Offenders will be tried under Prevention of Money Laundering Act
In a bid to tighten noose around fugitives like diamond merchant Nirav Modi and Vijay Mallya, the 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 Union 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 to impound and sell assets of Nirav Modi-type escapees with a view to quickly recover dues.
It also will apply to defaulters who have an outstanding of Rs 100 crore or more and have escaped from the country.
Union Finance Minister Arun Jaitley said the Bill, which will be taken to Parliament for approval in the second half of the Budget session beginning March 5, 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".
"A trial of fugitive will never be complete," he said, reasoning why confiscation of assets has been provided for.
The new law will apply 'the moment warrant is issued (and) the court decides the man is not submitting', he added.
It provides for an application being made before a special court for a declaration that an individual is a fugitive economic offender, attach and confiscate his properties in India and abroad, including benami property, and disposing them off to recover dues.
It provides for disentitlement of the fugitive economic offender from defending any civil claim.
'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,' an official statement issued after the Cabinet meeting said.
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 Bill makes provisions for a court ('Special Court' under the Prevention of Money-laundering Act, 2002) to declare a person as a Fugitive Economic Offender.
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 Rs 12,700 crore and left the country and are refusing to cooperate with law enforcement agencies.
The new law will allow quicker recovery of dues through a special court from such absconding offenders.
"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.
All assets, not just proceeds of crime, will be confiscated of an offender fleeing the country, he said, adding that offender cannot pursue any civil case in the country.
'There have been several instances of economic offenders fleeing the jurisdiction of Indian courts, anticipating the commencement, or during the pendency, of criminal proceedings. The absence of such offenders from Indian courts has several deleterious consequences - first, it hampers investigation in criminal cases; second, it wastes precious time of courts of law, third, it undermines the rule of law in India,' the statement said.
Most such cases of economic offences involve non-repayment of bank loans thereby worsening the financial health of the banking sector in India.
The existing civil and criminal provisions in law are not entirely adequate to deal with the severity of the problem and so the new law provide an effective, expeditious and constitutionally permissible deterrent to ensure that such actions are curbed.
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.
Photograph: Kind courtesy, Nirav Modi Jewels/Facebook