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[op-ed snap] New ideas for fighting corruption in India

Note4students

Mains Paper 2: Governance | Important aspects of governance, transparency & accountability

From UPSC perspective, the following things are important:

Prelims level: Not much

Mains level: Curbing corruption via innovative measures


Context

Corruption growing instead of reduction

  1. India’s liberalization that began in the 1980s should have curtailed corruption, but the opposite happened
  2. Even as technological innovations have reduced petty bribery, it has become clear that bigger forms of corruption in India are flourishing

Measures that can help in fighting corruption

  1. Bottom-up coalitions work and work better than individual resistance
  • There can be the formation of an institution called the “business community institution” (BCI)
  • An institution like the proposed BCI is likely to be more effective than the sum total of efforts put in by individuals across the country to reduce corruption
  • The BCI should enlist the support of the media, civil society, and existing social movements like the Zero Rupee Note and the ipaidabribe site, to resonate the anticorruption message

2. Social sanctions and economic incentives work better than legal action

  • If the law is effectively enforced, its penalties are good deterrents
  • Enacting and applying strong laws against corruption is inherently problematic since politicians and officials are the main beneficiaries of corruption
  • Social sanctions can be just as effective, or more so
  • Fear of social ostracism is a powerful consideration
  • An effective system of social sanctions will allow clean firms to experience a lower cost of doing business by being able to access better talent, cheaper capital or stronger pricing power

3. Accurate, publicly available information is essential

  • If workers, consumers, and suppliers of capital are to implement a strategy of penalizing corrupt businesses, they need to know who the clean firms are
  • To achieve this, the BCI will create a transparent rating system of 1 to 3 stars, like the Michelin star system for restaurants, reflecting its assessment of how clean a firm is

4. The verdict of markets favours clean firms

  • Markets are fairly efficient and the Indian stock market has shown tremendous maturity by offering significantly lower returns from non-clean firms
  • Firms with better quality of governance and accounting have yielded higher investment returns than other firms in the recent past
  • The market has delivered this outcome without the existence of an explicit rating system on the quality of governance

5. Corruption as an ailment is similar to obesity, not cancer

  • It is essential to not to think of corruption as cancer, insisting that every malignant cell must be removed or it will come back
  • Corruption should be compared to being overweight or obese
  • The fight against it is hard and slow; victories are partial; sometimes you regress
  • But keeping up the fight by all methods and at all times can mitigate obesity

Way forward

  1. India’s culture cannot be changed, from corrupt to clean, simply by relying on the government to enact and enforce laws
  2. Such a movement can succeed only if young and idealistic workers, consumers, entrepreneurs, managers, educators and the media all play their part and constitute a coalition against corruption

President promulgates Fugitive Economic Offenders Ordinance

Note4students

Mains Paper 2: Polity | Parliament & State Legislatures – structure, functioning, conduct of business, powers & privileges & issues arising out of these

From UPSC perspective, the following things are important:

Prelims level: Fugitive Economic Offenders Ordinance, Fugitive Economic Offenders Bill, Prevention of Money Laundering Act (PMLA)

Mains level: Rise in Fugitive economic offence cases and ways to deal with them


News

Using heavy hand for economic offenders

  1. President of India has promulgated Fugitive Economic Offenders Ordinance that will allow the government to confiscate properties and assets of loan defaulters who flee the country
  2. The Fugitive Economic Offenders Bill was introduced in the Lok Sabha on March 12, but could not be taken up for discussion and passage due to the logjam in Parliament over various issues

Provisions of ordinance

  1. The provisions of the ordinance will apply for economic offenders who refuse to return, persons against whom an arrest warrant has been issued for a scheduled offence as well as willful bank loan defaulters with outstanding of over ₹100 crore
  2. The ordinance seeks to confiscate properties of economic offenders
  3. It provides for confiscating assets even without a conviction and paying off lenders by selling off the fugitive’s properties
  4. Such economic offenders will be tried under Prevention of Money Laundering Act (PMLA)

Defining fugitive offenders

  1. The ordinance defines a fugitive economic offender as a person against whom an arrest warrant has been issued for committing an offence like counterfeiting government stamps or currency, cheque dishonour for insufficiency of funds, money laundering, and transactions defrauding creditors
  2. A fugitive economic offender is one who has left the country to avoid facing prosecution or refuses to return to face prosecution

CVC witnesses a dramatic drop in complaints

Note4students

Mains Paper 2: Governance | Important aspects of governance, transparency and accountability, e-governance- applications, models, successes, limitations, and potential

From UPSC perspective, the following things are important:

Prelims level: The CVC

Mains level: Why is the CVC witnessing this drop?


