Mauritius Turns Into A Tax Haven A Historical Perspective

I had written this article when I was preparing to argue the Indo-Mauritius Tax Treaty Abuse Case. The Delhi High Court decided in Shiva Kant Jha v. Union of India (2002) 256 I T R 563 (Del.), but It was reversed by the Supreme Court in Union Of India & Anr. V. Azadi Bachao Andolan & Anr (2003-(263)-ITR -0706 -SC ). I had written this article in course of my research conducting that PIL. As the matters relating to the Indo-Mauritius Tax Treaty have kept on vexing us over all these years, and as we have good reasons to reflect on many things which are happening in Mauritius, I have thought it appropriate to put this article in the public domain for the information of our government and people. A study of the article would equip our Government how to go about the Mauritian position on the existing Tax Treaty ( I mean the Indo-Mauritius Double Taxation Avoidance Convention).
Please note that on many points you will find this article outdated. I am sorry to say that I have not been able to update it. Hence you may find this article missing some the points and issues of current relevance. But it will surely give you a perspective on the issues, and would help how I perceived things whilst I conducted the PIL before the Delhi High Court and the Supreme Court. Many chapters in my book, On the Judicial Role in Globalised Economy deal with the important legal and constitutional issues which I had considered over several years I conducted the Indo-Mauritius Double Taxation Avoidance Convention. For the benefit of the readers I intend to put the text of that book on internet soon so that every one can read the book.

The Judgment: What it means

A Critique on the Misuse of the Indo-Mauritius Double Taxation Convention


Economic Zeitgeist and the Mauritian Initiative

1. Mauritius, officially now known as the Republic of Mauritius, is an island in the Indian Ocean extending 38 miles from north to south and 29 miles from east to west. Its Modern History is shaped by a matrix of exogenous influences. Till the Treaty of Paris (1814) it was under the French domination ; thereafter the British Control was established. Mauritius became independent in 1968 with in the Commonwealth of Nations in 1991 it became the Republic. Its population is 1,195, 000. Its ethnic composition is : Indo-Pakistani 67.0 %, Creole 27.4%, Chinese 3.0%, others 2.6% On the basis of religious affiliations the population consists of : Hindu; 50.6% ; Roman Catholic; 27.2%; Muslim; 16.3%; (1990) : Protestant; 5.2% Buddhists ; 0.3%; others; 0.4%.

2. It is a great tribute to this small country which on its five inches of ivory wrought with remarkable dedication a political society with rich achievements in the fields of social and economic developments. Some of the figures of some select segments are tabulated along with the comparable figures of the similar segments of our country.

Sr. No. Some select indicators * Mauritius India
1. Life expectancy at birth Male 67.0 years
Female 75.0 years Male 61.9 years
Female 63.1 years
2. Per capita income US $ 3,540 US $ 440
3. Literacy Males literate 87.1 %
Females literate 78.8 % Males Literates 75.8 %
Females literates 54.2%
4. Health Physicians 1 per 1,123 persons, Hospital Bade 1 for 303 persons Physicians 1 per 2,173 persons, Hospital Bade 1 per 1364 persons.

3. The people of Mauritius cultivated strong public opinion to keep the government under critical gaze. Even in the year 1982 when the Indo-Mauritius DTAC was negotiated Mauritius had given evidence of this. “In general elections held on June 11, 1982, the coalition government of Prime Minister Sir Seewoosagur Ramgoolam, which had governed the islands since before independence in 1968, was defeated. World recession, the effects of three cyclones, and record unemployment all contributed of his defeat.” It is this assertiveness of the common people that enabled the opposition to win a sweeping victory in the elections held on September 11, 2000. The way the opposition parties shorted out the contesting claims of the rival contenders for the post of the Prime Minister deserves appreciations. They agreed that Sir Anerood Jugnauth, the leader of the Mauritian Socialist Movement, would function as Prime Minister for 3 years after which Mr. Paul Berenger, the leader of the Mauritian Militant Movement was to become Prime Minister for the remaining two years of the term. This arrangement has worked, and now Paul Berenger is the Prime Minster, the first non-Hindu to become so after independence.
4. The achievement of Mauritius have in recent years been so outstanding that many considered it appropriate to speak of “economic miracle”. While it a lot to improve its performance in traditional economy its most ambitious affords were to make Mauritius an important regional economic and transportations centre. Its commitment to enrich itself with the gifts of information technology is part of the same grand design to scale higher excellence in economic development. In this pursuit it strove with astuteness in developing context and collaboration with many countries and got good assistance form the IMF. Through sustained efforts it effected economic recovery achieving economic growth of 7.1% in 1986 as against 6.5% in 1985 : “the highest recorded in Africa” It liberalized its economy and developed trade and commerce its sense of great commitment by 1988 it was nearing economic miracle. Guy Arnold by appraising indicators for 1988 writes :
“The growth of Mauritius’s manufacturing sector was one of the success stories of the third world. Based mainly on the export processing Zones (EPZs), manufacturing accounted for 53% of exports, surpassing sugar. The EPZs contained over 500 companies employing 90,000 people. The high level of education was seen as a key to this success; virtually all primary-age children attended school, and a high proportion of them went on to secondary school. The success of tourism had created its own problems. Sir Gaetan Duval, minister of tourism, suggested that 300,000 arrivals a year were the most the island could accommodate. Sugar still dominated the agricultural sector; the current crop stood at approximately 650,000 metric tons, 540,000 tons of which were exported. ”
In 1988 it established a stock exchange and open its first offshore bank. Foreign exchange restrictions were greatly relaxed so that free repatriations of capital and dividend could take place. Its saw the tremendous potentialities of offshore banking, and worked over the years to make the country an important financial centre. On realizing the potentialities of information technology it fell in love with it, and now is working to make a cyber city to reap. The 2002 Britannic Book of the Year writes:
“In January Berenger announced the creation of the Infocom Development Authority to manage growth in the information-technology sector: India agreed to provide Mauritius with a $100 million line of credit for the development of a “cybercity” technology-development centre. A number of Indian software companies also announced that they would invest in the project.”
Much credit for the achievement of Mauritius must go to the high standard of education maintained in the countries academic institutions. It appears it understood well what H G Wells said : “Human history becomes more and more a race between education and catastrophe.”

5. The advancement which Mauritius has made over the recent years should be considered in the context of the economic and social indicators of 1984. The Indian figures are also given for comparison.

Sr. No. Some select indicators * Mauritius India
1. Life expectancy at birth Male 63.3 years
Female 68.4 years Male 53.9 years
Female 52.9 years
2. Per capita income US $ 1,075 US $ 249
3. Literacy Males literate 90.5 %
Females literate 78.8 % Males Literates 46.7 %
Females literates 24.9%
4. Health Physicians 1 per 1547 persons, Hospital Bade 1 for 335 persons Physicians 1 per 2,554 persons, Hospital beds 1 per 1269 persons.

6. In Eighties Mauritius faced many inconvenient problems. As one of the most densely populated countries it needed sovereignty of the Chagos Archipelago both for its burgeoning population and for strategic purposes. In August 1982 Prime Minister Indira Gandhi visited Mauritius, and supported its claim to the Chagos. It is to be noted that the Indo-Mauritius Convention was done at Port Louis on 24th August 1982. In early Eighties the Mauritian economy was through a difficult time. Its economy largely depended on sugar production for which demand declined. “Meanwhile, the balance of payments deficit had grown alarmingly. For its size, Mauritius was one of the world’s most indebted nations, with debts amounting to ê432 million in March. ”

The Indian Context

7. When Mrs. Gandhi return to power in 1980 she found herself in a different ethos. Trials and tribulations which she under went during the Janta regime must have told on her psyche. She was no longer that Indira Gandhi. She worked with iron in her soul. She had seen how time-servers and go-getters change their colors. She had experienced the Irony of the inconstant in the ways of the world. She maintained her majesty but had lost her verve. During this phase Sanjay Gandhi played an effective role as her political aid. With his dynamism and assertiveness he formed a caucus which wielded enormous clout. Mrs. Gandhi became greatly pre-occupied with major political problems which had acquired dangerous proportion. Economic management was substantially left under the care of Sri Pranab Mukherjee who had been the Finance Minister. Sri Mukherjee whose financial acumen has been appreciated by no less a person than Sri R. Venkatraman, was close to the lobbyists and in many matters was not above board. The go-getters and the financial adventures proliferated their influence.

8. “Since 1980-81, particularly since 1983-84, the current account deficit has increased steadily and alarmingly.” Now there was a growing dependence on foreign private credit. “Following her return to office in January 1980,, Mrs. Gandhi had been interested in encouraging greater NRI involvement in the Indian economy. There were two reasons for this: her emotional instinct that NRIs should be linked to their motherland, and her desire to improve the economy. ” Dr. Manmohan Singh, the then Governor of the Reserve Bank of India indorsed the NRI portfolio investments. Massive efforts were made to perused to NRIs to make investment in India. How the scheme worked is beyond the scope of this book. But there is an interesting account of his bitter experience of investing in India has been drawn by Swraj Paul in his memoir, Beyond Boundaries. Describing how things stood before 1991 Bimal Jalan observes :
“India was, however, one of the few developing countries which continued to follow a highly restrictive policy towards foreign investment in the 1980s . Until mid-1991, there was virtually no change in the framework of rules and regulations governing flows of foreign investment. Such investment was permitted on a case-by-case basis in new projects, provided the technology accompanying such investment could take place was also restricted to a specified list of industries. ”
And after 1991 Indian economy was opened up inviting foreign investments on attractive terms the details of which are beyond the scope of this chapter.

9. In some measure of corruption has been endemic India’s public life in the post-independence era. It grew alarmingly during the darkness of Emergency. During Mrs. Gandhi’s term after return to power it waxed more scaling sinister heights during the periods when Rajiv Gandhi and Narasimha Rao were the Prime Ministers.

10. In all probability, the terms of the Indo-Mauritius DTAC were devised for the benefits of those Indians who wanted to use Mauritius as a route for investing in India their tainted wealth amassed outside the country. NRI investment through Mauritius would have been attractive in the early Eighties only for such Indians. The third country residents were not likely to invest in India through the Mauritius route. Because of socio-religious affiliations numerous context could be forged for parking ill- gotten money in Mauritius wherefrom this could be strategically managed effectively. And investment in India made by such masqueraders would be entitled to benefits under the Indo-Mauritius DTAC. This could not have been possible unless the lobbyists would have succeeded in influencing the Finance Minister and the senior bureaucrats. Those who negotiated on behalf of our Central Government were bound not to transgress constitutional and statutory limitations. The terms of the Indo-Mauritius DTAC show that they negotiated the terms of the treaty in violation of the statutory and constitutional limitations. Secondly, and without prejudice to the above argument, the adoption of the OECD Model for framing the Convention was highly in proper. It is a matter of record that our government was party to the deliberations which preferred the UN model. The adoption of the OECD model for the Indo-Mauritius DTAC must have been with some extrinsic motive.

Mauritius turns into a tax haven

11. The tax havens in the West Indies are the conjoint product of the necessity utilized by the unscrupulous tycoons of the super rich countries. Switzerland, as a tax haven, is a product of history. Mauritius became a tax haven by way of design. She could have evolved economically even without turning into a tax haven. But in the early Nineties it browsed the international scenario to find that a new chapter had began in global economic management. India had opened up its economy : and was eager to welcome foreign investments. Mauritius knew that her native resources were not sufficient to invest in India either as foreign direct investment or as portfolio investment. But it could become a good route for making investment by the residents of other countries. There are good reasons to believe that the persons who matter in government knew this : in fact, they assiduously promoted this more often by silence. Mauritius had sufficient experience of offshore banking. While her main object was to gain some financial advantage by becoming a secretive intermediary between India and the resident of other countries it must have felt the possibilities of its offshore financial-services as Mauritius had developed wide international context, specially in Africa, through its trade and commerce.

