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An Insight Into The Fugitive Economic Offenders Bill, 2017

The Fugitive Economic Offender Bill, 2018 that was enacted by the Union Cabinet on March 1, 2018 is a step toward making efforts for stopping dead in tracks the fugitive economic offenders, the likes of Vijay Mallya and Nirav Modi, who tend to abscond with large sums of money embezzled by using fraudulent means. The absconders remain outside the reach of the jurisdiction of the Indian Authorities, and this Bill is an attempt to curb any such activities.

This article is supposed to breakdown the several of the provisions that have been given in the Bill, which aim at dealing effectively with the absconders who have taken refuge in the protection of other countries.

The recent revival of this Bill back in the Cabinet all the more signifies at the fact that the urgency of the need of this Bill is recognized, since the heavy time offenders such as Vijay Mallya and Nirav Modi continue to refuse to return to the Country and face trial for their acts. Despite certain drawbacks, this Bill is sure to stir up trouble for the offenders, and will act as an effective deterrent. This article assesses the several aspects of the Bill, and then describes the drawbacks that were noticeable in the Bill, and need to rectified in order to be a better remedy.

Introduction
In a recent change of events, the Fugitive Economic Offenders Bill, 2018 (hereinafter, the Bill), which was introduced by the Government of India while the Budget Session of 2017-18 was still in progress, and also once again introduced in the Lok Sabha in March, 2018, has been approved[1] by the Union Cabinet. Without doubt, the gigantic blow to Indian economy in the form of scam brought about by Nirav Modi acts as a catalyst to this change. However, the Parliament of India is yet to pass the bill.

A plethora of powers have been added for the authorities for dealing with the Fugitive Economic Offenders. Under the various powers that have been granted under the Bill, is also the power to confiscate the properties of one who has been declared by the Special Courts[2] as fugitive economic offender.[3]

In addition to the properties situated within the territory, the act also empowers the authorities to impound the properties of the offenders that are situated overseas. These powers are well suited to stop the likes of Nirav Modi and Vijay Mallya in their tracks, and prevent them from absconding. After all, the main aim behind the seeking for enactment of this legislation is to deter the fugitive economic absconders, while simultaneously seeking quick recovery of the debts that are owed by such defaulters in the corporate sectors.

Some Highlights of the Bill:
Key Definitions:
The Bill defines the 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.[4]

The offences that have been brought within the ambit of this act range from default on loans by wilful actions, cheating, forgery, etc. The Bill includes offences that are an accumulation of all the other related offences, be it under the Prevention of Corruption Act, 1988, or some certain economic offences that are also included under the Securities and Exchange Board of India Act, 1992, Customs Act, 1962 and the Companies Act, 2013.

However, the Bill only includes those acts to be registered as an offence under it, who value at a total of more than 100 Crores. Unless this condition is met, any such act shall not be classified as on offence under this bill. Also, the burden of proof for an individual to be branded as a fugitive economic offender under the bill has been completely shifted on the investigating authorities, and the guilt of the accused depends on the proof, the standard of which has been set to be dependent upon the probabilities peculiar to the circumstances at hand.

Special Courts
Special Courts have been decided for dealing with offences under the Bill. As was the case under the Prevention of Money Laundering Act, 2002[5], those very sessions court will be set up, designated as Special Courts who will be responsible for the declaration of an individual as a fugitive economic offender[6], and also for the orders related to the confiscations of the property of such offenders.

Confiscation of Assets
It is the duty of the aforementioned courts to declare any defaulter as a fugitive economic offender, which is done upon an application that is filed[7] by the agencies tasked with the investigation process.

The agencies under the act have been termed as the Directors under the bill.[8] The application that is filed under the Section 6 of the bill needs to include the reasons that the directors have for the declaration of any individual as a fugitive economic offender, where the offender is as of that time, and the list of the assets that the offender has, which also includes the proceeds of this crimes.

There also is a separately prepared list of the interested persons - those who tend to have any sort of stakes in the assets that are held by the offender.
Section 8 of the Bill provides for an issue of notice to the offender, once the application under Section 6 has been filed in the due manner. Once the notice has been served to the offender, he is given a period of 6 weeks to appear as the notice describes.

Though, if the offender is somewhere remote, the notice may also be served to the offender by way of electronic means. Several other means have also been provided for the offender in the Bill, such that he may chose the appropriate way to respond to the notice, such as when the defaulter choses to appear with a counsel, he is provided with a week of time, to properly respond to the application filed against him.

