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New Measures Dealing With Bank Frauds: the Fugitive Economic Offenders Act

Vijay Mallya, Nirav Modi, PNB Bank FraudÂ are the three things that filled the newspapers, news channels and news-feeds for quite some time. In the past few years, the instances of banking frauds have increased manifold and all one could see in the newspapers was reports of banking frauds of thousands of crore rupees primarily involving non-repayment of loans. What added fuel to the fire was the fact that these defaulters left the country in order to evade their responsibilities and left their motherland in a miserable state in terms of the economic harm they caused.

These frauds not only harmed the economy of the country but also affected the image of the country and its financial system not only among its citizens but also throughout the world. People started blaming the legal system and the government of India for its failure to prevent such scams. This called for taking up of steps to deal with the issue at hand and thus Reserve Bank of India (RBI) and the government came up with certain measures to check financial institutions and their activities.

Certain laws have come up like Insolvency and Bankruptcy Code,2016 and amendments in certain Acts like Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act,2002 (SARFAESI Act) providing for a provision for three months jail in case borrower does not provide asset details. However, the most important development to deal with such cases is the coming up of The Fugitive Economic Offenders Act,2018 in order to deal with the problem of economic offenders leaving the country.Â

A fugitive economic offender is a person against whom an arrest warrant has been issued for his or her involvement in economic offences involving at least Rs 100 crores or more and has fled from India in order to escape any legal action.

A person can be called as a fugitive economic offender only in respect of offences mentioned in the Schedule to Fugitive Economic Offenders Act. A person is a fugitive economic offender only if declared so by the Special Court under the Prevention of Money Laundering Act,2002. The Fugitive Economic Offenders Act,2018 is a stringent measure because it allows for confiscation as well as attachment of properties. Properties resulting from proceeds of crime and well as benami properties of the offender whether in India or in abroad are liable to be confiscated. The act also disentitles him from defending civil claims.

The fact that the Act is fulfilling its purpose is visible from the fact that action has been initiated involving amount of Rs 27968.83 against seven offenders by December 2018 itself. The first person to be declared an economic offender within the Act was none other than Vijay Mallya and thus this declaration would allow confiscation of his properties.

The new measures by the government and the RBI, especially the Fugitive Economic Offenders Act can thus be considered effective measures to deal with the problem and would hopefully help in dealing with the problems in the banking, economic and financial sector in the country by not only bringing the money back but also acting as a deterrent for prospective offenders.