12. That in 1992 Mauritius underwent great change to became tax haven. Two very significant developments in 1992 coincided, and fortunately served to make Mauritius a Tax Haven Country:-

1. The Mauritius Offshore Business Activities Act (MOBAA) came into existence in 1992 and
2. Relaxation of regulation and controls by the Indian Government on direct foreign investment into India took place in 1992, Notably, on 15th September, 1992, guidelines for direct investment by foreign institutional investors (FIIs) were announced.
That the NRIs and the FIIs and their advisors quickly spotted the bonanza of avoiding Capital Gains Taxes (short term as well as long term ) in India by making use of the Article on Capital Gains in the Double Tax Avoidance Agreement between India and Mauritius. While off-shore companies are exempt from taxation in Mauritius they can at their option, pay a tax of between 0% and 35% As the provisions do not subject such companies to mandatory obligation, they do not subject them to liability to tax.

13. That Mauritius enacted the International Companies Act, 1994. Offshore Corporate laws were embodied in MOBAA 1992 which deals with the incorporation and regulation of Ordinary Companies and in the International Companies Act 1994 which deals with the incorporation and regulation of International Companies (ICs). An ordinary company that satisfies the requirements of the Mauritius Offshore Business Activities Act 1992 may be incorporated under the Companies Act 1984 and is registered as an offshore ordinary company. With the coming into effect of ICA 1994, existing companies holding investments in India and located in other offshore jurisdictions are able to migrate to Mauritius as “ an IC” and, thereafter, convert themselves into Ordinary Companies without having any capital gains tax or stamp duty implications in India. An IC is exempted form the provisions of Income Tax and will not be treated as a resident in Mauritius for the purposes of any tax treaty entered into by the Government of Mauritius. Only companies incorporated under the Companies Act 1984 and residents in Mauritius may access the benefits of the double tax treaties that Mauritius has entered into with various countries. The Companies Act 1984 governs the incorporation and administration of all companies formed in Mauritius other than international companies. These offshore entities in Mauritius enjoy various incentives which included tax exemption, free repatriations of profits without being vexed exchange control provisions, no withholding tax on dividends, interests, royalty and other payments made by an offshore ordinary company to the non-resident of Mauritius, and no tax on capital gains.

14.That the Offshore Companies were subjected to certain restrictions in matters of holding property in Mauritius, and in conducting certain transactions with the residents of that country under Sections 26 and 27 of the Mauritius Offshore Business Act 1992. Section 26 (1) prescribed that an offshore company “ shall not hold-

(a) immovable property in Mauritius ;
(b) any share, debenture, or any interest in any company incorporated under the Companies Act 1984 other than in a foreign company or in another offshore company or in an offshore trust;
(c) any account in a domestic bank in Mauritius Rupee.
And section 27 imposed certain restrictions in dealings with residents : its prescribes –
“Notwithstanding any other enactment, the Authority may authorise any offshore company engaged in any offshore business activities to deal or transact with residents on such terms and conditions as it thinks fit”.

15. That Articles 10 and 13 of the Indo-Mauritius Double Taxation Avoidance Convention pertain to the taxation of Dividend and Capital Gains. The effect of the Article 10 is that the recipient of dividend is liable to tax both in the country in which company paying dividend is “resident” and in the country in which he himself is a “resident”. The tax liability in the former is, however, restricted under the treaty to 2 rates (a) 5% of the gross amount of dividends if the beneficial owner is a Company holding directly atleast 10% of the Capital of the dividend, paying Company and (b) 15% of the gross amount of dividends in all other cases. The Article 13 relating to Capital gains prescribes that though gains form alienation of immovable property are taxed in the country in which such property is situated, gains derived from a movable property (other than movable property pertaining to a permanent establishment ) shall be taxed in the country in which the owner of the movable property is a resident. The Mauritius Offshore Business Activities Act 1992 contemplates per section 28 (1) a continuation of offshore company in these words ;
“A foreign company incorporated under the laws of any country other than Mauritius, may where it is so authorized by the laws of the country, apply to the Registrar to be registered as being continued in Mauritius as if it has been incorporated in Mauritius under the Companies Act 1984 and a company incorporate under the Laws of Mauritius may apply to the Registrar to be deregistered in Mauritius for the purpose of being continued in another country.”

16. Confidentiality: The section 15 of the Mauritius Offshore Business Act 1992 provides almost total confidentiality: it says-.

“The Authority and every member, officer or employee shall deal with all documents and other information in its possession or under its control concerning protected persons and all matters concerning such persons in respect of their offshore business activities, as secret and confidential, and shall not seek to identify these persons.
“Protected person” means an offshore company, the beneficial owner and shareholder of an offshore company lawfully carrying on offshore business activities under this Act. The statutory policy on confidentiality is indicated by the limitations to discloser even to the courts. Its is true that section 15 (5) (a) state that this section is without prejudice to “the obligations of Mauritius under any international treaty convention or agreement, and to the obligations of any public sector agency under any international arrangement or concordat.” On this provisions the following comments are worthwhile :
(i) The obligation under Article 26 of the Indo-Mauritius DTAC is about exchange of information which is hardly adequate to determine the issues relating to real residency and beneficial ownership. This point would be discussed in the chapter dealing with this DTAC.
(ii) The obligations to which section 15 (5) refers are restricted by the terms of the Convention which are not broad enough to ensure full disclosure.
(iii) The Competent Authorities have neither jurisdiction nor power to conduct investigation and to enforce compliance.
(iv) As a tax haven Mauritius follows a public policy of secrecy : so it interpret treaty terms and the statutory provisions in the light of its administrative commitments as a tax haven. The OECD in its report on Harmful Tax Competition An Emerging Global Issue has discussed how lack of transparency is effected because :
(a) “Favourable administrative rulings (e.g., regulatory, substantive, and procedural rulings) are given, allowing a particular sector to operate under a lower effective tax environment than other sectors…..”
(b) “Special administrative practices may be contrary to the fundamental procedures underlying statutory laws……”
(c) If the general domestic fiscal environment is such that the laws are not enforced in line with the domestic law, this could make an otherwise legitimate regime harmful…..”

Mauritius has all the features of tax havens

17.. The OECD identified the following features of a tax-haven :
a) no or nominal effective tax rates;
b) lack of effective exchange of information;
c) lack of transparency;
d) absence of a requirement of substantial activities

Richard Doernberg and Luc Hinnekens after close analyses of the realities operating in the tax-havens succinctly summarized the dominant features are the tax-havens in these words;

“ The OECD report defines a tax haven as “a jurisdiction actively making itself available for avoidance of tax which would otherwise be paid in relatively high tax countries.” To be useful to non-resident individuals and corporations, tax havens usually have the following characteristics which bolster their appeal as a location for commercial enterprise, while at the same time allowing a reduction or avoidance of tax in the individual or corporation’s country of residence : low taxes ( or none at all) on certain types of income and capital ; high levels of banking and commercial secrecy; absence of exchange controls on foreign deposits of foreign currencies; a disproportionately large financial sector; modern communications facilities, including sea and air transport; self promotion as an offshore financial center; and few or no tax treaties providing for ex-change of information.”
In fact the core feature of a tax haven is that it is establishes an opaque system. OECD in its reports on Harmful Tax Competition : An Emerging Global Issue identifies a tax haven and its factors with remarkable precession : to quote –
A tax haven :
“Many fiscally sovereign territories and countries use tax and non-tax incentives to attract activities in the financial and other services sectors. These territories and countries offer the foreign investor an environment with a no or only nominal taxation which is usually coupled with a reduction in regulatory or administrative constraints. The activity is usually no subject to information exchange because, for example, of strict bank secrecy provisions. As indicated in paragraph 42 and 43, these jurisdictions are generally known as tax havens.”

Factors to identify a tax haven :
“The necessary starting point to identify a tax haven is to ask (a) whether a jurisdiction imposes no or only nominal taxes (generally or in special circumstances) and offers itself, or is perceived to offer itself, as a place to be used by non-residents to escape tax in their country of residence. Other key factors which can confirm the existence of a tax haven and which are referred to in Box I are : (b) laws of administrative practices which prevent the effective exchange of relevant information with other governments on taxpayers benefiting from the low or no tax jurisdictions; (c) lack of transparency and (d) the absence of a requirement that the activity be substantial, since it would suggest that a jurisdiction may be attempting to attract investment or transactions that are purely tax driven (transaction may be booked there without the requirement of adding value so that there is little real activity, i.e. there these jurisdictions are essentially “booking centres”)
From the system which characterizes a tax haven the following consequences take place:
(i) “Because non-transparent administrative practices as will as an inability or unwillingness to provide information not only allow investors to avoid their taxes but also facilitated illegal activities, such as tax evasion and money laundering, these factors are particularly troublesome.”
(ii) “…tax administrators lack the power to compel such information from it situations, and they cannot exchange information under tax treaties or under other types of mutual assistance channels. The most obvious consequence of the failure to provide information is that it facilitates tax evasion and money laundering.”
(iii) “In addition, the absence of a requirement that the activity be substantial is important because it suggests that a jurisdiction may be attempting to attract investment and transactions that are purely tax driven. It may also indicate that a jurisdiction does not (or cannot) provide a legal or commercial environment or offer any economic advantages that would attract substantive business activities in the absence of the tax minimizing opportunities it provides.”
Through legal provisions Mauritius ring fanced its domestic economy.

18. Of late the world has recognized a hazards of money laundering and the user of tax haven routes for financing criminal activities. Efforts have been made at the international level also. What has been done in this field has been thus summarized in 2001 Britannica Book of the Year;
“At the international level , the Financial Action Task Force on Money Laundering in June 2000 issued a report identifying 15 jurisdictions where the existing measures to combat money laundering were deemed to be inadequate. The 15 locations-which included such high profile offshore financial centres as The Bahamas, the Cayman Islands, Dominica, Israel, Liechtenstein, the Philippines, and Russia- were described as “non-cooperative in the fight against money laundering”. An additional 14 jurisdictions had been investigated. Just days before the report was released, six jurisdictions (Bermuda, the Caymans, Cyprus, Malta, Mauritius, and San Marino ) issued letters offering to eliminate by the end of 2005 practices that had made them offshore tax havens.”
In the letter of assurance dated May 24, 2000 sent by the Minister of Finance of Mauritius to the Secretary-General of the OECD submitted apropos the runs as under :
“OECD’s Report, “Harmful Tax Competition: an Emerging Global Issue” (the “OECD Report”) said that the Government of Mauritius would elimination of harmful tax by administrative and legislative actions, and would ensure effective exchange of information in tax matters, transparency, and the elimination of any aspects of the regimes for financial and other services that attracted business with no substantial domestic activities in a phased manner by the end of the year 2005. Mauritius assure that it would refrain from introducing any new regime that would constitute a harmful tax practice under the OECD Report. ” .

