ECONOMIC OFFENDERS OF INDIA: MONEY MAY NOT BUY THEM HAPPINESS

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THIS ARTICLE WAS WRITTEN BY POOJA KHIMANI, A STUDENT OF JITENDRA CHAUHAN COLLEGE OF LAW, MUMBAI.

RBI’s latest financial stability report says credit picked up in 2017-18 despite sluggish deposit growth. But banks’ gross non-performing advances (GNPA) ratio is seen to be worsening from 11.6% in March 2018 to 12.2% in March 2019. A Credit Suisse (CS) report says banks’ GNPAs climbed to Rs 10.09 trillion at end-March from Rs 8.82 trillion at end-December. Multiple reasons contribute to it the banks face an NPA crisis in lakhs of crores only because of Fugitive Economic Offenders.

An Economic Offense is an act of crime which puts a grave impact on not only the Economy of a State but also on the people of the state whose hard-earned money is used for a Scam.

Since 1939, in the USA the term Economic Offences was analysed rigorously as White-Collar Crime with a great area of study. However, the term hasn’t been defined in India. Therefore, it is not clear as to what offences are covered by the term ‘Economic Offences’, however, The Fugitive Economic Offences Act, 2018 in its Schedule sums up multiple offences under 15 different Acts of Indian Legislature in force including but not limited to Indian Penal Code, Companies Act, RBI Act, Prevention of Money Laundering Act, as Scheduled Offences for the purpose of classifying an Offence as a Fugitive Economic Offence (FEO).

Introduction to The Fugitive Economic Offences Act,2018:

According to the list compiled by the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED), 28 Indians involved in Economic Irregularities had fled the country in the period between 2015 to 30^th June 2018.

Union Minister of State for External Affairs, Gen. (Retd.) V.K. Singh submitted the names of such persons to Lok Sabha on July 25, 2018. Replying to a question posed by Prof. K.V. Thomas, Mr. Singh said: “efforts are being made for securing the presence of these accused in the country by way of issuance of LOC (Look out circular), RCN (Red Corner Notice) and Extradition requests”.

The worry of ever-growing list of absconding economic offenders was the major reason why the bill was envisaged to be a part of Union Budget 2017 to bring to task organised criminals. Given that the Bill did not pass on it’s first introduction, the Government put forth the bill before Lok Sabha on 3^rd March 2018 which was passed on to Rajya Sabha for approval. The Council of States approved the bill on 25^th July 2018 and received Presidents Assent on the 5^th August 2018 making it a part of Indian Legislature.

Mr. Arun Jaitley, Minister of Finance & Corporate Affairs, while presenting the bill before Lok Sabha stated the reason for the need of the act as, “There have been several instances of economic offenders fleeing the jurisdiction of Indian courts anticipating the commencement of criminal proceedings or sometimes during the pendency of such proceedings. The absence of such offenders from Indian courts has several deleterious consequences, such as, it obstructs investigation in criminal cases, it wastes precious time of courts and it undermines the rule of law in India. Further, most of such cases of economic offences involve non-repayment of bank loans thereby worsening the financial health of the banking sector in India. The existing civil and criminal provisions in law are inadequate to deal with the severity of the problem”.

Rightfully so, the Preamble of the Act [1]specifically states for it, “to provide for measures to deter Fugitive Economic Offenders from evading the process of law in India by staying outside the jurisdiction of Indian courts, to preserve the sanctity of the rule of law in India and for matters connected therewith or incidental thereto”.

Key Provisions of the Act:

1. Applicable to whole of India.
2. Section 2(1)(f) read along with Section 2(1)(m) allow for an individual to be declared as a Fugitive Economic Offender if-

• an arrest warrant has been issued against him for any specified offences where the value involved is over Rs 100 crore, and
• he has left the country and refuses to return to face prosecution.

3. The Act does not require the authorities to obtain a search warrant or ensure the presence of witnesses before a search as reflected under Section 9.
4. To declare a person an FEO under Section 12, an application will be filed in a Special Court under Section 4 (designated under the Prevention of Money-Laundering Act, 2002) containing details of the properties to be confiscated, and any information about the person’s whereabouts. Under Section 10, the Special Court will require the person to appear at a specified place at least six weeks from issue of notice.  Proceedings will be terminated if the person appears.
5. Upon declaration as an FEO, properties of a person may be confiscated and vested in the Central Government, free of encumbrances (rights and claims in the property), under Section 12.
6. The provision of Supplementary Application under Section 13 allows authorities to provisionally attach properties of an accused, while the application is pending before the Special Court.
7. The FEO or any company associated with him may be barred from filing or defending civil claims by virtue of Section 14 of the Act.
8. The Central Government to appoint an Administrator for the confiscating and managing the properties of FEO. He shall not dispose of the property for a period of 90 days from such an order of declaration on account of the provision under Section 15 of the Act.
9. Section 17 lays down a provision for Appeal to the High Court within 30 days of the order which can be extended up to 90 days. The High Court has the power and the jurisdiction to hear an appeal on the basis of facts as well as the law.
10. Section 22 of the Act proves that, the provisions of the Act in addition to the existing laws and not in its derogation.

Analysis:

• The Preamble of the Act puts a stringency on all individuals attempting to evade the Indian legal process on, from and after the date of the enactment of the law.
• The Act extends not only to loan defaulters and fraudsters, but also to individuals who violate laws as mentioned in the Schedule to the Act including Governing Taxes, Black Money, Benami properties and Financial Corruption.
• Harassment and Planting of Evidence shall be curbed on account of the provisions of the Act not requiring a warrant to search and seize which differs from other laws such as (CrPC) the Criminal Procedure Code, 1973.
• Barring persons from filing or defending civil claims violates Article 14 and 21 of the Constitution i.e. the right of equality before law and the right to life. Article 21 has been interpreted to include the right to access justice.
• The modus operandi under the Act is different than any other act in force as in the other acts the procedure to be followed are general procedures in a penal case. However, under the FEO Act only an application with evidences to the Special Court is sufficient to initiate proceedings leaving no time for the offenders to abscond.
• The Act goes against the Capitalists who seek to defraud the country at large by suppressing the reality.

Conclusion:

The Act is stringent, seeks to target fugitives, it will prevent evasion of the law, curb big economic offenders to flee from the country. However, provisions like confiscation of property and search without a warrant can be misused by giving rise to a large number of fake cases which can be a result of multiple reasons including Personal and Political Vendetta. Further, the parameters for the execution of the Act are unclear still yet, once in operation the Act shall suppress the birth of another Mallya, Modi or Choksi.

[1] The Fugitive Economic Offenders Act, 2018