IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HON'BLE THE CHIEF JUSTICE MR.J.CHELAMESWAR & THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON THURSDAY, THE 3RD FEBRUARY 2011 / 14TH MAGHA 1932 WP(C).No. 35180 of 2009(S) -------------------------------- PETITIONER: -------------- DR.SURBAHMANIAM SWAMY, A-77, NIZAMUDDIN EAST, NEW DELHI-110013. BY PARTY IN PERSON RESPONDENTS: ----------------- 1. STATE OF KERALA, REPRESENTED BY CHIEF SECRETARY, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. 2. THE PRINCIPAL SECRETARY TO GOVERNMENT, INDUSTRIES (J) DEPARTMENT, GOVERNMENT OF KERALA, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. 3. KERALA STATE INDUSTRIAL DEVELOPMENT CORPORATION, T.C.XI/266 KESTON ROAD, KOWDIAR, THIRUVANANTHAPURAM-695 003, REPRESENTED BY ITS MANAGING DIRECTOR. ADDL.4. UNION OF INDIA, REPRESENTED BY ITS SECRETARY IN THE DEPARTMENT OF FINANCE AND INDUSTRY, NEW DELHI. 5. THE RESERVE BANK OF INDIA, REPRESENTED BY ITS GOVERNOR, MUMBAI. (ADDL.RESPONDENTS 4 & 5 ARE SUO MOTU IMPLEADED AS PER ORDER DATED 5.1.2010 IN WPC NO.35180 OF 2009) WPC NO.35180 OF 2009 - 2 - ADDL.6. AL BARAKAH FINANCIAL SERVICES LTD. REGD. OFFICE, 2ND FLOOR, CHOICE TOWERS, MANORAMA JUNCTION, KOCHI-682 016 (REPRESENTED BY ITS DIRECTOR C.K.MENON) 7. C.K.MENON, SOPWPARNIKA, VALANJAMBALAM, KOCHI-682 016 (ADDL.RESPONDENTS 6 & 7 ARE IMPLEADED AS PER ORDER DATED 16.3.2010 IN IA NO.3636 OF 2010) ADDL.8. SAID MUHAMMED, AGED 61 YEARS, SON OF KUNJIPOKERKUTTY HAJI, RESIDING AT KALLLENEALLL HOUSE, ANAKAYAM P.O., MUNDUPARAMBU VAZHI, MALAPPURAM DISTRICT. (ADDL.8TH RESPONDENT IS IMPLEADED AS PER ORDER DATED 16.3.2010 IN IA NO.3750 OF 2010) ADDL.9. INDIAN CENTRE FOR ISLAMIC FINANCE (ICIF), D-309, ABUL FAZAL ENCLAVE, JAMIA NAGAR, OKHLA, NEW DELHI-110025, REPRESENTED BY ITS GENERAL SECRETARY H.ABDR. RAQEEB. (ADDL.9TH RESPONDENT IS IMPLEADED AS PER ORDER DATED 5.4.2010 IN IA NO.4951 OF 2010) R1 & R2 BY ADVOCATE GENERAL SRI.C.P.SUDHAKARA PRASAD BY SR.GOVERNMENT PLEADER SRI.T.B.HOOD R3 BY SRI.NAGESWARA RAO, SENIOR ADVOCATE ADV.SRI.SAJI VARGHESE ADV.SMT.MARIAM MATHAI R4 BY SRI.T.P.M.IBRAHIM KHAN,ASST.SOLICITOR GENERAL OF INDIA R5 BY SRI.JACOB VARGHESE, SENIOR ADVOCATE ADV.SRI.VIVEK VARGHESE P.J. ADV.SRI.P.J.VINOD JOSEPH ADV.SRI.VARUGHESE M EASO R6 & R7 BY DR.RAJEEV DHAVAN, SENIOR ADVOCATE ADV.SRI.JACOB P.ALEX ADV.SRI.JOSEPH P.ALEX R8 BY ADV.SRI.J.R.PREM NAVAZ ADV.SMT.SARITHA DAVID CHUNKATH R9 BY ADV.SRI.P.K.IBRAHIM ADV.SMT.K.P.AMBIKA ADV. SRI.C.KHALID THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 14/12/2010, ALONG WITH WPC NO. 10662 OF 2010 THE COURT ON 03/02/2011 DELIVERED THE FOLLOWING: WP(C) NO.35180 OF 2009 APPENDIX PETITIONER'S EXHIBITS: EXT.P1 PHOTOCOPY OF ORDER, GO (RT) NO.1336/2009/ID DATED 14.10.2009 ISSUED BY THE 2ND RESPONDENT REFERRED TO IN THE WRIT PETITION EXT.P2 PHOTOCOPY OF REPLY ISSUED BY THE 3RD RESPONDENT VIDE REF.NO.CHN/RIA/09/985/22 DATED 10.11.2009 TO SRI.T.G.MOHANDAS EXT.P3 PHOTOCOPY OF ADVERTISEMENT FOR FILLING UP OF VACANCIES FOR THE POSITIONS OF CHIEF EXECUTIVE OFFICER (CEO), COMPANY SECRETARY PLACED IN THE WEBSITE OF THE 3RD RESPONDENT. EXT.P4 PHOTOCOPY OF ANSWER DATED 10.11.2009 ISSUED BY THE INFORMATION OFFICER, KSIDC VIDE REF.CHN/RIA/09/985/22 ISSUED TO SRI.T.G.MOHANDAS EXT.P5 PHOTOCOPY OF ANSWER DATED 4.12.2009 ISSUED BY THE INFORMATION OFFICER, KSIDC VIDE REF.CHN./RIA/156/25 ISSUED TO SRI.T.G.MOHANDAS RESPONDENTS' EXHIBITS: EXT.R1(A) TRUE COPY OF THE NEWS ITEM APPEARED IN THE MALAYALA MANORAMA DAILY DT.29.10.2010 EXT.R1(B) TRUE ENGLISH TRANSLATION OF EXT.R1(A) EXT.R1(C) TRUE COPY OF THE NEWS ITEM THAT APPEARED IN THE ISSUE OF 28.10.2010 OF THE ECONOMIC TILES EXT.R5(A) TRUE COPY OF NOTIFICATION NO.DNBS .132/CGM(VSNM)-99 DT. APRIL 20, 1999 EXT.R5(B) TRUE COPY OF THE LETTER NO DNBS(T) NO.147/02.04.029/2010-2011 DT.JULY 26,2010 EXT.R5(C) TRUE COPY OF THE SHOW CAUSE NOTICE DATED OCTOBER 28,2010 EXT.R5(D) TRUE COPY OF ADVERTISEMENT DT.JUNE 14, 2010 SOLICITING DEPOSITS FROM PUBLIC SUBMITTED BY SEYED SHARIAT FINANCE LTD. TIRUNELVELI EXT.R5(E) TRUE COPY OF RETURN IN FORM NBS-3 BY SEYED SHARIAT FINANCE LTD. TIRUNELVELI FOR THE QUARTER ENDED SEPTEMBER, 2010 EXT.R5(F) TRUE COPY OF THE LETTER DATED 20.1.2009 BY M/S.ASSALAM FINANCIAL AND INVESTMENT COMPANY (P) LTD., KOZHIKODE WPC NO.35180 OF 2009 EXT.R5(G) TRUE COPY OF THE LETTER DATED JANUARY 27, 2010 BY M/S. ASSALAM FINANCIAL AND INVESTMENT COMPANY (P) LTD. KOZHIKODE EXT.R5(H) TRUE COPY OF THE CIRCULAR DT.SEPTEMBER 28, 2006 ISSUED BY RBI WITH RESPECT TO FAIR PRACTICES CODE. EXT.R6(A) MEMORANDUM OF ARTICLES OF ASSOCIATION OF AL BARAKAH FINANCIAL SERVICES LIMITED. / true copy / J.Chelameswar, C.J. & P.R.Ramachandra Menon, J. ----------------------------------------------- W.P.