Critical Analysis of Fugitive Economic Offenders Act 2018-as a glimpse
Dr. J. Starmi, ML.,PhD.,
Assistant Public Prosecutor Grade II,
Judicial Magistrate Court No.I,
Ponneri.
Abstract
In recent scenario India has witnessed a huge number of scams and economic offences which have realised an adverse impact on the Indian economy and also the banking industry. In an attempt to bring to render justice and grab them by the neck, the Indian Parliament has recently enacted The Fugitive Economic Offenders Act (FEO), 2018 which has assented by the President on 31st July, 2018 and came into force on 21st April, 2018. The FEO Act, 2018 intends to tackle a peril of today that has far reaching implications upon the core of investor confidence and the well-being of the economy. The disdain and disregard shown by the Fugitive Economic Offenders is of such a nature that is representative of a deeply worrying state of affairs and a growing community of individuals who seek not to make a person living honestly, but to make one, essentially based upon wrongful gains derived by way of scams and fraudulent enterprises, who seek a safe exit from the consequent liability of their actions by evading the grasp of justice. The Act represents an efficacious endeavour to curb the far reaching menace that are, Fugitive Economic Offenders.
Introduction
Fugitive Economic Offender is a person who obtains loan from a bank and in future he failed to return the debt and escaped from India by avoiding arrest and prosecution. In this circumstance the creditor banks are unable to collect the debts and their financial status is very critical and great loss will be caused to the banks as well nation. If a bank’s economy reduced the nation’s economy level also reduced. For want of save the economic status of bank as well as nation in an unavoidable circumstance this Act has enacted by the government in 2018. India has witnessed the rise of Multi-Crore economic losses caused due to wilful defaults and scams. Due to the scandal broke of rich economic offenders for want to save the country’s income government have no other option to enact this legislation. This act first envisaged in union budget 2017 and came into force on the 21st day of April 2018. This Act contains three chapters and 26 Sections also including a schedule. This Article focussed about the important features and lacunas of this Act.
Object
The preamble of the act states that the act aims to provide for measures to deter fugitive economic offender from evading the process of law in India by staying outside the jurisdiction of Indian courts and to preserve the sanctity of the rule of law. It is simply says that if a fugitive economic offenders is remaining in abroad and doing their own job in their own manner without any annoyance. But this Act bottlenecks the offenders who escaped from India to abroad attach their properties and confiscate it. This act heavily relies on the Prevention of Money Laundering Act, (PMLA) 2002 and a lot of provisions and definitions are as one and the same as PMLA 2002. In earlier economic offenders are called as white collar criminals, by the enactment of this new legislation 2018 a new term fugitive economic offenders has coined down by the government. Under this act a person who has non repayment of one hundred Crore rupees and above and escaped from outside the territorial jurisdiction of India evading from criminal prosecution is called as fugitive economic offender. 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 wealth of such institutions. It is expected that the special forum to be created for expeditious confiscation of the proceeds of crime, in India or abroad, would coerce the fugitive to return to India and produce him before the jurisdiction of Courts in India to face the trial in respect of scheduled offences.
Background
There have been several instances of economic offenders fleeing from our country to evade clutches of Indian law and to remain outside the territorial jurisdiction of Indian courts. The absence of such offenders from Indian courts has several deleterious consequences. It hampers the investigation in criminal cases, wastes precious time of courts of law, undermines rule of law in India. Further, most such cases of economic offences involve non-repayment of bank loans thereby worsening financial health of banking sector. Moreover, existing non-coherent civil and criminal provisions in law are not entirely adequate to deal with severity of problem. This Act will provide effective, expeditious and constitutionally permissible deterrent legal teeth to enforcing agencies to ensure that such actions of Fugitive Economic Offender are curbed.
