Fugitive Economic Offenders Bill 2018

Fugitive Economic Offenders Ordinance, 2018 Impact on Creditor Rights

On April 21, 2018 the Fugitive Economic Offenders Ordinance, 2018 (FEO Ordinance) was promulgated to immediately bring into effect the provisions contained in the Fugitive Economic Offenders Bill, 2018 (FEO Bill)[1]. The Union Finance Minister Mr. Arun Jaitley, in his Budget speech, had announced that Central Government was considering the introduction of legislative changes to confiscate the assets of ‘big time offenders’, including economic offenders, who flee the country to escape the Indian legal system.

As the process of extradition has often been challenging and ineffective, the Ordinance seeks to compel the fugitive offender to face trial in India through severe deterrents. Care will need to be taken, however, to ensure that the Ordinance does not adversely impact creditor rights. The deterrents and their impact on insolvency resolution are discussed below.

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Fugitive Economic Offenders Bill, 2018

The Central Government in India had introduced the Prevention of Money Laundering Act, 2002 (“PMLA”), to prevent the circulation of laundered money. The Act defines money laundering as any process or activity connected to proceeds of crime, including its concealment, possession, acquisition or use and projecting or claiming it as legitimate property. While the PMLA Act allowed for confiscation and seizure of properties obtained from the laundered money, such actions were still subject to the processes of criminal prosecution. This led to many of the persons accused of money laundering, to flee the jurisdiction of Indian courts to avoid criminal prosecution under PMLA and the consequent confiscation of the properties.

On March 12, 2018, the Indian government introduced the Fugitive Economic Offenders Bill, 2018 (“Bill/Proposed Act”), in the Lok Sabha, after receiving approval from the Cabinet, to address the issue of such economic offenders avoiding criminal prosecution. The Bill defines a ‘fugitive economic offender’ as any individual against whom a warrant for arrest in relation to economic offences, under various statutes, listed in a schedule to the Bill (“Scheduled Offence”) has been issued, on or after the enactment of this Bill, by any Indian court, and who:

  • Has left India to avoid criminal prosecution, or
  • Being abroad refuses to return to India to face criminal prosecution.

Pertinently, in 2015, the definition of proceeds of crime in the PMLA was amended to include property equivalent to proceeds of crime held outside the country.

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