Supreme Court rulings on Encounters

In a confrontation in UP, a son of a gangster-turned-politician and his assistant were both killed.

Why talk about this?

In order to prevent any abuse of authority by the law enforcement agencies, proper norms and procedures must be followed, according to the National Human Rights Commission (NHRC) and the Supreme Court.

However, this encounter has highlighted the problem of extra-judicial executions or police “encounters” in India.

Supreme Court Encounters Guidelines

A bench that included the then-CJI RM Lodha and Rohinton Fali Nariman issued specific instructions in September 2014.

These guidelines came in the case “People’s Union for Civil Liberties v State of Maharashtra”.

The guidelines enumerated 16 points to be followed in the matters of investigating police encounters in the cases of death as the standard procedure for a thorough, effective and independent investigation-

Registration of a first information report (FIR) as mandatory

Magisterial inquiry

Keeping written records of intelligence inputs

Independent investigation by bodies such as the CID

A Magisterial Inquiry must invariably be held in all cases of death which occur in the course of police action

Next of kin of the deceased must invariably be associated in such inquiry

In every case when a complaint is made against the police alleging commission of a criminal act on their part, which makes out a cognizable case of culpable homicide, an FIR to this effect must be registered under appropriate sections of the IPC

Such an inquiry made under Section 176 of the Code of Criminal Procedure, 1973, must show “whether use of force was justified and action taken was lawful.”

Whenever the police receives any intelligence or tip-off on criminal movements or activities relating to the commission of grave criminal offence, “it shall be reduced into writing in some form (preferably into case diary) or in some electronic form.”

Following such tip-off or intelligence, if an encounter takes place and a firearm is used by the police party, resulting in death, then an FIR to that effect has to be registered and forwarded to the court under Section 157 without delay.

Provisions for an independent investigation into the encounter

The requirements/norms must be strictly observed in all cases of death and grievous injury in police encounters by treating them as law declared under Article 141 of Indian Constitution.

The law declared by the Supreme Court shall be binding on all other courts in Indian Territory.

NHRC’s involvement is not necessary, “unless there is serious doubt about independent and impartial investigation.”

The information about the incident must be sent to NHRC or the State Human Rights Commission.

NHRC Guidelines on Encounters

The National Human Rights Commission (NHRC) has asked all states and Union Territories to ensure that police follow a set of guidelines in cases where death is caused in police encounters.

These included the police’s duty to enter all information received about encounter deaths in an “appropriate register” and provisions for investigation by independent agencies like the State CID.

Issues with such encounters

Defies rule of law: This practice undermines the rule of law and due process, and violates the right to life and other human rights.

Use of force: There have been allegations of police and security forces using excessive force.

Fake encounters: There have been instances of staging encounters, and conducting fake encounters to eliminate suspects without following the due legal process.

Autocracy: These incidents have raised concerns about impunity, lack of accountability, and the need for reforms to ensure that law enforcement officials are held accountable for their actions.

Distrust among the public: Public often tend to lose belief among the constitutional process of justice.

Why are such encounters popular among public?

Lack of trust in the legal system: Some people may view extrajudicial killings and encounters as a way of bypassing the legal system which they may view as corrupt or inefficient.

Perception of safety: There may be a belief among some members of the public that such encounters can help to deter criminals and make their communities safer.

Frustration with the slow pace of justice: The Indian legal system can be slow and protracted, and some people may view extrajudicial killings and encounters as a way to expedite the process of justice.

Lack of awareness about human rights: Some people may not be aware of the human rights implications of such encounters, or may view them as a necessary means to an end.

Dabba Trading and its impact on the Economy

A number of letters from the National Stock Exchange (NSE) have warned individual investors about companies that engage in “dabba trading.”

The NSE advised clients to avoid subscribing to or making investments using these products that promised, assured, or guaranteed returns in the stock market since they were illegal.

The exchange does not recognise the entities participating in dabba trading as authorised members.

Define Dabba Trading.

Dabba (Box) trading is the term for unofficial trading that takes place outside from stock exchanges.

It entails placing bets on changes in stock prices without actually making a purchase of a specific stock, as is done in an exchange.

It involves betting on stock price movements without incurring a real transaction to take physical ownership of a particular stock as is done in an exchange.

In simple words, it is gambling centred around stock price movements.

How does it work?

In dabba trading, investors place bets on stock price movements at a certain price point.

If the price point rises, they make a gain, and if it falls, they have to pay the difference to the dabba broker.

The broker’s profit from the investor’s loss, and vice versa.

Transactions are facilitated using cash and unrecognised software terminals or informal records, which helps traders stay outside the regulatory mechanism.

What are the problems with dabba trading?

Since dabba traders do not maintain proper records of income or gain, they are able to escape taxation, which results in a loss to the government exchequer.

The use of cash also means that they are outside the purview of the formal banking system.

Investors in dabba trading do not have formal provisions for investor protection or grievance redressal mechanisms available within an exchange, which exposes them to the risk of broker defaults or insolvency.

Dabba trading also perpetuates a parallel economy, potentially encouraging the growth of black money and criminal activities.

What is the current scenario?

Industry observers have reported that dabba brokers harass clients for default payments and refuse payments upon profit.

Potential investors are lured by aggressive marketing, ease of trading using apps with quality interfaces, and lack of identity verification.

Brokers keep their fees and margins open to negotiation depending on an individual’s trading profile.

