By Amritananda Chakravorty
The fall out of the gigantic fraud allegedly masterminded by Nirav Modi and his uncle, Mehul Choksi, is still to be fully comprehended. One major fall out as been that the Union Cabinet cleared the Fugitive Economic Offenders Bill on March 1, 2018. Though the Bill was announced in the Budget session, its approval was fast trackedby the Central Government, when facts relating to Nirav Modi’s scam came to light. The scam, which Nirav Modi and his uncle pulled off by not giving any collateral against Letter of Undertakings (‘LOU’) issued by Punjab National Bank (‘PNB’) and initially thought to be of Rs. 11,000 cr,now has reached a value of 12,700 INR. This scam, closely following Vijay Mallaya fleeing India in 2016 and not paying back his dues to the public sector banks, and not cooperating with the Indian authorities, brought the urgency of the issue to the front. But whether the current Bill is the answer remains to be seen.
The Bill seeks to provide for measures to deter economic offenders from evading Indian law by remaining outside the jurisdiction of Indian courts, thereby preserving the sanctity of the rule of law in India. The Bill defines a‘fugitive economic offender as an individual against whom a warrant for arrest in relation to a scheduled offence has been issued by any court in India and the said person has left India or refuses to return to India to face the prosecution. Under the Bill, an application is to be made to the Special Court by the concerned authority that a particular person is a fugitive economic offender, and the Court may issue a notice to such person’. Within six weeks from the date of notice, the person is required to present herself at “a specified place at a specified time”. If the offender fails to do so, she will be declared a ‘fugitive economic offender’ and her properties, as listed in the application, will be confiscated. The Bill is applicable to persons who are accused of offences exceeding the value of 100 crores. The Bill would override any other existing law.
Though the Bill is not retrospective in its application, the authority can move an application to declare someone as fugitive economic offender, for offences already committed, thereby roping in people like Nirav Modi and Vijay Mallaya, amongst others.
But the question is does the Bill bring anything new to the table, in terms of preventing such crimes, or securing effective convictions, which are not part of the existing laws.
India has a gamut of laws addressing the issue of confiscation of assets of loan defaulters like Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFESI’), Recovery of Debts Due to Banks and Financial Institutions Act (‘RDDBFI’), Insolvency and Bankruptcy Code, and Prevention of Money Laundering Act, 2002 (‘PMLA’).
It is not clear how the new Bill is going to add to the existing provisions. In fact, there is a danger that the legality of some of the provisions of the Bill may be subject to constitutional scrutiny. The Bill provides for confiscation of assets to the Central Government, after declaration from the Court of a person being fugitive economic offender, and prohibits the Civil Courts from entertaining any claim pertaining to those assets by the economic offenders. The Bill also provides for the sale of confiscated properties, without waiting for the trial verdict, in accordance with the UN Convention against Corruption. As per legal experts, both these provisions are very broad and can be subject to legal challenge.
Experts also point out that sale of confiscated assets is a nightmare, as is evident from the cases of Sahara’s Amby Valley or Vijay Mallaya’s Kingfisher House, wherein no suitable buyer has been found by the administrator for months. This shows that the provision of confiscation of assets is not a real deterrent for loan defaulters like Nirav Modi or Vijay Mallaya, thereby adding no real advantage to the Bill.
In conclusion, it can be said that the present Bill is more of a knee jerk reaction to the Nirav Modi scam fall out, than a real thought out attempt to curb the menace of loan defaulters or non-performing assets of public sector banks. The PNB case has shown the deep malaise that has set in the banking regulatory mechanisms, wherein the handful of crony capitalists are taking the entire banking system, and in fact, the entire economic regulatory edifice by a ride, owing to their close proximity to the ruling establishment, while the poorest of the poor are being charged exorbitant penalties for insufficient funds in their bank accounts. This Bill has no intention to remedy this, which says a lot about the priority of the Government.
