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Vineet Narain Vs Union of India (1998) 1 SCC 2261

Date of Judgment: December 18, 1997
BENCH: S.P. BHARUCHA, S.C. SEN
MAIN LEGAL ISSUE INVOLVED IN THE PRESENT CASE.
1) Whether it was within the domain of judicial review and it could be an efficient
instrument for initiating the investigative process which was under the control of
executive. The focus was on the question, whether any judicial remedy was available in
such a situation.
SIGNIFICANCE OF THE CASE:
Effectively addressing public corruption is essential for the sustainable realization of economic
and social rights since the impact of corruption often overlaps with violations of economic and
social rights. This case is thus a step in the right direction in providing a mode of accountability
in public life.
This case is also significant because the Supreme Court liberally interpreted its powers under the
Constitution to devise various innovative procedural techniques. These include: the appointment
of amicus curiae to provide assistance to the court on legal issues: exercising supervisory
jurisdictionto monitor implementation (, and delivering detailed directions to the executive and
formulating guidelines to fill a legislative vacuum on the issue of public corruption. This case
created public awareness regarding the issue of corruption, and inspired people to engage with
the judicial system through the process of public interest litigation
HAWALA SCANDAL

1 Case Analysis: James Bedi

IV Year B.A.LL.B(Hons)

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On 25th March, 1991, one Ashfak Hussain Lone, alleged to be an official of the terrorist
organisation Hizbul Mujahideen, was arrested in Delhi. Consequent upon his interrogation, raids
were conducted by the Central Bureau of Investigation (CBI) on the premises of Surrender
Kumar Jain, his brothers, relations and businesses. Along with Indian and foreign currency, the
CBI seized two diaries and two note books from the premises. They contained detailed accounts
of vast payments made to persons identified only by initials. The initials corresponded to the
initials of various high ranking politicians, in power and out of power, and of high ranking
bureaucrats.

CBI ROLE & CASE FALLOUT:

The accused included prominent personalities including Sh. Lal Krishan Advani (then Deputy
PM), Sh. Sharad Yadav among many others. The prosecution that followed was prompted by a
PIL (petitioner : Vineet Narain). The court cases of Hawala scandal eventually collapsed without
convictions. Many were acquitted in 1997-98 partly because the Hawala Records (Jain Diaries)
were adjudicated as inadequate evidence. The CBI's role was highly criticised.
THUS THE PIL
Writ petitions were filed in public interest to ensure investigation in the Hawala case.

ALLEGATIONS:
The gist of the allegations in the writ petitions was that Government agencies like the CBI and
the revenue authorities had failed to perform their duties and legal obligations in as much as they
had failed to investigate matters arising out of the seizure of the "Jain diaries" that the
apprehension of terrorists had led to the discovery of financial support to them by clandestine
and illegal means using tainted funds obtained through hawala transactions; that this had also
disclosed a nexus between politicians, bureaucrats and criminals, who were recipients of money
from unlawful sources, given for unlawful consideration that the CBI and other Government
agencies had failed to investigate the matter, take it to its logical conclusion and prosecute all

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persons who were found to have committed and offence; that this was done with a view to
protect the persons involved, who were very influential and powerful; that the matter disclosed a
nexus between crime and corruption at high places in public life and it posed a serious threat to
the integrity, security and economy of the nation; that probity in public life, the rule of law and
the preservation of democracy required that the Government agencies the compelled to duly
perform their legal obligations and to proceed in accordance with law against every person
involved, irrespective of where he was placed in the political hierarchy.

THE COURT WHILE THRESHING THE CBI HELD THAT

That the CBI and other Governmental agencies had not carried out their public duty to
investigate the offences disclosed; that none stands above the law so that an alleged offence by
him is not required to be investigated; that the court would monitor the investigations, in the
sense that the court would do what we permissibly could to see that the sense that the court
would do what court permissibly could to see that the investigations progressed while yet
ensuring that we did not direct or channel those investigations or in any other manner prejudice
the right of those who might be accused to a full and fair trial."
The court directed the CBI not to report the progress of the investigations to the person
occupying the highest office in the political executive this was done to eliminate any impression
of bias or lack of fairness or objectivity and to maintain the credibility of the investigations.
Even after this matter was brought to the court complaining of the inertia of CBI and the other
agencies to investigate into the offices because of the alleged involvement of several persons
holding high offices in the executive, for quite some time the disinclination of the agencies to
precede with the investigation was apparent. It reveled nexus between high ranking politicians
and bureaucrats who were alleged to have been funded by a source linked with the source
funding the terrorists. In view of the funding also through foreign currency, some undesirable
foreign elements appeared to be connected. This revealed a grave situation poising a serious
threat even to the unity and integrity of the nation. The serious threat posed to the Indian polity
could not be underscored. The obvious need for an expeditious and thorough probe which had
already been delayed for several years could not but be countenanced. The continuing inertia of

