MUMBAI INSTITUTE OF MANAGEMENT AND RESEARCH

NAME: VISHAL S. TOTE ROLL NO. 1103 DIV. B SUBJECT: BUSINESS ETHICS

Corruption is a characters Cancer

Corruption and hypocrisy ought not to be inevitable products of democracy, as they undoubtedly are today Mahatma Gandhi.

Since Independence we have not gone through a more traumatic situation than the present days. Process of liberalization started in 1991 has resulted in the plundering of the nation by a few who were constantly and vehemently demanding more and more privatization of the very foundation of the Indian Economy, The public Sector. The looting of the public money shall not be justified. Even the strong proponents of neo-liberalization do not have the courage to celebrate the 20th anniversary of the policy of Liberalisation-Privatisation-Globalisation during these days!

CORRUPTION:
There are many definitions of corruption in the literature, most commonly used of which is the World Banks definition: The abuse of public office for private gain. Shleifer and Vishny (1993) define corruption as: The sale by government officials of government property for personal gain. Although the definitions emphasize the public sector aspect of corruption, this does not mean that corrupt activities are non-existent within private sector. Corruption can be seen as a principal agent problem.

There is usually a delegation of authority by the principal to the agent; discretion is given to the agent to act in name of the principal. Corruption occurs when this discretion is used for private benefit by the agent, to the detriment of the principal. The difficulty of detection or lack of accountability completes the picture. In all definitions, private benefit is emphasized; illegality of the ways of obtaining it is the main characteristic of corruption. Corruption literature has close connections with rent seeking literature. The main motivation behind both is the same: redistribute for private gain rather than produce. However, the two are not the same. Property owners have the incentive to influence decisions of those in power and sometimes influence of these interest groups may lead to correct decisions both from the point of view of principal and agent, so influence process may not involve corruption.

Corruption in India is not like an Octopus; but like a cancerous disease which urgently needs severe and hard (even painful) treatment, if not surgery at the earliest. The mixed economy and a strong public sector including the nationalised banks and insurance companies which saved the nation during the time of the recent global economic melt-down have become a golden goose in the hands of a greedy butcher. While those who praise the rate of growth of Indian economy, they consciously forget that we are experiencing a job loss growth and the inequalities are deepening in the society.

The unholy nexus of big corporate-ruling politicians-top bureaucrats is responsible for the shady deals which have led to the increase of black money and hence the prominence of a parallel economy in the largest democracy of the world. All the black money stashed in the secret accounts in foreign banks abroad is part and parcel of this parallel economy. Black money gives birth to black money alone like mother wiper delivers child wipers. If we are not courageous enough to fight and check the corruption and resultant black money, the parallel economy will allow the true economy very soon. It has been said that about 1/3 of Indian economy is now a parallel one and corruption gets institutionalised.

There have been reports that the match-fixing in the international cricket in India which was to the tune of Rs 1,000 Cr. in the 1990s has jumped to a whopping amount of more than Rs 20,000 Cr. in the first decade of 2000. The controversy engulfed the IPL since the beginning days of UPA-II is not a matter to be put into oblivion. The creed of greed has become more powerful than the creed of sportsmanship!

The opportunity to host the 19th Common Wealth Games at Delhi was a moment of pride for this great nation, even though half of its population are either starved or halfstarved. But it is a shame to the whole nation that it turned out to be a Corruptions Wealth Games. Even before the CAG report came, small children of commonsense knew about the day-light robbery (which could not be conducted by mere a handful of individuals alone.)

The 2G Spectrum deal will be giving more and more sleepless nights to the UPA topbrass in the coming days. While three Honble MPs (including one former Cabinet Minister) and some bureaucrats spent their days behind the bars in Tihar, at least some of the players of the unholy nexus may be experiencing the shocks of nightmares on broad day-light. From the Mother of All Scams we may be entering into the era of more and more sophisticated

scams and scandals. It is not the right time to forget the S-band Spectrum deal of the ISRO. Silence may be more powerful than the words at certain times; but it is not a befitting reply to 1.21 Billion citizens from the responsible representatives of the people. The Government has a duty to answer to the people, because the constitution was adopted, enacted and given to themselves by the people of India and the constitution.

For the price-rise, who is to be blamed of? Is it due to the people eating more? The latest Economic Survey Report of the GOI itself admits that commodities of daily use by the common man are under severe inflationary pressures. The help of an economist is not at all necessary for the working population and the poor people to understand that the costs of Food, Fuel, Energy, Health and Medicines, Rent, Education of the children etc are sky rocketing. While the vast majority of the Indian population are trying their best to make both ends meet, the precious natural resources are being looted by the mining-mafia and large corporate houses with the connivance of those who are in power. Lands and the land rights of the tribals, dalits, farmers and agricultural workers are being snatched away. It is just like they make law unto themselves.

The Adarsh Housing Society scam of Mumbai has exposed some dark sides of the economics of war. In the name of the Kargill War-Widows, what the rulers and the elites of the Indian Military has done is an unpardonable crime. Flouting of the concerned laws, rules and norms cannot be excused even if the whole construction is demolished. It is not surprising that corruption has infested the fourth largest armed forces in the World. India has become one of the largest purchasers in the international arms market. (Long live Peace!)

Judiciary also is not a holy-cow. If corruption has put its tentacles into the chambers, who gains and who loses? In this Sovereign, Socialist, Secular, Democratic Republic Judiciary is the custodian of the Constitution and the guardian of the fundamental rights of the people. But if some apples are rotten one can imagine the smell of the whole basket. It is high time for a self introspection than transfers, resignations and blaming the parliaments move for impeachments.

