Amendments to the Prevention of Corruption Act: Attachment and Forfeiture

The 2018 amendments to the Prevention of Corruption Act [PC Act] promise to bring major changes to how corruption offences will be prosecuted in India. The previous posts discussed the creation of a new offence under Section 8 for giving bribes, reforms to corporate liability under the PC through a new Section 9, and major changes to how the regime prosecutes public servants. In this post, I take up the insertion of a new chapter to the PC Act, which will make it possible for law enforcement to target the unlawful gains allegedly made from corrupt conduct. Since this is the last post in this stock-taking exercise, some general observations follow the more specific discussion.

Attachment and Forfeiture: The Text and the 1944 Ordinance

The 2018 amendments have added Chapter IV-A to the PC Act titled "Attachment and Forfeiture of Property". The idea being that persons should not be allowed to profit from corrupt acts, making it necessary for law enforcement to have powers to recover all the tainted assets one procured through PC Act offences. The new Chapter IV-A contains only one provision, Section 18-A, which says:

Section 18-A.(1) Save as otherwise provided under the Prevention of Money Laundering Act, 2002, the provisions of the Criminal Law Amendment Ordinance, 1944 shall, as far as may be, apply to the attachment, administration of attached property and execution of order of attachment or confiscation of money or property procured by means of an offence under this Act. 

(2) For purposes of this Act, the provisions of the Criminal Law Amendment Ordinance, 1944 shall have effect, subject to the modification that the references to "District Judge" shall be construed as references to "Special Judge".

As this straightforward provision suggests, all that Section 18-A does is to apply the Criminal Law Amendment Ordinance, 1944 [1944 Ordinance] to "attachment, administration of attached property and execution of order of attachment or confiscation of money or property" which is the result of PC Act offences. So the procedure under the 1944 Ordinance will be used to govern how the government goes after fruits of corrupt acts. What is this 1944 Ordinance? It was part of a wave of anticorruption measures introduced by an irked British Raj at a time when black-marketing and petty corruption were rife during the times of World War II. It mainly sought to recover money / property that persons gained by cheating Her Majesty's government or misappropriating such property. These were not the only kinds of criminal conduct imagined, and a Schedule to the 1944 Ordinance states the offences to which the procedure applies. Since existing criminal procedures did not clearly envisage this kind of action, the colonial regime fashioned a new process to allow for this recovery. Due to some judicial gymnastics by the Indian Supreme Court [discussed previously on this Blog], a colonial Ordinance (not statute) remains valid in independent India and for several years was the main legal basis for any attempts by the Indian government to seize criminal gains.

The broad outlines of that process are as follows. The process is triggered by law enforcement filing an application, which can be filed even before any criminal case is filed in court [Section 3, 1944 Ordinance]. This is filed before a "District Judge", who has powers to attach the allegedly tainted assets, or an amount equal to the criminal gains made, in the manner prescribed under the Civil Procedure Code 1908 [Section 3, 1944 Ordinance]. The attachment order can be made without hearing the accused if the District Judge is convinced there is some merit in the allegations [Section 4, 1944 Ordinance]. But for such an interim order to be made absolute, a chance to be heard must be given, not only to the accused but to other persons interested in the property too [Section 5, 1944 Ordinance]. If the District Judge is convinced that the application was bogus, she can revoke the order, but if she doesn't then the order will continue to run [Section 5, 1944 Ordinance]. For attachment - a temporary arrangement - to result in transfer of property / money, a criminal case must be filed and end in a conviction [Sections 10 and 13, 1944 Ordinance].               