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the agencies to even commence a proper investigation could not be tolerated any longer. In view
of the persistence of that situation, the court issued a number of directions.
The court further said that
"Unless a competent prosecution follows a fair and competent investigation, the exercise
in the ultimate analysis would be futile. Investigation without improving the prosecution
machinery is of no practical significance."
There shall be no premature media publicity by the CBI/Enforcement Directorate."
"It is sufficient to say that The Ministers general power to review the working of the
agency and to give broad policy directions regarding the functioning of the agencies and
to appraise the quality of the work of the Head of the agency and other officers to the
executive head is in no way to be diluted. Similarly, the Ministers power to call for
information generally regarding the cases being handled by the agencies is not to be
taken away. However, all the powers of the Minister are subject to the condition that
none of them would extend to permit the Minister to interfere with the course of
investigation and prosecution in any individual case and in that respect the concerned
officers are to be governed entirely by the mandate of law and the statutory duty cast
upon them."
CASES REFERRED WITH REGARD TO POWERS EXERCISED UNDER ARTICLE 32
READ WITH ARTICLE 142
Delhi Development Authority vs. Skipper Construction Co. (P) Ltd. And Another, 1996 (4) SCC
622 and Dinesh Trivedi,
Delhi Judicial Service Association etc. vs. State of Gujarat and Others etc.(Nadiad Case), 1991
(4) SCC 406,
K. Veeraswami vs. Union of India and Others, 1991 (3) SCC 655,
Lakshmi Kant Pandey vs. Union of India (in re: Foreign Adoption), 1984 (2) SCC 244
M.P. and Others vs. Union of India and Others, 1997 (4) SCC 306

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State of West Bengal & Ors. etc. vs. Sampat Lal & ors. etc. 1985 (2) SCR 256,
Supreme Court Advocates-on- Record Associations and Others vs. Union of India (IInd Judge
Case), 1993 (4) SCC 441,
Union Carbide Corporation and Others vs. Union of India and Others, 1991 (4) SCC 584,
Vishakha and Others vs. State of Rajasthan and Others, 1997 (6) SCC 241,
DIRECTIONS ISSUED BY THE COURT
I. CENTRAL BUREAU OF INVESTIGATION (CBI) AND CENTRAL VIGILANCE
COMMISSION (CVC)
1. The Central Vigilance Commission (CVC) shall be given statutory status.
2. Selection for the post of Central Vigilance Commissioner shall be made by a Committee
comprising the Prime Minister, Home Minister and the Leader of the Opposition from a
panel of outstanding civil servants and others with impeccable integrity to be furnished
by the Cabinet Secretary. The appointment shall be made by the President on the basis of
the recommendations made by the Committee. This shall be done immediately.
3. The CVC shall be responsible for the efficient functioning of the CBI. While Government
shall remain answerable for the CBI's functioning, to introduce visible objectivity in the
mechanism to be established for over viewing the CBI's working, the CVC shall be
entrusted with the responsibility of superintendence over the CBI's functioning. The CBI
shall report to the CVC about cases taken up by it for investigation; progress of
investigations; cases in which chargesheets are filed and their progress. The CVC shall
review the progress of all cases moved by the CBI for sanction of prosecution of public
servants which are pending with competent authorities, specially those in which sanction
has been delayed or refused.
4. The Central Government shall take all measures necessary to ensure that the CBI
functions effectively and efficiently and is viewed as a non-partisan agency.

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5. The CVC shall have a separate section in its Annual Report on the CBI's functioning after
the supervisory function is transferred to it.
6. Recommendations for appointment of the Director, CBI shall be made by a Committee
headed by the Central Vigilance Commissioner with the Home Secretary and Secretary
(Personnel) as members. The views of the incumbent Director shall be considered by the
Committee for making the best choice. The Committee shall draw up a panel of IPS
officers on the basis of their seniority, integrity, experience in investigation and anti corruption work. The final selection shall be made by Appointments Committee of the
Cabinet (ACC) from the panel recommended by the Selection Committee. If none among
the panel is found suitable, the reasons the reasons thereof shall be recorded and the
Committee asked to draw up a fresh panel.
7. The Director, CBI shall have a minimum tenure of two years, regardless of the date of his
superannuation. This would ensure that an officer suitable in all respects is not ignored
merely because he has less than two years to superannuate from the date of his
appointment.
8. The transfer of an incumber Director, CBI in an extraordinary situation, including the
need for him to take up a more important assignment, should have the approval of the
Selection Committee.
9. The Director, CBI shall have full freedom for allocation of work within the agency as
also for constituting teams for investigations. Any change made by the Director, CBI in
the Head of an investigative team should be for cogent reasons and for improvement in
investigation, the reasons being recorded.
10. Selection/extention of tenure of officers upto the level of Joint Director (JD) shall be
decided by a Board comprising the central Vigilance Commissioner, Home Secretary and
Secretary (Personnel) with the Director, CBI providing the necessary inputs. The
extension of tenure or premature repatriation of officers upto the level of Joint Director
shall be with final approval of the Board. Only cases pertaining to the appointment or

