The Origin:
The United Nations
Convention against Corruption(1)
ratified by India on 9th May 2011 is the only legally binding
universal anti-corruption instrument, whereunder countries are bound to render
specific forms of mutual legal assistance in gathering and transferring
evidence for use in court, to extradite offenders. Under this Convention, countries
are also required to undertake measures which will support the tracing,
freezing, seizure and confiscation of the proceeds of corruption. In his 2017-18 Budget Speech, the then
Finance Minister Mr. Arun Jaitley announced that the Government was considering
to introduce legislative changes or even a new law to confiscate the assets of
such absconders till they submit to the jurisdiction of the appropriate legal
forum in India. In reply to a Lok Sabha
question(2) on the action to be
initiated against absconding fraudster businessmen, the Minister for External
Affairs revealed to the Parliament a list of such absconding businessmen whom
it seeks extradition from foreign countries and also notified the House of its
intention to bring in a special legislation viz.
the Fugitive Economic Offenders Bill, 2018.
On
1st March 2018, the Union Cabinet approved the introduction of the Fugitive
Economic Offenders Bill, 2018 to provide for measures to deter fugitive
economic offenders from evading the process of law in India by staying outside
the jurisdiction of Indian courts. The Bill sought to confiscate properties of
economic offenders involved in offences having value of Rs.100 crores or
more. The Bill was introduced in the Lok
Sabha on March 12, 2018, but, as it could not be taken up for consideration and
passed in the House, it was promulgated
as the Fugitive Economic Offenders Ordinance
on April 21, 2018.
Objectives and Scheme of the
Fugitive Economic Offenders Act, 2018:
The Ordinance was replaced by a reintroduced
Fugitive Economic Offenders Bill, 2018 passed by the Parliament which received
the assent of the President on 31-07-2018 and the Fugitive Economic Offenders
Act, 2018 [“FEO Act”] was
retrospectively brought into force w.e.f. 21-04-2018.
The
FEO Act was enacted in the backdrop of 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,
which obstructed the investigation in criminal cases undermining the rule of
law in India. Such cases of economic offences also involved non-repayment of
bank loans thereby worsening the financial health of the banking sector in
India. The Modi 1.0 regime realised that the existing civil and criminal
provisions in law were inadequate to deal with the severity of the problem and
in order to address the said problem and lay down measures to deter economic
offenders from evading the process of Indian law by remaining outside the
jurisdiction of Indian courts, it proceeded to enact and enforce the FEO Act to
ensure that fugitive economic offenders return to India to face the action in
accordance with law.
The FEO Act which has applicability to the whole of India is
attracted when the value of such Scheduled Offence must be at least Rs. 100
crores. The FEO Act defines a ‘fugitive
economic offender’ (FEO) as a person against whom
an arrest warrant has been issued by any Indian court for committing a
‘Scheduled Offence’ and who has either left India to avoid criminal
prosecution, or being abroad, refuses to return to India to face criminal
prosecution(3). The ‘Scheduled Offences’ are enumerated in
the schedule to the FEO Act, which include: counterfeiting, forgery, fraudulent
removal of property and cheating under the Indian Penal Code, 1860; and dishonor of cheque under the Negotiable
Instruments Act, 1881; offences under the Reserve Bank of India Act, 1934,
Central Excise Act, 1944, the Customs Act, 1962, Prohibition of Benami Property
Transactions Act, 1988, SEBI Act, 1992 and the Black Money (Undisclosed Foreign
Income & Assets) and Imposition of Tax Act, 2015; taking of gratification
to influence a public servant under the Prevention of Corruption Act, 1988; money laundering offences under the Prevention
of Money Laundering Act, 2002; fraud under the Companies Act, 2013; and
defrauding creditors under the Insolvency and Bankruptcy Code, 2016, offences
under the Central GST Act, 2017 etc. The
Central Government is vested with powers to either add or omit any offences to
the list of the Scheduled Offences(4).
Authorities & Powers Under the FEO
Act:
The Director appointed in terms of the Prevention of Money
Laundering Act, 2002 has been empowered under the FEO Act to move the Special
Court to declare an individual as a ‘Fugitive Economic Offender’(5).
