Damodaram Sanjivayya National Law University

Visakhapatnam, A.P., India

Project Title – Government Largesse and Public Accountability

Subject: Administrative Law

Name of the Faculty: K Sudha Ma’am

Name of The Student: Sanskar Jain

Roll No. 2018080

Sem 6
Acknowledgement

I would like to express my special thanks of gratitude to my teacher who gave me the golden
opportunity to do this wonderful project on the topic which also helped me in doing a lot of
research and I came to know about so many new things I am thankful to them.
Secondly, I would also like to thank my friends who helped me a lot in finalizing this project
within the limited time frame.
 Chapterisati0n

Abstract

Introduction

Against Government Largesse

Public Accountability

Landmark Judgements

Conclusion
Introduction

When Confucius’ disciple Zigong asked him about the government more than 2000 years
ago, he stated three things that a government required: weapons, food, and trust. He said that
if the ruler cannot keep his hold on all three, he should first give up weapons and then food.
However, what should be guarded till the end is trust because “without trust we cannot
stand”.

The need for public accountability exists due to the need for a relationship of trust between
the public sector and the public. It is about the principle of illustrating reliability,
competence, and honesty in a manner to permit the public to judge their leaders and trust
them in handling their money and resources.

This article explores the concept of public accountability, the evolution and scope of the
Doctrine of Public Accountability, the need for such a doctrine, and it discusses impediment
to transparency of government such as corruption. It further elaborates on a highly applauded
legislation of The RTI Act (2005) and highlights two cases that demonstrated the need for
public accountability.
Against Governement Largesse

A counter-intuitive paper on centre-state finances argues putting more money into the hands
of state governments could actually lower the rate of GDP growth for the economy. The
authors, Professors N R Bhanumurthy, Sukanya Bose and Sakshi Satija of the National
Institute of Public Finance and Policy (NIPFP) do an interesting number-crunching exercise
to show “higher devolution share of the states appear to result in marginally lower overall
growth. Conversely, lower devolution share to the States vis-a-vis the baseline causes
economic growth to be higher by 0.4 per cent for the 14th FC period on an average and 0.3
per cent over the 15th FC…”

The exercise is significant when there is so much debate on whether it is the states or the
Centre that is the bigger spendthrift. Spending on subsidies by the Centre that often seem to
go nowhere, farm loan waivers or, as in the case of city-states like Delhi, free power and free
travel on public transport, are all seen as freebies. But which are more disruptive? Farm loan
waivers are certainly one of those and their equivalent, the promise of free power by states
like Punjab and Delhi. The NIPFP paper argues that after the dust has settled, the Centre
makes better use of its resources than the states. “The higher revenues of the Centre rather
than the states might result in an improvement in the nature of public spending towards
greater investment than consumption and, therefore, lead to higher growth,” the paper says.
But this may not always be the case. An Elara Research report points out that "the ratio of
incremental capital outlay to incremental revenue receipts of States is budgeted at 0.2 in
FY20, unchanged from FY19”. This is significant when the budgets of the states have
worsened. Despite the stresses, states seem to be holding on to their capital budget, it says.

