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PIL re: arbitrary appointment of new CAG

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    �Subject: PIL re: arbitrary appointment of new CAG �Main Point: PIL AGAINST THE ILLEGAL AND ARBITRARY APPOINTMENT OF THE NEW COMPTROLLER & AUDITOR GENERAL
    Message 1 of 1 , Jun 4, 2013
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      �Subject:PIL re: arbitrary appointment of new CAG
      �Main Point:PIL AGAINST THE ILLEGAL AND ARBITRARY APPOINTMENT OF THE NEW COMPTROLLER & AUDITOR GENERAL
      �Category of Topic:PIL
      �Message:

      SYNOPSIS of the PIL

      The petitioners are filing the instant writ petition in public interest seeking a writ of quo warranto or any other appropriate writ to declare the appointment of Shri Shashi Kant Sharma (hereinafter ‘Respondent No. 2’) as India’s new Comptroller & Auditor General of India (hereinafter ‘CAG’) as void. The appointment of Respondent No. 2 as CAG is liable to be declared non est or void as it is made arbitrarily by a procedure that does not withstand the test of constitutionality, also on the ground of conflict of interest, and ‘Nemo judex in causa sua’, i.e. no person shall be a judge in his own cause.

      For the detailed reasons given in the petition, petitioners are also seeking a direction for the future to the Union of India to frame a transparent selection procedure based on definite criteria, and by calling for applications & nominations, and by constituting a broad-based non-partisan selection committee, to recommend the most suitable person for appointment as the CAG to the President of India.

      CAG is constitutional auditor who acts as a watchdog over the expenditure & accounts of the Central Government, its instrumentalities and the State Governments. He has been given a stature and oath akin to the Judge of the Supreme Court of India and has been described as the “most important officer under the Constitution” by Dr. B R Ambedkar and others as recorded in the Constituent Assembly Debates.

      Arbitrary Selection

      The Constitution of India states that CAG shall be appointed by the President of India under his warrant and seal. The method of selection of the CAG has not been prescribed by the Constitution, but it is obvious that the process of selection has to be constitutional, non-arbitrary and in a manner that enables the selection of best person for the office. This Hon’ble Court has repeatedly held in a large number of judgments that every selection must be after following a process consistent with the rule of law. The process must be non-arbitrary, transparent and designed to select the best candidate. Since the office of the CAG acts as watchdog over the Government, the process of appointment cannot be at the sole discretion of the executive and has to be non-partisan.

      As far as the office of the CAG is concerned, the Government has followed no system for selection. There is no selection committee, no criteria, no transparency and no call for applications or nominations. The process is entirely arbitrary and opaque, and thus completely violative of rule of law and several judgments of this Hon’ble Court. Also, the zone of consideration has been restricted to civil servants, a limitation not found in the Constitution. An RTI application was filed with the Government on 21.02.2013 seeking information as to what is the system of appointment, whether there is any selection committee, what is the zone of consideration, what are the criteria etc. The response of the Government clearly shows that there is no search committee, no criterion, no system, no call for applications or nominations, and is therefore arbitrary ‘pick and choose’.

      There is no basis in law for the argument that since the Constitution does not prescribe any procedure for the appointment of the CAG means that the selection can be at the untrammeled discretion of the Government. If a man on the street is picked up and appointed without any audit credentials, then such an appointment would be illegal. If the Government exercises its discretion without application of mind, or by draw of lots or by throw of dice, or by an act of patronage, then such a selection would obviously be illegal. The fact the selection has to be made to such a high Constitutional post, ipso facto, would mean that there has to be a proper criteria, broad-based selection committee, call for applications and nominations, and set procedure for inter se evaluation of merit. These imperatives are particularly relevant for the selection of the CAG, a functionary who is supposed to be completely independent of the Government and unbiased in his auditing of Governmental actions and spending.

      In regard to another constitutional post of Chairperson of Public Service Commissions, a similar provision regarding appointment by the President is made in the Constitution, without prescribing any method for selection. In a recent judgment, this Hon’ble Court reaffirmed the legal principle that appointment to constitutional posts where the constitution has not prescribed any procedure cannot be arbitrary and has to be made after proper selection of the best candidate. This Hon’ble Court while holding the above upheld the judgment of the High Court quashing the appointment of Chairperson of State Public Service Commission and laying down detailed guidelines for selection in the future. (State of Punjab vs Salil Sabhlok dated 15.02.2013)

      In the case of Chief Information Commissioner and Information Commissioners appointed under the Right to Information Act 2005, there is no procedure prescribed for shortlisting the candidates. The RTI Act only states that the appointment would be made by the President on the recommendation of the Selection Committee consisting of Prime Minister, one Cabinet Minister and Leader of Opposition. This Hon’ble Court has directed that a short list would have to be prepared in a fair and transparent manner after calling for applications by an advertisement, and on the basis of rational criteria. (Namit Sharma vs Union of India, (2013) 1 SCC 745).

