Economic & Political Weekly (EPW) Editor Paranjoy Guha Thakurta’s resignation, following a legal notice by the lawyers for Adani Power Limited (APL) to the owners – the trustees of Sameeksha Trust, which owns and runs the Journal, Editor and authors of an article later withdrawn for “failing to meet editorial standards,” has sparked a debate on the media succumbing to corporate pressure.
Allegations Based on Single Source
The headline of the article in question based on a single statement from Mr Guha Thakurta’s source and the circumstantial evidence used to support it simply didn’t seem to justify it. The article is broadly based on two arguments: Changes to customs duties over the years and APL’s false submissions before the Gujarat High Court, both of which seem based on errors.
There were, in fact, a couple of articles written in 2016 and two articles co-authored in 2017 by Mr Guha Thakurta. The one in contention was published on 17 June 2017 titled ‘Modi Government’s Rs 500 Crore Bonanza to the Adani Group.’ Through a notice dated 5 July 2017 served through APL’s Ahmedabad-based advocates Thaker & Co, the corporate alleged several statements in the article were ‘defamatory’. In the first, in the article, it was suggested that the “quietly tweaked rules relating to Special Economic Zones – and the new rules specifically favour the Adani Group.”
It was only due to the 2016 amendment to the Special Economic Zones (SEZ) Rules, 2006, they wrote, that the customs and excise authorities could process applications for refunds of customs duties. This amendment was inserted, a confidential source told Mr Guha Thakurta, to make it easier for APL to claim a refund of Rs 506 crore relating to their Mundra Power Plant. Now, suggesting that Gautam Adani is understood to be close to the Prime Minister, and then asking, at the end of the article, “Were these rules tweaked to help one company headed by a well-connected individual?” impute collusion between the government and APL. By law, a statement is defamatory if it harms the reputation of a person, whether explicitly or by imputation. That it would be interpreted by APL as defamatory is a given.
Secondly, the article reads APL is claiming refunds on duties it never paid in the first place. Here, the authors are more direct in their allegations as they claim APL’s refund claim is based on sheer deception. They allege the refund is being claimed on customs duties paid by APL on raw materials and consumables used as inputs at the Mundra Power Plant which, according to their confidential source, APL never paid and that amounts to Rs 1,000 crore (as of March 2015). According to their confidential source, APL’s claims to have paid duties on raw materials despite having paid no such duties “misled” the Gujarat High Court in 2015.
APL was challenging the validity of a 2010 customs notification that imposed duties on the supply of electricity outside an SEZ on the basis, among other things, that it would amount to double taxation. The “fact of payment of duty on coal has been submitted by APL to the Gujarat High Court,” read the article. The authors then raised concerns about the Gujarat High Court judgment, which ruled in APL’s favour and did not cite any evidence that duties were paid by APL. Further doubts were raised on how the Additional Solicitor General, representing the Union of India, did not object to any of this.
Article Alleges Fraud and Perjury
Now, for APL to have made such a refund application and to have made such a claim in court, without having paid any duty at all in the first place, indicates fraud and perjury on behalf of APL, both of which obviously negatively affect its reputation, hence underlining a serious case for defamation.
The authors suggest the Amendment to the SEZ Rules, 2006 was brought in to make a special case for the Adanis. With regard to the SEZ Rules, 2006 (herein after referred to as the principal rules) in rule 47, after sub-rule (4), the sub-rule inserted, read:
(5) Refund, Demand, Adjudication, Review and Appeal with regard to matters relating to authorised operations under Special Economic Zones Act, 2005, transactions, and goods and services related thereto, shall be made by the Jurisdictional Customs and Central Excise Authorities in accordance with the relevant provisions contained in the Customs Act, 1962, the Central Excise Act, 1944, and the Finance Act, 1994 and the rules made there under or the notifications issued there under.
It surely doesn’t appear that this amendment only applies to the Adanis or is detrimental to the government or the public in any way. This amendment benefits anyone operating in an SEZ wishing to claim a refund of duties paid.
