Law,Corruption and Development Vivek Sai

LAW , CORRUPTION AND DEVELOPMENT

Project work on

L aw, Corr Corr uption and D evel vel opme opment nt Prof . H anumant Yadav Yadav (FACUL TY OF OF ECONOM ECONOM I CS) CS) SUBM I TTED BY: Vivek Vivek k umar sai (I I I rd Semes mester, ter, Roll No.146) No.146) SecSec- C

B.A. LL.B. SUBM I TTED ON: 19 September, September, 2011 20 11

HI DAYATULLAH DAYATULLAH NATIONAL NATIONAL LAW UNI VERS VERSITY Raipur (C.G.) (C.G.)

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Table of Contents: 

Acknowledgment………………………………………………..(i)

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Objectives…………………………………………………….....(ii)

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Research Methodology………………………………………….(ii)

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Introduction……………………………………………………….5

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(a) Law, (b) corruption ……………………………………… …5

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(c) Development ……………………..…………………………...5

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Causes of corruption and development……………………………5

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Indian economy,development under the law and corruption ……………………………………………………...……………...6 Measurement taken by government for the law,corruption and development ………………………………………………………9

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Corruption perception index………………………………………12

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The law deals with the corruption and development………………14

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Conclusion………………………………………………………….17

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References………………………………………………………….18

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ACKNOWLEDGEMENT Thanks to the Almighty God who gave me the strength to accomplish the project with sheer hard work and honesty.

May I observe the protocol to show my deep gratitude to the venerated Facult y-in-charge

Prof. Hanumant Yadav , for his kind gesture in allotting me such a wonderful and elucidating project topic. Her sincere and honest approach have always inspired me and pulled me back on track whenever I went astray.

Last, but by no means the least, I would like to thank all the members of HNLU family in general and my blooming and charismatic friends in particular for their wholehearted cooperation throughout the odyssey.

Vivek kumar sai (B.A-LL.B, III SEMESTER)

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Objectives: 

Law terms to economic

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Economic corruption or causes



Economic development

Research Methodology: This research paper is descriptive and analytical – a doctrinal in approach. It is largely based on secondary and electronic sources. Books and other reference materials from the Hidayatullah National Law University library are primarily helpful for the completion of this research paper.

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INTRODUCTION Law :- the law of variable propotion,then return to scale and in the next chapter

equal product curves .there are three laws of returns known to economist ,the law of diminishing ,increasing and constant return. There is said increasing, constant returns according as the marginal return rise, fall or remain unchanged as the quantity of a factor of production is increased in term of coast .there three laws are only three aspects of one law. The law of variable proportion (b) Corruption:- its is not easy to define the corruption .but in narrow sense, corruption is mostly concerned in „bribery „and it takes several forms .demanding

and accepting pecuniary favours by public person either for

performing an assigned job or for extending out of turn favour .offering bribes, particularly for undue and out of turn favour .pilferage and seepage of public funds. use of public office for personal pecuniary gains and demanding and accepting commission (c) Development:- in a development sense, corruption appears as a factor reflecting deviation from the avowed objectives the state consequently ,institution to govern the inter relationship between the citizen and the state are used instead for personal enrichment and the provision of benefit to the 1

corruption .

Causes of l aw, cor r uption and development 1. were there the scarcity of goods and services, corruption raised iths head and these scare goods are made available to needy at the price which include a premium. 2. the system of control and licence provide bureaucrats opportunities to force the people to pay hush money .it make a major cause of corruption in the post independence model of our country.

