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Discussion Paper
Institutional
Independence
in India
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Contents
Abstract ...................................................................................................................................................... i
CHAPTER-1
Introduction ............................................................................................................................................ 1
CHAPTER-2
The History and the Theory ................................................................................................................ 4
2.1 Subordinate or Delegated Legislation .......................................................................................... 9
CHAPTER-3
Tier One Institutions ........................................................................................................................... 12
3.1 The Judiciary ............................................................................................................................... 12
3.1.1 Courts .................................................................................................................................. 14
3.1.2 Judges .................................................................................................................................. 15
3.1.3 Conditions of Tenure .......................................................................................................... 16
3.1.4 Removal ............................................................................................................................... 16
3.2 Comptroller and Auditor General (CAG) .................................................................................. 16
3.2.1 Jurisdiction ......................................................................................................................... 17
3.2.2 Powers .................................................................................................................................. 17
3.3 Election Commission (EC) .......................................................................................................... 17
3.4 Union Public Service Commission (UPSC) ............................................................................... 19
CHAPTER-4
Tier Two Institutions .......................................................................................................................... 20
4.1 Central Vigilance Commission (CVC) ....................................................................................... 21
4.2 Economic Regulators ................................................................................................................... 23
4.2.1 The National Highway Authority of India (NHAI) .......................................................... 23
4.2.2 The Airports Authority of India (AAI) .............................................................................. 23
4.2.3 The Tariff Authority for Major Ports (TAMP) ................................................................. 24
4.2.4 The Telecom Regulatory Authority of India (TRAI) ........................................................ 24
4.3 The Electricity Regulatory Commissions (ERCs) ..................................................................... 26
4.4 The Competition Commission of India (CCI) ............................................................................ 26
4.5 The Securities and Exchange Board of India (SEBI) ............................................................... 27
4.6 The Reserve Bank of India (RBI) ............................................................................................... 28
CHAPTER-5
Conclusion .............................................................................................................................................. 30
CHAPTER-6
Recommendations ................................................................................................................................ 32
List of Boxes
Box 1:
Box 2:
Box 3:
Box 4:
Box 5:
Box 6:
Abstract
In India, several institutions have been mandated with institutional
independence. Most of such institutions were established to perform
the challenging task of maintaining a judicious balance between
conflicting interests and overhauling the governance system, by
enforcing accountability. The State has not been so successful in doing
the same.
Independence comprises automatic funding of the institution in
question, without having to depend on the whims of the ministers and
their civil servants. Given its importance to the entire governance
system, the process by which the concept of institutional independence
has evolved in India needs to be examined.
Institutional Independence has an inverse relationship with external
influences over the authorities. The lesser the influence, the higher
will be the scope for functional autonomy. Institutions are necessary
for the healthy functioning of political and economic democracy, but
they come into conflict while exercising their independence to make
social welfare meaningful. In India, the problem has been compounded,
because the Parliament also wants to exercise some control over the
way the institutions function.
In this paper, a comprehensive analysis of institutional independence
in India has been done which would facilitate cross-disciplinary
learning and identification of good and bad practices. The nature of
the relationship which the Government should maintain with the
institutions is highlighted in this paper.
Several instances of confrontations between the institutions and the
Parliament have been cited over the jurisdiction as well as
independence of action. Various obstacles in the way of the effective
functioning of the independent institutions have been examined in this
paper.
The paper suggests that institutional independence should not be
mistaken as an objective in itself, it should rather be seen as an
important requisite for achieving desired effectiveness, economy, and
efficiency in the system.
Chapter 1
Introduction
Institutional efficacy demands functional independence. Functional
independence for an institution implies achieving the desired degree
of autonomy and maintaining an arms length relationship from interest
groups.
Independence comprises
automatic funding of the
institution in question, without
having to depend on the whims of
ministers and their civil servants
However, there are several other agencies that function outside the
state domain. The contentious issue of (lack of) functional autonomy
keeps surfacing in different forms and contexts. It would be worthwhile
to look at the approaches being followed in India in this regard.
A comprehensive analysis of
different kinds of institutions
would facilitate cross-disciplinary
learning and identification of
good and bad practices
One of the most vexed issues to have dominated both political and
economic discourses in the democratic world in the latter part of the
last century is the question of institutional independence. The reason
is that the issue consists of a paradox which country after country has
tried to solve. Some have succeeded more than the others, but no one
has succeeded wholly.
The paradox is that, while institutions are necessary for the healthy
functioning of political and economic democracy, when they seek to
exercise their independence to make social welfare meaningful, they
come into conflict with the Executive, which, arguably, is the most
powerful of the various institutions. This power, as we know, arises
from the control that it exercises, directly or indirectly, over the power
to appoint and remove heads of institutions and their boards.
