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Whether India needs one more Act to catch Economic Offenders?

By reading the Preamble of the Fugitive Economic Offenders Bill – 2018, it emerges that the Bill is intended to deter economic offenders from evading the process of prosecution laws by remaining outside the jurisdiction of Indian courts. On 12.03.2018 the Bill has been introduced in the Lok Sabha.

Introduction

By reading the Preamble of the Fugitive Economic Offenders Bill – 2018 (in short ‘the Bill’), it emerges that the Bill is intended to deter economic offenders from evading the process of prosecution laws by remaining outside the jurisdiction of Indian courts. On 12.03.2018 the Bill has been introduced in the Lok Sabha. The Bill mainly consists of three Chapters, to name “Preliminary, Declaration of Fugitive Economic Offender & Confiscation and Miscellaneous, a Schedule for offences.”  The current article is an attempt to understand the Bill and its implications in a comprehensive manner.

The Prevention of Money Laundering Act, 2002 (hereinafter the PMLA)’ have suitable provisions to prevent money-laundering practices and confiscate the property derived from such activates.  However, under PMLA, the Central Government can confiscate an offender’s assets only after his conviction and also the confiscation is limited to the proceeds of the economic offence. The latest Bill provides for the attachment of all the assets of offenders, irrespective of whether they are the proceeds of economic offence or not. The Hon’ble Supreme Court in Y.S Jagan Mohan Reddy v. Central Bureau of Investigation AIR 2014 SC 1933, held that “The economic offence having deep-rooted conspiracies and involving huge loss of public funds needs to be viewed seriously and considered as grave offences affecting the economy of the country as whole and thereby posing a serious threat to the financial health of the country.”  In one more instance, the Hon’ble Supreme Court in A.A. Mulla & ors. v State of Maharashtra & Ano. 1996 VII AD (SC) 737 opined to ‘take a strict view in case of serious economic offences’.

Key Terms

1. Economic offences The term has not been defined in the Bill. However, other existing laws that are – the Indian Penal Code, 1860, the Prevention of Corruption Act, 1988, the Securities and Exchange Board of India Act, 1992, the Customs Act, 1962, the Companies Act, 2013, the Limited Liability Partnership Act, 2008, the Insolvency & Bankruptcy Code, 2016 has been suitably defined.

2. Fugitive P Ramanatha Aiyar’s Concise Law Dictionary defined the term as ‘a criminal suspect who flees, escapes prosecution especially by fleeing the jurisdiction’.

3. Fugitive economic offender The Bill has defined the term as ‘any individual against whom a warrant for arrest in relation to a scheduled offence has been issued by any court in India, who:

(a) leaves or has left India so as to avoid criminal prosecution or

(b) refuses to return to India to face criminal prosecution.’

4. Proceeds of crime Sub-clause (u) of Section 2 of the PMLA has defined the term as ‘any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property.’

However, the Bill defined this term more precisely as ‘any property derived or obtained, directly or indirectly, by any person from any criminal activity relating to a scheduled offence or the value of such property or where such property is outside the country, then the property equivalent in value held within the country’.

Salient features of the Bill

Salient features may be summarized as –

1. To extend stringent provisions to any individual who is, or becomes, a fugitive economic offender.

2. To establish a ‘Special Court’ to declare an individual as a fugitive economic offender;

3. To file an application before the ‘Special Court’ to take an appropriate action;

4. To issue a notice by the Special Court to the concerned individual who alleged to be a fugitive economic offender;

5. To attach and confiscate the properties of a fugitive economic offender;

6. To confiscate other properties, including benami properties, if any, belonging to such offender in India and abroad;

7. To disentitle the fugitive economic offender from defending any civil claim;

8. To lay down stringent measures to deter economic offenders from escaping the process of Indian laws or the jurisdiction of Indian courts;

9. To appoint an Administrator to manage and dispose of the confiscated property.

The Bill – In Brief

  • The first chapter of the Bill deals with the commencement, jurisdiction, definitions and applicability of the Act. Interestingly, unlike other Statues, the Bill extends its wings to the State of Jammu & Kashmir also.
  • The second chapter deals with the procedural aspects, filing an application, attachment, preservation of attached property, issuance of notice to the offender, hearing the application, declaration of an offender as fugitive economic offender, issuance of confiscation orders, appointment of administrator to administer the attached property and final disposal of confiscated property, if required.
  • The third and final chapter deals with the miscellaneous aspects like the burden of proof, powers of the authorities, powers of the Central Government to make Rules, to amend Schedule etc.

Orders of the Special Court – Any individual aggrieved by an order under provisions of the said Bill may prefer an appeal to the jurisdictional High Court within 30 days from the date of the order. The provisions of the Bill will override inconsistent provisions of any other law for time being in force.

List of Offences – In Brief

Schedule to the Bill deals with the economic offences. To name few –

1. Offences under the Indian Penal Code, 1860 like Criminal conspiracy, Counterfeiting and sale of counterfeited Government stamp, possession of counterfeit Government stamp, using counterfeit government stamp as genuine, cheating and dishonestly inducing delivery of property, fraudulently removal or concealment of property to prevent distribution among creditors, fraudulently preventing debt being available for creditors, fraudulently execution of deed of transfer containing false statement of consideration, fraudulently removal or concealment of property, possessing of counterfeited seal, counterfeited a mark used by a public servant, possession of any instrument for counterfeiting a property mark, selling goods marked with a counterfeited property mark, counterfeiting currency notes, etc.

2. Offences under the Prevention of Corruption Act, 1988 like illegal gratifications with respect to official acts, accepting gratification by corrupt or illegal means, etc.

3. Offences under the Securities and Exchange Board of India Act, 1992 like Insider trading, substantial acquisition of securities or control, etc.

4. Offences under the Customs Act, 1962 like the evasion of duty or prohibitions, etc.

5. Offences under the Companies Act, 2013 like non-repayment of deposits, carrying on business for a fraudulent purpose, carrying on business with the intent to defraud its creditors, members or any other persons, or forming a company for any fraudulent purpose, fraud, withholding of property etc.

6. Offences under the Limited Liability Partnership Act, 2008 like carrying on business with the intention or purpose to defraud creditors of the LLP or any other person or for any other fraudulent purpose.

7. Offences under the Insolvency & Bankruptcy Code, 2016 like defrauding creditors, etc.

Anomalies in the Bill

1. Fugitive Economic Offender

The definition itself, no doubt, has been vaguely defined.

2. Constitutionally valid

Certain provisions look like straight away violate the basic principles of natural justice by restricting or disentitle a declared fugitive economic offender to defend any civil claims in any civil proceedings. Hence, if challenged, the Bill could be struck down as unconstitutional.

3. Higher threshold limit

The scope of the Bill is that very much limited or restricted to very high profile economic offences i.e. the total value of such offences should be Rs. 100 crore or more. It is not clear that the main object of the Bill may serve any purpose since it is restricted for such kind of huge offences.

Conclusion

Definitely, the Bill aims to make up the flaws in the existing laws and enable the Central Government to confiscate the property of those evading prosecution by fleeing the country. However, the effectiveness of the Bill is purely depending on its proper implementation with due fair, reasonable manner and impartial enforcement.  However, the proposed law may be constitutionally challenged, as and when it comes into force.

Categories: Corporate Law
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