News

The Central Vigilance Commission (CVC) saw a dramatic drop in the total number of complaints 

  1. The 23,609 complaints was received in 2017 by the CVC
  2. This number was less than half of almost 50,000 complaints received in 2016, and the lowest in the previous five years

Possible reasons behind this drop

  1. According to officials, the system for weeding out duplication of complaints is improved
  2. Also, a few other streamlining exercises undertaken in recent years helped in decreasing the number of fake reports
  3. In majority of complaints the allegations were found to be either vague or unverifiable
  4. However,some experts, said a deeper study was required to assess if the public was losing its trust in anti-corruption bodies because of their perceived inefficiency, quality of investigations and possible manipulations at various levels
    The CVC’s annual report
  5. The annual report itself highlights one possible reason why there is a general public disenchantment with anti-corruption mechanisms
  6. When it receives a complaint, the CVC calls for inquiry reports from the appropriate agencies
  7. As per the laid down procedure, the inquiry/ investigation reports are required to be sent to the Commission within a period of three months
  8. However, it is observed that in a majority of cases, there is considerable delay in finalising and submitting reports to the Commission

Central Vigilance Commission wants to keep an eye on private banks

Note4students

Mains Paper 2: Polity | Statutory, regulatory & various quasi-judicial bodies

From UPSC perspective, the following things are important:

Prelims level: Central Vigilance Commission

Mains level: Corruption incidences in the banking sector and ways to curb them


News

Avoiding future instances of malfeasance

  1. The Central Vigilance Commission (CVC) has urged the Prime Minister’s Office to bring private sector banks under its watch
  2. It has cited the fact that they have been involved in many recent instances of malfeasance

Current provisions

  1. Vigilance officers in all State-owned public sector banks are required to report irregularities and possible wrongdoing to the CVC
  2. Private sector banks are out of the CVC’s purview
  3. They are subjected to statutory audits from the Reserve Bank of India (RBI)

Back2Basics

Central Vigilance Commission (CVC)

  1. CVC is an apex Indian governmental body created in 1964 to address governmental corruption
  2. It has the status of an autonomous body, free of control from any executive authority
  3. It is charged with monitoring all vigilance activity under the Central Government of India, advising various authorities in central Government organizations in planning, executing, reviewing and reforming their vigilance work
  4. The CVC is not an investigating agency. The only investigation carried out by the CVC is that of examining Civil Works of the Government.
  5. The Commission shall consist of:
  • A Central Vigilance Commissioner – Chairperson;
  • Not more than two Vigilance Commissioners – Members

6. The Central Vigilance Commissioner and the Vigilance Commissioners shall be appointed by the President on the recommendation of a Committee consisting of the Prime Minister (Chairperson), the Minister of Home Affairs (Member) and the Leader of the Opposition in the House of the People (Member)

[op-ed snap] Fear of forfeiture: on the Fugitive Economic Offenders Bill

Note4students

Mains Paper 2: Polity | Functions & responsibilities of the Union & the States

From UPSC perspective, the following things are important:

Prelims level: Fugitive Economic Offenders Bill, Code of Criminal Procedure, Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, UN Convention Against Corruption

Mains level: Laws to prevent economic frauds and lacunae in their implementation


Context

The proposed law to curb economic offences

  1. Given the apparent ease with which economic offenders flee India and cock a snook at the banking and judicial systems, the proposed law to seize their wealth is undoubtedly a welcome measure
  2. Its success rides on the slim hope that the threat of confiscation of property will act as a serious deterrent to those seeking to flee or as a big incentive for fugitives to return

Problems with previous laws

  1. From the provision in the Code of Criminal Procedure for attachment of the property of ‘proclaimed offenders’, to sections in Acts targeting smugglers, foreign exchange offenders and traffickers in narcotics, proceedings for forfeiture of property have been marked by shortcomings and procedural delays
  2. Laws like Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, have not exactly been a success
  3. Experience has shown that disposal of confiscated assets is not easy, especially at a price sufficient to recoup losses or pay off all creditors

How new bill overcomes these shortcomings?

