CRITICAL ANALYSIS OF FUGITIVE ECONOMIC OFFENDERS ACT, 2018 AND THE NEED FOR IMPROVEMENT

– MIHIKA ATTRI

ABSTRACT:

The history of India concerning economic offences is adequate to show the incapacity of the government in undertaking circumstances wherein the offender flees the country to avoid his confrontation with the prosecution for the offence. Fugitive Economic Offenders Act, 2018 intends to serve the government in the efficient mechanism of confiscation of property belonging to such fugitive economic offender who is evading the Indian legal system. The events of economic offences where the accused turns out to be an escapee are not obsolete and offences for the same include fraud, counterfeiting, tax-evasion, money-laundering, Benami transactions, transactions defrauding creditors, and other such offences. The law has attempted to cure the paralysis which prosecuting powers were inevitably coerced to suffer because of the absence of the offender, however, the Act goes much beyond the principles of natural justice and basics of criminology. This paper attempts to critically analyze the Fugitive Economic Offenders Act, 2018 and discuss its silence on crucial facets that it intended to accommodate and serve but is being overlooked.

KEYWORDS:

Fugitive economic offender Act, economic offence, confiscation, law.

INTRODUCTION:

The Fugitive Economic Offenders Act, 2018 was introduced as a Bill on March 12, 2018, in Lok Sabha following which it was passed on July 19, 2018, and by Rajya Sabha on July 25, 2018[1]. The Bill got the approval of the President on July 31, 2018, and became one of its kind for expeditious confiscation of proceeds of crime, both in India and abroad, to coerce the fugitive to surrender to the jurisdiction of Courts in India to face the prosecution under the scheduled law. Besides, this Act is a step towards achieving the commitments made to the United Nations Convention against Corruption (UNCAC). India is a party to the said Convention since 2011 and had ratified to undertake and adopt measures towards accumulating international co-operation in criminalizing offences related to corruption. The Act, hence not only ensures rule of law by forcing the fugitive to return to India for facing the scheduled law, in light of which they have been declared a fugitive economic offender but also re-establishes and reinforces the chance of higher recovery to financial institutions from economic defaults and irregularities committed by such offender[2].

APPLICATION OF THE ACT:

Section 2 (f) of the Act goes on to define a fugitive economic offender as:

any individual against whom a warrant for arrest has been issued by any Court in India, who– 

  • has left India to avoid criminal prosecution; or  
  • being abroad refuses to return to India to face criminal prosecution

The schedule of the Act provides for the description of an offence under various substantive Acts inter alia including offences under Indian Penal Code, 1860, Negotiable Instruments Act, 1881, Prohibition of Benami Property Transactions Act, 1988, Prevention of Corruption Act, 1988, Securities and Exchange Board of India Act, 1992, Prevention of Money Laundering Act, 2002, Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 etc. for which an individual could be declared as a Fugitive Economic Offender under the Act. For an individual to be declared a fugitive economic offender, the total value of the offence under the scheduled act should involve or exceed a total of one hundred crores.

For declaration, an application by ‘Director’ as stipulated in the Prevention of Money-laundering Act, 2002 shall be proposed in an assigned ‘Special Court’ as specified under sub-section (1) of section 43 of Prevention of Money-laundering Act, 2002 under section 2 of the Act with understanding to believe that an individual is a fugitive economic offender (in writing), with information available as to the whereabouts of such offender, and with a list of properties believed to be the proceeds of crime, including any such property outside India for which is to be confiscated.

The Act empowers the Authorities appointed for the Prevention of Money-laundering Act, 2002 to be the officials under this Act. The Directorate of Enforcement has a broad spectrum of power with respect to search, seizure, attachment, and confiscation of proceeds of crime. 

The Act implements that the Authorities may attach any property mentioned in the application and such attachment shall continue for 180 days further extendible with the approval of the Special Court. It further gives power to Authorities to attach the property without permission from the Special Court, provided they file an application within a period of thirty days. In the next stage, the Special Court shall publish a notice to the individual expecting him to appear at the specified date and place which is at least six weeks after the delivery of the notice, stating that failure to oblige shall result in him being declared as a fugitive economic offender. Consequent to such notice, if the individual appears then the Court shall dismiss the proceedings, and if he prefers to appear through counsel then Court may give one week to file a response, whereas performance in infringement of the same shall result in him being declared as a fugitive economic offender. The Court shall then allow confiscation of the proceeds of crime, Benami properties, or other properties of the declared fugitive economic offender, be the properties in India or abroad. Nonetheless, the Court has the power to exempt properties from such confiscation if any other person has vested legitimate investment in them. Thereupon confiscation, all rights and titles in the property shall vest with the Central Government free from encumbrances. The Central Government may dispose of the properties after the expiry of ninety days and no appeal shall be entertained after disposition of the said property.