(C) No. 35180 of 2009 & W.P.(C) No.10662 of 2010 ----------------------------------------------- Dated this the 3rd day of February, 2011 JUDGMENT J.Chelameswar, C.J. These two writ petitions are filed in public interest. The petitioner in W.P.(C).No.35180 of 2009 is a former Minister of the Union of India. 2. W.P.(C).No.35180 of 2009 is filed with the prayers as follows: “a) call for the records leading to the case and issue a writ of certiorari or any other appropriate writ, order or direction, quashing Exhibit.P1. b) issue such other appropriate writ, oder or direction which this Hon'ble Court may deem fit in the circumstances of the case. c) award costs to the Petitioner”. 3. The impugned order-Exhibit P1 is an Order dated 14.10.2009 evidencing a decision taken by the Government of Kerala. The relevant portion reads as follows: “The Islamic Financial Services (IFS) Industry has grown substantially over the years forming a significant segment within global financial services and is generating lot of interest as an WPs(C).35180/2009 & 10662/2010 - 2 - alternative model of financial intermediation. Growing awareness and demand for investment and financing in compliance with Shariah principles as well as increasing level of affluence have provided a fillip to Islamic Financial Services. With the objective of promoting an interest-free financing entity that follows Shariah principles, Government had entrusted KSIDC with conducting studies and looking into various aspects of formation of an Islamic Investment Company in Kerala for attracting investments in a right manner as per the Shariah of the Muslim Community to the development of the common public at large. The professional studies conducted on this project have concluded that there is a genuine commercial potential for an Islamic Financial Institution based in Kerala that has the potential to become a global payer. 2. The Minister for Industries convened a meeting of investors at Thiruvananthapuram on 15.07.2009 to discuss the formation of Islamic Financial Institution and decided to incorporate a company with 11% equity contribution from KSIDC and the remaining 89% from private investors. 3. The Board of KSIDC had approved a share contribution of Rs.110 Lakhs (11% of the initial paid up Share Capital) to the proposed Company and decided to proceed with further steps for registration of the Company for promoting the Islamic Financial Institution. 4. Govt. have examined the matter in detail and found that the decision of the Board of Directors of KSIDC is within the area of their competence and delegation of powers and WPs(C).35180/2009 & 10662/2010 - 3 - hence accord sanction for proceeding with further steps for registration of the Company.” Parties are referred to hereinafter as they are arrayed in W.P.(C). No.35180 of 2009. 4. K.S.I.D.C. (Kerala State Industrial Development Corporation) the third respondent is a wholly owned company of the first respondent that is the State of Kerala, engaged in promotion of industrial development of the State. The objects of the third respondent are “to promote, establish and execute industrial projects and enterprises for the economic and industrial development of the State of Kerala” and also “to aid, assist and finance any infrastructure projects or enterprises or other projects and to promote and establish companies and associations of private or public character”. 