What Mauritius has done

19. The policy of confidentiality in Switzerland is the product of its policy of neutrality it maintained in course of history reaffirmed by the Treaty of Versailles and the Declaration of London in 1920. The practice of banking secrecy grew to the present form on account of factors, inter alia, the following :

(i) The geo-political reasons which led Switzerland to maintain neutrality were responsible for generating faith of people that their wealth under the Swiss system was safe. To say the obvious, the most important factor ensuring safety is secrecy.
(ii) During the inter World War period it was essential to ensure secrecy in matters of transaction in bank accounts as there was an evident risk of confiscation of the accounts of the Jews by the Nazi.
But whenever any government produced proof of corruption on the part of the investors the Swiss authorities co-operated to promote the cause of justice. But things should be different if at any subsequent point of time it is shown to the competent authorities that any specific amount of wealth in the Swiss banks represented the proceeds of crimes. The story of Bofors illustrates the high water mark of the judicial process in Switzerland.

But other tax havens have a different track-record. The Caribbean tax havens evidence a specialty of the Caribbean economy: low tax and confidentiality Known as financial centres they help commission of financial crimes. On account of displeasure of the United States and the actions of the Paris-Financial Action Task Force some drastic actions were taken. To illustrate with reference to the Bahamas : in February 2001 the Bahamian government cancelled licenses of many offshore banks. It band more than 1,00,000 International Business Companies registered in the Bahamas but with anonymous ownership. Nauru, (population : 12,100), a tiny dot above Australia is doted with four hundred offshore banks whose ways invited serious displeasure of the Financial Action Task Force on Money Laundering. A common device is to set up holding companies in the tax haves. In this game players come from different parts of the world. It is said that some Saudi Arabian prince hold in Netherlands Antilles and many others “hold billions of dollars worth U.S real State through Antilles holding companies” India too has produced may bad patriots we have heard a lot about Saint Kitts. We could have known much about the ignoble adventures of our bad patriots in may such destination if our Government would have been patriotic enough to consider the interest of the nation supreme. Liechtenstein was held guilty of money laundering and also in concealing millions of dollars for the drug cartel based in Cali, Colm.,

20. In its eagerness to make Mauritius a most inviting tax haven the operative system has been made but opaque. It is in the public domain that several government agencies sort information from the Mauritian Authorities about the entities operating through Mauritius but they didn’t get good response. One thing more : as a matter of policy these Mauritian authorities didn’t investigate the affairs of such entities, they had, in fact, hardly anything to supply.

A Spacious Plea

21. The tax havens justify what they do on the ground of their sovereign rights to manage their economic affairs within their domestic jurisdictions. This should be clear from what happened at the Malta Conference of the Finance Ministers held in September 2000. The 2001 Britannica Book of the Year mentions;

“ At September 19-21 Commonwealth meeting of Finance Ministers in Malta, many small vented anger at attempts by the Organisation for Economic co-operation and Development to impose economic sanctions by July 2001 on 20 Commonwealth countries operating offshore financial centers unless they complied with OECD tax rules. Those countries insisted that as sovereign states they reserved the right to impose their own tax regimes. The ministers also renewed attempts to speed debt repayment, a matter that, owing to Commonwealth pressure led by successive British governments, had begun to pay off; only 10 countries still qualified for relief, however.”
The efforts of the Financial Action Task Force to eliminate harmful tax practice and money laundering are not appreciated by the States obviously because they profit by such sinister practice. The 2002 Britannica Book of the Year records :
“Continuing disputes between commonwealth countries and the Organization for Economic Co-operation and Development (OECD) over tax havens led to a stormy conference in Barbados chaired by Prime Minister Owen Arthur, at which the OECD backed down on a Memorandum of Understanding imposing new tax procedures on small states.”

[ see also:


Let Our Country Hear: No More Que Sera, Sera (What Will Be, Shall Be) A warning against the Mauritian trap, perish the thought, if Mauritius offers the North and South Agalega Islands as part of the deal for the continuance of the existing Indo-Mauritius Tax Treaty (by Shiva Kant Jha, Advocate, & former CCIT

It was inconceivable that our citizenry would ever smug under the notion with which Doctor Faustus, held ransom to Lucifer, had invited his doom: Que sera, sera” (What will be, shall be).

Shiva Kant Jha, On the Loom of Time p. 312


I acknowledge with high appreciation the concern shown by a brilliant young lawyer who has sent me an e-mail on 7 July 2012 in which he has expressed his reaction to the idea of an economic package under which our Government would allow the continuance of the regime created under the Indo-Mauritius Double Taxation Avoidance Agreement on the consideration of India acquiring two islands in the Indian Ocean, known as the Agalega Islands. It is interesting to quote his words as their semantic structure, and the nuances of expressions, express his shocking amazement at such an offer by Mauritius to India. He writes:

“I was intrigued by the idea that a country could cede their territorial and fiscal sovereignty to us concerning the Mauritius Double Taxation Treaty matter (to-days’ Times of India and Economic Times papers etc). I am sure huge discrete concessions have or would have changed hands and/or be adjusted to accommodate this ridiculous proposition (at the coaxing of course of our polity…. or rather some members of it….. what makes it a crime… in my opinion… is that the peoples of India subsidize the wealthy…. at the cost of our social welfare and overall development of the nation? How long would this paradigm dreamed of by the unethical polity members be sustainable? and how long will it take to act? Who will act?”

I must appreciate this vigilant citizen’s concern and commitment for public cause. Only such individuals can protect our nation’s interests and honour. Before I examine the offer as it has come within the public domain, it worthwhile to quote a few suggestive lines from my memoir, On the Loom of Time (at p. 313):

“Women beware of Women tells us about Binaca Capello, an Italian beauty, who was ravished in the background of her husband’s house, whilst in the foreground her protector was engrossed playing chess wholly unmindful to what was happening inside. This crime of ravishment was facilitated by Livia, professionally a procuress and corruptor, who had become a partner in the game of chess. When the sentinel on the qui vive, abandons trust, roguery takes a toll.”

The Times of India reports but Mauritius rejects whilst our Government keeps silence

The Times of India of July 6, 2012 has reported the Mauritian offer, and the unsolicited advice that Mauritius thought it fit to give to India suggesting the purposes for which those islands could be used to India’s great benefit: to quote in extenso —

“How far will a country go to secure a favourable deal for itself? Pretty far, it seems. Mauritius has offered a couple of sun-drenched islands to India as part of a trade and investment deal. While the offer has been talked about for a while, Mauritius has revived it – at a time when it’s very keen on persevering with the 1983 double-taxation avoidance treaty with India.
Mauritius foreign affairs and trade minister Arvin Boolell said that it was up to India to use the islands to its advantage. He said the “blue economy” had great potential. India could use North and South Agalega Islands (which are located 1,100 km north of Mauritius and have an official total area of 70 sq km) for setting up hotels and tourist resorts, for trade, marine studies, or for building a strategic presence in the Indian Ocean, official sources told TOI. North Agalega Island also has an airstrip.
In November 2006, TOI had first reported about preliminary discussions between the two countries for handover of Agalega Islands — which is closer to India than the African country —for development as a tourism and trade hub.” [ ].

On July 7, 2012, the Times of India published another report purporting to clarify what it had reported a day earlier: to quote—

“Mauritius foreign affairs and trade minister Arvin Boolell on Friday said that issue of handing over the Agalega Islands to India was not raised either on a standalone basis or as part of the double-tax avoidance agreement between India and Mauritius. “The issue was never discussed with the Indian authorities,” he said in response to a TOI report which appeared on Friday.
The TOI report did not say that Boolell had raised the issue with the Indian authorities. Boolell also denied that he had named the Agalega Islands in his conversation about the islands with TOI – again, the report didn’t say so. TOI had knowledge about an earlier proposal about the Agalega Islands and had, therefore, put a question on the two islands to which the minister had responded.
During the interaction with Boolell on Wednesday evening he was specifically asked about discussions on handing over “two islands to India”. His reply was: “On any issue, Mauritius and India stand shoulder to shoulder. Now, when a request is made, you have to study… and make sure if there is any demand made, you have to see to it that it serve the interest of the two parties. Of course you have to be responsible to the interests of our people. On any issue, however sensitive or insensitive it is, it is dealt with based on the principles of goodwill and mutual respect.” [

The reader of this article should note the tone of exultation at discovering the possibilities of the acquisition of a territory in the sprawling Indian Ocean likely to become important both for commerce, finance and defence. In the clarificatory comment the said paper says: “TOI had knowledge about an earlier proposal about the Agalega Islands and had, therefore, put a question on the two islands to which the minister had responded.” The Wikipedia notes: “In early December 2006, the Indian newspaper, the Times of India, carried a series of reports that Mauritius had suggested transferring the Agalegas to India on a long lease in order to develop tourist infrastructure.” It supports its statement with the following references: I quote the references so that the readers can themselves see from them what the vigilant citizens should draw from them:

1. ^ “Mauritius asks India to develop remote Agalega Islands into tourist resort – Asia – Pacific”. International Herald Tribune. 2009-03-29. Retrieved 2010-04-29.
2. ^ Sidhartha, TNN, Nov 25, 2006, 12.45am IST (2006-11-25). “India eyes an island in the sun-India-The Times of India”. Retrieved 2010-04-29.
3. ^ Sidhartha, TNN, Nov 25, 2006, 01.09am IST (2006-11-25). “India acquiring global footprint”. Retrieved 2010-04-29.
4. ^ TNN, Nov 28, 2006, 12.00am IST (2006-11-28). “Land Ahoy!-Editorial-Opinion-The Times of India”. Retrieved 2010-04-29.
What came out in the Times of India has also been reported in several other prestigious papers. It is interesting that this news evoked a wide public responses as is evident in the responses of many readers which you can read on the internet. I need not digress to those some commending the offer as India’s good fortune, others calling it a Mauritian trap. You will find on the internet some comments by persons who even apprehend bribery somewhere at work. I do not intend taking any position on such unseemly assertions. Only time would tell with what measure of integrity the countries conduct their diplomatic dealings in the affairs in which the people have great interest.
My objective this article is neither to support the veracity of such reports, nor to hold them false, or motivated. It is for our Government to take a position on the points reported. I have no access to any information except what has been reported by the prestigious The Times of India. I would be the happiest if the deal suggested is found wholly false. But this news under fast circulation cannot be ignored. We see how intelligent citizens have responded to the news. Besides, the news which surfaced in 2006 is still surfacing. It suggests that the idea is surely under circulation, or some decision pertaining to the matter is in the process of being done somewhere, obviously at high places. As most things in matters of tax treaties, tax havens, and secrecy jurisdictions are managed through an opaque administrative system, it is prudent for our citizenry to reflect on what has come out in the public domain. Whilst I do not doubt what Mauritius says, I am not in a position to ignore what is being reported. Besides, we are bound to remain vigilant. We have seen in this phase of economic globalization many instances when our nation’s vital interests were surreptitiously undermined. It is unwise to trust sans prudence. I intend to write this article in the spirit that is well expressed in the well-known idiom: ‘forewarned is forearmed’. The people of India and the people of Mauritius have been great friends: so neither India nor Mauritius would like to acquire wrongful gains, or wrongful loss. The misuse of the Indo-Mauritius must come to an end: earlier it is done better it is for us all.


