Enactment Of New Law To Ease Bad Loan Recovery

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Enactment Of New Law To Ease Bad Loan Recovery
Enactment Of New Law To Ease Bad Loan Recovery

In a bid to get quick recovery of dues from absconders involved in high-value corporate loan defaults, the Government is likely to soon move the Fugitive Economic Offenders Bill. The proposed Bill, likely to be introduced after Parliament reconvenes on March 6 for the second part of the Budget Session, seeks to impound and sell assets of fugitives, like diamond czar Nirav Modi and his uncle Mehul Choksi.

Also, the Bill defines a fugitive economic offender as a person who has an arrest warrant issued in respect of a scheduled offence and who leaves or has left India so as to avoid criminal prosecution, or refuses to return to India to face criminal prosecution.

“Once voted into law, the new legislation will empower investigating agencies to confiscate and vest with themselves any property of the absconding offenders without an encumbrance,” sources said.

In September last year, the Union Law Ministry had given a go-ahead to the Finance Ministry’s draft of Fugitive Economic Offenders Bill, 2017, and its passage into law is now being expedited as part of the Prime Minister Narendra Modi-led Government’s response to the Rs 11,400 crore PNB scam.

The Bill was first discussed in the 2017-2018 Budget by Arun Jaitley, who had promised a new law to deter economic offenders from evading the process of Indian law by fleeing the country.

The Bill covers a wide range of offences, including willful loan defaults, especially for corporate, cheating and forgery, forged or fraudulent document of electronic records, duty evasion and non-repayment of deposits among others.

The Bill, nevertheless, makes provisions for a court of law — a ‘Special Court’ under the Prevention of Money Laundering Act (PMLA) — to declare a person a “fugitive economic offender”.

When enquired about the proceedings about the Bill, a senior Government official told The Pioneer, “The proposed law is expected to deliver a time-bound judgment without delaying or dragging the case for too long. It would only be applicable to those cases who allegedly commit offences of over Rs 100 crore for which the special courts that will be trying these cases are not overburdened.

“In the recent past, we have been experiencing that high-value economic offenders have been fleeing India to defy the legal process seriously and undermining the rule of law in India as well. It is necessary to provide an effective, expeditious and constitutionally permissible deterrent to ensure that such actions are curbed. I think this Bill will serve the purpose of the Government in this regard.”

Also, at the discretion of any court, such person or any company where the absconder is a promoter or key managerial personnel or majority shareholder, may be ‘disentitled’ from bringing forward or defending any civil claim. This could effectively take away the fugitive offenders rights to reclaim the assets.

The Bill’s provision is compatible with the provisions of United Nations Convention against Corruption (ratified by India in 2011) that recommends “non-conviction-based asset confiscation for corruption-related cases”.

Generally, the PMLA allows the Enforcement Directorate (ED) that tracks foreign exchange movements to seize an accused however, the law did not allow complete ‘non-conviction’ based asset attachment without any encumbrances.

Under current rules, the ED is entitled to provisionally attach a defaulter’s property ‘pending trial subject to confirmation by the adjudicating authority and appeal’. On conviction in the trial, the property stands confiscated, free from all encumbrances, to the Central Government.

In the present Nirav Modi PNB fraud case, the ED is also investigating case and it already approached a Mumbai court seeking issuance of Letters Rogatory (LRs) for obtaining information about the overseas businesses and assets of Nirav.

However, a source close to the development said, “The provision for confiscation being available consequent to the conclusion of trial can rarely be used expeditiously. Further, the purpose for such confiscation is as punishment for the offence committed, and not strictly as a deterrent for any absconding accused to return to India.”

As far as this new law is concerned, it is also expected that a court is unlikely to attach property outside its jurisdiction in the first place without the procedure for endorsement being followed. As a result of such delays, such offenders can continue to remain outside the jurisdiction of Indian courts for a considerable period of time.

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