5. The 6th respondent is a company registered under the Companies Act and the same is evidenced by the certificate of incorporation dated 30th November, 2009. A copy of the memorandum of association of the 6th respondent is available in the record from which it appears that the share capital of the company is 1000 crores. It can be seen from the said memorandum of association that 8 individuals subscribed to the memorandum of WPs(C).35180/2009 & 10662/2010 - 4 - association, the details of which are given in the memorandum. Of the said 8 subscribers, 6 are Muslims and 2 are Hindus, a fact which is relevant in the context of the dispute in the case. It is also necessary to mention that of the above mentioned 8 persons 4 appear to be non-resident Indians as it is certified that they came to India on various dates specified in the said memorandum and under a passport. However, the third respondent stated in its counter that they are Indian citizens. What is important is that the third respondent is not a subscriber to the said memorandum though it is stated in Ext.P1 that the Board of Directors of the third respondent decided to proceed with further steps for registration of the company for promoting the Islamic financial institution. 6. In the meanwhile an advertisement inviting applications from eligible persons for filling up of the posts of Chief Executive Officer, Company Secretary, etc. of an unnamed company came to be issued on-line on a website of the third respondent which reads as follows: “WANTED The following Executives for a Public Limited Company with an Authorised Share Capital of Rs.1000 Crores and Head Office at Kochi, promoted with the objective of providing WPs(C).35180/2009 & 10662/2010 - 5 - interest-Finance for projects & services. The company will have Pan India presence to take up activities like PE & Venture Capital Fund, Leasing, Investment in Equity, Mutual Funds, etc.,initially, and will be operating in a fully Shariah compliant manner. 1. CHIEF EXECUTIVE OFFICER The candidate should have professional qualification/Post-graduate degree with sound experience in the relevant field. The CEO shall be responsible for building up the organisation and co-ordinate the overall functioning. He will report to the Board of Directors and the Shariah Advisory Board. 2. COMPANY SECRETARY ACS with minimum 5 years' post-qualification experience. He will report to the CEO. 3. ASSISTANT MANAGER (FINANCE & ACCOUNTS) ACA or ICWA with 1-2 year' post-qualification experience. He will report to the CEO. The age should not exceed 52 years for post-1, 35 years for post-2 and 28 years for post-3, as on 1.9.09. There may be relaxation in age by 5 years in case of deserving candidates. Emoluments will be at part with the best in the industry. Interested persons may send their C.V. with copies WPs(C).35180/2009 & 10662/2010 - 6 - of certificates, recent passport size photograph, on or before 30th September 2009, super scribing the envelope “APPLICATION FOR THE POST OF CEO/COMPANY SECRETARY/AM (F&A)” to: The Managing Director, Kerala State Industrial Development Corporation Ltd., Choice Towers, Manorama Junction, KOCHI - 682 016. Web Site : www.ksidc.org” Though it is not very clear from the said document as to the date on which it was issued it appears that it must have been issued sometime before 30th of September, 2009 as that is the date specified in the said advertisement to be the last date for submitting the application in response to the advertisement. We may also state that the third respondent in his counter affidavit did not choose to rebut to the relevant averments made at paragraph 3 of the writ petition. 7. One factor which requires to be noticed is that by the date of the above mentioned advertisement the 6th respondent company was not even incorporated, apart from the fact that the decision of the State of Kerala to participate in the equity of a company/Islamic financial institution evidenced by G.O.Rt.No.1336 WPs(C).35180/2009 & 10662/2010 - 7 - itself dated 14.10.2009, that is much later than the above mentioned advertisement. These facts may or may not have any bearing on the main issue in the writ petition. We only mention them to indicate the clumsy way in which the matter is handled by the 1st and 3rd respondents. The relevance of the above mentioned advertisement is that it also states that the company will be operating in a 'fully Shariah compliant manner'. 