1

Rose Ackerman(1999),corruption and government, causes consequence and reforms

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3. Coplex law and procedures which are prescribed by the state for the certain approvals and sanction provides dishonest bureaucracy enough scope to harass the public and thus force it to pay the official. 4. low salaries of public servant especially the lower level bribes act as incentives payment to clear files . 5. Protection provides to industrialist and businessman to steel po wer also led to corruption by department official and in some case .connivance of politician also found for receiving kickbacks. 6. Incresing tolerance in Indian society about corruption, treating as a way of life also perpetuates the growth of corruption. Failure of society to create institution to tackle case of corruption .more especially in high palce,create feeling of helplessness about the corruption among the masses

I ndi an economy development u nder the law and corr upti on In many parts of the world, however, there are serious challenges and resource Constraints to development, as defined above. Large segments of the population face crushing poverty. Infrastructures and services in housing, health, education and employment are not sufficient to meet basic needs. Vast numbers of people are unemployed or under-employed. in a globalizing world the increasing interconnectedness of nations and peoples has made the differences between them more glaring. A girl born in Japan today may have a 50% chance of seeing the 22nd century – while a newborn in Afghanistan has a 1 in 4 chance of dying before age 5. And the richest 5% of the world‟s people have incomes 114 times those of the poorest 5%.”13 Moreover, many countries have recently experienced or are experiencing strife and conflict, and citizens do not have guarantees that their basic human rights will be respected. Under these difficult conditions, public officials in developing countries have to take the lead in settling conflicts, rebuilding nations, setting up infrastructures, and striving to develop prosperous societies. In highly centralized states, public servants owe ECONOMICS

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their positions exclusively to party loyalty or are pressured to become partisan, facing punishment upon refusal. Their decisions in carrying out their duties will be shaped more by party expediencies than public interest. In rapidly decentralizing states, public officials wield enormous power as they decide on the future of state assets. If their societies offer few opportunities for economic advancement for them or their family members, they will face enormous temptations to profit personally while divesting of these assets. These conditions make corruption seem inevitable and a necessary evil in developing countries and countries in transition. So does underdevelopment cause corruption or does corruption cause underdevelopment? The two processes seem to be iterative. There are pressures from many sides that developing countries and countries in transition are facing to tackle the problems such as conflict, corruption and crime. Bottom up, spreading democratization is giving voice to citizens‟ demands for more transparency and accountability from their governments. Philippines and Indonesia witnessed crowds calling the Estrada and Suharto governments to account which ended up in new regimes. Leaders, like Obasanjo in Nigeria, are being elected on the difficult platform of cleaning up governments. In addition, an international advocacy organization, Transparency International, has been setting up country chapters to monitor corruption since 1993. Sideways, the fiscal pressures of the 1990s in donor countries have led to a reduction in bi-lateral aid. A decline in living standards and worse socio economic indicators in many developing countries have led to calls for stricter accounting of foreign aid. Top down, multi-lateral donors such as the World Bank and the International Monetary Fund have come out strongly against. (a) Impact of Corruption on Development:- the idea of the three utilities of corruption: economic, political and managerial. Of the utilities of corruption, Klitgaard notes that “they refer to the benefits from specific corrupt acts, not from systematic corruption pervading many or most decisions” and “the ECONOMICS

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assumption that … if the prevailing system is bad, then corruption may be good.” Other scholars also see more costs than benefits. They agree that though corruption may be beneficial in isolated instances, the its cumulative effect in the long run is detrimental to development . In fact, corruption diverts public resources from their intended purposes to private pockets and distorts the composition of government expenditure. “Empirical evidence based on crosscountry comparisons does indeed suggest that corruption has large, adverse effects on private investment and economic growth. Regression analysis shows that a country that improves its standing on the corruption index from, sabeing the most corrupt, 10 the least) will experience a 4 percentage point increase in its investment rate and a 0.5 percentage point increase in its annual per capita GDP growth rate. In addition, crosscountry analysis shows that corrupt governments spend less on education and health, and probably more on public investment. If corruption negatively affects economic growth due to deterred private investment, what are the precise factors that make private investors nervous? Generally, domestic and foreign investors want to be assured of a politically stable and economically predictable environment in a country before they commit their resources. The rule of law, transparency and accountability in the public sector affect not only the economic development but also play a critical role in the governance of a nation. Given this tendency, how can the rule of law, transparency and accountability in the public sector be improved to combat corruption in developing countries. Some fairly robust statistical evidence has now been furnished showing that higher corruption is associated with (i) higher (and more costly) public investment; (ii) lower government revenues; (iii) lower expenditures on 15 operations and maintenance; and (iv) ensuing lower quality of public infrastructure. The evidence also shows that corruption increases public investment, by making it more expensive, while reducing its productivity. A recent study by the Peruvian economist Paolo Mauro (1995 and 1998) found that a corrupt country is likely to face aggregate ECONOMICS

