1. Home Secretary Chairman

2. (ii) Secretary ® Member

3. (iii) DIB Member

4. (iv) Director CBI Member

5. JS (PP) MHA Member Secretary

1. The Committee was authorised to invite senior officers of various concerned Departments to gather the required information.

2. Special Secretary (Internal Security & Police), MHA, was subsequently added as member of the Committee. The Committee was desired to submit its report within 3 months.

1. In the first meeting of the Committee (held on 15^th July93), I had explained to the members that the Government had established the Committee after seeing the report of our intelligence and Investigation agencies on the activities/linkages of the Dawood Ibrahim gang, consequently to the Bomb blasts in Bombay in March 1993. From these various reports, it was apparent that the activities of Memon Brothers and Dawood Ibrahim had progressed over the years, leading to the establishment of a powerful network. This could not have happened without these elements having been protected by the functionaries of the concerned Government departments specially Customs, Income Tax, Police and others. It was, therefore, necessary to identify the linkage and to also determine how such information could be timely collected and acted upon in future.

2. In the course of the discussions, I perceived that some of the Members appeared to have some hesitation in openly expressing their views and also seemed unconvinced that Government actually intended to pursue such matters. Accordingly, I addressed separate personal letters to each of the Members of the Committee seeking their well-considered suggestions and recommendations. The responses are briefly brought out below.

   Secretary (R&AW)

3. The various offices abroad of this Agency have limited strength and are largely geared to the collection of military, economic, scientific and political intelligence. R&AW monitor the activities of certain organisations abroad only insofar as they relate to their involvement with narco-terrorist elements and smuggling arms, ammunition, explosives, etc. into the country. It does not monitor the activities of criminal elements abroad which are mainly confined to "normal smuggling without any links to terrorist elements". The present strength of the Agencys office abroad would not permit it to enlarge its field of activities. If, however, there is evidence to suggest that these organisations have links with intelligence agencies of other countries, particularly Pakistan, and they are being used or are likely to be used by such countries for destabilising our economy, it would become R&AWs responsibility to monitor their activities, as is being done by this Agency to collect vital information in regard to the investigations in the Bombay bomb blasts case.

4. The creation of a nodal agency to collect information regarding the activities of Mafia organisations is very essential. All the existing information/data available with R&AW, IB, CBI could be made available to this nodal agency. R&AW will nominate an officer of suitable rank to liaise with nodal agency on a regular basis to enable expeditious follow-up action.

1. A report on the nexus between the Bombay City Police and the Bombay under-world, was prepared by CBI in 1986. It would be useful institute a fresh study by CBI, on the basis of which appropriate administrative/legal measures could be initiated.

2. An organised crime Syndicate/Mafia generally commences its activities by indulging in petty crimes at the local level, mostly related to illicit distillation/gambling/organised seta and prostitution in the larger towns, in port towns, their activities involve smuggling and sale of imported goods and progressively graduate to narcotics and drug trafficking. In the bigger cities, the main source of income relates to real estate- forcibly occupying lands/buildings, procuring such properties at cheap rates by forcing out the existing occupants/tenants etc. Over time, the money power thus acquired is used for building up contacts with bureaucrats and politicians and expansion of activities with impunity. The money power is used to develop a network of muscle-power which is also used by politicians during elections.

3. CBI has reported that all over India crime Syndicates have become a law unto themselves. Even in the smaller towns and rural areas, muscle-men have become the order of the day. Hired assassins have become a part of these organisations. The nexus between the criminal gangs, police, bureaucracy and politicians has come out clearly in various parts of the country. The existing criminal justice system, which was essentially designed to deal with the individual offences/crimes, is unable to deal with the activities of the mafia; the provisions of law in regards to economic offences are weak; there are insurmountable legal difficulties in attaching/confiscation of the property acquired through Mafia activities.

