10 Chapter 3

Chapter-3
ANALYSIS OF SPECIFIC LAWS ON WHITE

COLLAR CRIMES
3.1 INTRODUCTION-
The notion of white collar crime was first introduced in the field of
criminology by Prof. Edwin H. Sutherland, in the year 1939 who has popularized the
term white collar crimes by defining such crimes as one committed by a person of
1
respectability and high social status in the course of his occupation. Sutherland also
included crimes committed by corporations and other legal entities within his
definition. The main categories of white collar crimes are corruption, food and drug
adulteration, counterfeiting, forgery, tax evasion, cyber-crimes, money laundering etc.
2
The Indian Penal Code, 1860 is the earliest comprehensive and codified criminal law
of India. But the social and economic structure of India has changed to such a large
extent that in many respects the Code does not truly reflect the needs of the present
day. Besides the Indian Penal Code, 1860 which provide some basic principles
relating to white collar crime, such as cheating, counterfeiting, breach of trust, fraud
and forgery, there are quite a few other enactments specifically designed to deal with
white collar crimes such as: the Prevention of Food Adulteration Act, 1954; the
Essential Commodities Act, 1955; the Copyright Act, 1957; the Narcotic Drugs and
Psychotropic Substances Act, 1985; the Prevention of Corruption Act, 1988; the
Transplantation of Human Organs Act, 1994; Foreign Exchange Management Act,
1999; Information Technology Act, 2000, the Prevention of Money Laundering Act,
2002; the Food Safety and Standards Act, 2006; the Punjab Prevention of Human
Smuggling Act, 2012; the Lokpal and Lokayuktas Act, 2013 etc. An analysis of some
of these acts has been made as under:-
3
3.2 THE PREVENTION OF FOOD ADULTERATION ACT, 1954 -
3.2.1 INTRODUCTION-
Food is one of the basic necessities for sustenance of life. Pure, fresh and
healthy diet is most essential for the health of the people. It is no wonder to say that
1 Edwin H. Sutherland, White Collar Crimes 7 (1949)

2Act No. 45 of 1860.
3Repealed by the Food Safety and Standards Act, 2006 (34 of 2006), sec. 97 and
Second Schedule (w.ef. 29-7-2010)
82
community health is national wealth. Adulteration of food-stuffs was so rampant,
widespread and persistent that nothing short of a somewhat drastic remedy in the form
of a comprehensive legislation became the need of the hour. A very important step
towards the addressing of the problem of food adulteration was done in the year 1954
by enacting a central legislation on the subject keeping in view the limits of the Indian
penal code, 1860. For example it does not cover the mixing of the substances that are
not noxious as water in milk and stone and inferior quality grains in pulses. Moreover,
it requires proving mens-rea. The Act provides for strict liability and at the same time
condition of adulterated food to be noxious is done away with.
Prior to this there were number of State laws for each State, which were enacted
at different times and without mutual consultation between the States. In 1937, a
committee was appointed by the Central Advisory Board of Health and it advised for
the central legislation to bring uniformity in the law. The basic idea behind it was
4
deterrent theory. In Municipal Corporation of Delhi v. Surja Ram, the object of the
Act was explained as follows-
The objects and the purposes of the Act are to eliminate the dangers to human
life from sale of unwholesome article of food.. .it is enacted to curb the widespread
evil of food adulteration and is legislative measure for social defense. It is intended to
suppress a socio-economic mischief, an evil that attempts to poison, for monetary
gains, a very source of substance of life and well-being of the community.
The Act provides for a Central Food Laboratory to which food samples can be
referred for final opinion in disputed cases and the Central Committee for Food
Standards. The central government is vested with the rule-making power. As per the
need, the Act was amended four times-1964, 1971, 1976 and 1986. It is pertinent to
mention here that the Prevention of Food Adulteration Act, 1954 was repealed by the
Food Safety and Standards Act, 2006.
3.2.2MAIN FEATURES OF THE ACT-
It would be beneficial for us to discuss some of the main provisions of Act
which are as under-
Meaning of Adulterant-
5
Any material which is or could be employed for the purposes of adulteration.
4
(1965) Cri LJ 571 (Del.).
5
Section 2(i) of the Prevention of Food Adulteration Act, 1954.
83
Definition of Food-
Any article used as food or drink for human consumption other than drugs and water
and includes
a. Any article which ordinarily enters into or is used in the composition or
preparation of human food.
b. Any flavouring matter or condiments and
c. Any other article which the Central Government may having regard to its
use, nature, substance or quality, declare, by notification in the official
6
gazette as food for the purpose of this Act.
The Central Committee for Food Standards-
The Central Government shall, as soon as may be after the commencement of
this Act, constitute a committee called the Central Committee for Food Standards to
advise the Central Government and the State Governments on matters arising out of
the administration of this Act and to carry out the other functions assigned to it under
7
the Prevention of Food Adulteration, Act 1954.
Food laboratories-
The Central Government shall, by notification in the Official Gazette, establish
one or more Central Food Laboratory or Laboratories to carry out the functions
entrusted to the Central Food Laboratory by this Act or any rules made under this Act.
The Central Government may, by notification in the official Gazette, also specify any
8
laboratory or institute as a Central Food Laboratory for the purposes of this Act.
Prohibition of import of certain articles of food-
No person shall import into India any adulterated food; any misbranded food;
any article of food for the import of which a licence is prescribed, except in
accordance with the conditions of the licence; and any article of food in contravention
9
of any other provision of this Act or of any rule made there under.
Prohibitions of manufacture, sale, etc., of certain articles of food-
No person shall himself or by any person on his behalf manufacture for sale, or
store, sell or distribute
(i) any adulterated food;
(ii) any misbranded food;
6
Ibid section 2(v).
7
Ibid section 3.
8
Ibidsection 4.
9
Ibid section 5.
84
(iii) any article of food for the sale of which a licence is prescribed, except in
accordance with the conditions of the licence;
(iv) any article of food the sale of which is for the time being prohibited by the
Food (Health) Authority in the interest of public health;
(v) any article of food in contravention of any other provision of this Act or of
any rule made there under; or
(vi) any adulterant.
Public Analysts-
Section 8 postulates that it is open to the State Government to appoint more than
one Public Analyst to any local area or areas and both would co-exist to have power
and jurisdiction to analyse an article or articles of food covered under the Act to find
10
out whether the same is adulterated.
Food Inspectors-
The Central Government or the State Government may, by notification in the
official Gazette, appoint such persons as it thinks fit, having the prescribed
qualifications to be food inspectors for such local areas as may be assigned to them by
11
the Central Government or the State Government.
Purchaser may have food analysed-
Under this Act purchaser is given the right to have the food articles analysed by
12
the public analyst on payment of such fees as may be prescribed.
Penalties Procedure-
A minimum imprisonment of six months with a minimum fine of Rs. 1000 is
envisaged under the Act for cases of proven adulteration, whereas for the cases of
adulteration which may render the food injurious to cause death or such harm which
may amount to grievous hurt the punishment may go up to life imprisonment and a
13
fine which shall not be less than Rs. 5000.
3.2.3 LOOPHOLES IN THE PREVENTION OF FOOD ADULTERATION
ACT,1954-
Roscoe Pound, while classifying the social interest under six heads, placed
public health at top of it. In India it is also one of the Directive Principles of the State
10
State of U.P. v. Hanif AIR 1992 SC 1121
11
Section 8 of the Prevention of Food
Adulteration Act, 1954. 12Ibid section 12.
13
Ibid section 16.
85
14
Policy. In spite of this fact, the object of the legislations has not been achieved.
There can be number of reasons behind it, but the doubt starts from the effectiveness
of the legislation itself. Following were some of the prominent loopholes of the
prevention of Food Adulteration Act, 1954.
(1)
The Prevention of Food Adulteration Act, 1954 did not provide for the mandatory
standardization of food products.
(2)
There was no requirement for training to the food inspectors. Usually, they did
not know how much sample to take and in what quantity the preservative is to be
mixed in the sample because of which the samples are usually destroyed by the
time they are tested.
(3)
The minimum numbers of such inspectors required for the area were not given.
In other words, the inspector to the population ratio was missing in the Act.
(4)
The Prevention of Food Adulteration Act, 1954 gave right to any person to get
15
the sample tested if he thinks that it contains deleterious substance. But for this
he had to pass two hurdles. First, he had to inform the seller the purpose for
which he was taking the samples and second that for analysis he had to pay the
requisite fees. As far as the first issue is concerned, no trader who is really guilty
will allow the consumer to take the sample. Secondly, though the fee is
refundable if the analysis report is positive, it is not possible for all to afford it
initially, as it is usually a costly affair. Moreover it is always doubtful whether the
analysis will be cent percent precise.
(5)
There was the major problem with procedural part of the Act. The Act failed to
mark distinction between the categories of adulteration and have same
16
punishment for all kind of adulteration.
(6)
While sentencing, the judge had no discretion as there was a provision of
minimum punishment. On the contrary burden was placed on him to state in
judgment the special and adequate reason as to why a particular punishment was
17
tented out.
14 Article 48-A of the Constitution of India.

15 Section 12 of the Prevention of Food Adulteration Act, 1954.
16 Subhash C. Sharma, Consumer Protection 381 (1995).
17 P.S Rao, A Critique on the Prevention of Food Adulteration Act,1954 827 (1983).
86
(7)
Lack of coordination had been witnessed between the food inspector and public
analyst who were not legal person and public prosecutor who was not the
18
technical person. All of this benefited the accused.
(8)
The Magistrate usually handling criminal cases were not specialists in food
adulteration matters and at the same time they had the mind set of giving benefit
of any doubt or any inordinate delay to the accused, which spoiled the
prosecution case.
(9)
On one hand we can see that the procedure adopted makes it difficult to prove the
accused guilty, on the other hand the Prevention of Food Adulteration Act was
covered under the Probation of Offenders Act, 1958 in case the accused was less
than 18 years of age.
(10)
Coming to the practical side, under the present scenario the retailers are not in the
position to press the manufacturers for giving guarantee. Moreover there are no
facilities available to the traders to test the purity of the articles at the time of
19
purchase.
Food adulteration is a major social problem in every society. Government of
India, enacted a Central Legislation called the Prevention of Food Adulteration Act,
the objective envisaged in this legislation was to ensure pure and wholesome food to
the consumers and also to prevent fraud or deception. The general public traders and
food inspectors are all responsible for perpetuating this evil. Unless the public rises
up against the traders and unscrupulous food inspectors, this evil cannot be curbed. It
is here the voluntary agencies, consumer guidance, proper cancelling and IEC
(Information, Education and Communication) materials can play a vital role.
3.3 THE COPYRIGHT ACT, 1957
3.3.1 INTRODUCTION-
Copyright is an exclusive right exercised over a work produced by the
20
Intellectual labour of a person. As in Sulmanglam R. Jayalakshmiv. Meta Musical,
the Madras High Court has held that the right which a person acquires in his literary
or artistic work which is the result of his intellectual labour is called his copyright.
18
Ibid.
19 Emily Andrews, Penal Law on Food Adulteration 337 (1984).
20 AIR 2000 Mad. 454. See also Fortune Films International v. Dev Anand and Anr. AIR
1979 Bom. 17,
Pillalamarri Lakshmi Kanthan and Ors. v. Ramakrishna Pictures and Ors. AIR
1981 A.P. 224, The Academy of General Education v. Smt. B. Malini Mallya AIR
2008 SC 1286, Eastern Book Company and Ors. v. D.B. Modak and Anr., AIR
2008 SC 809, Newspaper Ltd v. Ratna Shankar Prasad, AIR 1977 All. 356.
87
Copyright is not restricted in literary or artistic work. Copyright applies to
different other kinds of works also like dramatic, musical, cinematographic film,
computer programme, work of architecture and sound recording and any other work
which is produced by the intellectual labour of a person. In other words, different
kinds of works which are the results of intellectual labour of person fall within the
purview of the copyright. As the subject-matter of copyright is the work produced by
the intellectual labour of a person, therefore, the right to copyright is a right to
intellectual property of a person.
The exclusive right to copyright exercised by a person includes his right to
assign the copyright either wholly or partially in the favour of any other person. The
owner of the copyright may also grant any interest in the copyright by license in the
favour of any other person. The exclusive right to copyright also entitles the owner
of the copyright to restrain any person from doing an unauthorized act with respect to
the work in which his copyright subsists. As in Bharat Law House, Messrs v. M/s
21
Wadhwa Co. Ltd., it was observed that Copyright is the exclusive right to do and to
authorize others to do and restrain others from doing certain acts in relation to a
literary work. Exclusive right to copyright in a work also includes the right to
22
reproduce the work. As in Penguin Books Ltd. v. M/s India Book Distributors, the
Delhi High Court observed that anything with respect to the intellectual work in its
most elementary form means exclusive right to multiply copies of a book.
COPYRIGHT LAW-
Copyright law has been developed to give legal protection to copyright. Right
to copyright has become a statutory right under the Copyright Law. Copyright Law
prevents the reproduction, sale or any other act with respect to a work if it is done
without the consent of the owner of the copyright in that work because any act done
with respect to a work in which a copyright subsists without the authority of the owner
of such copyright is deemed to be an infringement of the copyright.
Copyright Law provides for the civil as well as criminal remedies against the
infringement of copyright. Copyright Law provides for civil remedies in the form of
injunctions, damages or accounts against the infringement of copyright. Similarly,
Copyright Law provides for the punishments in the form of imprisonments and fines
21 AIR 1988 Del. 68.
22 AIR 1985 Del. 29. See also Time Warner Entertainment Company L.P. and
Ors, v. RPG Netcom and Ors., AIR 2007 Delhi 226, B.K Dani and Ors. v. State of
M.P. and Anr. 2005 Cri LJ 876 (M.P.), R.G. Anand v. Delux Films and Ors., AIR
1978 SC 1613.
88
as a criminal remedy for the offence of infringement of the copyright. As in
23
Associated Electronics v. M/s. Sharp Tools, the Karnataka High Court observed as
follows-
The Copyright law is in essence concerned with the negative right of
preventing the copying of physical material, existing in the field of literature and art.
Its object is to protect the writer and artist from the unlawful reproduction of his
24
material.Similarly, in Sulmanglam R. Jayalakshmi v. Meta Musical, the Madras
High Court observed that the primary function of copyright law is to protect the
fruits of a mans work, labour, skill or test from annexation by the other people.
Copyright Law protects copyright of a person in a work produced by his
intellectual labour irrespective of his status. Thus, a saint who has renounced the
world has copyright in the work produced by his intellectual labour like any other
25
person. As in Sulmanglam R. Jayalakshmiv. Meta Musical, the Madras High Court
observed as follows-
The Law of copyright has to protect a mans copyright irrespective of his status
as a family man or saint. Merely because a person has renounced the world, he cannot
be compelled to renounce his copyright too. Thus, if a saint writes certain lyrics in
the praise of God, he has copyright over those lyrics under the Copyright Law.
OBJECTIVES OF COPYRIGHT LAW:
The Copyright Law achieves the following objectives-
1. Protection of individual commercial interest in an intellectual work.
2. Protection of social interest.
1. PROTECTION OF INDIVIDUAL COMMERCIAL INTEREST-
No person other than the owner of the copyright can do anything with respect to
the work in which the copyright subsists. However, the Copyright Law permits the
owner of the copyright to assign the copyright either wholly or partially to any other
person. The Copyright Law also permits the owner of the copyright to grant any
interest in the copyright by granting licence in the favour of any other person. The
owner may assign the copyright or grant licence in the favour of any other person in
consideration of monetary gain. Thus, copyright law not only protects the creative
genius of human mind, but also entitles a person to earn monetary gain from a work
23 AIR 1991 Kant, 406.

24 AIR 2000 Mad. 454.
25
Ibid
89
produced by his intellectual labour. As in Garware Plastics and Polyster Ltd.,
26
Bombay v. M/s. Telelink, the Bombay High Court observed as follows-
The Copyright Act is meant to protect the owner of the copyright against
unauthorized performance of his work, thereby entitling him monetary gain from his
27
intellectual property. Similarly, in Sulmanglam R. Jayalakshmi v. Meta Musical, the
Madras High Court observed that the primary function of the Copyright Law is to
protect the fruits of a mans work, labour, skill from annexation by other people.
28
Lord Atkinson in Macmillan & Co. Ltd. v. K & J., quotes Lord Halsbury as follows-
1 shall very much regret if I were compelled to come to the conclusion that the
state of law permitted one man to make the profit and to appropriate to himself what
has been produced by labour, skill and capital of another.
29
Whereas Lord Atkinson in Macmillan & Co. Ltd. v. K. & J., explains the basis
of Copyright Law as follows:
The moral basis on which (the principle of the protective provisions of
Copyright Act rests is the Eighth Commandant i.e., Thou shall not steal.
Emphasizing the importance of Copyright Law in protecting the commercial
interest of an artist or an author in his work, Honble Justice V. R. Krishna Iyer in
30
Indian Performing Rights Society Ltd. v. Eastern India Motion Pictures Association,
observed as follows:
The creative intelligence of man is displayed in multifarious ways of aesthetic
expression but it often happens that economic system so operates that the priceless
divinity which we call artistic or literary creativity in man is exploited and masters,
whose works are valuable are victims of pit falling payment. World opinion in defence
of human rights to intellectual property led to international conventions and municipal
laws, commission, codes, and organizations calculated to protect works of art. India
responded to this universal need by enacting the Copyright Act, 1957.
2. PROTECTION OF SOCIAL INTEREST-
Copyright Law not only protects the commercial interest of a person in the work
produced by his intellectual labour, but also protects the interest of the society
26 AIR 1989 Bom. 33.See also Mishra Bandhu Karyalaya and Ors. v.
Shivratanlal Koshal, AIR 1970 MP 261, Penguin Books ltd. v. India Books
Distributors and Ors., AIR 1985 Delhi 29
27 AIR 2000 Mad 454.
28 AIR 1924 PC 75, at page 81.
29
Ibid.
30
AIR 1977 SC 1443.
90
because art and literature are the essential constituents of culture of any society.
Maturity and excellence in the art and literature means maturity and excellence in the
culture. Thus, by protecting the copyright of the authors and artists in their artistic or
literary work, the copyright law protects the culture of the society. As the Delhi High
31
Court in Penguin Books Ltd.. England v. Indian Book Distributors, observed as
follows-
Copyright is a property right and throughout the world, it has been regarded as
a form of property working for special protection in the ultimate public interest.
32
Similarly, in Smt. Mannu Bhandari v. Kala Vikas Pictures Pvt. Ltd., the Delhi
High Court Highlighted the social interest served by the Copyright Law as follows:
The hallmark of any culture is excellence of arts and literature. Quality of
creative genius of artists and authors determine the maturity and vitality of any
culture. Art needs healthy environment and adequate protection. The protection which
law offers is thus not the protection of the artist or author alone. Enrichment of culture
is of vital interest to each society. Copyright Law protects this social interest.
COPYRIGHT LAW IN INDIA-
Copyright law existed in India even prior to its independence. The Copyright
Law in India can be traced to Indian Copyright Act, 1847. The Indian Copyright Act,
1847 was enacted during East India Companys regime. Later the Imperial Copyright
Act, 1911, of United Kingdom was extended to India as part of His Majestys
dominion. Then in 1914, Indian legislature passed the Indian Copyright Act of 1914.
To this Act was annexed the modified version or the Imperial Copyright Act, 1911 for
its application in India, Thus, prior to its independence the copyright law applicable in
India consisted of Indian Copyright Act, 1914 and the Imperial Copyright Act, 1911 of
United Kingdom as modified in its application to India by the Indian Copyright Act,
1914.
33
THE COPYRIGHT ACT, 1957
After Independence, the Indian Parliament enacted the Copyright Act, 1957 to
be applicable in India. The Copyright Act, 1957 of India repealed the Indian
Copyright Act, 1914, and the Copyright Act of 1911 passed by the Parliament of
United Kingdom as modified in its application to India by the Indian copyright Act,
31 AIR 1985 Del. 68.

32 AIR 1987 Del. 13.
33 It came into force on 21st January, 1958.
91
1914. The Copyright Act, 1957 came into force on 21.1.1958 and extends to the
whole of India.
3.3.2. INPORTANT PROVISIONS OF THE COPYRIGHT ACT, 1957
Following are the important features of the Copyright Act, 1957.
I. Different works in which copyright subsist-
The Copyright Act. 1957, specifies and defines different kinds of works in which
copyrights subsists. These different kinds of works include literary, dramatic,
musical, artistic, cinematographic film, computer programme, work of
architecture and sound recording.
II. Different meanings of copyright with respect to different kinds of work-
Sec. 14 of the Copyright Act, 1957, gives different meaning to different kinds of
34
works in which copyright subsists.
III. Authorities and Registration id copyright-
The Copyright Act, 1957, provides (or the authorities like, Copyright Office,
Registrar of Copyrights and Copyright Board for the purpose of the registration
of the copyright. However, registration of copyright is not compulsory under the
Copyright Act, 1957.
IV. Ownership and assignment of copyright-
The Copyright Act, 1957, provides for that who is the first owner of the
copyright. Sec. 17 of the Copyright Act, 1957, provides that under certain
circumstances persons other than the author of the work may become the first
35
owner of the copyright. Sec. 18 of the Copyright Act also provides that the
owner of the copyright in a work may assign the copyright wholly or partially in
36
the favour of any other person.
V. Licenses relating to copyright-
The Copyright Act, 1957, provides that licence relating to copyright in a work
may be granted to the favour of any other person by the owner of the copyright.
The Act also provides for the compulsory licence in Indian works withheld from
public and in unpublished work. Such compulsory licence is granted by the
Registrar of the Copyrights on the direction of the Copyright Board.
34 Section 14 of the Copyright Act, 1957.

35 Ibid Section 17.
36 Ibid Section 18.
92
VI. Term of Copyright-
The Copyright Act, 1957, provides for the term during which copyright in a
work subsists. Term of copyright in published literary, dramatic, musical and
artistic work subsists during the lifetime of the author of such work and for sixty
years following the year of the death of the author. Whereas in case of
photographs, cinematograph films, work of sound recording, the copyright
subsists for sixty years following the year of publication of these works.
VII. Copyright Society-
The Copyright Act, 1957, provides for the registration of copyright society. A
copyright society registered under sec. 33(3) of the Copyright Act is permitted to
carry on the business of issuing or granting licences in respect of any work in
37
which copyright subsists.
VIII. Rights of Broadcasting Organization and of Performers-
According to sec. 37 of the Copyright Act, 1957, every broadcasting
organization shall have a special right to be known as broadcast reproduction
38
right in respect of its broadcasts. Similarly, section 38 of the Copyright Act
provides that where any performer appears or engages in any performance, he
shall have a special right to be known as the performers right in relation to
39
such performance.
IX. Infringement of copyright-
Sec. 51 of the Copyright Act, 1957, provides for the acts which are deemed to be
40
the infringements of copyright in a work. On the other hand, sec. 52 of the
Copyright Act provides for the acts which are not deemed to constitute an
41
infringement of copyright in a work.
X. Remedies against the infringement of copyright-
The Copyright Act, 1957, provides for the civil as well as criminal remedy
against the infringement of copyright. The Copyright Act. 1957, provides for
civil remedies in the form of injunction, damages or accounts against the
infringement of copyright. Similarly, punishment in the form of imprisonment
37 Ibid Section 33 (3).