The fourth estate, the media is losing its shine and prestige due to the draining of honesty, integrity and the commitment towards the people as the watch dog of democracy. Media is considered by some emperors of neo-liberalism as a part of their business

kingdom. We have experienced the days of the paid-news. Instances of manipulated news and killing of news have become exposed. It is sad if the politics has become a business and sadder if all the four estates of our democracy have become business. And if business does not have any morals and ethics- it will be just a monster like Frankenstein. Those who try in vain to justify corruption as a side effect of growth will certainly be like naked kings in the streets! Corruption is an important social and ethical problem; fight with it requires changes in values, norms and behavioral patterns of the society. This is usually a long and difficult process. Decades should pass to change deep values of a society. In the mean time, it is possible to combat corruption by changing incentive structures in the economy. If deep causes of the problem are analyzed carefully, a new system of governance can be established, such that, even most opportunist individuals do not find getting involved in corrupt practices profitable. Aim of this thesis is to examine characteristics of the system providing a fertile environment for corruption and to figure out factors stimulating corrupt transactions using game theoretical models. The first two models examine corruption as a kind of transaction between the briber and the bribe. In the models, it is shown that intermediaries sector occur from the profit maximization behavior of agents. This sector, by establishing long term, trust based relationships with bureaucrats, decreases risks occurring from the fact that the two parties involved in a corrupt transaction do not know each other perfectly. This sector, by reducing the likelihood of detection, serves corrupt transactions, and in return for the service it provided, takes commission, so gets benefit. Third model examines a strange type of corruption, a case of (spurious)middlemen obtaining bribe from the public service bureaucrats give, by pretending that he has influence on the acceptance or speed of it. The model tries to detect the characteristics of the environment making such a deception process persistent.

Types of Corruption
Various types of corruption can be defined. Corruption may be bureaucratic or political, briber initiated or bribee initiated, may involve theft or may not, can be centralized or decentralized, internal or external, transactive or extortive, grand or petty, personal or institutional, intensive, nepotistic, etc. According to Ba (1996), external corruption is simply

a transaction between a member of organization and an outsider, as in the case of a bribe taking official.

On the other hand, internal corruption is a kind of collusion between superior and subordinate, through which proceeds from external corruption is transferred to upper levels. Centralized-decentralized and internal-external corruption types are linked in that, centralized corruption is based on a wellorganized internal corruption. In extreme cases the entire political and bureaucratic system can work as a monopoly in determining bribes for supplying public services. As Ackerman (1999) explains, decentralized corruption occurs where there are many public authorities giving independent, complementary services, each determining and collecting their own bribes. Due to the anarchy and unpredictability it create, decentralized corruption can be more distortionary for the businesses than centralized corruption. As a solution to both, it is frequently argued in the literature that, if a system of officers providing the same public service competitively can be established, competition among officers would reduce bribes down to zero. Trans-active corruption is a voluntary agreement between a donor and recipient, benefiting both parties; on the other hand, extortive corruption involves compulsion, imposed on donor to avoid some form of harm on the part of the donor. There is high leveled type of corruption (grand corruption) which involves big projects and big amounts of money in which high level politicians or bureaucrats involved and there is low leveled type of corruption (petty) where small amounts of money given to lower level civil servants just to speed up the procedures or to get small favors. Corruption may aim personal enrichment (personal corruption) or may aim to benefit an institution such as a political party (institutional corruption). Nepotistic corruption occurs when friends or relatives are appointed to public office by making them legally unjustified favored treatment over others.

Levels of Corruption in States

This TII-CMS India Corruption Study 2007, as in the case of the one for 2005, brought out that corruption involving citizens including BPL households, is all pervasive across the States and public services.

No State or service is anywhere near zero corruption level. Nevertheless, taking the degree of variation from State-to-State and service-to-service, the States are grouped into four levels to explain the extent / level of corruption based on a weightage scheme Moderate, High, Very High and Alarming. This grouping and positioning of States is limited to interaction of BPL households in availing the eleven services covered in this study. The service specific reports, covering the eleven services, present the relative position of States in the context of that service. Within each category, the States are arranged alphabetically. Considering significant difference between bigger and smaller States of North-East and others like Pondicherry, Chandigarh and Goa, the grouping is arranged separately for Big or Small ones. The above grouping reflects relative position of States in the context of all the eleven services. Moderate level of corruption does not mean that corruption is tolerable. Nevertheless, for better understanding, the States are grouped based on the level of Corruption in the context of the particular service. Very high and high level indicates that corruption level concerning BPL household is extensive both with respect to perception and experience in that year. Moderate level also indicates that the services are either not within the reach or access of the BPL households or that the extent of corruption level is relatively low. But, the States under alarming group calls for serious introspection, restructuring and even repositioning of certain services meant for BPL households. It is not that high corruption exists in all the services of a State or the position of services in all the States was alarming. In fact, in no State corruption involving BPL households in all the 11 services was very high or alarming. In some services, corruption was moderate but it was very high in the same State in other services. State would be better served if it focuses and seriously review services where corruption level was high, very high and alarming. By doing this, both extent of perception and experience of corruption could be brought down and the gap between the two could be narrowed. In Himachal Pradesh the level of corruption is moderate in all the 11 services studied whereas in the case Madhya Pradesh and Assam, corruption level in all the 11 services was high or very high or alarming. For example, in Delhi and West Bengal, corruption level was moderate in most services surveyed. Among smaller States of NorthEast and UTs, most of the 11 services in Nagaland and Goa had high or very high or alarming

level of corruption. Whereas it was moderate in Chandigarh and Tripura. TII-December 6, 2002.

Causes of Corruption
In the delivery of basic services, it is procedures that were pointed out as the cause of corruption and for their need to be simplified. In the case of need-based services, it is more counseling and sensitizing of the staff and transparency in the processes that needs to be addressed seriously. Establishment of accountability with an internal system of concurrent monitoring is a sine qua non for improving efficiency and curtailing corruption. Such measures could eliminate the compulsions for paying bribe by citizens. Only then middlemen menace could be minimized or eliminated. Because middlemen often work in league with internal functionaries. Citizens felt that absence and non-availability of staffs reinforces the environment for bribe seeking. Similarly, the discretionary powers of the functionaries at the service delivery point, the more the scope for corruption as in Police, Forest and Housing services. On the other hand, in a service which is otherwise perceived as relatively efficient asin the case of Banking Service (also at post offices) 48percent of BPL households feel that procedures arecumber some and are the cause of corruption.

