Fugitive Economic Offenders Bill

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Almost every alternate day, we can read or see or hear about new scams being unearthed. This has done a lot of damage to our financial institutions which is becoming more apparent every day. This has prompted the authorities into action. Defaulters of loan amounting more than INR 50 crores will have to submit their passport, introduction of National Financial Regulatory Authority (NFRA), auctioning of defaulters’ properties are some of the steps. Another significant step towards this is the Fugitive Economic Offenders Bill, which was cleared by the cabinet this month.

The first draft of the bill was prepared in 2017. In the last year’s budget, the finance minister had said the government would bring a stringent law that would help the government deal with cases where the economic offender has fled the country and in order to seize the properties of such offenders.

What is the bill about?

As per the draft bill introduced in Lok Sabha, it says –

“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”.

The bill aims to prevent the economic offenders as defined in the bill to escape the country and also provides power to the authorities to confiscate or seize such properties when necessary. This bill would cover cases above INR 100 crores and the trials of these cases will take place in Special Courts.

Is the bill really need of the hour?

India has always been the country where legal hassles could be endless. We still have laws that exist since the time of British rule. And on the case of economic offenders we have some tough laws which we don’t hear often. Maintenance of Internal Security Act (MISA), Conservation of Foreign Exchange and Prevention of Smuggling Activities Act (COFEPOSA), Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act (SAFEMA) are the laws which already exist and provide the authorities with power to seize or confiscate or even take preventive detention for the properties of such offenders.

The government says that the bill is aimed to prevent such offenders to flee away with taxpayers’ money; some say the bill is significant to deter such offences, while others say the bill is still uncertain and ambiguous.

There has been a lot of debate already done in this aspect. There are already numerous laws existing in India for such offences, The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFESI), Recovery of Debts Due to Banks and Financial Institutions Act (RDDBFI), Insolvency and Bankruptcy Code and Prevention of Money Laundering Act (PMLA) and Code of Criminal Procedure. But these haven’t worked till now. The offenders are still at large even after confiscation of their properties.

Another provision for contention is – The provisions of this Act shall apply to any individual who is, or becomes, a fugitive economic offender on or after the date of coming into force of this Act.

So as the bill says that the offenders will be put on trial under this act after it comes into force, the question remains that how will this bill help bring the offenders who have already fled the country? Whether the bill will be applicable retrospectively as soon it comes into force is yet to be cleared by the government as the bill is quiet about the same.

As per the statement of objects and reasons of the bill, it says that the burden of proof for establishing that an individual is a fugitive economic offender is on the Director or the person authorised by the Director, but also it mentions - disentitlement of the fugitive economic offender from putting forward or defending any civil claim. Also, as per section 18, No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Special Court is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.

This is contradictory to a person’s fundamental rights and also violates the principal of law which states innocent until proved guilty. The bill states giving power to relevant authorities to seize and confiscate properties including benami ones of the offender. The bone of contention here is that property is a legal right in India.

The bill states and recognizes all the economic offences which are mentioned in other acts such as the Indian Penal Code, the Prevention of Corruption Act, the SEBI Act, the Customs Act, the Companies Act, Limited Liability Partnership Act, and the Insolvency and Bankruptcy Code. The bill gives six weeks to such person who is declared as on offender to present him/her self before the specified court and time.

As per the proposed bill, if the total value of the offence amounts to Rs 100 crore or more, then only the provisions of this bill will be attracted. Now, as per Prevention of Money Laundering Act, in case of certain offences, the law becomes applicable even at INR 1 crore. This leaves a huge gap in the amount and definition of a fugitive economic offender.

As per section 22 of the bill, the provisions of this Act shall be in addition to and not in derogation of any other law for the time being in force. It still remains unclear whether what will be the jurisdiction of this bill.

The bill is certainly in its initial stage. A lot to clarification and specific interpretation of the bill remains pending. The government says that the other laws have long drawn processes and are cumbersome. In that case, is bringing in another law more sensible or overhauling the old laws?

The government needs to think whether auctioning of such properties will deter offenders or whether this is even the correct course. How will this bill help the offenders be brought back to the country? I hope this is not just a distraction from the root cause of the problem, as this law fails to tackle it; how to extradite the offenders back to India for trial.