Unveiling the Black Money: the Limitation of Legal Controls

Unveiling the Black Money: The Limitation of Legal Controls

Anupam Sinha, Research Scholar, PhD (Law) Jaipur National University Dr. Niharika Gaur Research Supervisor, Jaipur National University Jaipur, Rajasthan

Abstract: Every day we hearing about the black money through print and electronic media, almost everyone is completely aware of this. Black money or unaccounted money i.e. money collected by the fraud or malpractices or to other malicious act by people and on which no taxes has been paid. Among those who make black money, are not just people of criminal nature or background but also includes people who have a respectful status in the society like our elected representatives, bureaucrats, businessman etc. In the 21st century, India is rising as one of the world’s fastest growing and developing nation in all aspects. We achieved many successes, on the level of political, social, technical and economical. But, black money becomes an eclipse or obstacle in the way of proper development. In 2007, around 2699 Swiss accounts of HSBC was leaked in which 1668 accounts belongs to an Indians in which more than 25,420 billion rupees assets are deposited. It shows that how much corruption encompassed in our legislative, executive and also in judiciary systems. This is not only our problem but the whole world is battling against it. So, all together, are involved in this war. And it cannot be exaggeration that they handle it very effectively and somewhat, they succeeded in it. If it is about India rules and regulations, then there are lot and lots of laws for this. But still it is exist and most surprising thing is, how our finance controlling machineries are so helpless that they are almost failed to control it? If anyone withdrawal a single penny to their bank account, the bank kept detail of it, then why they are fail to trace the transaction of million and billion of money? In this research paper, researcher focuses on the reason of such failure and also focus on the rule and regulation which already available and how can tighten it to control more effectively over the black money?

Keywords: Black Money, Unaccounted Money, Financial Control, Legal Control, Law

Introduction । 1 न न न न ॥ These lines is derived from Chanakya‟s Arthshastra and the meaning of this Shlok is, it is possible that the motion and direction of the flying birds can be describe, but it is not possible to measure the depth of the mind and thought of the official that whether he will misuse or steal the wealth of the State or not. This lines clarifying that the corruption also occurs in our society from the beginning of human civilisation and remedies were also available. Chanakya was the one of the most prominent scholar of this world his lesson and advice still applied. He has described lots of things about corruption, which is proving to be true in today‟s time too. He also explained about the provision and procedure of the punishment related to accuse of corruption and cheating to the Crown. This procedure and punishment was so certain that any person think twice before committing crime like this. But, in today‟s world the fear of punishment almost lost, people are committing such offense, but still do not get caught. Now, stashing money which was earning through dishonestly is known as „Black Money‟. In India, black money refers to the unaccounted money or amount earned by black marketing or through dishonest means, on which the people does not paid taxes to the Government. Nobody mentioned the amount of the black money, which is deposited in the foreign banks or stashed anywhere. Actually, the problem of black money in our country is like termites, which destroy our economy faster in comparison to any other issues. It holds the status of parallel economy or also known as grey economy. The reason behind this situation is corruption. Politicians, bureaucrats, governmental or non- governmental professionals others apart of it, from hierarchy to peon all are involve in corruption in our country. These people are in the root of the black money. In 2012, Director of Central Bureau of Investigation said that approx $500 billion money of India is deposited in foreign banks by illegal means,2 which was clarify by contemporaneous Government that it is estimated amount of money which is funded by wrong doer not officially announced by Government.3 Put a glance on those figures, in which it has been reported that how much money has gone to the scam after that independence of Indian. Every political party said during their election campaign that they will do this and that to remove black money problem and they will bring back each and every single penny of the nation. India is ranked 16th in the list of 200 nation, who have the bank account in Swiss bank. This list was issued by the International Consortium of investigative Journalist (ICIJ). India hold 16th position with 1668 account in Swiss bank

1 Chanakya, Translated by Professor Indra, Kautilya Arthshastra 46, (Rajpal and Sons, Delhi, 2009, VII Edition 2015) 2PTI, “Black money: Indian have stashed over $ 500bn in Banks abroad, says CBI”. The Times of India, Available On: https://timesofindia.indiatimes.com/india/Black-money-Indians-have-stashed-over-500bn-in-banks-abroad-says- CBI/articleshow/11871624.cms, (Last Visited On: November 21, 2017) 3 PTI, “White paper on black money likely to be tabled in Budget Session”, Business Line, The Hindu, New Delhi, Available On: https://www.thehindubusinessline.com/economy/white-paper-on-black-money-likely-to-be-tabled-in-budget-session/article23068535.ece, (Last Visited On: November 21, 2017) JETIR1810089 Journal of Emerging Technologies and Innovative Research (JETIR) www.jetir.org 488

© 2018 JETIR October 2018, Volume 5, Issue 10 www.jetir.org (ISSN-2349-5162) and according to a report, in these accounts approximately 25, 420 billion rupees assets is deposited. Think about it, that how this amount can change the picture of our country? In the year 2014, BJP got absolute majority under the leadership of Narendra Modi, they promised to whole nation that they will curb black money and bring back the money which has been kept hidden outside the country and will bring development to the country. He accepted that, the unemployment of the country would end only when the country would end corruption. One major contribution of Prime Minister, for which India will remember him, was demonetisation, a bold step taken by him to curb black money, especially those amounts, which was hidden by the politicians and bureaucrats. If, the money which was lost in the scams and scandals since independence of India has been added, then it would be such amount, which is sufficient to develop India as super power.