4. It has been suggested that the menace has first to be tackled at the local level where the agencies of the State and the concerned Central Enforcement Agencies like Customs and Excise, Income-Tax etc. would be required to take effective action. In cases where a crime Syndicate has graduated to big business, it would be necessary to conduct detailed investigations into its assets, both movable and immovable. It has been stressed that when such action is not timely and effectively taken, the lower functionaries of the concerned State and Central Departments/organisations start overlooking the activities of the crime Syndicates. To elucidate this point, the Director CBI has given example of IQBAL MIRCHI of Bombay who till the late 80s, was merely a visitor to passenger and carrier ships to obtain liquor and cigarettes for selling the same at a profit. In the last 3-4 years, Mirchi acquired real estate valuing crores of rupees; he has many bank accounts and has been paying lakhs of rupees to his carriers. The growth of MIRCHI is due to the fact that the concerned Enforcement agencies did not timely taken action against him and, later, this perhaps became difficult on account of the enormous patronage that he had developed. If MIRCHI is investigated, the entire patronage enjoyed by him and his linkages will come to light. Director CBI has observed that there are many such cases, as that of MIRCHI where the initial failure has led to the emergence of Mafia giants who have become too big to be tackled.

5. Director CBI has stated that the main mode of communications/contacts of the Mafias operating at the international level is through telephonic communications. Referring to the useful leads emerging from the investigations into the activities of Dawood Ibrahim, a Mafia leader, the director CBI has stated that the effective monitoring of the telephonic calls made from India/received from abroad would yield useful information and, for this being done, Government may grant sanction to monitor certain telephonic connections.

6. The assistance of Banks in an essential input. The Bank Managers can be placed under obligations to render reports on all heavy transactions and suspicious accounts to the Enforcement agencies. Such a practice obtains in U. K.

7. Concluding his analysis, Director CBI has made the following suggestions to bring under control the activities of the criminal Syndicates:

1. Identification of offences and awards of deterrent punishments including preventive detention.

2. Trial procedures should be simplified and hastened.

3. Surveillance should be carried out through finger printing, photographs and dossiers.

4. Monitoring mechanisms should be established at the State and Central levels.

5. Establishment of Special Cells in the States CIDs and CBI.

6. Suitable amendments should be introduced in the existing laws to more effectively deal with the activities of Mafia organisations, etc.; this could also include review of the existing laws.

7. A detailed case study of10-15 case would provide useful information regarding the administrative/legal measures which would be required to be taken to effectively tackle the functioning of Mafia organisations. The CBI can do this within a short period.

1. DIB has reported that due to the progressive decline in the values of public life in the country "warning signals of sinister linkage between the underworld politicians and the bureaucracy have been evident with disturbing regularity, as exemplified by the exposures of the networks of the Bombay Bomb Blast case". He has recommended immediate attention to: -

1. Identification of the nexus between the criminals/mafias and antinational elements on the one hand and bureaucrats, politicians and other sensitively located individuals on the other.

2. Identification of the nature and dimensions of these linkages and the modus operandi of their operations.

3. Assessment of the impact of these linkages on the various institutions viz., the electoral, political, economic, law and order and the administrative apparatus.

4. Nexus, if any, between the domestic linkages with foreign intelligence.

5. Necessary action to show effective action to counteract/neutralise the Mafia activities.

6. Political and legal constrains in dealing with the covert/illegal functioning of the linkages.

1. Like the Director CBI, the DIB has also stated that there has been a rapid spread and growth of criminal gangs, armed senas, drug mafias, smuggling gangs, drug peddlers and economic lobbies in the country which have, over the years, developed an extensive network of contacts with bureaucrats/Governments functionaries at the local levels, politicians, media persons and strategically located individuals in the non-State sector. Some of these syndicates also have international linkages, including the foreign intelligence agencies. In this context, the DIB has given the following examples: -

1. In certain States, like Bihar, Haryana and UP, these gangs enjoy the patronage of local level politicians, cutting across party lines and the protection of Government functionaries. Some political leaders become the leaders of these gangs/armed senas and, over the years, get themselves elected to local bodies, State Assemblies and the National parliament. Resultantly, such elements have acquired considerable political clout seriously jeopardising the smooth functioning of the administration and the safety of life and property of the common man, causing a sense of despair and alienation among the people.

