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An Insight into Fugitive Economic Offenders Bill, 2017 – Crackdown on Financial Crimes & Fraud

Drafted by CS S.Abhinav

The Fugitive Economic Offenders Bill 2017 was drafted by the Union Government of India to prevent
the economic offenders from evading the process of law by remaining outside the jurisdiction of Indian courts. The Fugitive Economic Offenders Bill is aimed squarely at the likes of Nirav Modi and Vijay Mallya. The bill after becoming an Act will be applicable to the whole of India.

Let us first understand, who is a Fugitive Economic Offender under the draft bill; ͞Fugitive Economic Offender͟ 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.

The draft bill is attached with a list of offences, which include cheating, forgery, fraud, corruption,
insider trading, customs evasion, non repayment of deposits and more. It must be noted that the Act
becomes applicable only in the cases where the offence is for amounts above Rs.100 Crore.
Who can file an application to declare an individual as a fugitive economic offender?

The Director or any other officer authorised by the Director may file an application to the Special Court for a declaration that an individual is a fugitive economic offender.
The application must contain:—

(a) reasons for the belief that an individual is a fugitive economic offender;

(b) any information available as to the whereabouts of the fugitive economic offender;

(c) a list of properties or the value of such properties believed to be the proceeds of crime, including any such property outside India for which confiscation is sought;

(d) a list of properties owned by the person in India for which confiscation is sought;

(e) a list of persons who may have an interest in any of the properties listed under sub-clauses (c)
and (d).

After the application is filed, the Court will issue a notice to the person named a ͚fugitive economic
offender͛. Within six weeks from the date of notice, the person will have to present himself at ͞a
specified place at a specified time͟. If the offender fails to do so, then he will be declared a ͚fugitive
economic offender͛ and his properties as listed in the Director͛s application will be confiscated.
Once an individual is declared as a fugitive economic offender, the government can take steps to
confiscate the proceeds of the crime and any other property they own. In simple words the properties
left behind by the fugitives will be controlled by the state if they fail to return back to India within the
stipulated time.

The Bill also says that, once a person has been declared a fugitive economic offender, any court in India can deprive any individual from filing or defending a civil claim regarding that property. This means that even before a person is found guilty by the court, he is deprived of filing or defending a civil claim regarding the property. This provision of the bill is likely to create a controversy according to law  experts since it is in violation of the settled principle under the constitution of India that one is
considered innocent unless proven guilty.

This disentitlement even applies to companies, with the law saying even they will not be permitted to
file or defend civil claims if ͞any promoter or key managerial personnel or majority shareholder of the
company has been declared a fugitive economic offender.͟

After the confiscation of property, an administrator will be appointed by the court to manage and
dispose of the confiscated property.

Even though the process seems simple, the assets confiscated by enforcement agencies and courts are termed as distressed properties, and rarely find buyers. The prime example is that of Sahara͛s Amby Valley and the corporate office of the defunct Kingfisher Airlines which failed to garner bids or buyers despite multiple auctions.

Moreover it must be noted that the law cannot force or compel the fugitives to return as it mainly
depends on extradition process. However the toughness of the law either convinces the fugitives to
return back or by confiscating their property allows the creditors to enforce their assets and realize
their debt without them being simply frozen.

Another thing that caught the analysts and law experts is the fact that whether the law can be applied
retrospectively to the alleged crimes of Nirav Modi & Vijay Mallya. The draft bill is silent on this issue
and says that ͞the Act applies to any individual who is, or becomes, a fugitive economic offender on or
after the date of coming into force of this Act͟. Since the definition of the fugitive economic offender
covers anyone against whom a warrant for arrest for certain offences has been issued, it is likely to be applicable to people like Nirav Modi and Vijay Mallya. Even the Finance Minister in his briefing
suggested that the law will be applicable to all cases ͞old and new͟.

Conclusion:
If all the loopholes especially the disentitlement of pursuing or defending any civil claim regarding the
property or selling the confiscated property without trial as provided in the draft bill which are against
the principles of natural justice are plugged and sorted, then this law is likely to prove menace for
fugitive economic offenders and will provide a much sigh of relief and comfort for the creditors and
the Government in tackling financial crimes committed by the fugitives.

Disclaimer:

The entire contents of this Article have been prepared on the basis of relevant research
and as per the information existing at the time of the preparation. Although care has been taken to
ensure the accuracy, completeness and reliability of the information provided, I assume no
responsibility therefore. Users of this information are expected to refer to the relevant existing
provisions of applicable Laws and regulations. I further agree that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.

ABOUT THE AUTHOR 

The article is drafted by CS S.Abhinav is a graduate of Commerce from Kerala University and an  Associate Member of the Institute of Company Secretaries of India (ICSI). He is currently working as a Company Secretary in a Public Company in New Delhi. He can be contacted at abhinavcst@gmail.com or at +91 9400939427.

 

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