Chapter 2
The 17th century in Britain also saw the emergence of the struggle for
independence of the Parliament. It claimed the sole right to pass
legislation, which the King disputed. This is more clearly understood
when we see that, by the 1630s, the Lower House of the British
Parliament, the House of Commons, was dominated by the merchant
class. They eventually rose up in arms against the King, Charles I.
After a bloody civil war, the King was beheaded in 1649. This ensured
the independence and supremacy of the Parliament for all times to
come including when, 38 years later, it even felt enabled to invite a
foreign king, William of Orange, to come and rule Britain, because it
did not agree with the religion of James II, who was a secret Catholic.
In the US, which had learnt its lessons from the events in its mother
country, Britain, such independence was guaranteed in the
Constitution. However, until recently, even there independence was
interpreted to mean that the institution in question would not act
against the wishes and agenda of the Government of the day. The story
was much the same in most other countries.
This state of affairs was accepted for a long time. But, after the Second
World War, there has been a sea change, largely because of the
emergence of civil society groups. The pioneer, of course, was Ralph
Nader, the American crusader for consumer rights. It is also important
to note that the fact that such a movement emerged in the US, combined
with the rapid enhancements in public awareness of its rights, gave
the trend far more power and made it far more effective than if it had
started somewhere else in the world. Thus, even in this matter, the
US proved itself to be the trendsetter.
One final factor needs mentioning here, which we will discuss in detail
in another chapter. This is the issue of the hierarchy of institutions. It
is important to distinguish, in this context, between institutions that
are created by the Constitution of the country and those that are created
by the Parliament. The former are higher in the hierarchy and expect
their authority to be respected by the latter. However, a fundamental
problem can arise here, especially in democratic countries with large
numbers of poor people: this is the conflict between equity and justice.
On the face of it, the distinction between the two appears thin, but is,
in fact, critical to the manner in which outcomes are determined.
The Judiciary, in particular, is concerned with justice, whereas the
political establishment, including the Parliament and the Executive,
to which some of the second-order institutions report, is concerned
with equity. This can give rise to varying degrees of friction.
The co-operative and mutually deferential relationship between the
first and the second-order institutions is a mater of concern. Each
accuses the other of encroaching on its territory and matters get worse
when the Executive or the government joins in. Therefore, each begins
to scrutinise others more closely and this also creates difficulties, to
the detriment of institutional independence.
Box 3: Institutional Independence: Some Touchstones
Selection and Removal: Attracting right people to man
independent institutions is most crucial. Removal should only
be possible if found guilty in an inquiry.
Financial Autonomy: Functional independence can effectively
be delivered only when financial autonomy is ensured. In the
absence of the latter, the so-called independent institutions will
inevitably be subjugated to the will of the controller of the budget.
Staffing and Outsourcing: Empowering institutions to appoint
sufficient and capable staff is also equally important. They
should be allowed to appoint consultants through following
transparent process.
Regulation Framing: To conduct their business independent
bodies should be allowed to frame regulations within the broad
policy directives issued by the government. Such regulations
can be notified with having a prior approval from the
government. This should replace the practice of government
framing the regulations for these institutions.
Defining Policy Directives: The ambiguity should end. It should
not be left to the sole discretion of the government to define
what constitutes the policy directive. Gateways of policy
directive should be spelt out clearly in advance.
Delegated legislation is
increasingly assuming an
important role in the process of
law-making, comprising an
important component of
legislation
to lay down new law by themselves had been struck down as ultra
vires.
While in the context of increasing complexity of law-making,
subordinate legislation has become an important constituent element
of legislation, it is equally important to see how this process of
legislation by the Executive under delegated powers, can be reconciled
with the democratic principles or Parliamentary control. Legislation
is an inherent and inalienable right of the Parliament and it has to be
seen that this power is not usurped nor transgressed under the guise
of what is called subordinate legislation.
Amongst the mechanisms evolved by the Legislature to exercise control
over the delegated legislation, the most important is the constitution
of the Committee on Subordinate Legislation. It is this Committee of
the Legislature which examines if the powers conferred by the
Constitution or delegated under an Act passed by the Legislature have
been duly exercised and are within the conferment or delegation, and
not beyond. It has to see that delegated legislation does not transgress
into areas not prescribed for it, and also that it does not intrude into
the sphere which is the sole concern of the Legislature itself.
Chapter 3
Lastly, even when these imperatives are fulfilled, the interplay between
the Executive and the Judiciary can often be troublesome, because the
former tends to argue, as it has in India, that judicial independence is
not an end in itself, but a means to an end. This is a dangerous doctrine
and can lead, as it did in India, to the notion of a committed Judiciary
committed to the Government. Basically, judicial independence can
result in rulings that are contrary to the interests of the government,
which sometimes does things that are expedient, but not conducive, to
preserving the rights and liberty. It is here that the Judiciary is
required to step in and must act independently.