2. The big smuggling Syndicates, having international linkages, have spread into and infected the various economic and financial activities, including havala transactions, circulation of black money and operations of a vicious parallel economy causing serious damage to the economic fibre of the country. These Syndicates have acquired substantial financial and muscle power and social respectability and have successfully corrupted the Government machinery at all levels and yield enough influence to make the task of investigating and prosecuting agencies extremely difficult; even the members of the judicial system have not escaped the embrace of the mafia.

3. Certain elements of the mafia have shifted to narcotics, drugs and weapon smuggling and established narco-terrorist networks, specially in the States of J&K, Punjab, Gujarat and Maharashtra. The cost of contesting elections has thrown the politicians into the lap of these elements and led to a grave compromise by officials of the preventive/detective system. The virus has spread to almost all the centres in the country; the coastal and the border States have been particularly affected.

4. The Bombay bomb blast case and the communal riots in Surat and Ahmedabad have demonstrated how the Indian underworld has been exploited by the Pak ISI and the latters network in UAE to cause sabotage, subversion and communal tension in various parts of the country. The investigations into the Bombay bomb blast cases have revealed extensive linkages of the underworld in the various governmental agencies, political circles, business sector and the film world.

1. DBI has stated that the network of the Mafia is virtually running a parallel Government, pushing the State apparatus into irrelevance. It is thus most immediately necessary that an institution is established to effectively deal with the menace. In this connection, DIB has stated: -

1. Presently, there is no system/mechanism which is specially designated to collect and collate intelligence pertaining to the linkages developed by crime Syndicates/Mafia with the governmental set up. Nonetheless, the various intelligence/investigation/enforcement agencies collect, in the normal course of their functioning, information about the nexus between the bureaucracy and politicians with Mafia gangs, smugglers and the underworld. These agencies use such available inputs "only within the narrow confines of their work charter and choose not to take undue cognisance and follow-up action, leave alone sharing with any other agencies". Thus, all these agencies "function within their own cocoons, with the result that a plethora of information fails to get specific and purposeful attention needed for the exposure of the linkages". It is, therefore, necessary to immediately have an institutionalised system which "while giving total freedom to the various agencies to pursue their charter of work, would simultaneously cast on them the onus of sharing such inputs to a nodal outfit whose job will be to process this information for attention of a single designated authority". This will enable the Nodal Group to provide useful leads to the various agencies and, over time, a progressive data will get generated "to facilitate periodic reviews and analysis which could then be passed to a designated body".

1. As would be seen from the afore-stated brief discussions, specially the views expressed by Director CBI and DIB, it is evident that the muscle power of the crime Syndicates is sustained by their enormous financial power which, in turn, is secured by the Mafia elements by committing economic offences with impunity. In this context, I held detailed personal discussions with Secretary (Revenue) under whose control operate the various economic intelligence/investigative/enforcement agencies.

2. The Department of Revenue functions through the following major agencies: -

1. Central Board of Excise & Customs (CBEC)

   Interalia, CBEC is responsible for the prevention of smuggling. In this and other tasks, it is assisted by the Director General of Revenue Intelligence (DGR) and Directorate General of Anti-Evasion (DGAE). The DGRI deals with the evasion of customs duties; the DGAE with Excise duty evasion.

2. Central Board of Direct Taxes (CBDT)

   Income Tax Department administers the Income Tax Act, Wealth Tax Act, etc.

3. Central Economic Intelligence Bureau (CEIB)

1. Identification of major sources generating black money; directing and developing intelligence about such sources; planning and coordinating action and operations against such sources.

2. Assisting the various enforcement agencies in strengthening the intelligence gathering infrastructure and building up their capability for storage and retrieval of intelligence.

3. Conducting investigative and analytical studies in difficult areas of black money operations and monitoring indicators thereof.

1. Enforcement Directorate

   This Directorate is concerned with the enforcement of the investigation and penal provision of the Foreign Exchange Regulation Act; collection of intelligence relating to foreign exchange offences; enquiries into suspected violations of the provisions of FERRA, etc.