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extension of tenure of officers of the rank of Joint Director or above shall be referred to
the Appointments Committee of the Cabinet (ACC) for decision.
11. Proposals for improvement of infrastructure, methods of investigation, etc. should be
decided urgently. In order to strengthen CBI's in-house expertise, professionals from the
revenue, banking and security sectors should be inducted into the CBI.
12. The CBI Manual based on statutory provisions of the Cr. P.C. provides essential
guidelines for the CBI's functioning. It is imperative that the CBI adheres scrupulously to
the provisions in the Manual in relation to its investigative functions, like raids, scizure
and arrests. Any deviation from the established procedure should be viewed seriously and
severe disciplinary action taken against the concerned officials.
13. The Director, CBI shall be responsible for ensuring the filing of chargesheets in courts
within the stipulated time limits, and the matter should be kept under constant review by
the Director, CBI
14. A document on CBI's functioning should be published within three months to provide the
general public with a feedback on investigations and information for redress of genuine
grievances in a manner which does not compromise with the operational requirements of
the CBI.
15. Time limit of three months for grant of sanction for prosecution must be strictly adhered
to. However, additional time of one month may be allowed where consultation is required
with the Attorney General (AG) or any other law officer in the AG's office.
16. The Director, CBI should conduct regular appraisal of personnel to prevent corruption
and/or inefficiency in the agency.
III. NODAL AGENCY
1. A Nodal Agency headed by the Home Secretary with Member (Investigation), Central
Board of Direct Taxes, Director General, Revenue Intelligence, Director, Enforcement

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and Director, CBI as members, shall be constituted for coordinated action in cases
having politico-bureaucrat- criminal nexus.
2. The Nodal Agency shall meet at least once every month.
3. Working and efficacy of the Nodal Agency should be watched for about one year so
as to improve it upon the basis of the experience gained within this period.

IV PROSECUTION AGENCY
1. A panel of competent lawyers of experience and impeccable reputation shall be prepared
with the advice of the Attorney General Their services shall be utilised as Prosecuting
Counsel in cases of significance. Even during the course of investigation of an offence,
the advice of a lawyer chosen from the panel should be taken by the CBI/Enforcement
Directorate.
2. Every prosecution which results in the discharge or acquittal of the accused must be
reviewed by a lawyer on the panel and, on the basis of the opinion given, responsibility
should be fixed for dereliction of duty, if any, of the concerned officer. In such cases,
strict action should be taken against the officer found guilty of dereliction of duty.
3. The preparation of the panel of lawyers with approval of the Attorney General shall be
completed within three months.
4. Steps shall be taken immediately for the constitution of an able and impartial agency
comprising persons of unimpeachable integrity to perform functions akin to those of the
Director of Prosecutions in U.K. On the constitution of such a body, the task of
supervising prosecutions launched by the CBI/Enforcement Directorate shall be entrusted
to it.

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5. Till the constitution of the aforesaid body, Special Counsel shall be appointed for the
conduct of important trials on the recommendation of the Attorney General or any other
law officer designated by him.
STATUS AFTER THE JUDGEMENT
The judgment in was followed by the 1999 Ordinance under which CVC became a multimember Commission headed by Central Vigilance Commissioner.

The 1999 Ordinance

conferred statutory status on CVC. The said Ordinance incorporated the directions given by this
Court in above case. Suffice it to state, that, the 1999 Ordinance stood promulgated to improve
the vigilance administration and to create a culture of integrity as far as government
administration is concerned. The 1999 Ordinance was ultimately replaced by the enactment of
the 2003 Act which came into force with effect from 11th September, 2003.
ANALYSIS OF THE 2003 ACT
The 2003 Act has been enacted to provide for the constitution of a Central Vigilance Commission
as an institution to inquire or cause inquiries to be conducted into offences alleged to have been
committed under the Prevention of Corruption Act, 1988 by certain categories of public servants
of the Central Government, corporations established by or under any Central Act, Government
companies, societies and local authorities owned or controlled by the Central Government and
for matters connected therewith or incidental thereto. By way of an aside, we may point out that
in Australia, US, UK and Canada there exists a concept of integrity institutions. In Hongkong
we have an Independent Commission against corruption. In Western Australia there exists a
statutory Corruption Commission. In Queensland, we have Misconduct Commission. In New
South Wales there is Police Integrity Commission. All these come within the category of
integrity institutions. In our opinion, CVC is an integrity institution. This is clear from the scope
and ambit of the 2003 Act. It is an Institution which is statutorily created under the Act. It is to
supervise vigilance
CONCLUSION
There are ample powers conferred by Article 32 read with Article 142 to make orders which have
the effect of law by virtue of Article 141 and there is mandate to all authorities to act in aid of the
orders of this Court as provided in Article 144 of the Constitution. In a catena of decisions of The

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honorable Court, this power has been recognised and exercised, by issuing necessary directions
to fill the vacuum till such time the legislature steps in to cover the gap or the executive
discharges its role. It is in the discharge of the duty that the IRC was constituted by the
Government of India with a view to obtain its recommendations after an in-depth study of the
problem in order to implement them by suitable executive directions till proper legislation is
enacted. The report of the IRC has been given to the Government of India but because of certain
difficulties in the present context, no further action by the executive has been possible. That the
power exercised by the court for the propose to perform in the present case since this exercise
can no longer be delayed. It is essential and indeed the constitutional obligation of the Court
under the aforesaid provisions to issue the necessary directions in this behalf.