INTRODUCTION

The stated Act was first proposed in the Union Budget of 2017 and was originally adopted as an Ordinance. The Fugitive Economic Offenders Act, 2018 was passed with the President’s assent and was declared to have entered into force on April 21, 2018. According to the Act’s preamble, it is intended to prevent fugitive economic offenders from escaping the Indian legal system by remaining beyond the jurisdiction of Indian courts, as well as to protect the rule of law in India. The Prevention of Money Laundering Act of 2002 is frequently referenced throughout the Act (“PMLA”). Because many definitions and provisions are similar to those found in PMLA, it wouldn’t be incorrect to refer to the Act as a supplement to PMLA. Please keep in mind that the two legislation have distinct objectives. 

HISTORICAL BACKGROUND

After the escape of Lalit Modi, Vijay Mallya and recently Nirav Modi and Mehul Choksi emerged a wave of thinking that how to curb such offenders because such offenders not only inflict pecuniary losses on individuals but also damage the national economy and have security implications as well and further by fleeing from the prosecution proceedings as well as they also defy the rule of law. A Bill in respect of fugitive offenders was in the Lok Sabha, however, due to frequent adjournments of the House the bill did not materialize before the Lok Sabha., the Government has introduced Fugitive Economic Offenders Act, 2018 and finally government passed the Act in July 2018.

AN BRIEF OVERVIEW OF THE ACT

The bill intends to re-establish the rule of law by forcing fugitive economic offenders to return to India and submit to the relevant authorities. This would also help banks and other financial institutions recover more swiftly from financial defaults caused by such criminals, bolstering their financial health and avoiding the economy from suffering as a result of such crimes.

It attempts to seize illegal and Benami properties acquired as a result of financial collapses, as has been done in the past under other legislation such as the PMLA, 2002.

Declaration of a fugitive economic offender- To be declared a fugitive economic offender, the director or deputy director must submit an application with a Special Court. When the Special Court receives an application, it will send the applicant a notice asking him or her to appear at a particular place on a date six weeks from the day the notice was sent, as well as a The individual will be designated a fugitive economic offender if he or she fails to appear. If the individual appears at the specified place, the Special Court’s procedures will be terminated.

Possession of a fugitive economic offender’s property As long as they file an application with the court within 30 days, the Director can attach the property listed in the application on a Special Court order or provisionally attach it without Special Court permission. Your property will be released at the end of your case if you are found not guilty.

After hearing the application, the Special Court may declare a person a fugitive economic offender and issue a notice of seizure. Criminal gains, benami properties in India or abroad, and any other property in India or elsewhere are examples of such properties. 

The Bill allows any civil court or tribunal to prohibit a person who has been identified as a fugitive economic offender from filing or defending any civil claim, therefore avoiding numerous processes and preventing the offender from disputing Bill’s provisions before the trial

The Bill’s entire procedure is based on the burden of proof that an accused individual has amassed property as a consequence of illegal behaviour. The Director’s “reason to suspect” that an individual is an offender, as well as the filing of an application to discharge the burden of proof for proving that an individual is a “fugitive economic offender,” are both imprecise and ambiguous. All the police need to do is demonstrate that the individual detained committed one or more of the Scheduled Offences. It is a highly dependent act on a preponderance of probability, which means that an act is proved when the court either believes it exists or considers its presence so plausible that a sensible man would act on the premise that it exists given the circumstances. The 1872 Evidence Act, which requires proof beyond a reasonable doubt in criminal trials, has a lower bar.

The whole procedure under the Bill is time-limited, giving the accused the option to appeal (within 180 days) or dispute the order within that time frame.

The bill’s retroactive application is debatable. It does specify, however, that it applies to anyone who is or becomes a fugitive economic offender as a result of the ordinance’s implementation. As a result, the bill’s scope has been expanded to include criminals who have already left Indian jurisdiction but whose cases are still pending.

