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A guide to the Fugitive Economic Offenders Act, 2018

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The Fugitive Economic Offenders Act, 2018 prohibits “fugitive economic offenders” from avoiding the legal process before Indian courts by absconding and staying in foreign nations.

Fugitive Economic Offenders Act, 2018

A fugitive economic offender is an individual who has committed one or more scheduled offenses involving an amount of INR 100 crore or more and has either absconded from India or has refused to come back to India to avoid or face criminal prosecution.

Some of the most infamous fugitive economic offenders are jeweler and designer Nirav Modi, his wife Ami Modi, brother Nishal Modi and uncle Mehul Choksi, who absconded from India after carrying out the Punjab National Bank Fraud (PNB) letter of undertaking fraud worth INR 11,300 crore (US$ 1.4 billion).  Another is Vijay Mallya, former Member of Parliament (Rajya Sabha) who escaped to the UK after committing financial crimes in India.

Brief history of the Act: It started as The Fugitive Economic Offenders Ordinance, 2018 which came into force on 21st April, 2018. Later, The Fugitive Economic Offenders Bill, 2018 was passed by the Parliament and received the assent of the President of India and became The Fugitive Economic Offenders Act, 2018

1. Need for the Act

According to the Statement of Objects and Reasons of the Act, “there have been several instances of economic offenders fleeing the jurisdiction of Indian courts anticipating the commencement of criminal proceedings or sometimes during the pendency of such proceedings”.

The absence of such offenders from Indian courts has severe consequences such as:

  • obstructing the investigation in criminal cases,
  • wasting precious time of courts, and
  • undermining the rule of law in India.

Most of these cases involve non-repayment of bank loans and this worsens the financial health of the banking sector.

Since the existing civil and criminal law were inadequate to deal with these severe problems, the Fugitive Economic Offenders Act, 2018 was brought into force. It provides for:

  • Attachment and confiscation of the property of a fugitive economic offender and proceeds of crime.
  • The powers of Director relating to survey, search and seizure and search of persons.
  • Disentitlement of the fugitive economic offender from putting forward or defending any civil claim.
  • Appointment of an Administrator.
  • Appeal to the High Court against the orders issued by the Special Court.
  • Placing the burden of proof for establishing that an individual is a fugitive economic offender on the Director or the person authorised by the Director.

Few general provisions such as protection from judicial proceedings of the authorities for discharging their duties under the Act and the overriding effect of this Act over other inconsistent provisions present in any other law have been asserted.

2. Authorities under the Fugitive Economic Offenders Act

The Director and Deputy Director appointed under section 49(1) of the Prevention of Money-laundering Act, 2002 have the powers of:

  1. Discovery and inspection.
  2. Enforcing the attendance of any person, including any officer of a reporting entity and examining him on oath.
  3. Compelling the production of records.
  4. Receiving evidence on affidavits.
  5. Issuing commissions for the examination of witnesses and documents.
  6. Power of survey.
  7. Power of search and seizure.
  8. Power to search persons.

The burden of proof of proving that any individual is a fugitive economic offender rests on the Director or any authorised officer.

The Special Court, which is a Court of Session designated as a special court u/s 43(1) of the Prevention of Money-laundering Act, 2002 has the following powers:

  1. Attachment of property of an alleged fugitive economic offender.
  2. Power to issue notice on an alleged fugitive economic offender.
  3. Adjudicate and hear the application made by the Director alleging that an individual is a fugitive economic offender.
  4. Declaration of an individual as a fugitive economic offender.
  5. Power to confiscate or release property attached as per the provisions of the Act.

The Administrator appointed under this Act has the powers to:

  1. Manage the property which is attached by the Special Court.
  2. Execute measures and directions of the Central Government.

The Director can make an application, to the Special Court, if he believes that any individual is a fugitive economic offender. The reason has to be presented before the Court in writing along with:

  • any details of the whereabouts of such individual,
  • property details of the individual, and
  • the names of any other persons who might have an interest in such property.

A mechanism for appeal from the Special Court to the High Court on questions of fact and questions of law has also been specified under the Act. Due to the operation of Special Courts, the jurisdiction of other civil courts has been barred under the Act.

3. Relevant definitions

A “fugitive economic offender” means any individual against whom a warrant for arrest in relation to a Scheduled Offence has been issued by any Court in India, who:

  • has left India so as to avoid criminal prosecution; or
  • being abroad, refuses to return to India to face criminal prosecution;

The Act defines a contracting State as a country or place outside India in respect of which arrangements have been made by the Central Government with the Government of such country through a treaty or otherwise.