2. Narcotics Control Bureau (NCB)

1. I explained a Secretary (Revenue) the broad considerations on account of which the government had set up a Committee to look into the linkages developed by the Mafia elements. He informed me that he had recently held a meeting with senior representatives of the RBI, the Chairman CBEC, Chairman CBDT and the Economic Intelligence Council in the Department of Revenue, and readily agreed with my request to attend a meeting of the Committee along with his concerned officers for a full discussion on the issues before the Committee. Accordingly, I arranged a meeting of the Committee (30^th Aug 93) to hear the view of Secretary (Revenue), who was accompanied by Chairman CBDT, DGRI, Member (Customs) and Director (Enforcement). During the course of the discussions with Secretary (Revenue) and his aforesaid principal officers, the following significant observations were made: -

1. In the normal course of his work, to detect violations of Customs & Excise laws, DGRI comes across information of linkages between crime Syndicates and Governmental functionaries etc. As following up of such information is not within the charter of duties of DGRI, his officers focus primarily on the information relating to the violation of the laws relating to their charter.

2. As in the case of DGRI, Indirect information also becomes available to the CBDT about linkages. Here again, not being directly relating to their charter of responsibilities, the CBDT do not follow up such leads.

3. While the NCB is specifically responsible for booking drug traffickers, with the increasing importance being given to Narco-terrorism, the NCB have been asked to gather further information so that the real king-pins in the narcotics trade can be apprehended.

4. The Directorate of Enforcement comes across information on linkages and passes it on to the CBI and IB.

5. Of late, currency amounting crores of rupees in being seized, invariably packed in suit-cases and gunny bags. The Banks are reluctant to pass on information about account holders to CBDT and do not allow their officers to hold exploratory enquiries.

6. While a certain amount of information is shared between the various organisations under the Department of Revenue, and those under the MHA and Cabinet Secretariat, the exchanges are sporadic and limited. This is perhaps due to the fact that each concerned organisation/agency is anxious to protect its sources and is apprehensive that a full sharing of all information might jeopardise its operations, on account of premature leakage of information.

7. While DGRI, Director (Enforcement) and DG NCB authorised to undertake phone tapping of suspected offenders, the DGRI has not been allowed to enforce surveillance on the telephonic communications of political personalities.

8. Senior Police officers, even in the border States, are not trained or adequately informed of the work done by the directorate of Enforcement, specially in regard to money laundering operations.

9. Information about the activities of drug traffickers is passed on by DG NCB to the concerned State Governments and their agencies. However, niggardly responses by the latter and prolonged delays in the disposal of cases before Courts seriously hampers the effective functioning of the NCB. While the NDPS act prescribes the award of deterrent punishments of offences, the results are to the contrary. It is necessary that the directorates of prosecution in the State Governments are urgently brought under the control of the State Police.

1. Secretary (Revenue) stated that he field officers of his various Departments were faced with various problems, amongst which are:

1. The utter inadequacy of the criminal system; cases are not heard timely; functioning of the Government lawyers is grossly inadequate; all this results in a low percentage of convictions and mild punishments. Under the criminal justice system is geared up, the work of the enforcement agencies cannot be effective.

2. The field officers of the various agencies of the Revenue Departments are often pressurised by senior government functionaries/political leaders apparently at the behest of crime Syndicates/Mafia elements. Unless the field level officers are offered effective protection, they cannot be expected to maintain interest in vigorously pursuing action against the activities of such elements.

1. Chairman CBDT stated that insofar as the functioning of his officers is concerned, whenever they come into possession of any information regarding the violation of any other law, they pass it on to the concerned agency. He suggested that if the information available wit other agencies is passed on to him, his officers could pursue the same.

1. As a result of the discussions held by the Committee with Secretary (Revenue) and his principal officers, it is evident that:

1. While, in the course of their normal activities, information on the linkages of the crime Syndicates sometimes become available, such information is not pursued on the score that it is not directly related to offences falling within the laws administered by these agencies;

2. Such information is occasionally passed on by these agencies to the CBI and or IB;

3. The various agencies under the Department of Revenue do not specifically search on the linkages of crime Syndicates.

1. Consequent to the Committees discussions with the Secretary (Revenue) and his principal officers, I held a series of further personal discussions with the Secretary (Revenue). At my request Secretary (Revenue) gave me a personal note indicating his views, which are briefly as below:-

1. The information gathered by the various agencies under the Revenue Department, while gathering intelligence on offences relating to the laws administered by them, is generally not put to any use unless it is required to the passed on to the passed on to the other intelligence agencies outside the Department of Revenue.