The Problems with Chapter IV-A

Should persons convicted of corruption be permitted to benefit from their corruptly obtained gains? Arguably not. But, that is only the start of the matter. In this part, I argue that Chapter IV-A is hardly free of problems. The procedure applies to money or property procured by means of an offence. But procured is not defined anywhere. How would it work for public servants? Would "procure" target only the immediate gains made by the corrupt public servant in the form of bribes, or could it apply to the offence of being found in possession of assets disproportionate to your salary? And what about private persons. If the government alleges I bribed my way to get a government license, would this provision enable a seizure of my entire business built on that basis? The choice of having "procure" in Section 18-A stems from the fact that it is part of the language under the 1944 Ordinance. Which brings me to the other, broader aspects of problems with Chapter IV-A. The first of these is a problem of sheer redundancy. As mentioned above, the 1944 Ordinance has a Schedule which details the different offences to which this procedure applies. Item 4-A of that Schedule states that the Ordinance already applied to cases under the PC Act. So what was the need for Section 18-A in the 2018 amendments? Frankly, I haven't the faintest idea. There is then the issue of perpetuating the 1944 Ordinance itself: a procedure that is, in fact, the subject of pending legal challenges before the Supreme Court. I find it difficult to accept that India's Parliament still cannot come up with a new statutory process on the subject and is forced to retain a colonial era ordinance, passed during an emergency, based on arguably tenuous judicial reasoning? 

What makes the decision to retain the 1944 Ordinance for PC Act cases all the more puzzling is the proliferation of attachment and forfeiture provisions across recent statutes. Successive governments have become more enchanted with having these powers to enforce laws. Today, similar provisions are part of the Narcotics, Drugs and Psychotropic Substances Act 1985, Prevention of Money Laundering Act 2002, Benami Transactions (Prohibition) Act 1988 (since 2016), Lokpal and Lokayuktas Act 2014, and most recently the Fugitive Economic Offenders Ordinance 2018. Multiplication of such laws means each statute creates a new authority that will hear such cases before which the concerned law enforcement agency must file a claim. This only adds to the confusion, since it is common for a criminal transaction to be prosecuted under different statutes. Why not streamline the entire process and let one authority blossom from that muck, to consider all cases where the government seeks attachment and forfeiture of allegedly criminal gains? Not only does it help reduce government expenditure in creating and staffing more tribunals and bodies, but it will also help reduce potential conflicts of jurisdiction, and of conflicting legal interpretations coming about. Of course, a single authority will make life a lot easier for the accused persons as well.

Conclusions and Summing Up: New Act, Old Problems

These four posts have managed to take stock of the various key features of the 2018 amendments to the PC Act. What does one make of the changes which will soon become law? Media outlets have broadly been discussing whether or not the bribe-giving offence makes sense, and whether the PC Act now stands diluted in respect of cases against public servants. I think those questions have been answered to some degree through the posts. The bribe-giving offence makes sense, but the benevolent exceptions carry far too many loopholes to be effectively implemented without judicial support. The provisions of the PC Act have certainly been diluted - supposedly to protect honest officers - and this dilution is not as serious if we look at the offences, but more so when we look at the new provisions on getting prior sanctions. In addition to these issues, I also discussed the new regime on corporate criminal liability, which I am surprised has not been the subject of greater attention in the media yet.

But all this is what the new statutory regime is going to be on paper. None of which redresses what is a bigger set of problems with anticorruption measures in India: shoddy enforcement. I have talked about this before on this Blog and I apologise for being repetitive, but at the end of the day all these changes will end up as little more than political brownie points unless serious consideration is given on improving enforcement of the law. Can we really expect major changes to the scene if India's main anticorruption agencies - the CBI and the ED - remain subservient to vested political interests? Can we imagine the government winning cases in court if prosecutors have minimal resources, are poorly paid, grossly overworked, and rarely continue with a case from start to finish? Bringing about those changes requires more than printing new copies of statutes. It requires considerable political effort to generate consensus and then invest serious resources in reforming the legal process. But this is effort that no government is willing to bear as it does not translate into guaranteed political gains. If the new PC Act regime continues to operate without any changes on that structural level, the new legislation will continue to be plagued by some very old problems.

Perpetual Ordinances in India - Part Two

The last post on this point mainly aimed to put the context out there of the point of discussion: there are ordinances in force today which were enacted during 1940-1946, and are used quite frequently. The example most common in my sphere of work is use of the Criminal Law (Amendment) Ordinance, 1944: an ordinance brought in to deal with war-time corruption and embezzlement. In the last post, I tried to see what reasons might compel a system to make war-time ordinances permanent without any intervention by the legislature. There didn't seem to be much in it. Barring of course, a reason in the form of the nation's judiciary consistently holding that the ordinance attained legal permanence not warranting any legislative dealing. Here, lets look at the judicial opinion on the point - both before and after independence.