38 Ibid Section 37.
39 Ibid Section 38.
40 Ibid Section 51.
41 Ibid Section 52.
93
and fine is provided as a criminal remedy for the offence of infringement of
42
copyright under the Copyright Act, 1957.
3.3.3. GREY AREAS OF THE COPYRIGHT ACT, 1957
I. Copying a book is similar to stealing somebody's jewellery. Large scale
organized copying is like robbing a jeweller's shop or a bank. But then, there is a
major difference. In the case of a bank robbery the newspapers are full of
sensational news and the whole might of the State, especially the police, jumps
in to catch the culprit, there is pressure of public opinion even on the judge
trying the case. The effect is electric. On the other hand, in the case of a book
pirate, the police justify their inaction by pointing to murder dockets; the State
deflects the desperate appeals of Copyright owners with nonchalance and the
judge sits with a `so what' attitude while the man on the street remains in stark
oblivion.
II. The copyright does not protect the idea but it does protect the skill and the
labour put in by the authors in producing the work. A person cannot be held
liable for infringement of copyright if he has taken only the idea involved in the
work and given expression to the idea in his own way. Two authors can produce
two different works from a common source of information each of them
arranging that information in his own way and using his own language. The
arrangement of the information and the language used should not be copied
from a work in which copyright subsists.
III. There is not much piracy of books in India. By and large, to save their business
interests, publishers and distributors try to enforce copyright to the best of their
abilities. Yet, piracy hurts them hard because the books which get pirated
invariably are the few with good margin and high demand. Deprived of the
profits from such bestsellers the book industry starved of the much needed
capital for growth and investment in literary works of significance but low sales
potential, especially by up-coming authors. Harsher measures are therefore
needed to curb piracy.
IV. Another area of copyright infringement which needs to be tightened up relates to
protection of author's rights vis-a-vis the assignee or the licensee. There is need
to develop a model contract, too, which should also provide protection for the
author's rights in the fast changing scenario of electronic publishing, Internet,
etc.
42
Ibid Section 63.
94
The provisions of the Copyright Act,1957 show that the Copyright protection in India
is strong and effective enough to take care of the copyright of the concerned person.
The protection extends not only to the copyright as understood in the traditional sense
but also in its modern aspect. Thus, on-line copyright issues are also adequately
protected, though not in clear and express term. To meet the ever-increasing
challenges, as posed by the changed circumstances and latest technology, the existing
law can be so interpreted that all facets of copyright are adequately covered. This can
be achieved by applying the purposive interpretation technique, which requires the
existing law to be interpreted in such a manner as justice is done in the fact and
circumstances of the case. Alternatively, existing laws should be amended as per the
requirements of the situation. The existing law can also be supplemented with newer
ones, specifically touching and dealing with the contemporary issues and problems.
The Information Technology Act, 2000 requires a new outlook and orientation, which
can be effectively used to meet the challenges posed by the Intellectual Property
Rights regime in this age of information technology. Till the country has such a sound
and strong legal base for the protection of Intellectual Property Rights, the judiciary
should play an active role in the protection of these rights, including the copyright.
The situation is, however, not as alarming as it is perceived and the existing legal
system can effectively take care of any problems associated with copyright
infringement.
3.4. THE ESSENTIAL COMMODITIES ACT, 1955
The practitioners of evil, the hoarders, the profiteers, the black marketeers
and speculators are the worst enemies of our society. They have to be dealt
with sternly, however well placed important and influential they may be; if we
acquiesce in wrongdoing, people will lose faith in us-Dr. Radhakrishnan.
3.4.1 INTRODUCTION:
The Essential Commodities act, 1955 as enacted to ensure easy availability of
essential commodities to the consumers and to protect them from exploitation by
unscrupulous traders. The Act provides for regulation and control of production,
distribution and pricing of commodities, which are declared as essential for
maintaining or increasing supplies or for securing their equitable distribution and
availability at fair prices. Most of the powers under the Act have been delegated to the
State Government. Using the powers under the Act, various Ministers Departments of
the central Government have issued control orders for regulating production,
95
distribution, quality aspect, movement etc. pertaining to the commodities which are
essential and administered by them. The Essential Commodities Act is being
implemented by the State Governments by availing of the delegated powers under the
Act. The State Government/UT Administration have issued various control orders to
regulate various aspects of trading in essential commodities such as food grains,
edible oils, pulse, kerosene, sugar etc. The Central Government regularly monitors the
action taken by State Government/UT Administration to implement the provision of
the Essential Commodity Act, 1955.
The items declared as essential commodities under the Essential Commodities
Act 1955 are revised from time to time in the light of liberalized economic policies in
consultation with Ministries/Departments administering the essential commodities
and particularly with regard to their production, demand and supply. There are seven
broad categories of essential commodities covered by the Act. These are-
(I) Drugs
(II) Fertilizer
(III) Foodstuffs, including edible oilseeds and oils.
(IV) Hank yarn made wholly from cotton.
(V) Petroleum and petroleum products.
(VI) Raw jute and jute textiles.
(VII) 1. Seed of food crops and seeds of fruits and vegetables.
2. Seed of cattle fodder and
3. Jute seeds
4. Cotton seeds.
Main Objects of the Act
(I) To provide, in the interest of general public, for the control production, supply and
distribution of, and
(II) trade and commerce in certain commodities.
3.4.2MAIN FEATURES OF THE ESSENTIAL COMMODITIES ACT, 1955-
I. Power to control production, supply, distribution etc. of essential
commodities-
A careful study of section 3 of the Act reveals that the very object of the
passing of the Act is indicated therein. The object is equitable distribution of
essential commodities and making them available at fair prices for the general
public and in order to active this object, the
96
central Government can take necessary steps for regulation of production,
supply, distribution, trade and commerce of essential commodities. The object
behind the power exercisable under section 3 (1) is for maintaining or
increasing supplies of any essential commodities or for securing their equitable
distribution and availability at fair prices. This power vests with the Central
43
Government.
II. Holding in Stock-
Section 3 (2)(f) has been enacted to check evasion violation of stock limit
specified by control order. The control is an anti-hoarding measure so as to
prevent black-marketing and speculation in the business of essential
commodities. Looking at a control/levy order in this background, it cannot be
said to be violative of Article 14 of the Constitution. 44 Where the accused was
found to have stored pulses in excess of the permissible limit, collector was
justified in passing order of confiscation.45
III. Confiscation of Essential Commodity-
The Collector, may, if he thinks it expedient so to do, direct the essential
commodity so seized to be produced for inspection before him, and if he is
satisfied that there has been a contravention of the order, may order
confiscation of the essential commodity so seized; any package, covering or
46
receptacle in which such essential commodity is found.
IV. Issue of Show cause Notice before Confiscation of Food Grains-
No order for confiscating any essential commodity, package, covering,
receptacle, animal, vehicle, or other conveyance shall be made under section
6A unless the owner of such essential commodity package, covering,
receptacle, animal, vehicle or other conveyance or the person from whom it is
seized is given a notice in writing informing him of the grounds on which it is
proposed to confiscate the essential commodity. He must be given an
opportunity for making a representation in writing within such reasonable time
47
as may be specified in the notice against the grounds of confiscation.
43
Section 3 of the Essential Commodities Act, 1955.
44
M/S BishmberDayalChander Mohan v. State of U.P
AIR 1982 SC33. 45Jash Karan Rathi v. State of west
Bengal, 2001 Cri. L.J. 182.
46
Section 6-A of the Essential Commodities Act, 1955.
47
Ibid Section 6-B.
97
(I) The person concerned is required to be to be served with notice in
writing. Informing him of the grounds on which it is proposed to
confiscate the essential commodity.
(II) He should be given an opportunity of making representation in writing
within specified time.
(III) 48
Be given an opportunity of being heard in the matter.
V. Nature and Scope of Power-
Power of confiscation is discretionary49, but not arbitrary.50 Discretion is not
discrimination. This power is not without any guidelines or arbitrary
discretion.51 Legislature was conscious of the fact that while in its wisdom it
was empowering the collector to order confiscation, his order would be penal
in nature also that question, relating to rights and liabilities based on general
law may be involved. It was therefore deemed just and proper that the
collectors exercise of power should be open to scrutiny by Judicial Court.52
VI. Sale of Confiscated Commodity-
Section 6A (2) provide that when the collector is of the opinion that the
essential commodity is subject to speedy and natural decay or it is otherwise
expedient in the public interest to do so, he may order the same to be sold at
controlled price. Where no such price is fixed or the same to be sold by public
53
auction.
VII. Appeal-
The Act provides for a right of appeal to any person aggrieved by an order of
confiscation under section 6-A. The appellate authority has all power of
original authority54, and has the power of remand.55 Any person aggrieved by
an order of confiscation under section 6-A within one month from the
communication to him of such order, appeal to any Judicial authority
appointed by the State Government concerned and the Judicial authority shall,
after giving an opportunity to the appellant to be heard, pass such order as it
may think fit, confirming, modifying or annulling the order appealed against.56
48
Chandeswar Mahto V. State of Bihar 1978
Cr LJ 672. 49State of A.P v. BathuPrakasaRao,
etcAIR 1976 SC 1845. 50Sundari Devi v. State
of W.B. Cr LJ. 1391.
51
Umedisinh v. State, AIR 1977 Guj. 11.
52
Harbhajan Singh v. State of M.P. AIR 1978
MP> 150. 53Mariappa V. State of Karnataka,
1991 Cr. LJ 1167. 54Madhav v. State of
Maharastra, 1977 Cr. LJ 1800
55 M/S Ganga electrical v. State, 1991 Cr. LJ. 61 sec also Dal Chand v. State of
M.P 1977 Cr. LJ 1394
56 Section 6C of the Essential Commodities Act 1955.
98
IX. Penalties-
If any person contravenes any order made under section 3 he shall be
punishable in case of an order made with reference to clause (h) or clause (i) of
sub-section (2) of that section, with imprisonment for a term which may
extend to one year and shall also be liable to fine and in case of any other
order, with imprisonment for a term which shall not be less than three months
57
but which may extend to seven years and shall also be liable to fine.
X. False Statement-
If any person required by section 3 makes any statement or furnishes any
information which is false shall be punished with imprisonment for term which
may extend to five years or with fine or with both.58
XI. Offences to be Cognizable-
Every offence under the Essential Commodities Act, 1955 shall be
cognizable.59
XII. Presumption of Culpable mental state-
In any prosecution for any offence under this Act which requires a culpable
mental state on the part of accused, the court shall presume the existence of
such mental state60 but it is a rebuttable presumption and it would be open for
the accused to prove that he had no such mental state with respect to the act
charged.61
XIII. Cognizance of Offences-
The Act provides that no court shall take cognizance of any offence punishable
under this act except on a report in writing, by a public servant or any
62
aggrieved person or any recognized consumer association.
XIV. Constitution of Special Courts-
For dealing more effectively with persons indulging in anti-social activities
like hoarding and black marketing and the evil of vicious inflationary prices
and in order to expedite the process of prosecution under the Essential
Commodities Act, 1955, trial of accused was to be done in special courts with
57
Ibid Section 7.
58
Ibid Section 9.
59
Ibid Section 10A.
60
Ibid section 10C.
61
M/S Shri Laxmi Trading Co. V. Additional District Magistrate (C.S.S.) Rourkala,
1989 Cri LJ 659.
62
Section 11 of the Essential commodities Act, 1955.
99
experienced persons as judges. Only persons who are qualified for
appointment as judge of a High Court or are for a period not less than one
year, a Session Judge or an Additional Session Judge can preside over the
Court.
3.4.3 Loopholes and Suggestions for Improvements-
Human resource development of a nation is the barometer of its socio- cultural
growth. This growth is mainly facilitated by the administrative efficiency depending
upon the versatility and dynamism of the socio economic legislations and their
smooth implementation. However, in recent times the menace of bribery and
corruption is plaguing progress, the curbing of which is sine quo for effective benefits
of the essential commodity laws leading to balanced national growth.
Deriving powers from Section 3 of Essential Commodities Act, 1955 the
government i.e. Central, State and Union Territories issue Control Orders for
regulation of respective commodity in the nature of The Cotton Control Order,
63 64
1986 ; The Drugs (Prices Control) Order, 1995 ; The Petroleum Product
65
(Maintenance of Production, Storage and Supply) Order 1999 ; The Edible Oils
66 67
Packaging Order, 1998 ; The Sugar (Control) Order, 1966 ; The Seeds (Control)
68 69
Order, 1983 ; The Fertilizer (Control) Order, 1985 ; The Jute (Licensing and
70
Control) Order, 1961 etc,. These control orders are full of ambiguities and this
delegated authority also results in poor implementation, manipulation and increase in
litigation. At present there are nearly 1 lakh cases pending in different Judicial forum
relation to offences in essential commodities. The execution and control are full of
irregularities causing wastage of commodities, corruption and bribery in certain
essential commodity like foodstuffs and kerosene, petroleum products etc. The
medicinal drugs are also not free from adulteration and black marketing.
The law is full of shortcomings and although the Essential Commodities Act
has been finding sight from 1955/56 and also has been amended in 2006, it prima
facie runs with both positive and negative defects as a result of which in the Country
63 published in Gazette of India, Part 1, Section 1 dated 11.4.1986

64 published in Gazette of India(Extra), Part II, Section 3(ii), dated 6.1.1995
65 published in Gazette of India(Extra), Part II, Section 3(i), dated 16.4.1999
100
there is neither the control over production: a) over production leading to stocking of
71
commodities in warehouses to rot and perish ; b) low procurement price forcing
farmers to commit suicide burdened with debt ; nor over the supply and distribution of
72
the essential commodities: a) rising prices; b) mal distribution
As observed by the Apex Court food grains worth of Rs. 31, 000 Crores have been
73
siphoned off through the public distribution system through bogus ration cards etc.
and has been diverted to the open market not reaching the beneficiaries and needy
consumers for whom the budgetary subsidy was meant. So also rising fuel prices has
increased adulteration and rampant black-marketing activities, leading to a drop in
quality of commodities available at inflated price out of bounds for the common man.
Although the Act of 1955 gives overriding effect in case of conflict with any other
prevalent Law but this advantage has been used more to facilitate corruption resulting
in mal distribution and defective supply of essential commodities. The negativities
like red tapism, harassment in licensing of the retailers and genuine dealers and the
general public at large encouraging the intending offender. Procedural delay and
miserable failure of the prosecution in proving and establishing the allegations and
lack of scientific investigation in matters have also proliferated crime in essential
commodities.
Honble Supreme Court has declared from time to time that such law be strictly
and constructively interpreted and its objective of public welfare be upheld being the
paramount object but still this has not produced positive result eliminating further
harassment when the prosecution fails miserably in proving and establishing the
allegations in cover up cases.
The recent upshot in the prices of essential commodities, the inflationary trend
in foodstuff prices, petroleum products and fertilizers is a result of lack of control over
production and price fixation, mismanagement by the executive to check illegal use of
powers, failure to prevent hoarding, adulteration and black-marketing activities. There
is a need for forward and welfare oriented governance in the fields of supply and
distribution and control over essential commodities production, etc. An alarming need
is felt for a team of dedicated auditors and vigilance to monitor implementation of the
law and control orders and their violation. Also a need is felt
71
PUCL v. Union of India Supreme Court Order dt. 12.8.10 & 31.8.10
72
Ibid.
73
U.P. Roller Flour Mills Association & Ors. v. Govt. of India & Ors. AIR 2008 SC 130
101
for dedicated machinery for execution of essential commodity related duties. The
bribery and corruption exists in the supply and distribution system due to the failed
criminal justice system. Illegal dealing with rationed articles and adulteration of
petroleum products is a crime under the Prevention of Black Marketing Act, 1980 and
a case registered under the law must be tried in a Special Court constituted in each
State for speedy and relevant remedy. However, several States are yet to establish such
a Court, meaning that cases registered under the law in these States will have to wait
for years to be decided through the regular Courts.
Upon the analysis of the control orders which are the mechanism for keeping
abreast of the developing situation in a fast growing economy beset with the evils of
hoarding, profiteering and black-marketing effectively to be dealt with analysis of the
separate legislation, the Prevention of Black Marketing and Maintenance of Supplies
of Essential Commodities Act 1980, reflects a lack of coordination between the
implementation of the Law and for which a merger of the objects and procedure is
required. So also the Prevention of Black Marketing Act, 1980 needs to be extended to
the whole of India which at present excludes the State of Jammu and Kashmir.
Secondly, a public servant found guilty of offence or abetment for offences
relating to essential commodities should be strictly and separately punished away
from the normal punishment as provided under the Prevention of Corruption Act,
1988, as it is a heinous crime through Special Courts established for this purpose.
Honble Apex Court has directed the Ministry of Food and Agriculture, Government
of India for distribution of the excess food grains free of cost among the poor and
74
needy persons instead of wasting those and allowing to rot in godowns . The delay in
executing such direction of the Honble Apex Court has been seriously viewed by
their Lordships and their Lordships observed that their direction is not advisory in
nature, rather mandatory. The intentional delay generates curiosity towards the nexus
and soft corner on part of the Central Government and Food Corporation of India
towards the alleged offenders and license holders. A comprehensive and exclusive
implementation mechanism and enforcement agency needs to be designed for sound
implementation of this basic needs Law along with periodical assessment and review
through local bodies.
74
Supra Note 59.
102
The provisions of Section 2(a) (i) to (x) as amended in 2006 is short sighted and
only the restrictions imposed should have been relaxed and the Act should have been
made the Essential Commodities (Management) Act as in this age of globalization
regulation is traditional and certain managerial flexibility is the need of the hour.
Unless this is done there will be increase of litigation as regards the definition of
various essential commodities e.g. tea, bricks declared by the Supreme Court not to be
75
essential commodities. Under Section 6A, provision for confiscation of essential
commodity and the vehicle confiscation provision is defective and ambiguous and
76
needs a relook taking into consideration contemporary realities. Provision in Section
6-B should be modified for the issue the notice of confiscation to the owner only to
make it prudent and bring the actual offender liable. This will be more effective to
77
realize the object of the Act to curb the offences and or from whom it is seized
may be deleted as because confiscation can be done only from the owner of the
commodities and the vehicle. Otherwise there is no reason for issue of notice to
person from whom it is seized if he is not the owner and the commodity and carrier
can be confiscated to the State.
Payment of interest must be made compulsory in cases of the sale of confiscated
essential commodity along with the sale proceeds under Section 6C once there is
acquittal of the accused upholding principles of natural justice. The provision under
Section 10 does not make all partners liable for offences by firms leaving scope for
sleeping partner to go scot free who are actually active but sleeping partners as per the
present provisions of the Law resulting in clandestine and benami transactions.
Amendments should be made to make all partners liable and put the onus on them to
78
disprove allegations against them including, sleeping partners. To deter frivolous
prosecution strict penalty must be compulsorily imposed in case there is a miserable
79
failure of prosecution to prove and establish the allegations". As the judiciary takes a
very constructive view of the provisions of the law and does not interfere with the
80
execution of the law in antagonistic manner as reflected from the recent decisions no
room should be left for misuse of the Law by the prosecution.
75
S. Samuel , M.D. Harrisons Malayava v. Union of India,
AIR 2004 SC 218 76Dy. Commissioner v. Rudolph
Fernandez, AIR 2000 SC 1132
77
Section 6B, Essential Commodities Act, 1955.
78
Sham Sunder v. State of Haryana , AIR 1989 SC 1982
79
Ravichandran v. State, Criminal Appeal no. 909- 910 of 2003 Supreme Court dt.
25.3.2010.
80
Ibid.
103
Last, but not the least, there is an urgent need for a fresh relook at the Law
in the light of the drawbacks and problems faced in its implementation for proper
coordination and monitoring, to ensure utility of commodities and check on offences
increasing versatility in the control over the production, supply and distribution etc.
through the local bodies and involvement of the local beneficiary people by an
effective feedback system, suitably amending the Law so that the beneficiaries and
other stakeholders including the poorest of the poor gain a reasonable advantage and
help.
3.5 THE NARCOTIC DRUGS AND PSYCHOTROPIC SUBSTANCES ACT,
1985-
3.5.1 INTRODUCTION-
The genesis and development of the Indian drug trafficking scenario are closely
connected with the strategic and geographical location of India which has massive
inflow of heroin and hashish from across the Indo-Pak border originating from
Golden crescent comprising of Iran, Afghanistan and Pakistan are one of the major
illicit drug supplying areas of the world. On the North Eastern side of the country is
the Gold Triangle comprising of Burma, Laos and Thailand which are again one of
the largest sources of illicit opium in the world. Nepal also is a traditional source of
cannabis, both herbal and resinous. Cannabis is also of wide growth in some States of
India.
As far as illicit drug trafficking from and through India is concerned, these three
sources of supply have been instrumental in drug trafficking. Prior to the enactment of
the Narcotic Drugs and Psychotropic Substances Act, 1985 [NDPS Act], the statutory
control over narcotic drugs was exercised in India through a number of Central and
State enactments. The principal Central Acts were-
(a) The Opium Act, 1857;
(b) The Opium Act, 1878 and
(c) The Dangerous Drugs Act, 1930.
The Preamble to the Narcotic Drugs and Psychotropic Substances Act, 1985
provides as under-
An Act to consolidate and amend the law relating to narcotic drugs, to make
stringent provisions for the control and regulation of operations relating to narcotic
drugs and psychotropic substances to provide for the forfeiture of property derived
104
from, or used in, illicit traffic in narcotic drugs and psychotropic substances, to
implement the provisions of the International Conventions on Narcotic Drugs and
Psychotropic Substances and for matters connected therewith.
The Statement of Objects and Reasons for the Narcotic Drugs and Psychotropic
Substances Act, 1985 [NDPS Act] provides-
The statutory control over narcotic drugs is exercised in India through a number of
Central and State enactments. The Principal Central Acts, namely, the Opium Act,
1857, The Opium Act, 1878 and the Dangerous Drugs Act, 1930 were enacted a long
time ago. With the passage of time and the developments in the field of illicit drug
traffic and drug abuse at national and international level many deficiencies in the
existing laws have come to notice, some of which are indicated below:
I. The scheme of penalties under the present Acts is not sufficiently deterrent to
meet the challenge of well organized gangs of smugglers. The Dangerous Drugs
Act, 1930 provides for a maximum term of imprisonment of three years with or
without fine and four years imprisonment with or without fine with repeat
offences. Further, no minimum punishment is prescribed in the present laws, as a
result of which drug traffickers have been sometimes let off by the courts with
nominal punishment. The country has for the last few years been increasingly
facing the problem of transit traffic of drugs coming mainly from
some of our neighbouring countries and destined mainly to western countries.
II. The existing central laws do not provide for investing the officers of a number
of important central enforcement agencies like narcotics, customs, central excise
etc. with the power of investigation of offences under the said laws.
III. Since the enactment of the aforesaid three Central Acts, a vast body of
international law in the field of narcotics control has evolved through various
international treaties and protocols. The Government of India has been a party to
these treaties and conventions which entail several obligations which are not
covered or are only partly covered by the present Acts.
IV. During the recent years, new drugs of addiction which have come to be known
as psychotropic substances have appeared on the scene and posed serious
problems to national governments. There is no comprehensive law to enable
exercise of control over psychotropic substances in India in the manner as
envisaged in the convention on Psychotropic Substances 1971 to which also
India has acceded.
105
In view of what has been stated above, an urgent need was felt for the enactment
of a comprehensive legislation on narcotic drugs and psychotropic substances, which,
inter-alia should consolidate and amend the existing laws relating to narcotic drugs,
strengthen the existing controls over drug abuses, considerably enhance the penalties
particularly for trafficking offences, make provisions for exercising effective control
over psychotropic substances and make provisions for the implementation of
international conventions relating to narcotic drugs and psychotropic substances, to
which India is a party.
3.5.2 SCOPE OF THE NDPS ACT-
1. Under the NDPS Act, no person can cultivate coca plants, opium poppy and
cannabis plants or extract opium, Charas and Ganja from such plants.
2. The production of opium derivatives such as morphine, heroin and other
intoxicating psychotropic substances, except for medical or scientific purposes,
is a crime.
3. Possession of these drugs and trafficking for commercial gains in such drugs is
also a crime. Any person committing such offences can be punished with
imprisonment ranging from ten to thirty years and also fined from rupees one to
three lakh.
4. To make the law more deterrent and to further strengthen the hands of
enforcement agencies, the Prevention of illicit Traffic in Narcotic Drugs and
Psychotropic Substances Act, 1988 was brought in, under which the drug
traffickers can be detained for a period of one to two years so as to prevent them
from indulging in such illegal activities.
5. To make a real dent in these activities and also to give a final blow, further
amendment was made in the Act to provide for the forfeiture of the properties
from earnings related to drug crimes which became operative in 1989. This
amendment Act of 1989 has also brought in the provisions to award death
sentences in certain categories of drug offence.
6. A new Chapter V-A was incorporated in the Act, which provides for tracing,
identifying, seizing/freezing and forfeiture of the movable and immovable
properties acquired from illgotten funds by the drug traffickers. Offenders are of
following three types who:
a. have been convicted for an offence under NDPS Act, punishable with
imprisonment for a minimum term of 10 years or more;
106
b. convicted abroad for similar offences;
c. or against whom an order of detention under PITNDPS Act, 1988 has been
81
made. (Section 68 A to 68 Z)
3.5.3BACIC FEATURES OF THE NARCOTIC DRUGS AND
PSYCHOTROPIC SUBSTANCES ACT, 1985-
The NDPS Act 1985 sets out the statutory framework for drug law enforcement in
India. The main elements of the control regime mandated by the Act are as follows:
I. The cultivation, production, manufacture, possession, sale, purchase,
transportation, warehousing, consumption, inter-State movement,
transhipment and import and export of narcotic drugs and psychotropic
substances is prohibited, except for medical or scientific purposes and in
accordance with the terms and conditions of any license, permit or
82
authorization given by the Government.
II. The Central Government is empowered to regulate the cultivation, production,
manufacture, import, export, sale, consumption, use etc. of narcotic drugs and
83
psychotropic substances. The Central Government is also empowered to
regulate the manufacture, possession, transport, import inter-State, export
inter-State. sale, purchase, consumption and use of essential narcotic drugs.
The amendment to section 9 inserted by the NDPS Amendment Act 2014 also
provides that where in respect of an essential narcotic drug, the State
government has granted licence or permit under the provisions of section 10
prior to the commencement of the Narcotic Drugs and Psychotropic
Substances (Amendment) Act 2014, such license shall continue to be valid till
the date of its expiry of for a period of 12 months from such commencement,
84
whichever is earlier.
III. State Governments are empowered to permit and regulate possession and inter
State movement of opium, poppy straw, the manufacture of medicinal opium
85
and the cultivation of cannabis excluding hashish except poppy straw
produced from plants from which no juice has been extracted through
86
lancing.
81 Section 68-A to 68-Z of the Narcotic Drugs and Psychotropic Substances