Historical Background Behind everything there is a history. Just like this, black money is not created over a night. Its evidence is also present in our ancient time. In the Era of Chanakya, Kalhan, Ksemendra etc, corruption is also existed that‟s why these prominent persons of their era also mentioned the term corruption and remedies in their books. They did not use the word black money, but they described the similar situation that is corruption. It estimated that around 350 to 283 BC Chanakya, a renowned and learned person, also the founder of Mauryan Dynasty as well as chief advisor of Emperor Chandragupta Maurya and Bindusara Maurya. He wrote so many books like Arthshastra, Chanakya Neeti etc.4 According to him in Arthshastra,‟ it is almost impossible to examine that a fish, which is moving under the water are drinking or not drinking water. So, the Government servant employed in the Government work cannot be found out that while his service, he takes money themselves.5 According to Kalhan that corrupt people should not worthy for forgiveness. They must have punished hard. He strictly condemns the corrupt Government officer and politician in his era and suggested the King to stay away and alert to that kind of people. As same as these two prominent writers, philosophers, poet and writer Ksemendra6 also criticised hardly to those people who are involve in corruption. In his famous book, Ksemendra wrote that any person either he is courtier or priest or any general public they must be immediately terminated as well as punished by King. He said that bribery and corruption are spreading like epidemic disease.7 Only bribery or corruption is not the reason behind the money and power related crime another one was embezzlement. According to Kautilya (Chanakya), there are several ways (he listed forty) through which officers specially treasury and financial officer can embezzled in his time, like Vyavahara (trading), Upbhogya (embezzlement), Pratibandha (ban) etc.8 It shows that corruption is not the problem which rose suddenly but it was exist from the beginning, but it was not spread on large scale like today, because of the strict action taken by the King, was so hard in compare of today. It is mentioned in our history that in the ancient India there are so many punishment was available for those person, who was found guilty for corruption. The mode of punishment was imprisonment, distrainment of property, exile and death sentence.9 Punishment for corruption in ancient India was very stick, for the mismanagement in the maintenance of account; it was ten times of the amount which missed as a fine. Similarly, if the employee came with proper report and account officer was not ready to audit then he (account officer) was punished with the penalty. 10 Later on, during the World War II, the word „Black money‟ appears in front to the whole world. When Switzerland accepted to deposit or stashed the assets or money in its banks from other countries through the wrongful means during the period of Second World War. Before, discussing the relation of black money with Switzerland, should know about the situation of Switzerland during World War II. At that time, the Swiss currency became only currency which was more convertible in the world. And in 1940-45, that was the era where either Garman or other allies both sold large amount of gold to the Swiss National Bank. They use this money to buy raw material and oil to the neutral countries. Garman Bank Reich bank sold gold worth 1.3 billion Francs to Switzerland and exchanges this gold to Swiss currencies. This millions and millions prices of gold was plundered from the banks which belong to the occupied countries. During the World War II approx 581,000 Franc worth gold, which was taken to the Holocaust victims11 in the Eastern Europe was sold to Swiss Banks, which was the total contribution of 0.5% of the German war effort.12 In India, during the rule of Britishers, several committees and investigations were commenced to control and prevent Indian economic to the corruption and black money with the target to achieve the goal i.e. increasing the tax collection for the crown of Britain. In the same context, in 1936 the Ayer‟s Committee, were commence to investigate Black Money in Indian Colony. In the report of this Committee, it suggested amendments to protect and encourage honest tax payer and punish tax evasion.13 During the World War II, so many Indian business man or Industrialists want to earn money through the wrongful means like Black Marketing. This is the period, when a black market develops very fast because of scarcity in the food and other things production and supply.

4 V. K. Subramanian (1980). Maxims of Chanakya: Kautilya, 1, ( Abhinav Publications, 2012-06-06) 5 Chanakya, Arthshastra, Chapter IX, Examination of the conduct of Government Servant in the Book II 6 Ksemendra was a poet and writer of Dasavataramkritam and narmamala 7 Vinayan Janardhanan, Ethics and Corruption an Introduction: A definitive Work on Corruption for First- Time Scholar, (Partridge India, Gurgaon, 1st Published on 2016) 8 Kautilya and translated by Professor Indra, Kautilya Arthashastra, 98, Pancham Adhikaran, (Rajpal And Sons, Delhi, 7th Edition, 2015) 9 Ibid, P.90 10 Kamal Kishor Mishra, Police Administration in Ancient India, (Mittal Publication, Delhi, 1st Published in 1987) 11 Holocaust victims were the people who were tortured by the Nazis on the basis of their religion, political beliefs, gender and ethics like Jews. 12 Switzerland National Socialism and the second World War, Final Report, Independent Commission of Experts of Switzerland, Available on: https://www.uek.ch/en/schlussbericht/synthesis/ueke.pdf , (Visited on: November 22, 2017) 13 Income tax Enquiry Report,1936, Submitted to the Government of India as a result of the investigation of the Indian Income tax System

