Monday, 5 March 2018

Union Cabinet approves Fugitive Economic Offenders Bill, tighten noose around fugitives for confiscation of their assets

                                                                                                         BY- Soujanyaq Khetraj
                                                                           Intern at Veda Legal Advocates and Solicitors  

Advent of the Fugitive Economic Offenders Bill, 2018

The absence of economic offenders who try to escape criminal proceedings from Indian courts has several deleterious consequences - first, it hampers investigation in criminal cases; second, it wastes precious time of courts of law, third, it undermines the rule of law in India. Further, most such cases involve non-repayment of bank loans thereby worsening the financial health of the banking sector in India. Thus, this Bill intends to protect the interests of the lenders, essentially the banks and the financial institutions. It is felt necessary to provide an effective, expeditious and constitutionally permissible deterrent to ensure that such actions are curbed. It may be mentioned that the non-conviction-based asset confiscation for corruption-related cases is enabled under provisions of United Nations Convention against Corruption (ratified by India in 2011). The Bill adopts this principle. In view of the above context, a Budget announcement was made by the Government in the Budget 2017-18 that the Government was considering to introduce legislative changes or even a new law to confiscate the assets of such absconders till they submit to the jurisdiction of the appropriate legal forum.

The Union Cabinet approved the Fugitive Economic Offenders Bill, 2018, in a bid to tighten noose around fugitives like diamond merchant Nirav Modi and Vijay Mallya, and prevent such incidents in future. The Bill, which was introduced in September 2017, aims to provide an “effective, expeditious and constitutionally permissible deterrent to ensure that such actions are curbed”. This will empower the government to confiscate any property owned by such person in India.

It said that on such declaration of a fugitive economic offender, two consequences would follow:

First, any property that is a proceed of crime that the person is accused of, as well as any property owned by such person in India shall stand confiscated and vested in the government of India free from all encumbrances.

Second, at the discretion of any court, such person or any company where he is a promoter or key managerial personnel or majority shareholder, may be disentitled from bringing forward or defending any civil claim. If at any point of time in the course of the proceeding prior to the declaration, however, the alleged fugitive economic offender returns to India and submits to the appropriate jurisdictional court, proceedings under this Act would cease by law.

The Bill makes provisions for a Court ('Special Court' under the Prevention of Money-laundering Act, 2002) to declare a person as a Fugitive Economic Offender.

A Fugitive Economic Offender is a person against whom an arrest warrant has been issued in respect of a scheduled offence and who has left India so as to avoid criminal prosecution, or being abroad, refuses to return to India to face criminal prosecution.

A scheduled offence refers to a list of economic offences contained in the Schedule to this Bill which consist of certain specified offences under the Indian Penal Code, 1860, Prevention of Corruption Act, 1988, Securities and Exchange Board of India, 1992, Customs Act, 1962, Companies Act, 2013, Limited Liability Partnership Act, 2008, Insolvency and Bankruptcy Code, 2016

Salient features of the Bill:

Application before the Special Court for a declaration that an individual is a fugitive economic offender;
Attachment of the property of a fugitive economic offender;
Issue of a notice by the Special Court to the individual alleged to be a fugitive economic offender;
Confiscation of the property of an individual declared as a fugitive economic offender resulting from the proceeds of crime;
Confiscation of other property belonging to such offender in India and abroad, including benami property;
Disentitlement of the fugitive economic offender from defending any civil claim; and
An Administrator will be appointed to manage and dispose of the confiscated property under the Act.

How does it help lenders?

The Bill is expected to re-establish the rule of law with respect to the fugitive economic offenders, as they would be forced to return to India to face trial for scheduled offences. This would also help the banks and other financial institutions to achieve higher recovery from financial defaults committed by such fugitive economic offenders, improving the financial health of such institutions.

How does it help the government?

The Bill would help in laying down measures to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts.

The special forum to be created for
expeditious confiscation of the proceeds of crime, in India or abroad, would coerce the fugitive to return to India to submit to the jurisdiction of Courts in India to face the law in respect of scheduled offences.

If at any point of time in the course of the proceeding prior to the declaration, however, the alleged Fugitive Economic Offender returns to India and submits to the appropriate jurisdictional Court, proceedings under the proposed Act would cease by law. All necessary constitutional safeguards in terms of providing hearing to the person through counsel, allowing him time to file a reply, serving notice of summons to him, whether in India or abroad and appeal to the High Court have been provided for. Further, provision has been made for appointment of an Administrator to manage and dispose of the property in compliance with the provisions of law. All properties in addition to the proceeds of crime belonging to such offender would also be confiscated. Besides, he will be disentitled from defending any civil claim.

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