  1. The bill provides a fresh legal framework that would enable the confiscation of the property of those evading prosecution by fleeing the country or remaining abroad
  2. Under the Fugitive Economic Offenders Bill, confiscation is not limited to the proceeds of crime and extends to any asset owned by an offender, including benami property
  3. But, such clauses are liable for a legal challenge, especially if there are third party interests and doubts about real ownership

Forfeiture not linked to criminal conviction

  1. The government has justified not linking the forfeiture clause to criminal conviction
  2. It has been citing the principle enshrined in the UN Convention Against Corruption, which India ratified in 2011
  3. The convention envisages domestic laws for confiscation of property without a criminal conviction
  4. This is in cases in which the offenders cannot be prosecuted for reasons of death, flight or absence

Way forward

  1. While the utility and effectiveness of laws are best assessed in the implementation, it is important to ensure they are fair and reasonable
  2. The shortcomings in previous laws must be avoided, and the new legal regime impartially enforced

The Fugitive Economic Offenders Bill, 2017

Note4students

Mains Paper 2: Polity | Functions & responsibilities of the Union & the States

From UPSC perspective, the following things are important:

Prelims level: Fugitive Economic Offenders Bill, 2017

Mains level: Economic frauds in India and measures taken to prevent them


Context

Concerns over fugitive economic offenders

  1. Finance Minister had announced in last year’s Union Budget that the government would soon bring about a law that would allow the state to take possession of properties belonging to such offenders
  2. After the PNB fraud came into light, the Union Cabinet has approved the Fugitive Economic Offenders Bill, 2017

What is the Bill?

  1. The Bill aims to stop economic offenders who leave the country to avoid due process
  2. Offenses involving amounts of ₹100 crore or more fall under the purview of this law

What are economic offenses?

  1. Economic offences are those that are defined under the Indian Penal Code, the Prevention of Corruption Act, the SEBI Act, the Customs Act, the Companies Act, Limited Liability Partnership Act, and the Insolvency and Bankruptcy Code

Who is a ‘fugitive economic offender’?

  1. According to Section 4 of the law, a ‘fugitive economic offender’ is “any individual against whom a warrant for arrest in relation to a scheduled offence has been issued by any court in India, who:

    (i) leaves or has left India so as to avoid criminal prosecution; or

    (ii) refuses to return to India to face criminal prosecution.”

How is a person declared an offender?

  1. A Director, appointed by the central government, will have to file an application to a Special Court to declare a person as a ‘fugitive economic offender’
  2. The Director has the power to attach any property the accused holds

What does the offender have to do?

  1. The Court will issue a notice to the person named a ‘fugitive economic offender’
  2. Within six weeks from the date of the notice, the person will have to present themselves at “a specified place at a specified time”
  3. If the offender fails to do so, they will be declared a ‘fugitive economic offender’ and their properties as listed in the Director’s application will be confiscated

Once the property is confiscated, can the offender file a civil claim?

  1. Section 11 of the Act disqualifies those declared as offenders from either filing or defending a civil claim in court

What happens to the properties?

  1. The Special court will appoint an ‘administrator’ to oversee the confiscated property
  2. This person will be responsible for disposing of the property as well, and the property will be used to satisfy creditors’ claims

Delhi high court designates two special courts to try MPs, MLAs

Note4students

Mains Paper 2: Governance | Important aspects of governance, transparency and accountability, e-governance- applications, models, successes, limitations, and potential

From UPSC perspective, the following things are important:

Prelims level: PIL

Mains level: Very important decision by the high court.


News

Decision of the Delhi High Court

  1. The Delhi high court has designated two “special courts” in the Patiala House Court complex to deal with criminal cases against elected MPs and MLAs from 1 March

HC’s direction

  1. The high court directed that all cases against members of Parliament and members of legislative assemblies that are pending in various courts shall be transferred to the two special courts
  2. All matters before the special courts would be fast-tracked and disposed of within a year

Background

  1. The SC had directed the centre to set up special fast-track courts to deal with cases pending against legislators, in a public interest litigation (PIL)
  2. The PIL had sought a life-long ban on convicted persons from forming a political party or becoming political office-bearers
  3. The court gave the centre six weeks to submit its proposal along with costs
  4. The centre’s scheme to set up 12 such courts to dispose of 1,581 criminal cases pending against central and state lawmakers was accepted by the apex court on 14 December 2017
  5. According to the affidavit submitted by the centre before the Supreme Court, the cost of setting up these courts was Rs65 lakh each