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Scam: From 1947 to Till Now This detail is based on the circumstances which was arises after the independence of India i.e. from 1947 to till now and which can be called scam activities then it will be no exaggeration. So, let‟s starts from 1948:  Jeep Scam: When people come to know about the first scandal of Independent India, which is also known as „Jeep Scam‟. This scandal came in the spotlight due to the poor quality of the Jeep which was purchased for the use of Army. Army refused to accept it. Actually, it was the resembled model of used Jeep and higher price also paid for this. As well as, the supply of Jeep was done was also the reason of controversy because Government paid for 200 Jeep in advance and the supplier delivered only 155 Jeep. So, it was the scam of Rs. 80 Lakh, it was a huge amount at that time. In this scandal, may questions have been raised about the involvement of the then Prime Minister Pandit Jawaharlal Nehru and his closer V.K. Krishna Menon.14 This was the first scam in independent India.  BHU Scam: In the year 1956, Banaras Hindu University was in spotlight because of misappropriating use of the fund of the University, it was Rs. 50 Lakh scam.15 This scam was the first example of corruption in the field of education.  Mundhra Scandal: In the year 1957, in the Government of Pandit Jawaharlal Nehru Government another scam was happened. In this case, Life Insurance Corporation of India (LIC) were purchased the shares of Kanpur based Mundhra Firm and the amount was invested in this firm as share purchasing was Rs 1,26, 86, 100 Crore, which was huge about according to that time. Mundhra Firm was the one of the sixth company of the Haridas Mundhra, a Calcutta based Businessman and stock bettor too. He used his political influences for the investment of this amount to his drowning and sick company. Because, of his contacts with political hierarchy he got this investment without consultation of LIC‟s Investment Committee.16  Bofors Sandal: In the year 1987, a Swedish arms manufacturer company Bofors AB, bribed Indian and Swedish government and official of Rs. 65 million to crack the deal for sale of 410 Howitzer gun. The persons, who alleged to received amount of kickback was the biggest name of the government in which the name of the then Prime Minister Rajiv Gandhi was too. In the decades of 80s and 90s Bofors was occupied the place on the front page of the newspaper in India as well as abroad too.17  Telgi Scam: In the year 2003, Abdul Karim Telgi was started his business of fake stamp and stamp paper, which spread in a very short time in 18 states of India. This caused a loss of nearly Rs. 43,000 Crore to the Government. He had a chain of approximately 300 agents, who sell out these counterfeit stamp papers to the bank and other organisation where they buy it in bulk. Many police official and politicians were also involved in this scam too.18  Harshad Mehta Securities Scam: In the year 1992, a stock exchange broker and businessman Harshad Mehta used the loopholes of banking system and with the help of that he makes millions of money by fraudulent activities. It was the amount of Rs. 5,000 Crore. It is known as securities scam but more than securities market scam, it was banking scam. Anyway, after the revelation of this scam the security market was collapse. And, India again lost huge amount of hard earning money of people. In this scam, there were also many big names besides Harshad Mehta; one of them was the then Prime Minister PV Narshimha Rao. Mehta said that he paid to the Prime Minister of India, PV Narshimha Rao.19  JMM Bribes Case: In the year 1995, the government of PV Narshimha Rao was facing „No Confidence Motion‟. And, to save his government, he had bribe 4 MPs of the Jharkhand Mukti Morcha for vote in the favour of Congress Government. One of them, Shailendra Mahato, admitted that he had voted for note.20  Fodder Scam: In the year 1996, the Deputy Commission of West Singhbhum traced the irregularities in the entry of the transaction of the „Animal Husbandry Department‟ of the Chaiwasa. When he raid, found several objectionable documents and misappropriation in the files of the transaction of the money from Treasury of Bihar on the name of the animal feed, medicine and equipment. After the investigation there were approximately 200 people was alleged for the involvement, in which ex Chief Ministers were too. The then Chief Minister Lalu Prasad Yadav was the one of them. It was the scam of Rs. 950 Crore.21  Hawala Scandal: In the year 1996, one more multimillion scam came in light and this time several big fish caught in the trap. From ruling party to opposition all were involved in this scam. The amount of the money was 810 million. The main accuse was Jain Brothers. It was the system through which the transaction of money from India and to India without using legal channel to

14 V.K. Krishna Menon was the Higher Commission of Indian in Great Britain at the time of Jeep Scam and main, also see: SL Rao, Director general, NCAER,” The exponential rise of corruption”, The Hindu, Business line (Published on 24 March, 2016) (Last Visit On: November 21, 2017) 15 Sandal Sheet, India Today, Issued on: July 3, 2006, available on: http://archives.digitaltoday.in/indiatoday/20060703/scams.html, (Visited On: November 21, 2017) 16 Independent India‟s First Big Financial Scam: Mundhra Scandal, The Logical Indian, available At: https://thelogicalindian.com/news/independent-indias-first-big-financial-scam-mundhra-scandal/, (Visited On: November 21, 2017) 17 IBN Live, “What the Bofors scandal is all about?”, CNN IBN , available at: https://www.webcitation.org/6Aj2j0An9?url=http://ibnlive.in.com/news/what-the-bofors-scandal-is-all-about/252196-3.html, (Visited on: November 22, 2017) 18 W. Chandrakanth, “The stamp of a Scam”, Frontline, available on: https://www.frontline.in/static/html/fl2023/stories/20031121002204700.htm, (Visited on: November 22, 2017) 19 Pradhanmantri, Season 1, Episode 20, ABP News, available at: https://www.youtube.com/watch?v=CzkzwFwnbWQ&t=1441s, (Visited on: November 22, 2017) 20 PTI, “JMM MP‟s Bribery Case: Chronology of events”, available at: https://timesofindia.indiatimes.com/india/JMM-MPs-bribery-case- Chronology-of-events/articleshow/3889517.cms, (Visited on: November 23, 2017), also see: M. Yashasvi & H.R. Shvoprashad, “JMM Bribery Case”, Manupatra, available on: http://docs.manupatra.in/newsline/articles/Upload/DD3707E7-436D-4C0C-9983- 2F4F0EE1ADAA.pdf, (Visited on: May 20, 2018) 21 Express Web Desk, “What is Fodder Scam: A look at what all has happened since 1996”, The Indian Express, New Delhi, available at: https://indianexpress.com/article/what-is/what-is-the-fodder-scam-a-look-at-what-all-has-happened-since-1996-4645719/?abcde, (Visited On: May 19, 2018) JETIR1810089 Journal of Emerging Technologies and Innovative Research (JETIR) www.jetir.org 490

