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Will pending criminal cases in economic offences be a bar for grant of security clearance under the Standard Operating Procedure for National Security Clearance (Security Clearance)? Will such cases against shareholders of a company affect the prospects of a company in getting National Security Clearance?
And if yes, what is the extent of the shareholding of an accused person in a company which is likely to impede the chances of the company in getting Security Clearance?
These and many more questions have been raised by BJP leader Subramanian Swamy in his petition in Supreme Court filed pursuant to the grant of Security Clearance granted to Sun Group’s Red FM.
The dispute has its genesis in the clearance granted to Sun Group’s Radio FM due to a judgment of the Madras High Court which had overturned the decision of the Ministry of Home Affairs (MHA) in that regard.
The Security clearance was with respect to the airwaves auction for private FM radio channels. Swamy’s opposition to the grant of clearance is on the basis that the Sun group is controlled by Kalanidhi Maran and Dayanidhi Maran, both of whom are accused in the Aircel-Maxis scam.
Besides the judgment of the Madras High Court, Swamy has also referred to the decisions of the Delhi and Bombay High Courts.
Three High Courts, three decisions
Swamy has set out the decisions of the three High Courts on the issue.
Madras High Court: The Sun Group had challenged the MHA’s decision to refuse clearance on the ground that pendency of criminal cases cannot be a ground for withholding security clearance.
The High Court had allowed the petition and set aside the MHA’s order on the ground that the petitioners are not convicted and the cases against them are still pending.
Delhi High Court: Another Sun Group Company which had been refused security clearance by the MHA approached the Delhi High Court.
The Delhi High Court relied on clause 3.8 of the Notice Inviting Auction (NIA) and held that the NIA only contains a reference to the Company and its Directors, and there is no explicit reference to the shareholders of the company. Therefore, rejection of security clearance cannot be based on an allegation against any shareholder of the company.
The Delhi High Court further held that unless a person controls 51% or more shares in a company, pending criminal cases against that person will not have any bearing on the security status of that company.
Bombay High Court: Another company which was denied security clearance by the MHA approached the Bombay High Court. The Bombay High Court held that clearance cannot be denied only on the grounds of National security.
However, it also held that even if clearance is given, it can be withheld if security agencies or intelligence agencies of the Central government report adversely about the company. The court further held that the principle of natural justice can be an exception in such cases and the affected party need not be given a chance of being heard before denial of Security Clearance.
Swamy has submitted that the matters pertaining to national security of the country have been delegated to the MoH and any decision taken by the MHA in that regard cannot be questioned by any other Ministry or person.
He has then relied on the definition of ‘National Security’ as given by the MHA in its policy to issue National Security Clearance.
“(I) Matters relating to preservation of nation’s unity and territorial integrity and protection of life and liberty of its citizens and
(ii) Matters vital to economic security and integrity, protection of critical infrastructure and development and prosperity of the country and its citizens.
The above definition shows the intent of the Ministry that any offences affecting the economic security of the country will be under the ambit of National Security and has to be diligently and cautiously dealt with.”
Besides that, Swamy has placed reliance on clause 3.8 and clause 3.2.1 of the NIA. Clause 3.2.1 states that any person controlled by any person convicted of an offence involving moral turpitude or money laundering drug trafficking or terrorist activities shall not be eligible to apply for Security clearance. Clause 3.8 provides that the Company and its Directors must also receive security clearance.
Swamy’s contention is that the above clauses need to be read separately and independently.
“Where clause 3.2.1 is qualified with the word “conviction” i.e the persons controlling the company ought to convicted before the company can be disqualified, however, clause 3.8 puts no such embargo…In other words, under Clause 3.8 if the Company or its Directors are being prosecuted for serious offences pertaining to money laundering or financial scams, the Ministry has the power and discretion to reject Security Clearance under Clause 3.8.”
Regarding the Madras High Court judgment, he has submitted the following:
“Giving security clearance is a specialized job which is within the expertise and domain of MoH only. The Madras High Court has also erroneously interpreted that the Clause 3.2.1 and Clause 3.8 cannot be independent on its own with regard to the security clearance.”
Swamy has submitted that different High Courts of the country have been holding divergent position on the same issue.
“While Delhi High Court has held that if criminal cases are pending against a person who is in a position to control 51% or more shares of the applicant company, the security clearance of the said company can be lawfully denied, the Madras High Court is of the view that security clearances can be withheld only in case of conviction. Opposed to these two views is the position of the Bombay High Court which holds that security clearances can be denied and withheld anytime if there is an adverse report by security and intelligence agencies…”
Swamy has sought for a direction to be issued to the Ministry of Home Affairs to frame detailed guidelines for security clearance and “formulate a foolproof policy for grant of security clearance”.
The matter was heard today by a Bench of Chief Justice TS Thakur and Justice DY Chandrachud with Swamy appearing in-person. The Bench, after brief deliberations, issued notice to the Central government.