PNB fraud: Fugitive Economic Offenders Bill: India must not run away from a clearer law – The Economic Times–24.03.2018

By Sumer Singh Boparai

To circumvent a bellicose Opposition in Parliament, the Union Cabinet finally cleared the Fugitive Economic Offenders Bill (FEOB), 2017, on March1. The Bill’s object is to deter economic offenders from evading Indian law by a special court declaring a person a ‘fugitive economic offender’.

Subsequently, it aims to authorise the investigative agencies to confiscate any property or assets of the absconding offender. This move comes in the wake of jewellers Nirav Modi and Mehul Choksi defrauding Punjab National Bank (PNB) to the tune of Rs 12,636 crore.

Prima facie, the proposed legislation seems to be a step in the right direction. But a closer look reveals that some clauses fall foul of the basic tenets of natural justice and even the Constitution.

The Bill is shrouded in ambiguity and uncertainty, which GoI needs to address and clarify. Since the proposed legislation is still at an embryonic stage, one hopes that Parliament will plug the loopholes.

What GoI considers to be a genuine ‘deterrent’ is the provision in the Bill of the confiscation of the offender’s property. Once the court passes an order to this effect, the state agencies are entitled to proceed with the sale of these properties. It is, however, a well-established principle of law that aperson is innocent until proven guilty. The provision of selling the property on the mere declaration of a person as a fugitive economic offender and without a proper trial violates this principle.

Another befuddling provision is the Bill’s lack of clarity as to what will happen if the confiscated property is sold, and appeal under the proposed Section 15 is allowed. Further, Section 11 of the FEOB stipulates that any Indian court, in any civil proceedings before it, may disentitle an economic offender from putting forward or defending any civil claim.

This drastic provision also disentitles the companies in which the offender holds a key managerial post or is amajority shareholder. This violates the fundamental principles of natural justice and fair play. There could be wide ramifications, especially in the case of public companies, as individuals unrelated to the crime committed would unnecessarily be harmed.

GoI has not clarified (read: justified) such a blanket prohibition. It needs to be toned down if the Bill is to pass muster constitutionally. The legislation also makes an arbitrary distinction by virtue of which only offences involving sums over Rs 100 crore will attract the FEOB’s provisions. To substantiate this, GoI has expressed its concern for the ‘over-burdened judiciary’.

It is imperative that GoI provides a more plausible rationale, as not asingle taxpayer rupee ought to be swindled by fraudsters.

The FEOB deals with confiscating all properties belonging to a fugitive economic offender, and not just properties acquired through proceeds of crime. This, too, can be challenged as an overzealous provision. A comparative analysis with Britain’s Proceeds of Crime Act, 2002, shows that the prudent step would be to quantify the outstanding amount and then accordingly confiscate only those properties that have been acquired through proceeds of crime.

Moreover, there already exists a plethora of legislations that have provisions for attaching and selling such properties: Prevention of Money Laundering Act, Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (Sarfaesi) Act, 2002, Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and Code of Criminal Procedure. But they have failed to be a deterrent. Vijay Mallya, for instance, remains at large despite confiscation and sale of his properties.

A stringent legislation tackling economic malpractice is urgently needed. But GoI needs to reconsider certain provisions of the FEOB for the legislation’s own good.

The writer is an advocate. Views expressed here are author’s personal.

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

via PNB fraud: Fugitive Economic Offenders Bill: India must not run away from a clearer law – The Economic Times

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