This is Why India Needs a Conflict of Interest Law

The fact is that under the kind of conflict of interest laws other democracies have, Sushma Swaraj and Vasundhara Raje would have no defence at all.

India’s political class has set for itself such low standards of behaviour that a lot of what politicians do here would be outrightly declared as criminal misconduct in another democracy.

The Lalit Modi controversy has brought into sharp focus the absence of legal-ethical conduct among public persons and Parliament must take up the issue urgently. The priority must be to frame a modern law relating to conflict of interest, along the lines of what exists in the statute of the other countries like the United States.

After the expose of Sushma Swaraj’s “humanitarian favour” to Lalit Modi, the BJP’s immediate defence was, “At worst, it was an error of judgement, nothing more”. Some BJP defenders even argued that what Sushma did may have been morally wrong, but no illegality was committed. On Friday, the party fielded an official spokesperson at its headquarters to pronounce its considered verdict: “There is no technical and legal basis that you can say there is any point of impropriety (sic)“, BJP spokesperson Sudhanshu Trivedi said about both Swaraj and Rajasthan chief minister Vasundhara Raje.

The fact is that under the kind of conflict of interest laws other democracies have, Sushma Swaraj would have no defence at all.

Title 18 of US Code 208 provides the basic criminal conflict of interest statute in that country and “prohibits an executive branch employee from participating personally and substantially in a particular Government matter that will affect his own financial interests, as well as the financial interests of:

  • His spouse or minor child
  • His general partner
  • An organization in which he serves as an officer, director, trustee, general partner or employee, and
  • A person with whom he is negotiating for or has an arrangement concerning prospective employment.

If a similar provision covering criminal conflict of interest had existed in the Indian law, Swaraj would have got legally fixed. The fact that Lalit Modi, facing charges for money laundering, benefited from her discretionary help to get travel papers and the fact that Sushma’s husband had been his lawyer for more than 20 years and that her daughter was among the team of lawyers hired by Lalit Modi to argue the same issue before courts in India would make the external affairs minister’s case untenable.

Since we continue to treat conflict of interest as a moral issue and not strictly a legal one accompanied by criminal culpability, it is hardly surprising that we see blatant violations virtually every day.

Recently, a beedi manufacturer from Uttar Pradesh, Shyama Charan Gupta, was on a Parliamentary Committee which postponed the requirement for a more prominently displayed pictorial warning on cigarette packets even as Gupta waxed eloquent about how beedis were not such a big health hazard and that western research was biased against the Indian product. There could not have been a more obvious case of conflict of interest.

Jaitley and Ravi Shankar Prasad

Not many people in Lutyens’ Delhi are aware of the fact that Union finance minister Arun Jaitley has voluntarily recused himself from examining the files relating to the highly controversial Vodafone tax dispute – with the government making a tax demand on the company for over Rs.15,000 crore – because he had been advising Vodafone earlier in his capacity as a lawyer. Now Arun Jaitley has not declared this publicly but journalists familiar with the issue know this is the internal arrangement within the finance ministry. In my view, the finance minister must make this public so that it sets a benchmark for others in the government. Of course, the best course would be to enact a US-type conflict of interest law. Such a law will also require opposition MPs to declare their financial interest, if any, if a parliamentary committee, of which they are members, examines policy-legislative matters which may affect their own interests.

Some months ago, it was disclosed in the media that the telecom minister, Ravi Shankar Prasad, had been a legal advisor to the Reliance Industries group. Currently, as minister for telecom, he is overseeing the sector which impacts RIL’s ambitious 4G telecom project. As the project is launched by the end of this year, a lot of regulatory and policy issues will crop up in the 4G space. Prasad may well be advised to set new standards in the context of the current debate. Of course, he can also adopt a business-as-usual approach. He could rightly argue that Kapil Sibal too was a telecom minister and he examined policy which impacted his former client, Anil Ambani’s company, Reliance Communications. But times are changing and a stricter code of conduct ought to replace practices of the past. The writing on the wall is becoming clearer after the Sushma Swaraj-Lalit Modi episode.

The conflict of interest angle is even more blatant in the case of Lalit Modi and Vasundhara Raje.

Modi, a close friend of Raje’s, invests in her son’s company. That by itself is conflict of interest as per the US law. Even more shocking is the fact that Lalit Modi makes an investment at an over 900% premium on a share with a par value of Rs.10.

Raje’s son Dushyant has said no illegality has been committed because a private entity can pay any amount for one share to another private entity. After all, beauty lies in the eyes of the beholder! Robert Vadra was also overpaid for his land and licenses by DLF. Technically, under existing law, you cannot do anything about this. Remember, a Malaysian businessman called Ananda Krishnan had paid several times the value of the then leading DTH media company run by Zee TV to a fledgling outfit floated by the Maran family. This over payment for the shares of a new company had raised eyebrows then. There were both conflict of interest and possible money laundering aspects in the deal between the Marans and Ananda Krishnan.

The moral of the story is we urgently need laws to tackle such widespread violations of ethics and morality, which in current circumstances invite no punishment at all.

Note: This article has been edited to add the fact that Sushma Swaraj’s husband, Swaraj Kaushal, has been legal counsel to Lalit Modi for more than 20 years.