Indias legal system is based on
the common law traditions of the
United Kingdom. As such, India is
basically a common law
jurisdiction
3.1.1 Courts
Indias Judiciary has, in general, been highly independent. The
Constitution encompasses a clear separation of powers. The Judiciary
plays a central role within the Indian constitutional structure. Indias
legal system is based on the common law traditions of the United
Kingdom. As such, India is basically a common law jurisdiction.
Under the terms of List III, Schedule 7 of the Constitution, the Central
and State Governments enjoy concurrent responsibility for the
administration of justice, jurisdiction and powers of all courts (except
the Supreme Court, over which the Central Government retains
jurisdiction), criminal law and procedure and civil procedure. However,
the organisation of the Supreme Court and the High Courts remains
the exclusive jurisdiction of the Central Government, while the
provisions regarding the officers and servants of the High Courts fall
within the powers of the States.
All High Courts have jurisdictions conferred upon them by the Central
or State Governments on subjects within their respective legislative
competencies. High Courts also have original jurisdiction to issue writs
and orders for the enforcement of the fundamental rights contained in
Part II of the Constitution. State High Courts have a supervisory power
over all subordinate courts and tribunals in areas where they exercise
jurisdiction. There are currently 18 High Courts.
Chapter VI of Part VI of the Constitution relates to the creation of and
jurisdiction over subordinate courts. The power to establish subordinate
courts falls under the jurisdiction of both the Central and State
Governments. Article 235 places the administrative control of all the
district and other subordinate courts under the High Court of that
State. Special tribunals and courts are under the judicial control of
the High Courts and the Supreme Court.
3.1.2 Judges
Extensive constitutional provisions are intended to safeguard the
independence of judges, including articles regarding the selection,
conditions of tenure and removal of judges of both the Supreme Court
and the High Courts. The overburdened court system and the lack of
enforcement of court decisions in regions where there is armed conflict
pose the greatest threats to judicial independence.
3.1.4 Removal
Articles 124(4) and 217(1)(b) provide that the Supreme Court and High
Court judges, respectively, cannot be removed from office except by an
order of the President, confirmed in the same session, after an address
by each house of the Parliament, supported by a majority of the total
membership of that house and by a majority of not less than two-thirds
of those voting and present.
A judge may only be removed on the grounds of proved misbehaviour
or incapacity. Under the Judges (Inquiry) Act 1968, 100 members of
the Lok Sabha (the Lower House of Parliament) or 50 members of the
Rajya Sabha may request their respective Speaker or Chairperson of
the House to consider material relating to accusations of misbehaviour
or incapacity.
A Committee consisting of a Supreme Court judge, a Chief Justice of a
High Court and an eminent jurist is formed to apprise the judge of the
charges against him or her and to allow for the preparation of a defence.
If the Committee concludes that misbehaviour or incapacity has been
proved, it will report this finding to the Parliament for action. Members
of the Judiciary of the subordinate courts may only be removed by the
High Court, in its administrative capacity.
3.2 Comptroller and Auditor General (CAG)
The CAG was established in pre-independence era and, subsequently,
adapted to the Indian Constitution, under Articles 148 to 151. In 1971,
there were amendments to streamline its functioning.
The legal basis for the auditorial functions of the CAG of India is
provided by the Comptroller and Auditor Generals (Duties, Powers
and Conditions of Service) Act, 1971. Although India has a federal set
up, the Constitution provides for a unitary audit by the CAG of India,
who conducts audit of the accounts of both the Union and the State
Governments.
The CAG has a dual role: (a) as an agency to function on behalf of the
Legislature to ensure that the Executive complies with various laws
passed by the former in letter and spirit; and (b) on behalf of the
Executive to ensure compliance by subordinate authorities with the
rules and orders issued by the Legislature.
The CAG is neither a part of the Legislature nor the Executive, but is
an officer created by the Constitution to ensure that diverse authorities
act in accordance with the Constitution, with regard to all financial
matters. In addition, the CAG also plays a fiduciary role in federal
financial relations, under Article 279 of the Constitution.
The CAG also brings out a large number of reports relating to the
Union and the State Governments. These reports incorporate important
audit findings and performance reviews of systems, projects and
programmes and comprehensive appraisals of public enterprises and
other bodies and authorities. He also reports on Acts that infringe
upon the economic interests of the State, like mass embezzlement of
State assets, serious losses and wastes. These reports are laid before
the Parliament and State Legislatures concerned, every year. He can
share his audit reports with the public and the media only after laying
them in the Parliament and the State Legislatures. Some of these
reports are selected by the Public Accounts Committee of the
Parliament and State Legislatures for detailed discussions and
recommendations. The CAG assists the Public Accounts Committee
by vetting the Action Taken Notes on these selected Reports.
3.3 Election Commission (EC)
The EC was set up as a Constitutional Body in the year 1950.
