TaxTMI 
TaxTMI 
TaxTMI 
INTRODUCTION
Recently, India has witnessed cases of big time offenders, including economic offenders, who flee the country to escape the reach of law. Vijay Malaya, who owed 9000 crore to public sector banks has been playing catch me if you can with Indian investigation agencies for last several years and Nirav Modi is the new participant in the game. Finance Minister in his budget speech of 2017 proposed a law for such economic offenders. The idea has now materialized in form of Fugitive Economic Offender Bill. The Union Cabinet has given its assent to this bill, which is aimed to create deter for the people, who used to commit economic offence and flee to an alien country to avoid liability. Also, this bill is a big step towards achieving the goals laid down in the United Nations Convention against Corruption, which India ratified in 2011.
ABOUT THE BILL
According to the draft bill, a fugitive economic offender is “any individual against whom a warrant for arrest in relation to a schedule offence has been issued by any court of India who, either leaves or has left India to avoid criminal prosecution or refuses to return to India to face criminal prosecution”. The list of schedule offences is provided with the bill that includes offences like willful loan defaults, cheating, forgery etc.
The director appointed under PMLA Act should file an application under Section 6 of the bill to the special court for a declaration that an individual is a fugitive economic offender. The Special Court will issue a notice under Section 8 of the bill to the individual alleged to be an economic offender, which will require the individual to appear at a specified place at a specified time. Failure to do so will result in declaration of the individual as a fugitive economic offender and confiscation of property.
Once the person is declared as a fugitive economic offender, the special court may order to confiscate the properties 1) proceeds of crime, whether it is owned by the offender or not 2) any property owned by the offender in India. The special court will appoint an administrator to dispose of the confiscated property to satisfy the claims of the creditors.
The provision to confiscate property is not new, it can be found in many other laws most prominently in Prevention of Money Laundering Act. PMLA talks about attachment and confiscation of property, which is a proceed of crime meaning any property obtained or derived as a result of criminal activity. However, this bill will empower to confiscate all the property irrespective of whether it is acquired as a result of crime or not.
LOOPHOLES IN THE BILL
The bill mentions that if a promoter, key managerial personnel or majority shareholder of the company is declared as a fugitive economic offender then that company cannot defend or put forward any civil claim. A company is considered to have a separate legal entity and is considered as a person in the eyes of the law quite distinct from the individuals who are its member. Also, The shareholders are not the part owner of the company or its property. However, the provision mentioned in the bill seems to contradict the characteristic features of a company.
The bill mentions that the offence committed should be of or more than 100 crore. Article 14 of the Constitution forbids class legislation; it permits reasonable classification of persons, objects and transaction by the legislature for the purpose of achieving specific ends. The differentia adopted as the basis of classification must have a rational or reasonable nexus with the object that is to be achieved by the statue in question. This provision of the bill is definitely going to be challenged, as the classification seems to be arbitrary. For e.g. A person committing a economic offence of 99.99 crore will not be covered within this law
The bill provides for the sale of property without trial. The properties of the fugitive economic offender will be sold without conducting a proper trial whether or not the said person is actually liable for the offence, would amount in violation of constitutional principle that one is innocent unless proven guilty.
The bill provides that any individual aggrieved can appeal to the High Court within 30 days from the order. This provision is definitely a loophole, as it will hamper the speed of the said process. Appeal against the confiscation of property should only be allowed in Supreme Court for speedier resolution.
The bill provides that any individual after been declared as fugitive economic defender cannot put forward or defend any civil claim. The disentitlement from pursuing or defending any civil claim must be clarified and made reasonable. An absolute ban will conflict basic tenets of justice and fair play, besides being in violation of the Indian Constitution.
The bill provides for confiscation of all the properties of the offender, regardless of how much property would need to be confiscated to payoff the offender’s liabilities. Proceeds of Crime 2002 of United Kingdom, has more or less similar provision that provides to inquire into the total sum owed before deciding the extent of forfeiture.
The bill doesn’t specify the time frame within the court is required to conclude the hearing of the application for declaration of a fugitive economic offender. This is important to ensure that there is no unnecessary delay in the confiscation of the assets, and the offender doesn’t get the opportunity to dispose the assets in the meanwhile.
CONCLUSION
The bill is a huge step towards creating a deterrent effect for economic offender and would certainly help the government bring alleged fraudsters such as Mallya to justice. Although the bill is a great piece of legislation but there are provisions that are faulty and unlikely to survive judicial review. The bill will be tabled in the parliament for discussion and hopefully all the faulty provision will be removed or amended before it turns into an Act. Also, there are provisions that are ambiguous, which need to be clarified at an early stage to avoid unnecessary litigation.