Weekly Round-Up of Major Decisions of the Courts in India as also Legal Policy Developments
- Insurance company’s claim of contributory negligence of driver in a motor vehicle accident refused – The Supreme Court has refused to consider a claim of an insurance company that the contributory negligence of the taxi driver had not been proven. The lower courts had refused to go into the question, as the accident had occurred because of a collision with a stationery truck. The Respondent in the case had suffered injuries because of negligence on part of the taxi driver, in pursuance of which the Motor Accident Claims Tribunal had granted her petition for compensation. But the Supreme Court, agreeing with the High Court, stated that the fact that the accident occurred by colliding with a stationery truck was enough to show the responsibility of the driver. The High Court had also awarded a 30% increase to the respondent’s income keeping in mind inflation which was also contended by the insurance company, which was not interfered with by the Apex Court. [Oriental Insurance Company v Usha Bhagchandani, Civil Appeal No. 1872 of 2018 (arising from Special Leave Petition No. 2858/2018, date of order: 13.02.2018]
- Amicus ordered to look into measures of rehabilitation of women prisoners and their children – The Supreme Court has directed amicus curiae Advocate Gaurav Agarwal to examine the issue of rehabilitation and welfare of women prisoners and their children, on a suo motu petition initiated by the Court in 2013. In the same order, the Court also directed National Legal Services Authority of India (NALSA) to look into the issue of overcrowding of jails. The petition was a result of a letter written by retd. Justice RC Lahoti which highlighted the deplorable conditions in more than a thousand prisons in India. The Court had also passed several orders demanding response from states on various issues and given guidelines for prison reforms. [Re-Inhuman Conditions in 1382 Prisons v State of Assam, Writ Petition (Civil) No. 406 of 2013, date of order: 21.02.2018]
- PIL to raise marriage age to 25 years for men and women to 21 filed – A PIL has been filed to increase marriageable age to 25 years for men and 21 years for women, arguing that it would curb population. The petition further states that fertility is directly linked to age of marriage and increasing the age of marriage would be a measure of controlling the population. It also blames the rise in population on the increase in poverty, unemployment, starvation, food adulteration, health issues, depletion of natural resources and crime. Thus, the petition also goes on to ask for a uniform policy for population control. Ashwini Kumar Upadhyay v Union of India, Writ Petition (Civil) No. 157 of 2018]
- Clauses in insurance policies excluding genetic diseases violate Article 14 – The Delhi High Court has held that right to health and healthcare as recognised by Article 21 includes health insurance. Consequently, clauses excluding genetic diseases are too broad and so violative of Article 14. The Court said that such clauses are simply based on genetic pre-disposition of individuals, without any actual testing and does not constitute intelligible differentia. Insurance companies, the court said, were free to regulate the clauses between them and their customers but such ‘exclusionary’ clauses went out of the realm of contract and spilled into the realm of constitutional law. The Court also directed the Insurance Regulatory Development Authority (‘IRDA’) to look into exclusionary clauses and to create regulations against them. [M/s United India Insurance v Jai Prakash Tayal,Regular First Appeal No. 610 of 2016, date of judgment: 26.02.2018]
- BCI’s notice against Dushyant Dave stayed – Delhi High Court has stayed the notice issued by Bar Council of India to Senior Advocate Dushyant Dave. The complaint had been filed by Advocate R.P. Luthra demanding immediate disciplinary action against Dave citing “gross professional and other misconduct”. Orders had been passed by the BCI against Mr. Dave, directing the Bar Council of Gujarat to look into the allegations and decide on the complaint. The order based itself on the alleged advice by Mr. Dave to Tehseen Poonawalla to withdraw his petition from the Apex Court in the Judge Loya matter, casting allegations against certain Supreme Court judge. [Dushyant Dave v Bar Council of India, Writ Petition (Civil) No. 1849 of 2018, date of order: 27.02.2018)
- Court takes sou moto cognisance in Kerala tribal lynching case – On February 22, a 27-year-old tribal youth Madhu was beaten to death by a mob at Kadukumanna hamlet in Attappady, near Palakkad. The Kerala High Court has taken sou moto cognisance of the murder based on a letter written by Justice Surendra Mohan to the Chief Justice of the Kerala High Court. The Bench then took cognisance of the matter, and asked the Government to reply in 15 days.
- Notice issued in PIL seeking to declare the Telgana Eunuchs Act as unconstitutional – The Andhra Pradesh High Court has issued notice to the State of Telangana on a writ petition challenging the Telangana Eunuchs Act of 1919 as being ultra vires to Articles 14, 15, 19 and 21 of the Constitution of India. The petition has been filed by activists with the Centre for Law and Policy Research arguing that the Act is an obstacle in the full realisation of the rights of transgender persons, especially in the light of the decision in NALSA v Union of India and Justice KS Puttuswamy v Union of India. As per the petition, the Act discriminates against transgender persons only based on impotency and is clearly a case of targeted discrimination.
- Challenge to TRAI Regulations delivers a split verdict: The Madras High Court has delivered a split verdict in a challenge to the TRAI Regulations, 2017 regarding the validity of tariff order and interconnection regulation introduced by TRAI in 2017. In this case, Telecommunications (Broadcasting and Cable) Services Interconnection (Addressable Systems) Regulations, 2017 and Telecom (Broadcasting and Cable) Services (Eighth) (Addressable Systems) Tariff Order, 2017, which prevented the mixing of pay channels and free to air channels in a single bouquet, were challenged by TV Channels like Star TV and Vijay Television. The petition argued that TRAI was empowered only to regulate carriage or transmission of channels, but cannot regulate content, which was the sole preserve of the Copyright Act, 1956. While Justice Sundar held that TRAI regulations did touch upon content regulation, Chief Justice Smt. Indira Banerjee held that TRAI has wide powers of regulation and 2017 Regulations did not pertain to content. In light of split verdict, the matter is now placed before the next senior most judge to nominate a third judge to decide the issue. [Star TV Private Ltd. & Ors. vs. DIPP, Ministry of Commerce and Industry & Ors.,P. No. 44126 of 2016, date of judgment: 02.03.2018]
Other developments –
- Bombay Lawyers’ Association writes to Acting Chief Justice of Bombay HC regarding change in assignment in Sohrabbudin case – The Bombay Lawyers’ Association has written to the Acting Chief Justice of Bombay High Court, Justice VK Tahilramani seeking urgent remedial measures against reassignment of matters related to the Sohrabuddin case. The Justice originally hearing the cases had in the past reprimanded the CBI for not providing requisite assistance for the case. The letter points out that in the new assignment, the case has gone to Justice Gavai, who has spoken out against the Caravan story and rumours concerning Judge Loya’s death. The BLA has urged the ACJ to ensure that justice should not just be done, but also appear to have been done.