2. The linkages developed by crime syndicated get generally confirmed when pressure is mounted on the concerned agencies not to take action against the offenders or to go slow in the cases against them. Such pressures are mounted either immediately after a raid is conducted or at the time when prosecution is about to be initiated. Pressures are also exerted whenever corrupt and undesirable officers are shifted from sensitive assignments (Preventive Customs Divisions at the Airports, sensitive Collectorates in the Central Excise etc.)

3. In the narcotics arena, which includes cultivation of opium, manufacture of alkaloids, prevention of narcotics, smuggling etc. the financial stakes are astronomically high, Consequently, the level of corruption is of a very high order in this area of functioning and enormous pressures are brought to bear even when subordinate officials are posted away, specially when the shift of an officer adversely affects the interests of those who are making easy money.

4. Narcotics trade has a world-wide network of smugglers who also have close links with terrorists. Terrorists indulge in narcotics trade to amass huge funds, in various foreign currencies, from which they source their procurement of weapons etc.

1. While the Department of Revenue has initiated a number of steps to deal with the activities of smugglers and to plug loopholes in the system, Secretary (Revenue) has stated that a possible approach to effectively liquidating the linkages developed by the crime Syndicates would be to mercilessly prosecute the offenders without succumbing to any pressure whatsoever. He is of the view that once the offenders are deterrently punished under the law, their influence and strength will start declining, as also of all those who support them, wherever located. He has emphasised that for this objective being achieved it will be extremely necessary that: the entire government machinery involved in taking action against the crime Syndicate is allowed to perform its duties with total freedom; officers with impeccable integrity should be posted to head the various organisations which are responsible for taking action against tax offenders, smugglers etc; such officers should be selected with utmost care and provided sufficiently long tenures, giving them the clear mandate to ruthlessly punish the offenders; action must be taken to ensure the objective functioning of Courts which deal with the trial of economic offences; all cases before the Courts should be speedily concluded without the judicial officers coming under any pressure or succumbing to temptations; inefficient and corrupt elements in the various organisations must be weeded out and Government should take stringent action against officers who seek to exert political pressure for securing postings and appointments of their choice.

1. From the above narrated analysis, the following conclusions can be drawn: -

1. On the basis of the extensive experience gained by our various concerned intelligence, investigative and enforcement agencies, it is apparent that crime Syndicate and Mafia organisations have established themselves in various parts of the country.

2. The various crime Syndicates/Mafia organisations have developed significant muscle and money power and established linkages with governmental functionaries, political leaders and others to be able to operate with impunity (as recently exemplified by the activities of the Memon Brothers and Dawood Ibrahim).

3. While the CBI and IB and the various agencies under the Department of Revenue, in their normal course of functioning, come across information relating to the linkages of crime Syndicates/Mafia organisations, there is presently no system under which they are expected to pass on such information to an identical nodal agency. Sharing of such information is presently of an occasional nature an no evidence is available of the same having been put to any operational use (the only mentionable exception perhaps related to the recent investigations into the activities of Memon Brothers and the Dawood gang on which several of our agencies were put to work collectively.

1. Even where an agency comes across certain information about the linkages of crime Syndicates, it has no mandate to immediately pass it on to one or more agencies. Any agency which comes across information regarding linkages is also apprehensive that the sharing of such information may jeopardize its own functioning through premature leakage. In slum, the various agencies presently in the field take care to essentially focus on their respective character of duties, dealing with the infringement of laws relating to their organisations and consciously putting aside any information on linkages which they may come across.

