The government, stung by the twin absconding cases of Nirav Modi and Vijay Mallya, would be hoping for a smooth passage of the Bill in the two Houses.
The Union Cabinet on Thursday approved the Fugitive Economic Offenders Bill, 2017 that particularly seeks to protect the interest of lenders left high and dry by absconding corporate defaulters. Once voted into law, the new legislation will empower investigating agencies to confiscate, and vest with themselves, any property of the absconding offenders without encumbrances.
The Bill is likely to be tabled in Parliament in the second the part of the Budget session that starts March 6. The government, stung by the twin absconding cases of Nirav Modi and Vijay Mallya, would be hoping for a smooth passage of the Bill in the two Houses.
The Bill defines fugitive economic offender as a person who has an arrest warrant issued in respect of a scheduled offence and who leaves or has left India so as to avoid criminal prosecution, or refuses to return to India to face criminal prosecution.
The draft Bill covers a wide range of offences including wilful loan defaults, cheating and forgery, forged or fraudulent document of electronic records, duty evasion and non-repayment of deposits among others.
The Bill also seeks to bar an absconder from bringing forward or defending any civil claim. This could effectively take away the fugitive offender’s rights to reclaim the assets.
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The proposed law comes in the backdrop of the alleged Rs 12,636-crore defrauding of Punjab National Bank (PNB)—India’s second largest public sector bank—by diamond merchant Nirav Modi and his uncle and promoter of Gitanjali Gems, Mehul Choksi.
Both Modi and Choksi have left the country and are believed to be somewhere in Europe. The Modi heist comes even as the government continues its effort to Mallya back from London. The liquor baron faces charges of bank loan defaults worth an estimated Rs 9,000 crores.
The Bill’s provision is compatible with the provisions of United Nations Convention against Corruption (ratified by India in 2011) that recommends “non-conviction-based asset confiscation for corruption-related cases”.
In order to ensure that courts are not over-burdened with such cases, only those cases where the fraud amounts to at least Rs 100 crores will fall within the purview of this Bill. The Bill makes provisions for a court of law—a ‘Special Court’ under the Prevention of Money Laundering Act (PMLA)—to declare a person a “fugitive economic offender”.
While the PMLA allows the Enforcement Directorate (ED)—the government’s main agency that tracks foreign exchange movements—to seize an accused, the law did not allow complete “non-conviction” based asset attachment without any encumbrances.
Under current rules, the ED is entitled to provisionally attach a defaulter’s property “pending trial subject to confirmation by the adjudicating authority and appeal”. On conviction in the trial, the property stands confiscated, free from all encumbrances, to the central government.
This existing provisions have drawbacks when applied to high-value economic offenders. In large defaults, criminal proceedings are likely to be in several criminal courts across the country where assets are located. This multiplicity of proceedings may lead to conflicting orders of attachment by different courts.
Also, a court is unlikely to attach property outside its jurisdiction in the first place without the procedure for endorsement being followed. As a result of such delays, such offenders can continue to remain outside the jurisdiction of Indian courts for a considerable period of time.
The Fugitive Economic Offenders Bill is aimed at addressing these drawbacks. It will allow quicker attachment and disposal of property and assets helping recovery of defrauded or defaulted amount. It will also act as a deterrent for offenders to flee the country.
