Column: Courting ideology

Written by Surjit S Bhalla | Updated: Jul 8 2011, 06:25am hrs
The recent Supreme Court order on black money is really good news. It suggests that unrestrained and uncalled for action by the Court in areas where it has little expertise has peaked. Let me explain.

The study of time trends, from the Tulip Mania in 1637 to the 2008 sub-prime crisis, and the 2010 crisis of governance in India, etc, has one characteristic in commonirrational exuberance on the part of the major players. And a major cause of this irrationality is hubris. The reason the UPA lost all control and authority 2009 onwards was because it believed it could do no wrong, and that its ideas and mishaps of governance would not only be tolerated but approved by the people who had given it a strong mandate in the 2009 election. The Congress thought that whatever it proposed was right and damned any objections to its irrationality. In graphical terms, hubris leads to a blow-out or equivalently a collapse, i.e., an extreme turning point is reached.

In the vacuum created by the UPAs lack of leadership, in walked the Supreme Court. In one sense, this is as it should beafter all, that is what checks and balances are about. But this marching in can create problems if the balances transcend a reality check. And this is what seems to have happened with the Supreme Court. Over the last six months or so, the Supreme Court has enjoyed popularity and support for making decisions per se; when the Executive and/or Parliament is either impotent or makes the wrong decisions, the democratic polity will cheer anybody. Witness the outpouring of support for the motley crew of actors in the shape of civil society, media, babas and yoga practitioners. But this support is now waning, and that is happening for two reasons: first, the interlopers have been found wanting on many counts, and second, the traditional decision makers have got the messageeither act rationally and decisively or get shamed, and worse, booted out.

Hubris leads to blindness. In its most recent pronouncement on black money, the Court has most likely over-exposed itself. This 50-page document is historic, make no mistake about it. But historic does not mean goodit just means an extra-important event and, in my opinion, this judgment will mark the peaking of Supreme Courts activism for activisms sake. The black judgment is questionable on several counts, and I will attempt to document the pitfalls.

It is imperative that the drawbacks and implied or implicit errors be thoroughly documented, for it is the Supreme Court one is talking about. It is curious that in its activism the Court has not thought it fit to eliminate its power to make contempt of court judgmentsa heritage from the colonial past that is archaic at best. As present Supreme Court justice Markandey Katju states in his article, Contempt of Court: The Need for a Fresh Look, Much of our contempt law is a hangover from British rule. But under British rule India was not free and democratic How then can the law of those days be applicable today He goes on to say that the power of the court is not to prevent the master (the people) from criticizing their servant (the Judges) if the latter do not function properly or commit misconduct. In other words, the Supreme Court must realise that it is composed of humans, albeit humans with the capacity and power to make laws. And humans, regardless of their stripes, are all too prone to make a mistake now and then. And when they do, it needs to be pointed out emphaticallyfor that is the only check and balance left against the judiciary.

The Black Judgment: Ostensibly, the judgment is about the Hasan Ali case. Ali has been accused of money laundering. In reality, the judgment is a diatribe against economic reforms, capitalism, neo-liberalism, etc. The etcetera, in my humble opinion, has been heavily influenced by a rudimentary knowledge of Marxism. The rest of the time there are more than shades of an (obsolete) eighth grade moral science lecture. That this is so is documented below and in the next article.

In paragraph 5, the judgment states: First and foremost, such large monies stashed abroad, and unaccounted for by individuals and entities of a country, would suggest the necessity of suspecting that they have been generated in activities that have been deemed to be unlawful. In addition, such large amounts of unaccounted monies would also lead to a natural suspicion that they have been transferred out of the country in order to evade payment of taxes, thereby depleting the capacity of the nation to undertake many tasks that are in public interest.

Let us deconstruct this first and foremost statement. There is a clear implication that the money transferred abroad is unaccounted for, i.e., black money. Unaccounted for literally means money for which taxes are owed and not been paid. On this count, the Court does not make an error. But on the inference that all the money sent abroad is by definition black money is patently false.

As is well known, the government of India via the Reserve Bank restricts the transfer of money to $200,000 in any single year. If individuals want to transfer more money, they have to go through the illegal hawala route. But this wealth could be well earned and taxes on it paid. The simple point is that a fair amount of the money going through the illegal route is earned money for which taxes have been paidit is not unaccounted for black money. Elementary, Mr Watson.

There are several other errors of at least interpretation, if not fact, contained in the black judgment. Some of these will be explored in the next article. The citizens of India, experts in various fields, are a human resource waiting to help the judiciary in its endeavor to deliver justice. The Supreme Court should exploit this goodwill by hearing the experts, especially in areas in which it may have little ex-ante expertise.

Regarding inappropriate moral lectures, and as appetite for the instalment tomorrow, let me conclude with the following quote from the judgment. In addition, it would also appear that in this miasmic cultural environment in which greed is extolled, conspicuous consumption viewed as both necessary and socially valuable, and the wealthy viewed as demi-gods, the agents of the State may have also succumbed to the notions of the neoliberal paradigm that the role of the State ought to only be an enabling one, and not exercise significant control. Simple query: is significant control by the state constitutional

The author is chairman of Oxus Investments, an emerging market advisory and fund management firm. Please visit for an archive of articles etc.

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