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Fugitive Economic Offenders Bill, 2017: all you need to know

Context:

  • After the Nirav Modi–PNB fraud worth more than ₹12,000 crore, the Union Cabinet has approved the Fugitive Economic Offenders Bill, 2017.

Background:

  • 2017: The Fugitive Economic Offenders Bill 2017 was first mentioned by Finance Minister Arun Jaitley in his Budget speech in 2017-18.
  • It came against the backdrop of bringing back Vijay Mallya, who owes over Rs 9,000 crore in the Kingfisher Airlines fraud case. 

Who is a ‘fugitive economic offender’?

  • According to Section 4 of the law, a ‘fugitive economic offender’ is “any individual against whom a warrant for arrest in relation to a scheduled offence has been issued by any court in India, who:
  • leaves or has left India so as to avoid criminal prosecution; or
  • refuses to return to India to face criminal prosecution.”

What are the reasons for which the Fugitive Economic Offenders Bill, 2017 has been introduced?

The reasons for which the Fugitive Economic Offenders Bill, 2017 has been introduced are as follows:

  • There have been several instances of economic offenders fleeing the jurisdiction of Indian courts, anticipating the commencement, or during the pendency, of criminal proceedings.
  • The absence of such offenders from Indian courts has several harmful consequences such as :
  • it hampers investigation in criminal cases,
  • it wastes precious time of courts of law, third, it undermines the rule of law in India, and
  • most 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 not entirely adequate to deal with the severity of the problem.
  • It is, therefore, felt necessary to provide an effective, expeditious and constitutionally permissible deterrent to ensure that such actions are curbed.
  • Thus, a Budget announcement was made by the Government in the Budget 2017-18 that the Government was considering to introduce legislative changes or even a new law to confiscate the assets of such absconders till they submit to the jurisdiction of the appropriate legal forum.
  • (Note: Important for prelims): It may be mentioned that the non-conviction-based asset confiscation for corruption-related cases is enabled under provisions of United Nations Convention against Corruption (ratified by India in 2011).
  • The Fugitive Economic Offenders Bill, 2017 adopts this principle.

What are the aims and objectives of Fugitive Economic Offenders Bill, 2017?

The aims and objectives of Fugitive Economic Offenders Bill, 2017 are as follows:

Aim:

  • The Bill aims to stop economic offenders who leave the country to avoid due process.
  • Economic offences are those that are defined under 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.
  • (Note: Important for prelims): Offences involving amounts of 100 crore or more fall under the purview of this law

Objectives of the Bill:

  • The Bill is expected to re-establish the rule of law with respect to the fugitive economic offenders as they would be forced to return to India to face trial for scheduled offences.
  • This would also help the banks and other financial institutions to achieve higher recovery from financial defaults committed by such fugitive economic offenders, improving the financial health of such institutions.
  • It is expected that the special forum to be created for
    expeditious confiscation of the proceeds of crime, in India or abroad, would force the fugitive to return to India to submit to the jurisdiction of Courts in India to face the law in respect of scheduled offences.

What are the salient features of the Fugitive Economic Offenders Bill, 2017?

The salient features of the Fugitive Economic Offenders Bill, 2017 are as follows:

  • The Bill primarily empowers the government and investigating agencies to confiscate property and assets of economic offenders and defaulters who flee India.
  • It covers a wide range of offences, including wilful loan defaults, cheating and forgery, forged or fraudulent document of electronic records, duty evasion, non-repayment of deposits and others.
  • The Bill also proposes setting up of a “Special Court” under the Prevention of Money Laundering Act, which will declare a person a “fugitive economic offender”.

What are the legal procedures through which the Fugitive Economic Offenders Bill, 2017 will be implemented?

The legal procedures through which the Fugitive Economic Offenders Bill, 2017 will be implemented are as follows:

How a person is declared an offender?

A Director, appointed by the central government, will have to file an application to a Special Court to declare a person as a ‘fugitive economic offender’. Under Clause (2) of Section 6, the application must contain:

  • Reason/s for the belief that an individual is a fugitive economic offender;
  • Any information available as to the whereabouts of the fugitive economic offender;
  • 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;
  • A list of properties owned by the person in India for which confiscation is sought;
  • A list of persons who may have an interest in any of the properties listed under sub-clauses (c) and (d).”
  • (Note: Important for prelims): The Director has the power to attach any property the accused holds.

What does the offender has to do?

  • The Court will issue a notice to the person named a ‘fugitive economic offender’.
  • Within six weeks from the date of notice, the person will have to present themselves at “a specified place at a specified time”.
  • If the offender fails to do so, they will be declared a ‘fugitive economic offender’ and their properties as listed in the Director’s application will be confiscated.

Once property is confiscated, can the offender file a civil claim?

  • No, once property is confiscated, the offender cannot file a civil claim.
  • Section 11 of the Act disqualifies those declared as offenders from either filing or defending a civil claim in court.

What happens to the confiscated properties of the offender?

  • The Special court will appoint an ‘administrator’ to oversee the confiscated property.
  • This person will be responsible for disposing of the property as well, and the property will be used to satisfy creditors’ claims.

Are there any existing laws under which economic offenders are tried?

Yes there any existing laws under which economic offenders are tried.

  • The existing laws under which economic offenders are tried include Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (Sarfaesi), Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and Insolvency and Bankruptcy Code.
  • The current law framework allows the Enforcement Directorate to seize the property and assets of an accused as per the rules under the Prevention of Money Laundering Act.
  • But the existing laws do not allow complete “non-conviction” based asset attachment without any encumbrances.

Conclusion:

  • The Fugitive Economic Offenders Bill, 2017 sounds promising enough to bring transparency and justice for cases like PNB fraud accused Nirav Modi or Kingfisher Airlines fraud accused Vijay Mallya.
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