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Abhay Nevagi & Associates

THE IDEA OF PROLETERIAT LAUNDERING

THE FLEE TO FREEDOM

Stealing’ as a phenomenon has been traditionally attributed to the bourgeois in India. There have been several depictions of the ‘destitute’ who goes about laundering wealth in our country. But lately, India has been plagued with the syndrome of ‘Proletariat Laundering’.

A few classic cases in this regard, involves the elope of Mr. Lalit Modi to London (after the IPL scam) following which he was declared bankrupt by the Hon’ble High Court of London, the fiasco involving Vijay Mallya who left the nation after owing approximately 9000 crores (INR) to various Indian Banks and the most recent plunder and fleeing of ‘Gem Kingpin’ Nirav Modi, who allegedly owes 11,400 crores (INR).

One common trend in all these cases involves the culprit taking refuge on foreign soil immediately after apprehending prosecution by Courts in India.

 

THE LACUNA

India arguably has sufficient legislations to combat such a tendency to flee from Indian soil to avoid prosecution. Following are some of the primary legislations in this regard:

  • Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
  • The Recovery of Debts Due to Banks and Financial Institutions Act, 1993;
  • The Insolvency and Bankruptcy Code, 2016; and
  • The Prevention of Money Laundering Act, 2002.

But quite clearly, the plethora of legislations have not been able to prevent affluent money-churners of the Indian economy to siphon money and locate safe-haven beyond territorial jurisdictions of Indian Courts.

 

GOVERNMENT’S ANSWER

On 01.03.2018, the Union Cabinet has cleared the Fugitive Economic Offenders Bill, 2018 (further referred to as the FEOB 2017). The intent of the Government behind the introduction of this draft bill is clearly to deter economic offenders from staying beyond jurisdictional limits of the Indian Courts to prevent facing prosecution, which is detrimental to the sanctity of the rule of law in India.

The said Bill (‘Act’ after its implementation), after its commencement, shall have its application against any person categorized as ‘fugitive economic offender’ as defined under the draft Bill and its jurisdictions shall extend to the entire nation.

The draft Bill defines a “fugitive economic offender” as a person against whom an arrest warrant, in relation to a scheduled offence has been issued, by any court in India and who leaves India to prevent criminal prosecution or thereafter refuses to come back to India to face criminal prosecution. The offences that have been classified as ‘scheduled offences’ have been listed in Schedule I of the said draft Bill.

The Bill seeks to authorize the Director (as per the definition of ‘director’ u/s 4 (1) (c)) or any person authorized by the Director, who is not below the rank of Deputy Director, to attach the property of any fugitive economic offender under two apprehensions which are as reproduced below:

  • The property in question is the ‘proceed of a crime’ (as defined u/s 2 (u) of the PMLA Act, 2002) owned by an individual, who is a fugitive economic offender as per the said draft Bill; and
  • The property in question is being dealt or is likely to be dealt in such a manner that will render it as unavailable for confiscation in the future.

That such attachment shall continue for a period of 180 days beyond the date of order of attachment.

According to section 9 (1) of the said draft Bill, if an individual abides by the Notice issued against him by a Special Court, established under the provisions of the said Bill (‘Act’ after its commencement), the Special Court may terminate the proceedings against such individual under this Act.

 

ARE THE GREY-AREAS STILL GREY?

Section 19 of the FEOB 2017 states that after its implementation, the said Act shall have an overriding effect on all the existing laws in this regard. In this regard, what is to be ascertained is whether this legislation serves the purpose better that the laws that are already in existence.

 

THE LACUNA

Firstly, the draft Bill is only concerned with offences the quantum of which exceeds the value of Rs. 100 crore INR. Therefore, in case of offences that are below the said mark of 100 crores, the draft Bill clearly fails to plug the gap.

Secondly the Bill is commonly being seen to be ambiguous on various fronts. It does not give any reference of deterring offenders from fleeing the country, in apprehension of prosecution. Neither does it address offences by individuals under the garb of holding companies.

Lastly, as per the provision mentioned u/s 11 (1) of the said Bill, a fugitive economic offender is disentitled from defending any civil claim that may be initiated against him against any civil court of the country. Such a provision also, may be clearly in violation of the principles of natural justice.

 

FINAL CONJECTURE

The extent to which such a hasty step, assumed in the wake of one of the largest scams in the history of this nation, shall be successful, only time can tell. What is clear though, is the intent of the legislature to prevent offenders from siphoning money and taking shelter on foreign soil.

In the matter of Y.S. Jagan Mohan Reddy vs. Central Bureau of Investigation (MANU/SC/0453/2014), the Supreme Court of India has observed that “the economic offences having deep rooted conspiracies and involving huge loss of public funds need to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of country…

Similarly, in the matter of Gautam Kundu vs. Manoj Kumar, Assistant Director, Eastern Region, Directorate of Enforcement (Prevention of Money Laundering Act) Govt. of India (MANU/SC/1453/2015) (16.12.2015) involving the famous Rose Valley Chit-fund scam, the apex court has held, while deciding upon the said matter, that “this case is relating to “Money Laundering” which we feel is a serious threat to the national economy and national interest. We cannot brush aside the fact that the schemes have been prepared in a calculative manner with a deliberative design and motive of personal gain, regardless of the consequence to the members of the society”.

The Supreme Court has clearly on several instances justified, the reason for assuming a stringent and non-benevolent approach in cases of money laundering. It remains for the judiciary though to retrieve the massive quantum of tax-payer’s money that has been siphoned and set an example by punishing the offenders for something that should be regarded as a crime of the highest order.

Considering all this, the feeling among one and all is that the legislature need to urgently assume the same stance as the apex court and prevent this trend of ‘proletariat laundering’.

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