An Example of Democratic Functioning

By Jawaharlal Nehru

From speech in Lok Sabha initiating debate on the Commission of Inquiry into the affairs of the Life Insurance Corporation of India, February 19, 1958. 

It is just two months ago that this matter of the Life Insurance Corporation came into my ken when it was first raised in this House. Since then all of us have naturally been much concerned about it and have followed the developments from day to day. This has been a somewhat painful ordeal for some of us, and these two months have made us sadder, a little older and perhaps a little wiser. But that experience or wisdom has been purchased at a fairly considerable cost. For it has cost us the services of an able and distinguished Finance Minister at a time when those services were most needed. 

Whatever the penalties which we or others have paid or may suffer, this inquiry has demonstrated to India and to the world the democratic way in which we function. It has established the dignity and majesty of this Parliament, and of the procedures we follow in maintaining high standards in public life and administration. That is a great gain. That is an example to be remembered by all of us in India. 

In accordance with parliamentary procedure, this House heard yesterday a statement on the resignation of Mr. T. T. Krishnamachari. He has resigned and paid the penalty for what had happened. So far as this House is concerned, there is nothing more to be said about it. 

In the course of this inquiry, much has been said about public ownership as opposed to private ownership, about nationalised Life Insurance Corporation as opposed to private insurance companies, and about civil servants or business men being in charge of large undertakings. Not only some witnesses but the public press has discussed this matter and some individuals have expressed their opinions about the failings of nationalisation. That was not a question for inquiry before the Commission. However, it is good that the facts have come out before the public. 

I do not remember any such criticisms being made of the serious failures of a number of well-known private insurance companies. Apparently, such failures of private concerns were almost taken for granted and required no particular comment. It might be remembered that one of the principal reasons for nationalising life insurance was the fact of such failures and the gross mismanagement of companies. Business men were in charge of them. I am mentioning this so that we might consider this matter in proper perspective, and not in any way slur over or try to minimize the events that took place in connection with the purchase of certain shares by the Life Insurance Corporation, which have been the subject of inquiry. 

The Life Insurance Corporation has been doing rather well in recent months and is transacting far greater business than it has ever done before. After the initial few months which were taken up in problems of reorganization, when the quantum of business fell, it has made rapid progress. The officers who run it deserve credit for the way they have done it. That does not mean that we should not pay adequate attention to any wrong thing done. 

I should like to say at the outset, on behalf of the Government, that we are of the opinion that the transaction resulting in the purchase of shares of the six companies was not entered into in accordance with business principles. I am also opposed to its propriety on several grounds. We accept, therefore, the Commission’s findings in regard to this transaction. 

As the Chairman of the Commission remarked in the course of the inquiry, there are several facts in this case for which I have no explanation. Even the inquiry has not elicited all the information which would enable us to form a clear opinion in regard to a number of these facts. I fail to understand how the normal precautions were not taken in buying the shares and in fixing the prices, why the Investment Committee was not consulted, and why the prices of the transaction raised no protest. I do not know whether it is possible to elicit further information now or in the future. But an attempt will certainly be made. 

A number of officers of the Government or of the Corporation are concerned in some way or the other with these transactions. We feel that in so far as the officers responsible for putting through these transactions are concerned, appropriate proceedings on the basis of the findings of the Commission should be initiated. 

But I should like to remind the House that while that is necessary and should be done, it is not right for us to come to final conclusions in regard to persons who are not here to answer or to defend themselves. There are procedures laid down for this purpose and they should be followed. It has been a convention of this House that no one should be condemned who is not given an opportunity to defend himself. That is specially so in regard to public servants. It is even more necessary to remember that if an individual is held responsible, it does not follow that the whole group of officers are at fault or are to be condemned. It would be a bad day if we generalize from a particular case, more specially in regard to civil servants. 

I consider the great majority of senior civil officers serving in India to be a body of men and women of high ability and integrity who have served their country well. As a group, they can be compared to their advantage with any similar group in any part of the world. They had to face a new situation and new types of work. They have done their utmost, often with success, to adapt themselves to this new situation. 

In the course of the inquiry, though not in the report itself, mention was made of some persons wholly unconnected with these transactions in a way which might be disadvantageous to them and to the positiom they occupy. The Governor of the Reserve Bank was mentioned in that way. I regret that anything should have been said which reflects on a man of high integrity and ability, who occupies a position of great responsibility. 

In this inquiry a question has been raised about the employment of officials of the civil service in our nationalized undertakings and our big projects. It has been suggested that businessmen of experience would be more suitable. I would welcome businessmen or other non-officials if they have the ability and integrity that is required for such responsible posts. But there is another consideration to be borne in mind. A person serving in a nationalised undertaking should agree with the objective of nationalisation and of State control. It is interesting to remember that quite a number of our senior civil servants, after retiring from service, have been offered and have accepted high posts in private business and are then supposed to be experienced businessmen. 

The person chiefly and most intimately concerned with the particular question of investment, which arises here, was and is a person who is considered an old, experienced businessman. He is not a civil servant. He has had experience over a long period in one of the biggest life insurance companies previously. 

The question has arisen as to what part the Government should take in the working of an autonomous corporation. The Commission has recommended certain principles. We shall examine their recommendation in regard to these principles very carefully. Broadly speaking, we agree that autonomous corporations should have autonomy, subject naturally to such limitations as may be prescribed. 

