Swiss Bank Account and the Rule of Law 

(By K. Ramakumar, Sr.Advocate, High Court of Kerala)

The House of Lords, the highest justicing body in historical England has preferred national security and threat to the Britishers on British streets to the rule of law. This astounding declaration coming from the mother country of the rule of law has astonished many. Our Bhagat Singh was hanged by the Britishers in the name of rule of law. So was Veera Pandya Kattabomman. Yet, that court has now capitulated reversing the Divisional Court on the ground of a threat from a foreign country against detection of fraud in a Swiss Bank Account (See 2008 (4) All E.R. 927).

Remember ADM., Jabalpur ?

A Serious Fraud Office is functioning in England under the superintendence of its Director and the Attorney General of England. It started an investigation into the allegations of bribery by a Defence and Aerospace Company in relation to military aircraft contracts with Saudi Arabia. As the enquiry progressed, Prince Bandar bin Sultan bin Abdul Aziz of al Saud, ordered : - “Get it stopped”, and threatened that the Typhoon Contract was going to be stopped and the intelligence and diplomatic relations would be pulled. The Director of S.F.O. and the Attorney General succumbed to the pressure and decided to discontinue the investigation. The Corner House Research, a nonprofit making organization, sought judicial review of that decision before the Divisional Court. On the argument of the Crown, Moses Lord Justice declared :-

“So bleak a picture of the impotence of the law invites at least dismay, if not outrage. The danger of so heated a reaction is that it generates steam; this obscures the search for the legal principle. The challenge, triggered by this application, is to identify a legal principle which may be deployed in defence of so blatant a threat. However abject the surrender to that threat, if there is no identifiable legal principle by which the threat may be resisted, then the court must itself acquiesce in the capitulation.”

The conflict was between the rule of law and threat of a foreign country to pull off not only a defence deal but the diplomatic relations as well. It was clearly a threat to the administration of public justice within the United Kingdom. The words of Lord Justice Simon Brown in 1995 (3) All E.R.37 were quoted :- 

“One thread runs consistently throughout all the case law: the recognition that public authorities must beware of surrendering to the dictates of unlawful pressure groups. The implication of such surrender for the rule of law can hardly be exaggerated. Of course, on occasion, a variation or even short-term suspension of services may be justified. As suggested in certain of the authorities, that may be a lawful response. But it is one thing to respond to unlawful threats, quite another to submit to them - the defence, although perhaps difficult to define, will generally be easy to recognize. Tempting though it may sometimes be for public authorities to yield too readily to threats of disruption, they must expect the courts to review any such decision with particular rigour - this is not an area where they can be permitted a wide area of discretion. As when fundamental human rights are in play, the courts will adopt a most interventionist role”.

Lamented Lord Justice Moses: -

“The constitutional principle of the separation of powers requires the courts to resist encroachment on the territory for which they are responsible. In the instant application, the Government’s response has failed to recognize that the threat uttered was not simply directed at this commercial, diplomatic and security interests; it was aimed at its legal system.”

The rule of law enforced by the courts, it was held, is the ultimate controlling factor on which the Constitution is based. How the courts protect law by ensuring the independence of the decision maker free from pressure and threat was emphasized by the Divisional Court. The court held: -

“The courts are entitled to exercise their own judgment as to how best they may protect the rule of law, even in cases where it is threatened from abroad. In the exercise of that judgment, we are of the view that a resolute refusal to buckle to such a threat is the only way the law can resist.”

“Surrender deprives the law of any power to resist for the future. In Ex. P. Phoenix Aviation (1995) 3 All E. R.37 at 62, Simon Brown, L.J., criticized the public authorities who failed to consider what he described as ‘the awesome implications for the rule of law’, and inevitable impact upon the ever more enthusiastic future conduct of the protestors. The context of the threat, in the present case, was the investigation of making bribes to foreign public officials, an offence introduced in 2001. If the Government is correct, there exists a powerful temptation for those who wish to halt an investigation to make sure that their threats are difficult to resist. Surrender merely encourages those with power, in a position of strategic and political importance, to repeat such threats, in the knowledge that the courts will not interfere with the decision of a Prosecutor to surrender. After all, it was that appreciation which, no doubt, prompted the representatives of the Saudi Arabian Government to deliver the threat.”

It was emphasized that courts and lawyers have a duty to prevent surrender to the threats to the rule of law to prevent what happened in Fiji, Pakistan and Uganda. See the observation : -

“Our courts and lawyers have the luxury and privilege of common law and statutory protection against power which threatens the rule of law. All the more important, then, that they provide support and encouragement to those in a less happy position. How do they do so, if they endorse surrender, when in Uganda the courts are forced to resist when those whom they have released on bail are re-arrested on the court room steps by armed agents of the executive or when the Chief Justice of Fiji and Pakistan are deposed by military rulers?”