You may ask me: why should we cry wolf when nothing concrete has happened? Why should an Indian citizen cry when there is no proximate and clear cause of action? Mauritius has made an offer, and India is silent. We were told at our schools that an offer needs an acceptance to carry any weight. But I think this sort of criticism deserves to be rejected as it can often conceal traps under which unwittingly we might have the misfortune to groan. Besides, it is dangerous to trust even our government as it is seen that even governments can betray trust. Jean Dreze & Amartya Sen ( in India Economic Development and Social Opportunity. P. 16,) said: “The implicit belief, expressed in some writings, that government interventions are, by and large, guided by the demands of social progress is surely a gigantic folly.” In this Section of the article I would tell you something about the ways I have seen our government operating.

Our people must not fail to recognize that it has become a political constant that the governments are accustomed to lie. This point had been well expressed by Thomas Mann in his Death in Venice (at p. 63): “And the fears of people supported the persistent official policy of silence and denial.” I would illustrate with the way our internal sovereign space was bartered to promote the interests of the vested interests and the corporations, mostly MNCs.

Explaining the background of the Uruguay Round Final Act. Writing about the way our executive government entered into the WTO Treaty, Muchkund Dubey rightly writes :
“During the best part of this period, the Government of India did not take any step known to the public, to renegotiate on issues of interest to India. No indication was given to the Parliament or to the public that the minimum must which India should have taken up for negotiation had been identified. Nor was there any indication that either the Director General of GATT or major negotiating partners had been notified of India’s negotiating position.”
In the early phases of the negotiations India was assertive on her stand that the ambit of the negotiations could not subsume issues relating to IPR protection as this issue was not relevant to a liberal multilateral trading system. Then came the sudden reversal of India’s position and an abject surrender in the mid-term review in Geneva in April 1989. What led to this shift in Government of India’s position was not clear at first. But soon the real reason was known. “From the mid-term review session of the Trade Negotiation Committee in Montreal in December 1988, the word passed on to the Indian delegation at the political level was: “Do not appear to be ganging up against the Americans”. In operational terms, it meant that India should not try to be on the vanguard of the struggle of the developed countries ……..” .The Peoples’ Commission Report on GATT by V R Krisna Iyer, O Chinappa Reddy, D A Desai, (all the former Hon’ble Judges of the Supreme Court); and Rajinder Sachar (the then Hon’ble Chief Justice of Delhi High Court) had reasons to wonder why the Government of India did not publish a position paper explaining the reasons for the radical shift in India’s stance and the likely impact of providing enhanced levels of intellectual property protection and liberalization of investment and service industries demanded by the U.S. The Peoples’ Commission found that the entire negotiating process was neither transparent, nor it showed any accountability to the elected representatives of people in a democracy. It further found that adequate information regarding India’s stance at the GATT negotiations, and the position taken by other countries was not given to the people or their representatives. The nature of the possible impact of the treaty under negotiation was never brought in public domain. The results of the Uruguay Round of Multilateral Trade Negotiations (“Dunkel Draft”) came out in several hundred pages in December 1991 as a fait accompli. When the imposed issues were to be legislatively implemented our Parliament felt wholly coerced.
When the Patents (Second Amendment Bill) was under consideration, Pranab Mukherjee justified the unequal treaty as it had been begotten in an unequal world! But the heart of Manoj Bhattacharya bled: he, with an iron in his soul, said in the Rajya Sabha:
“One thing transpired, that there is an element of helplessness; they are trying to plead that we are in a helpless condition, that we cannot do it because we are already a member of the WTO, we are already committed we are already in the trap; and so we cannot come out of that trap, and for that only we have to effect these changes to the already existing very, very good and very, very progressive Indian Patents Law of 1970”.
“Kindly forgive me for saying so, the multi-national corporations work only to amass super-profits”
“They work only to amass super-profits. They are not satisfied. Their lust is not satisfied with the profits only. Their lust is satisfied only with super-profits. They are working only for super-profits. They have no concern for the public health, they are not concerned for the ailing children of ours, they have got no concern for the malnutritioned women of our country and they have no concern for the poor people of this country”.
Whilst all these happened, our leaders, the press and other opinion-makers were over busy with the inane trivialities of self-seeking politicking. Never had such an indifference ever been shown by a democratic country when it had sufficient presentiment of a strange tsunami creeping fast to overtake it. This plight of the nation takes mind again to the days of the Nawab of Awadh when, whilst the imperial forces were on his head, the Nawab was playing with pigeons. I recall someone writing about a person who played chess in his portico unmindful of the fact that inside the house he was being robbed and his wife raped!

I have referred to the seminal facts about the entering into the WTO Treaty to underscore what has happened several times later, including when the Indo-U.S Nuclear Deal was effected. Never think that the silence of our government in the public domain is a good clear indicator of its position that no allurement would make it budge from the position to take strong actions to prevent the misuse of the Tax Treaty. Harold Pinter, a Nobel Prize winning English playwright, aptly said: “ …. the majority of politicians, on the evidence available to us, are interested not in truth but in power and in the maintenance of that power.” Things as we seem them operating in this era of corporate imperium, make us feel that Noam Chomsky is not wrong when he said: ‘Democracy’ promotes the ‘national interests’ which means, ‘the special interests of domestic sectors that are in a position to determine policy ’, a fundamental trade-off between capitalist prosperity and economic security.” He even said in his Failed States (at p. 223): “Deceit is employed to undermine democracy, just as it s a natural device to undermine markets”;

The North and South Agalega Islands: and their worth on the Stock Market
The idea that has been adroitly floated is just a trade-off a fundamental trade-off between turning Nelson’s eye to what goes on through the Mauritian route, and the economic package that includes transferring two islands to acquire what they call an economic advantage of the continuance of the existing Indo-Mauritius Tax Treaty; “India to get the North and South Agalega Islands, and allow the loot of our nation go on through several ways, the most important being the misuse of the Indo-Mauritius Tax Treaty. Let us first see where these tiny terracotta exist on this wide globe. These islands are located 1,100 km north of Mauritius. They fall within the segment of the globe falling in latitudes 7 to 15, and longitude 45 to 60 in the Southern Hemisphere. The islands total area, as per the Mauritian version, comes to 70 km sq km. It is strange to note that event the extent of its area is subject to a controversy. The Wikipedia states: “The islands have a total area of 24 km² (North Island 14.3 km² and South Island 9.7 km²), although the official figure of 70 km² appears too high when compared with data from satellite images.” We get from the portal of the Republic of Mauritius that both the islands have a land area of 2,600 hectares (North Island – 12.5 kms long & 1.5 kms wide:
South Island – 7 kms long & 4.5 kms wide).
The Wikipedia points out: (i) “Agalega is managed by a company of the State of Mauritius, the Outer Island Development Company (IDOC), a company which develops remote islands”; (ii) There is no running water on the island. Drinking water comes from rainwater collected by gutters”: (iii) “Agalega is connected to Mauritius by air and sea. The airstrip on the island in the north allows takeoff and landing of small aircraft”; (iv) for “ education, there is a primary school for the young, but pupils then continue their education in secondary schools in Mauritius”. A close study of the geopolitical situation would suggest that, at its best, the islands can be no more than a peripheral defence centre in the Indian Ocean . As the islands fall within the sphere that can come within the zone of interest of the U.S naval, forces operating from the British Indian Ocean Territory, the power controlling the Agalega Islands can someday be goaded, or dragged, to become a strategic partner of the power that operates from Diego Garcia, an Oceanic neighbour through far-off no doubt but separated only by the waves. The Agalega Islands do not have that remarkable biodiversity and marine wealth for which the Chagos Archipelago and its numerous islands and atolls, now integral to the British Indian Ocean Territory, are well known. We had heard how the great defenders of democracy, the U.K. and the U.S.A. had driven out the Chagossians from Chagos to allow the United States to build the Diego Garcia as a massive navy and military base, and as the centres for amassing military supplies for operations within their ken of supervision. It deserves to be noted that that land and the adjoining regions are not for ordinary humans: they are meant only for defence purposes. The coastal regions of the Agalegan islands are yet not known for economic resources. Nobody knows of what worth are the waters adjacent to the coasts, and of what worth are the bio-diverse resources in the water columns, and on the ocean floors, and also below the subjacent floors. We neither know much about the economic worth of the mainlands, nor do we know even a little about the coastal regions to measure the possibilities of the blue zone that covers the coastal slopes and the adjacent earth-crust under the waters. The habits of the marine species are yet to be known to see whether they love the islands, or shun them with hate. The islands are the group of barren places with a few coconuts offering delight to the dismal population not more than 300! Inland animals do not exist on the islands which abound in swamps. The ibises are the birds which might not delight you for long, though their legs and plumes might interest you for a short while.
We have no reasons to feel allured to the Mauritian offer, if there be any, even though the islands being offered are ‘ sun-drenched’, and are capable to provide us scope to exploit what they call ‘blue economy’. We have a lot of ‘sun-drenched’ places in India itself, we do not need these tiny-tots to be added to our plenty. Besides, the ‘sun-drenched’ regions abound in the tropics. Much of Africa are ‘sun-drenched’, yet……. Whether this in itself is a bliss or bane, we can measure by examining the plight of Congo and its adjoining areas. We know that of late the expression ‘blue economy’ has acquired currency to express the economic potentialities of the sea waters and their other resources. Gunter Pauli’s The Blue Economy: 10 years – 100 innovations – 100 million jobs suggests such possibilities. According to the Center for American Progress, some of the areas of the Blue Economy are (i) the promotion of fisheries; (ii) the promotion of tourism as an industry; (iii) the massive generation of employment on account the fishing and tourist industries, and on account of the development activities at land due to the activities in the ‘blue economy’, and (iv) the exploration of the possibilities of using the oceanic waters as the source of energy. [ see: These economists are the sellers of dreams: we must not forget that most dreams are quickly lost.
The bluebirds are colourful, lovely and auspicious. See the spectrum of rainbow: the blue band is nearer, the green band is far off. But we need ‘green economy’, and only much after what they call ‘blue economy’. Assuming that the ‘blue economy’ can go much towards making us go green, the idea is incredible when we reflect on such possibilities from Agalega. If we intend to accept the trade off between the continuance the predatory Mauritius Indo-Mauritius route to loot India and the acquisition of those two islands either on sale, or lease, or an outright gift, it would be prudent to constitute a committee of real experts to conduct what the call the Feasibility Study examining the points touching cost-benefit analysis, and operational feasibility. Such feasibility study must go together with the study of the constitutional, legal, and moral propriety. Let us not put ourselves in a situation in which we will feel inclined to curse our decision-makers in the words Mrs. Ramsey in Virginia Wolf’s To the Lighthouse: “it was all as ephemeral as a rainbow.”
I do not think there is anything in the Agalegan islands which can allure tourists on an extensive scale. I do not think people would go there to count the sea-waves, or merely to be kissed by the sun-rays, or to dance with the ibises which differ from the bluebirds as do chalk from cheese. It is a different matter that in more decadent days such places might become good for the sex-workers industry, or , if the WTO deliberations widen the concept of ‘trade’ further, then such wares can be traded from the foggy reefs of far-off places which can be traded in our country because of public vigilance. I must not pursue this point further. . Didn’t great Tulsidas say: ‘Let us not flog a point that in unseemly’.
Let us not repeat the past: my mind goes to what Mrs. Indira Gandhi, Pranab Mukherjee, and (also perhaps) Dr Manmohan Singh had done in 1982-1983.
This proposed deal as a part of what the experts say “an economic package” reminds me of another unfortunate ‘politico-economic’ package that had been effected in the Indo-Mauritius negations of 1982-83. That had produced the present Indo-Mauritius Tax Treaty (the DTAA) the terms of which, they say, are under the consideration of both the countries for modification. They illustrate what we call the Brownian motions where the particles seem to move, but do not move. When I reflect on the style of the negotiations to modify the Indo-Mauritius Tax Treaty, it seems that our dominant government advisors and decision-makers know no more than what they have been during their stints at the World Bank, the IMF, and the WTO. I have good reasons to conclude that for them ‘democracy’ that the people are managed to set up for the benefit of the corporation, and is run under the ultimate control of the global economic institutions of which those three are most important. Their remote role-models are Jagat Seth and Rid Khans who had worked to subjugate the Nawab of Bengal to the East India Company. This group moves fast to implement their hidden agenda, otherwise thy work as Kanik taught to Dhritarashtra in the Mahabharata [Aadiparva Chap. 139, shloka 88 ]:

आशां कालवतीं कुर्यात कालं विघ्नेन योजयेत

‘If people expect anything to be done for general benefit, never fulfill that. Keep them expecting in vain for a long time. If ever it becomes possible to do good, create situations that make the delay go. It is prudent to go on deluding people by just keeping them on the tenterhooks, hoping all in vain.

