Lacking bite

The Fugitive Economic Offenders Bill (FEOB), 2017, which the Cabinet cleared 01 March 2018, is in effect more legislation with its heart in the right place but not the mind. The Bill, if cleared, is expected to give the authorities more powers to confiscate assets of fugitive economic offenders and liquidate them towards loan recovery. It also lays the burden of proof of innocence on shareholders or partners in such assets or firms. The onus will now be on them to prove that they were involved without knowledge of the fraudulent nature of the fugitive’s dealings. On the face of it, the legislation appears meaningful, particularly in the wake of the Rs12,000-crore fraud perpetrated on Punjab National Bank allegedly by diamond merchant Nirav Modi. However, this law does little more than what existing statutes can do. It, too, is not watertight and can be evaded with ease. One question that arises in the context is whether the Rs100-crore bar that has been set in the proposed law for it to be employed is justifiable. The government explains that it has set the bar to ensure that courts are not burdened with a high number of such cases. Does it mean that those who have outstanding loans under Rs100 crore and have fled the country are any less as fraudsters? One argument might be that big lenders should be able to cover such defaults without breaking sweat. But the fact remains that the money that will be used to cover for such defaults will be the hard-earned savings of numerous depositors. The number of people who will be affected by such defaults will be even higher with the digital push of the government and the number of people included through financial inclusion schemes. Even a reduction of one paisa from the accounts of such people over months should be adequate to help banks tide over the massive losses they incur on account of big-ticket loan defaults. The haste that the government is showing in pushing the legislation indicates that it is acting under pressure. It is evident that the proposed Bill will not suffice to work as adequate deterrent for defaulters intent on fleeing the country. In fact, it is only likely to help them devise new means of cutting back on their own losses before they flee the country. There are few ways and means for the authorities to know for sure whether a defaulter is planning to leave the country. Unless there is some clear-cut way to get to know a defaulter’s intention, there will be no point in making a law that shuts the stable door after the horse has bolted. Then there is the possibility of Section 11 of the Act, which disqualifies persons declared fugitive economic offenders from either filing or defending a civil claim in court, being challenged. The section can be questioned on the grounds that it goes against the basic tenets of the Constitution. Also, a special court’s order, which the director appointed by the central government will have to approach to get a person declared as a fugitive economic offender can be challenged. That will give fugitive defaulters an opportunity to delay proceedings and even get orders reversed. Unless the lacunae in the legislation are addressed, there would be no significant gain from its passage other than adding to the heft of toothless laws.

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