It’s been more than two years since liquor baron Vijay Mallya’s flight from the country, with his now-defunct Kingfisher Airlines having run up outstanding loans of over ₹9,000 crore from Indian banks. Lalit Modi was involved in Money Laundering through 16 different Forex violations through media advertisements etc . The amount of fraud is close to Rs. 1700 Crore. Both Mr. Mallya and former Indian Premier League commissioner Lalit Modi, who faces an Enforcement Directorate probe for foreign exchange law violations, are in Britain. They left Indian shores for safer climes under the NDA government’s watch, as did diamond merchants Nirav Modi, Mehul Choksi and their associates, whose firms defrauded the country’s second largest public sector bank of over ₹12,800 crore. India is no closer to getting Mr. Modi or Mr. Mallya back to face the law, with extradition proceedings against the latter crawling through U.K. courts.

There was an urgent need of the hour for the Government to keep into check such Fugitive Economic Offenders  who flee the country amidst of scams and economic offences.

The Fugitive Economic Offenders Bill, 2018 was introduced on the 12th day of March, 2018 in the House of the People and the said Bill could not be taken up for consideration and passing in the House of the People as the Parliament is not in session and the President is satisfied that circumstances exist which render it necessary for him to take immediate action. Fugitive Economic Offenders Ordinance, 2018 came into force from 21st April, 2018 and it extends to whole of India.

What is the purpose of Fugitive Economic Offenders Ordinance, 2018?

The main purpose of the Fugitive Economic Offenders Ordinance, 2018 was 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. It also aimed at preserving the sanctity of the rule of law in India and for matters connected therewith or incidental thereto.

What is Fugitive Economic Offender?

Any Individual against whom a warrant for arrest in relation to Scheduled Offences has been issued by any Court in India and such Individual has left India so as to avoid criminal prosecution or being abroad, refuses to return to India to face criminal prosecution.

Declaration of Fugitive Economic Offenders (FEO) :

Where the Director or any other officer not below the rank of Deputy Director authorized by the Director (appointed under sub-section (1) of section 49 of the Prevention of Money-laundering Act, 2002;) has reason to believe (the reasons for such belief to be recorded in writing), on the basis of material in his possession, that any individual is a fugitive economic offender, he may file an application in such form and manner as may be prescribed in the Special Court that such individual may be declared as a fugitive economic offender.

Additional Powers of Director under Fugitive Economic Offenders Bill, 2018:

The Director has been granted some additional powers to attach any property before making an application of any alleged FEO where there are reasons to believe that the property are proceeds of crime, or the property is owned by an individual who is a fugitive economic offender; and such property is being or is likely to be dealt with in a manner which may result in the property being unavailable for confiscation.

Provided that the Director or any other officer who provisionally attaches any property shall within a period of thirty days from the date of such attachment, file an application under section 4 before the Special Court. The attachment of any property under this section shall continue for a period of one hundred and eighty days from the date of order of attachment or such other period as may be extended by the Special Court before the expiry of such period. However, it shall not prevent the person interested in the enjoyment of the immovable property attached from such enjoyment.

Appearance Before Special Court :

Appears in Person : The Special Court may Terminate the proceedings depending upon facts and circumstances of the case.

Appears thru Counsel : Court may give a time one week to file reply to application

Fails to appear either in Person or Thru Counsel : It may proceed to hear application

If the Special Court is satisfied it may by order, declare the Individual as Fugitive Economic Offender for reasons to be recorded in writing

Onus To Prove:

The burden of proof for establishing that an Individual is a fugitive Economic Offender and that the property is the proceeds of crime or any other property in which the Individual so alleged has an Interest shall be on the Director;
Where any person claims that any interest in any property was acquired bonafide and without the knowledge of the fact that, such property constitutes proceeds of crime, the burden of proving shall lie upon such person.

Consequences of Special Court’s Order :

The Special Court may order any of the following properties shall stand confiscated to CG :

Proceeds of Crime in India and abroad, whether or not is owned by FEO any other property or benami property in India or abroad owned by FEO

When such property is in a contracting State, the Special Court may issue a letter of request to a Court or authority in the contracting State for execution of such order.

All the rights and title in the confiscated property shall, from the date of the confiscation order, vest in the Central Government, free from all encumbrances.

One of the harsh action taken up on being declared as FEO is it disallows any civil claim in any civil proceedings before any court or tribunal. It also disallows any Company or LLP from putting forward or defending any civil claim, if an Individual filing the claim on behalf of company/ LLP or is a promoter/ KMP/ Majority Shareholder of that company/LLP.

Management of Properties under Confiscation:

The CG may appoint Administrator who shall receive and manage the property in relation to which an order has been made.

The CG shall not dispose any property for a period of Ninety Days from date of order

Conclusion:

Although, the ordinance is quite clear on how serious the government is for those who are taking the Indian Law for granted by getting away from the process of law through the loopholes and fleeing away the country. The government is in no mood to let such people get away amidst of such frauds and scams. Although there are lot of criticism regarding the violation of Fundamental Constitutional right by disallowing any civil claims. What now remains to be seen is how seriously the law so framed is executed by the ED and how the property abroad is confiscated by the Indian Government.

Author Bio

Qualification: CA in Practice
Company: P Z & Associates, Chartered Accountants
Location: MUMBAI, Maharashtra, IN
Member Since: 13 Sep 2017 | Total Posts: 5

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