Subsequently, a notification was issued under the Representation of
Peoples Act, 1951. Until the late 1980s, it was widely perceived as a
body indirectly controlled by the Government. However, the issue of
institutional autonomy cropped up with seriousness during the
proactive approach adopted by one Chief Election Commissioner, who
Institutional Independence in India 17
Chapter 4
With the opening up of the economy in the late 80s and the early 90s,
permitting the private sector to participate in infrastructure services,
the role of the Government came under close public scrutiny.
Subsequently, the Government realised the need for separating the
policy-making function from day-to-day regulation. Hence, it gradually
established sectoral regulatory authorities, over the years. However,
developing a workable framework with these institutions still remains
to be understood by the Government functionaries. The absence of
adequate functional independence has been reported to hamper the
efficacy of some of the sectoral regulatory bodies.
A cursory survey of different laws enacted to set up these regulatory
bodies reveals a variance and lack of consistency in the Governments
approach. There also appears a clear attempt to keep, direct or indirect,
control over the functional independence across the board. Following
The selection and the appointment of the members and the staff and
the conditions of their services are subject to Government direction
and discretion. Workers are also to be represented in the board of the
Authority.
Competing airlines, including the state-owned Indian and Air India,
use common airports that are regulated by another state-controlled
agency, the AAI. The AAI is mandated to function as an arm of the
Government. The AAI generates revenues for the Government and its
annual budget has to be approved by the line ministry. A tribunal has
been set up as appellate authority.
Chapter 5
Conclusion
Transparency, with regard to the role of the Government in searching,
selecting, appointing, remuneration, extension, removal and reemployment procedures varies across the institutions. In general, the
political executives thus far have treated the issue as a matter of pure
political patronage. Many of the mentioned institutions are not
perceived as independent from the government departments.
Insufficient functional autonomy could be one of the reasons for that.
There are different ways the
Government exercises the control
over independent institutions
There are different ways the Government exercises the control over
independent institutions. For instance, most of the institutions covered
under this study depend upon the concerned ministries for their
budgetary allocations. Allowing an institution to become financially
self-sufficient (or less vulnerable) is an essential pre-condition for
functional autonomy.
Powers related to sanctioning and appointing the staff is another
equally important matter. It is difficult to justify the power of ministries
doing this job on behalf of an independent authority, which is the case
with most agencies at present.
Similarly, in many cases, independent authorities have to obtain
Government approval before appointing consultants or procuring
professional inputs from outside. Hence, virtually it is for the ministry
to decide in such matters, which is an encroachment on the
independence.
Arguably, the Government has the sovereign authority to express its
policy and convey the same to the respective authority in a transparent
manner. All laws examined here empower the Government to issue
policy directives. However, what constitutes policy has been left vague
and subject to interpretation, in a highly arbitrary manner. Better
clarity is needed in this regard. Unless independent institutions are
fully empowered, the expectations would not be met.
Chapter 6
Recommendations
The Parliament should consider establishing a permanent National
Commission on Institutions, to comprise representatives from all three
branches of the Government, as well as other stakeholders,
representatives of litigants and other groups with an interest in the
federal courts. The Commission would develop, on an ongoing basis,
recommendations concerning practices, procedure and administration
and evaluate legislative proposals.
The Commission should encourage heads of institutions to meet
informally with each other and with MPs for improving inter-branch
communication and understanding.
Institutions should be liberated from their ministerial masters and
funding should be provided on an autonomous basis by the Planning
Commission.
The Government and the Parliament should resist stripping the
institutions of their jurisdiction to hear and decide any issue.
The Parliament should provide for judicial review of questions in cases
involving administrative and regulatory actions and ordinarily to
provide for judicial review of enforcement and coercive actions of the
Government in administrative and regulatory actions.
The Parliament should resist efforts to intrude into the remedial
processes of the institutions for the purposes of restricting the ability
of litigants to obtain their rights.
Salaries should be market-related and subject to periodic and automatic
cost-of-living adjustments.
A Special Conduct and Disability Act should be legislated for holding
heads of institutions/judges accountable for misconduct that does not
rise to the level of an impeachable offence.
Goals
Develop healthy
competition regimes in
developing countries through
research and advocacy.
Foster an enabling
environment for the economy
and promote effective
regulatory frameworks.
R. S. Khemani
Adviser, Competition Policy
World Bank
Washington DC, US
Robert Anderson
Counsellor, WTO
Geneva, Switzerland
S Chakravarthy
Adviser
Competition and Law
Hyderabad, India
S L Rao
Chairman
Institute for Social & Economic Change
Bangalore, India
Scott Jacobs
Managing Director
Jacobs and Associates
Washington DC, US
Taimoon Stewart
Research Fellow
University of West Indies
St. Augustine, Trinidad & Tobago
ISBN 81-8257-080-8