INTRODUCTION

Simple definitions of economic offences include crimes involving performing fraud in chit funds, forging cheques, defrauding or deceiving financial institutions, and falsifying and swindling cash or cash equivalents. The most common economic offences include fraud, forgery, laundering, tax evasion, failure to pay back significant bank loans, etc. According to the Fugitive economic offender act’s preamble, the act was created in order to “preserve the sanctity of the rule of law” & “to provide for mechanisms to dissuade fugitive economic offenders from fleeing the processes of law in India by residing outside the jurisdiction of Indian courts.” The first goal was developed by explicitly mentioning the banking scam that liquor tycoon Vijay Mallya committed. Over 7000 crores are owed by the liquor tycoon to various banks. He has already been termed a “wilful deafulter” who fled India in order to avoid paying the penalty. In order to retrieve the debt incurred by the liquor baron, the Central Bureau of Investigation and the Enforcement Directorate filed cases before the judiciary under numerous laws. The government created the aforesaid legislation to prevent FEOs from avoiding the legal system and to maintain the country’s rule of law as a consequence of the failure of enforcement authorities. In simple words, this act promotes the selling of properties of fugitive economic offenders who leave the country to evade the law. This act helps to recover the debts from offenders who are termed fugitive economic offenders by the PMLA courts. 

According to this act, a Fugitive Economic Offender (FEO) is an individual against whom an arrest warrant has been issued in connection with the commission of an offence specified in the Act and that has a minimum value of Rs. 100 crore. 

HOW FEO IS DECLARED?

 

A special court (established under the PMLA, 2002) may label someone as a fugitive economic offender upon hearing the application. A notice is declared by the supreme court to an individual to appear before the court within six weeks of issuance of such notice. The proceedings will come to an end if the person shows up on the designated date and if the person fails to do so then he is declared as FEO. It has the authority to seize any property, whether it is located in India or outside, including Benami properties or proceeds from crime. After confiscation, the property’s rights & titles will be fully transferred to the government, free from every lien or other encumbrances. Additionally, the FEOA permits specified authorities to temporarily seize an accused person’s property whilst an application is being considered by the Special Court. An administrator may also be designated by the central government to oversee and dispose of these holdings.

ANALYSIS OF THE ACT

• The entire country of India would be covered by the Fugitive Economic Offenders Act without any exceptions, which will be declared to have taken effect on April 21, 2018. The act also regulates the purchase of properties that are in the nature of Benami or fall within the definition of Benami transaction, both in India and outside of India.
• Since the director & deputy director are nominated in accordance with section 49 of the act of 2002, the act is consistent with the PMLA. A fugitive economic offender is defined by the Act of 2018.
• A schedule that lists all of the offences for which a FEO may be charged has been attached to the act. Additionally, in order to be charged under the Act of 2018, the FEO should have conducted a fraud or perhaps a crime with a monetary value of over 100 crores in accordance with Section 2(m).
• Any person who becomes a FEO on or after the commencement of this act will be subject to its provisions, in line with section 3. In addition, under Section 4 of the Act, the Director or the Deputy Director may apply to the Special Court to have a person recognized as a FEO if they reasonably consider that person needs to be so because of specific materials within his possession.
• Every property listed in the application seeking a declaration as a FEO under section 4 may be temporarily attached under section 5 with the approval of the Special Court at which the case has been lodged. Whilst request under section 4 is being considered by the Special Court, this provision permits the attachment of properties.
• The Director or any other officer who has been granted this authority is granted the same authority to survey, examine, seize, & lookup people as police authorities under the Code of Criminal Procedure.
• The Special Court will use Section 10 to notify the person who is the subject of an application under Section 4 of the act. Anyone with an encumbrance upon any of the properties listed in the application will also receive the notification. The notice should expressly state that the suspected offender has six weeks to appear before the authority; else, he will be labelled a Fugitive Economic Offender.
• The process for hearing the application submitted in accordance with Section 4 is outlined in Section 11. It’s been made very clear that the actions under this act would be discontinued if, after receiving the notice required by section 10, the suspected offender appears before the authorities. While he will be classified as a FEO if he does not appear within the allotted 6-week period.
• The consequences of a person being declared a Fugitive Economic Offender are outlined in Section 12, subsection 2. The confiscation of the criminal proceeds from any properties, whether it is possessed by the FEO or otherwise not and whether it is located in India or elsewhere, or any property, and including Benami properties, would follow the identification of a person as a FEO.
• Furthermore, Section 14 forbids anyone who has been designated as a FEO from bringing or filing any civil claims with any Indian courts or tribunals. If “any 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,” they are also prohibited from filing a civil lawsuit.
• Those parties upon whom the burden of proof lies are made clear in Section 16.
• The Director or the individual so designated by the Directorate according to section 4 of the Act of 2018 will be responsible for proving that perhaps the person is a FEO or if the property is the outcome of the criminal proceeds. Through the virtue of section 17 of this act, it permits an appeal to be made from any order and judgement of the Special Court within a window of thirty days.
• Section 19 prohibits actions against the Central Government, the Presiding Officer of the Central Government, the Director, or the Deputy Director for steps they took in accordance with this act in good faith.