‘Perceived corruption’ list ranks India at 81 among 180

Note4students

Mains Paper 2: Governance | Citizens charters, transparency & accountability & institutional & other measures

From UPSC perspective, the following things are important:

Prelims level: Corruption Perception Index, Transparency International

Mains level: Measures taken to curb corruption and their success


News

Corruption Perception Index

  1. India has been ranked at 81st place out of 180 countries on a ‘Corruption Perception Index’
  2. The index is released by Transparency International
  3. India’s ranking is worse than those of China and Bhutan but better than those of Pakistan and Bangladesh

About the index

  1. The index ranks the countries by their perceived levels of public sector corruption according to experts and businesspeople
  2. It uses a scale of 0 to 100, where 0 is highly corrupt and 100 is very clean

Best and worst countries in terms of less corruption

  1. New Zealand and Denmark top the list, while Syria, South Sudan and Somalia are at the bottom

[op-ed snap] Ombudsman Bill gathering dust in the closet

  1. Background: SC criticizes Union government for delaying the appointment of a Lokpal
  2. A timely message, that efforts to cleanse the economy must be matched by equally strong measures to cleanse public life too
  3. No explanation for the failure to establish an institution even three years after passing the relevant law
  4. Reason for the delay: A minor amendment to the Lokpal and Lokayuktas Act, 2013 pending
  5. To enable leader of the largest party in opposition in LS to join the five-member selection committee, is yet to be passed
  6. Law provides for a five-member panel to select the anti-corruption ombudsman
  7. 5 members: comprising PM, the LS Speaker, the Leader of the Opposition, the Chief Justice of India and an eminent jurist
  8. The hitch is that there is no recognised LoP in the lower House
  9. Speaker can recognise LoP, only the leader of the principal opposition party that has 10% of the total number of LS seats

Protect honest officers, IAS delegation urges Centre

  1. Review: The delegation urged Govt to review some of the provisions of the Prevention of Corruption Act, 1988, and the Criminal Procedure Code, 1973
  2. Why? To ensure that ‘honest and sincere officers’ are not made scapegoats for ‘bona fide’ decisions taken in public interest
  3. Context: Recent suspension of a senior officer in the Home Ministry following the renewal of Foreign Contribution Regulation Act license to Islamic preacher Zakir Naik’s Islamic Research Foundation (IRF)
  4. Such moves by the government would send a wrong signal, demoralising others who take decisions in public interest in good faith
  5. Discuss the utility of Section 13(1) (d) of the Prevention of Corruption Act, 1988 to ensure probity in civil services. Do you think there is a need to amend this section to help bureaucrats to function fearlessly?

Bring corporate corruption under anti-graft law: Parliamentary panel- II

  1. Shield for public servants: A mandatory conditions for probe agencies like CBI to take previous approval of competent authority before conducting any enquiry or investigation against a public servant–including from peon to Secretary
  2. However, such approval will not be necessary for cases involving arrest of a person on the spot on the charge of accepting or attempting to accept any undue advantage for himself or for any other person
  3. Time-bound: Trial of corruption cases within two years time

Bring corporate corruption under anti-graft law: Parliamentary panel- I

  1. Context: The report of the Select Committee of Rajya Sabha on the Prevention of Corruption (Amendment) Bill, 2013
  2. Private sector: In a first, the Committee has recommended criminalising private sector bribery by bringing in corporates and their executives in the ambit of proposed anti-corruption law
  3. Also recommended a maximum jail term of seven years along with fine & punishment for bribe givers too
  4. At present: No law in the country that covers corruption in the private sector or criminalises bribe giving
  5. NGOs excluded: The panel has not agreed with the Govt’s proposal to include NGOs in the jurisdiction of a proposed anti-corruption law and exempted charitable services from it

India ranks 76 in Corruption Perception Index

The 2015 Corruption Perceptions Index clearly shows that corruption remains a blight around the world.

  1. The Transparency International (TI) has put India at rank 76 out of 168 countries in its latest Corruption Perception Index.
  2. The country’s 2015 corruption perception score remains the same as last year’s, showing lack of improvement.
  3. China fared worse than India and Brazil at rank 83 and Pakistan improved its score this year, though its rank remains poor at 117.
  4. Nordic countries– Denmark, Finland and Sweden topped the chart with their clean public sectors as in previous years.