In order to achieve its objective, section 5 of the FEO Act enables the
Director to attach any property which is a proceeds of crime or is a property or a benami property belonging
to a Fugitive Economic Offender. The properties
of a Fugitive Economic Offender whether in India or abroad by a Special Court can
be confiscated if such person is declared to be an FEO under the FEO Act(6) and all rights and title in such
properties shall vest with the Central Government with free from any
encumbrances. If the confiscated properties are situated outside India, then,
the Special Court is empowered to request a court or authority in the
contracting State for execution of the confiscation order(7). Upon confiscation, the
Central Government may appoint an Administrator under sec. 15 of the FEO Act to
receive, manage and dispose of such properties.
Unlike the Prevention of Money Laundering Act, 2002, the power of
attachment under the FEO Act is not limited to the ‘proceeds of the crime’ and
extends to any property owned by the FEO. In addition to the above, the FEO Act
also vests with the Director the powers of a civil court in trying a suit and
also the powers to carry out survey, search and seizure of properties, search
and detain a person. Once an individual
is declared an FEO, he or she is disallowed from proceeding with or defending
any civil claim before any court or tribunal in India(8). Similarly, a company or a limited liability partnership is not
allowed to proceed with or defend any civil claim, if the individual who has
been declared an FEO has either filed the claim on its behalf, is the promoter
or key managerial personnel or majority shareholder of the company, or has a
controlling interest in limited liability partnership. The FEO Act ousts the jurisdiction of civil
courts and also enjoys an overriding effect over other legislations(9).
Fugitive Economic Offenders (Procedure for Conducting Search
and Seizure), Rules, 2018 superseded the earlier rules framed under the
replaced ordinance and deleted all references to the applicability of Criminal
Procedure Code in relation to the conduct of search and seizure functions
thereby giving more teeth to the authorities for faster attachment and
confiscation of the properties of a FEO.
Fruits of the FEO Act:
Vijay Mallya case:
Pursuant
to the enactment and enforcement of the FEO Act, Vijay Mallya who is evading
Indian legal system for bank defaults of Rs.9,000 crores became the first
individual to be declared as the FEO in January 5, 2019. Earlier, on September 1, 2014, he was
declared as a wilful defaulter and on March 2, 2016, he slips away from
India. At the request from India, his
extradition trial begins in London on December 4, 2017. Allowing India’s request for extradition, the
Senior District Judge Arbuthnot (“the SDJ”), sitting at Westminster
Magistrates’ Court, on 10 December 2018 decided to send Vijay Mallya's case to
the Secretary of State. William Davis J
rejected his appeal on 5 April 2019. He
further renewed his application orally in front of Leggatt LJ and Popplewell J
on 2 July 2019: R (Mallya) v Government of India and Another (1) [2019] EWHC 1849
(Admin) which rejected all his grounds except for one. Consequently, his final appeal came to be
heard in February 2020 and disposed of by the High Court (Queens Bench
Division), London on 20.04.2020 holding that the earlier decision of the SDJ of
Arbuthnot cannot be faulted and that his extradition has to be certified to the
Secretary of State(10). When
Vijay Mallya sought leave to approach the UK Supreme Court against the
rejection of his appeal, Lord Justice Stephen Irwin and Justice Elisabeth
Laing, the two-member bench at the Royal Courts of Justice in London presiding
over the appeal refused on May 14, 2020 to grant the same holding that Mallya’s
appeal to certify a point of law was rejected on all three counts – of hearing
oral submissions, grant a certificate on the questions as drafted, and grant
permission to appeal to the Supreme Court thereby clearing the decks for his
extradition to India. This has been
possible because of the untiring efforts taken by the Enforcement Directorate
and the CBI in presenting India’s case before the courts in London to seek the
extradition of Mallya.
Nirav Modi & Mehul Choksi case:
Nirav
Modi and his uncle Mehul Choksi who are accused of cheating and defaulting a
consortium of Indian banks led by the Punjab National Bank have escaped from India
and are wanted for bank fraud of over Rs.13,500 Crores. Nirav Modi has
been lodged at Wandsworth prison in south-west London since his arrest in March
2019 on an extradition warrant executed by Scotland Yard. Choksi is at present based in the Caribbean
nation of Antigua. India has sought his extradition from that country and an
Interpol arrest warrant has also been issued against him.
