- The Washington Times - Friday, January 10, 2003

NEW DELHI, Jan. 10 (UPI) — The fundamental and well-known difference between the presidential form of democracy, as practiced in the United States, and the parliamentary system in operation in India or Britain is that the executive in a presidential system does not emerge from the legislature while in a parliamentary system the executive is a creature of the legislature.

Thus even bureaucrats of the executive can be summoned before the legislature on Capitol Hill, but in Westminster or New Delhi's Parliament House it is the minister and the minister alone, as a member of Parliament, which he has to be to become a minister, who is answerable to and responsible to Parliament.

Ministers in a parliamentary system have often tried to draw a distinction between mistakes of implementation, for which they say they cannot be held responsible, and mistakes of policy, for which they readily admit they are responsible.

The landmark judicial determination of the ambit of ministerial responsibility was perhaps in Britain in the 1920s where it was laid down in the Cricket Downs case that the minister had to bear the responsibility for major administrative decisions flowing out of policy decisions. The case related to a plot of land that during World War I had been acquired by the king's government for military purposes but had not in fact been put to military use. The courts held that the minister could not escape responsibility for the deprivation inflicted on the community that originally possessed the land on the plea that such matters are really decided by the civil service instead of by ministers.

In India's transition from a socialist to a market-oriented economy the question of the minister's responsibility for errors committed by his ministry has been further complicated by the need for independent statutory regulators to preserve the integrity of the markets, in the absence of which the individual investor, particularly the small investor who has no way of finding out on his own whether the market is being rigged, gets smashed when the market gets disrupted. Can such a regulator's sins of omission and commission be laid at the door of the minister?

This is the constitutional issue at the heart of a series of scams in India's capital markets, which have dotted the transition from socialism to the market over the last decade. The most dramatic was a scandal involving government securities and nationalized banks in the early '90s. The latest is a scam involving the stock markets through the boom of 1999-2000 and the bust of 2001, which plunged the stock market index to half its peak level, where the market has stagnated since it went bust in March-April 2001.

In between, there have been a series of other capital market scams, including promoters who put out glitzy prospectuses, collected millions and then simply vanished from view; the cumbersomely titled "non-banking financial corporations" which took vast deposits from a duped public and then decamped wrapping themselves in arcane legalities; and "plantation companies," reminiscent of the South Sea bubble of the 18th century and the 19th century joint stock companies which sold gullible investors the idea of gold to be found in bird-droppings, guana, in exotic locales of Latin America, promising a teak tree to your grandchild if you put your money today in a teak seedling!

But however many such scandals have occurred in the past decade of India going capitalist, nothing has caused a public outcry louder than a government-promoted mutual fund, The Unit Trust of India, going bust in the wake of the stock-market collapse of spring 2001. Its flagship scheme, US-64, so called because it was launched in 1964 to mobilize the household savings of the housewife and the pensioner, and had grown under socialism into not only the single most important instrument of small savings of 150 million Indians but had also led to UTI becoming the single biggest domestic player in our capital markets.

When there is a grave breakdown in governance, the Indian Parliament has evolved the device of a joint select committee of both Houses, known popularly as a Joint Parliamentary Committee, to undertake an extensive enquiry into what has gone wrong. The JPC is entitled to summon all government files — secret or otherwise — and take evidence from all concerned, including the minister.

I have been a member of the JPC set up a decade ago to enquire into the securities scandal as also of the JPC set up in 2001 to enquire into the stock-market/UTI scams, which has just submitted its report. The report runs to 500 pages and an entire volume of annexes, so there is no scope for summarizing its findings in this brief column. In essence, however, the JPC have faulted the Ministry of Finance in no less than 52 paragraphs for various sins of omission and commission, which have led to hundreds of millions of investors losing several billion of their hard-earned savings. Yashwant Sinha, the minister concerned, says his ministry has been named but he personally has not been named, so why should he resign?

Ironically, this minister was a fellow-member of mine in the previous JPC, which adumbrated the doctrine of ministerial responsibility. The minister of finance at the time had argued before that JPC that a minister is responsible for policy decisions and cannot be held personally responsible for administrative mistakes made by officials of his ministry.

Along with the rest of us, Sinha a decade ago rejected this argument and held that in terms of "the constitutional jurisprudence under which the parliamentary system works, such a distinction cannot be sustained." This doctrine has been recalled by the present JPC in the very words of the previous JPC and it is then asserted "ministerial responsibility for this report flows from the same principles." Yashwant Sinha is thus hoist with his own petard. Instead of dong the right and honorable thing — putting in his papers — he has rhetorically asked what else can one expect of the opposition but the demand for his resignation?

The answer, of course, is that what is sauce for the goose is sauce for the gander. However, for that answer to be given the nation will have to await the reconvening of Parliament in the last week of February. Sinha has gotten himself a further two-month lease of ministerial life because the JPC report was presented on the penultimate day of the last session. It will come up for consideration only after Parliament is reconvened. We will then see whether morality wins — or the brute Parliamentary majority of the Treasury benches.

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(Mani Shankar Aiyar is a member of the Indian Parliament representing the Congress Party. His column is published weekly.)

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