save the taxes. Actually, it is based on the trust which was applied in the older days to transfer money from one place to another and all transfer was based on the trust. In this tha main accused claimed that he was also provide money to the higher level of politician of India like L.K. Adwani, Madan Khurana, Sharad Yadav, V.C. Shukla, even the name of then Prime Minister PV Narshimha also taken by the S.K. Jain that he gave money to him.22 The amount of money in the scam was involved that is 810 Crore.  Ketan Parekh Scam: In the Year 2001, in this scam Ketan Parekh, who was the trainee of the Harshad Mehta and also an Institutional Stock Broker, manipulate stock market and share price and make profit with the help of circular trading system. And with the help of that system he raised the price of shares; he also borrowed a huge amount to Banks like Global Trust Bank (GTB) and Madhavpura Mercantile Co-Operative Bank (MMCB). These banks provide him financial support beyond its limitation and also violate the rules and regulation of Reserve Bank of India. He circulated a channel of companies which also use the circular trading system that why it is difficult to trace the investment of money which is arose through the stock Market and Bank. After the revelation of his business practice, he found guilty for illegally manipulating of stock exchange business. It was the scam of Rs. 1, 50,000 Crore. Again political link up involved in this scam too.23  Hasan Ali Khan Tax Defaulter Scam: Hasan Ali Khan was a businessman and horse owner. In the year 2007, Income Tax Department and Directorate of General of Economic Enforcement (ED) was raid and investigated his houses and work place for the doubt of involvement in the money laundering activities specially in Hawala transactions. Also, looking for the relationship with the International arms dealer Adnan Khashoggi, who helps him to open his first bank account in foreign bank in abroad. After this, he stashed $ 8 billion in the Swiss bank account. But in January 2012 the then Finance Minister said that the Swiss account of the Hasan Ali Khan was vacant and no money was there. But in later on investigating authorities accepted and alleged that Hasan Ali has $ 9 billion and it was not day dreaming it was based on the exchange of later between Union Bank of Switzerland, Zurich and Hasan Ali Khan.24 He became nations highest tax defaulter with the due amount of Rs, 50,000 Crore.  Satyam Scam: In the year 2009, the chairman of the company Ramalinga Raju alleged and found guilty for manipulating account of the company and create false information about the progress of the Satyam Computer Service also misused the fund of the Satyam‟s in real estate business. He was found guilty for money laundering, inside treading and account fraud. The lost of amount measures was Rs 14,000 Crore.25  2G Spectrum Scam: In the year 2009, one more scam which was directly linked with the politician and the then ministers of UPA Government for irregularities and opacity in the allotment of the 2G Spectrum license to the telecom industry. The biggest name was A. Raja, Member of Parliament, DMK and Union Cabinet Minister Communication and Information Technology and M.K. Kanimozhi, Member of Parliament, DMK and representing in the Rajya Sabha, was alleged and charged for the involvement in the Rs 1,76,000 Crore scam. But in December 21, 2017 CBI court acquitted every accused due to the lack of evidence.26  Also see those scandals that shook India and are examples of internal robbery of hard earned money of Tax Payers: Teja Loan Scandal- 1960- Rs. 22 Crore, KUO Oil Scandal- 1960- 2.2 Crore, HDW Submarine Deal- 1987, Rs. 20 Crore, ST Kitts Forgery- 1989- Rs. 45 Crore, Air Bus Scandal- 1990- Rs 2.5 Crore, Indian Bank Rip off- 1992- Rs. 300 Crore, Sugar Import Scam- 1994- Rs. 650 Crore, Bhansali Scam- 1995- Rs. 1200 Crore, Urea Deal- 1996- Rs. 133 Crore, Home Trade Scam- 2002- Rs 600 Crore, IPO Scam- 2006- Rs. 61 Crore, Madhu Koda Scam- 2009- Rs 4,000 Crore, Rice Export Scam- 2009- Rs. 2500 Crore, Orissa Mie Scam- 2009- Rs. 7000 Crore, Common Wealth Game- 2010- Rs. 40,000 Crore, Andhra Pradesh Land Scam- 2011- Rs. 200 Crore, Karnataka Land Scam- 2012- Rs. 20,000 Crore, Iron Ore Freight Scam- 2013- Rs. 29,236 Crore, Delhi Jal Board- 2014, Rs. 10,000 Crore, Odisha Industrial Land Mortgage Scam- 2014- Rs. 52,000 Crore, NTC Land Scam- 2015- Rs. 709 Crore, Nirav Modi Scandal- 2018- Rs. 11,000 Crore. If the amount is added, the total amount that has been lost in these scams will be Rs. 8, 031, 005, 011,000, which is more than sufficient to develop any country. With this amount India can become super power. Poverty and unemployment can be removed from India forever. And the most important thing which can be happen that for next 20 years at least, Indians do not have to pay any kind of taxes. Because of this amount patrol and diesel prices are also available at the lowest price rate till now. Almost 1,500 Universities, 2000 hospitals with the facility of free medicines, can be built and 95 million people have their own home.27 Think about it, what have we lost? Sources of black money According to Investopedia,” Possible sources of black money are drug trafficking, illegal weapons trading, terrorism, prostitution, selling counterfeit or stolen goods and selling pirated versions of copyrighted items such as software and musical recordings and many more.28