Purpose for paying bribe

One-third or more of BPL households paid bribe in the case of basic services only to get into the very service like getting a new ration card, new connection, new installation or an admission in school. In fact, in the case of need based services, half or more of BPL households either paid bribe for obtaining a certificate, a record, to get registered as eligible, to get an allotment, to get bank loan, or to file a complaint in the police station. Only 25 percent of BPL households in the study were from urban areas. No significant difference is found between urban and rural households in the pattern of their responses, even in the case of services like PDS, school education and water.

Repeat Visits
Corruption is more likely where and when the number of visits a citizen has to make to get a particular service is more. In fact, the number of visits one has to TIICMS India Corruption Study 2007 14

Basic Services Purposes of paying (in that order)

PDS New card, for monthly quota, change address, change shop, addition, license to sell Hospital For bed, outpatient, diagnostic service, medicine, ANC/PNC, operation, certificate, blood School Education (up to class XII) New admission, certificates, attendance/ promotion, scholarship, hostel seat Electricity New connection, meter repair, bill related, meter installation, bill adjustment, agriculture connection, ensure better supply Water Supply Installation / maintenance of hand pump, regularization of unauthorized connection, meter installation, repair of pipe, irrigation water, supply of water tanker

Need Based Services

NREGS Registration / to get selected, issuance of job card, wage payment Land Records/ Registration Income certificate, obtaining land record, sale/purchase deed, mutation, land survey, caste certificate, property tax Forest To pick fuel wood, for cutting trees, for saplings, to collect forest produce, forest land for farming, for grazing Police For filing complaint and FIR, as an accused, remove name as witness, passport verification, verification for job, character certificate, violation of traffic laws Housing Allotment of plot/house, release of house loan, toilet construction, ownership transfer Banking To take loan, open new A/c, pension, withdrawal, deferment of loan installment TII-CMS India Corruption Study - 2007

Major Purposes for Paying Bribe

Make is an indirect indicator for seeking bribe in that service. Such a phenomena also adds to perceptions about the service as a corrupt one. For a BPL household, for example, repeat visits to get registered or to get a card meant loss of wage or opportunity, apart from harassment. There is, additionally, the travel cost of visiting to the point, especially if it is distant from the place of residence.

The number of repeat visits that a citizen has to make to avail a public service, needs to be minimized, if it cannot be altogether be avoided. This survey identifies specific purposes for which BPL households visited the service providers three times or more. For getting a new ration card, 62 percent of BPL households, who had applied for it had to visit the Rationing office three or more times. Even to open a new account in local bank or post office, half of them visited three or more times in the last one year*. Also, for getting selected to get the job card in NREGS, 56 percent of BPL households had to visit three or more times.

Estimation of Bribe
Based on the incidence of bribe paid by sample BPL households, an estimate is made for the total amount paid as bribe by BPL households in the country during the last one year, in the eleven services. This exercise had taken into account the estimate of BPL households by the Planning Commission (Year 2004-05). More than a couple of States have had questioned the Planning Commissions estimate of BPL households. For example, in the case of Orissa, while the State Government puts the figure of BPL households at 4.2 million, the Planning Commission figure was 3.5 million. Since allocation of houses to poor under Indira Awas Yojana, as well as most other targeted programmes is based on the estimates of Planning Commission, the estimate made in this study for the bribe paid by BPL households in the previous year was done using Planning Commissions figures. The total bribe amount involved in a year in BPL households availing the eleven services covered in this study is estimated as Rs. 8,830 million. This could only be a conservative estimate and more an indicative one. The money involved in these estimates appear petty as in the case of NREGS, School Education and PDS, but most of it was paid directly to the functionaries. But the overall perception and damage effect of this petty corruption is much greater and calls for serious consideration of the Government to come up with schemes which would bring down corruption to zero level.

Services Ranking
School Education (up to class XII and Government schools) among 11 services studied stands last in the ranking that is the lowest in the level of corruption. But when one looks at this service individually, it is also entrenched with some corruption involving BPL households. That Police service stood number one corroborates the general impression. But that Land Records / Registration and House/Plot, which are specially tailored for BPL households, stand at two and three in the ranking, should be a matter of concern. While the level and extent of corruption in Police service was high in all States, as if it is universal but the ranks of other services shows variations across the states. Given the nature of need based services which are monopolistic or involve asset creation or volume, these services ranked high on corruption as compared to basic services.

Connections, Transparency and Intermediaries

Corruption is a risky transaction. It is not legally enforceable. Thus, application of the contract largely depends on the relative powers of the parties. The briber may not get the good or service in question even if (s)he paid the price, bribe. The bribee may face blackmail from the briber after delivering the service. As Jain (2001) also mentions about, open announcement of officer about his willingness to engage in a corrupt transaction may attract the best buyer, but also attracts attention of control authorities and rivals or superiors wishing to share corrupt proceeds. Hence, the process must be secret. All three stages of corrupt transactions, searching and negotiating the contract, contract enforcement and post enforcement lock-in, involve risk. Building long-term, reputation-based relationships between the briber and the bribee decreases the risks involved so less transaction costs occur in a corrupt transaction. However, building connections is also costly for the bribee so (s)he weighs the costs of building connections against the gains from less uncertainty involved in corrupt transactions with connected officers. Transparency has two opposing effects on corruption. Since higher transparency causes corruption to be detected more easily, it decreases corruption. Also, transparency makes rules, regulations, procedures more open; so decreases power of public officials. However, transparency may also make identifying key decision-makers easier for outsiders, which may increase incentives to build-up connections for corruption.

Intermediaries are specialized connection builders who decrease the costs involved in building connections. They do this job more efficiently by making the connection building investment once. After the connection is built, individual clients can get benefit of it at much lower costs than cost of building the connection by themselves. Intermediary also gets benefit, by obtaining their commission from the corrupt transaction (s)he helped for. The intermediaries sector that assists public in obtaining the government services, serves to decrease risks involved in offering bribe to an honest officer (from the side of the briber) with integrity or it decreases the probability to want bribe from a whistleblower client (from the side of the bribee).

