Conflict of Interest – the bottom line

The Asian Development Bank defines corruption quite concisely as ‘abuse of public office for personal gain’. Conflict between personal interest and the public interest is implicit in all incidents of corruption. Any corrupt act invariably compromises the larger public interest. Whether it is the frauds in Commonwealth Games, the allocation of 2G, denotification of government lands or illegal mining – there is a conflict of interest. Therefore, to deal with corruption, one must deal with conflict of interest.

As far as civil servants are concerned the Central Services (Conduct) Rules, 1964 prescribe the dos and don’ts of their behavior. Similar rules exist at the state government level. Rules dealing with potential conflict of interest are: Rule 4 (Employment of near relatives of government servant in companies or firms with which the government servant has official dealings); Rule 13 (Acceptance of Gifts) and Rule 18 (Transactions involving purchase or disposal of immovable and movable property with a person with whom the government servant has official dealings). The Conduct Rules and the other rules and codes that we talked of earlier do not apply to the political executive.

As for the members of parliaments, an Ethics Committee of Rajya Sabha was constituted by the Chairman, Rajya Sabha on 4 March 1997, with the mandate to oversee the moral and ethical conduct of members and to examine cases referred to it with reference to ethical and other misconduct of members. Similarly, the Speaker of Lok Sabha has constituted the Committee on Ethics with effect from 7 October, 2009.  The functions of the Committee include (a) overseeing the moral and ethical conduct of members; (b) examining every complaint relating to unethical conduct of member or connected with his parliamentary conduct referred to it and make such recommendations as it may deem fit; and (c) framing rules specifying acts which constitute unethical conduct. (Interestingly, Mr. T R Balu and Mr. Suresh Kalmadi are members of this Committee) Government of India has prescribed a Code of Conduct for Ministers of both the Union and State Governments. The Code lists a number of dos and don’ts the observance of which is watched over by the Prime Minister in case of Union Ministers and by the Chief Minister concerned in case of State Ministers.

What are then the remedies in case of breach of the above codes of conduct either by the civil servant or by the Honorable Member of Parliament? Firstly, the prosecution of an improper conduct in a court of law has to be under the provisions of Prevention of Corruption Act and the Indian Penal Code. Thus, effectively the codes themselves do not have any legal basis, nor do they have any mechanism for deterrence or prevention. Secondly, successfully convicting even those who have been caught with their hands in the till has been, if not impossible, very difficult. In case of civil servants, it is the long winding route of disciplinary proceedings. As observed by the Second Administrative Reforms Commission in its Fourth Report on  Ethics in Governance, ‘(T)he interpretation and requirements laid down by the highest courts have made disciplinary proceedings for major penalties convoluted, tedious and time consuming involving a large number of sequential steps before a person can be found guilty of charges and punished. Process unfortunately does not end there. Provisions for appeal, revisions and review only after completion of which, the delinquent officer would begin to suffer the penalty.  The accused officer also has the right to challenge the legality of the action .. before the Administrative Tribunal, … This apart, he reserves the fundamental right to invoke the writ jurisdiction of the High Court and the Supreme Court protesting violation such rights in the conduct of the inquiry.’ As for the members of political executive, the criminal justice system works in the same start-stop mode, which is best illustrated by the recent conviction of Sri Sukh Ram, former telecom minister in a case of undue favor shown to a cable supply company after fifteen long years.

Admittedly there is no substitute for anti-corruption laws and institutions such as Special Judges to try corruption cases, Lok Ayuktas and the proposed Lok Pal. The Prevention of Corruption Act 1988 lists offences for which a public servant including the political executive may be tried and punished. Together with provisions in the Indian Penal Code and other laws relating to economic offences, there is indeed a tight legal framework to try cases of corruption and fraud. The question is whether there are adequate opportunities for preventing corruption rather than dealing with it when it does take place. Is not an ounce of prevention better than a pound of cure? Is there a missing link somewhere? The Second Administrative Reforms Commission recommended two very significant reforms a) repeal of Article 311 of the Constitution to deal with undue litigation that negates the very spirit of the protection sought to be given to honest civil servants; and b) creation of an Office of Ethics Commissioner on the lines of Canada’s Conflict of Interest and Ethics Commissioner.

Legislation on conflict of interest and an office of Ethics Commissioner provide the important intermediate step in the control of corruption. Canada’s Conflict of Interest Act (2006) has many interesting features worth emulating. Firstly, it applies to all across the spectrum from a minister of the crown to members of ministerial staff and all those appointed by the Governor in Council. Secondly, the Act sets out clearly conflict of interest and post-employment rules for public office holders so as to minimize the possibility of conflicts arising between the private interests and public duties of public office holders and thus provides for the resolution of those conflicts should they arise. Lastly, it provides the Conflict of Interest and Ethics Commissioner with the mandate to determine the measures necessary to avoid conflicts of interest and to determine whether a contravention of this Act has occurred.

Apart from clear definitions of conflict of interest and listing activities that a public office holder is prohibited from pursuing, the most interesting and critical part of the Act are the compliance measures. The Act provides for recusal from any discussion, decision, debate or vote involving conflict of interest, confidential disclosure (and under certain circumstances public declaration) of assets and liabilities, gifts received above a given value, etc. The Act also requires the public office holder to divest his or her controlled assets by either selling them in arm’s length transaction or placing them in a blind trust (controlled assets are defined as those assets whose value could be directly or indirectly affected by government decisions or policy). Most importantly the Conflict of Interest and Ethics Commissioner, who oversees compliance with the provisions of the Act, has powers to investigate violations, in doing so summon witnesses, require them to give oral evidence, to produce documents, etc.

The advantage of having an Ethics Commissioner and a related law is that it provides a framework for preventing corrupt acts from taking place in the first place. Many members of the political executive and civil servants run ‘businesses’ ranging from trusts (particularly in education, which run more on commercial principles), co-operatives, NGOs, real estate ventures, companies, etc. in the name of family numbers. At one time, in Andhra Pradesh, the Transport Minister owned the largest fleet of passenger buses and was running a major travel company. Very often they are the beneficiaries of their corrupt actions. Once the rules on conflict of interest are in place and there is an oversight body to resolve the issues promptly, the opportunities for corruption would reduce.  Together with whistleblower policy or law and RTI, this can be a formidable framework for preventing corruption.

                                                                             Srinivas Kumar Alamuru
Advisor

[Disclaimer: Views expressed are those of the author and do not represent the views of CBPS.]