of the acquisition.

Thus, the shareholders and investors in the company were quick to shift gears into activist mode, evoking an incident hitherto unseen in Indian corporate history. From the outset, it was clear that the deal had thrown caution to the winds, materializing without any respect to shareholder sentiments. Despite the enormity of change proposed through diversification, Satyam failed to factor in public opinion on the matter that, prima facie, seems like a family affair.  The appalling lack of transparency has forced SEBI and the Ministry of Corporate Affairs to take note of the matter and the watchdogs will certainly examining the nuances of this deal.

The issue brings the role of independent directors of a Company to the forefront; their opinion on such matters is expected to echo the views of a rational shareholder and not merely the interests of the promoter.
Business Line has an exceptional piece on the matter and the author goes on to say,

Questions will be raised rightly about the role of independent directors in issues such as this. The standards of corporate governance were sought to be raised when the stock market regulator insisted that independent directors should be in the majority on the boards of listed companies. Companies have in general complied with the rules, but the nagging doubt was whether independent directors appointed by a body of shareholders dominated by promoter can at all remain independent. The Satyam saga has brought the issue to the fore yet again.

Transparency in corporate governance is crucial as India is opening her markets to major foreign players.  If our domestic  segments cannot set an ethical example to its shareholders and investors, retail and institutional confidence is going to take a hit. Lifting the corporate veil in such cases is integral to sustain the company’s reputation and shareholder trust.

For the average shareholder/investor, the Satyam fiasco presents yet another reminder of the need to be activist and informed. The economic crisis might generate a number of transactions which are intended to be a quick-draw shortcut to ease monetary repercussions. Nonetheless, those at the receiving end have to be cautious, adopting a rational approach to the ‘lucrative’ deals that present themselves. The $50 billion Madoff fraud has left investors reeling; corporate accountability must be preserved to ensure a fair disposition of rights.

Mark Felt, former FBI officer who revealed himself to be the key informant in exposing the Watergate Scandal (‘Deep Throat’), has died.

Felt, 95, breathed his last yesterday in a clinic close to his home in Santa Rosa, California. During the years of the scandal he was one of the highest ranking officers in the FBI, instrumental in investigating the break-ins and burglary at the Democratic National Office in Watergate Complex. The investigation subsequently uncovered a nebulous network of campaign fraud, illegal tax audits, political espionage and wiretapping associated with Nixon’s Re-election Committee; mounting bipartisan political pressure coupled with a series of futile court battles forced the President to resign in 1974.
Many of you might have seen Hal Holbrook’s performance as ‘Deep Throat’ in the famous movie ‘All the President’s Men’. Deep Throat’s identity was kept anonymous for 30 years by Washington Post journalists Bob Woodward and Carl Bernstein, until Mr. Felt himself revealed his informant status in 2005.

‘Deep Throat’ remains a legendary figure in investigative journalism circles and continues to be an inspiring icon for righteous officers of the State. Felt himself had come under heavy criticism for being a ‘traitor’ and letting down the Commander-in-Chief; many attributed his opposition to the President’s scheme to vindictiveness, for being superseded in the FBI Directorate by Nixon’s close political associate. However, there were many who disagreed.

As he himself wrote later,

The President wanted a politician in J. Edgar Hoover’s position who would convert the bureau into an adjunct of the White House machine.

Individuals like Felt are a rarity in today’s bureaucratic set-up; the extant legal regime must ensure that whistle-blowers and vanguards against corrupt official practices are protected.

To quote the American prosecutor, John Nields, from The Washington Post in 2005,

As Deep Throat, Felt helped establish the principle that our highest government officials are subject to the Constitution and the laws of the land.

(This post forms the second of a three-part article. The next one attempts to debunk the myth of tougher terror laws).

The overwhelming public response to laxities in handling terrorist attacks and security threats has prompted the Government to formulate a proposal for a federal anti-terror agency. The proposal, incorporated as an amendments to the National Security Act, 1980 is expected to be tabled in the upcoming Parliamentary session. The Bill, currently in its nascent stages, has not been placed before the public yet; we’ve relied solely on secondary sources to analyze the amendments.