Heavy red tape, opaque, difficult to understand rules and regulations encourage the establishment of intermediaries sector. Even honest people may prefer working with intermediaries to get the services they are legally entitled; since otherwise they would have to struggle with heavy red tape. Even worse, intermediaries sometimes try to create perceptions of corruption to obtain private benefit, even in the absence of any corrupt demand of the officer. Some intermediaries get more money by saying to the clients that bureaucrats are bribed, even in the case of no occurrence of corruption, pocketing the obtained money.

Oldenburg (1987), mentions about the Indian Land Consolidation Program. He finds out that, to maximize their benefits, middlemen try to spread the rumor that procedures are mysterious, real decisions are made behind scenes, nothing gets done without bribing the officials. Middleman tries to give the image that, he can reach the officials, get the job done, know subtle hints and techniques of passing money. Thus, administration is perceived to be more corrupt, even though real level of corruption is much lower. Land consolidation officials tried to combat claims, but it is very difficult to overcome these rumors. According to Oldenburg (1987), when it is widely believed that there is widespread corruption, this may even lead the official to corruption, as he is assumed to be corrupt anyway.

Costs of Corruption
Corruption has important detrimental effects on the economies. Most frequently cited cost of corruption is that, it discourages entrepreneurs, which in turn affects investment, growth and development of the country. Corruption acts as animplicit tax on entrepreneurs, but it is more distortionary than taxation. Deadweight costs of negotiating and paying bribe, cost of searching for persons to whom bribe must be paid, fees paid to intermediaries, cost of connections building etc. may add up to such large amounts that entrepreneurs may give up profitable investment projects. When corruption increases in an economy, rent-seeking becomes more profitable than investment, which also deters entrepreneurship. Underground economy expands as firms try to escape from corruption costs incurred while obtaining permits, licenses, etc. Public officials may raise entry barriers to the market to keep secrecy of corrupt deals within the existing group of firms, which leads to reduction in the number of firms in the market. Public resources that can be used in productive projects are wasted or used by those in power. Cross country comparisons show that corruption leads governments spend less on education and health and more on public investment. Corruption has also adverse consequences on income distribution. Usually, the poor does not have the resources to be able to pay bribes or to establish connections with politicians or bureaucrats to reach resources. Corrupt income is spent differently from honest income due to the secrecy needs, corrupt proceeds are usually invested and spent in abroad so capital flight is associated with corruption. As a result, redistribution caused by corruption do not bring about multiplier effects for the economy. Corruption lowers the legitimacy of the government. Countries that are more corrupt tend to be more politically unstable (Mauro,1998). Regulatory role of the government is much diminished. Democracy and ethics are also harmed in a corrupt society. Political corruption is perceived to be a more serious problem in democracies than in other forms of political systems, since corruption damages democracies more by undermining its basic principles of equality and rule of law.

Legally sanctioned acts of rent-seeking become illegal act of corruption when at least one of the following three conditions is violated

i)

The process of influencing the decision makersrepresents a competitive game played according to rules that are known to all players,

ii)

Thereare no secret or side payments to the agent,

iii)

The clients and the agents are independent ofeach other in the sense that, neither group benefits from the income earned by the other group(Jain, 2001,78).

Whistleblowers
If the two parties involved in a corrupt transaction obey secrecy with care, it is difficult for the law enforcement authorities to uncover corrupt practices. Therefore, whistleblowers, either clients or third party observers who place complaint from corrupt practices, play important role in corruption detection. However, being a whistleblower is also risky. Whistleblowers become heroes of conscience because they believe in the most basic moral concept: honesty. Because they speak out against waste, fraud, abuse and danger for the good of the rest of us-often at great personalrisk-they should be hailed as major heroes of democracy. Encouraging and protecting whistleblowers can be an effective strategy in combating corruption. For whistleblowers to feel secure, they must be protected from possible retaliations. In USA, organizations like Government Accountability Project, The Cavallo Foundation and statutes like Whistleblower Protection Act and False Claims Act protect whistleblowers and give rewards to reports of major cases of fraud.

CASES CASE-I
Joint Commissioner Of Police And ... vs Dayanand Tyagi on 6 July, 2007
Author: M Sarin Bench: M Sarin, S Bhayana JUDGMENT Manmohan Sarin, J.
1. Petitioners Joint Commissioner of Police and Deputy Commissioner of Police by this Writ Petition, assail the judgment dated 29.9.2003 passed by the Central Administrative Tribunal, Principal Bench, New Delhi. The Tribunal, by the impugned order, had directed that the respondent be considered for regular promotion from 29.3.1994. Further, that he would be entitled to arrears of pay as a consequence to the promotion if accorded and also in case, further regular promotion, if accorded. Petitioners were also given the liberty to seek modification of the earlier order of the Tribunal dated 6.8.2002, if considered appropriate by the petitioners. 2. For appreciation of the grounds in the present writ petition and the matter in controversy, the relevant facts are being set out hereinafter. (i) Respondent was appointed as a Constable on 11.12.1961. In due course, he was promoted to the rank of Assistant Sub-Inspector (Executive) on 6.6.1986. He was confirmed as Assistant Sub-Inspector (Executive) on 9.11.1989. Respondent was promoted to the rank of Sub-Inspector (Executive) on ad hoc and temporary basis w.e.f. 2.5.1991. He was enrolled to undergo Upper School Course w.e.f. 25.2.1992, which he completed in May, 1993. Consequently, his name was brought in the promotion list E-2 Executive w.e.f. 20.10.1993. However, fate ordained otherwise. Respondent was implicated in a case (Crime No. 55) punishable under Section 7 read with Section 13 of the Prevention of Corruption Act on 6.9.1993 when he was allegedly arrested and placed under suspension. Respondent was

