The Cabinet’s nod for a new law that allows the government to take over all assets of loan defaulters and economic offenders who flee the country to evade criminal prosecution is pragmatic.
Called the Fugitive Economic Offenders Bill (FEOB), the proposed law is meant to coerce such offenders to return to India, face prosecution and repay debts by doing business here. Else, they would lose all their domestic assets.
A retrospective enforcement of the law makes sense, although absconding millionaires ranging from Lalit Modi to Nirav Modi are likely to cry foul.
Presumably, the government hopes to recover significant amounts from outstanding loans through confiscation and subsequent auction of assets of those declared as fugitive offenders by Special Courts. The threshold value for cases to come under the FEOB is a sensible Rs 100 crore.
The need is to vastly improve our legal infrastructure for speedy completion of criminal investigation into frauds, and confiscation and sale of assets. A 180-day window during which the property will remain attached, and a provision for appeal against an order of confiscation appear reasonable. But cases should not drag on in the courts.
The administrator appointed by Special Courts (read: the Insolvency Professional) to deal with the confiscated assets must ensure that the fair market value is determined properly. The goal should be to minimise the haircuts that lenders need to take.
Already, different agencies have powers to seize assets of economic offenders. The draft FEOB Bill says it will override anything inconsistent in any other law in force. The need is for better coordination among enforcement agencies to ensure that they do not work at cross purposes. Systemic ills in the banking system must be fixed to prevent frauds.
This piece appeared as an editorial opinion in the print edition of The Economic Times.
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