Ashok Bhan
The declaration of Vijay Mallya as a fugitive economic offender will test the limits of the newly promulgated Ordinance.
Multiple efforts of extraditing Vijay Mallya from the United Kingdom have yielded no result.Once the King of Good Times, Vijay Mallya absconded from India after his company was alleged to have defaulted on an INR 900 crore IDBI Bank loan. Almost one year back.
Despite holding him in contempt of court, even the Supreme Court of India expressed its inability to proceed against Mallya unless he was brought before it. Instances of such absconding offenders, particularly those involved in financial misdemeanors and wilful default of bank loans, have been on the rise. Other names that immediately spring to mind: Nirav Modi and Mehul Chowksi in the PNB scam.
There is then naturally a widespread public angst in the system’s failure to bring such absconding accused back to India, or prevent them from absconding in the first place. The promulgation of the Fugitive Economic Offenders Ordinance, 2018 did not, therefore, really come as a surprise to many in the legal fraternity.
On 22 April 2018, an Ordinance is promulgated that aims to ‘preserve the sanctity of the rule of law in India’ by putting in place deterrence measures against ‘fugitive economic offenders’ who evade criminal trials of economic offences in India.
Almost a month since its promulgation, the Enforcement Directorate is now all set to institute proceedings for declaring Nirav Modi and Mehul Choksi as fugitive economic offenders – this could well be the litmus test for the ‘deterrence effect’ of the Ordinance.
But how promising does this Ordinance appear to be? As the name of the Ordinance suggests, it applies only to cases of economic offences.
A ‘fugitive economic offender’ is an individual against whom an arrest warrant in relation to an economic offence has been issued by an Indian court, and who has left India, or being abroad refuses to come to India to avoid criminal prosecution.
The Ordinance provides for a wide array of economic offences, most notably, cheating and counterfeiting under the Indian Penal Code, 1860, dishonour of cheques under the Negotiable Instruments Act, 1881; insider trading under the Securities and Exchange Board of India Act, 1992; money-laundering under the Prevention of Money Laundering Act, 2002 (PMLA); illegal gratification/ bribery to public officials under Prevention of Corruption Act, 1988; and conducting of business for a fraudulent or unlawful purpose under the Companies Act, 2013.
However, in order to come within the purview of the Ordinance, the total value involved in such an economic offences must be INR 100 crore or more; the reason for this minimum threshold remains unclear.
Once declared as a ‘fugitive economic offender’ by the court, the Ordinance provides for two significant deterrence measures. First, the court can order immediate confiscation of the proceeds of crime and other assets owned by the fugitive economic offender, whether in India or abroad.
Upon the expiry of 90 days from the order of the confiscation, the Government may sell off the property.
While provisions for confiscation can already be found under the PMLA and the Code of Criminal Procedure, 1973 (CrPC), such confiscation can be ordered only after the conclusion of the trial, which usually takes several years.
Until then, the Government could have only attached the property. Now, the Ordinance gives powers to order such confiscation within a few months.
Second, the Ordinance empowers courts and tribunals in civil proceedings to disallow such fugitive economic offender, or any company is which s/he is a promoter or a key managerial personnel or a majority shareholder, from putting forward or defending any civil claim in India.
The harsh reality of our criminal judicial system is that a criminal trial cannot proceed without the accused being present before the court in person.But this is where the ingenuity of the Ordinance seems to end. The harsh reality of our criminal judicial system, with no fault of its own, is that a criminal trial cannot proceed without the accused being present before the court in person.
Criminal trials, therefore, suffer for several years since it is practically impossible for any country to be able to force a person abroad (whether national or not) to face prosecution before its courts. Measures to force presence are already found in the CrPC, MLAT or multilateral treaties, either in the form of extradition or red-corner notices of the Interpol or diplomatic assistance. Although, none of them is bulletproof.
Courts in India have on several occasions expressed their constraints on this. Recently, in the Aircel-Maxis 2-G spectrum case, a Special CBI Judge noted “[i]t is obvious that when warrant is issued against an accused residing or staying in a foreign country, the chances of execution of warrant are very bleak. In such a situation, no useful purpose would be served by keeping the case live on the register of this Court.”
The Ordinance does not seem to solve this inherent problem. Quite to the contrary, it allows an accused offender to appear before the court through counsel. This liberty may have the effect of defeating the underlying purpose of the Ordinance as it can give considerable breathing space to an accused to present a case without returning to India.
Apart from the inescapable attorney-created procedural delays (for which the Ordinance gives enough room), it seems that the mere threat of confiscation of assets and barring of remedies in civil proceedings may not prove to be enough, especially when an absconder may weigh these outcomes with the possibility of facing prolonged prosecution in India and perhaps even a conviction.
Nonetheless, an effective and robust implementation of the Ordinance could allow the Government to swiftly recover the money lost by the exchequer or the public by selling the confiscated property.
All eyes are now set on the effect that this Ordinance may have if, and when, Nirav Modi and Mehul Choksi are declared as fugitive economic offenders.
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