8. In the background of the above mentioned facts the instant writ petition came to be filed in the month of December, 2009. When the matter came up for admission by an order dated 5th January, 2010 a Division Bench of this Court directed that 'the respondents would ensure that the said company does not commence any operation until further orders'. Subsequently the said order came to be modified by another order dated 8th April, 2010 in substance permitting the 6th respondent to carry on such activity as it is permissible in accordance with law, however prohibiting the State and its instrumentalities in any way participating in the business of the 6th respondent company. 9. In the meanwhile another writ petition, that is W.P.(C) No.10662 of 2010 also came to be filed in substance seeking the WPs(C).35180/2009 & 10662/2010 - 8 - same reliefs as the one sought in the other writ petition. It was admitted on 29.3.2010. Both the writ petitions were heard together as common questions of fact and in law arise in both the cases. One additional ground raised in the second writ petition is that the decision of the State of Kerala and the K.S.I.D.C. to participate in the capital structure of the 6th respondent company is an arbitrary decision as such a decision was taken without following any fair and transparent procedure. It is stated in Ground K of the said writ petition as follows: “K. It is submitted that the State Government or the 3rd respondent has not followed any fair and transparent method known to law in choosing the 4th respondent Company as the associate in the venture stipulated in Ext.P1. Therefore the 4th respondent is chosen by the 3rd respondent as their partner without resorting to any open notification or public tender for that matter. The very selection of the 4th respondent was done in a secret and clandestine manner without any element of transparency whatsoever. The entire deals were done behind the back and the offer and agreements etc were done secretly.” 10. The main ground of the attack in both the writ petitions is that the decision of the State of Kerala and the K.S.I.D.C. which is an instrumentality of the State of Kerala to contribute to the WPs(C).35180/2009 & 10662/2010 - 9 - share capital of the 6th respondent is inconsistent with the constitutional obligation of these two bodies to function on secular principles. Though it is not clearly pleaded it was specifically argued by Dr.Subramaniam Swamy that the impugned decision of the State of Kerala would be directly contrary to the mandate contained under Article 27 of the Constitution of India which reads as follows: “27. Freedom as to payment of taxes for promotion of any particular religion.- No person shall be compelled to pay any taxes, the proceeds of which are specifically appropriated in payment of expenses for the promotion or maintenance of any particular religion or religious denomination.” 11. On the other hand, the State and the K.S.I.D.C. pleaded in their counter affidavits that the impugned decision was taken in order to garner huge amounts of unutilised funds from the Gulf countries available with the non-resident Indians working in those countries with a view to utilise such funds for the investment in the State of Kerala for the development of its people by promoting and providing financial assistance to the industries in the State of Kerala. In substance the respondents do not dispute the fact that a decision was taken to participate in the business of the 6th WPs(C).35180/2009 & 10662/2010 - 10 - respondent company. They claim that notwithstanding the references in the Government Order dated 14.10.2009 and the advertisement issued by the 3rd respondent that the intention of the 6th respondent is to function in accordance with the requirements of Shariah, the motive and object of the State of Kerala and the K.S.I.D.C. is purely secular, i.e. to derive a commercial benefit from the business to be carried on by the 6th respondent. Therefore they cannot be accused of flouting the constitutional mandate of running a secular State. It is also the case of all the respondents that notwithstanding the fact that the 6th respondent company