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India Needs Good Governance & Not New Law to Catch Fugitives

MARCH 19, 2018

By Naresh Minocha, Consulting Editor

THE Fugitive Economic Offenders Bill, 2018 (FEOB) is a classical instance of the dog barking up the wrong tree. The only difference between classic and FEOB is that the bark at the wrong tree is intentional.

FEOB is mere political posturing before public that is upset with NDA Government's propensity to look the other way when economic offenders dart away to alien lands.

Introduced in Lok Sabha on 12th March 2018, FEOB seeks "to provide for measures to deter fugitive economic offenders from evading the process of law in India by staying outside the jurisdiction of Indian courts, to preserve the sanctity of the rule of law in India and for matters connected therewith or incidental thereto".

Says the Government: "The absence of such offenders from Indian courts has several deleterious consequences, such as, it obstructs investigation in criminal cases, it wastes precious time of courts and it undermines the rule of law in India. Further, most of such cases of economic offences involve non-repayment of bank loans thereby worsening the financial health of the banking sector in India. The existing civil and criminal provisions in law are inadequate to deal with the severity of the problem".

FEOB, however, says: "The provisions of this Act shall be in addition to and not in derogation of any other law for the time being in force".

Does this not imply that the process of attachment of assets under existing laws is adequate? If the seizure process is cumbersome in any law, FEOB should have pinpointed the flaws. And these could have been taken care of as amendments to relevant laws in FEOB.Modi Government itself has improved seizure mechanism by amending certain laws directly or through Finance Act.

A case in point is amendment of Prevention of Money Laundering Act, 2002 (PMLA) via Finance Act 2015. The Amendment to Section 2(1)(u) of PMLA has been made to deal with fugitives who hold property or take proceeds of crime outside the country. The Amendment enables attachment and confiscation of property equivalent in value held within the country.

Another initiative taken by Modi Government is amendment of Foreign Exchange Management Act, 1999 (FEMA) through section 2(GG), 13 A & 37A. It empowers the authorized officer to seize value equivalent, situated within India, of such foreign exchange, foreign security or immovable property situated outside India for its ultimate confiscation under section 13(1A).

FEOB has a schedule that lists offences under 15 Indian laws including Indian Penal code and Central Goods and Services Tax Act.

The Government thus has multiple legal options to attach property of economic offenders. The only worrisome issue is that these legal options are exercised late, often after the assets have been stripped or sold secretly or mortgaged multiple times.

Have different government agencies not seized assets of Nirav Modi, Mehul Choksi and Vijay Mallya? Have assets confiscations pressured any fugitive to return to India?

Is the value of seizures lower than the amount of money allegedly pocketed by the fugitives & parked abroad? In any case, do banks, revenue authorities, employees and others have conflicting claims over the attached assets?

Confiscation of domestic assets has hardly been a complex issue. An economic offender, who intends to flee India, always does advanced planning. He or she shuffles ownership/control of assets before fleeing. Mr. Mallya did precisely that for a couple of years with full knowledge of Modi Government. Information about most of his asset restructuring actions was available in the public domain. And yet he was allowed to fly with cartload of suitcases.

FEOB would actually serve as a constant reminder for business persons to transfer ownership of their assets before being declared as wilful defaulter by banks, tax revenue authorities, etc.

Instead of enacting FEOB, the Government should take four initiatives. These are: 1) improve the snail-paced process of signing extradition treaties with different countries; 2) seek revision of treaties with countries such as the UK that has shot down many extradition requests; 3) shorten the time taken in inter-agency process for serving extradition request to countries where fugitives are camping and 4) Make prior Government clearance for foreign travel mandatory for businessmen, who have defaulted in paying loans and taxes.

These suggestions require elaboration to drive home the point that the fault lies with the administration and not with the multiple laws that provide for seizure of assets of economic offenders.

Modi Government has so far signed extradition treaties with only two countries – Afghanistan and Lithuania. The ground work for these treaties, in all probability, was done by previous government.

India has so far signed extradition treaties with 48 countries. It has also entered into extradition arrangements with 9 more countries. It is clear that signing of extradition treaties has not been priority for India on diplomatic turf since the Independence.

Prime Minister, Narendra Modi, who loves speedy decisions, might not know that India has been negotiating extradition treaty with Singapore since 2002! The two countries, however, negotiated and signed Comprehensive Economic Cooperation Agreement (CECA) in a shorter span of three years during June 2005. Did Modi Government make signing of extradition treaty as a pre-requisite for further amendments to CECA?

As for revising extradition treaty with the UK, Modi Government has categorically stated that it has no plans to seek revision. This is in spite of the fact that the UK Government had shot down nine extradition requests and rejected three other requests for arrest of fugitives. As many as 16 extradition requests are pending with the UK.

This brings us to need for comparative study of extradition treaties that India has signed so far. Are all treaties in keeping with United Nations Model Treaty on Extradition?

It remains to be seen whether Parliament would transform debate on FEOB into a full-fledged discussion on the country's extradition challenges.

The discussion should also cover treaties on mutual assistance in criminal matters (MACT). The Government should disclose the guidelines for invoking Extradition Treaty or MACT treaty against an offender in the case of a country with which India has both treaties.

India has entered into MACT/ Mutual Legal Assistance Treaties (MLAT) with 39 countries which provide for serving of documents on offenders, declared fugitive or not.

Mr. Lalit Modi appears to be the beneficiary of India's misplaced reliance on India-UK MLAT. The mystery over persisting delay in acting against him under the Extradition Act is buried in files.

In November 2012, India urged the UK to deport Mr. Lalit Modi to homeland. A month later, the UK denied India's request, citing its own domestic laws. The UK asked India to submit a request under the usual mechanism for international judicial cooperation. Later, the Enforcement Directorate (ED) got issued a Letter of Request (LR) by a Special Court constituted under Prevention of Money Laundering Act, 2002 (PMLA) for the execution of the non-bailable warrant on Lalit Modi. This was to done to prepare ground for his transfer to India under India-UK Mutual Legal Assistance Treaty (MLAT) on criminal matters.

India thus submitted revised request to the UK on 6th February 2017.In July 2017, the Government told Parliament that "India-UK MLAT in criminal matters does not cover the subject to bring back persons under investigation."

According to another answer to a parliament question raised during August 2017, "a formal response from the UK side in this regard is still awaited. The Ministry of External Affairs has not received any formal request for extradition Mr. Lalit Modi from the concerned law enforcement agencies in India".

Mr. Modi's case is not isolated instance of laxity or ad hocism in handling cases of accused persons, who have gone missing.

In July 2017, the Government disclosed that ED has filed prosecution complaints against 53 persons, who are absconding, under PMLA. It, however, admitted in Parliament that Ministry of External Affairs did not receive any request from either ED or Ministry of Home Affairs for extradition of these persons.

Similarly, the Government informed Parliament during December 2017 that request for extradition of alleged anti-national Zakir Naik has not yet been made to Malaysia. He has been granted Permanent Residency status by the Government of Malaysia.

All these instances amply show that the fault lies in extradition mechanism& the way it is administered. The Government thus ought to fire all cylinders on the extradition front.