In the past couple of years, India has witnessed a spate of loan defaulters and embezzlers fleeing the country to evade prosecution. The most prominent among them are Nirav Modi, Mehul Choksi and Vijay Mallya.
In order to prevent such gross dereliction of justice, the Indian Parliament passed the Fugitive Economic Offenders Act in 2018. This act allows the government to declare financial criminals who have flown the coop, so to speak, as ‘fugitive economic offenders’ and confiscate their property.
Aim of the Fugitive Economic Offenders Act
The act contains various measures which seek to prevent individuals who have engaged in high-profile financial crimes from fleeing India with the intent to go outside the jurisdiction of the Indian judiciary and escape punishment for their crimes.
The act also sets down the various do’s and don’ts regarding the prosecution of a fugitive economic offender.
Who is a Fugitive Economic Offender?
A fugitive economic offender is an individual who is thought to have absconded with a sum of money amounting to over a hundred crores and a warrant has been issued on this matter. Furthermore, it is thought that that the individual has fled the country to avoid prosecution and is unwilling to face extradition.
Provisions of the Fugitive Economic Offenders Act
Procedure for Declaration of a Person as a Fugitive Economic Offender
1. Filing of an Application to Declare Someone as a Fugitive Economic Offender
According to this act, a Director or someone not below the rank of a Deputy Director, so appointed under the Prevention of Money-Laundering Act of 2002, may file an application to a Special Court, formed under the Prevention of Money-Laundering Act of 2002, to declare a potentially absconding individual a fugitive economic offender if he has the requisite evidence to support his accusation.
Information that must be presented include his supposed location, a list of properties (both in India and abroad) which have been considered to be proceeds of criminal activities or are benami in nature, and the names of people who may have a claim on these.
2. Attachment of Property
The authorities have been empowered with the capacity to attach any or all properties mentioned in their application. However, it must be proved that these properties are proceeds of crime and benami and that these are unavailable for confiscation.
This can be done for a period of one hundred and eighty days, and is liable for extension by the Special Court if it so wishes. Assent from the Special Court is not required if an application for this is filed within thirty days by the Director.
3. Powers of the Director and Other Officers
The Director or any such concerned person, not below the rank of a Deputy Director, has been endowed with powers equivalent to the Civil Court, as per the Code of Civil Procedure of 1908. The Director is able to conduct investigations, searches, mandate persons of interest to appear in front of him or her, examine individuals, demand evidence and so on.
4. The Director’s Power of Survey
If the authorised person in the case has evidence to believe that an individual is a fugitive economic offender, then he or she may enter the premises of a compound or any other such place, as far as he is able to in his capacity.
He or she may also ask any employee or person present to assist him with his or her inspection. The authorised person can also record statements, make inventories and make marks on the already-inspected records.
5. Search and Seizure of Property
If the Director of the operation believes an individual to be a fugitive economic offender and engaged in unlawful activities, he or she may delegate a subordinate to enter a place, suspected to be of relevance in the case, and make a search of the premises. Incriminating material may be seized and witnesses present may be asked to record statements.
6. Search of Persons Relevant to the Case
Moreover, if an authority, so declared by the Central Government, is of the opinion that an individual may be hiding relevant information and records on the matter, then he or she may search the person by taking him or her to a Gazetted Officer or Magistrate within twenty four hours.
The search will then proceed only if the Gazetted Officer or Magistrate sees cause for concern and will take place in the presence of at least two witnesses. Records of items seized, signatures of the witnesses, and a statement by the person in question will be required.
After an application is filed in the Special Court, the accused has to appear in front of the bench within six weeks, failing which he or she will be declared a fugitive economic offender and his or her property confiscated. A notice will be served to this effect within two weeks and may be sent to the accused at his or her email address.
8. Procedure for Hearing the Application
If the accused makes an appearance at the Special Court in the appointed time, then the judicial proceedings against him or her will be terminated. The accused’s counsel may also show up in his or her stead but has to submit an application explaining his or her client’s absence. The Special Court will assume that the accused’s non-appearance is the consequence of the failure of the notice to reach him or her or the fact that the individual has managed to elude the service of it.
9. Declaration of the Accused as a Fugitive Economic Offender
The Special Court, after having been satisfied with the evidence, will declare the accused as a fugitive economic offender and his or her property will be liable to be confiscated. All assets, be it in India or abroad, which have been established as proceeds of crime or are benami in origin will be taken away and the Central Government will become the possessor of these. It may dispose of these in any manner it so chooses. An exception will be made for property over which the fugitive economic offender has a legitimate claim, which will not be available for confiscation.
10. Supplementary Application
This pertains to any unlawful property which is discovered afterwards. A supplementary application for the confiscation of these will have to be filed.
11. Power to Disallow Civil Claims
One of the more controversial mandates of this act is this clause which prevents fugitive economic offenders from mounting a defence in other civil suits. Any court may be able to put a bar on the individual.
Furthermore, a court can also block applications or petitions filed on behalf of a company or a limited liability partnership if a key position like a managerial role or that of a promoter or majority shareholder is occupied by a fugitive economic offender.
This clause has been criticised on the grounds that it violates Article 21 of the India Constitution which guarantees an individual’s right to life and consequentially, his or her right to defend himself or herself.
12. Management of Properties Confiscated Under This Act
An Administrator is to be appointed to look after the property seized. He or she cannot dispose of it until ninety days have passed from the issuance of the confiscation order.
13. Rules of Evidence
The burden of proof or the responsibility of producing evidence to convict the fugitive economic defender shall rest on the Director, or the Deputy Director, whoever may be in charge of the case. However, the burden of proof for establishing that a particular property of the accused is of bona fide origin lies with the accused and his counsel.
Appeals against a judgement will have to be made to the High Court, preferably within thirty days from the pronouncement of the judgement. Any delay in filing of an appeal will need to be accounted for, if it is found to be sufficient, then only will the High Court entertain it. Appeals will not be accepted if ninety days have passed from the date of judgement.
15. Bar of Jurisdiction
Civil courts do not have the jurisdiction to rule over or interfere in the matter of the Special Courts.
16. Power to Make Rules
The Central Government has been authorised to create requisite rules regarding the procedures detailed in the provisions listed. The government will have to set the legal and administrative framework for filing applications, attachment of property, confiscation of it, conducting witness examinations, searches and so on.
17. Overriding Effect
The provisions of this act will override any clause in other acts which pose a contradiction with this. Nonetheless, this will “be in addition to and not in derogation” of such similar laws.
Although this Act will prove to be an important guide in cases of economic offenders taking flight, this act is somewhat redundant as there are other acts and laws which already have the same or similar provisions as in this.
For instance, the Prevention of Money-Laundering Act of 2002, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act of 2002, Code of Criminal Procedure of 1973, and the Benami Transactions (Prohibition) Act of 1988 are some of the acts which contain provisions repeated in the Fugitive Economic Offenders Act.
Additionally, the act makes no mention of what will be done with the confiscated property. If sold off, who will get the proceeds? People who have a prior claim on the money like unpaid workers or will it be used for government purposes?
Another question that has emerged is over the security, privacy and autonomy of the accused. The rights given to an accused under Article 21 are being suspended. Moreover, searches can now be undertaken without a search warrant, which is an alarming notion as a search warrant is usually considered as a safeguard against unlawful ingress on part of the law enforcement.