      In the CVC appointment judgment (CPIL vs UoI, (2011) 4 SCC 1), this Hon’ble Court held that shortlisting of candidates must be done on the basis of rational criteria with reasons, and all persons empanelled would be of unimpeachable integrity. This Hon’ble Court also directed that selection process must be fair and transparent. Though the CVC Act of 2003 was silent on the process of short-listing of candidates, detailed directions were given by this Hon’ble Court so that meritocratic selection can be made that could sub serve the purpose of the statute.

      In the present case, Respondent No. 2 has been arbitrarily selected without any transparency and without any criteria. Moreover, he suffers from a grave conflict of interest as is shown below, making the appointment unconstitutional and liable to declared non est and void.

      Conflict of Interest

      Before being appointed as the CAG, Respondent No. 2 had served in key positions in the Ministry of Defence that involved decision-making powers over purchases running into tens of lakhs of crores of rupees. During the period 2003-2007 he was the Joint Secretary in the Ministry of Defence. In 2007, after serving a brief stint as Additional Secretary, the Government posted him as the Director General of Acquisitions in charge of all defence purchases, where he served till September 2010. Thereafter, he served briefly as Officer on Special Duty, and was appointed as Defence Secretary in July 2011. He remained as Defence Secretary until recently when he was appointed as the CAG by the Government.

      During the last 6 years, when Respondent no. 2 was involved in clearing all major defence purchases either as DG (Acquisitions) or as the Defence Secretary, serious defence scandals of mammoth proportions have come out in the public domain. One of the defence deal that is a major source of embarrassment to the Government involves the procurement of 12 VVIP choppers for the Indian Air Force from Italy. This deal was cleared by Respondent No. 2 in 2010 when he was the DG (Acquisition). This Rs 3,500-crore deal with an Anglo-Italian firm Agusta Westland has been investigated by Italy and Italian prosecutors have in their chargesheet stated that a kickback of at least Rs 350 crore was paid to middlemen to swing the deal in the company’s favour. Pursuant to this, the CBI has registered an FIR and is investigating into the allegations of possible kickbacks in which 11 persons have been named as accused, including the former chief of Indian Air Force.

      The CAG had also made serious observations in the recent past on the defence ministry’s procurement policy, and in its Compliance Audit--Defence Services (Air Force and Navy) report, in November 2012, CAG had pointed at major deficiencies in the defence procurement. It noted that between 2007 and 2011, India concluded five offset contracts in the defence sector worth Rs 3410 crores that were not in consonance with the provisions laid down in the defence procurement procedure.

      The Admiral Gorshkov deal coincides with the tenure of Respondent No. 2 in the Defence Ministry. It involved the conversion of Russia ’s discarded warship�Admiral Gorshkov�into a full modern aircraft carrier, renamed INS Vikramaditya, originally scheduled to be delivered by August 2008 at a total cost of $947 million. This amount was to refurbish and convert the scrapped ship that was a gift from Russia.� Even now the ship has not been delivered and no one knows when it will be delivered, because the aircraft carrier has failed the ‘sea trials’ that have been carried out so far. The cost has gone up to a whopping $ 2.9 billion for this second-hand ship, which is 60 per cent higher than the cost of a new aircraft carrier of similar specifications. Soon after a huge cost escalation was given when Respondent No. 2 was DG Acquisition, a 2009 report of the CAG, states: “The objective of inducting an aircraft carrier in time to fill the gap in the Indian Navy has not been achieved.� The cost of acquisition has more than doubled in four years.� At best, the Indian Navy would be acquiring, belatedly, a second-hand ship with a limited life span, by paying significantly more than what it would have paid for a new ship.

      The tenure of Respondent No. 2 also saw the eruption of the scam relating to Tatra trucks. Respondent No. 2 as DG acquisition had cleared all purchases in 2008 and 2009. In 2011, when the former Army Chief, General VK Singh, tried to break the chain by refusing to accept a bribe of Rs. 14 crore to extend the yearly contract for Tatra trucks at a highly inflated price and complained to the Defence Minister, there was a huge uproar in the country and a CBI investigation was ordered. By then, seven thousand vehicles had been purchased with an approximate mark up of Rs 75 lakh, adding up to Rs. 5,250 crore of the taxpayer’s money. Soon after General VK Singh demitted office, the purchases commenced again under Respondent No. 2, now as the Defence Secretary.

      It is to be noted that the defence budget has grown hugely in the last decade, particularly in the last 5 years. In 2010-11, it was Rs. 1,47,334 crore, in 2011-12 it rose to Rs.1,64,415 crore, in 2012-13 it became Rs.1,93,407 crore and now in 2013-14 it is Rs. 2,03,672 crore. Thus, a major share of the annual budget is accounted for by the defence procurements and acquisitions. One of the biggest tasks of the CAG is to audit these expenditures cleared by the Defence Ministry. Under the circumstance, the Government ignored this crucial fact when it appointed Respondent No. 2 as the CAG, creating a clear situation of conflict of interest and virtually making him a judge in his own cause, as he would be auditing the defence purchases he himself sanctioned.