Act, 1985.
82 Ibid Section 8.
83
Ibid section 9.
84
Inserted by the Narcotic Drugs and Psychotropic Substances
(Amendment) Act 2014. 85Ibid section 10.
86
Inserted by the Narcotic Drugs and Psychotropic Substances (Amendment) Act
2014.
107
IV. All persons in India are prohibited from engaging in or controlling any trade
whereby narcotic drugs or psychotropic substances are obtained outside India
and supplied to any person outside India except with the previous
authorization of the Central Government and subject to such conditions as may
87
be imposed by the Central Government.
V. The Central Government is empowered to declare any substance, based on an
assessment of its likely use in the manufacture of narcotics drugs and
88
psychotropic substances as a controlled substance.
89
VI. Assets derived from drugs trafficking are liable to forfeiture.
VII. Both the Central Government and State Governments are empowered to appoint
90
officers for the purposes of the Act.
The NDPS Act is in effect a comprehensive Code not only for the control and
regulation of Narcotics Drugs and Psychotropic Substances; but also for the control of
selected chemicals - commonly known as precursors - which can be used in the illicit
manufacture of narcotic drugs and psychotropic substances, as well as for the
investigation and forfeiture of drug related assets.
VIII. ENFORCEMENT-
Given Indias size and the federal nature of our polity, a number of agencies
both at the Centre and in the States have been empowered to enforce the provisions of
the Act. These agencies include the Department of Customs and Central Excise, the
Directorate of Revenue Intelligence, the Central Bureau of Narcotics and the Central
Bureau of Investigation at the Central level and State Police and Excise Departments
at the State level. The Union Ministries of Social Justice and Empowerment and
Health are responsible for the demand reduction aspects of drug law enforcement
which broadly covers health-care and the deaddiction, rehabilitation and social
reintegration of addicts. Subject to the provisions of the Act, the Central Government
shall take measures as it deem necessary or expedient for the purpose of preventing
and combating abuse of narcotic drugs and psychotropic substances and illicit traffic
91
therein and for ensuring their medical and scientific use.
87
Section 12 of the Narcotic Drugs and Psychotropic
Substances Act, 1985. 88Ibid section 9-A.
89
Ibid chapter V-A.
90
Ibid sections 5 and 7.
91
2014.
108
Section 4(3) of the Act envisages the creation of a Central Authority to
coordinate the activities of the various Central and State agencies involved in drug law
enforcement, to implement Indias obligations under various international
conventions, and to coordinate with international organizations and authorities in
foreign countries in the prevention and suppression of the illicit traffic in narcotic
drugs and psychotropic substances. In terms of this provision, the Narcotics Control
Bureau was set up by the Central Government in 1986 with the broad idea to
coordinate drug law enforcement nationally.
The empowerment of a large number of agencies under the NDPS Act ensures
that Indias drug laws are enforced effectively on the ground. The Narcotic Control
Bureau basically functions as the national coordinator, international liaison and as the
nodal point for the collection and for dissemination of intelligence. This system
assures coordinated implementation within the parameters of a broad national strategy.
IX. INVESTIGATIVE PROCEDURES-
92
Chapter V of the NDPS Act sets out the powers as well as the procedures for
the investigation of offences under the Act. This Chapter empowers officers duly
93
authorized by the Central Government or a State Government to issue warrants , to
94
enter and search premises , to stop and search conveyances, to seize narcotic drugs
and psychotropic substances, to take statements and to arrest persons suspected of
having committed an offence, punishable under the Act.
The power to issue search and arrest warrants, is in terms of Section 41, been
vested both in Magistrates as well as in specially designated (Gazetted) officers of the
Central and State Governments. This is designed to ensure both timely and effective
action in response to any information. In addition, both the Central and the State
Governments are authorized to entrust any Officer duly empowered under the Act
with the powers of an Officer-in-Charge of a Police Station for the investigation of
offences under the Act. It needs to be noted, however, that while the powers to search,
seize, arrest etc., are inherent in the Act, all these are subject to both the substantive
92
Section (41-68) of Narcotic Drugs and Psychotropic
Substances Act, 1985. 93Ibid section 41.
94
Ibid section 42.
109
and procedural safeguards mandated by the Code of Criminal Procedure, in relation,
inter-alia, to the presence of independent witnesses at a search, the drawing up of
search lists or panchanamas, and the constitutional obligation to produce an arrested
person before a Judge within 24 hours etc.
X. LICIT OPIUM CULTIVATION-
Section 8 of the NDPS Act, inter-alia, prohibits the cultivation of the opium
Poppy, except for medical and scientific purposes and in accordance with the terms
and conditions of a license, permit or authorization given by the Government. Section
9, inter-alia, empowers the Central Government to permit and regulate the cultivation
of the opium poppy. Section 5 requires the Central Government to appoint a Narcotics
Commissioner who shall exercise all powers and perform all functions relating to the
superintendence of the cultivation of the opium poppy and the production of opium.
India is the largest licit producer of opium in the world, which is both exported
as well as used by the domestic pharmaceutical industry. The licit cultivation of opium
in India is regulated and controlled by the Narcotics Commissioner of India in terms
of the provisions of Sections 8, 9 and 5 of the NDPS Act. The Central Government
announces an opium policy each year which sets out the terms and conditions subject
to which licenses for the cultivation of opium shall be given, the areas where
cultivation shall be allowed, the prices at which the opium crop shall be purchased by
the Government and the minimum qualifying yield for a license in the ensuing crop
year. The crop cycle runs from October to May. Based on this policy, the Narcotics
Commissioner of India issues licenses to individual cultivators for specified tracts of
land. The key elements of the licit opium control regime in India are as follows:
I. Opium can be cultivated only on fields specifically licensed for the purpose.
II. The entire crop must be tendered to the Central Government at prices fixed by
the Government.
III. Failure to tender the minimum qualifying yield can disentitle the cultivator to a
license in the following crop season.
These policy controls are backed by strict enforcement on the ground which
include the measurement of fields, periodical crop surveys and physical checks to
prevent diversion. Failure to tender the entire yield to the Government is treated as a
serious offence and any cultivator who embezzles or otherwise illegally disposes of
110
the opium produced by him, is in terms of section 19 of the Act, punishable with
rigorous imprisonment for a term of between 10 to 20 years and a fine which shall not
be less than Rs.100,000/- but which may extend to Rs.200,000/-.
XI. SPECIAL PROVISIONS RELATING TO FORFEITURE OF
PROPERTY-
95
A new Chapter V-A , was introduced into the Act in May 1989 to provide for
the investigation, freezing, seizure and forfeiture of property derived from or acquired
through illicit trafficking in narcotic drugs and psychotropic substances. This Chapter
prohibits any person from holding any property derived from drug trafficking and
authorizes officers empowered under the Act to investigate, identify and seize such
property. The Chapter also sets out a quasi- judicial procedure for the forfeiture of
such property consequent to which it shall vest in the Central Government.
XII. OFFENCES AND PENALTIES-
96
Chapter IV , of the NDPS Act 1985 sets out the penalties for offences. These
offences are essentially related to violations of the various prohibitions imposed under
the Act on the cultivation, production, manufacture, distribution, sale, Import and
export etc. of narcotic drugs and psychotropic substances. All these offences are
triable by Special Courts and the punishments prescribed range from imprisonment
from 10 to 20 years for first offences to 15 to 30 years for any subsequent offences
together with monetary fines. In addition to persons directly involved in trafficking
narcotic drugs and psychotropic substances, any person who finances trafficking or
harbours a person involved in trafficking, or abets, or is a party to a criminal
conspiracy, including a criminal conspiracy to commit an offence outside India, is also
liable to punishment which shall be punishable with rigorous imprisonment for a term
which shall not be less than 10 years but which may extend to 20 years and shall also
be liable to fine which shall be not less than one lakh rupees but which may extend to
97
two lakh rupees. The Act was amended in May 1989 to mandate the death penalty
for second offences relating to contraventions involving more than certain quantities
of specified narcotic drugs and psychotropic substances. However it is pertinent to
point out that on 7-3-14 the Act was again amended and imposition of death penalty
which was made compulsory under section 31-A is now made
95 Chapter V-A (Section 68A to 68Y) ins. by Act 2 of 1989, sec. 19 (w.e.f. 29-5-
1989).
96 Ibid sections (15 to 40).
97 Ibid section 27-A.
111
98
optional. This is a welcome step but falls short of international human rights
standards and constitutional principles that restrict the imposition of the death
sentence to the most serious and rarest of rare crimes. Drug offences do not meet
this threshold and should not attract capital punishment at all.
The Act, provides punishment for consumption of narcotic drugs and the
99
punishment for the same is limited to between six months and one year only. By the
NDPS (Amendment) Act 2014 the punishment prescribed in relation to small quantity
of narcotic drugs and psychotropic substances has been raised from six months to one
year. The NDPS (Amendment) Act also amends section 31 of the Act which provides
enhanced punishments for offences after previous conviction. The punishment for
second and every subsequent offence is increased from one half of the maximum term
of imprisonment to one and one half of maximum term of imprisonment. The
punishment of fine is also increased from one half of the maximum amount to one and
100
one half times of the maximum amount.
XIII PRECURSOR CONTROL-
The 1988 U.N. Convention against Illicit Traffic in Narcotic Drugs and
Psychotropic Substances to which India is a signatory, requires parties to impose
controls on the manufacture, internal distribution and import and export of chemicals
which can be used in the illicit manufacture of narcotic drugs and psychotropic
substances. In order to implement Indias obligations under this Convention, the
NDPS Act was amended in 1993 in order to empower the Central Government to
declare any substance as a controlled substance and to regulate its manufacture,
101
import and export etc. Violations relating to such substances were established as
criminal offences punishable with imprisonment for up to 10 years and shall also be
102
liable to fine which may extend to one lakh rupees. In 1993, the Government of
India promulgated the NDPS (Regulation of Controlled Substances) Order, to regulate
the manufacture, distribution etc., of any substance declared to be a Controlled
Substance.
3.5.4 CHANGES INTRODUCES BY THE NARCOTIC DRUGS AND
PSYCHOTROPIC SUBSTANCES (AMENDMENT) ACT, 2014-
The NDPS Amendment Act 2014 make important, path breaking changes for medical
access to narcotic drugs by removing barriers that date back to 1985, when the Act
98 Inserted by the Narcotic Drugs and Psychotropic Substances (Amendment)
Act 2014.
99 Section 27 of the Narcotic Drugs and Psychotropic Substances Act, 1985.
100 Amendment of section 31 ins. by NDPS (Amendment) Act, 2014.
101 Section 9-A of the Narcotic Drugs and Psychotropic Substances Act, 1985.
102
ibid section 25-A.
112
was first introduced. The amendments also include provisions to improve treatment
and care for people dependent on drugs, moving away from abstinence oriented
services to treating drug dependence as a chronic, yet manageable condition.
1) Drugs for medical use-
India is one of the leading producers of morphine, yet patients in the country could not
access it owing to the stringent licensing requirements under the NDPS Act and Rules
framed by State Governments. Statistics reveal that the medical use of morphine
declined by 97% after the NDPS Act came into force.
This will now change as Parliament has adopted a new category of essential
narcotic drugs in section 2(viiia) of the Act a list, which the Central Government
can notify on the basis of expediency in medical practice. Drugs identified as essential
will be subject to Central Rules under section 9(1)(a), which will apply uniformly
throughout the country, bringing to an end the unwieldy and inept practice of
obtaining multiple State licenses for possession, transport, purchase, sale, distribution,
use and consumption.
The amendments broaden the object of the NDPS Act from containing illicit
use to also promoting the medical and scientific use of narcotic drugs and
psychotropic substances. The language incorporated in section 4, which is an
overarching provision, reflects the principle of balance between control and
availability of narcotic drugs, which is at the heart of international drug control but
has eluded the NDPS Act so far. This widening of scope, it is hoped, will pave the
way for more research on the beneficial use of narcotics, which up till now, remained
out of bounds for the medical and scientific community due to the overtly prohibitive
nature of the law. Importantly, medical use has not been specified and could include a
variety of medical conditions, besides drug dependence and pain relief.
2) Health and rights of people who use drugs-
Other salutary changes have been introduced in section 71, which significantly impact
the health and rights of people who use drugs. The NDPS Act now allows for
management of drug dependence, thereby legitimizing opioid substitution,
maintenance and other harm reduction services. Secondly, it authorizes the
Government to recognize and approve treatment centres, which currently operate
without license or accreditation, and inflict violence and torture on drug users. The
amendments will allow for instituting evidence based and human rights compliant
standards for drug treatment facilities, whether public or private.
113
3) Sentencing-
The latest amendments introduce some changes in penal sentencing for drug offences.
Sentencing under the NDPS Act is dependent on the quantity of the drug found, with
the scale of punishment varying from a maximum of 6 months for small quantity to
20 years imprisonment for a first offence involving commercial quantity.
Another important change is the Parliaments decision to recast the death
penalty, which, until now, was mandatory for a subsequent offence involving a certain
quantity of drugs under section 31A, as an alternative to imprisonment for 30 years
under section 31. This is a welcome step but falls short of international human rights
standards and constitutional principles that restrict the imposition of the death
sentence to the most serious and rarest of rare crimes. Drug offences do not meet
this threshold and should not attract capital punishment at all.
On the flip side, the amendment has increased the punishment for small
quantity offences from a maximum of 6 months to 1 year imprisonment. Consumption
of drugs continues to be punishable. This is regrettable as Parliament had the
opportunity to review and reform punitive provisions against people who use drugs. In
the last decade or so, a growing number of countries have moved towards the full
decriminalization of use and possession of drugs, with no reported negative
consequences on individuals and society. Some are boldly creating legalized markets
for the distribution, sale, possession and use of certain drugs. The NDPS amendments
seem regressive and out of step, against the current of international drug policy
reform.
4) Other changes-
The amendment opens the way for private sector involvement in the processing of
opium and concentrated poppy straw. It also offers some protection to persons
engaged in licensed drug activities by raising the rank of officers who are authorized
under section 42, to search and arrest license holders for alleged NDPS violations. The
NDPS (Amendment) Act 2014 provides that in respect of holder of a licence for
manufactured drugs or psychotropic substances or controlled substances granted under
this Act or any rule or order made there under, the power search shall be exercised by
103
an officer not below the rank of sub-inspector . Parliament has also adopted changes
to strengthen the forfeiture of property of persons arraigned on charges of drug
trafficking.
103
Amendment of section 42 inserted by the NDPS (Amendment) Act, 2014.
114
3.5.5. LOOPHOLES IN THE NARCOTIC DRUGS AND PSYCHOTROPIC
SUBSTANCES (NDPS) ACT,1985
The purpose of the Act is mentioned in the preamble of the Act:
An Act to consolidate and amend the law relating to narcotic drugs. to make
stringent provisions for the control and regulation of operations relating to narcotic
drugs and psychotropic substances, to provide for the forfeiture of property derived
from or used in illicit traffic iii narcotic drugs and psychotropic substances, to
implement the provisions of the International conventions on Narcotic Drugs and
Psychotropic Substances and for matters connected therewith.
However, even after twenty eight years of enactment of the Act, the war on
drugs has failed due to the following reasons:
(i) Delays in trial-
Justice delayed is Justice denied
104
Special courts have been created under this Act to help deal with the cases.
However, in many States, such courts are given the additional responsibility of dealing
with other cases as well, causing undue delays in the disposal of drug related cases.
Further, it is quite difficult to find witnesses, often due to threats from the accused
including possible bribes to turn hostile. A number of times long time-gaps between
the occurrence of the crime and the trial cast doubts on the accuracy of the evidence
leading to acquittal on grounds of insufficient evidence. It is indeed a well-known fact
that experienced advocates brings out inconsistencies in the statements of the witness
on cross examination so as to weaken the case of prosecution.
Many of those arrested on drug charges spend years in jail before their cases
finally come up for hearing, a direct consequence of the notoriously slow pace of the
Indian judicial system, in some instances, it has meant that those caught with small
quantities of drugs were eventually acquitted after spending years behind bars.
Beyond concerns about the obvious injustice, prolonged prison time for low level drug
offenders also raises the issue of recruitment by criminal groups.
104
Section 36 of the Narcotic Drugs and Psychotropic Substances Act, 1985.
115
Action needed to be taken-
Special Courts for the purpose of dealing with offences under the Act should be
established in every major city. At the very least, an exclusive bench should be set
up to deal with such cases. Further. the law enforcement agencies should be well
versed with the sections of this Act, The fact that only a few under-trials are
convicted under this Act highlights this major flaw.
(ii)Stringent Bail laws-
Studies have found out that most of the drug users are from socially and
economically backward classes. The elaborate provisions concerning bail coupled
with an inherent lack of knowledge, ignorance and poverty often results in the poor
vanquishing in prison.
Courts cannot provide bail to those accused of offences under Sections 19, 24 or
105
27A of the NDPS Act and for offences involving commercial quantities. Generally,
all are innocent till proved guilty. But this law says that you are guilty unless proven
innocent! The Act presupposes the guilt of the accused, reversing the onus of proving
ones innocence, which is not the norm as per Indian jurisprudence. Section 35
presumes that an accused under this Act had the intent, motive and knowledge of and
for his actions while Section 54 goes a step further to add that unless the contrary is
proved it shall be presumed that the accused was in possession of the illicit articles
106
seized from him.
The initial attitude was that drug abuse was a menace to society and needed to
be checked. This factor overshadowed the norms set down for the enforcement
officials for safeguarding the rights of the accused. Thus, there were several
convictions for terms of 10 years imprisonment and fines for possession of even very
small quantities.
(iii) Poor understanding of the addiction problem-
Addiction is a chronic, often relapsing brain disease that causes compulsive drug
seeking and use despite harmful consequences to the individual who is addicted and to
those around them. Drug addiction is a brain disease because the abuse of drugs leads
to changes in the structure and functioning of the brain. Although it is true that for
most people the initial decision to take drugs is voluntary, over time the changes in the
brain caused by repeated drug abuse can affect a persons self-control
105
IbidSection 2.
106
Ibidsection 54.
116
and ability to make sound decisions, and at the same time send intense impulses to
take drugs.
Through research done about drug addiction and its effects on the brain, one can
see how drug addiction is considered a brain disease. Drug addiction is a disabling
disease and can ruin a persons life. By consuming drugs, a persons brain becomes
rewired to tolerate high amounts of dopamine neurotransmitters, but once those
high amounts of dopamine cease to exist, the person experiences withdrawal
symptoms. However, there are ways drug addicts can control their drug intake by
using classical conditioning techniques, which allows them to associate drugs with
negative attributes.
The Act does not understand the concept of addiction, particularly in its
provision of once in a lifetime reprieve to addicts with mandatory treatment. It,
however, does attempt to provide some reprieve to the addicts. This is mentioned
107
under Section 64A of the Act. Addicts typically relapse several times before
stabilizing. This one time reprieve shows a complete ignorance of the phenomenon of
addiction on the part of policy-makers. Though the Ministry of Social Justice and
Empowerment has funded over 375 NGOs to run treatment centers, none of them are
notified centers; instead they are only recognized as centers where patients can seek
voluntary treatment. Of these, only three centers run under the Ministry of Health and
Family Welfare are notified.
The Act lays down the conditions and manner in which narcotic drugs and
psychotropic substances shall be supplied for medical necessity to addicts registered at
108
the centers. But till date, no mechanism has been created at the district or state
levels for this purpose. Further, the central registry of addicts was frozen in the late
1950s. This has had serious consequences on the type of addiction in the country.
Traditionally, India had a large number of opium consumers and an even larger
number of people using cannabis in one form or another. Earlier, there were numerous
retail outlets all over the country. But, with the advent of law, these natural products
have become scarce even as heroin and several pharmaceutical drugs are available in
plenty. Many users of traditional drugs have shifted to these extremely harmful drugs.
Opium is bulky in comparison to heroin-one kilo of heroin is extracted from 10 kilos
of opium; ganja smells and is also bulky. However, it is easier to transport, hide and
107 Section 64A- Immunity from prosecution to addicts volunteering for treatment.
108 Sections 71 and 78 of the Narcotic Drugs and Psychotropic Substances Act, 1985.
117
sell heroin than the raw drugs. Since heroin gives higher profits it enables the peddler
to bribe the authorities. In such a scenario, if one has to go to jail for 10 years for both
opium and heroin, why sell opium? This law has brought drug users in contact with
criminal gangs who alone can buy political and police protection.
Under section 27, illegal possession of certain drugs in small quantities intended
for personal consumption only carries a punishment of up to one year or a fine or
both. The amount of the specified drugs is listed by the central government and in case
of drugs not listed, the punishment is up to 6 months or a fine or both. In the case of
heroin, the small quantity specified is a quarter gram. Imagine sending a young man to
10 years rigorous imprisonment for possession of a quarter gram of heroin!
However, any addict convicted under this section may once in a lifetime be
released for medical treatment subject to certain conditions. to any hospital or
organization maintained or recognized by the center.
The real loser, though, is the society, particularly the poor and marginalized. Just
to prove the usefulness of the Act, the enforcement agencies are forced to file several
cases. Given the provisions of the Act and the manner in which they are used, many of
the accused end up in jails, even as under trials. It is therefore, crucial that we review
our basic premises and reform this Act.
Action needed to be taken:
There should be a substantial reallocation of resources and particularly an
increase in the provision of services for adolescents, women, people from
minority ethnic communities and people with mental health problems.
Treatment in prisons should also be considered but it should only be a secondary
option. Most of the under-trials or convicts put behind bars for a prolonged
period may resort to higher consummation of drugs. Where prisons are meant
for reformation, such people will come out with a higher degree of addiction.
Therefore, Prison authorities should cooperate closely with law enforcement
agencies to keep drugs out of the prison system. Prison personnel should be
discouraged from tolerating the presence of drugs in penal institutions.
To be effective, demand reduction programmes should be targeted at all young
people, particularly those at risk, and the content of the programmes should
respond directly to the interests and concerns of those young people.
Preventive education programmes showing the dangers of drug abuse are
118
particularly important. Increasing opportunities for gainful employment and
activities which provide recreation and opportunities to develop a variety of
skills are important in helping young people to resist drugs. Youth
organizations can play a key role in designing and implementing education
programs and individual counselling to encourage the integration of youth into
the community, to develop healthy lifestyles and to raise awareness of the
damaging impact of drugs. The programs could include training of youth
leaders in communication and counselling skills.
(iv) Harsh Punishments-
As per the Act, a convicted person shall be punished with rigorous
imprisonment for a term of not less than 10 years which may extend to 20 years and a
109
minimum fine of Rs. one lakh which may extend to Rs. 2 lakh or more. Offences
relating to cannabis are punishable with a minimum sentence of 10 years and a fine
110
which may extend to Rs. 10,0000. Far greater punishment has been imposed for a
repeat offence. The amendment in 1989, section 3l-A laid down the death penalty for
second offences with regard to certain drugs if the quantity involved exceeded
specified limits. The Narcotic Drugs and Psychotropic Substances Amendment Act
2014 make imposition of death penalty as optional which, until now, was mandatory
for a subsequent offence involving a certain quantity of drugs under section 31-A, as
an alternative to imprisonment for 30 years under section 31. This is a welcome step
but falls short of international human rights standards and constitutional principles
that restrict the imposition of the death sentence to the most serious and rarest of
rare crimes. Drug offences do not meet this threshold and should not attract capital
punishment at all.On the flip side, the amendment has increased the punishment for
111
small quantity offences from a maximum of 6 months to 1 year imprisonment .
Consumption of drugs continues to be punishable. This is regrettable as Parliament
had the opportunity to review and reform punitive provisions against people who use
drugs. In the last decade or so, a growing number of countries have moved towards
the full decriminalization of use and possession of drugs, with no reported negative
consequences on individuals and society. Some are boldly creating legalized markets
for the distribution, sale, possession and use of certain drugs. The NDPS amendments
109
Ibid sections 15-25 and
27A-29. 110Ibidsection 20.
111
2014.
119
seem regressive and out of step, against the current of international drug policy
reform. Such provisions again make the Act very impractical. As mentioned before,
most of the substance abusers are from a rural or a poor background. These people
will not able to pay the fines and due to the unavailability of legal aid, they are denied
justice.
The Act does not adequately discriminate between the addict, petty peddler and
drug trafficker. There is a complete lack of distinction between various offences.
Under the Act, any illegal activity related to drugs has been termed as trafficking and
the punishment made absolute. Circumstances of the offence, intent of the accused,
discretion of the judges, all of which form the basis of deciding the guilt or innocence
of an accused, have been done away with by a single stroke. The judge has to punish
the accused with a minimum sentence of five years (in the case of ganja) and 10 years
rigorous imprisonment in other cases. The punishment cannot be commuted, reduced
or transferred.
Action needed to be taken:
Prison sentences for possession only offences are not proportionate with the
harm done by the offence, and they impose substantial harm of their own. If
the objective is to reduce individual and social harm, as we believe it must be,
there are better responses available whatever the drug involved. It is said that
drug-related problems are more effectively addressed in the community than in
a custodial setting.
But, abolishing custodial penalties would rule out some community sanctions
that are available to the courts only as alternatives to imprisonment. In most
serious cases of problem drug use this will not matter because the offender
charged with possession is likely to be charged with other offences at the same
time. There may, however, be cases of problem drug users in possession of
certain dangerous drugs but not charged with any other offence where the
courts need to consider the full range of community orders. Because of the
pre-eminent harm of these drugs, it should he accepted that a custodial
sanction may be needed in such cases. It would act both as an incentive to
treatment and in order to enable the courts to consider the use of a wider range
of such orders, including community service orders. than would otherwise be
possible.
120
II. Unaddressed Concerns:
At present, efforts on the demand side focus on prevention, treatment,
rehabilitation and after care services undertaken within institutional and community
settings. There are currently 450 centers funded across the country for de-addiction
and counseling services. National level Drug Abuse Monitoring Systems have also
been established in an effort to understand trends in drug use and its implications for
drug abuse management. Most efforts in the area of demand reduction are funded by
Ministry of Social Justice and Empowerment and United Nations Office on Drugs and
Crime. The National Drug Policy follows the lines drawn by legislation and the focus
has been on demand reduction through prevention and treatment, and supply reduction
through enforcement activities. However, there has been a clear emphasis of political
support and resource allocation to supply reduction. One example of this relates to one
of the 2001 amendments to the act, which created a National Fund for Control of Drug
Abuse. This was designed to support the expansion of demand reduction programs,
but has yet to become active. Attempts at cost management by users, in combination
with the deteriorating quality of street drugs, have produced more risky forms of use;
that is to say, injecting behaviour. This has serious consequences for public health in
some parts of India. A recent study found that the purity of heroin sold on the street
varies from 3 per cent to 12 per cent. The Narcotics Drugs Control Board of India
places the purity of street level heroin at 5 per cent. In the North Eastern part of the
country it seems that a shift to injecting drug use is also a result of time management
issues. The behaviour of a drug user in these areas of political instability is more
dangerous than in other parts of the country.
The approach of the Indian government is law enforcement led, with limited
resources provided for treatment. This is unfortunate, since studies in other cultural
settings show that efforts dominated by the law enforcement are not particularly
effective. A high rate of drug incarceration as a strategy to control drug use has at best
a marginal impact and does not lead to a significant undermining of the drug market.
Indeed, experience from around the world reveals the cost effectiveness of appropriate
treatment and harm reduction programs and interventions.
There is a need to urge the Indian Authorities to:
Strengthen efforts to understand patterns and trends of drug use within the
country, especially in rural areas falling along the drug trading routes and those
close to cultivating areas.
121
Develop methods for supporting socio-cultural controls on drug
use.
Urgently assess the demand for drug treatment, particularly amongst the urban
poor engaging in the most dangerous forms of drug use, and increase the
coverage of a range of treatment interventions.
As a matter of priority, it is recommend that renewed attention should be given
to the information and research base which facilitates understanding of the
evolving picture of drug use and the cost effectiveness of welfare and control
responses. Routine statistics should be improved to reduce gaps in the
understanding of the scale, nature and extent of drug use. Enforcement and
treatment policies should be evaluated thoroughly, making full use of the
available range of social science research methods.
III. Health Aspect of the Substance Abusers-
To improve health, social and economic outcomes by preventing the uptake of
harmful drug use and reducing the harmful effects of licit and illicit drugs.
The Australian governments harm- minimization strategy focuses on both licit
and illicit drugs and includes preventing anticipated harm and reducing actual harm.
Harm minimization is consistent with a comprehensive approach to drug-related harm,
involving a balance between demand reduction, supply reduction and harm reduction
strategies. It includes:
1. Supply reduction strategies to disrupt the production and supply of illicit
drugs, and the control and regulation of licit substances;
2. Demand reduction strategies to prevent the uptake of harmful drug use,
including abstinence orientated strategies and treatment to reduce drug
use, and
3. Harm reduction strategies to reduce drug-related harm to individuals and
communities.
Individual jurisdictions and non-government organizations will continue to
develop plans and strategies that reflect the key elements of the National Drug
Strategy, and will report annually on implementation of programs, activities and
initiatives along with the promotion of partnerships between health, law enforcement
and education agencies.
122
CONCLUSION
Though the intended purpose of the NDPS Act is evident, its success can be
questioned with some commentators even going to the extent of terming it as
draconian. What is often observed regarding the NDPS Act is that the small fish get
caught while the big fish escape and evade the law owing to their clout. It is
mentioned that in Punjab recently a big drug racket has been exposed but because of
involvement of big fishes the racket seems to be hushing up. There have been reports
of how people who were merely sitting in the vicinity of drug users were caught and
charged under this Act by the police. The Act also fails to provide an adequate
distinction between minor and serious offenders as also the basis for the punishments
laid out. In finality, these issues bring to light the existing loopholes in the NDPS Act
which need addressing if its purpose, as mentioned in the preamble of the Act, is ever
to be achieved.
3.6 THE PREVENTION OF CORRUPTION ACT, 1988-
3.6.1 INRODUCTION-
Prevalence of corruption is one of the problems which our country has been
facing from time immemorial. Corruption retards our countrys growth and welfare to
112 113
the maximum extent. According to Strouds Judicial Dictionary corruption
114
means moral obliquity or moral perversity. Corruption can be defined as departure
from what is pure or correct from the original.
In India the first codified criminal law i.e. the Indian Penal Code, 1860
contained a full chapter which dealt with corruption. However, it confined its
operation to those defined as public servants under section 21 of the Indian Penal
Code, 1860. Mainly misconduct and abuse of power by public servants were covered
under this Code. Being governed in the traditional rule of criminal liability the
provisions in the Indian Penal Code, 1860 could not successfully combat corruption
by public servants who constituted a powerful class which has a considerable
influence for tilting the scales of justice. Moreover, the definition of public servants
suffered from many defects as many important functionaries engaged in discharging
public justice were left out of the definition of public servants.
112
Mota Ram v. State of Haryana, AIR 2010 SC 3780, See also State of Madhya
Pradesh v. Ram Singh, AIR 2000 SC 870, Subramanian Swamy v. Manmohan
Singh, (2012) 3 SCC 64.
113
Strouds F, The Judicial Dictionary 172 (1890)
114
P. RamanathaAiyar, The Law Lexicon 414 (2010).
123
The scope of bribery and corruption by public servants had considerably
st nd
increased due to 1 World War. Even after the 2 World War opportunities for corrupt
practices remained for a considerable time. Active schemes for post war
reconstruction opened wise new avenue for corruption among public servants.
However the existing provision of the Indian Penal Code, 1860 were found to be
insufficient for effective handling of corrupt public servants. Therefore to supplements
and strengthen law against corruption, the Prevention of Corruption Act, 1947 was
enacted. The Act being a social legislation aimed at eradicating corruption changed
the traditional rule of criminal liability by presuming mens-rea on the part of the
public servant if acts-reus was proved. Criminal misconduct in discharge of official
115
duty was made an offence under section 5 of the Act. However it neither gave
separate definition of public servants nor made any improvements in section 21 of the
116
Indian Penal Code, 1860. In pursunance of the Santhanam Committee for taking
stringent measures against corruption, the Act was amended in 1964. In spite of the
amendments in the Act, the situation vitiated by corrupt practices could not be
redeemed. Rather corruption expands its sphere of activity be engulfing the entire
society.
The Prevention of corruption Act, 1988 has replaced the Prevention of
Corruption Act 1947, and it has also incorporated section 161 to 165 of Indian Penal
117
Code, 1860. The new Act is envisaged as a comprehensive legislation for the
prevention of corruption in India by widening its scope and streamlining procedural
and related matters.
The Act of 1988 has broadly adopted the contemporary changes in the concept
of corruption as now understood in criminal law. Political corruption can now be dealt
with under the Act. The Act has adopted the independent definition of public servant
under section 2(c) of the Prevention of Corruption Act, 1988. The definition given
under section 21 of the Indian Penal Code 1860 is no longer applicable to the Act as
was the case under the Prevention of Corruption Act, 1947. The definition of public
servant under section 2 (c) especially under sub-section (ii), (iii), (vii) and (ix) has
115 Section 5 of the Prevention of Corruption Act 1947.

