IN THE HIGH COURT OF JUDICATURE AT PATNA CWJC No.4394 of 2004 ***** 1. Jan Chaukidar (Peoples Watch), through its Convener Basant Kumar Choudhary, son of Sri Hemant Kumar Choudhary Resident of North Sri Krishnapuri, P.S. Sri Krishnapuri, Town and District Patna. 2. Gopal Prasad Singh son of Sri Bakhori Singh Resident of 236, Nehru Nagar, P.S. Patliputra, Patna-13. …. …. Petitioners Versus 1. Union of India, through Secretary, Department of Finance, Govt. of India, New Delhi. 2. Central Board of Director Taxation, New Delhi. 3. Mr. Yashwant Sinha, father‟s name not known to the petitioner Minister of Foreign Affairs, Govt. of India, New Delhi. 4. Director, Central Bureau of Intelligence, New Delhi. 5. Director of Revenue Intelligence, Govt. of India, New Delhi. 6. Unit Trust of India through its Chairman, Unit Trust of India House, Mumbai Bithal Das Marg (New Marine Lines), Mumbai-400 020. 7. Reserve Bank of India, through the Governor, Mumbai. …. …. Respondents ----------- For the Petitioners : Mr. Arbind Kumar Advocate For the Respondent No.1 : Mr. Sudhir Singh, A.S.G. Mr. Sarvdeo Singh, C.G.C. For the Respondent No.4 : Mr. Bipin Kumar Sinha, Standing Counsel for C.B.I. ----------- P R E S E N T Hon'ble the Chief Justice & Hon'ble Mr. Justice Kishore K. Mandal ----------- Dated, the 5th December, 2008. By this writ petition, filed in the nature of public interest litigation, the following reliefs are sought: - (i) that a writ/direction may be issues restraining the respondent no.1 and 2 from issuing a tax free - 2 - bonds worth Rs.5000/- Crore to meet the short fall resulting from foreclosure of seven U.T.I.-I. (ii) That a writ of mandamus may be issued commanding the respondent-C.B.I. to probe into the role of respondents 1, 3, 6 in illegal siphoning of Rs.2800/- Crores and the resultant tax evasion through the Mauritius route under the cover of Double Taxation Avoidance Treaty. (iii) That writ of mandamus may be issued commanding the C.B.I.- respondent to probe into role of U.T.I. and the then Finance Minister in bailing out the Calcutta Stock Exchange in May, 2001 by buying Rs.25 crore worth of D.S.Q. Software at a price which was sure to collapse. (iv) That the writ of mandamus be issued commanding the C.B.I. to probe and fix criminal liabilities on responsible persons into the various acts of commission and omission by the authorities in U.T.I. resulting into loss of thousands of crores of public money by way of short falls in the value of U.S.-64 and M.I.P. Schemes of U.T.I.” 2. It is alleged that in March, 2001 stock market crashed. The crash was not ordinary but a result of manipulations. A Joint Parliamentary Committee („JPC') was set up on 26th April, 2001, to probe the market crash. The JPC submitted its report to the Parliament in December, 2002. The report of the Joint Parliamentary Committee is in two volumes; the first volume relates to market crash and the other is with regard to freezing of U.S.-64 scheme in June, 2001. It is stated that on 2nd July, 2001, the Unit Trust of India came under pressure due to the massive fall in its share market value of its flagship scheme US-64. The management announced freeze on sale and purchase of its shares for six months after which it was hoped that - 3 - value of shares would rise. It is alleged that major part of the funds raised by the Unit Trust of India in US-64 and M.I.P. schemes were supposed to be invested in debt schemes for reducing risk factors but on the other hand a significant amount was invested in equity; that resulted in huge loss to Unit Trust of India because of fall in prices of the shares of the companies in which the investments were made. According to the petitioners, by such loss, the savings of middle class to the tune of Rs.20000 crores were lost. The petitioners have alleged that such act of Unit Trust of India is nothing but an act of reckless speculation in connivance with brokers and the stock exchanges. The petitioners have also alleged that the Central Government attempted to bail out the Unit Trust of India by using money of taxpayers and thereby protecting the irregular actions of Unit Trust of India. Although, JPC has conducted a probe into stock market scam but no steps have been taken to bring culprits to book. 3. The counter affidavit has been filed by the Central Government through Department of Economic Affairs, Ministry of Finance. The Central Board of Direct Taxes and Unit Trust of India have also filed their respective counter affidavits. 4. That the JPC was constituted to make a report to the Parliament with regard to stock market scam and matters relating thereto in the year 2001 is not in dispute. The terms of reference of Committee are stated in the counter affidavit of the Central Government. The said terms of reference were thus: - “a. To go into the irregularities and manipulations in - 4 - all their ramifications in all transactions, including insiders trading, relating to shares and other financial instruments and the role of banks, brokers and promoters, stock exchanges, financial institutions, corporate entities and regulatory authorities. b. To fix the responsibility of the persons, institutions or authorities in respect of such transactions. c. To identify the misuse, if any, of and failures/ inadequacies in the control and the supervisory mechanisms. d. To make recommendations for safeguards and improvements in the system to prevent recurrence of such failures. e. To suggest measures to protect small investors. f. To suggest deterrent measures against those found guilty of violating the regulations.” 