The changes to the existing law include

  • Setting up of a National Security Authority that will take charge of administration and supervision of all investigation of terrorism-related crimes across the country
  • The Authority, comprising a Chairman and five members, will be responsible for prosecuting the accused
  • The appointment of a Security Commissioner (a high-ranking IPS officer) in each State, who will report directly to the Authority
  • Stringent Bail provisions
  • Fast-track Courts
  • Death Penalty (no surprises here)
  • Freezing of assets and bank accounts of those accused and their overt and covert sympathizers and sponsors
  • Punishment for those found guilty of raising funds or sponsoring terrorist acts, conspiracy, harbouring terrorists or threatening witnesses

While the attempts to usher in reform are perhaps well-intentioned, the proposed changes do not seem to be a radical digression from the extant system. The introduction of a National Security Authority will merely augment excessive bureaucratization, the very lapse currently being highlighted post-Mumbai. The Authority seems to be quasi-judicial, with powers to prosecute the accused. In this regard, it is important to note that the framework seems to base itself on the ethos of Tribunalization. While the main purpose of creating alternative judicial forums is to expedite the process of justice delivery, the same attitude cannot be adopted in an issue of such magnitude. Quasi-judicial authorities or fast-track courts are not the solution to tackle terrorism, as it involves a long, extended process of collecting evidence and arriving at conclusions. The allegations raised towards the accused will be, no doubt, grave – it is important that the veracity of claims is brought out through extensive investigation and not speedily dismissed. Missing the target will not only fail to curb terrorism, but also reduce the public’s faith in the legal machinery.

One may question the role of the Security Commissioner in each State; are they acting as officers of this quasi-Court? Will their findings and observations be treated as evidence? Is the State Police involved in assisting the Security Commissioners? What difference does such appointment bring about, apart from adding an unnecessary intermediary? These are questions to which the Government must respond. The onus upon the establishment to effectively tackle terrorism cannot be guised in the form of knee-jerk reactions.

The other provisions seem to belong to the macho-class of anti-terror laws. They have been advertised as tougher, more stringent norms to curb the menace of terrorism. However, tough does not mean efficient, as my next post will hope to convince.

(To be continued…..)

STATE SPONSORED ARMED CONFLICT :

THE SALWA JUDUM AND THE STATE OF CHATTISGARH[1]


Joseph Stalin once said, “One death is a tragedy, a million is a statistic”. Human emotion does not seem to ponder about the deaths occurring in numbers but seems highly passionate about the death of one being. The story of the Salwa Judum in the State of Chattisgarh is no different. Every month more than 300 people die as a result of fighting between two groups and till date more than 40,000 are displaced. The idea of violations and crimes in numbers just seems to baffle us.

 

The ‘Salwa Judum’ in Chattisgarh is termed by the government to be an anti- maoist force formed by the common man himself. For those sitting in the seats of government power, it is an alternative to tackling the Maoists and anti- naxalite factions in the state. But there is something more to it. In December 2005, a fourteen member team from five organizations all over the country conducted an investigation and the revelations were shocking. What the Chattisgarh government calls an anti- naxalite force seems to be more of a state sponsored private army supplied with guns, ammunition and basic supplies to deal with the Maoists.[2] On the basis of the fact-finding, three facts stood out strongly, First, that the Salwa Judum is not a spontaneous people’s movement, but a state-organized anti-insurgency campaign. Second, the situation is not one where the ordinary villagers are caught between Maoist- State clashes. Rather than questioning its own nonperformance on basic development, the government has resorted to clearing villages on a large scale. Tens of thousands of people are now refugees in temporary roadside camps or living with relatives with complete disruption of their daily lives. Prospects for their return are currently dim. Third, the entire operation, instead of being a peace mission as it is claimed, has escalated violence on all sides.[3]

 

The Salwa Judum is a force in the State of Chattisgarh led by elitist landowners, traders and trained by State police personnel. Not only that but these personnel are paid salaries out of State funds.[4] The facts in this regard are disturbing. There are child soldiers prevalent amongst the armed people. More than 40,000 tribal people have been displaced till date and 80% of the population in DanteWara district in Chattisgarh have been victims of the clashes.

 

There is no doubting the fact that atrocities and human rights violations have been committed. More importantly, the problem is that it is a state sponsored armed conflict. To tackle the naxal menace, the state seems to have formed a private army and removed the burden from state forces. In most territories, civilians belonging to the Salwa Judum are seen carrying around guns and ammunition and not even a single state police group is within the area. The problem does not stop here; both the forces are known to kill civilians who should not be a part of this conflict. There is evidence of torture techniques being used, rapes and a host of other human rights violations.