      There is no provision in the Constitution or in the CAG Act for a CAG to recuse himself in situations where clear conflict of interest is present. The very fact that the CAG would need to recuse himself marks a negation of the concept of a constitutional auditor and hence cannot be permitted. This is more so because the office of the CAG is a single-member body unlike the Supreme Court, the Election Commission or the Central Vigilance Commission. It may be recalled here that in the CVC case, the then CVC, Mr. P J Thomas, who had been the Telecom Secretary before his appointment, had stated that he would recuse himself whenever the Central Vigilance Commission was called upon to deal with the 2G spectrum scam investigations. This assurance of his was recorded in the 2G judgment of 16.12.2010 of this Hon’ble Court ((2011) 1 SCC 560, CPIL vs UoI). However, this Hon’ble Court still struck down his appointment as CVC vide judgment dated 03.03.2011 on the ground of his appointment having compromised the institutional integrity ((2011) 4 SCC 1, CPIL vs UoI).

      Recusing himself is a solution that is simply not available to the CAG. Major defence procurement decisions cannot be exempted from audit. Any such exemption would surely be unconstitutional. If the CAG recuses himself then that would mean that audit cannot be conducted and no report can be submitted to Parliament since none other than the CAG can sign an Audit Report.

      If right at the start of an appointment, a question of 'recusing' comes up prominently, then the appointment is ipso facto illegal. One can understand if an unforeseen difficulty arises after the appointment is made and a way out has to be found, but if that difficulty is foreseen before the appointment is made, then the only recourse is clearly to refrain from making such an appointment. If, in the present case, this difficulty was not foreseen and considered, then that is clearly a case of non-application of mind and a failure to take into account the material and relevant facts. That would also render the appointment non est in the eyes of law.

      In the CVC judgment referred to above, this Hon’ble Court declared the recommendation of the selection committee to the President for appointment of the then CVC as non est in law. This was so held since this Hon’ble Court found that the appointment would dilute the integrity of the statutory institution of the Central Vigilance Commission. This Court held that the test is whether the individual would be able to perform his duties ((2011) 4 SCC 1, CPIL vs UoI):

      If a duty is cast under the proviso to Section 4(1) on the HPC to recommend to the President the name of the selected candidate, the integrity of that decision making process is got to ensure that the powers are exercised for the purposes and in the manner envisaged by the said Act, otherwise such recommendation will have no existence in the eye of law.

      The HPC must also take into consideration the question of institutional competency into account. If the selection adversely affects institutional competency and functioning then it shall be the duty of the HPC not to recommend such a candidate. Thus, the institutional integrity is the primary consideration which the HPC is required to consider while making recommendation under Section 4 for appointment of Central Vigilance Commissioner. In the present case, this vital aspect has not been taken into account by the HPC while recommending the name of Shri P.J. Thomas for appointment as Central Vigilance Commissioner. We do not wish to discount personal integrity of the candidate. What we are emphasizing is that institutional integrity of an institution like CVC has got to be kept in mind while recommending the name of the candidate. Whether the incumbent would or would not be able to function? Whether the working of the Institution would suffer? If so, would it not be the duty of the HPC not to recommend the person.

      In this connection the HPC has also to keep in mind the object and the policy behind enactment of the 2003 Act… These provisions indicate that the office of the Central Vigilance Commissioner is not only given independence and insulation from external influences, it also indicates that such protections are given in order to enable the Institution of CVC to work in a free and fair environment. The prescribed form of oath under Section 5(3) requires Central Vigilance Commissioner to uphold the sovereignty and integrity of the country and to perform his duties without fear or favour. All these provisions indicate that CVC is an integrity institution.

      This is what we have repeatedly emphasized in our judgment – institution is more important than individual(s). For the above reasons, it is declared that the recommendation made by the HPC on 3rd September, 2010 is non-est in law.

      Therefore this Hon’ble Court clearly found that a person who is himself the subject of scrutiny, irrespective of his own personal integrity, would not be able to perform his duties impartially and this would affect his functioning. Hence on the test of institutional integrity, this Hon’ble Court held such an appointment to be illegal. The above judgment squarely applies with much greater force in the present case. Objectivity and fairness are the core principle that governs auditing. The impugned appointment of a person with such direct conflict of interest is also against the code of ethics of auditors. An auditor, who for whatsoever reason cannot be, or is expected not to be, unbiased, cannot be allowed to function as an auditor, more so as India’s constitutional auditor of the public finances.

      �Additional Information 1:http://www.karmayog.org/message/upload/6085/1/CAG.doc
      �Name:M.G.Devasahayam
      �Location:Chennai
      �Email 1:deva1940@...
      �Information about yourself:FORMER IAS & ARMY OFFICER
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