This article is written by Kaushika M.N, 4th-year student from Dr.Ambedkar law university, Tamil Nadu.
The base of any country’s development is its industrial growth, which necessitates huge investments from banks and the financial sector. Howsoever in recent times, there has been a shift from general welfare to the individual or family welfare wherein, the bigshot entrepreneurs, subsequent to indulging in scam, abscond from our country to foreign countries to avoid legal process. This shift leads to mounting of NPA’s and shake the financial stability of the country and trust of the common people. The laws in existence are incapable of effectively resolving this situation. Thus in this high time, Government of India passed Fugitive Economic Offenders Act, 2018, to remedy this evil and the agitation of the common man, besides upholding investor’s trust and well-being of the country’s economy.
The objective of this Act is to deter fugitive economic offenders who evade legal process in the country, thus to preserve the sanctity of the rule of law and make them subject to Indian Jurisdiction. The Act defines ‘fugitive economic offender’ as a person against whom an arrest warrant has been issued by the special court against a scheduled offence who has left India to avoid criminal prosecution or refuses to return India to face criminal prosecution.
Procedure for Reinstating Rule of Law
For confiscating the properties of a defaulter, an application has to be filed, by director to the special court for declaring an individual to be a fugitive economic offender, stating the reasons for claiming a person to be economic offender; further promulgating the properties or benami properties which he believed to be the proceeds of the crime, in India and outside India. Besides, this act permits provisional attachment of property of the alleged individual by the director either with the prior permission of the special court or attachment of the property can be done prior to filing of application if the director foresee the property will become inappropriable for confiscation in future, howsoever within 30 days of provisional attachment they have to file an application under section 4.The special court on receiving application, sends notice to individual to appear on specified place and date, further mentioning failure to appear will lead to the declaration of concerned individual as a fugitive economic offender. An individual on receiving notice from special court either have to appear in person or through legal counsel. If the individual neglects or fails to appear, the special court on being satisfied and for reasons to be recorded in writing may declare an individual as a fugitive economic offender. On being so declared the properties of the offender in India and abroad stands liable to get confiscated.
Howsoever the act raised a huge cry for passing the test of constitutionality.
Withstanding the constitutionality test
Right to a fair trial being a fundamental norm in every democratic country and international human rights law forbids conviction of an individual violating Audi alteram partem. It finds its base in article 10 of UDHR – “Everyone is entitled in full equality to a fair and public hearing by an independent and impartial tribunal in the determination of his rights and obligations and of any criminal charge against him. Further in article 14 of ICCPR. In Indian arena this right is strongly imbibed in article 21 of Indian constitution and section 243 of Cr.P.C, which affirms awarding opportunity to alleged individual to defend his case .This act is widely denounced for not in consonance with this norm by drafting section 5(2), section 10(3)(b), section 14.
Section 5(2) is contended to be arbitrary as it stands against the basic doctrine of criminal jurisprudence “presumption of innocence” and “proven beyond reasonable doubt” as it enables the appropriate authorities to search, seize and confiscate the property before the commencement of any proceedings on mere suspicion. Rebutting the allegation, it is held the pre-trial attachment is in line with article 54(1) (c) of United Nation Convention against corruption, which was ratified by India in 2011. Further allegation raised regarding fear of abuse of power by authorities.T he Apex court in Mafatlal Industries Ltd v Union Of India, propounded mere possibility of abuse of power is not a prima facie ground to strike down the provision as unconstitutional, in addition, held such order of the concerned authority may be set aside. Further, in J.Sekar and ors v UOI, Delhi H.C upheld the constitutionality of the second proviso of s.5(1) of Prevention of Money Laundering Act which is akin to section 5(2) of the said Act.
Section 10(3) (b) is contested for asserting mere failure to appear on the specified place and time shall result in a declaration of the individual as a fugitive economic offender and confiscation of property under this Act, thus paves the way for ex-parte order. Howsoever this claim can be set aside by professing sufficient time and opportunity is awarded by the special court under section 11(2).
Section 12(2)(b) stands the test of intelligible differentia and rational nexus, thus saved from falling under the ambit of unconstitutionality as the act made a clear distinction between fugitive economic offenders and economic offenders whereby the former evade the rule of law by fleeing to other countries and staying abroad. Further taking of proceeds in excess of claim is justified as it has rational nexus with the object of the act – to deter evading persons from the process of law and subject him to India jurisdiction and to restore the rule of law in India. This rational nexus has the effect of saving from unconstitutionality, some other provisions of the Act including the attachment of properties upon suspicion of them being siphoned off under Section 5.
Section 14 grants discretion to any civil court or tribunal from disallowing fugitive economic offender from contesting –filing or defending any claim or proceeding before it. This bar finds application upon all civil claims, including civil proceedings which have no nexus with the offence in. Further bars LLP or company with which the fugitive offender is connected from proceeding the claim. Thus violated individual’s right to access to justice, leads to ex-parte orders, besides there is no rationale in such measure. Despite, access to justice prima-facie finds no place in part III of the constitution. It is embraced under article 21 by way of judicial activism in Anita Kushwaha vs. Pushap Sudan. Wherein which it becomes a fundamental right. Thus it is contested that section 14 of the said act violates article 21of Indian constitution which is given wide amplitude since passing of Maneka Gandhi case. The Apex court in Justice K S Puttaswamy (Retd.) and Anr. Vs. Union of India and Ors enunciated that while adjudging constitutionality under Article 21, the court must have the view of the reasonable restriction, upon these rights, imposed in pursuance of compelling social, moral, state and public interest. This act intends to remedy the effect of social injustice the fugitive economic offenders have caused. Thus individual justice, right, liberty have to pay the way for social justice. Accordingly, the act withstands the test of Constitutionality under Article 21 of the Constitution in view of the compelling state and public interest furthered by this law.
Pitfalls in the act that need to be addressed
Regardless of the fact, the said act provides a statutory duration of 90 days for disposal of confiscated property from the date of declaration as a fugitive economic offender, it stands still with respect to the duration of proceedings and finalization of the decision of the special court. This ambiguity let courts consume enormous time. For confiscating properties of the fugitive economic offenders abroad the government should send a letter of request to the foreign contracting states for execution of the order, howsoever at present, the Indian government has not entered into the contract with all states. The threshold of 100 crores can be widely misused by committing multiple small amounts of economic offence. Further, the act is vague regarding the manner of utilization of sale proceeds after confiscation by the central government. The above-said obscurity will let wrongdoer find the loophole for evading the provisions of the act.
Howsoever this non-conviction based asset confiscation Act 2018, acts a deterrent to the future economic offender and holds accountable the past economic offender, thus serving or protecting the interests of investors, the general public, enhancing the financial stability of financial institutions and cure the general agitation. The Act represents an efficacious venture to curb the scams and economic offences that have an adverse impact on the Indian economy and development. The rationale of the act is to subject the individual to Indian jurisdiction and not adjudicate upon or penalize the offender, thus the act has to be perceived in this perspective. Thus the act stands the test of constitutionality, the words of Piyush Goyal, the central Minister on introducing the bill in the parliament “The bill is an effective, expeditious and constitutional way to stop these offenders from running away” stands justified. The first person to be charged under the new fugitive act is Mr.Vijay Mallaya, the liquor baron by the special court of Mumbai, this warrant Indian government to confiscate his properties for alleged 90000crore default, thus setting the act in right motion.