accused of demanding and taking bribe of Rs. 1,000/- for giving copies of M.L.C. in a case being investigated by him and a trap had been laid by the Central Bureau of Investigation. (ii) Following the above corruption case, respondent's name was brought on the secret list of persons of doubtful integrity vide an order dated 12.12.1993. A departmental enquiry was initiated against the respondent by DCP (South) on 5.4.1994. Respondent's name in the doubtful integrity list was extended on 29.6.1999 for a further period of one year or till finalization of the criminal case. In the event, charges against the respondent were not proved in the departmental enquiry and he was exonerated therein on 20.6.2000. The period of suspension from 6.9.1993 to 3.8.1995 was treated as period spent on duty for all intents and purposes. (iii) It may be noted that from 1993 to 2000, CBI neither filed the closure report nor the charge sheet. Even though as far back as May, 1995, the Superintendent of Police, CBI while intimating that challan had not been filed, had referred the case for regular departmental enquiry for a major penalty. It was only on 15.5.2003, i.e. after a gap of nearly 10 years and after the superannuation of the respondent on 30.4.2002, that the charge sheet was filed. In the event, vide judgment of 10.7.2006, the Special Judge CBI held that the defense of the respondent stood reasonably established and it had rendered the prosecution case highly doubtful, consequently, he acquitted the respondent, bringing the curtain down finally. (iv) Following the exoneration of the respondent in the departmental enquiry on 20.6.2000, he claimed that he was entitled to be promoted with all consequential benefits w.e.f. March, 1993. Petitioners did not acceded to the same resulting in the respondent filing OA No. 2954/2001. The Tribunal disposed of the said OA holding that the respondent's name would have to be removed from the secret list from inception, i.e., from 9.9.1993 and his claim for promotion was to be considered from the date his next junior was promoted. Notwithstanding that his name was in the Agreed List, directions to promote the respondent and grant of consequential benefits were given. On the petitioners not complying with the order of Tribunal, a Contempt Petition was filed and the Tribunal directed the petitioners to re-consider the matter in the light of the decision in the case of Union of India v. K.V. Jankiraman reported at . Petitioners thereupon passed an order granting

proforma promotion to the respondent from 29.3.1994 to 30.4.1994 instead of regular promotion. Petitioners also rejected the respondent's claim under Fundamental Rule 17. Respondent's attempt to file another Contempt Petition failed and he was permitted to challenge the above order by filing a fresh OA. This led to the respondent filing OA No. 3074/2002 wherein the impugned order referred to earlier was passed. 3. Learned Counsel for the petitioners in support of the writ petition in assailing the impugned order passed submitted that a criminal case was pending against the respondent following the filing of the charge sheet. The subsequent filing of the charge sheet by C.B.I. had been ignored while passing the impugned order. This plea is not of any avail to the petitioner as already noted vide judgment dated 10.7.2006, the respondent has been acquitted and the Court has held that the respondent has been able to establish his defense making the prosecution version highly doubtful. Learned Counsel for the petitioner next attempted to urge that though the Tribunal had relied on the judgment in Union of India v. K.V. Jankiraman (supra). The said case would not come to the rescue of the respondent inasmuch as in Jankiraman's case no criminal proceedings were pending against the delinquent employee while in the present case, at the relevant time, criminal prosecution was pending. Counsel for the petitioner further relied on Baldev Singh v. Union of Indiareported at wherein the Court held that simply because there had been acquittal, the same would not automatically entitle the employee to get salary for the concerned period especially when he was not in actual service. It relied on the rationale of 'no work no pay'. Reliance was also placed onUnion of India and Ors. v. Jaipal Singh reported at , which reiterated the above position. Lastly, counsel relied on fundamental Rule 17(2), whereunder "an officer shall begin to draw the pay and allowances attached to his tenure a post w.e.f. the date when he assumes the duties of that post and shall cease to draw them as soon as he ceases to discharge those duties" relying on the above, it was said that as the respondent had been performing the duties, he was not entitled to the pay and allowances for the period in question and proforma promotion had been rightly awarded to him. 4. We have considered the submissions made by learned Counsel for the petitioner. Before we deal with the merit of the case, certain salient features which emerge from the factual position as noted earlier need to be recapitulated. 5. The incident in question is of 6.9.1993. No charge sheet had been filed or criminal prosecution launched till 15.5.2003 i.e. for a period of nearly 10 years. In these

circumstances, it cannot be said that simply because criminal prosecution is launched in 2003 respondent is to be denied promotion prior thereto especially when he was completely exonerated in the departmental enquiry dated 20.6.2000. Moreover, as noticed above, even in the criminal case, he has been acquitted with the Court holding that the defense of the respondent stood established and prosecution case was highly doubtful. 6. Accordingly, this is not a case where the respondent can be said to be held guilty or where he has been visited with any penalty even of censure. The principles laid down in Jankiraman's case would clearly apply. The Supreme Court in the case of K.V. Jankiraman held "we are, therefore, broadly in agreement with the finding of the Tribunal that when an employee is completely exonerated meaning thereby that he is not found blameworthy in the least and is not visited with the penalty even of censure, he has to be given the benefit of the salary of the higher post along with the other benefits from the date on which he would have normally been promoted but for the disciplinary/criminal proceedings." It was further held "whether the officer concerned will be entitled to any arrears of pay for the period of notional promotion preceding the date of actual promotion, and if so to what extent will be decided by the concerned authority by taking into consideration all the facts and circumstances of the discipoinary proceedings/criminal prosecution. Where the authority denies arrears of salary or part of it, it will record its reasons for doing so." 7. We find that the Tribunal has correctly appreciated the legal position and decided the matter in accordance with law by noticing the factual position of the case. Baldev Singh's case (supra) on which reliance is placed, is distinguishable as in the said case, the employee's services were terminated following the arrest and conviction in the criminal case. In appeal, he was acquitted. The army personnel neither worked nor offered to work during the relevant period and it was even a case of failure to resume duty. Hence, the Court declined the arrears. Similarly, Union of India v. Jaipal Singh would not advance the petitioner's case as the same is distinguishable. This was a case where services had been terminated on account of being charged for criminal offences and conviction by Trial Court. The High Court had acquitted him. However, the Government did not reinstate him despite the acquittal. The High Court had directed reinstatement with full back wages. The Court held in the circumstances that the employee was entitled to back wages only from the date of acquittal and not from the earlier period. This case again is distinguishable. On the other hand, in the present case, respondent has been duly granted the promotions and the name appearing in the

agreed list was not a bar to the grant of promotion as it was the result of the petitioners' own action that the respondent was not permitted to work on the promotion post and it was on account of no fault of the respondent that he was denied the benefit of promotion. In these facts and circumstances and following the ratio of Jankiraman's case, respondent has been rightly granted the benefit of all consequential benefits from the date of his promotion. The writ petition has no merit and is dismissed.