Yet there are problems. The latest S&P ratings action on India says the country “differs from
most regional and global peers in that its state and local governments also run persistently
high deficits. In combination with higher Central Government deficits…we forecast India's
general government fiscal shortfall will remain elevated, averaging approximately 7.3 per
cent per year through 2022”. So, irrespective of the argument of who spends more recklessly,
the combination means India’s rating will tend to remain low. Which is bad news for both,
since this in turn means the cost of borrowings (externally and even internally) will remain
high for everyone concerned if the level of spending on these schemes does not come down.
An example of the run-off from these costs is the way Uttar Pradesh is playing around with
the pension liabilities of its employees. A state audit report notes the state has not paid up Rs
1,379.95 crore towards the pension of its employees. “…the State Government has created
uncertainty in respect of benefits due to the employees… thus leading to possible failure of
the scheme itself”. These are serious words from the Comptroller and Auditor General.
It is in this context that the 15th Finance Commission was asked to check out if the states
were being populist. In other words, could untied aid to them from the Centre be tied to any
standard of responsible behaviour? But as former finance secretary, Sumit Bose points out,
the definition of populism remains unclear. Still it may not be difficult to smell out which is a
populist scheme. The Maharashtra government has announced a loan waiver of up to Rs 2
lakh for farmers, with a cut-off date of September 30, 2019 and providing relief to non-
defaulting farmers who have a loan of above Rs 2 lakh. An SBI Research report points out:
“Going by State’s previous experience on farm loan waiver, this time the cost could be at
least Rs 45,000 crore, even if we hypothetically assume the farmers who will get the
maximum benefit and complete loan waiver are unchanged from the last loan waiver.”
In Delhi, the CAG points out “Losses in two power companies (Delhi Power Company
Limited of Rs 1,524 crore and Delhi Transco Limited, of Rs 1,206 crore) and Delhi Transport
Corporation (Rs 29,143 crore) accounted for 99.99 per cent of accumulated losses. For Delhi
Jal Board, which supplies water to the city, the loans outstanding amounted to Rs 26,268.89
crore, as on March 31, 2018. These figures are not surprising. Whether in Maharashtra or
Delhi, they have to do with the pet peeves of respective chief ministers. Cleary the trend
flourished initially under the cash-rich states of Tamil Nadu, but has now caught on
nationally.

The interim report of the Commission, headed by N K Singh, has not offered any comment
on this issue. In October they will possibly have no choice but to address the challenge
Public Accountability

Accountability in itself has a wide reaching ambit, however, public accountability must be
understood in the context of the relationship between the general public and its government.
Democratic countries have been founded upon the establishment of an elected legislature, and
on that account, a system of checks and balances. It has multiple authorities that are
independent of each other and have the power to hold each other accountable.

In India, public accountability is a product of its federal structure, consisting of a two way
process:

1. Upward accountability: Control of the government, such as the jurisdiction to

dissolve, approve and audit fiscal plans of administrative authorities.
2. Downward accountability: This is a weaker authority, as it rests with the public
only through the power of the electoral process.

The Indian Scenario

Public Accountability in India suffers from practical application. Systems of formal

accountability, such as right to information laws and experiments with e-governance, are set
up all over the country, however, they are not put in place with an intention for them to work.
Good laws, for instance The RTI Act (2005), have been passed, but enforcement and
monitoring is overlooked. Mandates are formulated and funds are provided to public
agencies, but the government still falls short on proper assessment and penalisation to hold
them accountable. Although accounts are publicly audited and parliamentary reviews are
regularly done, however, follow-ups would most likely leave a desire for more transparency.
In the current circumstance, it is evident that formal mechanisms work as long as actual
accountability is guaranteed on ground.

Doctrine of Public Accountability

In the last decade, Doctrine of Public Accountability has been materialising steadily as a facet
of administrative law. The development of this doctrine is key in establishing a check in the
increase of misuse of power by government servants and provision of a just and speedy relief
to people who may have suffered at the hands of such exploitation. The premise of this
doctrine is that the administrative authorities power and discretion is a public trust placed in
their hands and should be exercised in realisation of such conviction.

Evolution of The Doctrine

The Doctrine of Public Accountability had and continues to have its growth through cases
discussed and argued upon in courts. The case of Attorney General of Hong Kong v Reid
(1993) is one of the most illustrative cases of bribes and constructive trusts i.e., a judicial
remedy for a party deprived of their rights due to a person holding their property through
illegal means.

In this case, a prosecutor appointed by the Crown was paid in bribes for burying criminal
cases. With that bribe money, he purchased certain properties. It was held by the court that a
gift received and accepted by a public officer as payment to breach his public duties is a
bribe. Further, it was held that there existed a fiduciary duty, therefore, the owners are
constructive trustees of the Crown. This meant that money was owed to the person who had
suffered by the fiduciary, and he had to hold money acquired as a constructive trust.

This case was further followed in India by the Supreme Court in the case of Attorney General
of India v Amritlal Prajivandas (1994). In this case, the validity of the SAFEMA Act (1976),
this mandated release of properties that were received as incentives for smuggling or some
other malafide activity.