proposes to run its business in compliance with the principles of Shariah the 6th respondent is bound to function strictly in accordance with the law of this country. So long as the 6th respondent company so functions the fact that in addition to compliance with the law of the land the company also proposes to comply with a further requirement of running the business in accordance with the principles of Shariah does not make the activity of the company in any way inconsistent with the requirement of the secularism mandated under the Constitution. Therefore the State and its instrumentalities are not prohibited by the Constitution to be WPs(C).35180/2009 & 10662/2010 - 11 - associated with such a business activity of the 6th respondent company. 12. The State of Kerala in its counter affidavit had enumerated the various projects meant for the welfare of the people of Kerala which were planned but could not be implemented due to the shortage of funds. The reasons which prompted the State of Kerala to take the impugned decision and the procedure followed by the State of Kerala in taking such a decision are narrated in paragraph 9 of the counter affidavit. 13. At the outset we wish to deal with a preliminary objection raised by Dr.Rajeev Dhavan, Senior Advocate appearing for the 6th respondent. The substance of the submission is that the petitioners are not bona fide public interest litigants and therefore the writ petitions must be dismissed. In this connection Sri.Dhavan relied upon the judgment of the Supreme Court reported in State of Uttaranchal v. Balwant [(2010) 3 SCC 402]. At paragraph 181 of the judgment the Supreme Court laid down the following directions: “(3) The Courts should prima facie verify the credentials of the petitioner before entertaining a PIL. (4) The Courts should be prima facie satisfied regarding the correctness of the contents of the petition before entertaining a PIL. WPs(C).35180/2009 & 10662/2010 - 12 - (5) The Courts should be fully satisfied that substantial public interest is involved before entertaining the petition. (6) The Courts should ensure that the petition which involves larger public interest, gravity and urgency must be given priority over other petitions. (7) The Courts before entertaining the PIL should ensure that the PIL is aimed at redressal of genuine public harm or public injury. The Court should also ensure that there is no personal gain, private motive or oblique motive behind filing the public interest litigation. (8) The Courts should also ensure that the petitions filed by busybodies for extraneous and ulterior motives must be discouraged by imposing exemplary costs or by adopting similar novel methods to curb frivolous petitions and the petitions filed for extraneous considerations.” It is argued that: (written submission of Dr.Dhavan) “In the present case, Subramaniam Swamy and R.Babu have not disclosed any antecedents or their real interest in the case. The fact that Subramaniam Swamy is well known does not obviate giving details. In the case of R.Babu details are missing altogether. In fact Swamy has filed PIL's which could be taken to be pro- Hindu and Anti-Muslim cause including on Babri Masjid, Ram Setu and now Islamic Banking. R.Babu has hidden the fact that he belongs to a fundamentalist Hindu organization. A PIL cannot be a vehicle for communal baiting or creating communal disharmony.” WPs(C).35180/2009 & 10662/2010 - 13 - 14. We are of the opinion that the submission is to be rejected for more than one reason. The fact that Dr.Subramaniam Swamy took a particular stand either in the case of Babri Masjid or Ram Sethu, in our opinion, does not either make him 'pro-Hindu' or 'anti-Muslim' ipsofacto. Such a stereotyping would have the effect of shutting out all discourse in public sphere. The views held or professed by an individual may or may not be agreeable to others but the cardinal principle on which all democratic systems are based upon to borrow the words of Thomas Paine: “I may not agree with a word of what you say but I shall protect your right to say so”. The 6th respondent does not specify any harm or injury to the public which is likely to result by the