The Rules had earlier not specified any forum for appeals, refunds or any sort of disagreement with assessments of customs duties relating to SEZs. Refunds on excess Duty or wrongly-paid Duty were always open to claim under Sec. 27 of the Customs Act 1962, regardless of whether the entity claiming the refund was based in an SEZ or not. A clarification on the appropriate forum to do so, which the amendment provides for, does not – in any manner – create an entitlement to refunds, or any special rights for the Adanis.
The authors claim they have documents leaked to EPW, clearly indicating, “APL had not, in fact, paid the duty on raw materials and consumables.” The article says there has been no tax paid on raw materials and other consumables, which is mandatory as per the SEZ law. That such taxes are mandatory in law is only partially correct.
Under Rule 47(3) of the SEZ Rules 2006, “Surplus power generated in a Special Economic Zone’s Developer’s Power Plant in the SEZ or Unit’s captive power plant or diesel generating set may be transferred to Domestic Tariff Area on payment of duty on consumables and raw materials used for generation of power subject to the following conditions, namely:
(a) proposal for sale of surplus power received by the Development Commissioner shall be examined in consultation with the State Electricity Board, wherever considered necessary: Provided that consultation with State Electricity Board shall not be required for sale of power within the same Special Economic Zone;
(b) norms for production of a unit of power shall be approved by the Approval Committee;
(c) sale of surplus power to other Unit or Developer in the same or other Special Economic Zone or to Export Oriented Unit or to Electronic Hardware Technology Park Unit or to Software Technology Park Unit or Bio-technology Park Unit, shall be without payment of duty;
(d) for sale of surplus power in Domestic Tariff Area, the Unit shall obtain permission from the Specified Officer and the State Government authority concerned;
(e) duty on sale of surplus power to the Domestic Tariff Area shall be as provided for in this rule.”
This means a power plant, like APL’s, would not pay any duties on substances like coal when they were brought into the SEZ, claiming a duty exemption under the SEZ Rules. The entity would have to pay duty on inputs like coal but only to the extent that such coal was used to generate electricity going out of the SEZ. APL had, according to the article, availed duty exemptions to the tune of Rs 1,000 crore.
The crux of it being: Even if APL claimed duty exemptions on inputs of up to Rs 1,000 crore, they wouldn’t necessarily have to pay all of that when transferring electricity out of the SEZ. They would only be liable to pay duty on the inputs to the extent used to produce the amount of electricity, transferred outside the SEZ.
The article says the Gujarat High Court wrongly decided the 2015 case based on a false claim. The issue before the Gujarat High Court was whether it was possible for the government to ‘retrospectively’ charge any company customs duty on its supply of electricity out of an SEZ, that is, duties on outputs.
The contention based on double taxation was pivoted on the fact the company was already liable to pay customs duties on inputs under Rule 47(3) of the SEZ Rules. It didn’t matter whether APL had actually paid those duties or not – under Rule 47(3) they were still supposed to pay them. APL just had to establish that Rule 47(3) applied to them.
If APL had claimed in court that they had paid the duties and if it were proved they hadn’t, it would amount to perjury. Even this would not bear any relevance to the issue in contention and not affect the Gujarat High Court judgement.
Also, there is no record that APL actually made such a claim. The High Court judgment, while discussing APL’s arguments, maintains they say they were liable to pay tax, not that they actually paid it.
The article, quite generously, quotes a confidential source while making some serious allegations, an act that doesn’t quite immunise the authors in entirety. The substance of the allegations pins the onus on the author who can’t get away under the pretext of protecting the confidentiality of source. Neither is the author immune from legal processes nor is his source.
In 1986, the Delhi High Court, in the Jai Prakash Agarwal Vs Bishamder Dutt Sharma case directed Jan Satta and Punjab Kesari reporters to disclose their sources for a story alleging a judicial verdict in an election petition had been fixed. Three years later, in a case against The Hindustan Times, the Patna High Court ruled it was well within its rights to command a journalist to disclose his source.