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investment levels of approximately 5 percentage points less, than a relatively incorrupt country. The evidence from India is particularly stark. If corruption levels in India were reduced to that in the Scandinavian countries, investments rates could increase annually by some 12 percent and the GDP growth rate by almost 1.5 percent each year (Gandhi 1997). Corruption also acts as an additional tax on investment by lowering the potential return to an investor on both the initial investment and on subsequent returns. In India, current corruption levels mean that the implicit corruption tax on investment. The impact of corruption on the quality of public infrastructure is all too clearly visible in the towns and cities of India. The Public Works Department and the State Electricity Boards which are largely responsible for the maintenance of roads and management of power distribution respectively, are among the most corrupt government departments in India. In the capital city of Delhi itself the transmission and distribution losses in the power sector are estimated to be over 50% out of which almost 30% is attributed to theft which is done with the Connivance of the electricity board employees. (a) Corruption under development :-in short, corruption raises the cost of development it breeds in efficiency in departments to produce in inferior quality of goods-roads, water works, sub standard houses built by the (PWD), etc.it also reduces the realization in the form of tax revenue to the government and thus it lower the capacity of the government to reduce the budget deficits. It equally true that corruption creates black or parallel economy, but black economy has its own dynamism to perpetuate corruption. For the growth of healthy society ,it is vitally important that corruption should be eliminated or considerably reduced so that the phenomenon of black money does not destroy the vitals of the society .the real problem in identifying corruption ,however has been highlighted by katuliya in the following words :ECONOMICS

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It is also dealing with the government fund not to taste .at least a litlle bit ,of king‟s wealth .just as fish moving under the water cannot possibly be

found out either as drinking or not drinking water,so

government work cannot be found out while taking money for themselves. M easur ement taken by gover nment f or the law, corr upti on and development

The Indian Government and its regulatory bodies during the course of last year have introduced various legislations and regulations having a direct and indirect bearing on corruption, corporate frauds and questionable practices being followed by the private sector companies. Some of the important ones are as follows: 

Consent Orders : Country‟s capital market regulator Securities and

Exchange Board of India (SEBI)2 came out with an important circular on Consent Orders. What it meant in practice was that the person who had committed a violation could go the regulator, accept his guilt and get rid of past sins by paying a monetary penalty, proposed by him and agreeable to the regulator. 

Although the very concept of Consent Orders involves ethical issues, one may appreciate that it would substantially reduce the workload of the overworked the SEBI and at the same time help individuals, companies and firms to get petty violations resolved by payment of a penalty termed as consent fee.

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Unfortunately, the provisions are being used by large corporate houses and brokers to wash away bigger sins like involvement in the Ketan

2

Security and exchange board in india

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Parekh securities scandal, the initial public offer (IPO) 3 scam and even violation of insider trading norms of the SEBI. 

If the scope of Consent Orders is not narrowed down, they will only encourage private companies and habitual offenders to become bolder, take advantage of the loopholes and make money at the cost of ordinary investors.

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The extent to which these Consent Orders should be used could be a matter of debate, but no useful purpose would be served if everyone starts taking advantage of the provisions freely and frequently.

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Country‟s

apex

court

Supreme

Court

of

India,

stayed

the

operationalisation of the vital provisions of the Act and asked the government to amend the law. The government after much deliberations and delay amended the Competition Act in August 2007, as assured to the Supreme Court during the course of arguments. 