United Nations Convention against Corruption (UNCC)
The non-conviction-based asset confiscation for corruption related cases is enabled under provisions of United Nations Convention against Corruption (UNCC), India as a signatory and ratified in 2011. By way of that Article 54(1)(c) of the UN Convention enables signatories to consider taking such measures as may be necessary to allow confiscation of such property without a criminal conviction in cases in which the offender cannot be prosecuted by reason of death, flight or absence or in other appropriate cases. By adopting this principle this Fugitive Economic Offenders Act, 2018 also stated that confiscate the properties instead of punishing the offender this Act enacted by the parliament. 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.
Main features
This Act mainly focussed about the recovery of non-repayment of loans from fugitive economic offender. There are various salient features of this Act is explained under the following heads.
Fugitive Economic Offender
According to this Act 2018, ‘fugitive economic offender’ is a person, whose property has been attached by the government is barred to file civil claim against the government (Section 2(f) defines ‘fugitive economic offender’ as any individual against whom a warrant for arrest in relation to a Scheduled Offence has been issued by any Court in India, who (i) has left India so as to avoid criminal prosecution, or (ii) being abroad, refuses to return to India to face criminal prosecution.). The Act also defines ‘benami property’ and assigns it the same meaning as provide under the Prohibition of Benami Property Transactions Act, 1988. This implies that the FEO Act, 2018 applies to any property which is the subject matter of a benami transaction and also includes the proceeds from such property. Further it also covers within its scope the transactions which are one and the same nature of benami transactions under the Prohibition of Benami Transactions Act, 1988.
Scheduled offence
This Act stated about the Fugitive Economic Offender is a person who has committed any offence mentioned in the schedule contained this Act and the total value of the person involved such type of crime is fixed as more than 100 crore rupees. Such offences codified under this Act is based on various statutes such as Indian Penal Code, 1860, Negotiable Instruments Act, 1881, Prohibition of Benami Property Transactions Act, 1988, Prevention of Corruption Act, 1988, the Companies Act, 2013, Prevention of Money Laundering Act, 2002 etc.,. In a clear manner we can understand that if any person who has committed any offences above that pecuniary limit which has mentioned in the FEO Act 2018 that person is called as fugitive and his properties will be confiscated under this Act.
Extends and applicability
The Act extends to the whole of India and shall have effect, notwithstanding anything inconsistent therewith contained in any other law and further, it shall be in addition to and not in derogation of any other law for the time being in force. The said Act applies to any individual who is or becomes a fugitive economic offender on or after the enactment of this Act on 21st day of April 2018.
Special court
Further, upon a bare reading of this Act, it appears that Section 5 of the FEO Act, 2018 is similar to Section 5 of the Prevention of Money Laundering Act, 2002. It has been drafted on the same lines and both these provisions, though occurring in different statutes, provide for the same thing, i.e. attachment of the property of a person accused of committing the offences prescribed therein by the Director with the permission of the Special Court (Section 2(n) of the legislation provides that a 'Special Court' means a Court of Session designated as a Special Court under Section 43(1) of the Prevention of Money Laundering Act, 2002). This also displays the intention of the legislature towards to consolidate the power and grip of the regulatory and adjudicating authorities over such accused person in order to prevent him from leaving the territorial jurisdiction of this court, or absconding from the place which he legal bounds by the Indian government.
Request for Declaration
Another one important aspect of this act is need to declare a person as a FEO there is an application to declare an individual as a ‘fugitive economic offender’, it can be made by a Director or a Deputy Director as defined under the Section 4 of the PMLA 2002. Under Section 5 of the said Act subject to receipt of the Special Court's permission, the Director or the Deputy Director may proceed with attachment of properties; whether the property is proceeds of crime or any other property which is also including any benami property, such as owned by a fugitive economic offender. It is blatant to that the special court alone has a power to declare a person as a Fugitive Economic Offender.
Attachment of properties
In addition to the above, Section 5(2) of the Act, there is a non-obstante clause also provides for attachment of properties prior to any application being made for declaration of a fugitive economic offender. The attachment of any property under this section shall continue for a period of 180 days from the date of order of attachment or such other period as may be extended by the Special Court. However, in such a case, the application under S.4 has to be made within Thirty days from the date of such provisional attachment.
