India: An Introduction To The Fugitive Economic Offenders Act, 2018

Last Updated: 20 December 2018
Article by Vineet Kumar

In recent times India has witnessed a number of scams and economic offences which have left an adverse impact on the Indian economy and also the banking industry. Some prominent of these have been the IPL Scam having Lalit Modi (former IPL Commissioner) at the center of it, the Rotomac Scam, but probably the most reported one has been the alleged fraud by owner of the now defunct Kingfisher Airlines Vijay Vittal Mallya, who has been out of India for quite a while now in order to evade trail for criminal offences. In an attempt to bring once prominent liquor baron, who has been earlier declared a "fugitive" by Special PMLA Court in Mumbai, to justice and grab him by the neck, the Indian Parliament recently enacted The Fugitive Economic Offenders Act, 2018 which was assented to by the President on 31st July, 2018 and is deemed to have come into force on 21st April, 2018.1 The recent turn of events that led to the enactment of the legislation were a part of headlines not only in India but outside India as well. He is currently reported in the United Kingdom, where once 'the king of good times' is battling an extradition proceedings initiated by India to bring back Vijay Mallya to face criminal actions regarding the unpaid loans of about $1.4 billion that he owes to Indian authorities and creditors. Interestingly, he has also offered to repay the dues to all the creditors. In September, 2018 the Indian government had failed to provide any substantial evidence to justify extraditing tycoon Vijay Mallya from Britain to face fraud charges.2 On December 10, 2018, the proceedings regarding extradition of Vijay Mallya, which had been going on for almost a year, concluded in the favour of India. The United Kingdom's Westminster Magistrates' Court gave a green signal to extradite Mallya to India to face charges of fraud and economic offences for duping a number of banks of almost Rs. 9,000 Cr. The Court observed that there was no substance in the argument placed on behalf of Mallya that the charges and proceedings against him were politically motivated.

Coming to the Act itself, it has a variety of provisions including, but not limited to, declaration of a "fugitive economic offender" in respect of a person, attachment of the property of such person and bar over civil claims. The statute 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.3 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 in nature of benami transactions under the Prohibition of Benami Transactions Act, 1988.4

Further, upon a bare reading, 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.5 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 jurisdiction, or absconding from the legal bounds of the Indian government. 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.

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.6 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 which might be completely different from the proceedings initiated under the FEO Act, 2018. For these reasons, Section 14 has been questioned by the critics for taking the powers of the State and authorities at an unnecessary length, leading to denying the fundamental right of access of justice to the accused person, which has been held to be an integral part of the Right to Liberty under Article 21 of the Constitution, which has been affirmed by the Apex Court in a number of significant judgments, most landmark being the Maneka Gandhi vs. Union of India7. Additionally, the National Commission to Review the Working of Constitution (NCRWC), in its report, suggested incorporation of Article 30A in the Constitution, which was as follows:

"30A: Access to Courts and Tribunals and speedy justice

(1) Everyone has a right to have any dispute that can be resolved by the application of law decided in a fair public hearing before an independent court or, where appropriate, another independent and impartial tribunal or forum. (2) The right to access to courts shall be deemed to include the right to reasonably speedy and effective justice in all matters before the courts, tribunals or other fora and the State shall take all reasonable steps to achieve the said object."8

Vijay Mallya is now all set to be extradited and as per the updates the FBI has also requested the National Investigation Agency in India to join them and complete the formalities. Of course, Vijay Mallya has, as per the law of the UK, 14 days to appeal against the verdict in the higher court.

Footnotes

1. Section 1(3), The Fugitive Economic Offenders Act, 2018.

2. Michael Holden, Livemint (Sept. 12, 2018). (Available at: https://www.livemint.com/Companies/nLyNim2xqg5lgGLeYkB4PO/Vijay-Mallya-in-UK-court-for-extradition-case-hearing.html?utm_source=scroll&utm_medium=referral&utm_campaign=scroll )

3. Section 2(f), The Fugitive Economic Offenders Act, 2018.

4. Section 2(9), The Prohibition of Benami Transactions Act, 1988.

5. Section 5, The Fugitive Economic Offenders Act, 2018.

6. Available at: https://blog.ipleaders.in/fugitive-economic-offender/ .

7. Maneka Gandhi vs. Union of India, AIR 1978 SC 597.

8. National Commission to Review the Working of Constitution Report, 2002 (Vol. 1). (Available at: http://legalaffairs.gov.in/sites/default/files/chapter%203.pdf )

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