22 Jain Hawala Case, Frontline, Vol. 15, March 21- April 3, 1998, available on: https://web.archive.org/web/20070310210202/http://www.hinduonnet.com/fline/fl1506/15060270.htm, (Visited on: November 23, 2017) 23 The Ketan Parekh Scam, ibscdc.org, available at: http://www.ibscdc.org/Case_Studies/Finance/Finance/Finance%20The%20Ketan%20Parekh%20Scam.htm, (Visited on: November 23, 2017) 24 Hasan Ali Khan Tax defaulter 2008, Scamsofindia.com, available at: http://scamsofindia.com/hasan-ali-khan-tax-default-2008/, (Visited on: November 24, 2017), Also see: Hasan Ali Khan, First Post, available at: https://www.firstpost.com/topics/hasan-ali-khan-64018.html, (Visited on: November 24, 20017) 25 Satyam Scam Full Story Explained: Case Study in Hindi, available at: https://www.youtube.com/watch?v=-ZGIN1wLux4, (Visited on: November 24, 2017) 26 A Vaidyanathan & Deepshikha Ghosh, “Former Telecom Minister A Raja, Kanimozhi, 15 others acquitted in 2G spectrum Case: 10 Points,” NDTV, available at: https://www.ndtv.com/india-news/2g-scam-case-verdict-former-telecom-minister-a-raja-and-dmk-leader- kanimozhi-acquitted-in-2g-case-1790406?pfrom=home-lateststories, (Visited on: December 22, 2017) 27 Top Corruption Scams in India: Since 1948 to 2015, YouTube, available at: https://www.youtube.com/watch?v=imposI2Z_qg&t=129s, (Visited on: December 22, 2017) 28 Black Money, Investopedia, Available On: http://www.investopedia.com/terms/b/black-money.asp , (Visited On: November 23, 2017) JETIR1810089 Journal of Emerging Technologies and Innovative Research (JETIR) www.jetir.org 491

It is an economical as well as social problem. It is perceived as a problem with adverse sociological effects on society, like social inequality, social deprivation, poverty and crime etc. It can also be called parallel economy or underground economy or unofficial economy, which is the result of the loose economic policies of the government, especially loose legal implementation, which affected our nation‟s economy and development. Alcohol or drugs affects those, who consume it, but black money affects every man whether they involve in it or not, who is working hard to earn money for better life as well as follow all rule and regulation, deposits taxes on time. After, the above discussion, let‟s know about the sources of black money that how money turn into black? i) Scam Scam is the most common way through which wrong doer creates money easily by taking advantages of his/her position. Scam means a fraudulent scheme performed by a dishonest individual, group or company in attempt to obtain money or something else of value. Scams traditionally resided in confidence tricks, where an individual would misrepresent themselves as someone with kill or authority, i.e. a doctor, lawyer, investor. Nowadays, the use of internet become wide, new form of scams come in knowledge like scam betting, email spoofing, phishing, online lottery or request for helps. These are considering as being internet fraud or scams.29 According to the Cambridge Dictionary, the definition of „Scam‟ is “an illegal plan for making money, especially one that involves tricking people.”30 As discussed above about the major scams of India and that total about which lost by Indians because of it is sufficient to explain the situation arises by the scams in India. It is clear that scams are the biggest source to generate black money. Through this only, India has lost the hard earned money of people as the black money. And the irony is that, it was done by those, to whom people had chosen as their representative that is MLAs, MPs, Ministers, Chief Minister, even Prime Ministers too, as well as, from the higher officials to peon, from bottom to top everyone are involve in the corruption. Theft is theft, whether it is related to millions and billions of rupees or a single penny. In short, corruption is the main reason behind all scam or corruption is the father of every scam. Hawala, 2G Spectrum, Fodder Scam etc are the example.

ii) Black marketing The word Black Market means a market, where the goods are illegally purchase and sold at a higher price than their actual price. It is also known as Black marketing. Such acts, which charges more than Maximum Retail Price (MRP) and violate the rule and regulation of price fixing, that kind of act is known as black marketing. Such work is done secretly, with the aim of earning more money and tax evasion. It is not that the goods are sold at a higher price but the goods are also sold at lower price, but instead of this seller do not make the bill, so that the tax can be save later by changing the account. And people are willingly to do this to save some money. Now, let‟s know about the good and services in which black money is more active. a) Drugs: Especially banned or illicit drugs like opium, heroin, and cocaine, if they earn money through this can of trade than it is consider as black marketing. b) Prostitution and forced labour: It is highly in demand specially in poorer countries, where unskilled worker in prostitution are highly paid and unskilled worker in labour are lower paid. c) Animals and woods: Trading of animal and wood or timber are banned but still people selling and buying it through illegal means d) Other sources of black marketing: Alcohol, organs, transportation, counterfeiting etc. iii) Tax evasion Tax evasion is the act in which any person, organisation, corporation etc. evade or ignore actual and true tax liability and if they found guilty for the illegal money collection without paying true tax, they treat as a criminal and punished by penalties and imprisonment.31 People have right to reduce the amount of tax, there are difference between tax minimization and evasion. They try to reduce the tax amount but under the border of legal act. But tax eviction is the act where person stashed the amount of unpaid income in the foreign bank and with the help of „round tripping‟ or „transfer pricing‟. This is the way through which Black Money turns into white. Income which is evaded by the people mostly is businessman, politicians, bureaucrats, celebrities‟ even common man too. And the result become as the imbalance of the economic status of our country. We all know that taxes and revenue are the main sources of the Indian economics but eviction of taxes and revenue arise the imbalance situation in our country and why only in country even all over the world, it can create the financial crisis too. iv) Organised Crime: Any criminal activities, which is regulated by group or groups of people at large level is called organised crime. It is well managed and planned activities. Its include drug trafficking, human trafficking, prostitution, terrorism and money laundering etc. According to the Soli Sorabjee Committee, appointed by the Supreme Court of India, stated that “the activities of organized criminal and terrorist to the serious threat aimed at destabilising the security, integrity and economy of India. Such activities it said should not be constructed as acts merely of ordinary crime or law and order nature. Committee also mentioned that it cannot be left to be dealt as normal crime and law and order related problem on State Police Force only but it should be considered as federal crimes”.32 These lines are sufficient to describe the seriousness of the situation. In 2000, General Assembly of United States presented United Nation Convention against Transnational Organized Crime and its Protocol to Adoption at the session and it come in force from 2003. United Nation Office on Drugs and Crime (UNODC) is the controlling authority of this convention under which convention is working.