A fugitive economic offender, according to Section 2 (f) of the Act, is:

“Any person named in a warrant of arrest issued by any Indian court, who has fled India in order to evade criminal prosecution; or has refused to return to India in order to face criminal prosecution”

The schedule of the Act defines the description of an offence under various substantive Acts inter alia including offences under the 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. The total amount of the infraction under the scheduled law must be at least one hundred crores to be classified as a fugitive economic offender. 

Section 5(2) of the legislation has been criticized for neglecting to contain the crucial idea of natural justice, namely, “innocent until proven guilty.” Even if no actions have been begun, this clause allows the director or a subordinate not below the level of deputy director, or the ED itself, to search, seize, and attach property. Furthermore, once a period of ninety days has passed after a person proclaims himself a fugitive economic offender, his property may be disposed of by the competent authorities. This viewpoint is informed by UNCAC Article 54.

ADVANTAGES AND DISADVANTAGES OF THE ACT 

Advantage

The Special Court seizes the alleged offender’s properties, Benami Properties, and other styles of issue of alleged economic crime upon declaration as a fugitive from justice, which differs from other laws, such as the CRPC, 1973, where arrogation lasts two years after proclamation as a fugitive from justice. However, if the Special Court determines after the proceedings that the individual is not a fugitive economic offender, the Special Court shall order the release of any property or record attached or taken over under this Act to the person who is entitled to it.

The rights and titles to the seized items can become vest with the federal government following a suitable arrogation of the possessions located in India or elsewhere and/or the opposite issue of crime. They become free of any encumbrances on the property, such as charges or liens. 

The federal government may then appoint an administrator to administer and lose these properties through mercantilism them to hear creditors’ claims and subside them.

Another fascinating feature of this Act is that any Court or court in the Indian nation, in any civil proceeding before it, may prohibit such individual from asserting or defending any civil claim, which may appear to violate Article twenty-one of the Constitution, the right to life enshrined beneath Article twenty-one, which has been interpreted to incorporate the right to access just information. When a fugitive economic offender is identified as a person, the Act goes so far as to prevent that person from defending alternative lawsuits involving his inheritance or marital problems.

Before an inquiry, the Act does not require the investigating Officers to obtain an exploration warrant or verify the presence of witnesses. This is in contrast to other statutes that provide such protections, such as the Code of Criminal Procedure (CrPC) of 1973. These measures protect against harassment and evidence tampering.

Disadvantage

• The law holds a criminal responsible until he or she is proven innocent, which is in violation of the constitution.
• It is unlawful to sell confiscated assets before the adjudication is completed.
• The prohibition on pursuing civil lawsuits against an offender’s wealth confiscation is unlawful.
• Seized assets are considered distressed assets, and they are difficult to sell.

Despite the fact that the law includes strict requirements and attempts to plug vulnerabilities in India’s financial system, it contains numerous clauses that are illegal and might be ruled null and invalid by the courts, rendering efforts to enact similar measures useless.

IMPLICATIONS

The Act forces the escapee, or offender, to return to India and submit to the jurisdiction of Indian courts, enhancing the chances of effective and timely restitution by financial institutions in the case of economic failures. However, constitutional and criminological considerations must not be overlooked. The remedial components of the Act are what give rise to the problems that arise as a result of it. The following are some of the problems that make a judicial examination of the Act problematic

(A) Pre-trial confiscation of property

As stated in clause (b) of sub-section (2) of section 12 of the Act, confiscation does not apply just to property related to the profits of crime, but also to “any other property.” Confiscation applies to “any other property,” as specified in clause (b) of sub-section (2) of section 12 of the Act. It’s crucial to understand that confiscation is not the same as the sort of attachment mentioned in Section 83 of the Criminal Procedure Code, 1860. The Act’s definition of “confiscation” means that the property will now vest in the Central Government, free of encumbrances and that the Central Government or Administrator (as defined in the Act) will be entitled to dispose of the property even if the fugitive is not present.