Nuts and bolts / institution building

The Uttar Pradesh Lokayukta controversy highlights the need for greater attention to anti-corruption systems and processes.

  1. Anti-corruption institutions are not magic wands that can be waved at will.
  2. They are no better than their processes and procedures, and they will falter unless the nuts and bolts are of good quality and kept in good repair.
  3. Lokpal movement, which foregrounded the issue of corruption in the national imagination, had a pronounced moralistic streak that, among other things, caused it to distrust and skirt systems and structures.
  4. The entire system was corrupt, it suggested, and therefore, the anti-corruption authority had to exist outside it.
  5. Insufficient clarity about the institutions, systems and protocols that are expected to drive the change is bound to derail it.
  6. In UP selection of Lokayukta, a miasma of ad hoc-ness and arbitrariness suffocated the process.
  7. It could flourish only because the nuts and bolts of the selection procedure of the Lokayukta — the first step towards building the institution — were insufficiently considered.

SC wants interim mechanism to protect whistleblowers

  1. SC has noted that whistleblowers who raise their voice against corruption in govt. need to be protected.
  2. The apex court wants Centre to create a interim mechanism for dealing with complaints of whistleblowers and their safety.
  3. The interim mechanism will be in place till a law is enacted in Parliament.
  4. The bill has been passed by the LS and there is a demand to send it to the Select Committee of the RS.

Anti-corruption bill sent to select committee

  1. The RS referred the Prevention of Corruption (Amendment) Bill, 2013, to a Select Committee after objections over certain clauses.
  2. They pointed to an overlap with the provisions of the Lokpal Act and sought greater clarity.
  3. The long-pending Bill provides for more stringent punishment for bribery, both for the bribe-giver and the bribe-taker.
  4. The Bill also seeks to increase penalty for corruption to a maximum of 7 years from 5 years currently.

Walmart paid millions of dollars in bribes in India: report

 

  1. America’s multinational retail corporation Walmart is suspected to have paid bribes worth millions of dollars.
  2. To help move goods through customs or obtain real-estate permits.
  3. Walmart’s massive bribery efforts is unlikely to bring in any penalty on it.
  4. As its Indian operation does not yield any profit under the provisions of the Foreign Corrupt Practices Act</strong> (FCPA) of the US.
  5. Penalties under the FCPA, connected to the amount of profit the alleged misconduct generated, the payments in India wouldn’t be likely to result in any sizable penalty.

 

Leniency for corrupt officials will weaken judiciary: SC

  1. The penological philosophy behind punishment for offences under the Prevention of Corruption Act, 1988 – There is no room for sympathy or leniency towards a public servant convicted of corruption.
  2. Misplaced sympathy or unwarranted leniency will send a wrong signal to the public, giving room to suspect institutional integrity.
  3. The 1988 Act was amended last year to increase the punishment for corruption.
  4. Min punishment was raised from 6 months to 3 years.

[op-ed snap] Amending the law against corruption

Some amendments fail to address key issues in corruption jurisprudence.

  1. In 2013, the bill proposed to extend the protection of prior sanction for prosecuting public servants to former officials as well.
  2. The ostensible reason was that Section 197 of the Code of Criminal Procedure protected retired officials, while the PCA covered only serving officials.
  3. But the sanction provision ought to have been restricted to prosecutions that flow from deviations from public policy, laws and regulations.
  4. Possessing unexplained assets, being caught red-handed while taking a bribe and misappropriating property cannot be actions in the course of official functions.
  5. A distinction ought to have been made between collusive bribery and bribery under coercion.
  6. Some +ive features – The trial court itself can now deal with the process of attachment of property instead of the district court.
  7. Fixing a time frame for grant of sanction and completion of trial is a welcome feature.

Changes in Act will make graft ‘heinous crime’

  1. The Union Cabinet approved amendments to the Prevention of Corruption Act, 1988.
  2. Amendments provide for classifying corruption as a heinous crime and longer prison terms for both bribe-giver and bribe- taker.
  3. The proposed amendment will also ensure a speedy trial, within two years, for corruption cases.
  4. This will also help in meeting the country’s obligations under the United Nations Convention Against Corruption more effectively


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