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In this article, Mansi Mishra discusses the key highlights of the Fugitive Economic Offenders Bill, 2018.

The Fugitive Economic Offenders Bill, 2017 (FEOB) was approved by the Union Law Ministry on 19th of September, 2017. After due deliberation and debate, it finally received thumbs up from the Parliament. This article aims at throwing light on the basics one needs to know about the Bill.

Fugitive Economic Offenders Bill, 2018 – What it is all about

The background for the drafting and passing of the Fugitive Economic Offenders Bill, 2018 was set by liquor baron Vijay Mallya, who fled the country as a move to save him from prosecution for economic frauds committed by him. Mallya owed an estimate of INR 9000 Crore to different Indian banks including the State Bank of India, Punjab National Bank, IDBI and many more. This was followed by a hot debate in public discourse as to the inefficiency of existing legal mechanisms in curbing economic offences and due delivery of justice. Amidst this came the budget speech of Finance Minister Shri Arun Jaitley where he assured the nation to come up with a new law soon. However, the matter was expedited only after Nirav Modi fled away leaving behind a debt of a whopping INR 12000 crore.

The Bill is basically aimed at acting as a deterrent for those who commit economic offences and flee, thereby, defying the Rule of Law in India and evading jurisdiction of Indian justice system. The Bill has prospective application[1] and its extent[2] doesn’t find the State of Jammu and Kashmir as an exception unlike a lot of other legislation. This Bill, if brought into force, would apply only to the fugitive economic offenders.[3]

Fugitive Economic Offender

Section 4(e) of the Bill speaks about as to who can be said to be a “fugitive economic offender” for the purpose of the Bill. A fugitive economic offender is any person who has an arrest warrant issued against him in relation to any of the offences laid down in the Schedule of the Bill coupled with the condition that he has either left India evading criminal prosecution or he has refused to return to India to face criminal prosecution.[4] Special Courts designated under Section 43(1) of the Prevention of Money Laundering Act have the jurisdiction to carry out the proceedings.

How it Works

There is a specified and comprehensive procedure involved from identifying a fugitive economic offender to the actual delivery of justice. Here is a summary of how it all works as per the Bill:

  • Filing of Application – The starting point of all the procedural formalities is an application that is filed by the Director, who is appointed under Section 49(1) of the Money Laundering Act[5], or by any other authorized person under Section 6 of the Bill. Section 7 lays down the components of the application so filed.
  1. Reasons as to why the authorized person believes that the individual named in the application is a fugitive economic offender.
  2. Any information, if available, regarding whereabouts of the fugitive economic offender.
  3. The value or list of properties inside or outside India that are believed to be “proceeds of crime[6]”.
  4. A list of properties owned by the individual in India of which confiscation is sought
  5. A list of persons having interest in the properties that are either proceeds of crime or owned by the fugitive economic offender in India of which confiscation is sought.

The Director or any other authorized person (not below that rank of Deputy Director) may with the application any property which he believes to be either a “proceed of crime” or a property that runs a risk to be dealt with or being already dealt with in a manner which would make it unavailable for confiscation.[7] This has to be done through an order in writing. Such attachment would last for a period of 180 days from the date of attachment.[8]

  • Issuance of notice – Once the application is filed, a notice shall be issued to the alleged fugitive economic offender[9] as well as the person believed to be having interest in the property mentioned in the application.[10] Upon receipt of such notice, the alleged offender would be required to appear at a place and date specified in the notice (which would not be less than six weeks from the date of notice), the failure of which would result in his being declared as a fugitive economic offender.[11]
  • Forwarding of the notice – The notice then shall be forwarded to the concerned authority of the contracting state[12], in case the alleged offender is outside India, through electronic media. The notice may be sent to an email address that is given by the fugitive while allotment of Permanent Account Number (PAN), application of Aadhar or any other working email address.[13]
  • Hearing of application – If the offender appears before the Special Court upon service of notice in person, the proceedings against him may be terminated by the Court.[14] In case he appears through a counsel, he is given one week’s time to file a reply.[15] In case there is no appearance at all, the Court may hear the application subject to its satisfaction about the service of notice or the impossibility of service of notice.[16]
  • Declaration – Upon satisfaction about the guilt of alleged offender, he is declared to be a fugitive economic offender as per Section 10(1) of the Bill. Thereafter, the proceeds of crime, irrespective of them being owned the offender or not, as well as the properties owned by him in India are confiscated by the Central Government. Unidentified properties are quantified[17]. Exemption may be given to third parties provided they were unaware of the properties being proceeds of crime.[18]
  • Administration and Disposal of Property – Once the confiscation order is passed, an Administrator is appointed who manages all the affairs related to the management of the confiscated property including disposing the property, hearing the claims of creditors and settling them. Wherever applicable, he would follow the priority prescribed under Acts specified in Sub-sections 4 and 5 of Section 13.

Features and Areas of Concern

  • Section 11(1) of the Bill empowers the Special Courts to disentitle an alleged individual from defending or putting forward a civil claim. This may result in violation of Article 21 and go against the spirit of the Constitution.
  • Section 11(2) of the Bill gives the discretion to the Special Courts to disentitle a person from filing or defending a civil claim on behalf of a company if he inter alia is a majority shareholder, key managerial personnel or promoter declared as a fugitive economic offender. This is an area of concern.
  • Under Section 14(4) of the Bill, the standard of proof applied by the Special Courts is preponderance of probability instead of requiring proof beyond reasonable doubt.
  • The burden on the third parties to prove their ignorance of the fact that the properties were proceeds of crime would create unnecessary hardships for those unrelated parties.
  • Recovery of Debts Due to Banks and Financial Institutions Act (RDDBFI), Insolvency and Bankruptcy Code (IBC) and Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFESI) are laws that would co-exist with the proposed Act. Since the Bill has an overriding effect[19], a saving clause would be of immense need to protect the existing laws trying fugitive economic offenders.

References

[1] Section 5 of the FEOB

[2] Section 3

[3] Supra Note 1

[4] Section 2(e)

[5] Fugitive Economic Offenders Bill, Section 4(c) (2017)

[6] “Proceeds of crime” is defined in Section 4(g) of the Bill as any property that is obtained, directly or indirectly, from indulging into a criminal activity related to the scheduled offences, or the value of such property or where it is held outside India, the value of such property in India

[7] Fugitive Economic Offenders Bill, Section 7 (2017)

[8] Fugitive Economic Offenders Bill Section 7(3) (2017)

[9] Fugitive Economic Offenders Bill Section 8(1) (2017)

[10] Fugitive Economic Offenders Bill Setion 8(2) (2017)

[11] Fugitive Economic Offenders Bill, Section 8(3)(b) (2017)

[12] Contracting State, as per Section 4(d),  is any State or place outside India with which the Central Government of India has arrangements by way of treaty or otherwise

[13] Fugitive Economic Offenders Bill, Section 8 (6) (2017)

[14] Fugitive Economic Offenders Bill, Section 9(1) (2017)

[15] Fugitive Economic Offenders Bill, Section 9(2) (2017)

[16] Fugitive Economic Offenders Bill, Section 9 (3) (2017)

[17] Fugitive Economic Offenders Bill, Section 10 (3) (2017)

[18] Fugitive Economic Offenders Bill, Section 10(5) (2017)

[19] Fugitive Economic Offenders Bill, Section 19 (2017)

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