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India's White Collar Fugitives: How to Bring Back The Future Nirav Modi or Vijay Mallya

Advocacy Consultant
Mar 22, 2018 2:39 PM 4 min read

Stung by criticism over the INR12,000 crore PNB scam, the Government of India is all set to present the Fugitive Economic Offenders Bill before the parliament. The Bill was first announced last year by Finance Minister Arun Jaitley following the liquor baron Vijay Mallya’s escape to London in the aftermath of his alleged INR9,000 crore loan default. With diamond czar Nirav Modi following the white collar crime trail out of the country after fleecing another Public Sector Bank (PSB), the government has come under increasing flak for being unable to stop the repeated flight abroad of economic offenders.


What is the Bill?


The Fugitive Economic Offenders Bill allows the government to confiscate the assets of those ‘economic offenders’ who have fled the country, without the need for them having been pronounced guilty by a court of law. The fugitive in this case, will not be able to contest the confiscation of his assets. The provisions of the Act would be applicable only in cases where the quantum of fraud has been determined to be in excess of INR100 crore, and would not be limited to cases of fraud or loan default alone but would also cover tax evasion, benami properties, black money and corruption.


The need for the Bill was felt as economic offenders routinely escape the country leaving law agencies clawing at thin air.


The provisions of the Bill will not be effective retrospectively - which means Modi’s and Mallya’s assets aren’t going under the hammer anytime soon. However, it could prove to be an effective deterrent for crimes of this scale in the future.


So Why is There So Much Debate Surrounding the Bill?


While a commendable legislation on the surface, the Bill is likely to get considerably diluted as experts deem many of its provisions to be unreasonable and unconstitutional.


For instance, the sale of an accused’s assets without a trial to decide whether the person was, in fact, guilty of the said crimes is likely to meet with stiff resistance as it goes contrary to the basic tenets of the Indian Constitution and justice wherein a person is considered innocent unless proven guilty.


Another provision which is likely to be challenged is the blanket ban on contesting the confiscation of property by the deemed offender as it goes against set judicial principles.

How to Bring Back The Future Nirav Modi or Vijay Mallya


How Do Other Countries Deal With Fugitive Economic Offenders?


While the Bill sounds like a revolutionary piece of legislation in India, similar Acts have been in place in most countries in the developed world for a long time. So while confiscation without conviction might seem a little extreme, it isn’t exactly an entirely new practice. Clear precedents exist in many countries such as the US, EU, and Malaysia. In fact, the United Nations (UN) itself endorses confiscation without conviction, albeit under specific circumstances. The United Nations Convention against Corruption, for instance, encourages states to confiscate such properties as they believe may have been accumulated due to the proceeds of corruption without a conviction in cases in which the offender cannot be prosecuted for reasons of flight, death, absence or in other appropriate cases. (Article 54-C)


Even within the Indian legislative framework, the provision for seizure of property of economic offenders is not an entirely novel feature of this Act. The existing Prevention of Money Laundering Act (PMLA) provides for confiscation of property without conviction as long as there is a reason to believe that non-attachment of property is likely to frustrate proceedings under PMLA. However, this clause has seldom been used as it is time-consuming and cumbersome, and can be challenged in a court of a law, causing the investigation to be bogged down in the legal dragnet. As a result, the PMLA has proved to be totally ineffective in preventing the flight of economic offenders to foreign shores.


Where the Fugitive Economic Offenders Bill goes beyond these legislations is in mandating that the confiscation of property would not be limited only to those accumulated using the proceeds or benefits of the crime under investigation but can be extended to cover all the accused’s assets in India and abroad. In this perhaps, the Bill is unique among all the existing anti-corruption and money laundering laws in the world.


Treating the Symptoms, Avoiding the Cause


What remains undisputed though is that the Bill is not directed towards addressing the core problem of Non-Performing Assets (NPA) in India’s PSBs that caused the twin Mallya and Nirav Modi scams in the first place. Corruption in India is systemic wherein the rich and the influential are able to manipulate questionable policies enacted by the government to swindle public funds. Punitive action, in the form of stringent legislation merely attempts to sweep up after the damage has been done without tackling the root cause of the problem. In the present case, both Vijay Mallya and Nirav Modi cases are outcomes of policy and governance lapses that led to creation of the NPA problem in the banking sector. Thus while legislation like the Fugitive Economic Offenders Bill is commendable and a welcome step in combating corruption, it appears to ignore the root cause of the illness while treating the symptoms.