The term “person” has been defined to include:

  1. an individual,
  2. a Hindu Undivided Family (HUF),
  3. a company,
  4. a trust,
  5. a partnership,
  6. a limited liability partnership,
  7. an association of persons or body of individuals (whether incorporated or not),
  8. other artificial juridical persons, and
  9. an agency, office or branch owned or controlled by any of the persons defined as a person under the Act.

The “proceeds of crime” means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a Scheduled Offence, or the value of any such property, or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad.

4. List of scheduled offences

The list of offences covered under the Schedule of the Act are given below:

Offences under the Indian Penal Code, 1860

  1. Criminal conspiracy
  2. Counterfeiting Government stamp
  3. Making or selling instruments for counterfeiting Government stamps.
  4. Sale of counterfeit Government stamps.
  5. Possession of counterfeit Government stamp.
  6. Using as genuine, a Government stamp known to be counterfeit.
  7. Cheating.
  8. Cheating with knowledge that wrongful loss may ensue to a person whose interest the offender is bound to protect.
  9. Cheating and dishonestly inducing delivery of property.
  10. Dishonest or fraudulent removal or concealment of property to prevent distribution among creditors.
  11. Dishonestly or fraudulently preventing debt being available for creditors.
  12. Dishonest or fraudulent execution of deed of transfer containing false statement of consideration.
  13. Dishonest or fraudulent removal or concealment of property.
  14. Forgery of valuable security, will, etc.
  15. Using as genuine, a forged [document or electronic record].
  16. Making or possessing counterfeit seals, etc., with intent to commit forgery punishable under section 467.
  17. Making or possessing counterfeit seals, etc., intent to commit forgery punishable otherwise.
  18. Counterfeiting device or mark used for authenticating documents described in section 467, or possessing counterfeit marked material.
  19. Counterfeiting device or mark used for authenticating documents other than those described in section 467, or possessing counterfeit marked material.
  20. Using a false property mark. 482 Punishment for using a false property mark. Counterfeiting a property mark used by another.
  21. Counterfeiting a mark used by a public servant.
  22. Making or possession of any instrument for counterfeiting a property mark. Selling goods marked with a counterfeit property mark.
  23. Making a false mark upon any receptacle containing goods.
  24. Counterfeiting currency notes or bank notes.
  25. Using as genuine, forged or counterfeit currency notes or bank notes

Offences under the Negotiable Instruments Act, 1881
Dishonour of cheque for insufficiency, etc., of funds in the account.

Offences under the Reserve Bank of India Act, 1934

Offences under the Central Excise Act, 1944
Offences and Penalties.

Offences under the Customs Act, 1962
Evasion of duty or prohibitions.

Offences under the Prohibition of Benami Property Transactions Act, 1988
Prohibition of benami transactions.

Offences under the Prevention of Corruption Act, 1988

  1. Public servant taking gratification other than legal remuneration in respect of an official act.
  2. Taking gratification in order, by corrupt or illegal means, to influence public servants.
  3. Taking gratification for exercise of personal influence with a public servant.
  4. Punishment for abetment by public servant of offences defined in section 8 or section 9 of the Prevention of Corruption Act, 1988.
  5. Criminal misconduct by a public servant.

Offences under the Securities and Exchange Board of India Act, 1992

  1. Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control.
  2. Offences for contravention of the provisions of the Act.

Offences under the Prevention of Money- laundering Act, 2002

  1. Offence of money laundering.
  2. Punishment for money laundering.

Offences under the Limited Liability Partnership Act, 2008
Carrying on business with intent or purpose to defraud creditors of the Limited Liability Partnership or any other person or for any fraudulent purpose.

Offences under the Foreign Contribution (Regulation) Act, 2010

  1. Penalty for article or currency or security obtained in contravention of section 10.
  2. Punishment for contravention of any provision of the Act.

Offences under the Companies Act, 2013

  1. Offer or invitation for subscription of securities on private placement.
  2. Repayment of deposits, etc., accepted before commencement of the Companies Act, 2013.
  3. Punishment for contravention of section 73 or section 76 of the Companies Act, 2013.
  4. Carrying on business of a company for a fraudulent or unlawful purpose.
  5. Conducting the business of a company with intent to defraud its creditors, members or any other persons or otherwise for a fraudulent or unlawful purpose, or in a manner oppressive to any of its members or that the company was formed for any fraudulent or unlawful purpose.
  6. Punishment for fraud.
  7. Punishment for wrongful withholding of property.

Offences under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
Punishment for wilful attempt to evade tax.

Offences under the Insolvency and Bankruptcy Code, 2016
Punishment for transactions defrauding creditors.

Offences under the Central Goods and Services Tax Act, 2017
Punishment for certain offences.

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