Public Good Needs To Be Proved
Also, that APL may consider the statements to be defamatory, doesn’t suggest they stand to win a defamation case before the law. The legal notice sent to Sameeksha Trust and its authors is strongly worded as is usually the case with defamation notices sent to publications. It runs into 34 paragraphs that do raise some valid concerns about the article.
Now, where defamation is concerned, it must be noted that there are broadly two kinds of defamation. One, being a civil defamation where truth is a defence and, if proved, can lead to the defamation suit being dismissed. The other, as is in question here, being a criminal defamation suit as laid down in Sections 499 and Section 500 of the Indian Penal Code, where just the truth isn’t a defence.
Here, even if a person has spoken the truth, he can be prosecuted for defamation. Under the first exception to Section 499, truth will only be a defence if the statement was made ‘for the public good.’ And that, is a question of fact to be assessed by the judiciary.
While these sections have been debated for years now, particularly during the more recent Subramaniam Swamy Vs Union of India case where the ‘arbitrary and over-broad rule,’ becomes a huge deterrent to those making statements, regarding politicians or political events, even which they know to be true. The risk of a court failing to find the statement for the public good is too high for comfort. Here, instead of making the plaintiff prove the accused made a false statement, Section 499 gives the accused the burden of proving the statement was not only true but also made for the public good.
Also, a person can be prosecuted under Section 499 even if he or she has not made any verbal or written statement at all. In a particular case, a magistrate issued criminal process solely on the allegation the defendant conspired with the person who made the allegedly defamatory written statements. There is nothing in Section 499 that protects a person who has not made any statement at all from being charged with criminal defamation case purely on the allegation of having conspired with someone who made the allegedly defamatory statement.
Why, even an ironical statement can amount to defamation. “An imputation in the form of an alternative or expressed ironically,” may amount to defamation. Also, Section 499 applies to any imputation concerning any person. This means anyone can file a criminal defamation suit under Sections 499 and Section 500 even if that person is a public official holding high office. Section 499 expressly states that “making an imputation concerning a company or an association or collection of persons may amount to defamation. Therefore, public institutions too can file suit for defamation,” according to the explanations provided under Section 499 of Indian Penal Code.
So, if following the notice, the article was not withdrawn unconditionally and APL moved court for Criminal Defamation, Sameeksha Trust (as the owners of EPW) and the authors of the article would not just have to prove the allegations in the article were substantiated but also, that these allegations were made ‘in the public interest’. Now, that would be a tall task!
Unilateral Response Binds Trust Legally
The Trust justifiably held the Editor Mr Guha Thakurta may have committed a grave impropriety by unilaterally responding to APL’s defamation notice regarding the article. On talk of buckling under corporate pressures, in a letter, they said, “There is no question of the Sameeksha Trust, an independent non-partisan institution, bowing to external pressures of any kind. It never has. It is guided solely by the objectives of maintaining the ethos, quality and standards of EPW, while ensuring spotless propriety and ethics in the working of its staff.”
On the basis of this statement and additional corroboration, it appears the Trust decided to withdraw the article because it did not meet EPW’s editorial standards. In wanting to respond to the defamation notice from APL, Mr Guha Thakurta was entirely justified but since the notice had been addressed first and foremost to the Sameeksha Trust, and to the other authors as well, Mr Guha Thakurta claimed to be acting on the Trust’s behalf, without informing them let alone getting their approval, seemed out of place.
With Mr Guha Thakurta claiming to be acting on behalf of the other authors, without consulting them at all, there could arise a ground for claim by the Trust and the other authors, if they felt they suffered some harm as a result. Mr Guha Thakurta’s letter binds the Trust to certain positions regarding the veracity of the claims in his articles, which the Trust is predictably unhappy about particularly since they don’t have faith in the article.
Freedom of Press isn’t an absolute right and does not immunise you from the processes of law particularly if your Freedom borders on either Defamation or isn’t for Public Good.
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