 

Questions need to be answered. Can the state sponsor a private army to handle an internal disturbance? Can the state discharge its constitutional duty to protect, if any and hand it over to private groups? The idea of state sponsored conflicts is clearly in violation of UN principles[5] and other international obligations. Protocol II of the Fourth Geneva Convention categorically puts forward the rights of victims in non- international armed conflict. These include the provisions of basic needs, health and compensation.[6] Furthermore, without doubt, the State has a primary constitutional duty to protect its citizens from any disturbance; external or internal.[7] The maintenance of law and order in the territory of the state is a constitutional obligation that states must follow. The Supreme Court has used this explanation in the cases of terrorism as in Kartar Singh v. Union of India[8], and AN Ray C.J. in ADM Jabalpur v. Sivakant Shukla[9] used this obligation to justify the violation of rights during emergency. If such explanation has been used in these cases then certainly they are applicable in this instance too and no exceptions can be created.

 

The discharge of such an obligation is inherently related to the power- responsibility equation. If power is to be delegated, which in this case is to deal with naxal factions, so must responsibility and both of them can’t be separated. Not surprisingly then, no one seems to be taking responsibility for the violations and deaths of civilians in Chattisgarh while the power seems to have been conspicuously discharged and frequently used and abused.

 

In May, 2007, Nandini Sunder and Ramchandra Guha filed a petition before the Supreme Court challenging the Constitution of the Salwa Judum in Chattisgarh. While the case is still sub judice, I would like to put forth an observation of the Court in this regard. Initially the Bench consisting of Chief Justice KG Balakrishnan and Justice Raveendran asked counsel that when the Central Government in its assessment to control naxalites menace permitted local restraint groups to be armed, “should the court interfere in such a policy. You must understand that naxalites go on killing innocent people in villages. The police are not coming to the rescue of these people. What is wrong in arming the local people to counter the naxal menace.”[10] (Quoting the Court)

 

Only after the atrocities and human rights violations were bought to the notice of the Court did it issue a notice to the Government of Chattisgarh to respond it. It is interesting to note the observation of the Court in this regard. With all due respect, the Court has commented that the formation of a state sponsored army is justified to meet the end of handling the naxalites. In doing so, the Court has again given sanction to a means- end approach. That is, state action is to be held valid if it is purposeful in nature and meets a desired end. Such is the approach taken by the Court in the case of terrorism and emergency. The Naxal problem just got itself temporarily added to the list. This seems to attract Jhering’s notion of law serving as a means to an end[11]. Accordingly, in such a purposeful evaluation of law, even if it sacrifices individual liberty, it will be valid[12]. To quote from Kartar Singh’s case[13] ;

 

“that it has been felt that in order to combat and cope with such activities effectively, it had become necessary to take appropriate legal steps effectively and expeditiously so that the alarming increase of these activities which are a matter of serious concern, could be prevented and severely dealt with.”

 

With this application of this approach, the Court seems to discount the fact that rights and constitutional obligations are inalienable and cannot be discarded to meet an particular end. The point needs to be noted here that not only has the state outsourced its duty to protect its citizens but also has given them a free hand do commit human rights violations and not hold them accountable for killing people. Such state action cannot be justified at any cost. It is hoped that the Supreme Court would take note of such rights violations, disband the Salwa Judum and concentrate on the welfare of the lakhs of tribals in the State who have fallen victim to the clashes. The law has been violated and someone has to be held accountable for it and the State cannot get away with this.

 

 

 


 

[1] Aditya Swarup, B.A.L.L.B. (hons.), NALSAR University of Law, Hyderabad.

 

[2] The Study was conducted by People’s Union for Civil Liberties (PUCL) Chhattisgarh, People’s Union For Civil Liberties (PUCL) Jharkhand, People’s Union for Democratic Rights (PUDR) Delhi, Association for the Protection of Democratic Rights (APDR) West Bengal, and Indian Association of People’s Lawyers (IAPL). The details of the Study can be found at http://www.pucl.org/Topics/Human-rights/2006/salwa_judum.pdf (last visited 12th May, 2007).

 

[3] Ibid.

 

[4] “War in the Heart of India: An Enquiry into the ground situation in Dante Wara District, Chattisgarh”, Independent Citizen’s Initiative, 20th July 2006.

 

[5] UN General Assembly Resolution 49/60 of 1995,Measures to eliminate terrorism : UN Security Council Resolution 1373/ 2001. Also to be noted is the Lockerbie Case (UK v. Libya), 1992 ICJ Rep. 3 where Libya’s sponsoring of activities was held in violation of International Law.