Two factors, they say, worked in adopting the model and the provisions of that much misused treaty. They were:
First, the eagerness of our country in the early 1980s in order to make Mauritius support Indian cause in the UNO. Writing an article whilst the Indo-Mauritius Treaty misuse Case was before the Delhi High Court, I had written an article on Mauritius (which I now place on my website for our people to consider): to quote from the para 6 of that said article:

“In Eighties Mauritius faced many inconvenient problems. As one of the most densely populated countries it needed sovereignty of the Chagos Archipelago both for its burgeoning population and for strategic purposes. In August 1982 Prime Minister Indira Gandhi visited Mauritius, and supported its claim to the Chagos. It is to be noted that the Indo-Mauritius Convention was done at Port Louis on 24th August 1982. In early Eighties the Mauritian economy was through a difficult time. Its economy largely depended on sugar production for which demand declined. “Meanwhile, the balance of payments deficit had grown alarmingly. For its size, Mauritius was one of the world’s most indebted nations, with debts amounting to ê432 million in March.” [1984 Britannica Book of the Year].”

Second, we all know that the most misused Indo-Mauritius Double Taxation Avoidance Convention was done in 1983 when Shri Pranab Mukherjee, the then Finance Minister, had been the F.M. And Dr Manmohan Singh, the present Prime Minister, had been the Governor of the Reserve Bank. Even in those early years of the onset of the so-called liberalization scandalous receipts had intruded in our country through craft and collusion. The so-called “round tripping” was on, and the conditions for “treaty shopping” had been assiduously created. Who knows more than they how through foggy routes from abroad tax-evaders and fraudsters keep on coming first in trickles, then in waves!

Nobody knows how and why the negotiators adopted the OECD Model of a tax treaty in 1982. The conjoint motives seem to be to appease Mauritius to get rich quick, and to invite the NRIs to invest in India. Writing about these matters, I brought to the notice of the Supreme Court in my Writ Petition (C) 445 of 2006 [ PIL]:
“Even this Petitioner, while talking to Dr Manmohan Singh, in the context of some other PIL under hearing before the Hon’ble Delhi High Court, got straight from the horse’s mouth that the prime object of the Indo-Mauritius tax treaty, when it was made, was to have more of foreign exchange as India needed it most at that time. The Petitioner appreciates the candour of Dr Singh in stating so though his researches have led him to the view that the maelstrom of the financial crisis in the early eighties were largely stage-managed to provide a free play for the corporate imperium which in the early eighties had established its sway thanks to the policies set afoot by Ronald Regan, the U.S. President under the pressure and persuasion of the U.S. corporate interests which were massively propagated as the only public interests.”
I wish this new deal hibernating somewhere may not let down our nation’s interest.

If we turn calculators
As we are now calculators at work in the global market, let us calculate for how much a commercial crook would like to buy both the islands about which there is much fuss in the public domain. This exercise can be undertaken as an exercise to understand the devil’s game. For me it is a daunting task. Only they can calculate the worth of those two islands who know how to see countries, humans and the coconuts as the counters on the baffling structure, in features no different from a managed Stock Market!
We determine price of a piece of land by comparing the price disclosed in the comparable sales within a proximate time-frame. As such an exercise on the wide sea is not possible, I pause at the figure for which the Chagos Archipelago had been purchased ,in November 1965,from Mauritius to constitute the British Indian Ocean Territory (BIOT), to provide the U.S. stations to conduct military activities. We know that the USA needs the whole globe to remain a super-power not realizing that a country’s, or a man’s destiny is scripted in ways that these experts can never understand. World’s history tells us loud, but who listens? We get in the Wikipedia that the deal was for “£3 million pounds”. Acting under the BIOT Ordinance No 2, the British Government purchased all ” the plantations throughout the Chagos archipelago for 660,000 pounds from The Chagos Agalega Company”. If the vast Chagos Archipelago, with rich marine resources and vast wealth of bio-diversity features, could fetch, on sales under the conditioned environment, only that much, how much these two hair-like islands, almost bereft of exploitable resources, can be of worth for us? And what are we going to do with these clods already under the threat of getting submerged under the sea waters. Is it prudent to lose our legitimate revenues and our wealth for such tiny gains? What we lose in a year on account of the misuse of the Indo-Mauritius route is enough to provide resources to buy many more such islands, be they in the Indian Ocean, or in the Caribbean.

If I let loose my fancy: a macabre scenario that we must reject

If ever I become the Devil’s Advocate and Financial Planner, I can foresee the purposes to which such islands can possibly be put to use. I visualize them, in brief, though I do this with abhorrence.
(1). The Rogue Finance, that works to establish corporatocracy, would love to make those two islands their centres of operations They would make them in the Indian Ocean what the Caymans Islands, or the Virgin Islands are in the Caribbean. The Rogue Finance would establish in the Agalega Islands the counterparts of the Ugland House of the Caymans Islands, and the Cathedral Square of Mauritius. Please read my short article in my “In the Nutshell Series” at my website entitled : ‘Let us play Columbus to explore the regions of Darkness on our good Earth’.
On the scrutiny of their facts, I made the following observations which seem to me wholly apt:
“They love to operate through opaque systems so that the World can see the Trojan horse, but not the soldiers hidden in that.”
“When I call such jurisdictions the Realm of Darkness, I do not call them so because the Sun does not shine there. The Sun shines their brighter, and almost all the year round, because the Caribbean is in the tropical region.”
You may also see the Section (v) of my critique of the Vodafone Judgement that I had sent to the then Finance Minister : at
(2). If such islands on the remote seas become part of the territory of India, the Rogue Finance would surely shift its Indian operations to these foggy places. They can become in the Indian Ocean what the islands are there in the Caribbean. Milton’s Comus, to which the Supreme Court refers in Shrisht Dhawan v. Shah Bros (AIR 1992 S C 1555 , ) says :
‘’T is only daylight that makes sin.

Patronizing the emergence of such economic centres would make our system even more opaque. And that would go against our Right to Know which is one of our fundamental rights, also in tune with our commitment under the U.N. Convention against Corruption to ensure transparency. We all know that the fundamental right to “freedom of speech and expression” cannot be exercised properly unless with it goes the Right to Know. Our Supreme Court has recognized the supreme importance of the Right to Know [ see Reliance Petrochemicals Ltd. v. Proprietors of Indian Express Newspapers Bombay Pvt. Ltd (AIR 1989 SC 190 ); S.N. Hegde v. The Lokayukta, Banglore (AIR 2004 NOC 169 )].
(3). The quest to seek secret places to amass the looted wealth, or to set up stations to conspire against others, are the common traits of the herds of the greedy becoming grosser and grosser in this phase of the economic globalization. The factors which have contributed to the emergence of such trends are many which I have discussed in detail in the Chapter entitled the ‘Realm of Darkness’ in my memoir, in my On the Loom of Time. At the outset of the Chapter, I wrote a story that reveals how capitalism works when the State turns subservient to the syndicate of investors and the MNCs. It goes thus:

“One winter morning, I was having my morning walk in the District Park adjacent to my residence at Sarita Vihar in New Delhi. My wife, Veena, was with me. We saw two dogs running, one about two furlongs behind the other. The first one had a piece of meat in its mouth, a part inside its jaw but most part dangling outside. We saw that it ran inside a bush, and came out soon to counter the other rushing to invade the place where it had hidden its wealth. It illustrated what the idiom ‘dog in the manger’ is known to suggest. They quarreled, fought tooth and nail till the guard of the garden showered his lathi on them to drive them away. We sat on the wooden bench to relax. It so happened that we saw two cats coming out of that bush: both happy and jovial licking each other lustily. They must have had their feast inside the bush, and now were out on their romantic errands. My wife put her gloss on what had happened. This is how the demonic persons, driven by greed, amass wealth, and hide that from others; but, in the end, go empty handed, perhaps with silent agony in their heart. Whenever I reflect on the ‘secrecy jurisdictions’, and the ways of the greedy capitalists of our brave new world of the neoliberal ideas and strategies, my wife’s that gloss on that event always comes to mind. My mind goes to the Mahabharata which tells us how it was a dog that had guided and escorted King Yudhisthira to heaven. I feel amused that her gloss has given me some understanding of why and how the structure of deception works enabling the Rogue Finance to dance casting its spell over the world, and also on the cyberspace. ”

(4) Let us not provide one more rendezvous to the crooks whose greed has no end. The ideas of much advertised ‘corporate social responsibility’ and ‘corporate ethics’ must not make us oblivious to the ways of their limitless greed. We all know how after the World War II the super-wealthy persons of America and Britain established financial services centres in the tiny islands in the oceans. Discussing the emergence of the ‘new states system’, I wrote in my memoir, On the Loom of Tme:

“The development of science and technology in the second half of the last century helped people to get access to all the areas on the globe. Thousands of islands in the Pacific, the Indian Ocean, and the Caribbean became easily accessible; and convenient network was established on our planet and in the cyberspace. Most of these places were suitable for hiding things. And by manipulating the elastic concepts of ‘territorial sovereignty’, ‘residence’ and ‘incorporation’, many of them turned themselves into effective and inviting centres for fast growing international finance.”

My mind goes with what I read in the Harivamsa (Chap. 30). It says:
न जातु कामः कामानामुपभोगेन शाम्यति
हविषा कृष्णवर्त्मेव भूयः एवाभिवर्धते

यत् पृथिव्यां व्रीहियवं हिरण्यं पशवः स्त्रियः
नालमेकस्य तत् सर्वमिति पश्यन्न मुह्यति
[Not all the wealth, not all the women,
can satisfy the lusty urge of a single man;
When that is the truth, control thy desires,
As desires never end whatever you do.
They wax more and more whilst enjoyed
They flame forth as does fire when ghee is poured.
Then think, O Men, how to get real happiness,
Then think , O Men, how to trammel the desires.]

