“The Fugitive Economic Offenders Ordinance, 2018”. was approved by the union cabinet and then promulgated by the President on April 21st, 2018. This ordinance is brought with a clearly defined approach in mind that is to make sure that no economic offender can leave the country and even if they leave their assets can be seized and confiscated by the government without any hiccups, for this reason, the ordinance vests many special powers to the courts and the directors.”
With the assent of the President of India, the Fugitive Economic Offenders (FEO) Ordinance, 2018 gets promulgated; the new law lays down the measure to empower Indian authorities to attach and confiscate the proceeds of crime associated with economic offenders and the properties of the economic offenders. The earlier legislation that empowered GoI to deal with economic offenders is largely an amalgamation of various laws, and is, therefore, riddled with procedural delays and loopholes.
These loopholes allowed big-ticket tax and loan defaulters to circumvent the law and delay, or indefinitely hold off, the confiscation of their assets against their debt. Moreover, laws such as the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, 2002, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and the Prevention of Money Laundering Act, 2002, conceptualise the attaching of assets as a punitive measure, rather than as a deterrent.
“Fugitive Economic Offenders Ordinance preamble states - A Bill to provide for measures to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts. ”
Need for Implementation of Ordinance
The need for the Ordinance had arisen as there have been many 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 deleterious consequences – first, it hampers investigation in criminal cases; second, it wastes precious time of courts of law, third, it undermines the rule of law in India. The existing civil and criminal provisions in law are not entirely adequate to deal with the severity of the problem.
In view of the above context, 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. Pursuant to the above announcement, the Fugitive Economic Offenders Bill, 2018 was introduced in LokSabha on the 12th March, 2018. The Fugitive Economic Offenders Bill, 2018 was listed for consideration and passing in LokSabha on many occasions after its introduction. The Lok Sabha has since been adjourned sine die and both the Houses of Parliament were prorogued on 6thApril, 2018.
Defining Economic Offender
In order to address the deficiency in the present laws and lay down measures to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts, the Ordinance is being proposed. The Ordinance makes provisions for a Court (‘Special Court’ under the Prevention of Money-laundering Act, 2002) to declare a person as a Fugitive Economic Offender. A Fugitive Economic Offender is a person against whom an arrest warrant has been issued in respect of a scheduled offence and who has left India so as to avoid criminal prosecution, or being abroad, refuses to return to India to face criminal prosecution. A scheduled offence refers to a list of economic offences contained in the Schedule to this Ordinance. Further, in order to ensure that Courts are not over-burdened with such cases, only those cases where the total value involved in such offences is INR 100 crore or more, is within the purview of this Ordinance.
The Fugitive Economic Offenders Ordinance, 2018, inter alia provides for–
(i) making an application before the Special Court for a declaration that an individual is a fugitive economic offender;
(ii) attachment of the property of a fugitive economic offender and proceeds of crime;
(iii) issue of a notice by the Special Court to the individual alleged to be a fugitive economic offender;
(iv) confiscation of the property of an individual declared as a fugitive economic offender or even the proceeds of crime;
(v) disentitlement of the fugitive economic offender from defending any civil claim; and
(vi) appointment of an Administrator to manage and dispose of the confiscated property under the Act.
If at any point of time in the course of the proceeding prior to the declaration, however, the alleged Fugitive Economic Offender returns to India and submits to the appropriate jurisdictional Court, proceedings under the proposed Act would cease by law. All necessary constitutional safeguards in terms of providing hearing to the person through counsel, allowing him time to file a reply, serving notice of summons to him, whether in India or abroad and appeal to the High Court have been provided for.
Merits of FEO Ordinance
The FEO Ordinance may have some merits. First, only economic offences that total or exceed Rs 100 crore in value are within its purview, safeguarding small and medium enterprises from being scapegoated or unjustly accused. In all likelihood, to be able to commit an offence above Rs 100 crore, the accused would be a well-established enterprise.
Second, even though not foolproof, the provision of a centrally-appointed director who bears the burden of proof, and judicial oversight in the form of a special court can significantly reduce corruption, misuse and harassment.
Third, the FEO Ordinance empowers GoI to seize not only domestic assets of an accused, but also foreign assets and “ benami ” properties. One controversial provision here is that GoI can also seize properties other than those suspected to be obtained through proceeds of crime. But, rather than being an after-the-fact, punitive measure, confiscation of assets envisaged in this Ordinance is to deter economic offenders from absconding, or to coerce ‘fugitive’ offenders to submit to the jurisdiction of an Indian court. Finally, to tackle the loopholes and procedural delays, the FEO Ordinance restructures, codifies and brings together various legislations into one comprehensive law. The onus is now on GoI to ensure that its implementation is fair and safeguards against undue harassment of legitimate businessmen. From Fear to Fair Alongside improving India’s ‘ease of doing business’, GoI needs to place equal emphasis on reducing India’s ‘fear of doing business’.
We are increasingly moving towards an inquisitorial — as opposed to an accusatory — system of justice, where media trials and political propaganda declare an individual guilty until proven innocent in a court of law.
Discretion and ambiguity in legislation are two possible pathways to corruption. So, Parliament must ensure that this law is as airtight and unambiguous as possible. The Law needs to be crafted very meticulously so as to ensure that the lines between evidence and coincidence, causation and correlation, are not blurred. The Law shouldn’t be embarking on a wild-goose chase and brand businessmen as crooks or absconders — just because there are a few bad instances
In that context, maybe it’s time for us to restore an accusatorial system of justice, and perhaps include offences under the Prevention of Money Laundering Act (PMLA) and other laws pertaining to economic wrongdoing in the bailable category.
It is expected that a special forum will be created for expeditious confiscation of the proceeds of crime, in India / abroad, This would possibly pave way for return to India to submit to the jurisdiction of Courts in India to face the law in respect of scheduled offences.
Since the proposed law would utilise the existing infrastructure of the Special Courts constituted under under the Prevention of Money-laundering Act, 2002 and the threshold of scheduled offence is high at Rs. 100 crores or more, no additional expenditure is expected on the enactment 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.