ISSUES:

The Act compels the escapee i.e., offender to return back to India and submit to jurisdictions of Indian Courts, facilitating the chances of effective and prompt reimbursement by financial intuitions in case of economic defaults. However, while ensuring that the constitutional aspects and the principles of criminology are not overlooked. The issues that arise out of the Act emerge from the remedial aspects of the Act. The issues that make the Act difficult to survive the judicial scrutiny are[3] :

  • Pre-trial confiscation of property:

Confiscation is not restricted to only property belonging to the proceeds of the crime but to “any other property” as asserted in clause (b) of sub-section (2) of section 12 of the Act. Herein, it is crucial to understand that the confiscation doesn’t mean the kind of attachment that is mentioned under section 83 of the Criminal Procedure Code, 1860. However, the term “confiscation” in the Act means that the property shall now vest with the Central Government free from encumbrances and that the Central Government or Administrator (as defined in the Act) could dispose-off the property in absence of the fugitive. The only bar that remains here is of ninety days duration for which neither the Central Government nor the Administrator could dispose-off the property. Firstly, it is necessary to understand that the property that could be confiscated is not only proceeds of crime of the offender but is also ‘any other property’ that has nothing to do with the economic offence. Further, there have been no clarifications to the fact that how the property shall be attached for confiscation if there are joint owners wherein one of them or several of them are not fugitive economic offenders. However, section 4 of the Act provides that nothing shall stop an involved person from the enjoyment of immovable property having claim to any investment in the property. This secondly leads to the deduction that the joint owners need to be vigilant with their property to show their claims and entitlement over the property after confiscation within ninety days, otherwise if the same gets disposed-off then they might end up in a loss.

  • Manner for preservation of property:

The issue that occurs after the confiscation of property is that the Act nowhere provides how the Central Government shall use the proceeds of the sale after disposing-off the property[4]. To what extent the Special Court may spare the confiscation of property looking at the interested claimant as per section 4 has not been specified. As the Act also doesn’t incorporate any provision as to the settlement of dues of other persons (secured creditors, unsecured creditors, and others) after disposing-off the property, which alone could be the ground leading to the declaration of such person being the fugitive economic offender[5]. However, the Act manifests the position of Administrator who shall serve the Central Government in administering with the property but the power of the administrator has not been discussed in the Act. Thus, the question again remains unsettled.

  • Bar on fugitive economic offender from defending or filing any civil suit:

The substantial and direct violation that prevails with the Act is of breach of one’s fundamental right to have an appeal to legal remedies. Having access to justice is a fundamental right within the meaning of Article 14 and Article 21 of the Indian Constitution[6]. Section 14 of the Act provides that:

“Notwithstanding anything contained in any other law for the time being in force, –

  • 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; and
  • any Court or tribunal in India in any civil proceeding before it, may, disallow any company or limited liability partnership from putting forward or defending any civil claim if an individual filing the claim on behalf of the company or the limited liability partnership, or any promoter or key managerial personnel or majority shareholder of the company or an individual having a controlling interest in the limited liability partnership has been declared as a fugitive economic offender.”

In Anita Kushwaha v. Pushap Sudan[7] , Supreme Court has held that “Given the fact that pronouncements mentioned above have interpreted and understood the word “life” appearing in Article 21 of the Constitution on a broad spectrum of rights considered incidental and/or integral to the right to life, there is no real reason why access to justice should be considered to be falling outside the class and category of the said rights, which already stands recognized as being a part and parcel of Article 21 of the Constitution of India”.

CONCLUSION:

Considering the intent of the Legislature in passing the Act, with convincing provision for prevention and expeditious recovery in economic offences wherein the offenders escape the jurisdiction of Indian courts and doesn’t want to face for his deeds, the Act would become significantly indispensable. However, the provisions which make this Act distinguishable in the manner of providing efficacious remedy also makes the same too fleeting in withstanding the judicial investigation. In a nutshell, the Act seems to be in the developing as it fails to soundly respond to pre-trial confiscation of property, mannerism for the preservation of property, and bar on fugitive economic offenders from filing or defending any suit of civil nature as this not only violates the very principles of natural justice but also the fundamental right of the same from access to justice. Thus the potential of the Act seems to be very scathing in terms of it’s withstanding the test of judicial analysis.


[1] Team PRS Legislative Research, The Fugitive Economic Offenders Bill,2018 PRSLEGISLATIVE RESEARCH, http://www.prsindia.org/billtrack/fugitive-economic-offenders-bill-2018. Accessed on January 24,2021

[2] Question No.1129 Extradition of People Involved in Financial Irregularities, MINISTRY OF EXTERNAL AFFAIRS, GOI, https://www.mea.gov.in/rajyasabha.htm?dtl/30801/question+no1129+extradition+of+people+involved+in+financial+irregularities. Accessed on January 21, 2021

[3] Malcolm Katrak, Fugitive Economic Offenders Bill: A Viable Project or a Doomed Battle?,( INDIACORPLAW, December 18, 2017) > https://indiacorplaw.in/2017/12/fugitive-economic-offenders-bill-viable-project-doomed-battle.html. > accessed Jan 18, 2021, 17:54 IST

[4] PRS Legislative Research, supra, note 1.

[5] Malcolm, supra, note 7.

[6] Constitutional vision to access to Justice in India – Legal Articles in India, LEGAL ARTICLES IN INDIA, (May 3, 2018, 00:58), http://www.legalservicesindia.com/law/article/937/10/Constitutional-vision-to-access-to-Justice-in-India., accessed on January 24, 2021

[7] Anita Kushwaha v. Pushap Sudan, (2016) 8 SCC 509

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