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(The Lok Sabha is set to debate upon the Fugitive Economic Bill 2018 during the Monsoon Session, which commences today. In light of this development, The Quint is reposting this article published at the time of the Bill’s introduction in March – the text of the Bill has remained unchanged.)
Vijay Mallya. Lalit Modi. Nirav Modi. Mehul Choksi. Jatin Mehta. Ritesh Jain.
The list of such defaulters who’ve committed vast financial fraud and are now refusing to return to India to face justice, grows longer every day, it seems. With the unearthing of every new scam, the massive damage to the financial health of our banks becomes ever more apparent, and the government has been coming under increasing pressure to do something about all of this.
In response, the Fugitive Economic Offenders Bill 2018 (FEO Bill) was introduced in the Lok Sabha on 12 March 2018. The draft Bill was floated last year, but it has been projected as a strong response to the Rs 12,700 crore PNB scam. The government claims that it will:
This would seem like a cause for celebration. Unfortunately, the proposed law contains some seriously problematic provisions that will surely lead to it being challenged in the courts and maybe even struck down for violating the Constitution and basic principles of natural justice.
When the Bill was introduced in Parliament, BJD MP Bhartruhari Mahtab opposed it, saying that: “Anyone can be prosecuted or property can be acquired without the person being found guilty. These provisions are against fundamental rights”.
He was making a reference here to the flagship provision of the Bill, which allows the Central Government to confiscate all properties belonging to a person declared as a “fugitive economic offender”. A fugitive economic offender is defined in section 2(f) as an individual:
Under section 12(2) of the Bill, once a person is declared a fugitive economic offender by a Special Court, that Special Court can order that any property of the offender, whether in India or abroad, is confiscated and belongs to the Central Government. This applies not only to properties which are the proceeds of the crimes committed by the fugitive economic offender, but also to other properties or benami properties owned by the offender.
Note that this is not just attachment of property, where the CBI or ED seize properties while carrying out investigations so that the accused can’t sell off things involved in a crime. Confiscation means that the Central Government has the right to sell the properties, even those jointly owned by other people who are not fugitive economic offenders. Most worryingly, the ‘offender’ can’t even claim it back if eventually acquitted.
Citing a Supreme Court judgment from 2016, Mahtab also pointed out that “no one can be denied access to justice which is a facet of right to life under the Constitution.” Here, he was referring to the other significant problem in the Bill – taking away a person’s right to make or defend a civil claim in court.
On top of this, the Bill also says that if any representative, promoter, key managerial personnel, majority shareholder or owner of a controlling interest in a company or LLP is declared a fugitive economic offender, then the company or LLP can’t file or defend cases either. Again, this can be the case even if the company has nothing to do with whatever offence the fugitive is alleged to have committed.
Commenting on the viability of the Bill, Mahtab said: “Prima facie, the provisions may seem very novel but it is unlikely to pass judicial scrutiny as it is based on premises of guilty till proved innocent as against innocent until proved guilty.”
His own opposition to the introduction of the Bill was unsuccessful for procedural reasons, but he is right to point out that the Bill could very easily run into legal trouble. What is interesting is that these criticisms have been around ever since the draft Bill was circulated, and yet the government has not seen fit to correct these issues.
Back in August 2017, advocate Abhinav Sekhri criticized the initial draft of the Bill for including these two provisions in The Caravan, and these concerns were also raised on the reputed legal blog India Corp Law in December 2017.
The Law Ministry and Cabinet, however, feel that the Bill does not fall foul of any constitutional issues, and that it has sufficient safeguards. Who’s got it right then?
Pre-Trial Confiscation of Property
India has a long history of draconian provisions for suspected economic offences. These include preventive detention under the Maintenance of Internal Security Act (MISA) and the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act (COFEPOSA), as well as the confiscation of suspected illegal properties under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act (SAFEMA).
The Supreme Court has also refrained from holding such provisions to be unconstitutional. In 2015, the apex court upheld the validity of Orissa’s Special Courts Act, which allowed for confiscation of suspected disproportionate assets from individuals being investigated for corruption charges.
First, it involves very little scrutiny before confiscation can kick in. A person can be declared a fugitive economic offender after a very short period, and very little opportunity to defend themselves. Once an application is made to a Special Court from the authorities, the Court issues a notice to the alleged offender to appear before them and explain themselves within six weeks. If the offender sends a lawyer, another week can be tacked on.
After hearing the authorities and the alleged offender (if he turns up), the Court decides whether to declare the person a fugitive economic offender or not. If they do, they can then allow confiscation of the properties. While the declared offender can appeal to a High Court, the Bill prevents any court in the country from issuing a stay on the declaration or confiscation.
This is all in stark contrast to COFEPOSA or SAFEMA, for instance. Under COFEPOSA, the detention had to be reviewed within three months of being initially imposed, and that too by highly qualified legal experts. Under SAFEMA, only properties of persons who had previously been convicted of smuggling offences could be confiscated.
Secondly, the FEO Bill doesn’t make any provision for situations where the person is later acquitted. The key reason why the Supreme Court upheld the Orissa Special Courts Act’s confiscation scheme in 2015 was that it wasn’t actually a pre-trial confiscation, as it only really kicked in after conviction. It included express provisions which prevented the confiscated properties from being sold, and said they would be returned to the owner if acquitted. The FEO Bill fails to do either of these things, and so could lead to properties being taken away even from an innocent person.
Disallowing Civil Claims
Mahtab rightly pointed out that a Constitution Bench of the Supreme Court in 2016 held that access to justice is part of the fundamental right to life. In Anita Kushwaha vs Pushap Sudan,former CJI TS Thakur held that not only was this a constitutional right under Article 21, but that to deprive a citizen of access to a court or tribunal would violate the right to equality under Article 14 of the Constitution as well.
Not only this, the drafters have gone way too far by applying this bar to a company or LLP related to the fugitive economic offender. The company or LLP may have nothing whatsoever to do with the offence, and is still liable for punishment, punishing the entity, its employees and its shareholders for no fault of their own. Even if this were applied without malice, this is a gross abuse of legal rights, and it also has tremendous potential for misuse.
If one or even both these provisions is found to be unconstitutional, this doesn’t mean the whole law would be struck down. Without them, however, the Bill adds nothing really to the law.
Even with them, it can be argued, the Bill doesn’t amount to much. BJD MP Tathagat Satpathy says:
Indeed, the claim that existing law is insufficient to deal with the problems of these kind of fugitive offenders isn’t really borne out. Existing law already allows for attachment and, upon conviction, confiscation of properties and assets. None of this is as draconian as the provisions of the FEO Bill, but as pointed out, that’s why the existing law is constitutional.
Moreover, the Bill does nothing to resolve the crux of the problem with such fugitive offenders – getting them to return from that foreign country. As examined in detail here, India’s extradition record is absolutely dismal, thanks to inept handling from the relevant authorities, whether the CBI or the Ministry of External Affairs, and systemic problems with our prisons and judgment system make countries unwilling to hand over absconding scamsters.
Unfortunately, the Centre has decided to press ahead with this misguided legislation. The only good thing is that its worst elements are unlikely to see the light of day, whether opposed in the Rajya Sabha or struck down by the courts. In sum, an utterly futile waste of time, money and effort.
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Published: 20 Mar 2018,12:52 PM IST