 

[6] Protocol II, Geneva Convention relative to the Protection of Civilian Persons in Time of War, 75 U.N.T.S. 287. Though India is not a party to this Convention, it still has a customary obligation to protect such people.

 

 

 

[7] Article 355, Constitution of India. A reading can also be inferred from the Directive Principles of State Policy.

 

[8] Kartar Singh v. Union of India, (1994) 3 SCC 569.

 

[9] ADM Jabalpur v. Shivakant Shukla, (1976) 2 SCC 521.

 

[10] “Constitution of Salwa Judum Challenged”, THE HINDU, 20th May 2007.

 

[11] R. Von Jhering, “Law as a Means to an End”, MDA Freeman, (ed.), Lloyd’s Introduction to Jurisprudence, 7th Ed. 2001, p. 703.

 

[12] I. Jenkins, “Jhering”, (1960-61) 14 Vanderbilt L. Rev. 169.

 

[13] Kartar Singh v. State of Punjab, (1994) 3 SCC 596. The approach was further upheld by the Court in People’s Union for Civil Liberties v. Union of India, (2004) 9 SCC 580<!–[if supportFields]&gt; TA \l "People’s Union for Civil Liberties v. Union of India, (2004) 9 SCC 580" \s "People’s Union for Civil Liberties v. Union of India, (2004) 9 SCC 580" \c 1 &lt;![endif]–>.

Yesterday was World Torture Day. While there is no need to explain the prevalence of torture in our country, I’d like to use this opportunity to show the attitude of the Courts towards this grave violation. This I’d do by critiquing the case of Masooda Parveen v. Union of India, the judgment which was announced in May this year.

The deceased and husband of the petitioner, Ghulam Mohi-uddin Regoo was one day taken by 17 Jat Regiment soldiers an  brutally tortured. The reason that the wife and most witnesses gave was because he had refuse to pay an extortion fee to the soldiers. The petitioner alleged that her husband was tortured to death by the army and later his body was returned in pieces to her. The explanation given by the Army was that he was leading them to a hideout which was blown up the moment he reached there with the soldiers. Surprisingly no soldier was injured by the blast and the only fatality was Ghulam’s death. Ghulam’s wife, Masooda filed a petition before the Court demanding compensation and a job on “compassionate grounds.”

The Army said that Ghulam was a militant so no ordinary law would apply to them in this regard. They went on further to say that since Ghulam was a militant, Masooda would have to suffer for her husband’s wrongdoing. The Army’s rationale was readily accepted by the Supreme Court which stated that since there is ‘no evidence to say that he was not a militant, so he is presumed one’. It indirectly stated that if the Army identifies a person as a militant he is one until proved otherwise. There was no evidence produced by the Army to support this notion and nothing on record about Ghulam’s mode of death. From what I understand, in a petition for habeas corpus, it is upon the state to show that death was incidental and it is all the more onerous on the state to show so. It further stated,

“We are not unmindful of the fact that prompt action by the army in such matters is the key to success and any delay can result in leakage of information which would frustrate the very purpose of the army action.”

So the Court has violated the ruling in Naga People’s Movement v. Union of India, and given an upper hand to the Army to indulge in such nefarious activities. These are troubled times for the judiciary. An organ that is supposed to be a guardian of human rights and injustices disappoints us by relying on irrational convictions. The support of the Army by the judiciary is unprecedented as is evident in this case. The judicial sanction of torture in the name of national security is a pandora’s box in its true sense. Absolute power corrupts, its usage without any checks is the cornerstone of evil. This time Ghulam was picked up and killed, tomorrow its going to be someone else. The matter could have also been simply resolved by given compensation on compassionate grounds and not accepting guilt as asked for by Masooda. But the Army argued otherwise and now a bad precedent has been set. So we should now be prepared for more people to be branded as terrorists by the Army.

This case did not get the publicity that a situation like Jessica Lal got. It is a reflection of what we Indians think of such instances. ‘We don’t care is someone is blown up into pieces. We would like a rapist to get a death sentence. Kashmiris are likely to be terrorists so they deserve it.”

Such notions are bad publicity. Human rights concerns are non existent in a majority of Indians. For them, torture is good if a person is caught. But what if the person might not be a terrorist? I used to admire Dershowitz a lot. Lately he stated something to the effect that torture is good if it produced desired results (don’t know for sure). I am losing faith in the system. There is injustice everywhere. Right from my college to international issues. To what extent can one stand all this is the question? Do I just sit and watch or is there something I can do?