CASE-II
Supreme Court of India
Lalu Prasad @ Lalu Prasad Yadav vs State Of Bihar Through Cbi (Ahd) ... on 6 December, 2006
Author: . Arijit Pasayat Bench: . A Pasayat, S Kapadia CASE NO.: Appeal (crl.) 1276 of 2006 PETITIONER: Lalu Prasad @ Lalu Prasad Yadav RESPONDENT: State of Bihar Through CBI (AHD) Patna DATE OF JUDGMENT: 06/12/2006 BENCH: Dr. ARIJIT PASAYAT & S.H. KAPADIA JUDGMENT: JUDGMENT (Arising out of SLP (Crl.) No. 5865 of 2005) WITH CRIMINAL APPEAL NO. 1278 OF 2006 (Arising out of SLP (Crl.) No. 5866 of 2005) Dr. ARIJIT PASAYAT, J

Leave granted. In both these appeals the basic question raised relates to the validity of sanction to prosecute the appellants for offence punishable under Section 13(1)(e) read with Section 13(2) of the Prevention of Corruption Act, 1988 (in short the 'Act'). Sanction has been accorded both under the provisions of Section 19(1)(b) of the Act and Section 197 of the Code of Criminal Procedure, 1973 (in short the 'Code'). Plea relating to cognizance of the offence is that previous sanction is necessary under the Act if the public servant does not hold the same office which he allegedly abused on the date when the cognizance was taken by the Court. Stand of the appellants is that even though a public servant does not hold the same office and holds some other office, then also sanction is necessary. It is stated in that context that the decision in R.S. Nayak v A.R. Antulay (1984 (2) SCC 183) is per incuriam because the effect of Section 19(2) of the Act had not been considered. It is also submitted that the effect of the recommendations made by the Law Commission in its 41st report which necessitated sanction in terms of Section 197 of the Code extending the protection of sanction for a retired public servant as well should have been also extended under Section 6(1) of the Prevention of Corruption Act, 1947 (in short the '1947 Act') corresponding to Section 19(1) of the Act. This according to us is a case of causus omissus. The decision in R. S. Nayak's case (supra) cannot be regarded as a binding precedent in respect of the issues which did not relate to the three questions which were required to be decided in that case. The order rejecting the plea of lack of sanction and the jurisdiction is required to be passed by a speaking order. The Secretary to the Government had no jurisdiction to sign the sanction order on the instructions of the Governor. Therefore, the so-called sanction of the Governor has no sanctity in the eye of law. There is no material to show that the alleged dis-proportionate assets were relatable to a period when Smt. Rabri Devi was the Chief Minister. At that time she was also either holding the office of MLC or MLA and, therefore, the sanction granted has no validity. It is to be noted that in Lalu Prasad Yadav's case the sanction had been given by the Governor. The prosecution did not obtain the sanction separately so far as the appellant Rabri Devi is concerned as she was only a house wife and not a public servant during the relevant period. In the sanction accorded in respect of the appellant- Lalu Prasad Yadav, it has been expressly mentioned that the acts of Smt. Rabri Devi amounted to aiding and abetting of commission of offence under Section 13(1)(e) by her husband Lalu Prasad Yadav and she was thus liable to be prosecuted for offence punishable under Sections 107 and 109 of the Indian Penal Code, 1860 (in short the 'IPC').

One of the submissions made by Shri P.P. Rao, learned senior counsel appearing for the appellants is that the courts below had erroneously come to the conclusion that both in the case of discharge and for framing of charge no reasons are necessarily to be recorded. It is submitted that report of Dr. Bakshi Tekchand Committee which formed the basis of inserting Sub-section (2) of Section 6 of 1947 Act admits of no doubt and the same envisages two offices being held by the public servants one at the time of alleged offence and other at the time of taking cognizance. Learned counsel for the respondent-State submitted that none of the pleas raised have any substance in law. So far as the plea relating to causus omissus is concerned the position in law is as follows: Two principles of construction one relating to causus omissus and the other in regard to reading the statute as a whole appear to be well settled. Under the first principle a causus omissus cannot be supplied by the Court except in the case of clear necessity and when reason for it is found in the four corners of the statute itself but at the same time a causus omissus should not be readily inferred and for that purpose all the parts of a statute or section must be construed together and every clause of a section should be construed with reference to the context and other clauses thereof so that the construction to be put on a particular provision makes a consistent enactment of the whole statute. This would be more so if literal construction of a particular clause leads to manifestly absurd or anomalous results which could not have been intended by the Legislature. "An intention to produce an unreasonable result", said Danackwerts, L.J. in Artemiou v. Procopiou (1966 1 QB 878), "is not to be imputed to a statute if there is some other construction available". Where to apply words literally would "defeat the obvious intention of the legislature and produce a wholly unreasonable result" we must "do some violence to the words" and so achieve that obvious intention and produce a rational construction. (Per Lord Reid in Luke v. IRC (1963 AC 557) where at p. 577 he also observed: "this is not a new problem, though our standard of drafting is such that it rarely emerges". It is then true that, "when the words of a law extend not to an inconvenience rarely happening, but due to those which often happen, it is good reason not to strain the words further than they reach, by saying it is causus omissus, and that the law intended quae frequentius accidunt." "But," on the other hand, "it is no reason, when the words of a law do enough extend to an inconvenience seldom happening, that they should not extend to it as well as if it happened more frequently, because it happens but seldom" (See Fenton v. Hampton (1858) XI Moore, P.C. 347. A causus omissus ought not to be created by interpretation, save in some case of strong necessity. Where,