Confiscation
After considering the reasons mentioned by the director under Section 5(2) of the Act court in accordance with Section 12 the reasons to be recorded in writing and declare to be recorded in writing may declare a person s a fugitive economic offender. Upon this declaration, properties which are proceeds of a crime whether owned by the offender or not; and any other properties including which personal and benami properties, owned by the offender; shall stand confiscated to the Central Government. Once, the properties confiscated by the government such properties to be treated as government properties. By way of public auction the non repayment of debts to be returned by the government to the concerned banks.
Bar from civil proceedings
One of the most prominent provision provided under the FEO Act, 2018 is the bar from putting forward or defending any civil claim once an individual has been declared a fugitive economic offender by the virtue of Section 12 of the Act by the Special Court. This bar finds application upon any and all civil claims, including civil proceedings which have no nexus with the offences in question including but not limited to divorce proceedings, succession petitions, suits relating to family disputes, consumer complaints etc. The bar so stipulated under the Act is elementally different from an Order of Moratorium under the Insolvency and Bankruptcy Code, 2016 as while the latter stipulates the halt on all relevant proceedings for both litigants, the former has the effect of disabling the FEO from filing or defending any and all civil claims. This provision necessary implies towards ex-parte proceedings against a company or any individual declared to be fugitive economic offender. Such a provision puts the individual or company in an adverse position as they are barred from defending or maintaining any civil claim against the government which might be completely different from the proceedings initiated under the FEO Act, 2018.
Burden of proof
As far as burden of proof is concerned, it shall be the Director as defined under the PMLA or the person authorized by the Director who has to prove that an individual is a fugitive economic offender. However, if it is a case of any person claiming bona fide interest, then the burden is on the said person to prove his innocent stake in the property and validity of his claim.
Loopholes
Even though this Act enacted for the purposes of recovery of non- returnable debts from the fugitives there are number of lacunas given passage to escape the offender from the nod. Those loopholes are discussed in the following paragraphs.
Futile legislation
The first thing that comes to mind is that whether the said Act was absolutely essential or is it a case of a futile legislative action taken in haste to calm the agitated common man in light of the recent high value monetary scams. Just like PMLA, the said Act makes a direct reference to various other statutes and includes scheduled offences as per those statutes but interestingly covers a lot less offences as compared to PMLA. In simple we can say it is supplemental to PMLA Act. The reasoning behind this narrow approach may be due to the fact that unlike PMLA, wherein confiscation and disposal of properties actually takes place only after conclusion of proceedings, the said Act provides for confiscation and subsequent disposal of properties, whether situated in India or abroad, on the mere declaration of an individual as a ‘fugitive economic offender’ if the individual fails to return to Indian jurisdiction. Such a draconian section is bound to have a strong deterrent effect on the accused and will surely force him to surrender or at least appear, either himself or through an appointed advocate, before the appropriate authorities in India and that's what seems to be the legislative intent here.
Fugitive be treated as innocent
There is no such provision under this Act defined a term fugitive but in Section 2(f) stated that persons who are all comes under FEO under this Act. The seemingly arbitrary Section 5(2) is bound to receive some criticism for not being in consonance with a basic principle of justice is ‘innocent until proven guilty’. The section is a major enabling provision for the Enforcement Directorate, the law enforcement agency in such matters or any other appropriate authority as it gives them ample power to search, seize and attach properties even without commencement of any proceedings. Further, as pointed out above the authorities may even dispose off the properties after a period of Ninety days from the date of declaration of the fugitive economic offender.
Existing provisions
By focussing this Act, whether the government is having the existing provisions, to penalise the absconding fugitives or not. Since there are existing legal provisions, the logical follow-up is to ask how this Act is better. Prior to the Act, anyone who violates the India law and absconds could be proclaimed as an offender under Section 82 of the Code of Criminal Procedure, and Section 83 of the same statute allowed for the attachment of the offender’s property such a proclamation. In addition to the above, it is also important to highlight the domestic scenario and the approach taken by our courts. Such stringent provisions exist in various other statutes as well, such as the provision of forfeiture of properties under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) (FEMA) Act, 1976. The constitutionality of this FEMA 1976 Act has been upheld by the Supreme Court in Attorney General for India v. Amratlal Prajivandas (AIR 1994 SC 2179). Likewise provision of freezing of assets of a company by the Serious Fraud Investigation Office be conducted by the Companies Act, 2013 and provisions of provisional attachment made under the Income Tax Act 1961 among others.