Let us look at the Act which gave birth to the Life Insurance Corporation. The entire capital of the Corporation has been found by the Government. According to the Act, the Government has the right to appoint the entire Board, the right to lay down the rules, the right to approve the regulations which may be made by the Corporation itself and the right even to wind up the Corporation. Thus, although the Corporation was meant to be independent and autonomous in its day-to-day functioning a machinery was provided for the Government to give guidance to the Corporation in various ways. Parliament in its wisdom imposed upon the Government the responsibility that this business should be conducted properly through a Corporation and authorized the Government to give directives when they found such directives necessary.

Mr. C. D. Deshmukh, the Finance Minister, stated in Lok Sabha on the 18th May, 1956 that there was the further safeguard that the Central Government had the right to give directions to the Corporation in the matter of investment. Investment does mean not only investment generally but specific investments. Therefore, to lay down as a principle that the Government must keep aloof from the Corporation completely would be to challenge the decisions of Parliament. 

Having made this point clear, I should like to add that we entirely agree that an autonomous corporation should not be generally interfered with. Indeed, it is our belief that there should be more and more devolution of power and authority, subject to certain safeguards. 

This inquiry has raised very novel questions. In the United Kingdom similar questions have arisen in regard to a recent inquiry called the Bank Rate inquiry. The inquiry exercised British opinion greatly, as indeed the present inquiry has exercised Indian opinion. The two inquiries are not of the same type ; the matters involved are not the same. Nevertheless there is a certain similarity, and the same questions have arisen. 

After the Bank Rate inquiry was over, many doubts were expressed as to the proper mode of a public inquiry in such cases. I believe the practice in regard to inquiries in England is to hand over a case to the Treasury Solicitor and he is given the assistance of the chief of police to make investigations. Upon the investigations being completed, all the information is put before the inquiry commission. The commission does not, as a rule, take part in the examination of witnesses, but leaves it to the Attorney-General who is furnished with statements obtained by the Treasury Solicitor. The Attorney General conducts both the examination and the cross-examination and in doing so and in presenting the case, he acts only in the interest of bringing out facts. 

I am explaining this, because it is a matter for the future. The other day I stated elsewhere that the method of inquiry was not very satisfactory'. Some people thought that I was criticizing the Chairman of the Commission. It \\as far from my thought. I was not criticizing the Chairman at all. but rather the whole approach. The fault really and principally lay with us in not thinking this matter out beforehand. As a matter of fact, if I may say so with some hesitation and in all confidence, we were hustled by Parliament. 

Parliament did not order us. We appreciated Parliament’s eagerness, a very legitimate eagerness. We were asked; Did some Members of the Cabinet want to delay this inquiry? Did they want to postpone it? With this kind of atmosphere surrounding us we wanted to take action immediately and, of course, from the very first day we were anxious to have a full inquiry to elicit all the facts and take steps. But we were not quite clear as to the best way of doing it. and because of our lack of prescience or lack of thought given to it. difficulties arose, as they arose in England in a different context. 

It is for Parliament to consider at a later stage, and for the Government to keep in mind as to what type of procedure we should allow. It is not necessary for us to follow the British practice in this or any other matter. But since in many ways we do follow the British practice in Parliament, we can learn much from what has been done elsewhere. I certainly think, subject to further consideration, that when such an occasion arises in future for the appointment of a commission, some preliminary step should be taken and some preliminary investigation should be made to be placed before the tribunal to help them. 

There is another aspect to such an inquiry. The inquiry, like any judicial procedure, must necessarily be conducted with decorum and dignity and without public interference. I think, as a rule, a public inquiry is better than a private inquiry. But if the whole atmosphere of the court becomes surcharged by public excitement and public exclamation and interference, it is not the normal atmosphere which should prevail in a judicial court or in a like inquiry. The Chairman of the Commission, Mr. Justice Chagla, was much distressed at what was happening in his court and protested many times about it. Every effort should be made to prevent this kind of public excitement from overflowing into a court room. 

There are questions relating to ministerial responsibility ,and like questions. These are important, but they are hardly within the purview of the Inquiry' Commission. These questions are really for Parliament to determine and are usually matters of convention. We accept the broad principle of ministerial responsibility. But to say that the Minister is always responsible for all the actions of the officers working under him may be to take this much too far. 

May I say that this inquiry had obviously nothing to do with the broad principles of the policy of the Government? It is not for such inquiries to criticize, comment on or object to the broad principles of policies which Parliament has laid down. But there has been so much reference in the press and elsewhere to these broad policies and an attempt has been made to run down those broad policies not only in regard to insurance but even in regard generally to the public sector. I feel it is necessary to state quite clearly and positively that so far as the Government’s policies in regard to the public sector and in regard to enlarging the public sector are concerned, they hold completely. There is not a shadow' of doubt in our mind that those policies are right and should be pursued. 

I have already stated that the Government accept the Commission’s findings to the effect that the transaction resulting in the purchase of .shares of the six companies was not entered into in accordance with business principles and was also opposed to propriety on several grounds. Further, the Government intend to initiate proper proceedings on the basis of the findings of the Commission in respect of the officers responsible for putting through the transaction. The Government also intend to examine carefully certain principles recommended by the Commission for adoption by the Government and the Corporation. 

हिन्दी में इस भाषण को यहाँ पढ़ें। 

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