Why in News?

The Union cabinet recently approved Fugitive Economic Offenders Bill to confiscate assets of those who flee the country and refuse to return after committing frauds in excess of Rs. 100 crore.

Who is a fugitive economic offender?

Fugitive economic offender is a person who has an arrest warrant issued in respect of a scheduled offence and who leaves or has left India to avoid criminal prosecution, or refuses to return to India to face criminal prosecution.

How someone is declared a ‘fugitive economic offender’?

According to the draft law, officials, referred to as directors or deputy directors under the Prevention of Money Laundering Act, can file an application to a Special Court for a declaration that they are a fugitive economic offender. This application should

1. Give the court the reasons for why it should declare the person a fugitive offender
2. Provide information about the current whereabouts of the person
3. Provide a list of properties believed to be the proceeds of the crime
4. Provide a list of properties which the government believes should be confiscated and,
5. Provide a list of other persons who may have some interest in those properties.

As soon as such an application is filed, the government can attach (meaning prevent the trading or selling of) any properties mentioned in it for 180 days. Once the application is done, the Special Court will send a notice to the person and anyone else who has interests in the attached property.

Existing laws related to fugitive economic offenders:

The existing laws under which such fugitive economic offenders are tried include:

1. Recovery of Debts Due to Banks and Financial Institutions Act (RDDBFI),
2. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (SARFESI) and
3. Insolvency and Bankruptcy Code (IBC).

Why there is a need for a new law?

1. There have been several instances of economic offenders fleeing the jurisdiction of Indian courts in fear of proceedings.
2. Under the existing laws, banks have failed to recover the dues in the past three years.
3. The absence of such offenders from Indian courts has several consequences

• It hampers investigation in criminal cases
• It wastes precious time of courts of law
• It undermines the rule of law in India.

Highlights of the Bill:

1. To deter economic offenders from evading the process of Indian law.
2. Applicable in value of offences over Rs 100 crore.
3. Empowers Financial Intelligence Unit (FIU) under finance ministry to file an application in special court for the declaration of fugitive economic offender for confiscation of their assets.
4. As soon as such an application is filed, the government can attach any properties mentioned in it for 180 days.
5. Once the application is done, the Special Court will send a notice to the person and anyone else who has interests in the attached property. The notice to the person involved will require them to appear at a specific place and time no less than six weeks from the date of the notice. If they refuse to appear for up to six weeks, the Special Court can take up the case and label the person a fugitive economic offender.
6. Once a fugitive economic offender has been declared, the government can confiscate the “proceeds of the crime”, even if it is not owned by the fugitive offender, and any other properties they own as well.
7. Confiscation of other  property belonging to such offender in India and abroad, including benami property.
8. Disentitlement of the fugitive economic offender from defending any civil claim; and
9. An Administrator will be appointed to manage and dispose of the confiscated property under the Act.

Challenges with the bill

Violation of the Indian Constitution:

• Under the new law, there will be blanket ban on offenders contesting the confiscation of their properties through civil suits.
• An absolute ban violates justice, equality and in result the Indian Constitution.

Violates the principle of innocent unless proven guilty:

• The bill allows selling the property without trial = violation of the settled principle under the Constitution that one is considered innocent unless proven guilty.

Not easy to find buyers:

• Assets confiscated by enforcement agencies and courts are termed as distressed properties, and seldom find buyers.
• A case in point is Sahara’s Amby Valley, which despite efforts by Bombay high court’s official liquidator has been unable to find suitable buyers for almost a year.

Way forward

1. The blanket disentitlement from pursuing or defending any civil claim under the law should be clarified and made reasonable.
2. To avoid failed attempts at the sale the bill should provide for

• time limits for disposal and encashment of property,
• separate limits for movable-immovable property and running business, and
• Quick disposal of property which would lose its value over time.

Practice Question

1. Who are fugitive economic offenders and how they are declared as such? Do you think that the fugitive economic offenders law would help solve the problem of economic offences in India?