In addition to advocacy role, which the Commission is performing even today, it will be able to check corporate malpractices like abuse or misuse of dominance and cartelization. It will also have the powers to inquire into mergers and acquisition and prevent formulation of conglomerates to the detriment of consumers

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Measurements by the development: - Developing Code of Corporate Governance. Working together with civil societies, government and private sector to develop and disseminate anti corruption messages.. Regional and international initiatives provide a forum for private sector, public sector, and civil society actors to come together with a common goal of reducing vulnerability to corruption .India is a signatory to

3

Initial public offering

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UNCAC4 and UN5 Convention against Transnational Organized Crime but not yet ratified. We are pushing the Government for it and we need your support. Finally, attitudinal change is necessary. By changing our thoughts, we can change our attitude and thereby change our behavior, which can change our lives. The quality of our thoughts equals the quality of our lives. Let us all work towards changing our attitude towards corruption. Let‟s say No to corruption Corr uption per ception i ndex

It was noted that India‟s rank in CPI6 slipped to 71 among 102 countries surveyed in 2002 whereas it was 88 among 158 countries surveyed in 2005.its score decline from 2.9 in 1998 to 2.7 in 2002 and rose again to 2.9 in 2005 and further to 3.5 in 2007. For the year 2010 this index has further decline to 3.3 this is not a healthy development Country

(CPI)

rank among 180 countries

4

United nation convention against corruption United nation 6 Corruption perception index 5

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1.newzeland

9.3

1

2.sweden

9.2

4

3.united kingdom

7.1

20

4.india

3.3

5.indonesia

2.8

6.pakistan

2.3

7.bangladesh

2.4

87 110 143 143

(CPI perception index for selected index for selected countries (2010) In given CPI index table the index of corruption of India id 3.3 and thus it is far behind the level of achievement by Newzeland , Sweden and Switzerland with CPI above 9 .at the other end of the spectrum Pakistan, Indonesia and Bangladesh can be classed as very highly corrupt countries .while India has performed somewhat better than this latter group of countries .the Indian government should initiate measure to improve its CPI closer to the levels achieved by countries such as newzeland and Sweden .decline in corruption perception index for India in recent years is a matter of concern

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Th e l aw deals with the corr upti on and development

THE PREVENTION OF CORRUPTION ACT, 1988:(a) "election" means any election, by whatever means held under any law for the purpose of selecting members of Parliament or of any Legislature, local authority or other public authority; (b) "public duty" means a duty in the discharge of which the State, the public or the community at large has an interest; Explanation.-In this clause "State" includes a corporation established by or under a Central, Provincial or State Act, or an authority or a body owned or controlled or aided by the Government or a Government company as defined in section 617 of the Companies Act, 1956. (c) "public servant" means- any person in the service or pay of the Government or remunerated by the Government by fees or commission for the performance of any public duty; Any person in the service or pay of a local authority ; any person in the service or pay of a corporation established by or under a Central, Provincial or State Act, or an authority or a body owned or controlled or aided by the Government or a Government company as defined in section 617 of the Companies Act, 1956; any Judge, including any person empowered by law to discharge, whether by himself or as a member of any body of persons, any adjudicatory functions; any person authorised by a court of justice to perform any duty, in connection with the administration of justice, including a liquidator, receiver or commissioner appointed by such court; any arbitrator or other person to whom any cause or matter has been referred (D)

Power to appoint special Judges :- (1) The Central Government or the State

Government may, by notification in the. Official Gazette, appoint as many special Judges as may be necessary for such area or areas or for such case or group of cases as may be specified in the notification to try the following offences, namely: (a) Any offence punishable under this Act; and (b) Any conspiracy to commit or any attempt to commit or any abetment of any of the offences specified in clause (a). ECONOMICS