examination of the issues projected by the petitioners. On the other hand, the petitioners are projecting far reaching issues of Constitutional law. If the views of the petitioners are eventually accepted the impugned action of the State of Kerala would be Constitutionally impermissible. In our view, such impermissible action would not only be a mere infraction of a Constitutional obligation but would have the effect of disturbing the very foundation of our Constitutional structure. Secondly, assuming for the sake of argument that either or both of the petitioners are WPs(C).35180/2009 & 10662/2010 - 14 - 'Hindu fundamentalists' an undefined expression but for the purpose of the present case (we adopt the definition of the famous contemporary author Karen Armstrong). It means a person of 'militant piety' we see no reason to reject audience. Our Constitution not only assures in theory but also demonstrated in practice that the due process of law would not be denied even to persons accused of in most heinous crimes such as 'terrorism'. Therefore to non-suit the petitioners on the ground that they are allegedly holding some 'militantly pious' views would neither be legally justified nor politically correct. 15. It is not the case of the 6th respondent that the petitioners have some private gain to be derived out of the present litigation. The only submission is that they are resorting to 'communal baiting' or creating 'communal disharmony'. The submission is to be rejected for three reasons. Firstly, the 6th respondent asserts that it is not a company exclusively consisting of shareholders of a particular religious denomination (be it Muslim or other), but only inspired by certain principles of Sharia. Therefore the objection of the petitioners if accepted eventually would affect all the shareholders of the company. Secondly, a legal objection before WPs(C).35180/2009 & 10662/2010 - 15 - a Constitutional Court to a particular practice of the State on the ground that it is inconsistent with the obligations of the State under the provisions of the Constitution in our opinion could never be said to promote communal disharmony. Such a view in our opinion would be 'secular fundamentalism'. Third and the most important reason is that the debate in the instant case may be centred around the 'Sharia' and therefore appear to be dealing with the rights of one religious denomination. But the issue raised transcends all religion. The concept of secularism and the fundamental rights under Articles 25 to 28 are guaranteed to followers of all religions. 16. Before we examine the various submissions in the writ petitions we deem it appropriate to make a brief survey of the letter of the Constitution in so far as it is relevant for the purpose of the present case. 17. The preamble of the Constitution declares that the aim of the Constitution is to constitute India into a sovereign socialist secular democratic republic and also to secure all its citizens justice, liberty, equality and fraternity. In Part III of the Constitution various fundamental rights are guaranteed. Some of these fundamental rights are guaranteed only to the citizens of India while WPs(C).35180/2009 & 10662/2010 - 16 - some are guaranteed to all persons who are subject to the sovereignty of India. Articles 15 and 16 prohibit the State from discriminating against any citizen on the ground only of religion in the matters of access to various public facilities or public employment. Articles 25 to 28 guarantee freedom of religion in its various facets. Clause (1) of Article 25 declares that all persons are equally entitled to freedom of conscience and the right to freely profess, practise and propagate religion. Article 26 guarantees to every religious denomination the rights to acquire and administer property in accordance with law to manage its own affairs in matters of religion and to establish and maintain institutions for religious and charitable purposes. Article 27 prohibits the State not to subject any person to any tax the proceeds of which are to be utilised for the promotion or maintenance of any particular religion. Article 28 on the one hand prohibits any kind of