Confiscation
Once a person is declared a Fugitive Economic Offender, the government can confiscate the properties of the fugitive and can attempt to recover the owed dues. The first question to ask is what is the necessity of this bill? Is there no existing law for absconders? Section 5(2) of the said Act which provides for attachment of properties on mere suspicion prior to declaration of fugitive economic offender and/or initiation of any proceedings may possibly be challenged on grounds of its constitutionality for being against basic doctrines of justice. Although there was a potential misuse or exploitation of this provision by the authorities is a valid concern, the intent of the legislature of compelling absconders to surrender has to be kept in mind too. In the case of J.Sekar and others v. Union of India and others ((2018) CriLJ 1720), the Court upheld the constitutionality of second proviso of Section 5(1) of PMLA 2002. The said non-obstante proviso is akin to Section 5(2) of the FEO 2018 Act. It enables the competent authority under PMLA to forthwith provisionally attach properties of an accused on mere suspicion and without following the procedure as prescribed under the Code of Criminal Procedure, 1973.
Unconstitutional Provisions
The new Act is also plagued with unconstitutional provisions. The Act states, ‘on a declaration of an individual as a fugitive economic offender, any Court or tribunal in India, in any civil proceeding before it, may, disallow such individual from putting forward or defending any civil claim’. Access to justice is an inalienable right as reiterated by the Supreme Court, yet this Act is a blatant disregard of the Supreme Court order and denies the rights of citizens. Section 14 of the 2018 Act, disallows civil proceedings is a sweeping Section which also bars related to initiate civil case against government. This is an unnecessarily wide and strict provision especially since the said Act does not actually adjudicate upon the innocence or guilt of a person but merely declares the person to be a fugitive economic offender. Chances are fairly high that the constitutionality of this provision will be deliberated upon in the near future. In fact, the Hon’ble Supreme Court in Anita Kushwaha v. Pushap Sudan ((2016) 8 SCC 509) held that ‘access to justice’ as a facet of right to life guaranteed under Article 21 of the Constitution and also a part of right to equality under Article 14 of the Constitution.
Additional period for the fugitive
Section 82 of the CrPC mandates that anybody evading a warrant issued by a court he has to be appearing before the court and recall it within thirty days, failing which his properties be confiscated. Strangely, the Act argues for more time for the absconder to appear before the court, which is six weeks. What is the logic for this extension? Why the government trying to protect? Government officials failed to consider about that the fugitive is also an offender. Although the said Act provides for a period of 90 days from the date of order of declaration before disposing off confiscated properties, it is surprisingly silent on any timeline within which the Special Court should decide on an application under the said Act. This may potentially delay the proceedings especially in a case where the alleged offender enters an appearance through a counsel. While an alleged offender should not be denied the right to defend himself, absence of any fixed timeline gives just too much leeway to the accused to delay or stall proceedings without actually submitting himself to Indian authorities.
Arbitrary threshold
Another arbitrary provision in the Act, without any logical backing, is the threshold set. The bill covers only economic offenders of Rs 100 Crore or more. Why? Shouldn’t all white collar absconders come under the law? As if a person absconds after sweeping Rs 99 Crore, this bill would not apply to him. The prescribed threshold of Rs. 100 Crores for offences may let many wrongdoers evade the provisions of the said Act. Alongside the monetary value, the nature of offence too should be considered for the purposes of the Act. Also this act applies only to the FEO who has committed an offence after the enactment of this legislation of this Act such as the 21st day of April 2018.