The mechanism could potentially induce volatility and cause losses for the regulated bourse when dabba brokers look to hedge their exposures.

What are the legal implications?

Dabba trading is recognised as an offence under Section 23(1) of the Securities Contracts (Regulation) Act (SCRA), 1956.

Upon conviction, it can invite imprisonment for a term extending up to 10 years or a fine up to ₹25 crore, or both.

MUDRA Scheme

The PM reacted angrily to those making fun of the Pradhan Mantri Mudra Yojana (PMMY) and claimed that individuals who granted loans to powerful businesses “over phone” had no concept of the potential of microfinance.

MUDRA Scheme

The Government of India announced the MUDRA (Micro Units Development and Refinance Agency) Scheme in April 2015 as a financial initiative to promote micro-enterprises in India.

The programme is intended to meet the financial requirements of the nation’s non-corporate, non-farm sector firms.

The programme’s goals are to encourage entrepreneurship, create jobs, and give Indian small and microbusinesses access to financing.

Range of loans

The MUDRA scheme provides loans ranging from Rs. 50,000 to Rs. 10 lakhs to small and micro-businesses.

These loans are provided through various financial institutions such as banks, microfinance institutions, and non-banking financial companies (NBFCs).

The scheme also offers refinance support to these institutions.

Category       Loan Amount

Shishu            Up to Rs. 50,000

Kishore          Rs. 50,001 to Rs. 5 lakhs

Tarun Rs. 5 lakhs to Rs. 10 lakhs

Key features of the MUDRA scheme

Refinance support: The scheme offers refinance support to various financial institutions, such as banks, microfinance institutions, and non-banking financial companies (NBFCs), to provide loans to small and micro-businesses.

Employment generation: The scheme aims to promote entrepreneurship and employment generation in the country.

Digitalization of financial transactions: The scheme has helped in promoting the digitalization of financial transactions.

Focus on underprivileged and marginalized sections: The scheme aims to provide financial assistance to underprivileged and marginalized sections of the society, especially those belonging to the non-corporate, non-farm sector enterprises in the country.

Simplified loan processing: The loan processing under the scheme is simplified and requires minimal documentation.

No collateral requirement: The loans provided under the scheme do not require any collateral or security.

Competitive Interest rate: The interest rate for the loans provided under the scheme is competitive and affordable.

Inflation in India is Driven by Food Prices

According to former Deputy Governor of the Reserve Bank of India, Viral Acharya, the pricing power of five large corporations, or the “Big 5,” is to blame for the recent trajectory of inflation in India. The argument is invalid, though, because food price inflation in India differs from that in the rest of the globe. Although corporate pricing power does exist, it is constrained, and it is still unclear how much it contributes to total inflation.

The factor of food price inflation

Divergence between Indian and Western inflation rates is not new:

Sudden surge of Inflation in India: After the global financial crisis of 2008, Indian inflation surged higher than the economies of the US and UK due to food price inflation caused by negative agricultural shocks and high procurement price hikes.

Core inflation: Food-price inflation tends to feed into core inflation, so it would be hasty to conclude that Indian inflation is higher than the West today due to corporate pricing power.

Food price inflation: Evidence suggests that in India, food price inflation affects core inflation, and food price inflation enters costs of the non-agricultural sector.

Corporate pricing power in India:

Corporate pricing power and overall inflation: Corporate pricing power exists in Indian industry, but the extent to which it drives overall inflation in India is debatable. The question is how much corporate power is driving inflation beyond its obvious role in elevating the price level.

Prices of food: To measure inflation without considering the price of food is to exclude what matters most to the public, as opposed to central bankers.

Inflation control strategy: India’s inflation control strategy needs to address the challenge of ensuring the production of food at affordable prices.

Comparing WP inflation with CP inflation

Comparing WP inflation with CP inflation is to acquiesce in a mismatch.

The commodity basket corresponding to CP includes items that do not enter the wholesale price index, so we would be comparing apples with oranges.

The argument is based on a short time period

WP inflation has eased considerably in the six months preceding March 2023, but CP inflation has not. However, a mismatch between WP and CP inflations is not new.

So, the maintenance of high price increases by firms in the retail sector even after wholesale price inflation has declined in 2022-23 may just be a compensating mechanism, i.e., the rising input cost of the retail sector is being passed on with a lag.

Rising food prices driving current inflation

Over 75% of the direct contribution to inflation in the first three quarters of the financial year came from sectors in which the Big 5 are unlikely to be represented in a big way.

The contribution of food products alone was close to 50% in most time periods.

Rising food prices are driving current inflation in India.

The current inflation control strategy

Considerable rise in food prices: In India, food prices have only risen, and in recent years their rate of inflation has been very high. For all the reforms since 1991, the real price of food, i.e., its price relative to the general price level, has risen considerably.

What matters most to public must be considered: In the context, to measure inflation without considering the price of food is to exclude what matters most to the public, as opposed to central bankers.

Current strategy restricted to using the interest rate to dampen aggregate demand: India’s inflation control strategy is currently restricted to using the interest rate to dampen aggregate demand. This strategy avoids addressing the challenge of ensuring the production of affordable food.

Question mark on RBI’s ability to control inflation: The RBI has been unable to control even the core inflation which central banks are assumed to be able to control. A recent intervention explaining core inflation in India has highlighted the RBI’s inability to control inflation.