Applications
filed by the Enforcement Directorate for their declaration as FEO are pending
before the Special Court, Greater Mumbai and in the meanwhile, their efforts to
stall the proceedings of the Special Court by appealing to the Bombay High
Court was rejected(11). Thereafter, on December 5, 2019, Nirav Modi
became the second person, after Mallya, to be declared as the FEO by a Special
Court. Meanwhile, Nirav who is held in a
London prison since March 19, 2019, despite offering
to raise the bail security amount to 4 million pounds, could not secure from
the UK courts any bail since he posed a flight risk and had the means to
influence witnesses and tamper with evidence.
His extradition trial has already been commenced by the CBI and the
Enforcement Directorate before the UK Court in May 2020 and the proceedings are
now sub judice before the District
Judge Samuel Goozee of the Westminster Magistrates’ Court in London.
Indian law enforcement agencies,
including the CBI, Enforcement Directorate and Directorate of Revenue and
Intelligence (DRI), are currently pursuing around 50 fugitives – mostly
economic offenders – living abroad, through red notices, extradition requests
and look out circulars (LoCs). Some of
the big names include Vijay Mallya, Nirav Modi, Neeshal Modi, Mehul Choksi,
Nitin and Chetan Sandesara, Lalit Modi and European middlemen Guido Ralph
Haschke and Carlo Gerosa. There are at
least 16 extradition requests made by Indian authorities pending in the UAE,
the UK, Belgium, Italy, Egypt, the US and Antigua and Barbuda against various fugitives. The list of economic offenders on the run has
been increasing over the past few years. Ministry of Finance had reported to
the Rajya Sabha in December 2019 that over the last few years, 67 economic
offenders had fled India, fearing prosecution. These economic fraudsters
defrauded the Indian banks and other financial institutions to the tune of Rs
17,947.11 crore. Among these 67 fugitive
economic offenders, six cases are being investigated and reported by the
Central Board of Indirect Taxes & Customs, while 10 cases have been
reported by the Enforcement Directorate and 51 by the CBI.
The Modi 1.0 regime paved the way for the enactment of the FEO Act
and it is heartening to note that the subsequent Modi 2.0 government has been
relentlessly pursuing the extradition trial of FEOs so as to bring them to
justice before the Indian courts and also help recover the defrauded amounts by
bringing to sale their confiscated properties. In June 2019, Modi’s call for a combined
strategy to crack down on fugitive economic offenders found resonance with
leaders of G20 states, which resulted in a joint statement by G-20 leaders
reaffirming their commitment to deny safe haven to such individuals. It is under this exemplary political resolve
that the CBI and ED had found resonance to painstakingly initiate and
relentlessly pursue red corner notices and extradition requests and trials in
foreign countries to secure the extradition of the FEOs to face trial in
India. It cannot be gainsaid that the
enactment and unflinching enforcement of this piece of legislation, both in
India and abroad, is one of the manifestations of a discerning government,
which should not be lost sight of.
End Notes:
(1) Adopted by the UN General Assembly on 31 October
2003 vide resolution no.54/4 which entered into force on 14 December 2005
(2) Lok Sabha Unstarred Question
No.3198 answered on 14.03.2018 by Shri M.J. Akbar, Minister of State for
External Affairs.
(3) Section 2(f) of the FEO Act, 2018
(4) Section 20 of the FEO Act, 2018
(5) Section 4 of the FEO Act, 2018
(6) Section 12 of the FEO Act, 2018
(7) Section 12(5) of the FEO Act, 2018
(8) Section 14 of the FEO Act, 2018
(9) Section 18 and 21 respectively
of the FEO Act, 2018
(10) Vijay Mallya vs. Government
of India and National Crime Agency [2020] EWHC 924 (Admin)
(11) Nirav Modi and Anr. vs. State
of Maharashtra and Anr. Bombay High Court order dated 04/12/2019
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