EXAMPLE: FRAUD BY KINGFISHER AIRLINES

Business tycoon Vijay Mallya founded Kingfisher Airlines, a full-service airline, in around 2005. The airline suffered significant losses right away as a result of poor management on the side of the organization. A number of poor choices were made, including purchasing the seriously losing Deccan Air and combining it with Kingfisher Airlines, and also offering extremely luxurious amenities to customers at very affordable prices. From 2008 forward, Kingfisher Airlines was continuously disclosing losses until it was shuttered in 2012. When kingfisher acquired Deccan Airlines, the losses began to grow. Even though Kingfisher Airlines had reported losses since its operations, the bankers did not reject Mallya’s request for a loan in 2010 when he reached them. The group of banking institutions disregarded the situation of kingfisher and gave him a loan for Rs. 1500 crores with a personal guarantee. In 2014, banks like the United Bank Of India, SBI AND PNB, all declared Mallya as a wilful defaulter. In 2016 various banks approached the supreme court in order to prevent the absconding of Mallya but failed as by that time he had absconded and left the country. The special court under the prevention of money laundering act issued an arrest warrant against Mallya.

CONCLUSION

The Prevention of Money Laundering Act, of 2002 has been made more effective via the enactment of the Fugitive Economic Offenders Act. As fast as the economic offender concedes to the jurisdiction of the Indian Courts, the proceedings started underneath the former shall stop. This is therefore a move to retrieve the nation’s economic offenders. By allowing the investigating agencies to seize and dispose of the properties, the statute makes it easier to collect debt from such economic offenders. For the financial institutions and banks which are the main targets of such crimes, it represents a glimmer of optimism.

The Prevention of Money Laundering Act also calls for agreements and arrangements with other nations to return these fugitives. The biggest drawback of the current legislation is how slow and onerous it is. The recovery is therefore put off, and banks are stuck holding non-performing assets lasting for decades. However, the same procedure has been quickened with the introduction of the 2018 act. Furthermore, such a sluggish and ineffectual method might not be welcomed at a time when mobility is so convenient. 

A list of the 39 nations with which India has Mutual Legal Assistance Treaties, which are utilised for serving various types of legal documents, has been given by the Ministry of External Affairs. Therefore, greater of this facilitation is needed in order to speed up the seizure procedure. In conclusion, the government’s initiative to implement the FEO’s actions can be seen as necessary at this time. Nevertheless, certain clarification and adjustments may be appreciated for better execution because they call for a comprehensive approach rather than solely focusing on recovering back from assets situated in foreign.

 

Written By – Gourav Bavishi