116 Government of India Report, The Committee On Prevention of Corruption
(Ministry of Home Affairs, 1964)
117 Section31 of the Prevention of Corruption Act 1988.
124
covered political corruption as elected representative such as MP, MLA, MC, the
Chairman of Corporation are now public servants.
3.6.2 MAIN PROVISIONS OF THE PREVENTION OF CORRUPTION ACT,
1988-
(1) PUBLIC SERVANT-
Under the Prevention of Corruption Act, 1947, the definition of public servant was
not given but for the purpose of that Act, public servant meant a person as defined in
section 21 of the Indian Penal Code, 1860. The Prevention of Corruption Act, 1988
118
defines public servant exhaustively. A plethora of case laws which were decided
under the old Act has become redundant and many categories of person have been
brought under the definition of public servant. Substitute sub-section (viii), (x) and
(xiii) of clause (c) of section 2 (c) are new and large number of persons who, earlier
were not hold to be public servant are included in the definition under the Prevention
of Corruption Act, 1988. The status of accused person was earlier determined by the
application of section 21 of the Indian Penal Code, 1860 but under the Prevention of
Corruption Act, 1988 now the definition of public servant is given in clause (c) of
section 2 of the Act. The Prevention of Corruption Act, 1988 deals with corruption in
the public sector by public servants. Though the Act does not cover corruption in
private sector, the definition of public servant in section 2 of the Act even covers
certain categories of people who are not employed by the government. The Prevention
of Corruption Act, 1988 does not only cover persons employed by the government or
in the regular pay of the government but also persons remunerated by fees or
concession for the performance of any public duty by the government but not
employed by it. The latter category is very important because, by virtue of their
position such persons enjoy considerable power and can abuse the same to indulge in
corrupt activities. The public servant thus include the Ministers, Members of
Parliament, State Legislative Assemblies, Municipal Corporation, State Corporations,
State Cooperative Societies etc. in its fold. Even office bearer of Non-Governmental
organization that receive financial assistance from the government are defined as
public servant.
The clause (b) has been incorporated in section 2 which defines Public Duty
as duty in the discharge of which the State, the public or the community at large has
118
ibid Section 2(C).
125
an interest. The emphasis has been shifted from appointment and remuneration to
public duty. The explanation under clause (b) enumerated the world State which
includes A corporation established under a Central Provincial or a State Act or an
authority or a body owned or controlled or aided by the government or a government
company as defined in section 117 of the Company Act 1956.
The clause (2) (c) read with explanation to 2 (b) define public servants on the
basis of pay or remuneration drawn from government or State funds. Even before the
119
Prevention of Corruption Act, 1988 it was held in G.A. Moterio v. State of Ajmer,
that true test to determine whether a person is a public servant is whether he is in the
service or pay of the government and whether he is entrusted with the performance of
public duty and that if both these requirements are satisfied then the nature of office
does not matter much.
Section 2 (c) clause VIII is new clause which has added a new category to the
public servants and provides a new concept to the definition by importing a public
duty in sec. 2 (c) (viii). A Sarpanch of gram panchyat is a public servant within the
120
meaning of this clause. It was held in Bhanwar Lal Mali v. State of Rajasthan that
Sarpanch is a public servant and prosecution sanction is required before launching
prosecution against him. The question whether an MLA or M.P. can be held as a
public servant within the meaning of section 2 (c) Viii was contested in a court prior to
the enactment of Prevention of Corruption Act, 1988 and it was held in majority of
cases that he is not a public servant with in the provisions of section 21 of the Indian
Penal Code, 1860. But after the enactment of Prevention of Corruption Act, 1988
situation has changed drastically and interpretation has been changed. It was held in
many cases that Honble Ministers are public servants within the meaning of section 2
of the Prevention of Corruption Act, 1988. Honble Supreme Court in M. Karunanidhi
121
v. Union of India has held that the Chief Ministers as well as Ministers are public
servants and in the connection reference was made to Article 164(5) of the
Constitution of India. The clause IX of section 2(c) of the Prevention of
119 1956 SCR 682.See also Rathinam v. State of Tamil Nadu &Anr, (2011) 11
SCC 140,Mota Ram v.
State of Haryana, AIR 2010 SC 3780, State of Madhya Pradesh v. Ram Singh, AIR
2000 SC 870, Subramanian Swamy v. Manmohan Singh, (2012) 3 SCC 64.
120 1994 (3) Crimes (791) Raj. See also Madhukar Bhaskarrao Joshi v. State of
Maharashtra, AIR 2001 SC 147, Sita Ram v. State of Rajasthan, AIR 1975 SC
1432, Hazarilal v. State, 1980 (2) SCC 390.
121 AIR 1979 SC 878. See also M. Narayanan Nambiar v. State of Kerla, AIR 1963
SC 1116, Som Nath Puri v. State of Rajasthan, 1972 (1) SCC 650, Manish Trivedi v.
State of Rajasthan, 2014 Cri LJ 429 (SC)
126
Corruption Act, 1988 is a new clause introduced in the Act and needs a fresh look by
the courts as in the previous cases the court did not recognized them as public
servants. Perhaps because of the ambiguity a new clause has been introduced.
The class X to Xii is specific and those categories of public functionaries have
been classified as public servants with all their privileges and liabilities. The
explanation 1 and 2 have been appended to deal with controversial situations. Any
person who takes upon himself duties and responsibilities of a public servant must be
regarded as a public servant and the fact that he is not drawing salary or remuneration
should not be allowed to change the position. An ex-public servant can also be
prosecuted under the Prevention of Corruption Act, 1988 as the crucial date for the
purpose of attracting the provisions of Act is the date of commission of the offence
and not the date of retirement, resignation, removal and dismissal of public servant.
(2) SPECIAL JUDGES-
Under the Prevention of Corruption Act, 1988 the Central Government and the State
Government has power to appoint special judges for trying the cases punishable under
122 123
the Act. In State of Rajasthan v. J.P. Sharma, it has been held that all the special
judges, in case there are more than one appointed for the area, shall have jurisdiction
to try the case. Even if without being specified as required under sub section (2) of
section 4 a special judge of the area tries an accused for an offence specified under
sub-section(1) of section 3, then the trial shall not be vitiated and the accused will
have to show that as a result of trial by a special judge without being so specified by
the State Government, his case has been prejudiced. In People Patriotic Front, New
124
Delhi v. K.K. Birla, it was held that sub-section (1) of section 4 provides that only
special judge shall try the offences specified in sub-section (1) of section 3. Offences
specified therein and conspiracy in relation to them are triable only by a special judge
and he alone can take cognizance and therefore, complaint filed in the court of the
125
Magistrate is not maintainable. In Dewan Chand v. State it was held that there can
be no appointment of special judge for particular cases but the appointment can be for
particular area.
122 Section 3 of the Prevention of Corruption Act, 1988.

123 1988 cri.L.J.858. See also Bhagirath v. State of Haryana, AIR 1997 SC 234,
Neraj Kumar v. State of Rajasthan, 1996 Cri LJ 2067 (Raj).
124 1984 Cri LJ 545. See also Shivpillaiv. B.C. Jose, AIR 1986 Ker. 153, Shri
Rajendra Jonkov. The Superintendent of Police, C.B.I. 2004 Cri LJ 3703, M.
Srinivasulu Reddy v. State Inspector of Police
1993 Cri LJ 558.
125 1976 Cri LJ 1823. See also Ramesh Lal Jain v. Naginder Singh Rana, (2006) 1 SCC
294, Vineet Narain
v.Union Of India, (1998) 1 SCC 226, Jaswant Singh v. State of Punjab, AIR 1958
SC 124.
127
(3) OFFENCES UNDER THE ACT-
(a) BRIBERY OF PUBLIC SERVANT-
The Act punishes a public servant or a person expecting to be a public servant,
who accepts, obtains or agrees to accept or attempts to obtain from any person, for
himself or for any other person, any gratification other than legal remuneration, as a
126
motive or reward for doing or for bearing to do any official act. The important point
to note is that even the sheer demand of a bribe or agreeing to accept a bribe is an
offence under the law. Actual exchange of bribe is not an essential requirement to be
prosecuted under this law. The main ingredients of an offence under section 7 of the
Act as observed by Honble Justice Ranganath Mishra in R.S. Nayak v. A.R. Antulay
127
and another, are as under-
(1) that accused was a public servant.
(2) that he must be shown to have obtained or attempted to obtain from any
person any gratification other than legal remuneration and
(3) that the gratification should be as a motive or reward for doing or
forbearing to do, in exercise of his official function, favour or disfavor to
any person.
It is immaterial whether amount is received before or after the favour is done.
The section does not require that the public servant must in fact be in a position to do
the official act, favour or service at the time of the demand or receipt of the
gratification.
To constitute an offence under this section it is enough if-
(a) The public servant who accepts the gratification, takes it by inducing a
brief or hold out that he would render assistance to the giver with any other
public servant and
(b) The giver gives the gratification under that belief.
It is further immaterial if public servant receiving the gratification does not
intend to do the official act to favour or forbearance which he holds himself out as
capable of doing. Further those public servants who do not take a bribe directly, but
through middlemen or touts and those who take valuable things from a person with
whom they have or are likely to have official dealings, are also punishable as per
126 Section 7 of the Prevention of Corruption, Act, 1988.

127 AIR 1984 SC 684.
128
section 10 and 11 respectively. It is obvious that there is zero tolerance for corruption
by public servants in the law and the Prevention of Corruption Act demands
exemplary conduct from them.
All these offences are punishable with minimum imprisonment of six months,
extendable up to five years, and also with a fine. In Madhukar Bhaskararao v. State of
128
Maharashtra, it was held that once the premise is established, the inference to be
drawn is that the said gratification was accepted as motive or reward for doing or
forbearing to do any official act. In B. Hanumantha Rao v. State of Andhra
129
Pradesh, the petitioner demanded Rs. 50,000 as illegal gratification from PW1 and
also threatened that if this amount is not paid he would seize the arrack depot and its
machinery for supplying arrack in polythene sachets without permission. The
petitioner was caught with the amount of Rs. 50,000 and his hands too turned pink on
being dipped in sodium carbonate solution. It was held that the petitioner accused is
guilty of accepting illegal gratification under section 7 of the Prevention of Corruption
Act, 1988.
The receipt of gratification as a motive or reward for the purpose of inducing the
130
public servant by corrupt or illegal means will amount to an offence. Ingredients of
the offence under section 8 of the Act are -
(i) The accused should accept or agrees to accept (or even attempt to
obtain) gratification from someone.
(ii) The gratification is for himself or someone else.
(ii) It is a motive or reward to induce a public servant by corrupt or illegal
means to do or to forbear to do any official act or to show favour or
disfavor to any person etc.
The gravamen of the offence is acceptance of or obtaining or even the attempt
to obtain illegal gratification as a motive or reward for inducing a public servant by
corrupt or illegal means. It is not necessary that the person who received the
gratification should have succeeded in inducing the public servant. It is not even
necessary that the recipient of the gratification should, in fact have attempted to
128
AIR 2001 SC 147. See also R. S. Nayak v. A. R. Antulay (1984) 2 SCC 183. ),
State (Delhi Administration) v G.P. Nayar 1974 Cri LJ 1363, B.C. Chaturvedi v.
Union of India and Others, AIR 1996 SC 484, S.K. Puri and Ors. v. State and Anr.
2004 Cri LJ 3198, State of Maharastra v. Wasudeo Ramchandra Kaidalwar, AIR
1981 SC 1186, Jatinder Singh v. State 2001 Cri LJ 11, State Karnataka v. C.S.
Krishnamurthy 2004 Cri LJ 3440.
129 AIR 1992 SC 1201.
129
131
induce the public servant. In Dewan alias Vasudevan v. State it has been held that it
is not necessary that the person who received the gratification should have succeeded
in inducing the public servant. It is not necessary, that the recipient of the gratification
should, in fact, have attempted to induce the public servant. The receipt of
gratification as a motive or reward for the purpose of inducing the public servant by
corrupt or illegal means will complete the offence. But it is necessary that the accused
should have had the animus or intent, at the time when he receives gratification that is
received as a motive or reward for inducing a public servant by corrupt or illegal
means.
(b) CRIMINAL MISCONDUCT BY A PUBLIC SERVANT-
Section 13, 14, 15 and 16 of the Prevention of Corruption Act, 1988 correspond
to Sections 5(1), 5(2), 5(3A) and 5(3B) of the repealed Prevention of Corruption Act,
1947, and pertain to the offences of criminal misconducts and the punishments for
such offences. The major change brought about in the PC Act, 1988, pertains to
withdrawal of the Courts powers to impose a sentence of imprisonment less than the
sentence provided in the Act. A public servant is said to commit the offence of
criminal misconduct,-
(a) if he habitually accepts or obtains or agrees to accept or attempts to obtain
from any person for himself or for any other person any gratification other
than legal remuneration as a motive or reward such as is mentioned in section
7; or
(b) if he habitually accepts or obtains or agrees to accept or attempts to obtain
for himself or for any other person, any valuable thing without consideration
or for a consideration which he knows to be inadequate from any person
whom he knows to have been, or to be, or to be likely to be concerned in any
proceeding or business transacted or about to be transacted by him, or having
any connection with the official functions of himself or of any public servant
to whom he is subordinate, or from any person whom he knows to be
interested in or related to the person so concerned; or
131
1988 Cri. L.J. 1005. See also H.S. Gotla v. State, 2001 Cri LJ 2695, Vishnu
Kondaji Jadav v. State of Maharastra AIR 1994 SC 1670, State of Uttar Pradesh v.
Surinder Pal Singh AIR 1989 SC 811, Ram Babu Singh v. Addl. D.G.P. of Police
1993 Cri LJ 1253, State v Dr. R.C. Anand and Anr., AIR 2004 SC 3693.
130
(c) if he dishonestly or fraudulently misappropriates or otherwise converts for
his own use any property entrusted to him or under his control as a public
servant or allows any other person so to do; or
any public servant who commits criminal misconduct shall be punishable with
imprisonment for a term which shall be not less than one year but which may extend
132
to seven years and shall also be liable to fine.
133
In M. Krishna Reddy v. State, Deputy Superintendent of Police, Hyderabad, it
was held that to substantiate a charge under section 13 (1) (e), the prosecution must
prove the following ingredients namely:
(1) The prosecution must prove that the accused is a public servant,
(2) The nature and extent of the pecuniary resources or property which are found
in his possession,
(3) It must be proved as to what were his known sources of income i.e. known to
the prosecution,
(4) It must prove quite objectively that the resources or property found in
possession of the accused were disproportionate to his known source of
income. Once the above ingredients are satisfactorily proved, the offence of
criminal misconduct under section 13(1) (e) is complete, unless the accused is
able is able to account for such resources or property and it is only thereafter
the burden shifts to the accused to prove his innocence. In State of U.P. v.
134
Kanhaiya Lal, it was held that as distinguished from section 7 of the Act, in
order to be a criminal misconduct under section 13 (1) (d) of the Act, the
action of a public servant deriving pecuniary advantage need not necessarily
be connected with the performance of his official duty.
(4) POLICE OFFICER AUTHORISED TO INVESTIGATE UNDER THE
PREVENTION OF CORRUPTION ACT, 1988: The police officer competent to
investigate the offence would be not below the rank of-
(a) An inspector of police in the case of Delhi Special Police Establishment.
(b) Assistant Commissioner of Police in Metropolitan areas of Bombay,
Calcutta, Madras and Ahmedabad.
(c) a DSP else where