The Doctrine was further elaborated upon in the famous case of DDA v Skipper Construction
Corporation (1996). In this case, the general public was prioritised and said to be defrauded
even if there existed a fiduciary relationship or not or there was involvement of a public
officer or not. The Supreme Court said that it has the authority to pass orders irrespective of
the above-mentioned requirements, if there was an illegal acquirement of properties. It was
also held that Indian courts are not simply courts of law but also courts of equity.

Through another judgment, Nilabati Behera v State of Orissa (1993), courts now award
compensation and exemplary costs are imposed on fundamental rights violation because of
power abuse by a public officer. In this case, it was held that recognition of such a claim
exists under public law. Human rights of the aggrieved were recommended to be given
constitutional protection through public law review under Article 226 and Article 32 of The
Constitution of India (1950). There is also evidence of Judicial Activism in this doctrine as
courts recognize the proper accountability of authorities that do not discharge their statutory
duty efficiently.

The Need for The Doctrine: Corruption

Public corruption is as old as public administration itself. While countries endeavour to

become social welfare states, it has inevitably resulted in the expansion of bureaucracy in size
as well as in number. This expansion has consequently resulted in a huge amount of work for
administrative authorities and the application of their discretion and power. It is an age-old
tale, discretion and power always bring with the possibility of their abuse.

In its 14th report, the Law Commission had emphasised the disturbing amount of
administrative action in India that can go unchecked as it uses its discretionary powers
without public accountability. It also highlighted the increase in number of administrative
adjudication evident by the increase in administrative tribunals. The issue of public
accountability is foundationally connected with the issues of executive jurisdiction, delegated
legislation, and adjudication.

The most important body that enforces public accountability is the Central Bureau of
Investigation (CBI). Earlier, it existed under the Executive but that overshadowed its purpose
to enforce accountability in the government itself due to the absence of independence,
therefore, it was separated by the Supreme Court and brought under the aegis of the Central
Vigilance Commission (CVC). Other directions were given by the Court to ensure the
purpose of the CBI is not impeded and to make it the prime body of enforcing transparency in
government functions.

Sanathan Commission had highlighted the problem of India’s corruption problem by

observing that witnesses told them how a regular percentage is paid by the parties to the
transaction of purchase, construction, sale, and other businesses on the government’s behalf.
This percentage is distributed among officials in agreed proportions.
Corruption cannot be fought against unless systemic changes are made in the method of
government functioning in public administration. Depoliticisation of bureaucracy and their
only job should be to function as per the requirements of their profession. Government’s
success or failure rate is hugely dependent on public administration efficiency, however, if it
is regularly interfered with and asked to function in a way completely opposite to its mandate,
it will never be efficient.

A noble legislation introduced for the benefit of transparency in public administration is

the Prevention of Corruption Act (1988). In the PV Narsimha Rao v State (CBI/SPE) (JMM
Bribery Case) (1998), the court held that public servants’ ambit of the PCA will cover
Members of Parliament and Members of Legislative Assemblies. Immunity must not be
granted to these persons under Article 105 of The Constitution of India (1950) for offences
committed outside the Parliament/Legislature.

However, the judgement was heavily criticised, for blindsiding the public by naming
corruption when Article 105 does not deal with enabling a provision against corruption.
While the immunity exists for legislative independence, however, give and take of bribes
does not come under the legislative process.

RTI as A Tool to Enforce the Doctrine

Absence of participation by the general public can be attributed to lack of information about
the government process. The Supreme Court, while giving opinion, in the case of SP Gupta v
President of India (1981), on the importance of an open government, said that the the demand
for government’s openness is grounded in the reason that the exercise of their right to vote,
choosing their leaders for the next five years, and then returning into passivity without any
interest in the government is not what democracy is.

In 1975, during the case of Raj Narain v State of Uttar Pradesh, the Court held that secrets
must not exist in a government where agents are held responsible for their conduct. In 1982,
during the S.P. Gupta Case, the court elaborated on the positive trend of liberal democracies
moving towards an open government and how India should be no exception to this new
democratic culture. In 1997, in the case of Dinesh Trivedi v Union of India (1997), it was
held that to secure participation of the general public in the democratic process, vital
decisions taken by the government should be conveyed to them and the basis thereof.