However, in the situation when the defaulter is unable to reply to the application within the allotted time period, or fails to appear in the designated manner, the Special Courts shall continue with hearing the application following the procedure that has been mentioned in the Section 9(3) of the Bill, make use of the evidence that has been submitted before it, and then continue to declare the defaulter as a fugitive economic offender, and then proceed with dealing with the issue as suited, while complying with what has been mentioned in the Section 10 of the Bill.

The Court may order the confiscation of the property of the offender, however, may exempt any such property in which someone bonafide has an attached interest. On being satisfied that the interest of the person is genuine, and was obtained bonafide, without the knowledge that the property concerned was a proceeds of crime, the Special Court can order such property to be exempted from confiscation.

There are several other provisions that have been included in the Bill, which clearly set out the procedure for the dealings with the fugitive economic offenders, such as the provision for disentitlement[9] from putting forward or defending any claim, the procedure for disposal of any confiscated property[10]. The Bill also includes the procedure for the appointment of the administrators, who are tasked with the dealing of the confiscated property.[11]

The Existing Laws: Why Are They Insufficient?

The major reason why this the enactment of this Bill is so sought after is that the existing civil and criminal legislations do not have a sufficient deterrent effect on the offenders, because the power of the courts or the concerned authorities has been severely confined to the attachment of the properties of the offender, or the properties that were the proceeds of the crime of the offender. However, this will not be the case after this Bill has been enacted, because the Bill now empowers the Authorities and the Courts to explicitly confiscate the properties that are related to the offender, be it his own properties or the proceeds of his crimes.

Under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), the provisions enable any lender to recover his money from the borrower by selling of the properties of the borrower that are in possession of the lender, in the case that the borrower is unable to repay the loan. Similarly, under the Insolvency and Bankruptcy Code, 2016 (IBC), the defaulters, be it the directors or the promoters of the company, all are replaced by an insolvency professional and then the appropriate path for the company is devised, whether to wind up or revive the company.[12]

These laws, however, do not allow for the inclusion of the properties that are not directly related to the offence that has been committed by the offender. In contrast, the enactment of this bill will help the authorities create a deterrent effect on the offenders, since their own properties will also be able to be dragged into the scenario on them committing a default, such that under the powers conferred by the bill, the authorities are now empowered to confiscate the properties of the offender, whether related or not.

Challenges:
Although the Bill has received a plethora of positive feedback, and is in high demand to be enacted, however, it is undeniable that there are several shortcomings that the Bill still overlooks and fails to cover.

The Bill absolutely fails to cover the time period in which the Special Courts are to proceed with the hearing, nor the time in which the hearings need to be concluded, and there is a rather dire need for such a provision, so that there is no more delay than affordable in the confiscation of the properties of the offender, in order to deprive the offender, the opportunity to dispose-off the assets that the authorities can confiscate.

In addition, in the Section 10(5) of the Bill, the Court has granted an exemption to the properties from being confiscated if there happens to be a stake by a bonafide person who happens to have no knowledge of the property being a proceed of crime. This provision needs a little correction, and should be altered to suit other possible remedies, since this could be considered a loophole and potentially exploited by the offender.
 
Conclusion:
The Fugitive Economic Offender Bill, 2018 has already received a nod from the Union Cabinet, and also has loads of support from the other entities. It is a promising legislation that can have a serious deterrent effect on the offenders who abscond from their crimes, and attempt to evade prosecution, but there are is still a little room for correction in the Bill, to make the small shortcomings of this Bill entirely fool-proof from any potential exploitations by the hands of these offenders.

The main intention of the act is to restrain the entities like Vijay Mallya and Nirav modi, whose acts have been crimes of severe nature. In addition to the existing legislations, the enactment of this Bill by the Parliament would cause a severe detriment in the number of such offenders, and will work to achieve considerably positive results.

End-Notes:
  1. Available at - http://pib.nic.in/newsite/PrintRelease.aspx?relid=176920.
  2. Court of Sessions, designated as a Special Court under the Section 43(1), Prevention of Money Laundering Act, 2002.
  3. Section 10(2), Fugitive Economic Offenders Bill, 2018.
  4. Id., Section 4(1)(e)
  5. Supra nt. 2.
  6. Supra nt. 3, Section 10.
  7. Id., Section 6.
  8. Id., Section 4(1)(c).
  9. Id., Section 11.
  10. Id., Section 13.
  11. Id., Section 12.
  12. Explained: Fugitive Economic Offenders Bill Spells Trouble for the likes of Vijay Mallya, Nirav Modi, Mehul Choksi. The Financial Express. Available at - https://www.financialexpress.com/economy/explained-fugitive-economic-offenders-bill-spells-trouble-for-likes-of-vijay-mallya-nirav-modi-mehul-choksi/1259073/.

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