Ultimately, rejecting the theory of State necessity, the Divisional Court upheld the challenge to the decision of the Director and its affirmation by the Attorney General.

Significantly, the House of Lords reversed the decision of the Divisional Court, of course with reluctance. Lord Bingham took note of the strange circumstances : -

“The Director was confronted by an ugly and obviously unwelcome threat. He had to decide what, if anything, he should do. He did not surrender his discretionary power of decision to any third party, although he did consult the most expert source available to him in the person of the Ambassador and who, however, properly left the decision to him. The issue in these proceedings is not whether the decision was right or wrong, nor whether the Divisional Court or the House agreed with it, but whether it was a decision which the Director was lawfully entitled to make. Such an approach involves no affront to the rule of law, to which the principles of judicial review give effect. (See R on the application of Alconbury Developments Ltd. v. Secretary of State for the Environment, Transport and the Regions (2001) UK.....2 All E.R. 929 at 73 (2003) 2 AC 295 per Lord Hoffman).”

Baroness Hale of Richmond expressed her helplessness in the matter in the following words: -

“My Lords, I confess that I would have liked to be able to uphold the decision (if not every aspect of the reasoning) of the Divisional Court (2008) EWHC (Admin). (2008) 4 All ER 927). It is extremely distasteful that an independent public official should feel himself obliged to give way to threats of any sort.”

She noted the consequence of risk to British lives on British streets, and concurred to reverse the Divisional Court.

The House was confronted with a situation of a clear conflict between the rule of law and a threat from an ally country of stiff diplomatic measures in case the fraud continued to be investigated. The Apex Court of England ruled that the decision of the Attorney General and the Director of S.F.O., cannot be faulted on the principles of judicial review and the exercise of discretion by them cannot be interfered with by the House.

What a sad thing to happen in the country of Lord Atkin !

Some Thoughts on Vasanthakumari and Joint Transfers

(By K.G. Balasubramanian, Advocate, High Court of Kerala)

I read 2009 (3) KLT 43 - Vasanthakumari v. Omanakkuttan Nair - with genuine interest. I was reminded once again of the resplendent glory of Transfer of Property Act that has survived 1947 followed by “We, the People”, KLR Act etc. It was nostalgic to come across a provision almost obscured by desuetude, hesitantly waking up, unlike some distant cousins in the Contract Act. When I say obscured, I do not mean just by time, but by legislative changes in these unjust times.

I have always been in envious awe of the last 3, 4 generations of lawyers who had grand legal encounters in courts, with uncanny sense of law and logic, developing the perfect, if not faultless, legislations of 19th century and early 20th, leaving legal classics in their wake for new generation lawyers like me to gloat over, that “this is My Past”.

Too bad, I felt, Vasanthakumari had no opposition. Did poor Omanakkuttan think a walk over would not be granted? But, a walk over Vasanthakumari did have, despite the learned Judges’ initial unwillingness.

But, Sir, did I notice correctly? I feel, the learned Judges would have probably disappointed Vasanthakumari had “The Benami Transactions (Prohibition) Act, 1988” been brought to their notice.

In that Act, unless the context otherwise requires, “Benami transaction” means any transaction in which property is transferred to one person for a consideration paid or provided by another person. S.3(2) provides that nothing in sub-s.(1) shall apply to 

(a) the purchase of property by any person in the name of his wife or unmarried daughter and it shall be presumed, unless the contrary is proved, that the said property had been purchased for the benefit of the wife or the unmarried daughter;

(remainder of the section omitted for the purpose of this dissection). 

S.4 provides that (1) “No suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other person shall lie by or on behalf of a person claiming to be the real owner of such property.

(2)  No defence based on any right in respect of any property held benami, whether against the person in whose name the property is held or against any other person, shall be allowed in any suit, claim or action by or on behalf of a person claiming to be the real owner of such property.

(3) Nothing in this section shall apply, -

(a) where the person in whose name the property is held is a coparcener in a Hindu undivided family and the property is held for the benefit of the coparceners in the family; or

(b) where the person in whose name the property is held is a trustee or other person standing in a fiduciary capacity and the property is held for the benefit of another person for whom he is a trustee or towards whom he stands in such capacity.

Now, I have my own impression that challenge of gender discrimination apart, there is no reason to exclude husband and son from S.3(2)(a). Family Courts Act does not create any new right, except as to procedure and jurisdiction for enforcement of rights under existing laws. The facts narrated in the judgement do not, to my notice, make out a case u/S.4(3)(b) for Vasanthakumari. She can be only in S.4(1), (2) situations.

Oh, Vasanthakumari,

Daughter of Spring,

Love withered,

Law weathered,

You did bring Spring,

Without the fragrance

Of roses and lilies!

I remain

Yours contentiously 

Awaiting Autumn

That is mine!