This article needs additional citations for verification. (June 2011) (Learn how and when to remove this template message)
The Hawala scandal, also called the Jain Diaries case or the hawala scam was an Indian political and financial scandal involving payments allegedly sent by politicians (black money) through four hawala brokers, namely the Jain brothers. It was a US$18 million bribery scandal that implicated some of the country's leading politicians. It also led to a fixed tenure of minimum 2 years for CBI Directors, to prevent politicians from interfering with the Director's duties.
In 1991, an arrest linked to militants in Kashmir led to a raid on hawala brokers, revealing evidence of large-scale payments to national politicians. On 25 March 1991, as per the court proceedings published by the Supreme court of India, Ashfak Hussain Lone, a person alleged to be an official of the terrorist organisation Hizbul Mujahideen, was arrested in Delhi. During his interrogation, the police learnt that his organisation was funded through hawala, using Surendra Kumar Jain and his family as a conduit. Based on this and further information received during Lone's interrogation, the Central Bureau of Investigation (CBI) conducted raids on the premises of Surrender Kumar Jain, his brothers, relations and businesses. During the raids, the CBI seized Indian and foreign currency, two diaries and two note books at the premises. These diaries contained detailed accounts of vast payments made to people identified only by initials. The initials corresponded to the initials of high ranking politicians, both in power and out of power, and of high ranking bureaucrats. At this stage, the investigation stopped at the CBI and neither the Jains, nor the contents of their diaries were investigated by the CBI. Meanwhile, officers of the CBI involved in the investigation were transferred out to other places by orders from ruling politicians. However, the case continued to make headlines in the newspapers media, as it was pursued by a few journalists.
On 4 October 1993, writ petitions were filed at the Supreme court of India, in the public interest under Article 32 of the Constitution of the India. These contained allegations that Government agencies like the CBI and the revenue authorities had failed to perform their duties and legal obligations as they had "failed to investigate matters arising out of the seizure of the "Jan diaries"; that the apprehension of terrorists had led to the discovery of financial support to them by clandestine and illegal means using tainted funds obtained through `havala' transactions; that this had also disclosed a nexus between politicians, bureaucrats and criminals, who were recipients of money from unlawful sources, given for unlawful consideration that the CBI and other Government agencies had failed to investigate the matter, take it to its logical conclusion and prosecute all persons who were found to have committed and offence; that this was done with a view to protect the persons involved, who were very influential and powerful; that the matter disclosed a nexus between crime and corruption at high places in public life and it posed a serious threat to the integrity, security and economy of the nation; that probity in public life, the rule of law and the preservation of democracy required that the Government agencies the compelled to duly perform their legal obligations and to proceed in accordance with law against every person involved, irrespective of where he was placed in the political hierarchy." In India, the Havala method is an illegal method of transacting in foreign currency. It is illegal and contentious due to two reasons. Firstly, it is highly secretive as it does not reveal the identity of people on either side of the transaction, even to the havala operators. Secondly, it violates the FERA regulations of India as it does not use approved channels of regular banks for foreign currency transactions. However, it is often used in India for two reasons. Firstly, to transfer legally earned salaries (example : by ordinary workers overseas in Saudi Arabia and UAE) to their hometowns, as hawala transaction costs are a fraction of banks, and havala operators can be found in the smallest villages of India. Secondly, by politicians, bureaucrats and nefarious elements to transfer corruption money.
Discovery of involvement of politicians in hawala
Those accused included L. K. Advani, V. C. Shukla, P. Shiv Shankar, Sharad Yadav, Balram Jakhar, and Madan Lal Khurana. The entire list contained politicians from the BJP, Congress and independent MLAs and MPs, with amounts varying between Rs. 50,000 to Rs. 7.5 crore. The prosecution that followed was partly prompted by a public interest petition (see Vineet Narain), and yet the court cases of the Hawala scandal eventually all collapsed without convictions. Many were acquitted in 1997 and 1998, partly because the hawala records (including diaries) were judged in court to be inadequate as the main evidence. The Central Bureau of Investigation's role was criticised. In concluding the Vineet Narain case, the Supreme Court of India directed that the Central Vigilance Commission should be given a supervisory role over the CBI.
Supreme court judgment
The supreme court proceeding did not relate to the hawala case per se, but rather to the suspicious transfer of the CBI Director Joginder Singh and the rampant misuse of political power to curb the investigations of the CBI and Revenue department. In its judgment, delivered on 18 December 1997, the court, through judges S.P.Bharucha and S.C.Sen gave a ruling consisting of a 26 points list of pronouncements, the most important of which made it impossible for politicians in the government to remove the Director of the CBI for 2 years, thus ensuring that the CBI and its officers would have freedom to carry out their work without political interference.
The Jain Hawala story was broken by two Delhi-based journalists Ram Bahadur Rai and Rajesh Joshi, working for the Hindi daily Jansatta. Then Vineet Narain, the journalist filed a public interest litigation in the Supreme court of India.
- Vineet Narain, 1999, Corruption, Terrorism and Hawala Scandal in Hindi ebook
- Kapoor, S. (1996), Bad Money, Bad Politics: The Untold Hawala Story, Har–Anand Publications, Delhi - cited (p. 22) by Ashok V. Desai in The Economics and Politics of Transition to an Open Market Economy: India, OECD Working Paper 155 accessed at http://www.oecd.org/dataoecd/18/3/1921937.pdf 26 May 2011
- Hawala. An Informal Payment System and Its Use to Finance Terrorism by Sebastian R. Müller (Dec. 2006), ISBN 3-86550-656-9
- Supreme Court judgement on 2 March 1998 that quashed CBI chargesheets against LK Advani, VC Shukla and Jain brothers
- "Vineet Narain & Others vs Union Of India & Another on 18 December, 1997". www.indiankanoon.org. Supreme court of India. Retrieved 25 October 2018.
- Bhatnagar, Gaurav (24 October 2018). "Why the Modi Government's Ouster of Alok Verma Is Likely to Face a Legal Challenge". The Wire. Retrieved 25 October 2018.
- "Vineet Narain Case, Directions of the Court". 2 November 2006. Archived from the original on 2 April 2007.
- "Jain hawala case". www.milligazette.com. Milligate archives. Retrieved 25 October 2018.
- Joshi, G.P. (3 May 2013). "From hawala scam to coalgate, full circle for Supreme Court". The Hindu. Retrieved 25 October 2018.
- Sudha Mahalingam (21 Mar – 3 Apr 1998). "Jain Hawala Case: Diaries as evidence". Frontline magazine. 15 (6). Archived from the original on 10 March 2007. Retrieved 2 Nov 2006.
- "WHO GOT WHAT AS PER JAIN DIARY". www.milligazette.com. Milli gate archives. Retrieved 25 October 2018.
- "Supreme Court judges admit to pressure in hawala case". Rediff on the net. UNI. Retrieved 25 October 2018.