What will happen to the three hundred souls now living in Agalega Islands. The Chagossians had been driven out from Chagos. What will happen to those souls in Agalega? Will they be turned de facto slaves in the service of the super-rich? Will they become service-providers to those who will try to turn the islands into super-luxury hotels? Will their eviction become one more legal issue? I understand that certain matters relating to what happened to the Chagossians are even now before the European Court of Human Rights. Are the humans mere commodities to be traded to effect what is now called an ‘economic package’? Can any state do such things in the ethos of our time? Are we still in the age when it was possible under a marriage treaty between England and Portugal to put Bombay in the vanity-bag of Catherine of Braganza, the daughter of the Portugese king King John married to the infamous British monarch Charles II. I know that there are several instances when parts of a country have been sold; we know several instances of the humans being transferred for consideration; and we are told by the present-day neoliberals that countries have gone, and the humans are mere commodities on their stock exchange or commodity market. Erich Fromm said in his The Sane Society ( p. 356) , that man is now a commodity: ‘his value as a person lies in his saleability, not his human qualities of love, reason, or his artistic capacities’. I pray to God that our country never stoops to enter into such a phase of depravity as this sordid idea shocks us all except those whose souls are made captive by the IMF-WTO regime.


A General Warning to our Government, and a notice in rem, made pro bono publico
I deem it in public interest to assert in the public domain that the Government has no competence to enter into treaties which violate the provisions of our Constitution. The Government of India’s position on India’s Treaty-making power communicated to the Secretary General of the UNO in 1951 is wrong, and must be withdrawn. In that it had notified the world that : to quote from the U.N. Doc. ST/LEG/SER.B/3, at63-64 (Dec. 1952) (Memorandum of April 19, 1951: it asserts—

“Parliament has not made any laws so far on the subject, and , until it does so, the President’s power to enter into treaties (which is after all an executive act) remains unfettered by any “internal constitutional restrictions.”
The text of our Government’s Circular is quoted in National Treaty Law and Practice ed. Duncan B Hollis, Merritt R. Blakeslee & L. Benjamin Ederington p. 356-357 (2005 Boston). It is submitted that this Circular must be withdrawn as it gives to all the countries wrong ideas about India’s constitutional position, and is capable of seriously embarrassing not only our citizenry but also our Courts and Parliament as they too become bound in terms of treaty obligations under the eyes of public international law which saddle even them to the incidence of International Responsibility if incurred through treaties. I may mention that I brought a Writ Petition before the Delhi High Court seeking, in public interest, the issuance of appropriate directions, orders or writs in the nature of mandamus or declaration, or any other writ or order to the Central Government so that the executive acts, done even at the international plane, but ultra vires the Constitution of India, were held domestically inoperative. The Government of India did not dispute in its Counter-Affidavit.

The above mentioned constitutional issue was raised by through a Writ Petition, which was withdrawn, and was moved before the Delhi High Court. It was done under the circumstances thus brought out in the first para of the Writ Petition (C) No. 1357 of 2007: to quote—

“The issues raised in this Writ Petition had been raised in a petition under Art 32 before the Supreme Court of India on August 19, 2006. The matter came up for a preliminary hearing before a Division Bench of the Hon’ble Supreme Court on Oct. 9, 2006. The Writ Petition had to be withdrawn as the Hon’ble Judges persistently observed that this Petitioner should have invoked jurisdiction of the High Court under Art 226 of the Constitution. Per its order the Court granted ‘liberty to seek other appropriate remedies’. ….On Nov. 17, 2006 a Division Bench of this High Court directed the petitioner to file a petition ‘more focused, short and precise to the issues raised’, and for that reason granted ‘ permission to withdraw the petition with liberty to file a fresh petition, making it short and precise and particularly, focusing on the main issues.’ Hence this petition shortened by more than 50% and has been virtually re-written in compliance with this Hon’ble Court’s directions, …. It was not possible to make it more precise as some of the greatest constitutional issues, raised for the first time before an Indian court, are to be placed per this petition before this Hon’ble Court. The issues raised have got great domestic and international consequences in this phase of Economic Globalization; and the judicial decisions thereon would be of concern to the people in most jurisdictions world over. This petition is filed wholly and exclusively pro bono publico in due discharge of what the petitioner considers his public duty as a citizen of the Republic of India.”

A Division Bench of the High Court (Coram: Sanjay Kishan Kaul and Ajit Bharihoke JJ) declared in their judgment, given in the open court, on November 11, 2009:

“….. insofar as the fundamental question of any act of the Government in pursuance to an international treaty resulting in violation of any provision of the Constitution or not satisfying the test of being in compliance with the doctrine of basic structure is concerned, the respondents do not even dispute the said position and have drawn our attention to their counter affidavit where while dealing with the treaty making power of the Union executive and the Parliament it has been stated in para 1 “it is humbly submitted that the Government of India can only enter into a treaty in conformity with the constitutional provisions laid down in the Constitution of India”.

As I felt the High Court did not decide some of the core issues, I filed the Special Leave Petition before the Supreme Court. I argued the matter on August 16, 2010. The Times of India of August 17, 2010 made some insightful comments under a suggestive title: “Centre’s treaty-making power must conform to Constitution: SC”. The comment, I would have made on the observations of the Supreme Court, has been insightfully made by the journalist who said:
“A petitioner, advocate Shiva Kant Jha, complained before a Bench comprising Chief Justice S H Kapadia and Justice K S Radhakrishnan that the executive was going ahead and signing a large number of multilateral treaties to fulfil its WTO obligations and was refusing to adhere to constitutional provisions. When he argued that Delhi High Court had dismissed his petition on the ground that treaty-making power of the executive was not subject to the constitutional framework, the Bench said, “Who says it is not. If you show us that a certain provision was in breach of the Constitution, certainly the apex court can examine it. Such treaties which violate the basic structure of the Constitution will be struck down. This is already stated in the HC judgment.”…Though the court did not entertain the petition, it surely showed a shift in approach in scrutinizing the constitutional validity of the multilateral and bilateral agreements entered into by India.”

I most humbly submit that when our government enters into any Understanding, Agreement, or Treaty, it must not forget the following mandatory norms sacrosanct under our Constitution:
1. The Sovereignty of the Republic of India is essentially a matter of constitutional arrangement which provides structured government with powers granted under express constitutional limitations.

2. The Executive does not possess any “hip-pocket” of unaccountable powers”, and has no carte blanche even at the international plane.

3. The executive act, whether within the domestic jurisdiction, or at the international plane, must conform to the constitutional provisions governing its competence.

4. The direct sequel to the above propositions is that the Central Government cannot enter into a treaty which, directly or indirectly, violates the Fundamental Rights or the Basic Structure of the Constitution; and if it does so, that treaty must be held domestically inoperative.
But I have found on good grounds that these norms are not palatable to the neoliberals, to those effectively brainwashed by the IMF-WTO. If you wish to go into details, please the Chapter 21 (‘Our Constitution at Work’) of my memoir On the Loom of Time .

One thing more. When the Indo-Mauritius Double Taxation Convention had been signed in 1983, Mauritius was ‘was a constitutional monarchy with the British monarch as head of the state.’ ‘It was 1991 when a constitutional amendment was passed, providing for a republican form of government, with the president as head of the state.’ We all know that it is the British view of the Treaty-making power that prevails in Mauritius, because its Constitution has not gone counter to the British ideas pertaining to the Treaty-Making power by distributing the entire gamut of the state’s sovereign powers through its constitution, as has been done by our Constitution. Those who carry on deliberations with Mauritius must not forget that they are bound by our Constitution whether they act in New Delhi, or Port Louis.


Let us for a minute play the game that the speculators play getting cheers from the mainstream media. Whose interest this news, which is the subject-matter of the article, can possibly promote? I have racked my brain but I am not out of the labyrinth and darkness, and I feel prudent to keep my mouth shut. My mind runs hopping from point to point without coming to any conclusion. Whose interest, in effect, gets promoted by spreading such a news? It is possible to keep hopping from an assumption to assumption despite the possibility that the whole pursuit may turn out wholly foolish. I do not know. But there is no harm if we evaluate ideas like these:
(i). Our government might have engineered things to acquire places to have its own Diego Garcia in the Indian Ocean to intoxicate our people with the dreams of military power ruling the waves, as the GDP-driven dreams are not getting enough customers. This might help it even to play second fiddle to the USA, after establishing a strategic partnership through the Indo-US Nuclear Deal. Besides, our government would succeed the ruffled feelings of the criminals all brands by providing them with an wonderful Alsatia (an area around Whitefriars, London, in the 17th century, which was a sanctuary for criminals and debtors ) about which the common people of our country would know hardly anything.
(ii). The Mauritius Government might have thought fit, on cost/benefit analysis, to part with such islands in order to go on with greater crescendo reaping the harvest of licit and illicit gains under the unwise and predatory Tax Treaty.
(iii). The neoliberal thinkers, and their institutions might have contemplated such things to happen to provide one more centre for the Rogue Finance in the best service of the Indian fraudsters and sharp operators who know best how to get things going all unnoticed as they work on the entente cordiale of fraud and collusion. I recall the pregnant words of Nehru who, writing about the USA, had said:
“This “Big Business” ruled the country. They chose the President, they made the laws, and often enough they broke the laws. There was tremendous corruption in this Big Business, but the American people did not mind so long as there was general prosperity.”
I do not know whether things have changed even now.

(iv). The MNCs might have striven, with all their ignoble strategies for which they are well known, to build one more Sone Ki Lanka on the waves till it becomes feasible to build some cloud castle in the cyberspace. The humans plan for few years only because they die, but the corporations can plan for centuries because they never die (they only commit suicide). Besides the ‘corporations’ are never vexed by ‘conscience’ which might trouble even a human crook sometime, somewhere, in life.
(v). Some corporations already existing, or some super-rich eager to promote one, might have thought to get the islands for the corporation to run paying lip-service to some established government. They say that even now those islands are managed , by the Outer Island Development Company (IDOC), said to be under the control of the State of Mauritius.
(vi) . Can’t this proposal emanate in the strategy of financial planners, tax-planners, and the wealth managers? The possibility os such moles at work cannot be ruled out. They have access to the most powerful; and they appear to be on the hotline with the global gladiators of the present-day economic architecture. They reap vast fortune through their crafts, and they even corrupt our system in many subtle ways. They have within them the stuff with which Sir Basi Zaharoff had corrupted public institutions. Read what Pandit Nehru had written about him in s Glimpses of World History, and evaluate what we see around us going on with no sense of shame. Nehru wrote in Chapter158:
“Two very able Greeks happened to be friends of Lloyd George, who was then Prime Minister in England and very powerful in the Allied councils. One of these was Venizelos, Prime Minister of Greece. The other is a very mysterious person, known as Sir Basil Zaharoff, although his original name was Basileios Zacharias. As a young man, as early as 1877, he became the agent in the Balkans for a British armament firm. When the World War ended, he was the richest man in Europe and perhaps in the world, and great statesmen and governments delighted to honour him…. The public knew little about him and he kept away from the limelight. He was, indeed, the typical modern international financer who feels at home in many countries and influences and, to some extent, even controls governments of various democratic countries. People have a sensation of governing themselves in such countries, but behind them, unseen, stands the real power, international finance.”
I need not go on counting such sinister possibilities in which I neither believe, nor ever wish to believe: only Time will tell us what is happening under a shroud of fog.
Why have I wasted so much of your time? My Apology laced with my reasons.