133 AIR 1993 SC 313.
134 1976 Cri LJ 1230.
131
(d) an Inspector of Police authorized by State Government by general or
135
special order.
It is pertinent to mention here that in exercise of powers conferred by section 17
of the Prevention of Corruption Act, 1988 the Governor of Punjab has authorized
136
Inspector of Vigilance Bureau Punjab to conduct the investigation under the Act.
137
In State of Uttar Pradesh v. Surinder Pal Singh, the respondent was a
Station House Officer of Police Station and was promoted as Deputy Superintendent
of police. While digging some land 20 gold bricks were found by some persons which
they failed to deposit with the authorities but the respondent seized the gold bricks on
information received but misappropriated the gold bricks. The investigation was
carried out but the respondent challenged the legality of the investigation by an officer
junior in rank to him. It was held that the Inspector of Police, Crime Branch who
made the investigation had been authorized by the State Government as contemplated
by Section 17. The investigation was not vitiated in law on the ground that the said
Inspector was not higher in rank to the police officer who was alleged to have
committed the offence.
(5) PREVIOUS SANCTION NECESSARY FOR PROSECUTION-
No court shall take cognizance of an offence punishable under section 7, 10, 11, 13
and 15 alleged to have been committed by a public servant, except with the previous
sanction,-
(a)
in the case of a person who is employed in connection with the affairs of
the Union and is not removable from his office save by or with the sanction of
the Central Government, of that Government;
(b)
in the case of a person who is employed in connection with the affairs of a
State and is not removable from his office save by or with the sanction of the
State Government, of that Government;
(c)
in the case of any other person, of the authority competent to remove him
138
from his office.
139
In Ramesh Lal Jain v. Najinder Singh Rana, it was held that grant or refusal
of sanction must be preceded by application of mind on the part of appropriate

136 Punjab Govt. Gaz. Notification No S.O. 84/C.A. 49 /1988/S.17/2012
137 AIR 1989 SC 811
139 (2006) 1 SCC 294.
132
authority. If the accused can demonstrate such an order to be suffering from non-
application of mind, the same may be called in question before a competent court of
140
Law. In State Inspector of Police, Vishakhapattnam v. Surya Sankaram Karri
sanction to prosecute the accused was granted by an officer who was not competent to
remove the accused from service. No evidence was produced before the court that
officer had been conferred delegated powers. Sanction granted by an officer not
competent to do so is nullity. Similarly in Subramaniam Swami v. Manmohan
141
Singh, it has been held by the court that when an offence is committed by a public
servant and he resigns before cognizance is taken by the court, no prior sanction is
needed. A. Raja, Union Tele-com Minister resigned from the post of Minister in 2G
Spectrum Scam but continued to be a member of Parliament. It was held by the Court
that no sanction is required under section 19 of the Prevention of Corruption Act 1988.
3.6.3 SHORTCOMINGS OF THE PREVENTION OF CORRUPTION ACT,
1988-
(1) Inherent delays in the Criminal Justice System-
The Prevention of Corruption Act 1988 is the existing Law in India dealing with
offences relating to corruption. The system under the Act is painfully slow and
punishments are not swift. Under the Prevention of Corruption Act, 1988 prior
permission of the authority is required before launching prosecution against a public
142
servant. This often delays the launch of a prosecution. The concerned authorities
often take considerable time to grant such permission. Also, permission is sometimes
denied on political and other grounds.
(2) Insufficient number of Judges-
The Prevention of Corruption Act provides for trial of corruption cases under
143
the Act exclusively by the special judges. The number of special judges is highly
insufficient compared to the number of corruption cases filed in their courts. As a
result, these courts are overburdened and there is a large discrepancy in the number of
cases disposed by the investigating agencies and the number of cases disposed by the
courts, adding to backlog each year.
(3) Delays during the trial-
During trial of offences, adjournments are often taken for granted on various
grounds. Further, the proceedings in the trial courts are challenged at various stages
140 AIR 2006 SC 46.

141 AIR 2012 SC 1207.
133
by parties filing petitions in the same court as well as in higher courts. Appeals and
revisions filed in higher courts against the order of the trial court often take years to be
concluded.
(4) No Law to tackle Corruption in Private Sector-
The Prevention of Corruption Act, 1988 is the existing law in India dealing with
offences relating to corruption. This law however, was essentially enacted to take care
of corruption cases in the public sector and by public servants, where as in fact, there
is widespread corruption in the private sector also which seriously hampers the overall
growth and development of the country. After the liberalization of the Indian economy
in the early 1990s, the private sector has expanded greatly. The problem of corruption
in the private sector is increasing with the expansion of the private sector. Today it has
assumed alarming proportions. It has become the single biggest menace to Indian
society.
(5) Hostile Witnesses-
In order to convict a corrupt public servant, the prosecution has to prove its case
beyond doubt. This is a strict legal requirement as per the Indian Evidence Act, the
general Law on evidence in India. There is no exception to this requirement even for
corruption cases. Prosecution has to depend heavily on the testimony of witnesses
who often do not support the prosecution case because of influence, allurement and
intimidation from the other side. There is no witness protection scheme, nor are there
provisions for quick and effective action against witnesses who become hostile. As a
result, witnesses frequently become uncooperative and spoil the prosecution case.
(6) Ineffective Asset Recovery-
Though there are legal provision for confiscation and recovery of property
acquired as proceeds of crime, such recovery is not easy. Corrupt public servant often
acquire properties with the proceeds of crime in the name of their friends, relative,
family members and other acquaintances. Therefore, it is not easy to prove in court
that such properties are the proceeds of crime. Such properties are quite often held
offshore under strict privacy laws and it is not easy to trace and recover them,
especially in the absence of desired international co-operation.
CONCLUSION
There are adequate laws in India to fight corruption in the public sector. The
Prevention of Corruption Act, 1988 is a comprehensive law which covers all possible
acts pertaining to corruption and corrupt practices by public servants. There are laws
134
relating to tracking, seizing, and confiscating proceeds of such crimes, both inside and
outside the country. India has signed mutual legal assistance and extradition treaties
with several countries to facilitate international co-operation in the fight against
corruption. Ratification of the UN Convention against Corruption by India will further
strengthen its resolve to fight against corruption by providing and obtaining
international co-operation.
Despite all these measures and laws, the country is still not free from the
scourge of corruption. Corruption is still one of the biggest impediments to extending
the benefits of development and progress to the poorest of the poor. The Indian
criminal justice system is facing many problems and challenges in its fight against
corruption. At present, there is no law to deal with corruption in the private sector,
which has grown in leaps and bounds in last two decades, as envisaged in the
UNCAC. Offenders take advantage of the very strict requirements of Indian courts to
prove every point beyond doubt. The system suffers from inherent delays; as a result
punishment is not swift. Corruption is considered a high profit-low risk activity by
corrupt public servants. Recoveries of assets, which are proceeds of crime, remain a
big challenge. Such assets are often held offshore and getting them back is a herculean
tasks, especially in the absence of desired international co-cooperation.
The fight against corruption is, therefore, not an easy one. We need to join
forces against this enemy with all resources at our disposal to achieve better and more
effective results. The United Nations Convention against Corruption can be seen as a
watershed in the resolve of the international community to fight corruption. The
provisions relating to asset recovery in the UNCAC are the most important. Effective
use of the same by signatory countries will, therefore, go a long way to achieving
better results in this regard. International co-operation to fight corruption as envisaged
in the UNCAC is therefore inescapable and a requirement of the hour.
3.7 The Transplantation of Human Organs Act, 1994
3.7.1 INTRODUCTION-
Dhanwantari narrates "During the great war of Gods, Rudra severed the head of
Yadnya. The Gods then approached the famous celestial twin surgeons,
Aswinikumaras. They successfully united Yadnya's head to his trunk restoring him to
144
life." This is how it started.
144
Sushrut Samhita, 17.
135
3.7.2 What is Organ Transplantation:
An organ transplant is a surgical operation where a failing or damaged of organ
in the human body is removed and replaced with a new one. An organ is a mass of
specialized cells and tissues that work together to perform a function in the body. The
heart is an example of an organ. It is made up of tissues and cells that all work
together to perform the function of pumping blood through the human body. Any part
of the body that performs a specialized function is an organ. Therefore eyes are organ
because their specialized function is to see, skin is an organ because its function is to
protect and regulate the body, and the liver is an organ that function to remove waste
from the blood.
Organ transplantation has been part of medical technology for over forty years,
begging in the 1950's with the first consistent successes in kidney transplantation.
Recent advances in technology which are advancing the frontiers of transplantation
dramatically, however are now poised to combine with another powerful force-that of
free markets-to impel society to confront the mechanism by which providers and users
of human organs are brought together. Inside the human body, there are twenty-five
different organs and tissues that can be transplanted under current technology. Organ
transplantation is not some sort of experimental new science. Success rates for such
surgeries are as high as 95+% and for many disease, a transplant is the standard
method of treatment.
3.7.3 Main Object of the Act-
Till the passage of the Transplantation of Human Organs Act, 1994 there was no
comprehensive legislation regulating the removal of human organs. In 1991, the
central government constituted a committee a prepare a report, which could form a
basis for all-India legislating. Although the main terms of the committee were
concerned with brain death it also recommended that trading in human organs be
145
made a punishable offence. The Transplantation of Human Organ Act was thus
passed by the parliament in 1994.
The main objects of the Act are as under-
(1) to provide for the regulation of removal, storage and transplantation of human
organs and tissues for therapeutic purposes and
(2) for the prevention of commercial dealing in human organs and tissues and
(3) for matters connected therewith or incidental thereto.
145
Sec 19 of the Transplantation of Human Organ Act, 1994.
136
3.7.4 Silent Features of the Transplantation of Human Organs Act, 1994-
The Transplantation of Human Organs Act, 1994 is meant to provide for the
regulation of removal, storage and transplantation of human organs for therapeutic
purposes and for the prevention of commercial dealing in human organs. The
Central Act illegalizes the buying and selling of human organs and make cash-for-
kidney transaction a criminal offence.
(1) The Act establishes an institutional structure to authorize and regulate
human organ transplants and to register and regulates, through regular
checks, hospitals that are permitted to perform transplants.
(2) The Act recognizes, for the first time in India, the concept of brain-stem
death, paving the way for a cadaver-based kidney transplant program.
(3) The Act defines two categories of donor:-
First, it permits a near relative, defined as a patients, spouse, son,
daughter, father, mother, brother, sister, grandfather, grandmother,
146
grandson, granddaughter.
Secondly, in section 9 (3) of the Act, live donor who are not near
relative but are willing to donate kidneys to the recipients by
reason of affection or attachment towards the recipient or for any
other special reasons are permitted to do so, provided that the
transplantation have the approval of the Authorization Committee,
147
established under the Act.
(4) The Act very sensibly provides for registration of hospitals claiming to
have the necessary competence and facilities to perform particular organ
148
transplantation. This is a regulatory measure intended to protect the
interest of patients. It is with the Appropriate Authority, set up by the State
government under the Act, that hospitals intending to do transplants must
register. Approvals are granted only after the institution fulfill certain
technical, infrastructural and medical requirements.
149
(5) The Act makes the offence of kidney trading non-cognizable. In other
words, the police cannot look into complaints of kidney trading
146
Ibid section 2 (1).
147
Ibid section 9(3).
148
Ibid section 14.
149
Ibid section 22.
137
independently but must wait for a complaint to be made by the Appropriate
Authority set up under the Act or by an officer authorized by it or by an
individual who has given prior notice of not less than 60 days to the
Appropriate Authority.
(6)
According to the Act, no registered medical practitioner shall undertake the
removal or transplantation of any human organ or tissue or both unless he
has explained, all possible effects, complications and hazards connected
with the removal and transplantation to the donor and recipient
150
respectively.
3.7.5 AN ANALYSIS OF THE TRANSPLANTATION OF HUMAN ORGANS
ACT, 1994-
The organ trafficking is not new to the world and India is considered to be one
of the biggest center for this market. Illegal organ transplants are on the rise in spite of
having a special legislation in place to deal with the menace. The Law for various
reasons failed in its objective and implementation giving scope to make the ground
fertile for organ scandals. It is also creating hurdles for various philanthropic agencies
which are working to further the cause of transplantation and sometimes unwittingly
helping the kingpins and touts to easily circumvent the law.
Due to various scam and sting operation being reported in the news and
prosecution of medical professionals thereupon in such cases, the medical fraternity is
scared of granting permission for donation of human organs on one ground or another.
Those cases that are refused permission go to the courts for justice. There is a delayed
procedure in the courts and many times such patient dies before the verdict. All this
needs a critical evaluation that whether the Act is serving the purpose for which it was
enacted or it is the hindrance in a noble cause of donation of human organs.
Most of the reputed institution have made it a policy that they will operate
upon only those cases where the donor or near relative is spouse, son, daughter, father,
mother, brother or sister and permission of the authorization committee to donate the
organ and for operation is not required.
Due to the fact the many medical professionals have been caught unaware
because they did not know the intricacies of law. They were supposed to check the
affidavits whether they are genuine or not. Without any training for such purposes
150
Ibid section 12.
138
obviously they relied upon these documents and when these documents turned out to
be fake, the axe of law fall upon them.
They were supposed to find the genuineness of the donor without any
investigative power with them. But keeping in mind the urgency of the situation they
took decision and made judgment which in few cases turned out to be wrong. After
the cases were made out against medical professional the entire medical profession
got scared. Then the authorization committee felt that they have to be cautious to save
themselves from inadvertent passionate wrong decision. In this process they became
overcautious and in the process of verifying all the documents it started taking a long
time.
Medical professionals were in a dilemma that they had taken a solemn oath
that they will try to save the life of the patient by all means. When they were sitting in
such committees they were not trying to save the life of critically ill patients of renal
failure but trying to rule out that there is no monetary involvement in these organ
donations. They were at great pains, when they had to deny permission as now they
were not trying to save the life of the patient but were just acting contrary to it.
To lessen this burden in the conscious of medical profession it was suggested
that some senior police officer and some revenue officer should be made member of
such authorization committees. Police officer will be able to establish the identity of
donor as they had investigative teams with them. They will be able to rule out the
monetary transaction. Revenue authorities could verify the affidavits so they were
made members. After the introduction of these members it was thought that the
process will become simpler and it will take less time. But it was a general feeling that
this is tricky situation and nobody wanted to take onus for decision and waiting time
for the renal failure patients did not decrease.
As the donors were mostly from a different State than the recipient, a question
arose that which the authorization committee will give permission for donation,
whether the committee where the recipient is living or donor is living or where the
patient is getting operated. Appropriate authority took the decision that the
authorization committee of the place, where the hospital carrying out renal
transplantation is situated will take the decision.
This raised a problem of verifying the person from very distant places. Papers
were sent back to the different states for verifying the antecedents of the donor and
recipients. The process took a lot of time. During this time patients, many a times
139
become more critical. Appeal in such cases against the decision of the authorization
committee, was with appropriate authority. They were also medical professionals and
they had the same dilemma as members of the authorization committees. They also
could not expedite the process of quick decisions. After this appeal lied with the
Central Government where the appeal is against the order of the Appropriate
Authority appointed under sub section (1) of section 13 or the State Government,
where the appeal is against the order of the Authorization Committee constituted
under clause (b) of sub section (4) of section 9 or against the order of the
Authorization Committee constituted under clause (a) of sub section 4 of section 9 or
against the order of the Appropriate Authority appointed under sub section (2) of
section 13 of the Transplantation of the Human Organ Act, 1994.
Many patients went to the courts for getting quicker decision regarding
permission for organ transplantation. But courts have also their own lengthy
procedure and sometimes they got the death call earlier than the verdicts from the
courts. To expedite the process now Deputy Commissioners, who were earlier
members of the committees had now been made chairman of the authorization.
Committees in Punjab and there is one medical professional as a members along with
Senior Superintendent of Police and members of NGO.
No registered medical practitioner shall undertake the removal or
transplantation of any human organ unless he has explained, in such manner as may
be prescribed, all possible effects, complications and hazards connected with the
151
removal and transplantation to the donor and the recipient respectively. It has been
of served that most of the times surgeons involved in organ translation do not tell
exactly what is needed to be told and just explain it is a simple operation and they
need not be afraid. This is not a good practice. It is the need of the hour that donor is
told clearly as per the law so that later on donor does not feel cheated.
In the western countries organ donation is mostly from the brain dead persons
but in India this phenomenon has not picked up. It has been seen that poor person
posing as servants of the person and showing attachment due to love and affection to
their masters, are the donors mostly. It becomes very difficult to rule out involvement
of money in such cases. Many times donor gives wrong affidavits that they are not
accepting money when the situation points otherwise. People should be made aware
151
Section 12 of the Transplantation of Human Organs Act, 1994.
140
that organ donation after death can save the life of many patients. Procedure for organ
donation after death should be made simple people who want to donate organ may be
issued cards like driving licenses which can be kept in their pockets. To make it more
simpler consent for organ donation may be entered on the driving licenses of the
donors. Organs then may be removed as early as possible from dead bodies of such
persons without any further legal formalities. Organ banks may be started in good
hospitals and may be given to the needy patients as per waiting list of that State or a
particular area.
3.7.6 Loopholes of the Transplantation of Human Organs Act, 1994-
1.The Act permits unrelated organ donation by reason of affection on attachment
152
towards the recipients or for any other special reasons. This provision has
been widely abused to facilitate organ trade. The recipient and the seller get
the approval of the Authorization Committee by fabricating a story of close
relationship when it is actually a trade.
153
2.A further problem is that all the offences under the Act are non-cognizable.
This means that the police cannot launch an independent investigation into a
claim of organ trade, but have to wait for action to be taken by the Appropriate
Committee. Under the Act court has to has to wait 60 days for the Appropriate
Committee to do its own investigation. This impedes swift investigation of
complaints of organ trade, thereby weakening enforcement of the law.
3.The Act is also problematic from the gender inequality point of view. Due to the
weak position of women in Indian society, including spouses in the category of
154
near relative which do not require the permission from the Authorization
Committee is very problematic. Moreover a person can marry a girl for the
purpose of organ transplantation. In India women are major donor because
they generally live in dependency relationship with their husband.
Consequently it is the wifes best interest to donate, thereby ensuring future
family income. She may not be coerced by her surroundings as such, but by
her general weak position with in Indian society and so she does not have
much choice.
152
Ibid section 9 (3).
153
Ibid section 22.
154
Ibid section 2 (i).
141
155
4.The other major problem with Act is that since the organ trade is banned the
poor are not able to complain anywhere if they are cheated by doctors and
middlemen, because selling a kidney is violation of the law and punishable
with 5-10 years imprisonment and a fine from Rs 20 lakhs to 1 cror. The High
156
Court of Madras has example of this. In this case a kidney seller approached
the State Human Rights Commission to obtain the remainder of money he was
promised for his kidney. The commission has held that it has no jurisdiction to
entertain the complaint since section 19 of the Act makes it clear that no donor
of kidney can claim payment of money.
3.8 FOREIGN EXCHANGE MANAGEMENT ACT, 1999-
3.8.1 BACKGROUND : SCENARIO WHEN FERA WAS ENACTED
FERA was enacted in 1973 when scenario called for a strict and rigid regulatory
regime.
Foreign exchange was scarce.
There were instances of misuse of foreign exchange
Indias foreign trade was not substantial compared to what it is today, it was very
limited. The process of globalization had not yet started. In such scenario, there was
apprehension that regulations would be circumvented by unscrupulous persons. Such
apprehension led to enactment of Foreign Exchange Regulation Act, 1973 as a
comprehensive piece of legislation. Foreign Exchange Regulation Act, 1973 was
157
administered ruthlessly by overzealous officer of enforcement. Foreign Exchange
Regulation Act, 1973, consisted of more rigorous framework of control. Severe
restrictions on current account transactions had continued till mid-1990 when
relaxations were made in the operations of the FERA. The control framework was
essentially transaction based in terms of which all transitions in foreign exchange
including those between residents and non-residents were prohibited, unless
specifically permitted. Unlike other laws where everything is permitted unless
specifically prohibited, under Foreign Exchange Regulation Act, 1973 nothing was
permitted unless specifically permitted. Hence the tenor and tone of the Act was very
drastic. It provided for imprisonment of even a very minor offence. Under Foreign
Exchange Regulation Act, 1973, a person was presumed guilty unless he proved
155
Ibid section 19.
156
Writ petition number 40101 and 41806 of 2002.
157
Dalip K. Sheth, Treatise on FEMA Law and Practice 3 (2002).
142
himself innocent whereas under other laws, a person is presumed innocent unless he is
proven guilty.
3.8.2 SCENARIO 25 YEARS LATER-
After passage of 25 years however the entire scenario which prevailed in 1973
underwent a change.
Internal Economic controls had been progressively relaxed.
Externally, the process of globalization had gained momentum.
Indias foreign trade had substantially increased. Its economy and market had
become substantially stronger and vibrant.
Time had thus come to take serious re look at Foreign Exchange Regulation Act,
1973. The government of India took a step towards liberalization by announcing the
New Industrial Policy in 1991 to remove obstacles in the inward flow of foreign
exchange. Steps were taken to rationalize Foreign Exchange Regulation Act, 1973.
While it was necessary to continue to regulate activities of foreign companies or
branches of such companies and foreign citizens in India, special restrictions in
respect of the companies registered in India were considered no longer necessary, and
the regulations on foreign investment needed simplification to attract greater flow of
foreign capital and investment.
Foreign Exchange Regulation Act, 1973, was enacted at a time when there was
death of foreign exchange in India and the main aim behind the enactment was to
restrict the out flow of foreign exchange from India. As a result it was made very
stringent. With the growth of Foreign trade and commerce the foreign exchange
reserve (FOREX) position of our country improved considerably. The provisions of
Foreign Exchange Regulation Act, 1973 were becoming draconian, unrealistic and
anachronistic. This was accepted by the authorities and Foreign Exchange
Management Act, 1999 was enacted.
3.8.3 FERA to FEMA-
Foreign Exchange Management Act, 1999 is an Act to consolidate and amend
the law relating to foreign exchange with the objective of facilitating external trade
and payments and for promoting the orderly development and maintenance of foreign
exchange market in India. The law relating to foreign exchange control in India has
undergone a substantial change in scope, content and approach by the substitution of
the Foreign Exchange Regulation Act, 1973 (FERA) by the Foreign Exchange
143
Management Act, 1999 (FEMA), which was passed in winter session of the
th
Parliament in 1999. The bill was introduced in the 13 the Lok Sabha on 25 Oct99.
th
The presidential Assent was received on 6 Jan 2000. Finally the Foreign Exchange
st
Management Act, 1999, came into operation w.e.f. 1 June 2000. The most noticeable
aspect of Foreign Exchange Management Act, 1999, is that there is no imprisonment
prescribed for contravention of the law, not even as an alternative punishment and for
the blatant and deliberate of violations. Foreign Exchange Regulation Act, 1973, had a
controversial 27 year stint during which many bosses of the Indian Corporate world
found themselves at the mercy of the Enforcement Directorate (E.D.) Any offence
under Foreign Exchange Regulation Act, 1973, was a criminal offence liable to
imprisonment whereas Foreign Exchange Management Act, 1999, seeks to make
158
offences relating to foreign exchange civil offences.
The provisions of Foreign Exchange Management Act displays so much change
that one could almost de link Foreign Exchange Management Act, 1999, from Foreign
Exchange Regulation Act, 1973, and concludes that Foreign Exchange Management Act,
1999, is a new law altogether which needs an independent reading and interpretation
159
divorced from the earlier law and decisions rendered there under.
The approach has shifted from that of conservation of foreign exchange to one
of facilitating trade and payments, as well as developing orderly foreign market. This
definitive shift in the objectives of foreign exchange management could be seen in the
160
preamble to the new legislation.
Important aspects of transition were: Capital account convertibility, timeframe
for convertibility, the recommendations of Tarapore Committee and symptoms of the
currency crisis. For a clear perception of implications of the transition from FERA,
1973 to Foreign Exchange Management Act, 1999,, these aspects should be reviewed.
Foreign Exchange Management Act, 1999, which has replaced Foreign
Exchange Regulation Act, 1973 had become the need of the hour since Foreign
Exchange Regulation Act, 1973 had become incompatible with the pro-liberalization
policies of the Government of India. Foreign Exchange Management Act, 1999, has
brought a new management regime of Foreign Exchange consistent with the emerging
frame work of the World Trade Organization (WTO).
158
http://www.wikipedia.org/wiki/Foreign_Exchange_Management_Act,
(March 3rd, 2007). 159http://www.welcome-
nri.com/info/project/femaact1.htm (March 5th, 2007).
160
Rama Devi R. lyer, Compounding of Contravention Under Foreign Exchange
Management Act 1999 (FEMA) 126 (2006).
144
Objectives of FEMA, 1999
The objectives of the Foreign Exchange Management Act, 1999 have been to
consolidate and amend the law relating to foreign exchange with the following
objective-
(a)
facilitating external trade and payments and
(b)
for promoting the orderly development and maintenance of foreign
161
exchange market in India.
3.8.4 SCOPE AND APPLICABILITY-
162
FEMA, 1999 applies to
(a) All branches, officer and agencies outside India owned/controlled by a
person resident in India and
(b) Any FEMA, 1999 contravention committed outside India-by any person
to whom this Act applies.
FEMA applies to the whole of India and hence, any transaction which takes place in
India will be subject to the governance of FEMA, 1999. Thus any transaction
undertaken by non-resident in India would need compliance of FEMA. FEMA also
applies to the branches, officer and agencies outside India owned or controlled by a
person resident in India.
The question whether FEMA would apply to the transactions of a resident
individual which took place outside India. There are several provisions, which restrict
a resident from certain transactions outside India, such as acquisition of immovable
property. Though the branches, etc. of resident himself can carry out transactions
abroad which are otherwise not permitted to him in India. However, the word also
in section 1(3) seems to suggest that the transactions of a resident person outside India
would be subject to FEMA 1999.
3.8.5 MAIN FEATURES OF THE FOREIGN EXCHANGE MANAGEMENT
ACT, 1999-
(1) Regulation and Management of Foreign Exchange-
This is the most significant part of Foreign Exchange Management Act, 1999. It deals
with the dealing in foreign exchange, current and capital account transactions, export,
163
realization and reparation of foreign exchange and exemption in certain cases.
161
Dalik K. Sheth, Treatise on FEMA (LAW and Practice) 3 (2002).
162
Section 1(3)Foreign Exchange Management Act, 1999
163
Chinubhai R. Shah and Ms. Komal Parikh, FERA To FEMA
59 (2000).
145
Provision of Foreign Exchange Management Act, 1999, on dealing in foreign
exchange provides that no person shall without the general or special permission of
Reserve Bank of India, deal in or transfer foreign exchange or foreign security to any
person other than an authorized person, make payment outside India or receive
payment in any manner otherwise through an authorized person on behalf of person
resident outside India or enter into financial transaction in relation to acquisition of
assets outside India.
164
The provision of FEMA, 1999 dealing with export goods and services
165
appears highly simplified compared to similar provision of FERA 1973. It requires
the exporter to furnish to the Reserve Bank of India correct particulars including the
export value of goods/payment of services, and where it is not ascertainable, value
which the exporter expects to receive, other information as the Reserve Bank of India
may require.
(2) Holding of Foreign Exchange, etc-
No person resident in India shall acquire, hold, own, possess or transfer any foreign
166
exchange, foreign security or any immovable property situated outside India,
(3) Current account transactions:
Any person may sell or draw foreign exchange to or from an authorized person if such
sale or drawal is a current account. The Central Government can, in public interest and
in consultation with the Reserve Bank, impose reasonable restrictions for such
167
transactions.
(4)Capital account transactions-
Any person may sell or draw foreign exchange to or from an authorized person for a
capital account transaction. The Reserve Bank may, in consultation with the Central
Government, specify any class or classes of capital account transactions which are
permissible; the limit up to which foreign exchange shall be admissible for such
transactions: Reserve Bank may, by regulations prohibit, restrict or regulate the
following,-
1. Transfer or issue of any foreign security by a person resident in India;
2. Transfer or issue of any security by a person resident outside India;
164 Section 7 of Foreign Exchange Management Act, 1999