Letter of request
Although the said Act covers foreign properties and provides for a letter of request to be made to foreign states, the reality remains that India has a poor track record when it comes to extradition. This Act is applies to the properties which prevailed in India alone. Thus, due importance needs to be given to strengthening of international relations, simplifying of extradition procedures and culmination of more robust extradition arrangements/treaties. This Act fails to disclose about to produce the accused by summoning and produce him before the Indian courts. This Act not mentioned about that if an offender who has stayed in another country where our extradition treaties are exist.
Government usurping power
Another provision in the Act is that once a person has been declared a Fugitive Economic Offender, his properties are confiscated and vested with the government. The government should take necessary steps to sell the properties by public auction and return the non- recover dues to the creditor banks. Unnecessarily it is over burden to the government. But is the declaration of a person as FEO, a conviction? From a bare reading of the said Act, it appears that only a Director or an officer not below the rank of a Deputy Director can apply under Section 4 for declaring that person as a fugitive economic offender, he may file an application in such form and manner as may be prescribed in the Special Court under PMLA. By way of that such individual may be declared as a fugitive economic offender. There is no scope for any other person to bring forth an application directly or even indirectly. The reason behind such omission is unclear. This is an assumption based on prima facie evidence, which means it is necessary enough for doubt but is it sufficient enough to declare conviction? Even Prevention of Money Laundering Act, 2002 allows for confiscation of property, but only after a trial. Under FEO Act not mentioned about the trial procedure.
Notifying scheduled offences
Another instance of the government usurping power through this Act is using the power of notification. The government can change the schedule of offences listed with a simple notification. There is no need for sanction from the parliament for the same. The relationship between some of the absconding offenders and the ruling government is no secret. This Act will give the government the power to change the offences on convenience without any accountability.
Vexatious search
Section 62 of the PMLA provides for punishment of officers in case of vexatious searches made by them. Considering the similar nature of the laws, it would have been prudent to have incorporated a similar provision under the said Act. But this Act there was no such provision is prevailed to fix responsibilities of the executing officers like director, etc.,
Standard of proof
The said Act places reliance on preponderance of probabilities as the standard of proof to be used by the Special Court. Although, this is a lower parameter as compared to the general principle of requiring proof beyond reasonable doubt for prosecution of offences, the target of the said Act should be given some importance to bring the alleged offender within the Indian jurisdiction and not adjudicate upon and penalise the alleged offender. Needless to say that it remains to be seen as to how the said Act would work in tandem with the existing statutes especially in relation to attachment of properties and recovery of dues under different statutes before different fora.
Conclusion
This Act is in prospective effect and not in retrospective effect. If is in retrospective effect it will be applicable to the existing economic offenders. Hence it is in prospective manner it is not possible to register the existing offenders under this Act. In final there was no such provision is available in this act regarding to prevent the fugitive economic offenders before quit from country and also missing about to stand them before the Indian court and face the trial. As per this act not mentioned about the investigating procedures, which is authorised to investigate the offence and nature of offence etc., and also which court is having jurisdiction to decide these cases. In the absence of these issues it will be go ahead with the PMLA 2002. During this stage there was no such necessary to enact this new legislation 2018. In case any blue collar criminal who abscond from India means as per extradition Act 1962 and CrPC taken effective measures to extradite that accused to India but in this 2018 legislation not speaks about the extradition issues for these need to verify Extradition Act 1982 in these circumstances the purpose of enactment of this Act 2018 is unanswerable. In addition to that this act not mentioned about the procedures regarding search and seizure, attachment and confiscation we need to follow the SARFAESI Act 2002. If it so during the existence of SARFASEI Act the necessary of this Act 2018 is open to discussion. In case of traditional crime committed by anyone in the society his passport will be impounded by the investigating authorities and prevent the blue collar criminal is easily escaped or absconded from the eyes of prosecution. But this 2018 Act no such provision is available. But this Act totally speaks about the offender who absconded from India by evading prosecution. It is so clear that this Act gives pathway to the accused to escape from India. Further that in India there are plenty of legislations are available in India to reduce the crime rate. But it is in paper. Instead of enacting new legislations government should take stringent effect to those legislations which has already exist in India no one has tried to escape from the eyes of law.