Why have I wasted about 9000 words? We are told that we have much abler persons, with high academic distinctions and global credentials certified by the IMF-WTO combine, to run our government. I do not wish to say anything on the point. I would again quote a few lines from Nehru’s Glimpses of World History:

”Men in authority—kings, statesmen, generals, and the like—are advertised and boomed up so much by the press and otherwise that they often appear as giants of thought and action to the common people. A kind of halo seems to surround them, and in our ignorance we attribute to them many qualities which they are far from possessing. But on closer acquaintance they turn out to be very ordinary persons. A famous Austrian statesman once said that the world would be astounded if it knew with what little intelligence it is ruled.”
All the citizens must remember what was put so well by John Philpot Curran: “The condition upon which God hath given liberty to man is eternal vigilance”.
[ also see: ]

Conclusion best expressed

Some years ago, the then Pope said that silence with which the world witnessed the Hiroshima was culpable and criminal. Let not our children ask the question, ‘Where were you when mafia rule brooded over benighted country.’
—N.A. Palkhivala

Something is Rotten in Our System: Come Together to Set the Spreading Rot Right

Something is Rotten in Our System: Come Together to Set the Spreading Rot Right
by Shiva Kant Jha

I have received a number of e-mails from some very distinguished citizens drawing my attention to what Shri S. Gurumurthy has written on certain issues touching ‘on how the main state actors – politicians and civil servants – had steeply declined in morals’. He writes that, whilst in the flight from Delhi to Chennai, he had an opportunity to discuss this point with ‘a Tamil Nadu cadre IAS officer, known for high integrity’. In course his chat he asked that officer ‘a straight question’:

‘”Can you point at when exactly did the decline start?” He was equally straight. Political morality, he said, crashed with the “advent” of Indira Gandhi, and business, he added, became buccaneering with the “rise” of Dhirubhai Ambani. That was exactly my view too. A simple comparison of the standards of political morality before and after Indira Gandhi’s advent and the norms of business before after Ambani’s emergence would prove what he had said.’

One of the e-mails I have received refers to Shri S Gurumurthy’s article (of 14th June 2012) entitled ‘Success sans ethics’.

I am glad that this morbid aspect of our political life is yet not forgotten wholly. I express my good wishes for Sri Gurumurthy, and also those who have drawn my attention to it through e-mails. My intention is not to examine this complex issue at length. But two points I intend highlighting:

(1) First, whilst we have kept on recognising the rot that has set in our polity, no serious effort has ever been made to remedy it. I would draw your attention a few lines from my memoir, On the Loom of Time, which I had written after witnessing closely the melodrama of the Emergency, and the Fodder Scam, and also after closely studying the Reports of various Commissions. Over those days, I was in a position to see what was happening in our polity at work. I was a member of the IRS, and worked in Bihar rising to the rank of the Chief Commissioner of Income-tax for Bihar, Orissa, Assam, and the North-East. In Chapter 11 of my memoir, On the Loom of Time, I had written a few words on ‘The Root of All Evil’ which, as we all have seen, has grown sturdier and mightier in recent years. I quote from pp173-174:

“(x) The Root of All Evil grew apace

It is seen that the public services in India have registered an abysmal decline after independence. The politicians and the bureaucrats virtually forged an alliance to promote their greed. The Shah Commission considered this to be the very root of all evil. I had occasions to see how deep and morbid this nexus had gone. I was working in close interactions with Shri Venketrama Aiyar Commission of Inquiry about which I have already written something. After referring to the reports of Commissions headed by the Sri S. R Das, Sri Rajgopal Iyengar, Sri Venketrama Aiyar, Sri Madholkar, Sri A. N. Mulla, Sri G.K Mitter, the Shah Commission of Inquiry aptly observed in its Report:

“The Commission is not aware of the action taken, if any, in response to these Reports submitted from time to time in regard to the Minister -Civil Servant relationship. The fact, however, remains that the refrain in all these Reports in so far as this concerns the relationship of the Ministers with the civil Servants, is the same. One cannot but be struck by the near-unanimity in the observations of the several Com- missions on the unhealthy factors governing the relationship between the ministers and the Civil Servants. Yet nothing seems to have been done, at any rate effectively, to set right such of the aspects of these relationships which, prior to the emergency, had contributed to the several developments which came in for indictments by the Commissions. In the light of this, it may be easy to conclude that what happened during the emergency is merely a tragic culmination of the particular trend that had been identified and condemned from time to time by the Commissions of the past. The Commission owes it to the citizen of India to emphasize that appointments of Commissions by themselves are not enough if the Governments concerned do not follow up and implement at least such of the recommendations as are avowedly accepted by the Government. Unless the Government is prepared to apply the corrective principles in the Minister-Civil Servant relationship effectively and with a determination to produce the desired results at different levels and within the several components of the Government, the agonizing impact of this unfortunate malaise would be felt by the common man in the streets, in the villages, in the factories and in the far distant corners of this vast country.”

It is an irony of history that the leaders who were shaped during the J.P Movement became involved in the infamous Fodder Scam. The J.P Movement, which worked for the alleviation of the fate of the suffering millions, failed to have an impact on the character of the politicians and the system of governance in the State. It also illustrates the point that it is easy to bring down a government but it is difficult to run a clean and good government.

(xi) My Dismay & the Lessons to be drawn from Bihar’s Fodder Scam

So where have we come? The story that I have narrated in this Chapter of my Memoir is the tale of evasion and abdication of duties by the government and its organs and agencies. The Patna High Court bewailed that the “values of public life are fast declining”. In fact the ‘decline in moral values’, which is the core cause of all scams, is, over the recent decades, the burden of song in various decisions of our courts including the Supreme Court of India. We read the events of the past with an iron in our soul. Fali Nariman said about the Emergency:

“One of the lessons of the Internal Emergency (of June 1975) was not to rely on constitutional functionaries. These functionaries failed us – ministers of government, members of Parliament, judges of the Supreme Court, even the president of India.”

The Fodder Scam, and the response of the authorities to it and towards its protagonists, deserve the same pungent but saddening comment.”

(2). How the entente cordiale inter se the politicians-in-power and the lucky business works I had examined with reference to the concrete facts revealed both by the framing of the Indo-Maritus Tax Treaty, and by its gross abuse which our government knew full well. In the context of what Gurumurthy said, it may be worthwhile to read the last Section of the Chapter 23 (‘Profile of a PIL in the Revenue Matters) : at pp. 364-366 —

During the BJP regime, it was widely talked about that Sri Yashwant Sinha, the then Finance Minister, was responsible for getting the Circular 789 of 2000, issued. It was in the air that one of his relations had been a portfolio manager 44 for some foreign investment funds handling Indian operations. And the then Prime Minister turned a blind eye to all that was going on (reported in the Indian Express of June 5, 2000).

I was surprised when the Attorney General, representing our Government, and Shri Salve, representing the Global Business Institute Limited of the Cathedral Square, Mauritius, submitted before the Supreme Court that the use by the third country resident of the Mauritius tax treaty was “perhaps” “intended at the time when Indo-Mauritius DTAC was entered into”. But the Court did not decide the point suggested: but the probability of this assertion colouring the judicial approach could not be ruled out. The unstated, but dexterously suggested, idea was just to free the BJP government (and its then Finance Minister, Mr. Sinha ) from the remissness in promoting ‘treaty shopping’, and to put the blame on the Congress as the Indo-Mauritius DTAC had been signed when Mrs. Gandhi had visited Mauritius in 1982 along with Mr. Pranab Mukherji. It was unbecoming of both the counsels to suggest this, even in pregnant aside. As the Petitioner, I contradicted them, and even asserted in my Curative Petition: “This conclusion is based on no material.” In my letter to Shri Jaswant Singh, the Minister of Finance (during 2002-04) in the BJP Government, I brought to the knowledge of the Government how things had moved, and I requested him to take appropriate actions: to consider whether some legislative change was worthwhile, or whether it was feasible to move the Supreme Court for a reconsideration of its decision in Azadi Bachao so that public revenue and public values were not jeopardised. In the penultimate paragraph of that letter I wrote to then Finance Minister:

‘This letter is just pro bono publico in the interest of the common people of this country with per capita income just U.S. dollars 440 [when in
Mauritius it is U.S. dollars 3,540]. We can forget only at our peril Gandhiji’s talisman: “Recall the face of the poorest and weakest man whom you have seen and ask yourself if the step you contemplate is going to be of any use to him. Will he gain anything by it?’

But the Government took no action. Even the letter went unacknowledged. The reasons for inaction were understandable.

Under the UPA regime, things are no different. The Common Minimum Programme of the Congress-led United Progressive Alliance, formed in 2004, formulated as one of the items in its programme: “Misuse of double taxation agreements will be stopped.” I thought that the Supreme Court’s veiled deprecation of the misuse of the Indo-Mauritius DTAC, in Azadi Bachao, would bear some fruits. I felt the Court’s cri de coeur would receive a good response, and our Executive, or our Parliament, would take effective remedial steps in the matter. But nothing happened. In the recent months we have witnessed a lot of Brownian motion where things seem to move, but do not move.One of its effects is that, despite all the sound and fury, the major political parties promote only the capitalist agenda where tax havens constitute strategic devices for tax evasion, tax-mitigation, and amassing ill-gotten wealth. The tax havens or secrecy jurisdictions function as the veritable Alsatia (a sanctuary for criminals), and centres for money-laundering. The Wikipedia concludes that Mauritius based ” front companies of foreign investors are used to avoid paying taxes in India utilising loopholes in the bilateral agreement on double taxation between the two countries, with the tacit support of the Indian government”.

Whether it is Mrs. Gandhi, or Atal Bihari Vajpayee, whether it is Pranab Mukherjee or Yashwant Sinha, the fate of the country is the same: to suffer. It was suggestively said by someone: if Raja Ram becomes the King, Sita is banished, if Duryodhana rules, Draupadi is openly humiliated: Sitas and Draupadis have suffered this way. Bharat Mata’s plight, as our deeds attest, is no better. It is the duty of every citizen to think about it. I would be the happiest person if my distressing conclusions are proved wrong. We must not forget what Thomas Jefferson said: “Eternal vigilance is the price of liberty”. And we wish that the persons in power keep in their mind what Walt Lippman said :

“Those in high places are more than the administrators of Government bureaux. They are the custodians of a nation’s ideals, of the beliefs it cherishes, of its permanent hopes, of the faith which makes the nation out of a mere aggregation of individuals. They are unfaithful to their trust when by word and example they promote a spirit that is complacent, evasive and acquisitive”.

In Liversidge v Anderson48 the dissenting Judge Lord Atkin referred to the court “being more executive-minded than the executive”. I saw in the course of the PIL that our Government was more corporate-minded than corporations! I also found evidence sufficient to appreciate what Prof. Allen said: “There is, apparently, something in the tranquil atmosphere of the House of Lords which stimulates faith in human nature.”49 I appeal to the brooding omnipresent Justice to ensure that someday Truth triumphs, and Dharma rules. I hope someday the Judgment, which failed to provide remedy against our nation’s loot, would be overruled with the comment that Liversidge’s Case [1942] AC 206 had deservedly received from Lord Diplock in R. v. Rossminster50 : ” this House …. were expediently and, at that time, perhaps, excusably wrong,”

Dear reader, I have just told you in brief certain aspects of one of the PILs I conducted experiencing anguish at the ways our Government behaved. I never considered myself a party to the litigation. I, “a single public-spirited taxpayer” had brought the matter before the court to “vindicate the rule of law and get the unlawful conduct stopped”; and thereafter, I acted only pro bono publico to assist the court as an ordinary citizen of the Republic.51 I had used Chesterton’s observation as an epigram in Chapter 12 of this Memoir. I would end this Chapter hoping that our nation would no longer be “one vast vision of imbecility”.