165 Section 18 of Foreign Exchange Regulation Act, 1973.
166 Ibid Section 4.
167 Ibid Section 5.
146
3. Transfer or issue of any security or foreign security by any branch, office or agency
in India of a person resident outside India;
4. Any borrowing or lending in foreign exchange in whatever form or by whatever
name called;
5. Any borrowing or lending in rupees in whatever form or by whatever name called
between a person resident in India and a person resident outside India;
6. Deposits between persons resident in India and persons resident outside India;
7. Export, import or holding of currency or currency notes;
8. Transfer of immovable property outside India, other than a lease not exceeding five
years, by a person resident in India;
9. Acquisition or transfer of immovable property in India, other than a lease not
exceeding five years, by a person resident outside India;
10. Giving of a guarantee or surety in respect of any debt, obligation or other liability
incurred,-
(i) By a person resident in India and owed to a person resident outside
India; or
(ii) By a person resident outside India.
(4)
A person resident in India may hold, own, transfer or invest in foreign currency,
foreign security or any immovable property situated outside India if such currency,
security or property was acquired, held or owned by such person when he was
resident outside India or inherited from a person who was resident outside India.
(5)
A person resident outside India may hold, own, transfer or invest in Indian
currency, security or any immovable property situated in India if such currency,
security or property was acquired, held or owned by such person when he was
resident in India or inherited from a person who was resident in India.
(6)
Without prejudice to the provisions of this section, the Reserve Bank may by
regulation prohibit, restrict, or regulate establishment in India of a branch, office or
other place of business by a person resident outside India, for carrying on any activity
168
relating to such branch, office or other place of business.
(4) Contravention and Penalties-
Under the Act penalty for any of contravention has been specified as thrice the amount
involved, where it is quantifiable, and otherwise, up to Rs 2 lakhs + Rs 5000 per day
169
for continuing contravention. The provision is in total contrast to the provision of
the erstwhile FERA, 1973 which provided for imprisonment and no limit
168
Ibid Section 6.
169
Ibid Section 13.
147
170
on fine. Also, one question which arises here is that where the alleged person is an
authorized person, whether this fine will be in addition to the one under section 11 (3)
of Foreign Exchange Management Act, 1999.
However if the person does not pay the fine within 90 days from the date of
notice, then after formalities of show cause notice and personal hearing, he can be
subjected to civil detention. If he does not respond to the notice there can be warrant
of arrest. The civil detention is on the following lines where the amount involved
exceeds Rs. 1 crore, detention is for three years, otherwise, six months. However, it is
171
clearly civil detention and not imprisonment.
This is a major diversion from FERA, 1973 which contained provisions that
would lead to imprisonment even in trivial cases. Perhaps the government is of the
opinion that there should be pecuniary punishment for economic offences, where that
punishment is not complied with, then, civil detention and if that is also not complied
with, then a warrant of arrest.
(5) Directorate of Enforcement-
The Central Government shall establish a Directorate of enforcement with Director
and such other officers or class of officers as it thinks fit, who shall be called officer of
enforcement, for the purpose of this Act. The Central Government may authorize the
Director of Enforcement or an Additional Director of Enforcement or a Deputy
Director of Enforcement to appoint officers of enforcement below the rank of an
Assistant Director of enforcement. Subject to such conditions and limitation as the
Central Government may impose, an officer of enforcement may exercise the powers
and discharge the duties conferred or imposed on him.
Implication of Enactment of FEMA, 1999-
172
FERA 1973 is repea1ed. However, all offences committed under the repealed
FERA 1973 shall continue to be governed by the provisions of repealed FERA, 1973
173 174
as if it were not repealed. It has been held in T.S Balaiah v. TA. Rangachari that
a person who has committed a contravention under the repealed law cannot claim to
be proceeded against only under the provisions of repealed law. Same decision was
170
Ibid Section 56.
171
Ibid Section 14.
172
Section 49(1), Foreign Exchange Management Act, 1999.
173
Ibid Section 49(4).
174
AIR 1969 SC 741.
148
175
followed in Tiwari Kanhaiya Lal v. CIT. The possible controversy is now settled
due to the express language of FEMA. 1999, which provides that after expiry of two
years from the date of commencement of FEMA, 1999, no court shall take cognizance
176
of a contravention under section 53 of the repealed FERA, 1973. Although before
the expiry of the said period of two years all offences committed under the repealed
Act shall continue to be governed by the old act i.e. FERA, 1973 as if it was not
177
repealed.
Constitutional validity of penal provisions-
Classification of offenders reasonable-
178
The classification of offences into two types one which was to be dealt with
departmentally and other which was to be tried by criminal court is reasonable and not
violative of Art 14 of Constitution of India. The Supreme Court in Superintendent &
179
Remembrancer of Legal Affairs v. Girish Kumar Navlakha has held that the
departmental adjudication in the first instance and criminal trial only for contravention
of certain provisions did not violate Art 14 of the Constitution of India.
The constitutional validity of section 13 of FEMA, 1999 cannot be challenged
on the ground that it is governed by a procedure different from that prescribed by the
Code of Criminal Procedure, 1953. Supreme Court in Shanti Prasad Jain v. Director
180
of Enforcement, has held that a law which prescribes a special procedure for
investigation of breaches of foreign exchange regulation will not be hit by Article 14
of the Constitution of India as it is based on classification which has a just and
reasonable relation to the object of the legislation.
Mens-Rea- Whether essential ingredient-
181
It is clear from FEMA, 1999 that companies are liable for offences under
FEMA. 1999. In FEMA, 1999, there is no provision corresponding to section 59 of
FERA, 1973 which provided for presumption of culpable mental state. A view may,
however, be expressed that on careful consideration of the various contraventions
under FEMA, 1999, it would appear that the certain sections may require mens-rea
e.g. section 14 which imposes civil imprisonment for non-payment of penalty.
175 (1975) (4 SCC 101).

176 Section 49(3), Foreign Exchange Management Act, 1999.
178 Section 13, Foreign Exchange Management Act, 1999.
179 AIR 1975 SC 1030.
180 AIR 1962 SC 1764.
181 Section 42, Foreign Exchange Management Act, 1999.
149
Nature of penalty proceedings-
182
The proceedings under FEMA l999, is a proceeding against the contravener
and is applicable to any person who contravenes any provision of the Act, rules,
regulations. etc. In substance, it is a proceeding against a person for the purpose of
penalizing him for contravention of the provision of the Act and the same is available
when the contravener is known. The Supreme Court in Shewpujarai Indrasarai v.
183
Collector of Customs has held that in case where the Customs authorities can
proceed only against the goods, there can be no question of applying the penal Section
to a person.
I. Penalty proceedings not criminal in nature-
Supreme Court in DE v. MCTM Corporation Pvt. Ltd.,184 has held that the
penalty imposed under Foreign Exchange management Act, 1973 was for
breach of a civil obligation and was not a sentence. It was observed that the
enforcement officers were expected to function as adjudicators and not as
judges in criminal courts. Accordingly it was held that the nature of penalty
proceedings was adjudicatory and not criminal.
II. Penalty cannot be based on guess work, conjecture or surmise-
In penal provisions, the degree of proof that is required is that which is
required in a criminal case. This was held by Madras High Court in Union of
India v. Marcel Nevens.185
III. The powers of the Enforcement officers is Quasi-judicial-186
Hence liability to penalty does not arise merely on default being proved, this
proposition is forfeited by the ratio of Supreme Court decision in Hindustan
Steel Ltd. v. State of Orissa.187
IV. Doctrine of Double Jeopardy-
Double punishment in form of imposition of penalty 188 as well as imprisonment
for non-payment of penalty would not amount to double jeopardy and thus
protection is not available under the Constitution of India 189.

183 AIR 1958 SC 845.
184 (1997) 88 CC 499 (SC): (1996)2 SCC 471.
185 (1978) MLJ 122 (Mad).
187 (1972) 38 ITR 26(SC).
189 Article 20(2), Constitution of India.
150
In Leo Rey Freyv. State of Punjab,190 the Supreme Court held that the
proceedings before Sea Customs Authorities under section 168 [Adjudication
under section 16 of Foreign Exchange Management Act, 1999] were not
prosecution within the meaning of Article 20(2) of the Constitution. Unless all
three essential conditions laid down in clause (2) of Art. 20. viz. prosecution in
court, punishment and same offence are fulfilled, the protection is not
available. The prohibition against double jeopardy would not be available if
any of these three elements does not exist.
V. Period of limitation for imposing penalty: An important question concerning the
imposition of penalty is there any bar or limitation under the Act as regards the
imposition of penalty? This question was answered in N. Shaik Mohammed v.
Directorate of Enforcement191, in this case, the Foreign Exchange Regulation

Board held that, Foreign Exchange Regulation Act, 1973, does not prescribe
any period of limitation for imposition of penalty for contravention of the
provisions of the Act. It was further held that Chapter XXVI of the Code of
Criminal Procedure, 1973, which prescribes the period of limitation for taking
cognizance of offences also does not apply to the cases falling under Foreign
Exchange Regulation Act, 1973, by virtue of Economic offences
(Inapplicability of Limitation) Act, 1974, section 2 thereof. A reference to
section 16 (6) of Foreign Exchange Management Act, 1999, shows that the one
year mentioned therein for disposal of complaint is only recommendatory not
mandatory.
Conclusion
Draconian FERA, 1973 is a matter of past. It is however, hoped that while
implementing FEMA, the Central Government and the Reserve Bank of India do not
place the same level of restrictions by Rules and Notification etc. Only such healthy
attitude and would let the spirit of FEMA prevail in terms of liberalization. It is
submitted that if the implementation of FEMA shall be with sincerity and without
partisanship then it will yield good results.
190 AIR 1959 SC 375.

191 (1993) 66 Taxman 522 (FERAB). (FERA Board)
151
3.9 INFORMATION TECHNOLOGY ACT, 2000
3.9.1 INTRODUCTION-
We are in era of Information Technology. The advent IT revelation has seen rise
of an IT society with an IT culture. In less than half a century the development of it
has been tremendous with its encompass being from Raja to Praja's Sovereign to
subject. There is hardly any area which has been left untouched by it, from cradle to
cremation IT has an important role and as a substitute to human activities, it is deeply
rooting and impacts our normal day to day activities. In addition to countries like the
U.S. Singapore, France, Malaysia and Japan, India is the twelfth nation to have cyber
legislation.
The internet is growing rapidly. It has given this to new opportunities in every
field we can think of-be it entertainment, business, sports or education. However there
are always a two sides to a coin, cyber crime (illegal activity committed on the
internet) is one of its major disadvantages. The internet along with its many
advantages has also exposed us to security risks that come with connecting to a large
network. Computers today are being misused for illegal activities like-e-mail
espionage, credit card fraud, spam, software piracy, in true sense of the term it does
invade our privacy and offend our senses. Criminal activities in the Cyberspace are on
the rise. The modern thief can steal more with a computer than with a gun.
Tomorrows terrorist may be able to do more damage with a key board than with a
bomb. To further aggravate the problem, criminals realizing the effectiveness of
computers and the internet to successfully perpetrate conventional crime, are
increasingly resorting to using them as tool for committing such crimes.
The Indian parliament considered it necessary to give effect to the resolution by
which the General Assembly adopted Model law on Electronic Commerce adopted by
the United Nations Commission on Trade Law. As a consequence of which the
Information Technology Act, 2000 was passed and enforced on 17 may 2000.
3.9.2 MAIN OBJECT OF THE ACT-
The main object of the Information Technology Act 2000 is to provide legal
recognition for transactions carried out by means of electronic data interchange and
other means of electronic communication, commonly referred to as "electronic
commerce", which involve the use of alternatives to paper-based methods of
communication and storage of information, to facilitate electronic filing of documents
with the Government agencies and further to amend the Indian Penal Code, the Indian
152
Evidence Act, 1872, the Bankers' Books Evidence Act, 1891 and the Reserve Bank of
India Act, 1934 and for matters connected therewith or incidental thereto.
3.9.3 POSITIVE ASPECTS OF THE INFORMATION TECHNOLOGY ACT,
2000-
The Information Technology Act, 2000 attempts to change outdated laws and provides
ways to deal with cyber-crimes. We need such laws so that people can perform
purchase transactions over the Net through credit cards without fear of misuse. The
Act offers the much needed legal framework so that information is not denied legal
effects, solely on the ground that it is in the form of electronic records.
(1) It seeks to empower government departments to accept filing, creating and
retention of official documents in digital format. The Act has also proposed a
legal framework for the authentication and origin of electronic
records/communications through digital signature.
(2) The Act legalizes the e-mail and gives it the status of being valid form of
carrying out communication in India. This implies that e-mails can be duly
produced and approved in a court of law, thus can be regarded of as substantial
document to carry out legal proceedings.
(3) The Act also recognizes the legal Admissibility of digital signatures and digital
records. They have been accorded the status of being legal and valid means
that they can form strong basis for launching litigation in court of law. It
invites the corporate companies in the business of being Certifying Authorities
for issuing secure Digital Signature Certificate
(4) The Act by allowing the Government to issue notification on the web has
heralded the era of e-governance.
(5) It eases the task of companies of the filing any form, application or document
by laying down the guidelines to be submitted at any appropriate office,
authority, body or agency owned or controlled by the Government. This has in-
fact been quite effective in saving the costs, time and manpower for the
corporate.
(6) The Act also provides statutory remedy to the corporate in case the crime
against the accused for braking into their computer systems or network and
damaging and copying the data is proven. The remedy provided by the Act is
in the form of monetary damages.
153
(7) Also the law sets up the Territorial Jurisdiction of Adjudicating officer for
Cyber-crimes and the Cyber Regulation Appellate Tribunal.
(8) The Law has also laid down guidelines for providing internet services on a
license on a non-exclusive basis.
3.9.4 LOOPHOLES OF THE INFORMATION TECHNOLOGY ACT, 2000
The Information Technology Act 2000 was undoubtedly a welcome step at a
time when there was no legislation on this specialized field. The Act has however
during its application has proved to be inadequate to a certain extent.
The various loopholes in the Act are as under-
1) Hurry in the enactment of the legislation did not serve as had been desired-
Experts are of the opinion that one of the reasons for the inadequacy of the
legislation has been the hurry in which it was passed by the parliament and it is
also a fact that sufficient time was not given for public debate.
2) Cyber torts-
The growth in the cases of cyber stalking, cyber harassment, cyber nuisance,
and cyber defamation has shown that the I.T. Act 2000 has been ineffective in
dealing with those offences. However at this juncture it must he mentioned that
the I.T. Act 2000 read with the Indian Penal Code is capable of dealing with
such offences.
3) Domain Name-
Electronic Commerce is based on the system of domain names. The
Information Technology Act, 2000 does not even touch the issues relating to
domain names. Even domain names have not been defined and the rights and
liabilities of domain name owners do not find any mention in the law.
4) Vague Definitions-
Section 67 is also vague to certain extent. It is difficult to define the term
lascivious information or obscene pornographic information.
5) Uniform law-
A worldwide uniform cyber law to combat cyber-crime is the need of the hour
Cyber-crime is a global phenomenon, thus the initiative to fight it should also
come from the same level.
6) Lack of Awareness of Cyber Laws-
One important reason that the Act of 2000 is not achieving complete success is
the due to the lack of awareness among citizens. As a consequence of such lack
154
of awareness, most of the cases go unreported. If the people are vigilant about
their rights the law definitely does and would protects their rights.
7) Jurisdiction Issues-
Jurisdiction is also one of the debatable issues in the cases of cyber-crime due
to the very universal nature of cyber space. With the ever-growing arms of
cyber space the territorial concept seems to vanish. New methods of dispute
resolution should give way to the conventional methods. The Information
Technology Act of 2000 is silent on these issues.
8) Extra Territorial Application-
Though S.75 provides for extra-territorial operations of this law, but they could
be meaningful only when backed with provisions recognizing orders and
warrants for information issued by competent authorities outside their
jurisdiction and measure for cooperation for exchange of material and evidence
of computer crimes between law enforcement agencies.
9) Formation of an association of experts to deal with cyber-crimes:-
The government has taken a leap in this direction by constituting cyber-crime
cells in all metropolitan cities. There are many cases in which the C.B.I has
achieved success.
10) Cyber Savvy Bench-
Cyber savvy judges are the need of the day. Judiciary plays a vital role in
shaping the enactment according to the order of the day.Mr T.K.Vishwanathan,
member secretary, Law Commission of India, has highlighted the requirements
for introducing e-courts in India.
11) Tendency of People to hesitate in reporting cyber-crimes-
One of the fatal drawbacks of the Act has been the cases going unreported. One
obvious reason for the same is the non-cooperation on the part of police force.
The police are a powerful force today which can play an instrumental role in
preventing cyber crime. At the same time, it can also end up wielding the rod
and harassing innocents. preventing them from going about their normal cyber
business. For complete realization of the provisions of this Act a cooperative
police force is required.
Thus to Conclude Prevention is better than cure. Though inure teeth can be
added to the Information Technology act. & Amendments and regulations can be
instrumental in achieving the control desired to be imposed by such laws yet the best
155
remedy is and shall always lie in taking certain precaution while operating the net.
Information Technology Act, 2000 is a laudable effort by the Government to create the
necessary legal infrastructure for promotion and growth of electronic commerce. The
Information Technology Amendment Act, 2008 is a great achievement and a
remarkable step ahead in the right direction. The Information Technology Act, 2000
also needs to evolve with the rapidly changing technology environment that breeds
new forms of crime and criminals. Despite the enactment of cyber laws a lot more
needs to be done, both online and offline, as well as within the judiciary and law
enforcement agencies. However, a number of right steps have also been taken to make
the Information Technology Act more relevant in today's context.
3.10 THE PREVENTION OF MONEY LAUNDERING ACT, 2002
3.10.1 MONEY LAUNDERING -THE CONCEPT-
192
Money Laundering refers to the conversion or Laundering of money
which is illegally obtained, so as to make it appear to originate from a legitimate
193
source. Money Laundering is being employed by launderers worldwide to conceal
criminal activity associated with it such as drug/arms trafficking, terrorism and
extortion. Robinson states that
Money laundering is called what it is because that perfectly describes what takes
place-illegal, or dirty, money is put through a cycle of transactions, or washed, so that
it comes out the other end as legal, or clean money. In other words, the source of
illegally obtained funds is obscured through a succession of transfers and deals in
order that those same funds can eventually be made to appear as legitimate income.
194
Article 1 of EC Directive defines the term money laundering as the
conversion of property, knowing that such property is derived from serious crime, for
the purpose of concealing or disguising the illicit origin of the property or of assisting
any person who is involved in the committing such an offence or offences to evade the
legal consequences of his action and the concealment or disguise of the true nature,
source, location, disposition, movement, rights with respect to, or ownership of
property, knowing that such property is derived from serious crime.
192 Section 2(1) (p) of Prevention of Money Laundering Act, 2002.

193 Popularly this is known as making black money white.
194
Council Directive 91/308/EEC of 10 June 1991 on prevention of the use of the
financial system for the purpose of money laundering.
156
195
The Prevention of Money Laundering Act, 2002 defines money laundering
as whosoever directly or indirectly attempts to indulge or knowingly assists or
knowingly is a party or is actually involved in any process or activity connected
proceeds of crime including its concealment possession, acquisition or use and
projecting it as untainted property shall be guilty of offence of money Laundering.
Thus Money Laundering is not an independent crime, it depends upon another
crime (predicate offence), the proceeds of which is the subject matter of the crime in
money laundering. From the legal point of view, the Achilles Heel in defining and
criminalizing money laundering relates to the so-called predicate offence understood
as the criminal offences which generated the proceeds thus making laundering
necessary. Hiding or disguising the source of certain proceeds will of course, not
amount to money laundering unless these proceeds were obtained from a criminal
activity. Therefore, what exactly amounts to money laundering, which action and who
can be prosecuted is largely dependent on what constitutes a predicate crime for the
196
purpose of money laundering.
3.10.2 MONEY LAUNDERING - AN ORGANISED CRIME-
Money Laundering has a close nexus with organized crime. Money Launderers
accumulate enormous profits through drug trafficking, international frauds, arms
dealing etc. Cash transactions are predominantly used for money laundering as they
facilitate the concealment of the true ownership and origin of money. It is well
recognized that through the huge profits the criminals earn from drug trafficking and
other illegal means by way of money laundering could contaminate and corrupt the
structure of the State at all levels, this definitely leads to corruption. Further, this adds
to constant pursuit of profits and the expansion into new areas of criminal activity.
Through money laundering, organized crime diversifies its sources of income
and enlarges its sphere of action. The social danger of money laundering consist in the
consolidation of the economic power of criminal organizations, enabling them to
penetrate the legitimate economy. In advanced societies, crime is increasingly
economic in character. Criminal associations now tend to be organized like business
enterprises and to follow the same tendencies as legitimate firms; specialization,
growth, expansion international markets and linkage with other enterprises. The
195 Section 3 of the Prevention of Money Laundering Act, 2002.