29 Business Dictionary, Scam, definition, Available On: http://www.businessdictionary.com/definition/scam.html, (Last Visited On: November 22, 20170 30 Scam, Cambridge Dictionary, available at: https://dictionary.cambridge.org/dictionary/english/scam, (Visited on: 25 November, 2017) 31 Ibid 32 B.V. Kumar, The Darker Side of Black Money, 1, (Konark Publishers Pvt Ltd, New Delhi, 2nd Edition) JETIR1810089 Journal of Emerging Technologies and Innovative Research (JETIR) www.jetir.org 492

According to Article 2(a),” Organized Criminal Group, shall mean a structured group of three or more persons, existing for a period of the time and acting in concert with the aim of committing one or more serious crimes and offences established in accordance with this convention, in order to obtain, directly or indirectly, a financial or other material benefit.”33 In the same convention Article 7 related to the measurement to the combat of the money laundering. It provide framework to the state for the preventing and combating against the organised crime also supporting those states whose fighting against it.34 According to the former National Security Advisor M.K. Narayanan,”Stock Exchange in Mumbai and Chennai has, on occasion, reported that fictitious or notional companies were engaged in stock market operations. Some of them were involved in terrorist outfits”. And it‟s true; these activities are either providing financial support or weapons.35 According to the report of the Global Financial Integrity (GFI), this was released on the February, 2011. In which it is clearly mentioned that the illicit financial flow of least developed or developing countries in the year 1990-2008 was $197 billion and other surprising fact is the top most country in this report was Bangladesh with an outflow of $ 34.8 billion. The administrator of the United Nation Development Programme (UNDP) Helena Clark remarks in the UNDP conference that “illegal flow of money interrupted the development of Least Developed Countries (LDCs)”. “The effort of the LDC‟s to raise its resource for social and economic development is affected. These flows are often absorbed into banks, tax havens and offshore financial centres in developed countries” said Clark. The report of the Global Finance Integrity in February, 2011 said there are $ 650 billion markets of illicit trade. The United Nations Human Development Report, 1999 which stated that organized crime syndicate grossed income is US$1.5 trillion, which is more than the revenue of many developed country. Jeams Henry said that only from 1979 to 2010, the sum of $ 72.7 billion, (Rs. 4, 06,000 Crore) assets from India has been hidden in foreign Banks. According United Nation‟s report,” the global drug generated an estimated US$ 321.6 billion in 2003. This would equal to the 1% of the world trade, the total amount of the world GDP of US$36 trillion in the same year.”36 It is stated in this report that the annual illegal drug sale is greater that the GDP of 88% countries of the world. The head of the United Nation office on Drugs and Crime said that,” it is not a small enemy against which we struggle actually it is a monster”. The South East Asian countries are the major producer of illicit poppy cultivation which is better known as Golden Triangle.37 Afghanistan is the largest producing country of the poppy. v) Round tripping: Round tripping is also the way to turn black money into white and how? Then, through very simple process applied for this, and that is, any assets, whether in the form of money or valuable bonds or things, when they return back to the same place from it was moved, that it is known as round tripping. In the case of black money, people use this system to turn its unaccounted or black money into white and freshly laundered form and after completion of this journey, people who belongs to that money can freely use it as Foreign Direct Investment (FDI). Which kind of channel used to move and return of money? So, Hawala transaction, payment to those companies which is situated in abroad, or, foreign investment in the country. Now, the process of Round tripping is completed. In the International scenario, this is a way, through which it is use for tax evasion and money laundering. Mauritius is the best example of round tripping in India because, in the year 1982, India signed a tax treaty with Mauritius and according to this treat any business professionals or corporate companies, who is investing their money in India through FDI will pay tax in Mauritius only and the tax which imposed on that kind of investment was trivial. According to Income Tax law, Mauritius based companies can invest money in India but they have one special privilege that these investor can pay tax in Mauritius, where tax is significantly very low.38 So, Mauritius has been became the gateway for foreign investors especially Indians, who invests their unaccounted money with the help of this channel and turn it white and fair. It is easy to place money in the jurisdiction with the favourable tax treaty and after sometime send it back to India, so profit became tax free or very low tax applied. Country like Mauritius, Switzerland, Lichtenstein etc. are tax heaven and tax evaders always stashed their black money or income in these country because the secrecy policy of the bank of these country. Mauritius is the No. 1 in investment of FDI with 33% and on portfolio Mauritius hold second rank after USA.39 In 21st of May, 2012, Finance Minister Mr. Pranav Mukharjee submitted a white paper on Black money in which he disclosed that because of DTAA (Double Taxation Avoidance Agreement) Provision, 51% of the FDI parked in India only from Mauritius and Singapore within the last 12 years, which is a big amount for the small country like them. Government have doubt that the investors are those Indian who stashed their black money in the tax heaven countries like Mauritius, Singapore etc.40 Legal control on Black money in India As it seems, the law related to the abolition of the black money has been made in the last few years, then it is not right. From Indian Penal Code, 1860 to Black Money (Undisclosed Foreign Income and Assets) and imposition of Tax Act, 2015, there are several law established by the government to curb the extent of the black money in India. So, let‟s see the legal aspects and limitation of those rule and regulation which was enacted with the intention of the make our society corruption free and black moneyless. 1) Indian Penal Code, 1860: Indian Penal Code is a substantive law which explains those act which is consider as crime and its punishment, this code which was enacted in the year 1860. The code also mentioned that, which act is considered as corruption or

