The Fugitive Economic Offenders Bill, 2017- Government’s New Weapon to Curtail “Economic Fraud”?

[Shivika Dixit]

The author is a fourth-year student at National Law Institute University, Bhopal. She may be reached at shivikadixit167@gmail.com.

On March 1, 2018, the Union Cabinet cleared the Fugitive Economic Offenders Bill, 2017. According to the long title of the Bill it is, “A Bill to provide for measures to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts, thereby preserving the sanctity of the rule of law in India.”[i] The Bill will be tabled before Parliament and will be debated upon in the next meeting during the presently ongoing budget session. The government on clearing the Bill said that it is expediting the matter for crackdown on defaulters and that the Centre cannot allow people to “make mockery of laws.”[ii] But is this Bill the be-all-end-all of the problem of high value economic fraud in the country? Maybe not.

A “fugitive economic offender” defined under section 4(1)(e)[iii] means “any individual against whom a warrant for arrest in relation to a scheduled offence has been issued by any court in India, who: (i) leaves or has left India so as to avoid criminal prosecution; or (ii) refuses to return to India to face criminal prosecution.” A “scheduled offence”[iv] refers to a list of economic offences contained in the schedule to this Bill. Only those cases where the total  value  involved  in  such  offences  is  Rs. 100  crore  rupees  or  more are within  the purview of this Bill.  The Bill is mainly centered on seizure of assets and confiscation of the properties of the fugitive economic offender. The explanatory note[v] to the Bill provides that, in order to ensure that courts are not over-burdened with a floodgate of such cases, the limit is set of Rs. 100 crores. Any class legislation according to article 14 of the Indian Constitution should have a rational nexus between the classification and the object sought to be achieved. However, there is no justification on this point neither in the Bill nor in its explanatory note. There are no parameters to explain why the cap of Rs.100 crores has been set.

There is no legal void to try economic offenders fleeing the country before they are apprehended. We have the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the Insolvency and Bankruptcy Code, 2016 and the Prevention of Money Laundering Act, 2002. However, according to the government,[vi] the existing civil and criminal provisions in the various laws mentioned above are not adequate to solve the severity of the problem. The  civil  provisions  deal  with  the  issue  of  non -repayment of debt, but there are no special provisions to deal either with high-value  offenders or with those who might have absconded from India when any criminal case is pending. In case of the latter, “proclaimed offenders” under Section 82[vii] of the Code of Criminal Procedure, 1973 can be used and the property of such offender can be attached as provided under section 83[viii] of the Code. However, this poses difficulty if a high value economic offender is involved as there can be multiple cases in various criminal courts throughout the country where his/her property is situated and the disposal of such cases will take considerable time and the person can escape out of the jurisdiction of the Indian courts. Further, the Prevention of Money laundering Act, 2002 provides for the Enforcement Directorate to confiscate the properties of the defaulter on conviction in the trial whereas the Bill adopts the principle laid down in the United Nations Convention Against Corruption which India ratified in 2011.[ix] This Convention recommends non-conviction-based asset confiscation for corruption-related cases. The note explains[x] that all necessary constitutional safeguards in terms of providing hearing to the person through counsel,[xi] allowing him time to file a reply,[xii] serving notice of summons to him[xiii] whether in India or abroad, and allowing an appeal to the High Court[xiv] have been provided for. The Bill also provides for service of notice to the contracting State[xv] where the fugitive economic offender absconded to; this might slightly ease out the difficulties in extradition requests that India faces.

There are certain concerns pertaining to the Bill. For instance, the Special Court[xvi] can, on an application[xvii] by the Director[xviii] for declaration of a person as a fugitive economic offender, declare the person as one and will order the Centre Government to confiscate: (a) proceeds of crime[xix], whether or not such property is owned by the fugitive economic offender, and (b) any other property in India, owned by the fugitive economic offender.[xx] Under section 12,[xxi] the Special Court may appoint an administrator who is an insolvency resolution professional under the Insolvency and Bankruptcy Code, 2016 to manage and deal with the confiscated property. Further, the Special Court may, while making the confiscation order, exempt from confiscation any property which is a proceed of crime in which any other person other than the fugitive economic offender has an interest, provided it is shown that such interest was acquired without knowledge of the fact that the property was a proceed of crime.[xxii] Section 10(5) shifts the onus of proof on the person other than the fugitive economic offender to show that the interest in such property was acquired without such knowledge.[xxiii]

There is no clarification by the government as to why the existing civil or criminal provisions in various other laws are inconsistent. In such a scenario, the non-conviction based asset confiscation will have a chilling effect. Further, section 11[xxiv] provides that if a person is declared as a fugitive economic offender, any court in India, in any civil proceeding before it, may, in its discretion, disentitle such individual from putting forward or defending any civil claim. This is seemingly barbaric.