The Supreme Court judgment, in the Raj Narain case, of right to know in 1975 to the
enactment of Right To Information (RTI) Act in 2005, the country has come a long way. The
passage of this act made way for a new administrative culture and provide a boost to
democracy. The Chief Information Commissioner of India hailed the legislation as
outstanding and unprecedented as per the response of the public.

Landmark legislation, the RTI Act has all central, state, and local governments and public
authorities under its ambit. It also has applicability on the judiciary and the legislature.
‘Information’ has been defined as including the right to inspect work, documents, and records
that are held by the government and also permits the extraction of certified samples for
verification.

Over the years, there have been many appeals to amend the law to allow the refusal of
information that is irrelevant to an applicant. However, refusal of information is not the
answer. Proactive disclosure can prove to be a highly positive step. The RTI Act in itself has
its basis on the principle of ‘Maximum Disclosure’ and ‘Minimum Exceptions’, i.e. revealing
almost all information and making an exception in cases where the information is absolutely
necessary to be kept confidential. While government offices are flooded with frivolous
applications, the way to deal with this is to make information available to the public domain
voluntarily. Rather than cursing the exposure of the RTI Act, public officials should treat it as
an allowance of expression of opinions and a shield against claims of manipulation.

RTI is continuously proving to be an effective tool for tackling corruption. Achievements of

those like the civil society organisation ‘Parivartan’ in Delhi, wherein they collected
information about the flow of public funds is the best illustration of how information can be
used to hold the government accountable. However, it is evident that more work needs to be
done. In a report by Transparency International, If India was to reduce corruption to the level
of Scandinavian countries, there would be a 12% increase in investment and a 1.5% per
annum growth rate in the GDP.
Landmark Judgments

Medical Council of India Case

Facts

In Dr. Ketan Desai v The State (2010), a petition was filed against Ketan Desai, Medical
Council of India President, for large scale bungling in medical admissions of medical
colleges in Pune, Ghaziabad, and Punjab as well as granting them recognition. Details of an
income tax raid were presented in the petition, wherein it showed the existence of an
unexplained receipt of 6.5 million rupees through bank drafts in wife’s, daughter’s name.

Judgment

Since, the objective of the Medical Council is to maintain uniform standards of the Council
and recognise/de-recognise medical colleges on the basis of such standards, Desai’s actions
came directly under the ambit of a public servant. It was ruled that Ketan Desai had taken
advantage of his position and misused such power as president. He was removed from the
position as well as the office and also penalised with fine and custody. Through such
incidents, the public is defrauded while public servants benefit themselves.

Commonwealth Games Case

Facts

In Suresh Kalmadi v The CBI (2012), Chief of the Organising Committee of the CWG, had
acquired the government a massive loss due awarding the TSR contract to an expensive firm.
Facts revealed that it was a conspiracy to award an expensive contract on purpose even
though there was a much cheaper option. A total loss of about Rs 95 Crore was calculated
due the difference of costs between Swiss Timing and MSL Spain. After his arrest, Kalmadi
had filed an appeal in the Supreme Court which is still ongoing.
Judgment

Owing to the malpractices of such public servants, the government had to bear the burden of
costs at a rate 1000% higher than what it would’ve originally cost. The taxpayers have been
defrauded and will have to pay the price for lack of accountability. The Court must ensure
that such offenders pay for their actions.
Conclusion

The task of the government does not come to an end after creating institutions, laws and
measures; it’s when the real job of making sure these laws are effective starts. Indian
Judiciary has been proactive in the area of public administration and the evolution of this
doctrine. However, if corruption is not tackled with, proper accountability for execution of
roles becomes a long lost dream.

By passing legislation such The RTI Act (2005), the government has illustrated its intention
to establish good governance, however, a lot still needs to be done to ensure effective
application of this act and that comes with public officials taking a step forward to ensure the
rightful usage of taxpayers money and transparency of government. Small steps such as
implementation of performance appraisal mechanisms for honest officials can go a long way
to incentivize other officials to follow suit.