33 Article 2(a), United Nation Convention against Transnational Organized Crime, 2000 34 Ibid, Article 7 35 Supra 32, p.2 36 Niklas Pollard, UN report puts world‟s illicit drug trade at estimated $321b, Reuters, The Boston Globe, June 30,2005: http://www.boston.com/news/world/europe/articles/2005/06/30/un_report_puts_worlds_illicit_drug_trade_at_estimated_321b/ , (Last Visited On: November 23, 2017) 37 Ibid 38 Tojo Jose, What is Round Tripping of FDI?, Indian economy, 1 Jan, 2015, Available At: http://www.indianeconomy.net/splclassroom/108/what-is-round-tripping-of-fdi/, (Visited On: November 23, 2017) 39 Tejas Desai, India-Mauritius tax treaty: An end and a new beginning, Forbes India, available at: www.forbesindia.com/blog/economy- policy/india-mauritius-tax-treaty-an-end-and-a-new-beginning/, (Visited on: November 25, 2017) 40 Pranav Mukharjee, Finance Minister,” Black Money White Paper”, May 2012, (Visited on: November 25,2017) JETIR1810089 Journal of Emerging Technologies and Innovative Research (JETIR) www.jetir.org 493

instigate any person to commit an act which is mentioned under this act as crime like Bribery which is comes under Section 171 B, and Section 171E is related to its punishment which is one year imprisonment and fine or both. Rather than this, Chapter X of the IPC which is related to the „of Offence by or relating to public servants‟ and covers Section 166 to 171 is related the offence committed by the person who misuse his position in government service or legislation. Punishment for involvement in such acts has also been mentioned. Section 161 to 165 A was replaced from IPC in 1988 under Section 31 of the Prevention of Corruption Act, 1988. Apart from this, provisions have been made regarding crimes related to coins and government stamps within section 230 to 263A, which is mentioned in chapter XII in IPC.41 2) Income Tax Act, 1961: The main motive behind the enactment of the Income Tax Act was to control the flow of money through the income. Income tax Acts covers those incomes which are generated from salary, Housing property, business or profession, capital investment and other sources.42 Chapter XXII of the Act explained the rule which is applied on the every person, when they fail to provide proper information and support to the Income Tax department; in short this chapter belongs to the offence and punishment mentioned under this act. If any person found guilty under section 132 (1) and (2) then they can be punished with imprisonment and fine or both, imprisonment shall be rigorous in nature. Section 131 to 138 provide them lots of power through which they can search and seizure the assets, document, account book and any other thing which can help them to find out the fact behind the issue. Section 278A states that if the accused person is convicted under section 276A, 276B, 276BB, 276CC, 276DD, 276E & 278 and again if he convicted of any of the aforesaid offence then he will be punished to seven years of imprisonment with fine. But in 1989 section 276 DD and 278 E has been deleted by the Direct Tax Laws (Amendment) Act, 1987. Apart from these sections, there are many provisions available to control black money, tax evasion, and unaccounted income stashing.43 3) Foreign Exchange Management Act, 1999: FEMA was enacted in December 29, 1999, to combat against the flow of black money, which was circulated between India and abroad as well as to keep eyes on the foreign exchange of economy. FEMA was formed as a replacement for FERA. There are total 49 sections, under which definitions such as currency, foreign currency, foreign exchange etc are given. When a business organisations or parties imports goods from other countries and exports its products to them or invests in the companies situated in abroad, the process is known as „foreign exchange‟. So, the meaning of Foreign exchange is „foreign currency‟ which includes:- i) Deposits, credits and balances payable in foreign currency: ii) Drafts, traveller‟s cheques, letters of credits or bill of exchange, expressed or drawn in Indian currency but payable in any foreign currency: and iii) Drafts, traveller‟s cheques, letters of credits or bill of exchange drawn by banks, institutions or person outside India, but payable in Indian currency.44 In FEMA, it is clarified that, if any person or organisation is transacting more than 10 lakh rupee in a month or in small amount in a month but the total of whose sum is 10 lakh or more than 10 lakh then in this condition both parties should maintain their account of such transaction. These transactions must be take place between authorised persons. An Act to regulate certain payments dealing in foreign exchange, securities, the import and export of currency and acquisition of immovable property by foreigners. Also prohibited Indian to deal in foreign exchange, securities and hold, own & possess immovable properties in abroad.45 Under this Act, the provision of penalties are very strict, if any person found guilty then he will pay the fine, which is thrice to the sum of contravention where such amount or two lakh rupee where convention where amount is not qualified or five thousand rupees per day from the first day when contravention continues.46 This act also clear the way of law related to money laundering. 4) Prevention of Money Laundering Act, 2002: This act was enacted in January 17, 2003 and the aim of the enactment was prevent the economy of the India from money laundering. This act was amended thrice that is 2005, 2009 and 2012. The provision of punishment was mentioned under section 4 of the act that is rigorous imprisonment of minimum three years which can be exceeding up to seven years and with the fine of five lakh rupees. 5) Black money (Undisclosed Foreign Income and Assets) and imposition of Tax Act, 2015: This act was enacted in it has been passed in Lok Sabha on May 26, 2015. It was passed by the Government to fight against black money. Black money, which is unaccounted, stashed or evaded income of the individual or organisations, which are not, mentioned anywhere. However, there is no any specific definition mentioned for the term „Black money‟, in short, money earned by illegal means or taxes not paid over it. This act was enacted with the aim of curb of black money and imposes penalty and punishment of imprisonment for such income. Section 41 to 47 is related to the penalty in which the provision and condition of the penalties are mentioned. 6) The High Demonetisation Bank Notes (Demonetisation) Act, 1978: November 8th, 2016 was the day when India and Indian actually know about the cancelation of the legal tender of the banknotes which is in circulation, but few people know that this is not the first time happened. Before 2016, in 1946 and in 1978 the then government demonetised the legal tender of highest denomination banknote that is Rs. 1000 and Rs, 10,000 which was printed in 1938 by The Reserve Bank of India and again in 1978, but the latest demonetisation affects 87% of the running currencies as well as black money stashers too.47 7) The Specified Bank Notes (Cessation of Liabilities) Act 2016: This act was enacted on December 30th, 2016. And an aim behind the constitution of this act was to promulgate to complete the process of demonetisation. Under this act government frame the provision of punishment and penalties for those who use demonetised banknote that is Rs. 500 and Rs. 1,000. This act provides the