The Privy Council and High Courts before 1950
In 1944 the Privy Council decided King Emperor v. Benoari Lal Sharma & Ors [72 Indian Appeals 57] and upheld the validity of the India & Burma (Emergency Provisions) Act 1940. The issue of its permanence had obviously not arisen yet, this being a dispute before 1946. What this decision is important for is the words used by Viscount Simon L.C. to describe the effect of the 1940 Act. He said the "operation of the words 'for the space of not more than six months from its promulgation' was suspended during the period therein specified." Suspended, not obliterated. The question did directly present itself before the Federal Court in J.K. Gas Plant Manufacturing Co. v. King Emperor [AIR 1947 FC 38].

The Appellants had been condemned by tribunals established by way of a combination of several war-time ordinances. An argument of the Appellants challenged the validity of the tribunal that condemned them, on the grounds that the ordinances must cease to apply after 01.04.1946. This claim was rejected by the Court. It understood the 1940 Act as not merely suspending the six-month validity for ordinances, but making those ordinances "subject to no time limit as regards their extent and validity". The Federal Court had lend support to the views of the Sind High Court [Duninchand Amboomai v. Crown (1947 Cri LJ 494)], and Madras High Court [In Re MS Mehdi (1947 2 MLJ 192)]. The Allahabad High Court arrived at the same conclusion soon after [Sridhar Achari v. Emperor (AIR 1948 All 182)], and within two years there seemed unquestionable validity for the idea of permanent ordinances.

Post 1950 and the Supreme Court 
The now-entrenched position was again followed by the Calcutta High Court in Mahabir Prasad Bajoria v. M.S. Biswas [AIR 1956 Cal 176]. But the seemingly obvious oxymoron of a permanent ordinance was bound to come up before the Supreme Court sooner or later. The validity of the High Denomination Bank Notes Demonetisation (Ordinance) 1946 was challenged and it went all the way to the Supreme Court. Five judges ultimately handed down the decision in Hansraj Moolji v. State of Bombay [AIR 1957 SC 497] and held permanent ordinances, although oxymoronic, were quite legal.  The Court held ordinances made by the Governor General were akin to acts of the legislature, and every act without a time limit is a perpetual act. As the phrase imposing the six month limit was "omitted" for all ordinances during the operation of the 1940 Act, this made them permanent.

This decision follows a simple logic: Ordinance = Act; Act if without time limit = Perpetual Act; therefore Ordinance without time limit = Perpetual Law. QED. I believe this is too simplistic. An ordinance in effect is akin to an Act but this does not mean the two are the same. The court somehow did not consider the fundamental nature of an ordinance being executive action as important. But this is what makes ordinances very, very different. What's more, the court was so content with the text of the Act that it did not deem appropriate to consider the intent or context of the 1940 Act. Neither was any reference made to the 1915 Act made by the British to extend operation of war-time ordinances. In my opinion, some more consideration of these issues was merited.

Conclusion
The Constitution Bench verdict in Hansraj Moolji has sanctified the legality of an irrational and seemingly illegal concept of permanent and perpetual ordinances. I admit, rationality is (sadly) no yardstick to test constitutionality. But colourable exercise of power is, and by allowing perpetual ordinances the court has enabled the executive to do indirectly what it could not do directly. This seemingly harmless pre-independence era relic of perpetual ordinances can be used to devastating effect if you think about it, and install a rather grim version of the "Ordinance Raj" some people have been fearing.

(the title of this post was changed from Permanent Ordinances in India - Part Two to Perpetual Ordinances in India - Part Two on 24.08.2015)

Perpetual Ordinances in India - Part One

The fact that a thing such as "perpetual ordinances" exists should strike you as rather odd. Well, maybe not if you had the chance to glance through the Law Commission's recent reports on obsolete laws (or some news reports about the Law Commission's work). The Law Commission over a course of what are currently four reports (available here) has highlighted several ordinances created during the Second World War continue as valid laws today. Not only do I find it very interesting that pre-independence ordinances govern us today, but also the very idea of a perpetual temporary law strikes me as brilliant. I admit, it is quite common for India to have arcane laws which don't matter as you might be thinking. But these ordinances don't always fall into that harmless category: the 1944 Criminal Law (Amendment) Ordinance is actively used today in litigation to attach properties. Can this be legal? Well, yes. Should it be so? Honestly, No. Part one of this two part entry considers the history behind perpetual ordinances.

