Will the Fugitive Economic Offenders Bill of any real use?

Legal experts are not sure if threat of confiscation of property will be deterrent enough for fleeing offenders

Illustration: Uttam Ghosh/Rediff.com

Vijay Mallya reportedly left Indian shores on March 2, 2016.

It has taken the government two years to expedite the introduction of a law to deter economic offenders from fleeing the country.

A sense of déjà vu prevailed in the Punjab National Bank fraud case, involving diamond traders Nirav Modi and Mehul Choksi.

The proposed Fugitive Economic Offenders (FEO) Bill, 2018, seeks to empower the government to confiscate the property of proclaimed economic offenders who have fled the country.

However, experts expect several legal challenges in its implementation that may nullify the deterrence caused by the threat of forfeiture for economic offenders leaving the country.

The existing provisions of the law do not deter the fugitive economic offenders largely because the extradition processes between India and other countries are generally cumbersome and time-taking, say legal experts.

“India is not a favoured country in case of extradition requests. Courts in the UK have rejected the extradition requests on the ground that the jail condition in India was inhumane and that the accused could not be guaranteed a fair prosecution,” noted Anuj Berry, partner, Shardul Amarchand Mangaldas.

The provision to confiscate the property of proclaimed offenders is already there under different laws. For instance, the Prevention of Money Laundering (PML) Act, 2002, prescribes three stages before the final confiscation of an accused’s property.

This involves provisional attachment of the property, confirmation of the attachment pursuant to adjudication and finally the confiscation of the property subject to conviction.

“If the alleged offender cannot be brought before the court to participate in the trial and defend himself, the objective of the existing laws is often frustrated,” says Ajay Bhargava, partner, Khaitan & Co.

Under the existing laws, the power of the court is confined to the attachment of properties of the offender which were secured or those properties which are proceeds of the alleged crimes.

However, under the proposed Bill, the Special Court has the power to authorise confiscation of all properties owned by the fugitive offender.

Under the PML Act, only the proceeds of crime or such property that is involved in money laundering attract the provisions of attachment.

That is not the case in the proposed FEO Bill. It seeks to allow authorities to also attach the personal properties owned by such offender.

The PML Act provides that all the properties attached shall vest with the central government.

An administrator is responsible for proper maintenance and custody of such properties.

However, the provisions of the FEO Bill provide for the disposal of all such properties by the administrator to satisfy the claims of the creditors.

This proposed Bill would create an added pressure on the fugitive economic offender as all the properties belonging to the offender will automatically come under its ambit,” says Sandeep Grover, partner, IndusLaw.

While the measures to deter economic offenders to turn fugitive may appear well-intentioned, legal experts stress on the need for ironing out several loopholes in the draft Bill.

The provision that empowers any court to disentitle any person from putting forward or defending any civil action if that he/she is declared as a fugitive economic offender is seen as draconian.

“A challenge may be made against such provision on the ground that it is disproportionate and arbitrary,” says Berry.

Chandrasekhar Tampi, partner, Kochhar & Co, points out that this provision effectively punishes the fugitive economic offender as well as the minority shareholder(s) of the company who may have had nothing to do with the offence.

“Significantly, from the standpoint of constitutionality, this provision may face a challenge on the ground that it seeks to oust the principle of natural justice,” he adds.

Legal experts say the draft Bill that is in public domain does not provide for a situation where the confiscated property is in excess of the claims against the fugitive offender.

“There also may be a challenge to the pre-determination of the status of the property as proceeds of crime without considering evidence and without trial,” says Bhargava.

Experts say taking away the right of the accused to pursue or defend civil proceedings is contrary to the basic tenets of justice and fair play, besides being violative of the Constitution.

Berry points out that though the scope of the proposed FEO Bill is restricted to those offences value of which is Rs 100 crore or more, this provision could easily be circumvented by mischievous or devious actions.

“There is no such monetary limit under other corresponding laws, other than the PML Act, which has a limit of Rs 10 million. The monetary limit of Rs 100 crore appears to be excessive,” he says.

This limit must be made harmonious with such other laws, he adds.

Legal experts agree, as is the case with any new law, the various provisions of the proposed Bill is likely to be tested in the court.

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