Nirav Modi effect: Cabinet okays `Fugitive Economic Offenders Bill’

The union cabinet on Thursday approved the Fugitive Economic Offenders Bill that provides for confiscating all assets of absconding fraudsters and loan defaulters to recover dues.

The cabinet chaired by Prime Minister Narendra Modi also approved setting up of a National Financial Reporting Authority (NFRA) as an independent regulator for the auditors.

The proposed fugitive law aims at tightening the noose around economic offenders like Nirav Modi and Vijay Mallya, by impounding and selling assets of their assets in order to quickly recover dues.

The law will also apply to defaulters who have an outstanding of Rs100 crore or more and have escaped from the country.

Finance minister Arun Jaitley said the Bill, which will be taken to Parliament for approval in the second half of the Budget session beginning 5 March, defines a fugitive offender as someone against whom a court has issued an arrest warrant for a scheduled offence and who leaves or has left India so as to avoid criminal prosecution, or refuses to return to India to face trial.

The new law is different from the Prevention of Money Laundering Act, which also provides for confiscation of assets of economic offenders, he said.

Under PMLA, only profit of crime is confiscated and that too upon conviction. The new law extends to all assets irrespective of whether it is acquired as a result of crime or not, he said. "This is triggered by the offender being a fugitive".

To confiscate assets of fugitive offenders, the lender has to make an application before the special court for a declaration that an individual is a fugitive economic offender, upon which the court, if satisfied, will issue of a notice to the individual alleged to be a fugitive economic offender.

The bill provides for confiscation of the property of an individual declared as a fugitive economic offender – both in India and abroad - including benami property.

The bill also seeks to disentitle the fugitive economic offender from defending any civil claim.

An administrator will be appointed to manage and dispose of the confiscated property under the Act.

If at any point of time in the course of the proceeding prior to the declaration, however, the alleged fugitive economic offender returns to India and submits to the appropriate jurisdictional court, proceedings under the proposed Act would cease by law.

All necessary constitutional safeguards in terms of providing hearing to the person through counsel, allowing him time to file a reply, serving notice of summons to him, whether in India or abroad and appeal to the high court have been provided for.

Further, provision has been made for appointment of an administrator to manage and dispose of the property in compliance with the provisions of law.

The Bill has been proposed to address the lacunae in the present laws and lay down measures to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts.

The law, though it was announced in the Budget for 2017-18, has been hastened after Nirav Modi and his uncle Mehul Choksi allegedly defrauded state-owned Punjab National Bank of Rs12,700 crore and left the country and are refusing to cooperate with law enforcement agencies.

"In the last Budget, there was an announcement that the government bring law to confiscate assets of fugitives under economic offences. That has been approved by (the) cabinet today," Jaitley said.

He said the law will apply to new and old cases of persons who have fled the country to avoid prosecution.

The jurisdiction of NFRA for investigation of Chartered Accountants and their firms would extend to listed companies and large unlisted public companies, the thresholds for which shall be prescribed in the Rules. The Central Government can also refer such other entities for investigation where public interest would be involved.