however, a causus omissus does really occur, either through the inadvertence of the legislature, or on the principle quod semel aut bis existit proetereunt legislators, the rule is that the particular case, thus left unprovided for, must be disposed of according to the law as it existed before such statute - Causus omissus et oblivioni datus dispositioni communis juris relinquitur; "a causus omissus," observed Buller, J. in Jones v. Smart (1 T.R. 52), "can in no case be supplied by a court of law, for that would be to make laws." The principles were examined in detail in Maulavi Hussein Haji Abraham Umarji v. State of Gujarat and Anr. (JT 2004(6) SC 227). The golden rule for construing all written instruments has been thus stated: "The grammatical and ordinary sense of the words is to be adhered to unless that would lead to some absurdity or some repugnance or inconsistency with the rest of the instrument, in which case the grammatical and ordinary sense of the words may be modified, so as to avoid that absurdity and inconsistency, but no further" (See Grey v. Pearson (1857 (6) H.L. Cas. 61). The latter part of this "golden rule" must, however, be applied with much caution. "if," remarked Jervis, C.J., "the precise words used are plain and unambiguous in our judgment, we are bound to construe them in their ordinary sense, even though it lead, in our view of the case, to an absurdity or manifest injustice. Words may be modified or varied where their import is doubtful or obscure. But we assume the functions of legislators when we depart from the ordinary meaning of the precise words used, merely because we see, or fancy we see, an absurdity or manifest injustice from an adherence to their literal meaning" (See Abley v. Dale 11, C.B. 378). The plea that the effect of Law Commission's report and Dr. Bakshi Tekchand report has not been considered by the Legislature and therefore this is a case of "causus omissus" is clearly without any substance. This Court had occasion to deal with a similar plea in Kalicharan Mahapatra v. State of Orissa (1998 (6) SCC 411). It has been noted as follows: "13. It must be remembered that in spite of bringing such a significant change to Section 197 of the Code in 1973, Parliament was circumspect enough not to change the wording in Section 19 of the Act which deals with sanction. The reason is obvious. The sanction contemplated in Section 197 of the Code concerns a public servant who "is accused of any offence alleged to have been committed by him while acting or purporting to act in the discharge of his official duty", whereas the offences contemplated in the PC Act are those which cannot be treated as acts either directly or even purportedly done in the discharge of his official duties. Parliament must have desired to maintain the distinction and hence the wording in the corresponding provision in the former PC Act was materially imported in the new PC Act, 1988 without any change in spite of the change made in Section 197 of the Code."

It may be noted that Section 197 of the Code and Section 19 of the Act operate in conceptually different fields. In cases covered under the Act, in respect of public servants the sanction is of automatic nature and thus factual aspects are of little or no consequence. Conversely, in a case relatable to Section 197 of the Code, the substratum and basic features of the case have to be considered to find out whether the alleged act has any nexus to the discharge of duties. Position is not so in case of Section 19 of the Act. The plea of causus omissus as raised by learned counsel is at variance with the stand taken in respect of a similar plea in Parkash Singh Badal's case. In that case the stand of learned counsel for the appellant was that the provision does not exist and has to be read into the statute and since the effect of Section 19(2) of the Act has not been considered in R.S. Nayak's case (supra) therefore it is a case of per incuriam. We have examined the issue in the said case and have turned out the plea. In Shivendra Kumar v. State of Maharashtra (2001 (9) SCC 303) it was inter alia observed as follows: "11. On a perusal of Section 6 of the Act, it is clear that previous sanction is mandatorily required for launching prosecution against a public servant who is alleged to have committed an offence punishable under Section 161 or 164 or 165 IPC or under sub- section (2) or sub-section (3-A) of Section 5 of the Act. Indeed the language of the section is in the form of a prohibition against any court taking cognizance of such offences except with previous sanction. The authority/authorities to grant such sanction are specified in clauses (a), (b) and (c) of sub-section (1). Under clause (a) it is laid down that in the case of a person who is employed in connection with the affairs of the Union and is not removable from his office save by or with sanction of the Central Government, of the Central Government. Under clause (b), it is provided that in the case of a person who is employed in connection with the affairs of a State and is not removable from his office save by or with the sanction of the State Government, of the State Government; and under clause (c) in the case of any other person, of the authority competent to remove him from his office. The difference in the language used in clauses (a) and (b) on the one hand and clause (c) on the other, cannot be lost sight of. While in the former, the Central Government or the State Government, as the case may be, is to grant the sanction, under clause (c) it is specifically provided that the authority competent to remove the delinquent public servant from office is one who is competent to grant

the sanction. As noted earlier, Section 6(1)(b) is applicable in the present case. The said provision does not specify any particular officer as the competent authority to grant sanction. It only states that the State Government, without whose sanction the delinquent officer cannot be removed from office/post, is the competent authority to pass the order of sanction. From the sanction order, which is available on the record, it is clear that the Secretary, Medical Education Department passed/signed the order of sanction of prosecution against the appellant on behalf of the Governor. It is not the case of the appellant that the Secretary had no authority to act on behalf of the State Government. It follows that the order of sanction in the present case was passed by the Secretary of the Medical Education Department with the authority of the Governor of the State Government. No material on record has been brought to our notice to show that the Governor had issued any order authorising an officer other than the Secretary of the Department to pass order of sanction in the case. If that was the case, then the appellant should have produced the order or at least raised the contention that an officer other than the Secretary had been authorised for that purpose. No such material appears to have been produced. When the Secretary was being examined in support of the sanction order passed by him such question was also put to him. Reliance is placed on a sentence in his deposition that he is not the authority to remove the appellant. This statement, without further material, cannot form the basis of the contention that the Secretary, Medical Education Department was not competent to pass the order of sanction on behalf of the State Government. The Government functions through its officers. The Secretary is the Head of the Department and the principal officer representing the State Government in the Department concerned. Unless specific material is produced to show that some other officer was competent to deal with the matter of sanction of prosecution against the appellant it can be reasonably assumed that the Secretary of the Department is the competent authority to pass the order of sanction. The object of Section 6 or for that matter Section 197 of the Criminal Procedure Code, which is a pari materia provision, is that there should be no unnecessary harassment of a public servant; the idea is to save the public servant from the harassment which may be caused to him if each and every aggrieved or disgruntled