196 Brigitte Unger, The Scale and Impacts of Money Laundering 16 (2007).
157
holders of capital of illegal origin are prepared to bear considerable cost in order to
197
legalize its use.
3.10.3 REGULATION OF MONEY LAUNDERING IN INDIA-
With its growing financial strength, India is vulnerable to money laundering
activities even though the countrys strict foreign exchange laws make it difficult for
198
criminals to launder money. International Narcotics Control Strategy Report by
199
Bureau for International Narcotics and Law Enforcement Affairs emphasizes
Indias vulnerability to money-laundering activities in following words-
Indias emerging status as a regional financial center, its large system of informal
cross-border money flows, and its widely perceived tax avoidance problems all
contribute to the countrys vulnerability to money laundering activities. Some
common sources of illegal proceeds in India are narcotics trafficking, illegal trade in
endangered wildlife, trade in illegal gems (particularly diamonds), smuggling,
trafficking in persons, corruption, and income tax evasion. Historically, because of its
location between the heroin-producing countries of the Golden Triangle and Golden
Crescent, India continues to be a drug-transit country.
Money-Laundering in India has to be seen from two different perspectives,
i.e., money laundering on international forum and money laundering within the
country. As far as the cross-border money laundering is concerned Indias historically
strict foreign-exchange laws and reporting norms have contributed to a great extent to
control money laundering on international forum. However, there has been threat from
informal transactions like Hawala.
In India, before the enactment of the Prevention of money laundering Act
2002 (PMLA-2 hereinafter), the following statutes addressed scantily the issue in
question:
The Conservation of Foreign Exchange and Prevention of Smuggling
Activities Act, 1974.
The Income Tax Act, 1961
The Benami transactions (Prohibition) Act, 1988
197 Ernesto Savona, Responding to Money Laundering : International Perspectives 1

(1997).
198 India vulnerable to money-laundering, T.V. Parasuram in Washington, March 02,
2004 12:30 IST, available at <http://imdownloads.rediff.com/money/index.html>
199 See International Narcotics Control Strategy Report dated February 29,
2008, available at http://www.state.gove/documents/organization/102588.pdf
accessed on November 15, 2012.
158
The Indian Penal Code, 1860 and the Code of Criminal Procedure,
1973.
The Narcotic Drugs and Psychotropic Substances Act, 1985
The Prevention of Illicit Traffic in Narcotic Drugs and Psychotropic
Substances Act, 1988.
However, this was not sufficient with the growth of varied areas of generating
illegal money by selling antiques, rare animal flesh and skin, human organ, and many
such varied new areas of generating money which was illegal. Money Laundering was
an effective way to launder the black money (wash it to make it clean) so as to make it
white. The money laundering is a threat not only to financial systems but also to the
integrity and sovereignty of the nation. In view of the urgent need for the enactment of
a comprehensive legislation inter-alia for preventing money laundering and connected
activities, confiscation of proceeds of crime, setting up of agencies and mechanisms
for coordinating measures for combating money laundering etc., the PML Bill was
th th
introduced in the Lok Sabha on 4 August 1998, which ultimately was passed on 17
January 2000. However, the implementation of the same did not see the light of the
200
day unit 2005 when it was enforced. The time when the Act of 2002 came to be
enforced it was too old to cater to the current needs of the anti-money laundering law.
To bring the necessary changes in light of the liberalization of economy and securities
market in India, there was a need to have more comprehensive anti-money laundering
201
law and that is how the Prevention of Money Laundering (Amendment) Act 2012
came into existence.
3.10.4 THE MAIN OBJECT OF THE ACT-
(1) To prevent, combat and control money laundering
(2) To protect the company from being used for money laundering
(3) To confiscate and seize the property obtained from the laundered money
(4) To have a proper Customer Due Diligence (CDD) process before
registering clients.
(5) To Monitor/maintain records of all cash transaction of the value of more
than RS. 10 Lakhs.
200 came into force on 1-7-2005, vide G.S.R. 436 E, dated 1st July, 2005, published
in Gazette of India, Extra, sec.3(i), dated 1st July, 2005.
201 hereinafter referred as Prevention of Money Laundering (Amendment) Act, 2012
159
(6) To maintain records of all series of integrally connected cash transactions
within one calendar month
(7) To monitor and report suspicious transaction.
(8) To discourage and identify money laundering or terrorist financing
activities.
(9) To take adequate and appropriate measure to follow the spirit of the
PMLA.
3.10.5 SALIENT FEATURES OF THE PREVENTION OF MONEY
LAUNDERING ACT, 2002-
The salient features of the Prevention of Money Laundering Act, 2002 are as
follows:-
1).Offence of money laundering and punishment-
Money Laundering means whosoever directly or indirectly attempts to indulge
or knowingly assists or knowingly is a party or is actually involved in any process or
202
activity connected [proceeds of crime including its concealment, possession,
acquisition, or use and projecting or claiming] it as untainted property shall be guilty
203
of offence of money laundering. The punishment prescribed for the offence of
money laundering in cases of money obtained from normal crime is rigorous
imprisonment for a term which shall not be less than 3 years but which may extend to
204
7 years and shall also be liable to fine. However, for the proceeds of crime which
involved in money laundering related to any offence specified under paragraph 2 of
205
part A of the schedule the punishment of rigorous imprisonment of 7years has to be
read as 10 years.
2).Attachment of Property involved in Money Laundering-
If the Director has reason to believe that a person is in possession of property
involved in money laundering or he is dealing in such property, the Director is
206
empowered to attach the property. The period of attachment can be 180 days from
the date of the order. The Act also provides that no such order for attachment shall be
made unless a report has been forwarded to a magistrate under section 173 of Code of
202 Ins. By Act 2 of 2013, sec 2(x) (w.e.f. 15-2-2013 Vide S.O. 343 (E), dated 8-2-2013).
204 The words which may extend to five lakh rupees omitted by Act 2 of
2013, Sec. 4 (w.e.f. 15-2-2013, vide, 343 (E) dated 8-2-2013)
205 These deal with the offences under the Narcotic Drugs and Psychotropic
Substances Act, 1975, Section 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25A, 27A,
29.
206 Sec. 5 of the Prevention of Money laundering Act, 2002.
160
Criminal Procedure, 1973 or a complaint has been filed by a person authorized to
investigate the offence mentioned in that schedule, before a magistrate or court for
taking cognizance of the scheduled offence, as the case may be or a similar report or
complaint has been made or filed under the corresponding law of any other country.
As far as scheduled offences director is empowered to attach the laundered property
after the case regarding offence is sent by the police officer or a complaint is filed
before the court for taking cognizance of the offence. The Director after attachment of
any property shall within 30 days from such attachment, file a complaint before the
Adjudicating Authority.
3). Enforcement Paraphernalia-
(a) Adjudicating Authority-
The Act prescribes for formation of three members adjudicating authority. The
adjudicating authority shall consist of a chairperson and two members and shall
function within the department of revenue, ministry of finance of the central
government with headquarters at New Delhi. The Adjudicating authority upon receipt
207
of complaint or information of an offence under the Act issue a notice of not less
than 30 days on such person calling upon him to indicate the sources of his income as
to why the said property not be declared to be property involved in money laundering.
(b)Administrator- An officer not below the rank of joint secretary to the Government
of India is to perform the functions of Administrator for management of properties
208
confiscated under the Prevention of Money Laundering Act, 2002.
209
(c)Appellate Tribunal -
This is to hear appeal against the orders of the Adjudicating Authority and the
authorities under the Act. The Tribunal consists of a chairperson (a person who is or
has been a judge of the Supreme Court or High Court) or is qualified to be a judge of
210
the High Court.
207 Ibid Section 8.

208 Ibid section 10.
209
Ibid section 25, see also Prevention of Money-Laundering (Appointment and
Conditions of Service of Chairperson and Members of Appellate Tribunal) Rules,
2007.
210
Ibid section 28.
161
(d)Special Courts-
The Central Government in consultation with the Chief Justice of High Court for
the trial of offences of money laundering may by notification designate one or more
211
courts as special courts for such area as may be specified.
212
(e)Authorities under the Act -
The following classes of authorities are prescribed under the Act.
(1)
Director or Additional Director or Joint Director.
(2)
Deputy Director
(3)
Assistant Director
(4) 213
Any other classes of officer as may be appointed.
214
Further the Act prescribes a list of officers such as officer of customs, Police
Officer, Officer of Reserve Bank, etc., who are required expressly to assist the
authorities in enforcement of this Act. The enforcement paraphernalia is given
extensive power to discharge the duties under the Act. The Adjudicating Authority for
215
the purpose of the Act is vested with power of Civil Court. Further, powers are
provided to the enforcement directorate to search a person, retention of property and
has the power of civil court while exercising power under section 13 to impose fine on
entities for their failure to make statutory disclosures. Though, such wide powers are
given to the authorities under the Act at the same time a stopper is put in the form of
punishment for vexatious search. Vexatious search by any authority or officer
exercising power under the Act is punishable with imprisonment up to two years or
216
fine up to fifty thousand rupees. Though this amounts to safeguarding the general
public from vexatious searches protecting their life and liberty under Article 21 of the
Constitution, it is not encouraging for officers who do not want to take risk. However,
proceedings under section 62 can be initiated only after the approval of Central
Government.
211
Ibid section 43.
212
Ibid section 48.
213 The Central Government is authorized under section 53 to empower any officer
not below the rank of Director to the Central Govt. to act as authority under the Act.
214 Section 54 of the prevention of Money Laundering Act 2002.
215
Ibid Sec. 11.
216
Ibid section 62.
162
217
The Supreme Court of India in Pareena Swarup v. Union of India, has dealt
with the issue of constitutionality of Adjudicating Authorities and Appellate Tribunal
under the Prevention of Money Laundering, Act 2002. This writ petition under Art 32
of the Constitution of India by way of public interest litigation sought to declare
various section of the Prevention of Money Laundering Act, 2002 such as section 6
which deals with adjudicating authorities, composition, power etc. section 25 which
deals with establishment of Appellate Tribunal, section 27 which deals with
composition etc. of Appellate Tribunal, section 28 which deals with qualification for
appointment of Chairperson and Member of the Appellate Tribunal, section 32 which
deals with origination and removal, section 40 which deal with members etc., as
ultravires of Art 14, 19(1) (g), 21, 50, 323 B of the Constitution of India. It was also
pleaded that these provision are in breach of scheme of the constitutional provisions
and power of judiciary. Court found merit in the arguments of the petitioner and held
that It is necessary that the court may draw a line which the executive may not cross
in their misguided desire to take over bit by bit and judicial functions and powers of
the State exercised by the dually constituted courts. While creating new avenue of
judicial forums, it is duty of the Government to see that they are not in breach of basic
Constitutional scheme of separation of powers and independence of the judicial
function.
(4)Reporting Requirements for Certain Entities-
Every reporting entity shall maintain a record of all transactions, including
information relating to transaction covered under clause (b), in such manner as to
enable it to reconstruct individual transaction and to furnish information to the
Director relating to such transactions whether attempted or executed, the nature and
value of which may be prescribed. It is compulsory for the reporting authority to
maintain records of documents evidencing identity of its clients and beneficial owners
as well as account files and business correspondence relating to its clients. The said
records shall be maintained for a period of five years from the date of transaction
between a client and the reporting entity. Further aforesaid entities have to maintain
the records of the identity of all its clients for the period of five years after the
business relationship between a client and the reporting entity has ended or the
218
account has been closed, whichever is later.
217 CDJ 2008 SC 1701.

163
(5)Summons, searches and seizures-
219
Chapter V of the Prevention of Money Laundering Act, 2002 provided for a
comprehensive mechanism for survey, search and seizure. The authorities under the
Act have power to enter any place for survey when the said authority has a reason to
believe on the basis of material in his possession that any offence of money
laundering has been committed and the person in charge of such place have to
220
facilitate in the survey of such authority. This procedure is not arbitrary as it has to
be according to the procedure established by law under Art. 21 of the Constitution and
must be fair and reasonable, for example the reason to believe has to be put down in
writing and the proceeds of survey has to be transferred to the Adjudicating Authority
in a sealed envelope as soon as possible.
If any person has committed any act which constitutes money laundering or is
in possession of any proceeds of crime involved in money laundering or in possession
of any records relating to money laundering, then any authorized officer can
I. enter and search any building, place, vessel, vehicle on aircraft where that such
record on proceeds of crime are kept.
II. break open the lock of any door, box, locker, safe, almirah or other receptacle
where key thereof are not available.
III. seize any record or property found as a result of such search.
IV. place marks of identification on such records or make or cause to be made
extracts or copies there from.
V. make a note or an inventory of such record or property.
VI. examine on oath any person who is found to be in possession or control of any
record or property, in respect of all matters relevant for the purpose of any
investigation. However no search shall be conducted unless, in relation to the
scheduled offence, a report has been forwarded to a magistrate under section 157
of the code of criminal procedure 1975 or a complaint has been filed by a person
221
authorized to investigate the offence mentioned in the schedule.
Further if any person has secreted about his person or in anything under his
possession, ownership or control any record or proceeds of crime which may be
useful for or relevant to any proceedings under this Act an authority authorized
219
Ibid section 16-24.
220
Ibid section 16.
221
IbidSection 17.
164
in this behalf by the Central Government by general or special order search that
person and seize such record or property which may be useful for or relevant to
222
any proceeding under this Act. No search of any person shall be made unless,
in relation to a scheduled offence, a report has be forwarded to a Magistrate
under section157 of the Code of Criminal Procedure, 1973 or a complaint has
been filed by a person, authorized to investigate the offence mentioned in the
schedule before a magistrate or court. If on the basis of the material in
possession an officer authorized in that behalf has reason to believe that a person
has committed are offence under this Act may arrest that person informing him
223
the grounds of arrest. Further the authorities have power to retain the property
and the records seized under the Act for a period of one hundred and Eighty days
224
pending the adjudication by adjudicating authority.
(6) Fines, Punishment, and Reverse Burden of Proof-
Failure in the reporting requirements mentioned above leads to a punishment not
225
less than 10 thousand rupees which may exceed to one lakh rupees for each failure.
The Act provides for a reverse Burden of Proof as far as a criminal case is concerned.
Normal rule of evidence in any proceeding is that the burden of proof is on the
226
plaintiff or the complaint. However, under the Act, the person charged of an offence
of money laundering has to prove his innocence by showing that the property in
227
dispute or money in dispute is untainted. Moreover, there is a presumption as to
records or property seized from a person that such record or property belonged to that
228
person unless rebutted by him. In cases where there are many transactions which
are found to be interconnected the presumption would be towards their
229
interconnectedness unless rebutted. The offences under the Act are cognizable and
230
non-bailable. The cognizance of an offence under the Act can only be taken by
222
Ibid Section 18.
223
Ibid section 19.
224
Ibid section 20.
225
Ibid section 13.
226 Section 101 of the Indian Evidence Act, 1872.
227 See section 24 of PMLA 02. Even otherwise, in tax matters, the courts and
tribunals have generally adopted the view that in matters of illegal and clandestine
transactions, the facts would be within the special knowledge of the accused and
prosecution of revenue is not expected to prove such special facts by leading in
evidence.
228
Ibid section 22.
229
Ibid section 23.
230
Ibid section 45.
165
Special Court when a complaint in writing is made by the Director or any officer
authorized by Central Government in writing.
(7) Extending Reciprocity to Contracting States-
Contracting State is any country or place outside India in respect of which
arrangements have been made by the Central Government with the Government of
231
such country through a treaty or otherwise The Act provides for entertaining the
232
letter of Request from the Contracting States to identify and trace the proceeds of
crime laundered from Contracting State and vice-versa to identify and trace the
233
proceeds of crime laundered from India to contracting State. The Act also provides
for attachment, seizure and confiscation of property in a Contracting State on our
behalf and in India on Contracting States behalf. The Success of this part mainly
depends on the bilateral treaties.
3.10.6 PROBLEM AREAS FOR INDIA IN HAVING A PROPER ANTI
MONEY LAUNDERING REGIME-
Anti-money laundering efforts of India are commendable on paper. There are
many problem areas for India in having an effective AML regime. There are several
factors contributing to these problems and there is a need to concentrate the efforts on
one direction aimed towards the focus of the problem. Some of the key problem areas
are pointed as follows:
Growth of Technology-
Not only the growth of technology has helped the common man it has proved
also a boon for these money-launderers and India is not an exception to this. Cyber
finance is the growing concept in this developing economy. The speed at which the
technology is growing is not matched up with the enforcement agencies, specifically
highlighted by the lame situation of cyber crimes.
Unawareness about the Problem-
Unawareness about the problem of money-laundering among the common
people is an impediment in having proper AML regime. People in India, especially
among the poor and illiterate, do not trust banks and prefer to avoid the lengthy
231
Ibid section 55.
232 It is also known as Letters Rogatory. Section 77 of Civil Procedure Code 1908-
Letter of Request-In lieu of issuing a commission the Court may issue a letter of
request to examine a witness residing at any place not within [India]. A letter
rogatory, also known as a letter of request, is a request from a court in India to a
court in a foreign country requesting international judicial assistance in effecting
service of process.
233 See Chapter IX of the PMLA 02 generally for this section.

166
paperwork required to complete a money transfer through a financial institution. The
hawala system provides them same remittance service as a bank with little or no
documentation and at lower rates and provide anonymity and security. This is because
many dont treat this to be a crime and are not aware about the harmful effects of the
crime.
KYC Norms-Do they serve the purpose-
234
Now India has KYC Norms in place in both money market and capital
markets. However, these KYC Norm dont desist the Hawala transactions, as RBI
cannot regulate them. Further, KYC norms become a mockery because of indifference
shown by the implementing authorities. KYC norms are followed in letters but the
requirement is to follow it in spirits. Increased competition in the market requires and
gives motivation to the banks to lower their guards. Specifically, the franchisees of
banks that are authorized to open accounts.
Lethargy of Enforcement Mechanism-
India started its anti-money laundering exercise in the year 1998, a well start, but
not properly tackled and saw the day of enforcement only in 2005-seven years- a long
time for enforcement. When the AMLA 02 with amendments in 2005 came into force,
it was inherent with many lacunas as there were several developments in those seven
years which the Act failed to address. Then, as obvious, a need was felt to have further
amendments. PML Bill 2008 was laid before the parliament and in 2012 the
legislation was again amended.
Smuggling-a rampant activity-
India has illegal black market channels for selling goods. Smuggled goods such
as food items, computer parts, cellular phones, gold, and a wide range of imported
consumer goods are routinely sold through the black market. By dealing in cash
transactions and avoiding customs duties and taxes, black market merchants offer
better prices than those offered by regulated merchants. This problem though has
lessened due to liberalization policy of the government.
Tax Laws-
Justice Learned Hand in the case of Commissioner v. Newman stated that Over
and over again courts have said that there is nothing sinister in so arranging ones
affairs to keep taxes as low as possible. Everybody does so, rich or poor, and all do
right, for nobody owes any public duty to pay more than the law demands: taxes are
enforced exactions, not voluntary contributions. To demand more in the name of
234
KYC means Know Your Customers.
167
morals is mere cant. Closer back home in India, the Supreme Court of India in Azadi
235 236
Bachao Andolan & Anr. cited. Lord Tomlin in IRC v. Duke of Westminster while
237
upholding the validity of treaty shopping . There is a need to make a distinction
between the tax avoidance and tax evasion. There are apprehensions that Double
238
Taxation Treaties may lead to money-laundering channel.
Absence of comprehensive enforcement agency-
As seen earlier, money-laundering has now become hybrid and is not only
related to NDPS cases but many areas of operation. Separate wings of the law
enforcement agencies are dealing with digital crimes, money laundering, economic
offences and terrorist crimes. The agencies do not have the convergence among
themselves but the criminals have. Criminals are working in a borderless world but
the police in one State is still grappling with procedures on how to arrest a person
residing in another State.
3.11 THE FOOD SAFETY AND STANDARDS ACT, 2006
3.11.1 INTRODUCTION-
The Food Safety and Standards Act, 2006 has been enacted to consolidate the
laws related to food. The important thing to note is that it does not deal with the food
adulteration alone. It can be easily inferred from the broad definition of the term
unsafe food under section 3 (zz) along with many other expressions important for
laying down the standards.
239
Again, the Act gives a vast definition of adulterant. At the same time few
more definitions give us a broad picture such as contaminant, extraneous matter
and food additive. The short title also leads us to the same conclusion. The
interpretation clause defines food safety, as assurance that the food is acceptable
240
for human consumption., and standard {under section 3(zv)} as in relation to
235 263 ITR 706.

236 In this case, Lord Tomlin had remarked that Every man is entitled if he can to
order his affairs so that the tax attaching under the appropriate Acts is less than it
otherwise would be. If he succeeds in ordering them so as to secure this result, then,
however, unappreciative the Commissioners of Inland Revenue or his follow tax
gatherers may be of his ingenuity, he cannot be compelled to pay an increased tax
237
Parul Jain, Mauritius: Global Tax Management For Emerging Trans National
Corporations, http:/www.mondaq.com/article.asp?articleid=61050
238 http:/www.thehindubusinessline.com/2003/12/06/stories/2003120600570400,htm.
239 According to s. 3(a) , ..any material which is or could be employed for
making the food unsafe or sub-standard or misbranded or containing extraneous
matter.
240 S. 3(q) of the Food Safety and Standards Act, 2006
168
any articles of food means standards notified by the food authority. For removing
any doubt the term sub-standard is also defined {under section 3 (zx)}.
Objectives of Food Safety and Standard, Act, 2006
An Act to consolidate the Laws relating to food
To establish the Food Safety and Standards Authority of India.
Laying down science based standards for articles of food and to regulate their
manufacture, storage, distribution, sale and import, to ensure availability of safe
and wholesome food for human consumption and for matters connected therewith
or incidental there to.
3.11.2 BENEFITS OF FOOD SAFETY AND STANDARDS ACT, 2006-
The Act is a historic one. It is fully agriculture oriented and will constitute a
regulatory authority that will govern the standards and quality of food right from
national level to Panchayat level. The advantages of the Act are as under:
(1)
The biggest advantage it has is the mandatory standardization it provides for
food.
(2)
The liability of the person under the Act will be civil liability which will be
easier to prove.
(3)
It will be the special responsibility of the food business operator to ensure that
the articles of food satisfy the requirement of the Act at all stages of production,
241
etc.
(4)
As the Act has taken inspiration from the Codex, its standard will match the
world level quality.
(5)
For the first time there is a provision for compensating the consumer who gets
any injury or incur any health hazard, along with the penalty or punishment
242
given to the perpetrator.
(6)
The Act imposes responsibility on the operator of business to recall the articles
243
of food, if he finds that they dont satisfy the standards of the Act.
(7)
Under the Act if the inspector or the food officer is found misusing his power,
244
there is provision to impose fine on him on the proof of his being guilty. The
amount of fine is 10,00,00.
241 Sec 26 of the Food Safety and Slandered Act 2006.

