The Cabinet on Saturday cleared a proposal to promulgate an ordinance to attach assets of fugitive economic offenders like jeweller Nirav Modi, after efforts to get Parliamentary approval for the Fugitive Economic Offenders Bill (FEOB) in the recently-concluded Budget session failed. The ordinance will make it easier to attach all the assets of economic offenders fleeing India to escape the reach of law, even without a conviction. Offences with a value of Rs 100 crore or more will be covered by it. Ironically, the FEOB, which was introduced in the Lok Sabha on March 12, could not be passed due to frequent disruptions over issues, including the $2-billion fraud at state-run Punjab National Bank, involving Nirav Modi and his uncle Mehul Choksi.
The ordinance, modelled after the FEOB, will come into effect after the assent of the President.While the existing Prevention of Money Laundering Act (PMLA) has provisions for the confiscation of an offender’s assets, it’s only after conviction, with the attachment also limited to the proceeds of crime. However, the ordinance provides for the attachment of all the assets of offenders, irrespective of whether these are the proceeds of crime or not.
“We can’t allow people to make a mockery of law — that you first indulge in loot and then refuse to submit to our legal system,” finance and corporate affairs minister Arun Jaitley had said on March 1, in a veiled reference to businessmen like Modi and Vijay Mallya, after the Cabinet had approved the FEOB. To attach the foreign assets of a fugitive offender, the cooperation of the relevant country would be required, Jaitley had said.
A new law was required, as existing laws have certain inadequacies in promptly attaching the assets of high-value economic offenders who flee India after committing wilful defaults or acts of fraud. Criminal proceedings in such cases usually require to be in various courts in the country and there are chances that court orders on confiscation of assets are at odds with one another.
The idea of the new law was first proposed by Jaitley in Budget 2017-18, in the backdrop of Vijay Mallya, who owes over Rs 9,000 crore to a clutch of Indian banks, fleeing the country to escape legal proceedings. As per the ordinance, courts under the Prevention of Money Laundering Act will be entrusted with the responsibility to trying cases involving big economic offenders fleeing the country.
Currently, such offences are tried under multiple laws namely the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (Sarfesi), Recovery of Debts Due to Banks and Financial Institutions Act and Insolvency and Bankruptcy Code.
The provisions of the ordinance will override the relevant clauses in extant laws and will also provide for appointment of an administrator to dispose of the attached property to pay off the creditors.
According to the ordinance, a fugitive economic offender is one who has an arrest warrant issued in relation to a scheduled offence and who leaves or has left India so as to avoid criminal prosecution, or refuses to return to India to face criminal prosecution. The offences covered under the ordinance include wilful loan defaults, cheating and forgery, counterfeiting government stamps or currency, among others.