Explained: SC order on Finance Ministry reward to whistleblower in ANI tax case

The Supreme Court recently directed the Union Finance Ministry to reconsider the reward amount paid to a whistleblower under its ‘Reward to Informers’ policy. What are the ANI tax case and informer dispute about, and what drove the apex court to ask the ministry to pay the whistleblower more? 

The Federal gives you the lowdown.

What is the case history?

Over a decade ago, a whistleblower had informed the Finance Ministry of a tax default by news agency ANI Media Pvt Ltd to the tune of ₹2.59 crore. “In 2010, ANI had received a demand from the appropriate authority for payment of deficient service tax,” said ANI in a tweet. “This demand was voluntarily and duly complied without contest by ANI forthwith. This was duly accepted by the competent authorities and the matter stood closed.”

So, ANI paid up the amount on being asked to.

What is the whistleblower dispute about?

The dispute sprung from the reward that the Finance Ministry gave the whistleblower for the information. Clause 4.1 of the Reward to Informers and Government Servants Review of Policy-Procedure and Guidelines, issued by the Finance Ministry’s Department of Revenue, states that the reward is up to 20 per cent of the amount evaded plus the amount of fine and penalty levied.

Also read: Informers take enormous risk; govt rewards should encourage them: Bombay HC

According to a LiveLaw report, the petitioner — the whistleblower — claimed that he was given a reward of just ₹5.50 lakh in the ANI tax case. Under Clause 4.1, the appellant argued, he was entitled to ₹51.87 lakh, or more than nine times what he received.

What did the aggrieved informer do?

Unhappy with the reward amount, the informer approached the Bombay High Court in 2015, filing a petition under Article 226 of the Constitution. The affidavit submitted by the Principal Commissioner of Service Tax acknowledged that the appellant had provided crucial information regarding ANI Media.

After examining the details furnished by the petitioner, the reward committee had approved a final reward amount of ₹5.50 lakh, said the affidavit. This amount was decided on according to the information provided and subsequent investigations, it added.

However, the whistleblower challenged the tax department’s position, according to media reports. In his rejoinder, he said his responsibility ended with providing information on service tax evasion. If the information given was accurate and led to successful recoveries, the reward amount should be computed based on the amount recovered, he argued. 

His contention was that the authorities cannot separate the information and attribute to him only a portion of it. 

What happened next?

In 2016, a High Court division bench directed the informer to file a civil suit since he had raised issues of disputed facts. The appellant then took the matter to the Supreme Court.

The Supreme Court ruled in favour of the appellant and asked the Finance Ministry’s reward committee to review the case. It further asked the committee to come up with a fresh decision on the reward amount  considering the appellant’s contentions.

Explainer: Why India banned rice export and how it will affect the world

It held that the reward committee had ‘not applied its mind’ and that it must give well-founded reasons for arriving at a decision for the award amount. It also held that subsequently supplying reasons through affidavits was not sufficient.

LiveLaw quoted Justice Abhay S Okha and Sanjay Karol as saying that the minutes show “complete non-application of mind” on the prayer made by the appellant. The court expressed concern over the lack of reasoning behind the decision to limit the appellant’s reward to ₹5.50 lakh. So it partially allowed the appeal and gave the committee six months to arrive at a new decision.

What’s ANI saying?

ANI has taken objection to what it perceives as “attempt to mischaracterise an order passed by the Supreme Court in unrelated proceedings where ANI is not even arrayed as a party”. “Any insinuation or suggestion of any wrongdoing is mischievous and defamatory,” it said in a tweet. 

The news agency’s contention appears to be that it had paid the tax as demanded, the subsequent dispute was between the informer and the Finance Ministry, and its name is now being unnecessarily dragged into it.