There is a ninety-day moratorium during which neither the Central Government nor the Administrator can sell the land. To begin, it’s crucial to understand that the property that might be taken includes not just the offender’s proceeds of crime, but also “any other property” that is unrelated to the economic crime. There have also been no remarks on how the property would be taken if joint owners are not fleeing economic offenders.

Section 4 of the Act, on the other hand, provides that nothing precludes a person with an interest in the immovable property from enjoying it. As a result, the second conclusion is that joint owners must be vigilant with their property in order to show their claims and entitlement to the property within ninety days of confiscation, or risk losing it if it is disposed of.

(B) Manner for the preservation of property

The issue that emerges when the property is seized is that the Act makes no provision for how the revenues of the sale will be used by the Central Government once the property has been sold. The Special Court’s ability to delay property seizure while evaluating the interested claimant under Section 4 is unknown. Because the Act makes no provision for the payment of other people’s obligations (secured creditors, unsecured creditors, and others) once the property is sold, this alone may make someone a fugitive economic offender. The Act, on the other hand, creates the position of Administrator, who will help the Central Government in managing the property, albeit the administrator’s power is not specified. As a result, the problem remains unsolved.

(C) Fugitive economic offenders are prohibited from defending or filing civil actions

The Act is a significant and blatant violation of a person’s fundamental right to legal remedy. Article 14 and Article 21 of the Indian Constitution establish access to justice as a fundamental right. According to Section 14 of the Act,

“Regardless of any other legislation in existence at the time, –

• Any Court or tribunal in India, in any civil process before it, may prohibit a person from bringing or defending any civil claim if that individual has been declared a fugitive economic offender;
• 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.”

JUDICIAL INTERPRETATION

• Sekar and Anrs. vs Union of India & Anr

“The Delhi High Court confirmed the constitutionality of the PMLA’s Section 5(1) second provision.” Section 5(2) of the Act is referenced by the non-obstante provision. On the basis of mere suspicion, the relevant authorities can confiscate the accused’s property under the PMLA Act without submitting an application or sending a report to the magistrate under the Criminal Procedure Code, 1973. However, the Supreme Court of India is now hearing this case, and the decision will certainly have an influence on the stated act.” Section 14 of the FEO act, on the other hand, which prohibits individuals, LLPs, and corporations from filing or defending civil cases in which the act applies, unreasonably creates a problem for the innocent if they are not involved in any of the activities listed in the act but are suspected of being FEO. As a result, because it violates the idea of natural justice, it will be challenged in the future. 

• Anita Kushwaha v. Pushap Sudan

The Supreme Court held that “Given that the aforementioned pronouncements 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 reason why access to justice should be considered to be outside the class and category of the aforementioned rights, which is already recognised as a fundamental right.

• Sushil Kr Sharma vs Union of India21 and Mafatlal Industries Ltd. and Anrs . v. Union of India

The Supreme Court said that the mere potential of misusing the authority given by legislation is insufficient to strike down the provision or declare it unconstitutional or irrational without more evidence. The court also has the ability to set aside the order, and judgement, and provide any suitable remedies to the aggrieved party without upsetting the bare provisions of the legislation. 

CONCLUSION

The Fugitive Economic Offenders Act is the government’s response to the embarrassment of a string of large bank defaulters fleeing the country after duping them several thousand crores of rupees. This legislation is a kind of blanket ban on economic offenders contesting the seizure and sale of their assets and properties without a trial in a court. According to information circulated in the newspapers recently that Mehul Choksi is ready to return the money which is the result of this Act. But Government should also take care that the fate of this Act should not be like other legislations which are already in existence such as the Prevention of Money Laundering Act(PMLA) and the Foreign Exchange Regulation Act(FERA) which failed to stop Indian industrialists from stashing large amounts of wealth in tax havens abroad, but has been a great tool of harassment, blackmail and control by politicians and corrupt officials.