Put in the dock by Shah Commission

Replying to the debate on the general budget on Friday, March 9, Finance Minister Pranab Mukherjee mentioned that the government was serious about the issue of bringing back “black money.” In the course of his reply, he is reported to have said that during the Emergency, he had, because of his deep concern in this regard, ordered raids on a “very important family” that he did not want to identify. He is reported to have added “it was not a fruitless raid. One tonne of primary gold with Swiss marks was discovered. Later on with the change of government, I was accused of causing Emergency excesses and was put in the dock before the Shah Commission.”

I do not know whether the tonne of gold was a figment of the Finance Minister's fertile imagination, but the allegation that he was put on the dock by the Shah Commission in any such case where major tax evasion was later established by discovery of a tonne of gold, is, to put it politely, factually incorrect. The Shah Commission dealt, inter alia, with Emergency excesses. Five of those cases related to the Income Tax department over which the present Finance Minister presided as Minister of State for Finance (Revenue).

It is necessary to mention that in spite of subsequent authoritarian measures to practically obliterate this valuable document, a few copies of the Shah Commission Report survived. The country owes a debt of gratitude to Era Sezhiyan, a great parliamentarian, for his efforts at publishing the report recently in the form of a book with an excellent introduction from him.

The five cases referred to are briefly mentioned below, with page, etc., references for those interested. The first two cases can be clubbed together. They were tax raids on two brave trade union leaders, Prabhat Kar and D.P. Chadha, general secretary and president, respectively of the All India Bank Employees Association (First Interim Report of the Commission, Chapter 7, Para 7.294 onwards at pp 93-94).

Significantly, action in this case was initiated by the then powerful Director, CBI, D. Sen. He sent for the tax official concerned, gave him the orders, which were meekly followed. The Director, CBI, later recorded a secret note which says that the two persons' houses “were got searched” and added that a report regarding the search is enclosed. In his oral testimony, Sen said that the report was sent either to O.M. Mehta, the then reasonably notorious MOS in the Home Ministry, or to R.K. Dhavan. Neither Sen nor the above two dignitaries was in anyway lawfully concerned with the Tax law or its administration. As the then Minister in charge of Revenue, Pranab Mukherjee, cannot escape responsibility for this high handed and unlawful exercise of the drastic and draconian provisions of the tax law to suppress legitimate trade union activity.

Then comes the Baroda Rayon Corporation case (Second interim Report, Chapter 9, pages 10 to 15 para 9.1 to 9.27). It will be useful to mention at the outset that the alleged one tonne of gold was not discovered or seized in this case. In fact, this raid was very similar to the drama of raids, arrests and “grilling” of persons like Suresh Kalmadi, A. Raja and other near and dear ones by the CBI, the ED and other sundry agencies.

I said no gold was found, but something more precious was. But that material was not used to detect tax evasion. Three files containing the vital information V.K. Shah, the managing director of the company, so helpfully placed in his briefcase were “seized” from him and through the chain of command reached the present Finance Minister who quite legitimately forgot almost immediately what he did with them. It used to be said those days by persons close to the then important hangers-on that the party high command was keen on verifying details of large sums of money apparently handed over to a then charismatic party leader allegedly to persuade some legislators to act in a particular manner. V.K. Shah only requested that the papers be seized from him rather than he hand them over and thus betray his Guru.

The next tax raid case dealt with by the Shah Commission was the one on Bajaj and Mukund groups in May 1976. Here again, there was no discovery of the tonne of gold because no such claim was made during the proceedings before the Commission in justification of the action taken. What was submitted then on behalf of the Group was that this favour was bestowed on them because of their association with Jayaprakash Narayan and the Sarvodya movement. Besides, Viren Shah, Managing Director of Mukund Iron and Steel Works, who was a close associate of the Bajaj family, was a persona non grata at the Imperial Durbar.

To conclude, at least one benevolent act of the then Emergency Regime merits mention. In the course of a routine enquiry, it was noticed that the identity of two women who were registered as shareholders in Maruti Ltd, a Sanjay Gandhi venture, could not be verified as they did not live at the address furnished in the company's records. The moment further enquiries were started, they came to an abrupt stop. The Director of Investigation recorded that the “Chairman has desired that no enquiries should be made regarding this case till further instructions from him.” A mere 35 years have elapsed. The instructions might well be on their way. Obviously, the investment in unverifiable names was of unaccounted money.

Based on the above, it would not be unreasonable to ask the Finance Minister to specify in which case where a tonne of primary gold with Swiss markings was discovered was he “put in the dock by the Shah Commission.” History and propriety demand an honest answer.

(V.U. Eradi, former member of Central Board of Direct Taxes, was the officer concerned dealing with the tax matters in the Shah Commission.)