Page 39 - Banking Finance January 2025

ARTICLE

Rule of evidence including provisional attachment prior to adjudication of a
person as an FEO.
1. The burden of proof for establishing that an individual
is a fugitive economic offender and a property is the
proceeds of crime or any other property in which the Hence, the Ordinance may have a significant adverse effect
individual alleged to be a fugitive economic offender has on a corporate insolvency process where properties of the
an interest, shall be on the Director or the person corporate debtor are attached or confiscated as proceeds
authorized by the Director to file the application. of crime or benami properties. It may restrict the ability of
financial creditors to realize their dues from such properties.
2. Where any person claims that any interest in any
property was acquired bonafide and without knowledge To take care of this issue there is an inbuild procedure in
of the fact that, such property constitutes proceeds of the ordinance i.e. Ordinance provides for exemption from
crime, the burden of proving such fact shall lie upon him. confiscation of such proceeds of crime, in which any other
person other than the FEO has an interest, if it is satisfied
Appeal that such interest was acquired bona fide and without
Every appeal under this section shall be preferred within a knowledge of the fact that the property was proceeds of
period of thirty days from the date of the judgment, crime.
provided that the High Court may entertain an appeal after
the expiry of the period of thirty days, if it is satisfied that To avoid such inadvertent consequence of restricting the
the appellant had sufficient cause for not preferring the ability of banks to recover their dues from the companies of
appeal within the period of thirty days. No appeal shall be defaulting promoters, the exemption provided in the
entertained after the expiry of the period of ninety days. Ordinance must necessarily be exercised to assist the
resolution process and allow the lenders to maximize their
General rules recovery. The valiant objections of the Ordinance of
confiscation of assets will be defeated if a mechanism for
1. Bar of jurisdiction: No civil court shall have jurisdiction protecting legitimate rights of lenders in relation to assets of
to entertain any suit or proceeding in respect of any
FEOs is not put in place rigorously. Same to be applied for sale
matter which the Special Court is empowered.
under the Securitization and Reconstruction of Financial
2. Protection of action taken in good faith: No suit, Assets and Enforcement of Securities Interest Act, 2002
prosecution or other legal proceeding shall lie against (SARFAESI). The attachment or confiscation off properties of
the Central Government or Presiding Officer of the FEO would otherwise have penalizing effect on banks or Fis.
Special Court or Director or any other authorized officer
for anything which is in good faith done or intended to In this context, on one hand the Ordinance aims to assist
be done under this Ordinance. banks/FIs in recovery of financial debts by confiscation and
3. Power to make rule: The Central Government may, by disposal of properties on the other hand the administrator
notification in the Official Gazette, make rules for appointed under the Ordinance should have the potential
carrying out the provisions of this Ordinance. of impacting the corporate insolvency resolution process
under the Insolvency Code.
4. Power to remove difficulties: The Central Government
may amend if any difficulty arises in giving effect to the Conclusion
provisions of this Act by order by publishing the same
amendment in the Official Gazette. The law cannot force any offender to return. It is more
dependent on extradition processes. But it is aimed at being
Impact on Insolvency Resolution under so harsh that it convinces alleged offenders to return to
India, otherwise the properties would be confiscated. It
the Code ensures that the investigation does not mean assets that

The Ordinance provides that all the rights and title in the might be leveraged by a bank are not simply frozen. If it is
confiscated property shall, from the date of the confiscation required, the properties can be utilized for adjustment of
order, vest in the Central Government, free from all outstanding dues by the processes of confiscation and sale
encumbrances. Such properties are subject to attachment as per provision of Ordinance.

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