Fugitive Economic Offenders Bill, 2018

The Central Government in India had introduced the Prevention of Money Laundering Act,
20021 (“PMLA”), to prevent the circulation of laundered money. The Act defines money
laundering as any process or activity connected to proceeds of crime, including its
concealment, possession, acquisition or use and projecting or claiming it as legitimate property.
While the PMLA Act allowed for confiscation and seizure of properties obtained from the
laundered money, such actions were still subject to the processes of criminal prosecution. This
led to many of the persons accused of money laundering, to flee the jurisdiction of Indian
courts to avoid criminal prosecution under PMLA and the consequent confiscation of the
properties.

On March 12, 2018, the Indian government introduced the Fugitive Economic Offenders Bill,
20182 (“Bill/Proposed Act”), in the Lok Sabha, after receiving approval from the Cabinet, to
address the issue of such economic offenders avoiding criminal prosecution. Pertinently, in
2015, the definition of proceeds of crime in the PMLA was amended to include property
equivalent to proceeds of crime held outside the country.

After the recent financial frauds came to fore in India, especially the Rs 13,000 crore PNB
scam where diamantaire Nirav Modi and Mehul Choksi fled the country, it became apparent
that the existing civil and criminal provisions are not entirely adequate to deal with the severity
of the problem. The absence of offenders during investigations poses problems for the probing
agencies apart from undermining the law of the country. The ordinance will come into effect
after the assent of the President.

The benefit of the ordinance:

The ordinance is expected to re-establish the rule of law as the accused will be forced to return
to India and face trial for his offences. This would also help the banks and other financial

1
The Prevention of Money-Laundering Act, 2002 (15 of 2003).
2
The Fugitive Economic Offenders Bill (Bill No. 79 of 2018).

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 institutions to achieve higher recovery from financial defaults committed by such fugitive
economic offenders, improving the financial health of such institutions.

The impact of the ordinance:

It is expected that the creation of a special forum for a speedy confiscation of the proceeds of
crime, in India or abroad, would force the fugitive to return to India to submit to the
jurisdiction of courts in India to face the law in respect of scheduled offences.

Strategy for implementation and targets:

The ordinance makes provisions for a court (‘Special Court’ under the Prevention of Money-
laundering Act, 2002) to declare a person as a ‘Fugitive Economic Offender.’ A Fugitive
Economic Offender3 is a person against whom an arrest warrant has been issued in respect of
a scheduled offence and who has left India so as to avoid criminal prosecution, or being
abroad, refuses to return to India to face criminal prosecution. A scheduled offence4 refers to a
list of economic offences contained in the Schedule to this Ordinance. Further, in order to
ensure that courts are not over-burdened with such cases, only those cases where the total value
involved in such offences is 100 crore rupees or more, is within the purview of this ordinance.

Other provisions under the ordinance:

(i) making an application before the special court for a declaration that an individual is a
fugitive economic offender;

(ii) attachment of the property of a fugitive economic offender and proceeds of crime;

(iii) issue of a notice by the special court to the individual alleged to be a fugitive economic
offender;

(iv) confiscation of the property of an individual declared as a fugitive economic offender or

even the proceeds of crime;

(v) disentitlement of the fugitive economic offender from defending any civil claim; and

3
Section 2(f), The Fugitive Economic Offenders Bill, 2018.
4
Section 2(m), The Fugitive Economic Offenders Bill, 2018.

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(vi) appointment of an administrator to manage and dispose of the confiscated property under
the act.

If at any point of time in the course of the proceeding prior to the declaration, however, the
alleged Fugitive Economic Offender returns to India and submits to the appropriate
jurisdictional court, proceedings under the proposed Act would cease by law.

The expenditure incurred:

Since the approved law would utilise the existing infrastructure of the special courts constituted
under the Prevention of Money-laundering Act, 2002 (PMLA) and the threshold of scheduled
offence is high at Rs 100 crore or more, no additional expenditure is expected on the enactment
of the ordinance.

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