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(2) A person shall not be qualified for appointment as a special Judge under this Act unless he is or has been a Sessions Judge or an Additional Sessions Judge or an Assistant Sessions Judge under the Code of Criminal Procedure, 1973. (E) OFFENCES AND PENALTIES:- Whoever, being, or expecting to be a public servant, accepts or obtains or agrees to accept or attempts to obtain from any person, for himself or for any other person, any gratification whatever, other than legal remuneration, as a motive or reward for doing or forbearing to do any official act or for showing or forbearing to show, in the exercise of his official functions, favour or disfavour to any person or for rendering or attempting to render any service or disservice to any person, with the Central Government or any State Government or Parliament or the Legislature of any State or with any local authority, corporation or Government company referred to in clause (c) of section 2, or with any public servant, whether named or otherwise, shall be punishable with imprisonment which shall be not less than six months but which may extend to five years and shall also be liable to fine. Explanations.(a) "Expecting to be a public servant." If a person not expecting to be in office obtains a gratification by deceiving others into a belief that he is about to be in office, and that he will then serve them, he may be guilty of cheating, but he is not guilty of the offence defined in this section. (b) "Gratification." The word "gratification" is not restricted to pecuniary gratifications or to gratifications estimable in money. (c) "Legal remuneration." The words "legal remuneration" are not restricted to remuneration which a public servant can lawfully demand, but include all remuneration which he is permitted by the Government or the organisation, which he serves, to accept. (d) "A motive or reward for doing." A person who receives a gratification as a motive or reward for doing what he does not intend or is not in a position to do, or has not done, comes within this expression. ECONOMICS

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(e) Where a public servant induces a person erroneously to believe that his influence with the Government has obtained a title for that person and thus induces that person to give the public servant, money or any other gratification as a reward for this service, the public servant has committed an offence under this section. (f)

INVESTIGATION INTO CASES UNDER THE ACT: - Notwithstanding

anything contained in the Code of Criminal Procedure, 1973, no police officer below the rank,(a) In the case of the Delhi Special Police Establishment, of an Inspector of Police; (b) in the metropolitan areas of Bombay, Calcutta, Madras and Ahmadabad and in any other metropolitan area notified as such under sub-section (1) of section 8 of the Code of Criminal Procedure, 1973, of an Assistant Commissioner of Police; (c) Elsewhere, of a Deputy Superintendent of Police or a police officer of equivalent rank, Shall investigate any offence punishable under this Act without the order of a Metropolitan Magistrate or a Magistrate of the first class, as the case may be, or make any arrest therefore without a warrant: Provided that if a police officer not below the rank of an Inspector of Police is authorised by the State Government in this behalf by general or special order, he may also investigate any such offence without the order of a Metropolitan Magistrate or a Magistrate of the first class, as the case may be, or make arrest therefore without a warrant: Provided further that an offence referred to in clause (e) of sub-section (1) of section 13 shall not be investigated without the older of a police officer not below the rank of a Superintendent of Police.

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CONCLUSION:

Those norms that are intended to ease the application of the regulations. Such norms include the provisions governing the declaration of the secondary income of public officials. It can also be stated that, with care and proper interpretation, premature assumptions about contradictions with other international standards can be shown to be invalid. The law develops and changes and must be adapted to new circumstances. The degree of flexibility that is normally assumed to be Implicit in a provision of general application is perhaps also permitted in respect of the presumption of innocence. Common sense for example dictates that the prosecution should not be required to shoulder the virtually impossible task of establishing that a defendant does not have a licence when it is matter of comparative simplicity for the defendant to establish that he or she has one. To me .the Indian public was suffering. According to me the corruption is the major problem for the Indian public and they were harass by the bureaucracy and their offices members but important problem is faces towards the corruption over by the Indian people. And Indian government has made the laws for preventing the corruption and the development corruption raises the cost of development it breeds in efficiency in departments to produce in inferior quality of goods-roads, water works, sub standard houses built by the (PWD), etc.it also reduces the realization in the form of tax revenue to the government and thus it lower the capacity of the government to reduce the budget deficits.

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REFRENCES: K .sudarshan and v. pandit on corruption and development,indian economic review ,vol ix,new series number 2,october 1976 Government of india, ministry of finance, report on the committee control subsides, may 1979 s.gurumurthy, bribery and capital flight, financial express, Jul y 26, 1987 Datt & sundharam, indian economy, 63nd revised edition, new Delhi Dewitt k.k, modern economic theory , New delhi,2004

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Law,Corruption and Development Vivek Sai

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