Page 38 - BF Cover February 2019

ARTICLE

from the order of the confiscation. The increasing number of fraud cases some arbitrary sections, but it has a
reported by banks and defaults of bank strong intent of making big financial
♦ While provisions for confiscation debts, not only increases the level of absconders compelled to surrender to
are already provided under the PMLA Non Performing Assets of banks but also Indian jurisdiction. It is expected to re-
and the Code of Criminal Procedure, constitute the largest portion of establish the rule of law by speedy
1973 (CrPC), such confiscation can be economic offences. The number of confiscation of properties forcing the
ordered only as the final step after the fraud cases reported by banks, which fugitive to return to India and face trial
conclusion of the trial, which usually generally averaged around 4,500 cases for his offences.
takes several years. a year in the past 10 years skyrocketed
to a shocking number of 5,835 cases in The effective and robust
Until then, the government could have the year 2017-18. implementation of the Act would help
only attached the property. to secure recovery of huge money by
Attachment, as differentiated from This year itself it has been estimated selling the property so confiscated. This
confiscation, does not have the effect that the banking and finance sector has would also help the banks and other
of vesting the property in the suffered losses of a staggering amount financial institutions to achieve higher
government's name and consequently of Rs. 41,000 crore due to frauds. It recovery from financial defaults
does not allow for its sale. includes Nirav Modi, Vijay Mallaya and committed by such fugitive economic
others, who fled the country without offenders, improving the financial
♦ The term 'proceeds of crime' paying huge bank dues. health of such institutions.
continues to have a wide scope (much
like in the case of the PMLA) to include The scheduled offences under the law In January 2019, the Minister of State
any property, derived or obtained, include dishonour of cheques under for Finance informed the Parliament
directly or indirectly, by 'any person' as Negotiable Instruments Act 1881, that 27 defaulting business and
a result of criminal activity relating to Transactions defrauding creditors economic offenders, under pending
a Scheduled Offence. under Insolvency & Bankruptcy Code, probes of Directorate of Enforcement
2016, Cheating, forgery and (ED) and Central Bureau of
ii) Disallowance of Civil Claims counterfeiting under Indian Penal Investigation (CBI), fled the country in
♦ A 'Fugitive Economic Offender' or Code, 1860 and conducting the last five years. He also informed that
a company or limited liability business of a company with intent to Directorate of Enforcement (ED) filed
partnership, where such 'Fugitive defraud its creditors and fraud under applications under Fugitive Economic
Economic Offender' is a majority Companies Act, 2013, wherein Offender Act 2018 against seven
shareholder, promoter, or a key fraudsters and defaulters of banks, fled defaulting persons involving amount of
managerial person can be disallowed the country, can now be booked to Rs. 27,968.83 crore.
from filing or defending any civil claims submit to Indian courts.
by a civil court or tribunal. Mr. Vijay Mallya is first to have been
This would help the banks and other declared a 'Fugitive Economic Offender'
The immediate confiscation (and financial institutions to achieve higher under the Fugitive Economic Offenders
consequent sell) of properties and recovery from financial defaults Act, 2018 by Special PMLA Court on 5th
disallowance of civil claims will committed by such fugitive economic January 2019.
definitely force a 'Fugitive Economic offenders, improving the financial
Offender' to submit to jurisdiction of health of such institutions. In coming few days or months, it will
Indian courts to face the judicial be seen how the said Act would work
proceedings. Conclusion : in tandem with the existing statutes
The Fugitive Economic Offenders Act especially in relation to attachment or
Benefits to Banking might look to have some similar confiscation of properties and recovery
Industry: provisions of other statues or to have of dues under different statutes.

38 | 2019 | FEBRUARY | BANKING FINANCE