My Musings on Pranab Babu’s Presidential Candidature

My Musings on Pranab Babu’s Presidential Candidature
by Shiva Kant Jha


I was closely observing the eagerness of the corporate world, the foreign lobbies, and their hired creatures at work at different fora to get rid of Shri Pranab Mukherjee from the office of the Finance Minister of our country as, of late, had had refused to toe the lines of the MNCs on many matters of economic and fiscal management. The Supreme Court’s decision in Vodafone Case became a flash point as it brought before the nation the dread of the corporatocratic dominance so aggressively being pursued in this phase of economic liberalization. There are reasons to believe that that decision might be viewed as our legal system’s contribution to neoliberalism. The Judgement was cast in the form of a simple categorical syllogism that ran: the major premise: that which promotes the incoming of FDI is good; the minor premise: that the Department’s view of the tax law, as adopted in the Vodafone Case, does not (or is unlikely to) promote that policy; hence the conclusion: the Department’s view is not good. This craze for FDI, dear to the neoliberals even at the wreck of law and morality. seemed too much to me. I wrote two letters to Shri Mukherjee first letter was dated Jan. 30, 2012. The second letter was dated April 23, 2012. I had ended my first letter inspiring him with the words of Tagore Tor Daak Shune Keu Naa Aase Tobe Eklaa Chalo Re and the second with the well-known words from Holy Quran Change Quote beautifully inscribed on the arc-shaped outer lobby of our Lok Sabha.

In these I evaluated the judgement, and suggested certain remedial measures including retrospective legislation to undo the effect of the judgement on some material points which helped the MNCs to promote their interest causing wrongful loss to our country but wrongful gains to those who did not deserve them both on the counts of law and morality. I read with delight what Mr, Mukherjee said his budget speech in our Parliament:

‘We cannot declare India as a tax haven simply to attract the foreign investment. I want foreign investment for technology, for development, for resources. ….Please remember that when the investment was also not there, we did not eat lizards.’

Mr. Mukherjee presented a bold budget, and he altered the law of income-tax so that the Rogue Finance of our time might not, through corporate structuring through tax havens and secret jurisdictions, deprive our nation of the legitimate claims on our revenue. The corporate world, and those who work for that on massive, but mostly tainted, consideration, moved heaven and earth to subject our government to all sorts of pressures and persuasions so that their unfair gains are not lost. If you are interested in watching this morbid melodrama so adroitly choreographed and staged by the MNCs, their foreign mentors, lobbyists and the mainstream media, please read the short articles under ‘In the Nutshell Series’ on my website

What I had seen getting unfolded to kick up Shri Mukherjee to the high office of the Presidency of our Republic, I noticed well captured in the following words of Prof. Arun Kumar who wrote perceptively in The Hindu in his article dated June 22, 2012:

“Pranab Mukherjee is likely to be India’s next President. It seemed to be touch and go until the tide turned in his favour. It has been suggested that the corporates swung it for him not because he is one of the most seasoned Indian politicians but because they wanted him out of the Ministry of Finance. He has acted tough on retrospective taxation and GAAR – the measures in his recent budget to tackle black income generation. But it would not be surprising if the real pressure was from foreign shores. Indian corporates are sensitive to what their foreign counterparts think. So is our political leadership. Britain and Netherlands exerted strong influence on the Vodafone case. How much of our politics is being determined by such pressures? ”

This comment reminds me of what I had written in Chap. 26 (The Realm of Darkness: the triumph of corporatocracy’) in my memoir, On the Loom of Time, after reading what we all see written on the wall. I quote from page 434 to help you catch what I have suggested so cryptically:

“The outcome of the corporate imperium would be a corporate empire to which the peoples of the world must remain obedient. The global consortium of the corporations would look after the corporate interests. Any global corporation, wherever incorporated, would receive the protection by the consortium. Like the Concert of Europe in the European political history, the corporate consortium would work for the corporations. The structure of ‘government’ must remain only to protect the corporations from people’s wrath. We all know how Palmerston justified his intervention to protect the commercial interests of Don Pacifico by invoking the doctrine of the Roman Empire: civis Romanus sum ( “I am a Roman citizen”), by which an ancient Roman could proclaim his rights throughout the empire48 to get his native State’s protection. An MNC would need this sort of protection in every land. We must note how this corporate imperium was brought about: an expert has insightfully said—”The empire, unlike any other in the history of the world, has been built primarily through economic manipulation, through cheating, through fraud, through seducing people into our way of life, through the ecomomic hit men…”


I had occasions in the past to reflect on some of the public acts of Pranab Babu. Whilst he always impressed me as a tactful politician, loyal to the cause he served, I had some reservations too on many points and issues. Even in my Autobiographical Memoir, On the Loom of Time (please see the homepage of my Website), I had occasions to comments on him: some of which I quote though they can be appreciated or depreciated only in the context of the exposition in the book: —

(a). In the Shah Commission Report [at p. 231 of On the Loom of Time]:

“I would highlight only one point which drew my attention because that pertained to the working of the Income-tax Department. It is generally believed that the income tax authorities, being statutory authorities would, always function in terms of law. The Shah Commission Report examined comprehensively how the powers under section 132 of the Income-tax Act, 1961, were misused in conducting searches and seizures in the cases of the Baroda Rayon Corporation and the Bajaj Group of Company. The persons, who were involved in such acts of the abuse of power, included Shri S R Mehta, the then Chairman of the Central Board of Direct Taxes, and Shri Pranab Mukherjee, the then Minister for Revenue and Banking. After elaborately examining all the relevant facts in Chapter IX of the Report, Justice Shah stated:

“….In the face of the overwhelming evidence in support of this view, Shri Harihar Lal’s protestations that he had reasons to believe that conditions for invoking Section 132 of the Income Tax Act existed,cannot be accepted. They stem from a reluctance to accept that he had allowed his judgment in the exercise of this extraordinary power to be swayed by extra-legal directions of his superior officer. The Commission is of the view that Shri S. R. Mehta’s action in directing Shri Harihar Lal to initiate action under section 132 of the Income Tax Act in this case amounts to subversion of lawful processes and an abuse of authority….”

“On the uncontroverted statement of Shri S. R. Mehta that these papers were handed over to Shri P. K. Mukherjee, Shri P.K. Mukherjee’s action in obtaining and retaining seized documents and subsequent failure or omission on his part to return them to the Chairman of the Central Board of Direct Taxes or to any other concerned or duly authorized officers in the Income Tax Department, also amounts to subversion of lawful process and abuse of authority.”

“The statutory provisions pertaining to the mode of the seizure of the documents, and the provisions governing the post-seizure procedure were blatantly breached. The dramatis personne of this morbid drama included the then CBDT Chairman (Shri S. R. Mehta), the then Director of Inspection (Inv.) (Shri Harihar Lal), and Shri Pranab K. Mukherjee, the then Minister for Revenue and Banking. It was shocking how lies and half-truths were traded, how the Administration allowed itself to become the stooges of the politicians. A reading of the Chapter IX of the Commission’s Report, would convince you that they had played their unworthy role in that strange melodrama. I have already quoted two short extracts from that Report in Chapter 11. The great Tulsidas said: “Let us not go on putting gloss on the unseemly”: so I must stop pursuing these points further. ”

(b) How he had assessed our Parliament [at p. 321 of On the Loom of Time]:

“In February, 1992, Shri M.A. Baby, Member of Parliament, Rajya Sabha gave a notice of his intention to introduce the Constitution (Amendment) Bill, 1992 to amend the Constitution of India providing that every agreement, treaty, memorandum of understanding, contract, or deal entered into by the Government of India with any foreign country “shall be laid before each House of Parliament prior to the implementation of such agreement…” Shri Baby spoke passionately in support of the said Bill. Shri Pranab Mukherjee, M.P. argued that seeking prior Parliamentary approval was problematic. He referred to the Treaty of Versailles, negotiated by President Wilson, which the U.S. Senate could not appreciate. Besides, he said, Parliament was not so constituted as to discuss the international treaties and agreements in an effective manner.

(c ). in the context of the WikiLeaks [at p. 329 of On the Loom of Time]:

“But what is worth noting is the way the politicians in power responded to the problem posed by the leak. Our Prime Minister Dr. Manmohan Singh, and the Finance Minister Pranab Kumar Mukherjee advanced several reasons for not discussing such leaks: first, that the 15th Lok Sabha could not consider the issues which pertained to the period the 14th Lok Sabha; and, second, that the doctrine of diplomatic immunity did not permit our government to examine such reports. Both the reasons were wrong.”

But his role in presenting the last budget, and his position against the foreign looters of our nation have much endeared him to me and many others. There is a great likelihood that those who want to kick him up to make room for a compliant person to grace the chair of the F. M. would succeed. I wish if Pranab Babu reads Bernard Shaw’s Major Barbara. The story is suggestive. Major Barbara, a much acclaimed officer of The Salvation Army, discovered, at the end of the day, that her glorious career had inglorious support. Her ascent had been facilitated by the tainted money from an armament manufacturer and a whisky distiller. She suffered after discovering her morbid reality. It seems her only misfortune was that her conscience was not yet dead. But what this story suggests is evident in matters at most places in our nation’s public life, providing a veritable ‘shock continuum’ to the citizens.


I would request my reader not to forget the wisdom so felicitously expressed by Chesterton in his well-known ‘The Mad Official’:

“These are peoples that have lost the power of astonishment at their own actions. When they give birth to a fantastic fashion or a foolish law, they do not start or stare at the monster they have brought forth. They have grown used to their own unreason; chaos is their cosmos; and the whirlwind is the breath of their nostrils. These nations are really in danger of going off their heads en masse; of becoming one vast vision of imbecility…”

Introduction to DemocracyWatch India

Introduction to DemocracyWatch India
by Shiva Kant Jha

uddhared atmana’tmanam
Na’tmanam avasadayet
atmai ‘va hy atmano bandhur
atmai’va ripur atmanah.

The Bhagavad-Gita

Change Quote

(“Almighty God will not change the condition of any people unless they bring about a change in themselves.”)

The Holy Quoran

“Great innovations never come from above; they invariably come from below….[from] the much-derided silent folk of the land-those who are less infected with academic prejudices than great celebrities are wont to be.”

Jung, C.G, Modern Man in Search of a Soul

I have set the following as the guiding norms in writing the critical comments on certain current topics of our common interest. You should not expect them to be scholarly and exhaustive expositions. Constraints, both of time and health, prevent me pursuing such high objectives. These would be my brief responses to the challenging topics which matter for our citizenry. My effort would be amply rewarded if it succeeds in stimulating your thoughts, good if you agree with them, best if you disagree with them if there be good reasons to do so. I think this sort of quest is both our right and duty. I hope the threads of thoughts can be carried to higher and higher ascents by persons abler than me. This is how we must explore truths and seek solutions in democracy. The effort of this humble self is wholly pro bono publico. I hope you will find the comments made with candour but always with utmost good faith. As the promotion of thoughts and culture to promote and protect our democracy to achieve the mission delineated in our great Constitution is our common and constant pursuit, let us resolve to pursue the ideals so felicitously expressed in the Mahabharata by the great Veda Vyasa in the pregnant words which I have quoted at the Homepage of my website . I render its import in English thus:

Sorrow which we share in common,
It is unwise to shed tears thereon;
It is prudent to find and forge some ways
To diagnose the cause to get rid of the ailment.

“Let a man lift himself by himself ; let him not degrade himself; for the Self alone is the friend of the self and the Self alone is the enemy of the self.”

The Bhagavadgita VI. 5 ( Dr. S. Radhakrishnan’s Translations)

(“Almighty God will not change the condition of any people unless they bring about a change in themselves.”)