Moreover, section 19 stipulates that, on coming into force, the provisions of the Bill have an overriding effect over anything inconsistent with other laws. The government mentions that the Bill is proposed to serve the end of deterring high-value economic offenders absconding India and thus a mechanism is brought into place via this Bill to provide for an expeditious, effective and constitutionally permissible deterrent to ensure such actions are curbed. However, it is too early to say that the Bill will surely attain what it proposes. Will it be able to prevent any other episodes of the likes of Nirav Modi and Vijay Mallaya? It has to pass the test of time and the rigmarole of legal machinery already in place. If the Bill is discussed in depth and clause by clause when it is tabled in the Parliament, there is a great chance that it can become one of the most sought after laws in the country.

[i] Long title of the Fugitive Economic Offenders Bill, 2017.

[ii]http://www.firstpost.com/india/cabinet-approves-fugitive-economic-offenders-bill-2018-arun-jaitley-says-centre-cant-allow-people-to-make-mockery-of-law-4372559.html. < Last visited on 05/03/18.>.

[iii] Section 4(1) (e) – Definition of ‘fugitive economic offender’, The Fugitive Economic Offenders Bill, 2017.

[iv] Section 4(1) (i) – Definition of ‘scheduled offence’, The Fugitive Economic Offenders Bill, 2017.

[v] Para 6, Pg. 3, The Fugitive Economic Offenders Bill, 2017- Explanatory Note.

https://dea.gov.in/sites/default/files/Final_Explanatory_Note%20on%20the%20Draft%20Bill.pdf. <last visited on 05/03/18>.

[vi] Para 3 and 4, Pg. 2, The Fugitive Economic Offenders Bill, 2017- Explanatory Note.

https://dea.gov.in/sites/default/files/Final_Explanatory_Note%20on%20the%20Draft%20Bill.pdf. <last visited on 05/03/18>.

[vii] Section 82, Code of Criminal Procedure, 1873.

[viii] Section 83, Code of Criminal Procedure, 1873.

[ix] Para 8, Pg. 4, The Fugitive Economic Offenders Bill, 2017- Explanatory Note.

https://dea.gov.in/sites/default/files/Final_Explanatory_Note%20on%20the%20Draft%20Bill.pdf. <last visited on 05/03/18>.

[x] Ibid.

[xi] Section 9- Procedure for hearing the application, The Fugitive Economic Offenders Bill, 2017.

[xii] Ibid.

[xiii] Section 8- Notice.

[xiv] Section 15- Appeal, the Fugitive Economic Offenders Bill, 2017.

[xv] Section 4 (d) provides that “contracting state” means any country or place outside India in respect of which arrangements have been made by the Central Government with the Government of such country or place through a treaty or otherwise.

[xvi]Section 4 (j) defines a “special court” means a court of session designated as Special Court under Section 43(1) of the Prevention of Money Laundering Act, 2002.

[xvii] Section 6- Procedure for making an application.

[xviii]  Section 4(c) provides that “director” means the Director appointed under Section 49(1) of the Prevention of Money Laundering Act, 2002.

[xix] Section 2(g) provides that “proceeds of crime” means any property derived or obtained, directly or indirectly, by any person from any criminal activity relating to a scheduled offence or the value of such property or where such property is outside the country, then the property equivalent in value held within the country.

[xx] Section 10(2)- Declaration of Fugitive Economic Offender.

[xxi] Section 12- Appointment of administrator.

[xxii] Section 10(5), Declaration of Fugitive Economic Offender.

[xxiii] http://www.livelaw.in/explained-centres-claims-fugitive-economic-offenders-bill-valid/ <last visited on 05/03/18>.

[xxiv] Section 11- Disentitlement.