Brief Background

Ordinances are peculiar creatures of the law - conferring legislative powers on the executive head of state and blurring the dearly held separation of powers model. While some (including the current NDA government) would argue ordinances are essential to ensure the state machinery keeps running where parliament takes too long to deliberate. Others call this a convenient backdoor for the ruling government to enforce its decisions when it fails to convince in parliament. Perhaps to balance both views, most ordinances come with stipulated time limits. Ordinances in India both before and after 1950 came with an upper limit of six months, following which they would automatically be repealed.

Few would argue though about the necessity of swift decision-making in particular situations, such as war. It was during the Second World War that the Colonial Government introduced a mechanism for swift decisions in the India and Burma (Emergency Provisions) Act, 1940. The Act did not create any law, but did alter this idea of limited ordinances. Broadly, the six month limit on operation of ordinances was done away with for ordinances passed during a time frame set out by the Act. A hugely convenient measure in an era where legislation was the domain of the infrequent meetings of the Governor General in Council (as the 1935 Government of India Act had not been enforced in its entirety). 

A Story of Two Wars

This was by no means extraordinary. In fact, the British had done the same thing during the First World War with the Emergency Legislation Continuance Act, 1915. Barring linguistic differences, it is difficult to say that the laws pursue differing objectives. The 1915 Act recognised that "owing to the state of war existing between His Majesty the King Emperor and certain foreign powers it is expedient to provide for the continuance in this Act mentioned of the provisions contained in those ordinances". The normally temporary ordinances were made permanent "during the continuation of the present war and a period of six months thereafter" through Section 2 of the Act.

In the 1940 Act, there were no recitals barring the economical reference to this being "an act to make emergency provision with regard to the government of India and Burma". What was vastly different was the phrasing of provisions removing time limits over ordinances. Section 1(3) needs to be quoted at length:

Section 72 of the Government of India Act (which, as set out in the Ninth Schedule to the Government of India Act, 1935, confers on the Governor General power to make Ordinances in case of emergency) shall, in respects Ordinances made during the period specified in section 3 of this Act have effect as if the words: 'for the space of not more than six months from its promulgation' were omitted ....

What happens after 01.04.1946?
This period mentioned in Section 1(3) ran from 27.06.1940 till 01.04.1946. During that six year period, nearly 190 ordinances were brought into force. Would they continue to remain in force beyond six months after 01.04.1946, or would 190 laws lapse as the emergency for which they were enacted ceased to exist? This would have been a telling question, and unfortunately there is little material in the public domain on the deliberations that might have occurred on the subject then. Most of the material makes it appear that there were no discussions. What we have are court decisions, which we shall come to in the next post. But despite not having the deliberations, we do have clear evidence of their conclusions: out of the 190 laws 127 are reported as being allowed to remain in force after 01.04.1946. The others were specifically repealed over the course of time [see, Hans Raj Executive Legislation in Colonial India (1989) and Shubhankar Dam, Presidential Legislation in India (2015)]. 

Conclusion
I avoided discussing judicial opinion here to see whether one can arrive at this conclusion of retaining ordinances through independent reasons. Why would we need to retain ordinances made during the emergency created during Second World War after the emergency ceased. If these laws are useful - what stops a parliament from re-enacting them (as currently happens with ordinances)? The lack of any debate on those 190 odd ordinances in the subsequent parliament of independent India is astounding. I would argue that quick, context-laden, decisions, should be reviewed in a neutral setting. Further, given the peculiar war-focus of those war-time ordinances, it would be best for the default to be termination of those laws with there being need for specific retention. But none of this was done, and we have been left with the strange legacy of colonial executive decisions governing us today. I admit that my involvement in these issues might have biased me into thinking there are no independent reasons, which is why I'd love to have comments.