1. In the discussions in the Committee, I asked each of the Members as well as the Secretary (Revenue) and his principal officers about their views regarding the establishment of a Nodal Agency for the collection, collation and operationalisation of all information relating to the activities of crime Syndicates. Broadly, the following approaches have been mooted:

1. The DIB has stated that while considering the establishment of any nodal mechanism "It must be appreciated that the problems has enormous impact on national security and is indeed highly political in nature". In this context, he has suggested that the nodal set up should be under the IB, which is even otherwise engaged in monitoring various political activities having a bearing on national security. He has recommended that "an exclusive Top Secret Cell be established in the IB to function as Nodal Group for receipt of inputs from various security/revenue agencies which reveal political-bureaucrat-underworld nexus. Such sharing will be through personal communication in writing, while operating difficulties could be sorted out through periodic meetings among the heads of these organisations to be chaired by the Home Secretary". The Top secret Cell will share all tactical and operational information with other concerned agencies on "need to know and act basis".

2. The other approach recommended is to set up a system under which the Head of the Various Intelligence and Revenue Agencies shall meet on a regular basis and exchange vital information, without there being any leakage.

1. In the background of the discussions so far, there does not appear to be need for any further debate on the vital importance of setting up a nodal point to which all existing Intelligence and Enforcement agencies (irrespective of the Department under which they are located) shall promptly pass on any information which they may come across, which relates to the activities of crime Syndicates.

2. If the proposition in the preceding para is sustained, a decision will need to be taken regarding the Department/Ministry under which the nodal set-up should be located.

1. Under the existing arrangements for the transaction of Government business, the Ministry of Home Affairs is responsible for all matters relating to internal security. It is for this reason that the Intelligence Bureau is a part and parcel of this Ministry (It is only by tradition that the DIB reports directly to authorities outside MHA). R&AW functions under the Cabinet Secretariat and deals with external intelligence. The various Intelligence, Investigation and Enforcement agencies dealing with the implementation of economic laws report to the Revenue Department under the Ministry of Finance. The CBI, which is the principal criminal investigation agency of the Centre, is under the department of Personnel.

2. In my view, considerable care would have to be taken to ensure that the information which becomes available to the Nodal Cell is handled by a very senior and trust-worthy officer. Any leakage of such information would not only jeopardize potential action against the powerful criminal Syndicate, but may also be susceptible to political exploitation. Under all circumstances, it will have be ensured that the information available with the nodal set-up is used strictly and entirely for stringent action against the crime Syndicates, without allowing any scope whatever of its being exploited for political gain.

3. In the preceding context, it would be logical it the nodal set-up is under the MHA, directly handed by the Home Secretary who can be assisted by one or more selected officers of the Ministry for the collation and compilation of all information received from IB, CBI, R&AW and the various agencies under the Department of Revenue. The manner in which such information is operationalised would need to be confidentially discussed with the concerned Head of Organisations and, as necessary, with Secretary (Revenue). It will also need to be ensured that the nodal set-up functions with extreme secrecy. Needless to say, and leakage whatever about the linkages of crime Syndicate with senior Government functionaries or political leaders in the States or at the Centre could have a destabilising effect on the functioning of Government. As such, it would not appear prudent to entrust the functioning of the Nodal Cell to any level below that of the Home Secretary. Further, the Government would also have to carefully consider and prescribe the authorities to whom the Home Secretary will report in regard to the sensitive information received by the nodal set-up as well as regarding the operations to be launched by one or more of the concerned agencies to apprehend, investigate and prosecute the offenders.

1. In the normal course, this Report would have been drafted by the Member Secretary and finalised by the Committee. Considering the nature of the issues involved, I did not consider it desirable to burden the Members of the Committee with any further involvement beyond the views expressed by them. Accordingly, I decided to personally dictate this Report.

2. I have prepared only three copies of this report. One copy each is being submitted to MOS(IS) and HM, the third copy being retained by me. After HM has pursued this Report, I request him to consider discussing further action with finance Minister, MOS (IS) and myself. The emerging approach could therefore be got approved from Prime Minister before being implemented. At that stage other concerned senior officer would be taken into confidence.

3. After an initial discussion at the level of MOS(IS) and HM I could send a copy of this Report to FM, before the issues are discussed with him.

HM (Copy No.2/3)