person is allowed to institute a criminal complaint against him. The protection is not intended to be an absolute and unqualified immunity against criminal prosecution. In a case where it is seen that a sanction order has been passed by an authority who is competent under the law to represent the State Government, the burden is heavy on the party who challenges the authority of such order to show that the authority competent to pass the order of sanction is somebody else and not the officer who has passed the sanction order in question." (underlined for emphasis) That brings us to another question which though may not have any relevance after the rejection of the principal plea, has to be considered because such issues frequently come up for consideration. The question raised relating to recording of reasons at the time of framing of charge is different from a case of opinion on the basis of which an order of discharge of the accused is passed. Sections 227 and 228 of the Code with regard to discharge of accused and framing of charges against the accused respectively in a case triable by Court of Session; Sections 239 and 240 concern discharge and framing of charge in case of warrant, triable by the Magistrate whereas Section 245 deals with discharge and framing of charges in cases instituted other than on the police report, indicates the difference. The relevant provisions read as follows: "227-Discharge: If upon consideration of the record of the case and the documents submitted therewith, and after hearing the submissions of the accused and the prosecution in this behalf, the Judge considers that there is no sufficient ground for proceeding against the accused, he shall discharge the accused and record his reasons for so doing." "228.-Framing of Charge-(1) If, after such consideration and hearing as aforesaid, the Judge is of opinion that there is ground for presuming that the accused has committed an offence which-

(a) is not exclusively triable by the Court of Session, he may, frame a charge against the accused and, by order, transfer the case for trial to the Chief Judicial Magistrate or any other Judicial Magistrate of the first class and direct the accused to appear before the Chief Judicial Magistrate, or, as the case may be, the Judicial Magistrate of the first class, on such date as he deems fit, and thereupon such Magistrate shall try the offence in accordance with the procedure for the trial of warrant-cases instituted on a police report; (b) is exclusively triable by the Court, he shall frame in writing a charge against the accused. (2) Where the Judge frames any charge under clause (b) of sub-section (1), the charge shall be read and explained to the accused and the accused shall be asked whether he pleads guilty of the offence charged or claims to be tried." "239. When accused shall be discharged.(l) If, upon considering the police report and the documents sent with it under Section 173 and making such examination, if any, of the accused as the Magistrate thinks necessary and after giving the prosecution and the accused an opportunity of being heard, the Magistrate considers the charge against the accused to be groundless, he shall discharge the accused, and record his reasons for so doing." "240. Framing of charge.(l) If, upon such consideration examination, if any, and hearing, the Magistrate is of opinion that there is ground for presuming that the accused has committed an offence triable under this Chapter, which such Magistrate is competent to try and which, in his opinion, could be adequately punished by him, he shall frame in writing a charge against the accused. (2) The charge shall then be read and explained to the accused, and he shall be asked whether he pleads guilty of the offence charged or claims to be tried." "245: When accused shall be discharged(1) If upon taking all the evidence referred to in Section 244 the Magistrate considers, for reasons to be recorded, that no case against the accused has

been made out which, if unrebutted, would warrant his conviction, the Magistrate shall discharge him. (2) Nothing in this section shall be deemed to prevent a Magistrate from discharging the accused at any previous stage of the case if, for reasons to be recorded by such Magistrate, he considers the charge to be groundless." This Court in State of Bihar v. Ramesh Singh (AIR 1977 SC 2018) observed as follows: "Reading the two provisions together in juxtaposition, as they have got to be, it would be clear that at the beginning and the initial stage of the trial the truth, veracity and effect of the evidence which the prosecutor proposes to adduce are not to be meticulously judged. Nor is any weight to be attached to the probable defence of the accused. It is not obligatory for the Judge at that stage of the trial to consider in any detail and weigh in a sensitive balance whether the facts, if proved, would be incompatible with the innocence of the accused or not. The standard of test and judgment, which is to be finally applied before recording a finding regarding the guilt or otherwise of the accused not exactly to be applied at the stage of deciding the matter under Sections 227 or Section 228 of the Code. At that stage the Court is not to see whether there is sufficient ground for conviction of the accused or whether the trial is sure to end in his conviction." In Kanti Bhadra Shah and Anr. v. State of West Bengal (2000 (1) SCC 722) again the question was examined. It was held that the moment the order of discharge is passed it is imperative to record the reasons. But for framing of charge the Court is required to form an opinion that there is ground for presuming that the accused has committed the offence. In case of discharge of the accused the use of the expression "reasons" has been inserted in Sections 227, 239 and 245 of the Code. At the stage of framing of a charge the expression used is "opinion". The reason is obvious. If the reasons are recorded in case of framing of charge, there is likelihood of prejudicing the case of the accused put on trial. It was inter alia held as follows: "It is pertinent to note that this section required a Magistrate to record his reasons for discharging the accused but there is no such requirement if he forms the opinion that there is ground for presuming that the accused had committed the offence which he is competent to try. In such a situation he is only required to frame a charge in writing against the accused. Even in cases instituted otherwise than on a police report the Magistrate is required to write an order showing the reasons only if he is to discharge the accused. This is clear from Section 245.

As per the first sub-section of Section 245, if a Magistrate, after taking all the evidence considers that no case against the accused has been made out which if unrebutted would warrant his conviction, he shall discharge the accused. As per sub- section (2) the Magistrate is empowered to discharge the accused at any previous stage of the case if he considers the charge to be groundless. Under both sub-sections he is obliged to record his reasons for doing so. In this context, it is pertinent to point out that even in a trial before a Court of Session, the Judge is required to record reasons only if he decides to discharge the accused (vide Section 227 of the Code). But if he is to frame the charge he may do so without recording his reasons for showing why he framed the charge." But where the question of jurisdiction is raised and the trial Court is required to adjudicate that issue, it cannot be said that reasons are not to be recorded. In such a case reasons relate to question of jurisdiction and not necessarily to the issue relating to framing of charge. In such a case reasons dealing with a plea relating to jurisdiction have to be recorded. In the ultimate, analysis in these appeals is that they are without merit and are dismissed.