5. That the Joint Parliamentary Committee has submitted its report to the Parliament on 19th December, 2002 is an admitted position. 6. The Joint Parliamentary Committee recommended in its report that Unit Trust of India should conduct a review of instances of investments going into default within a short period of sanction indicating possible deficiencies in the investment decision making process. The Government was also asked to present its Action Taken Report within six months of the presentation of the report and further reports of progress of Action Taken until action on all recommendations were fully implemented to the satisfaction of the Parliament. The Government submitted to the Parliament first Action - 5 - Taken Report on 9th May, 2003 and subsequent ATRs are said to have been submitted from time to time. From the affidavit filed by the Central Government, it is apparent that instructions have been issued that wherever instances of irregularities on the part of Unit Trust of India officials come to the notice of the Government, necessary action be taken. The details of some of these actions as set out in the affidavit are thus: - “(a) In July 2001, Government of India appointed a committee under the Chairmanship of Shri S.S. Tarapore (Tarapore Committee) to enquire into activities of UTI to, inter-alia, ascertain whether investment/ disinvestments decisions taken by UTI and in particular in the US-64 schemes in the last ten years were based on commercial or extraneous considerations. The committee identified 89 companies and out of those 89, scrutinized UTI‟s investment in 19 companies. The JPC recommended a thorough enquiry of the secondary market transactions of UTI in the shares of these 89 companies. The Government has already handed over these cases to SEBI for investigation and SEBI has already initiated enquiry. If on the basis of the SEBI report, any instance of criminal negligence of UTI officials comes to the notice of the Government further action regarding filing of FIR with the local police or with CBI will be taken, depending on the nature and severness of the criminality involved. (b) Altogether seven cases have already been registered by CBI and above cases are under investigation. A list of Cases under investigation by the CBI is attached as Annexure „A‟. (c) In addition, in the matter relating to the financing of Sh H C Biyani, broker at Calcutta Stock Exchange (CSE) by Stock Holding Corporation of India Ltd. (SHCIL) under their Sell-n-Cash scheme, on the basis of a complaint from CSE, Kolkata Police have registered a case and the matter is under.” 7. As could be seen that prior to constitution of the - 6 - Joint Parliamentary Committee, the Government of India also appointed a Committee under the chairmanship of Shri S.S.Tarapore known as „Tarapore Committee‟ to enquire into the activities of Unit Trust of India to, inter alia, ascertain whether investments/disinvestments decisions taken by the Unit Trust of India and in particular in US-64 schemes in the last ten years were based commercial or extraneous considerations. The Tarapore Committee gave its report and based on those recommendations further action has been taken. 8. It is pertinent to mention here that Tarapore Committee in its report observed that by and large, over the vast tracts of its operation, the Unit Trust of India has functioned well and the focus on its deficiencies must be viewed constructively with a view to bringing about improvement in its working. 9. As regards bail out plan of the Government of India which is assailed by the petitioners, it is important to notice that the tax free bonds guaranteed by the Government of India has been received well by the investors. If a large number of investors opted for the tax free bonds guaranteed by the Government of India and for conversion of the redemption proceeds of few foreclosed schemes to some other schemes, it can safely be assumed that large section of investors welcomed the steps taken by the Central Government. 10. It needs no emphasis that in the matters of commerce and investment, market decisions are based on market - 7 - positions and such decisions are not amenable to judicial review. Be that as it may, we find that the authorities concerned have taken all necessary actions concerning the scam highlighted by the petitioners and that Actions Taken Reports pursuant to the reports submitted by the JPC are being submitted to the Parliament from time to time, Court‟s intervention in the matter is not at all called for. 11. Consequently, no order needs to be passed in this public interest litigation. It is disposed of accordingly. R. M. Lodha, CJ Kishore K. Mandal, J Pawan/-