242 Ibid S. 28.
243 Ibid Sec. 28
244 Ibid Sec. 39
169
(8)
Now there will be only one minister looking into the whole affair instead of nine
ministers.
(9)
The graded system of penalties will remove confusion and inequality that
existed before as there was same minimum punishment for all forms of
245
adulteration.
(10)
In the adjudication system, there are two types of treatment; the matters that are
hazardous to the health and those that are not. The matter will be referred to the
Special Court.
(11)
Farmers and the fisherman are excluded from the purview of the Act.
(12)
There is a wide network of checks and balance that have been provided in this
Act. Every business operator is required to have license or registration. Each
distributor is required to identify food articles to the manufacturers and every
seller to the distributor. Standards based on science are required to be in place
that will support the scientific development of the food processing industry.
(13)
There is a provision for establishment of the scientific panel and committees.
(14) 246
There is provision for improvement notice to be given to the one not
complying with the standards after noncompliance of which.
(15)
There are so many checks to make sure that a wrong case is not made against
any manufacturer. Starting from the food safety officer, the Adjudicating Officer,
Food Safety Appellate Tribunal, State Commissioner if Food Safety, Special
Courts and finally the High Court will provide correction if required.
(16)
The Act will include the food distributed in the Public Distribution System i.e. it
will cover the Food Security Act, 2009. This is possible by virtue of section 3
(n), which defines food business, it means any undertaking, whether for profit
or not and whether public or private, carrying out any of the activities related to
any stage of manufacture, processing, packing, storage, transportation,
distribution of food, import and includes food services, catering service, sale of
247
food or food ingredients.
3.11.3 LOOPHOLES OF THE FOOD SAFETY AND STANDARDS ACT, 2006-
Above mentioned benefits give a very bloomy picture but if we look deeper the
legislators seem to be overzealous in incorporating the international standards. The
245 Ibid Ss. 48-67

246 Ibid S. 32
247 Ibid Section. 3(n).
170
main focus of the Act is on the processing industry and the unorganized sector is
completely neglected. Almost every report says for a Central authority but doesnt
mention how the establishment of central authority has proved to be effective in other
countries. Some of the drawbacks are given below:
1.
As the Act provides for compulsory process of registration, this may
create problem for small businessmen like hawkers and venders.
2.
There is no registration process mentioned; nor is there any authority
specified for the registration.
3.
The Food Safety Officer has defined no jurisdiction for the sake of
248
inspection and seizer of sample.
4.
The provisions that give power to the officers to grant license, or impose
249
huge penalty give way to possibility of corruption.
5.
As the Act provides for both the criminal as well as civil procedure, there
is possibility of confusion as to what procedure to be followed.
6.
One year limitation period has been provided for the bringing the case in
the notice of an authority under the Act.
7.
Except from the packaged drinking water, the potable water used in the
manufacture of most of the articles of food, is excluded from the purview
of the Act.
8.
Finances are lacking for the complete implementation of the Act.
According to the Financial Memorandum of the original Bill. The total
sum allocated for the purpose is ten crore rupees. Seven crore have been
spent on the infrastructure of the food authority and remaining sum is kept
for the establishing of laboratories, which is highly insufficient.
9.
There is no final decision as to which Ministry will see the administration
side of the Act. Is it Food processing Ministry or the Health Ministry that
will see the implementation?
10.
There are certain expressions that are not defined and that might add to
the number of litigations due to their ambiguous meaning. For example,
safe and wholesome food for human consumption, good manufacturing
practices, and good hygienic practices. Similarly, it is not clear as to
248 Ibid Section. 41(1).

249 Ibid Section. 69(1).
171
why contaminant, unlike any other term, is not defined as the codex
defines it. It omits the intention part of the definition.
11. The unorganized sector in India cannot be supposed to adhere to the
norms of the Act as mentioning ingredients and their specification, etc.
12. There is no estimation of the cost to be borne by the State Governments,
Which are the nodal agencies.
13. As food business includes any undertaking whether giving profit or not,
this tends to include in itself and even criminalizes services rendered by
the gurudwaras, the zaket at Mosques and dargah, bhandaras, which feed
millions of poor people. To avoid such undesirable consequences, we
need laws to project the diverse food laws and culture from the disease
causing homogeneous centralize food culture of the West.
14. There is no technical qualification attached to the ranks of the officers
who are assigned the task of issuing of license and fixing of liability.
3.11.4 SUGGESTIONS FOR IMPROVEMENTS-
After thoroughly going through the provisions, I have following suggestions to
submit:
1. As the number of the hawkers cannot be denied in India, there should be
representation from their association as well, in the Food authority.
2. The definition of food expressly the animal feed from its purview. The fact is
that whatever pesticides. Insecticide etc. gets into the animal feed and consumed
by the animal (cow, goat, etc.) becomes a part of food chain. For example, it is
presents in the milk. Therefore, this should be made part of the definition.
3. Food chain from farm to the products needs to be traced. But as the framers are
excluded from the purview of the Act, the tracing is possible to the mandi only.
4. As there is lack of proper training of procedure, both legal and scientific or
technical, there has usually been problem taking the sample in the adequate
manner and quality required for testing. For this purpose, the Ministry of HDR
can think over role of universities, which can, after looking at the seriousness of
the affair, provide for the courses on food testing.
5. A separated Ministry must look after the matter of food adulteration being a
serious matter that affects the health of the citizens. In fact it should continue to
run under the Ministry of Health of rather than of the Food processing, which has
to deal with and look into other relevant affairs.
172
6. Food adulteration is a very serious offence. Therefore, it should make the CEOs
of the company liable.
7. Hawkers should be brought under the ambit of the Act, as they do the major part
of the commerce. The method of testing in their case should be made simple and
non-technical (not involving so many formalities)
8. Food recall should be issued in media to inform the citizens and make them
aware about the unsafe food.
9. The Act should have a compulsory provision for black listing of the companies or
even publication when held guilty of the offense. It should be made part of the
punishment. Provisions for publishing the name of the culprit is there but not in
every case. So, it should be done in every case,
CONCLUSION
Among the prominent features is the sanction part which provides for fine as well
as imprisonment. First of all, the evil of food adulteration being a socio economic
crime generates a lot of wealth and therefore the perpetrator would easily be able to
pay the fine for which he become liable, be it 10 lakh rupees which is the highest.
Secondly, the distribution of the punishments also seen odd. The manufacturing,
storing, selling, distribution or importing of unsafe food carries the maximum
punishment of life like imprisonment and 10 lakh rupees if activities result in death
while the maximum penalty for the death of the consumer is 5 lakh rupees. Thirdly, as
the socioeconomic crimes on one hand are considered to be harming the public to
maximum extent and on the other hand they hardly carry the social stigma that is
usually a feature in other firms on offence. The penalties will hardly solve the
purpose. Therefore, alone whit this there should be provision for publication of the
conviction so that people come to know about the perpetrator and at the same time
they are also excluded from the syndicate that was working together with him. The
extreme step could be blacklisting the manufacturer or seller, so that he cannot carry
the business anymore.
Power given to the consumer to take the sample is not a new feature. There are
already a set of problems that he faces and that is the reason why we hardly find such
steps being taken. The bigger problem is to detect or find the difference between a
pure and adulterated food. General public finds it difficult to distinguish between the
two. Therefore, this provision had been of rather no use in the past and there was no
point in its retention. Instead, there should be special branch of police and
173
inspectorate with wide power of search and seizure, which should be at strict vigil all
the time.
Again there is an appreciable feature of setting the tribunal at appellate are much
required for the expeditious remedy. It would have been better if the same procedure
was given for the court of first instance. There is also need to reconsider the number
of times the person is given the chance of appeal. There is also provision for the
special courts, where the burden of proof should be shifted from the prosecution.
There should be a good coordination between the investigation team and prosecution
because most of the escapes in past were because of the poor link between the two.
Likewise, there are speculations regarding other features too, such as the number
of inspectors or their qualification and training, etc. The biggest doubt that arises is
the adaptability of the Act that has been framed by taking features from other
countries and especially the Codex. Are the provision suited for the Indian conditions
especially with regard to the unorganized sector? For example, section 3(s) says about
Food Safety Management System which means adoption of Good Manufacturing
Practices, Good Hygienic Practices, Hazard Analysis and Critical Control Point for
the food business. These terms are not explained in the definition clause though they
are extensively dealt with in the Codex Alimentarius on Food hygiene Basic Text.
There are high standards laid in the Text while defining the terms as food hygiene,
Hazard analysis and critical control point. The Codex says about the environmental
hygiene where the food production should not be carried in areas where there is
presence of potentially harmful substances. The equipments used should be
disinfected; there should not be contamination from the soil and air; the persons
working in the establishment should not be infected with any disease, personal
hygiene, air ventilation, lighting, temperature control etc. With this background we
can find very few establishments that fulfill the requirements if we dont consider the
multination set ups. These guidelines work in the western countries because they have
a strong enforcement mechanism. There the businessmen have the means to maintain
such guidelines as they are rich. In India the position of traders is not so good.
Moreover they dont have the sense of hygiene.
Therefore, in spite of the best of the legislation, the result seems to be with no
big change in the practice. It is because on cannot change the mind setup of the people
who are illiterate and have little to think of others. This cannot be done all of a sudden
but strict enforcement machinery is feasible. The need is not of a new legislation but
174
to see whatever the provisions are, they should be strictly adhered to. At the same
time the need of the hour is not an integrated law (that the Act actually is) but the
integrated approach that includes the contribution from the public and NGOs as well.
At the same time taking note of the spate of the crime, a separate Ministry should be
assigned the enforcement and control.
True that the utopia of a society totally free from socio-economic crime as food
adulteration is mere wishful thinking and impossible to achieve, but every step
forward can be made by multiplying the efforts both in the legal, extra-legal planes
and at the governmental level. Honest Implementation is the key word.
3.12 THE PUNJAB RIGHT TO SERVICE ACT, 2011
3.12.1 INTRODUCTION-
Right to service legislation in India comprises statutory laws which guarantee
time bound delivery of services for various public services rendered by the
Government to citizen and provide mechanism for punishing the errant public servant
who is deficient in providing the service stipulated under the statute. Right to service
legislations are meant to reduce corruption among the government officials and to
increase transparency and Public accountability Madhya Pradesh became the first
State in India to enact Right to service Act on 18 August 2010 and Bihar was the
second to enact this bill on 25 July 2011.Several other states like Bihar, Delhi, Punjab,
Rajasthan, Himachal Pradesh, Kerla, Uttrakhand, Haryana, Uttar Pradesh and
Jharkhand have introduced similar legislation for effectuating the right to services to
the citizens.
3.12.2 MAIN OBJECT OF THE ACT-
The main object of the Punjab Right to service Act 2011 is to provide for the
delivery of services to the people of the State of Punjab with in the given time limits
and for matters connected therewith and incidental thereto.
3.12.3 MAIN FEATURES OF THE ACT-
1. Right to service-
Under the Act the right to service has been defined as a right to obtain the
250
service within the given time limit.
2. Designated officers, first Appellate Authority and second Appellate
Authority-
250
Section 2 (g) of the Punjab Right to service Act, 2011.
175
The State Government may, by notification, specify the designated officers,
251
First Appellate Authority, Second Appellate purpose of this Act. The Act also
provide that the designated officer shall provide the service to the eligible
person within the given time limit.
3. Procedure for obtaining service-
The eligible person shall make an application to the designated Officer for
obtaining any service under the provisions of the Act. The Designated officer
shall, on receipt of an application provide service or reject the application
252
within the given time limit and in case of rejection of application, shall
253
record the reasons in writing and intimate the same to the applicant.
4. First Appeal on rejection of application-
If the application for providing service is rejected or is not provided service
within the given time limit, the applicant may file an appeal to the first
appellate Authority with in thirty days from the date of rejection. The First
Appellate Authority shall consider the matter and if in its opinion the
grievance of the eligible person appears to be genuine, it may direct the
Designated officer to provide the service with in specified period and in case
of default, to appear before it in person and explain reasons thereof. After
affording an opportunity of hearing to the Designated Officer and the eligible
person, the First Appellate Authority may pass an order either accepting the
appeal or rejecting the same. The First appeal shall be disposed of by the First
254
Appellate Authority within a period of thirty days of its receipt.
5. Second Appeal-
An appeal can be made from the order of the First Appellate Authority to the
second Appellate Authority, who can either accept or reject the application by
making a written order stating the reasons for the order and intimate the same
255
to the applicant and can order the public servant to provide the service to
the applicant.
6. Penalties to the erring officials-
Where the Second Appellate Authority is of the opinion that the Designated
251
Ibid section 3.
252
Ibid section 4.
253
Ibid section 5.
254
Ibid section 6.
255
Ibid section 7.
176
officer or any other officer involved in the process of providing service as
failed to provide service without sufficient and reasonable cause it may impose
a penalty which shall not be less than 500/- and not more than 5000/-.
Where the second Appellate Authority believes that the official has caused
undue delay in providing service it may improve a penalty at the rate of 250/-
Rs. per day for such delay on the Designated officer or any official involved in
the process of providing such service, which shall not be more than 5000/-.The
second Appellate Authority can also recommend disciplinary action against the
256
defaulters .
7. Compensation to the Applicant-
The applicant may be compensated out of the penalty imposed on the
257
officer.
8. Display of services and given time limit-
The services and the given time limit shall be displayed locally and on website
by the secretary of the Department concerned for the information of the
258
public.
9. Constitution of the State Public Service Commission-
Under the Act the State Government is authorized to constitute a commission to
be called the Punjab Right to Service Commission. The commission shall be a
body corporate and have the power to acquire, hold and dispose of property,
259
both movable and immovable and it can also sue or be sued. The Head office
of the commission shall be at Chandigarh.
10. Powers and functions of the Punjab Right Service commission-
It shall be duty of the Commission to ensure proper implementation of the Act
and to make suggestions to the State Government for ensuring better delivery of
service. The commission can entertain and dispose of revisions under section
10. It can take sue moto notice of failure to deliver service in accordance with
this Act and refer such cases for decision to the First Appellate Authority or the
Second Appellate Authority. The commission can carry out inspections of
offices entrusted with the delivery of services and offices of the First Appellate
Authority and to Second Appellate Authority. The Punjab Right to services
256
Ibid section 9.
257
Ibid section 9(2).
258
Ibid section 11.
259
Ibid section 12.
177
Commission can also recommend Departmental action against any officer or
employee of the State Government who has failed to discharge function cast
260
upon him under the Act.
3.12.4 DEMERITS AND SUGGESTIONS FOR IMPROVEMENTS-
Notified in October in 2011 the Punjab Right to Service Act 2011 guarantees time
bound delivery of 67 public services to the citizens .In case of failure, the applicant
can approach the higher authorities.
I. Low public awareness with hesitation on part of the officials means that from all
the 22 district of the State very few complaints have been received under the
Punjab Right to Services Act, 2011. At some of the District Administrative
Complexes, the complaint forms recommended under the RTS Act are missing
from the Public Counter. The general Public is still very reluctant to follow the
official procedure of complaint submission and follow ups. Even the RTI Act,
which is the most people friendly Legislation, is mostly being used by the
NGOs or social activists of the general public.
II. The Punjab right to service Act 2011 comes into play only after the submission of
the application. What if the official doesn't even accept their documents unless
they bribe them? They usually point out one mistake or another in the
application making, the public to run from one end, to another end so the
bribery still prevails.
III. Currently Punjab does not have any central monitoring system in place to
supervise movement of applications relating to services promised in the RTS
act. Shortage of staff is another issue which is yet to be sorted out. The very
purpose of introducing the Right to service Act is defeated when enough staff
members are not there. The time bound delivery will only add to the burden of
existing staff.
IV. The grievance redressal as envisaged under the Act is also not good. The main
motive of any public welfare legislation is ensuring service to people without
much hassle. However, the Punjab RTS act is litigation prone as complainant
is supposed to go from one appellate authority to another and that too in the
same department before reaching the proposed independent Commission.
260
Ibid section 17.
178
V. Some minimal compensation on verification of the applicants claim at the level
of the first appellate authority must be provided to the applicant. The Delhi
(Right of Citizen to Time Bound Delivery of Service) Act 2011; has this
provision of compensating the aggrieved citizen along with delivery of service
at the level of first competent authority. The cost is letter recovered from the
concerned official if he is found responsible for delay in delivery of the
service, such a provision can go a Long way in making the legislation a
success since fear of fine is likely to deter officials from dereliction while early
delivery of compensation will motivate people to complain.
3.13 THE PUNJAB PREVENTION OF HUMAN SMUGGLING ACT, 2012
3.13.1 INTRODUCTION:
The nature of every human being from the time immemorial is to become
prosperous and thus to search for greener pastures and in order to achieve the same,
some people intend to go abroad at any cost. But every person does not fulfill the
qualifications and conditions to go abroad, yet their ambition to go abroad allures
them to adopt any mean to do the same, which are not always lawful. As such, in
order to achieve their goal, they start visiting persons whose relatives, friends or
known persons are already settled abroad for eliciting information about easiest way
to go abroad. During this process some innocent/illiterate/gullible persons fall in the
trap of unscrupulous persons who allure and induce such persons with false promises
to send them abroad by charging heavy amount of money. But thereafter these persons
are exploited by these elements for their illegal monetary gains by giving them false
assurances for arranging their visas to foreign countries in general and advanced
countries like Canada, USA, UK etc. particular.
Further, under the garb of arranging visas, these unscrupulous elements/agents
receive hefty amount of money and documents like passport from innocent persons.
But in most of the cases no such visa is provided and in majority of cases, the
unscrupulous travel agents stamp their passports with fake visas. In many cases, the
unscrupulous persons/travel agents disappear after taking hefty amounts of money and
documents from them as mentioned above and in majority of cases these persons are
intercepted either in India at the time of embarkation of journey or in foreign countries
at the time of disembarkation and some of them are even deported back to India.
179
More often than not, criminal cases are registered against them for possessing
forged documents. In some cases, the illegal travel agents after dumping them
disappears along with their passports and other documents. Such people have even to
face acute financial hardship when they are left in lurch by such agents at foreign
shores in inhospitable conditions. Some time, this lead to serious medical problems
like frostbiting and some of them even meet tragic death as happened during infamous
Malta Boat Tragedy. Presently, there is no proper legislation under which strict legal
action can be taken against these unauthorized and illegal travel agents and also to
handle such situations to safeguard the legitimate interests of illiterate/innocent
persons who have been cheated in afore-mentioned manner. The Government of
Punjab has enacted a legislation to curb illegal activities of people involved in
organized racket of human trafficking. The human smuggling is a deadly business that
must be combated as a matter of grave urgency and happily Punjab is the first state
ready to combat it.
3.13.2 MAIN FEATURES OF THE PUNJAB PREVENTION OF HUMAN
SMUGGLING ACT, 2012-
The Punjab Prevention of Human Smuggling Act 2012 Received the assent of
th
the Governor of Punjab on the 4 January, 2013. The main object of the Act is to
provide for the regulation of the profession of travel agent with a view to check and
curb their illegal and fraudulent activities and malpractices of the person involved in
the organized human smuggling in the State of Punjab and for the matters connected
therewith or incidental thereto.
It has several noteworthy features-
(1)
Human Smuggling and travel agents are well defined. Travel agent is defined
as a person in a profession that involves arranging, managing or conducting
affairs relating to sending persons abroad or which arise out of the affairs of
persons sent to a foreign country. It include consultancy for permanent
emigration, obtaining education, work, travel for tourism, cultural
entertainment or musical shows, medical treatment, spreading or preaching
261
religion and so on.
261
Section 2(m) of the Punjab Prevention of Human Smuggling Act, 2012.
180
(2)
The key focus of the legislation is on human smuggling as oppose to human
trafficking. Human smuggling shall mean and include illegally exporting,
sending or transporting persons out of India, or any type of facilitation thereto
by receiving money from them or their parents, relatives or any other person
262
interested in their welfare, by inducing, alluring, or deceiving or cheating.
(3)
The Act provides for a much needed licensing regime for agents and require
compulsory bank guarantees. Clearly, this will nail down middlemen of all
sorts and fly-by-night street operators. The Act provides that no person shall
undertake the profession of a travel agent unless he obtains license under the
263
Act.
(4)
The Act further provides that a person, desiring to undertake the profession of
a travel agent or who is already in this profession on the commencement of
this Act shall make an application to the competent authority. If the competent
authority is satisfied that application made under the Act is in order, it shall
issue a license. Before the issuance of license under the Act the particulars of
the application is verified by the Police. The validity of the license for travel
264
agent will be five years.
(5)
The legislation is not without teeth because it gives the power of search ,
265
seizure and arrest. If any Executive Magistrate not below the rank of SDM
or Police officer not below the rank of Deputy Superintendent of Police has a
reason to believe that any document in respect of which an offence punishable
under this Act has been committed is concealed in any building, conveyance or
place. He can break open any door of any house and remove any obstacle to
such entry in case of resistance. The officer can detain and search and arrest
any person whom he has reason to believe to have committed any offence
punishable under the Act.
(6)
Under the Act a police officer not below the rank of DSP shall have power to
investigate the offence under the Act which shall be completed within a period
of two months from the date of information given to him by any person. The
police officer of the rank of Superintendent of Police shall verify the
262
Ibid section 2(g).
263
Ibid section 3.
264
Ibid section 4.
265
Ibid section 10.
181
investigation conducted by the I.O. SSP shall act as a nodal Officer for all the
266
investigation made under the Act.
(7)
Any person who contravenes the provisions of the Act or keeps or uses the
device for human smuggling, shall be punished with imprisonment for a
periods not less than three years, which may extend to seven years and fine
267
which may extend to five lakh rupees.
(8)
In addition to imposing penalty the court may also award a reasonable amount
268
of compensation to the aggrieved person to be paid by the travel agent.
(9)
Under the existing central Legislation, travel agents can be booked under
section 420 of the Indian Penal Code 1880 in terms of which it is difficult to
prove the offence of cheating as moot transactions take place in cash. But the
Punjab Prevention of Human Smuggling Act 2012 gives more powers to the
Police in terms of offences being cognizable and non-bailable.
(10)
The Act provides that if any difficulty arises in giving effect to the provisions
of this Act, the State Government may, by order published in the Official
Gazette, make such provisions of this Act, or may appear to be necessary or
expedient for removing the difficulty. But such provision cannot be made after
the expiry of two years from the date of commencement of this Act. Every
order made under this section shall be laid, as soon as may be after it is made
before the Legislative Assembly.269
3.14 CONCLUSION
The forgoing discussion makes it clear that white collar crimes are increasing
especially with changes in technology. White collar crimes are more dangerous to
society than ordinary crimes, firstly because the financial losses are higher, and
secondly, because of the damages inflicted on public morale. White collar crimes are
not confined to boundaries of any one country and have become a transnational
problem. In India the Indian Penal Code, 1860 provides some basic principles relating
to white collar crimes such as cheating, counterfeiting, breach of trust, fraud and
forgery. However there are quite a few other enactments specifically designed to
tackle the problem of white collar crimes. After analyzing the provisions of various
laws we may conclude that we have got many laws on almost every aspect of public
266
Ibid section 11.
267
Ibid section 13.
268
Ibid section 14.
269
Ibid section 22.
182
life of our country. An analysis of some of the important laws indicates that
enforcement of these laws is lax due to lack of will of people in general as well as
politicians and bureaucrats in particular. To curtail the menace of white collar crimes,
amendments in the existing laws are necessary, but at the same time we must not
forgot that it is the social, economic and political conditions which will be responsible
for proper enforcement of these laws. At this present juncture what we need is the
strengthening of our enforcement agencies such as the Central Bureau of
Investigation, the Enforcement Directorate, The Directorate of Revenue Intelligence,
the Income-tax Department and the Customs Department.
183

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Chapter-3

ANALYSIS OF SPECIFIC LAWS ON WHITE

1 Edwin H. Sutherland, White Collar Crimes 7 (1949)

14 Article 48-A of the Constitution of India.

23 AIR 1991 Kant, 406.

31 AIR 1985 Del. 68.

34 Section 14 of the Copyright Act, 1957.

37 Ibid Section 33 (3).

63 published in Gazette of India, Part 1, Section 1 dated 11.4.1986

81 Section 68-A to 68-Z of the Narcotic Drugs and Psychotropic Substances

115 Section 5 of the Prevention of Corruption Act 1947.

122 Section 3 of the Prevention of Corruption Act, 1988.

126 Section 7 of the Prevention of Corruption, Act, 1988.

132 Section 13 of the Prevention of Corruption Act, 1988.

135 Section 17 of the Prevention of Corruption Act, 1988.

140 AIR 2006 SC 46.

164 Section 7 of Foreign Exchange Management Act, 1999

175 (1975) (4 SCC 101).

182 Section 13(1), Foreign Exchange Management Act, 1999.

Directorate of Enforcement191, in this case, the Foreign Exchange Regulation

190 AIR 1959 SC 375.

192 Section 2(1) (p) of Prevention of Money Laundering Act, 2002.

195 Section 3 of the Prevention of Money Laundering Act, 2002.

197 Ernesto Savona, Responding to Money Laundering : International Perspectives 1

207 Ibid Section 8.

217 CDJ 2008 SC 1701.

233 See Chapter IX of the PMLA 02 generally for this section.

235 263 ITR 706.

241 Sec 26 of the Food Safety and Slandered Act 2006.

245 Ibid Ss. 48-67

248 Ibid Section. 41(1).

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