41 Indian Penal Code, 1860 42 Tarun Kumar, “History & Evolution of Income Tax Act in India”, available at: https://taxguru.in/income-tax/history-evolution-income- tax-act-india.html, (Visited on: November 26, 2017) 43 Income Tax Act, 1961 44 Section 2 (n) Foreign Exchange Management Act, 1999 45 Ibid Section 10 46 Ibid 13 (1) 47 PTI, “High-Value notes demonetisation: its 1978 redux!” Business line, The Hindu, available on: https://www.thehindubusinessline.com/money-and-banking/highvalue-notes-demonetisation-its-1978-redux/article9320703.ece, (Visited on: November 27, 2017) JETIR1810089 Journal of Emerging Technologies and Innovative Research (JETIR) www.jetir.org 494

provision of penalty that any person who makes wrong declaration will be penalised with the fine of: a) Rs. 50,000 or b) with five times the value of the deposited banknotes. Also, prohibited people from receiving, holding and transferring demonetised banknotes after December 31st, 2016, except certain specific condition like hospitalisation, study fee etc. Any person who holds and circulate demonetised banknote will be punished with the fine of: a) Rs. 10,000 or b) five times the value of notes holds.48 8) Real Estate (Regulation and Development) Act, 2016: This act was commenced on May 1st, 2016 the motive behind the establishment of this act was to control the investment of black money in real estate sector, which is consider as the biggest place for the black money investment. This act made registration compulsory for builders and brokers, and also made mandatory to the customer that they also purchased the property only from the registered broker and builders. This act provides protection for buyers.49 9) Judicial Standards and Accountability Bill, 2010, Citizen Grievance Redressal Bill, 2011, Lokpal and Lokayukta Bill, 2011, Prevention of Bribery of Foreign Public Officials Bill, 2011, Public Procurement Bill, 2012, The Benami Transaction (Prohibition) Bill, 2011 Rather than these laws there are more laws available to tackle to this issue and all are quite powerful. But, not sufficient to combat against corruption, because, the provisions of penalties are not enough in front of the size of the Black money. Think about it, if a person commits a crime like Hawala, Fodder scam or any other multimillion financial crimes in that condition, if he/she will be punished with the penalty of 50,000 or 2 lakh than, will this punishment justify it or not? Suggestion and Conclusion In this Article, so many acts, bills and laws discussed which were enacted to control the flow of money. From 1860 to till now, every government tried to control it, but not succeeded, and the black money growing likes an invincible demon. The law mentioned above and its provision may be able to control it for a moment but not permanently. Political involvements are one of the reasons, because in the maximum cases of corruption, illegal money laundering, Benami property, tax evasion etc the involvement of politician and government officials found. The unclear stand of Governments arising questions, that what is the reason behind the softness toward the corrupt politicians and official? Is government try to hide them or support them? It is not that, enacted laws are not able to control it, but it has not been implemented properly to dealing with this problem, an example of Mauritius is enough, because of the loophole in the treaties with Mauritius, it becomes the gateway of entrance of the illegal money laundering through round tripping. Finally, it concludes that the provision of punishment should be more strict in those law, which has been made, so that the criminal afraid to it, and must be properly implemented.

48 Section 5, 6, 7 of the Specific Bank Notes (Cessation of Liabilities) Act, 2016 49 Section 3and 9 of the Real Estate (Regulation and Development) Act, 2016 JETIR1810089 Journal of Emerging Technologies and Innovative Research (JETIR) www.jetir.org 495