India takes its first big step towards avoiding future Nirav Modi, Vijay Mallya-like scams

• On July 20th, the lower house of India’s Parliament passed the Fugitive Economic Offenders Bill.
  
• The bill allows the government to seize the domestic as well as foreign assets of “economic offenders” who have left the country so their creditors may recover their dues.
  
• In addition to loan defaults and money laundering, the crimes that fall under the purview of the bill include tax evasion and the use of black money.
  

With the multi-million dollar frauds of Vijay Mallya, Nirav Modi, Mehul Choksi and Lalit Modi still fresh in the memory, India’s lower house of Parliament has finally passed a bill aimed at preventing wilful defaulters and scamsters from getting away scot free.

The Fugitive Economic Offenders Bill, which was discussed and approved in the Lok Sabha on July 20th, follows a Presidential ordinance in April which was used by the Enforcement Directorate to initiate asset confiscation proceedings against Vijay Mallya last month.

It was meant to be passed in the Budget Session, but since the session proved to be extremely unproductive, the government had no choice to take the ordinance route in the interest of acting quickly. The bill will now move to the upper house of Parliament for approval before becoming an act, replacing the ordinance in the process.

Asset seizures and trials

The bill is meant to provide more firepower to the government’s clampdown on white collar crime. It allows the government to seize the domestic as well as foreign assets of “economic offenders” who have left the country so their creditors may recover their dues. In order to be designated an “economic offender”, the government needs to file a motion in a special court as it did on July 11th for Nirav Modi and Mehul Choksi.

While the bill doesn’t enable the government to bring back criminals to the country, the government assumes that the threat of asset confiscation will convince them to come back and stand trial. In addition to loan defaults and money laundering, the crimes that fall under the purview of the bill include tax evasion and the use of black money.

The bill cannot come into effect retroactively, meaning that it will only apply to scams that take place after the date of its enactment. However, the government has already used the ordinance to declare the aforementioned scamsters “economic offenders”.

The provisions of the bill indicate that the government is mainly interested in the big fish, the scamsters that make headlines. It only applies to cases where the funds laundered or dues total more than ₹1 billion.

This was a source of contention, especially amongst opposition parties, which felt that the ₹1 billion threshold would allow a lot of smaller scams to go unresolved. In response, the interim Finance Minister, Piyush Goyal, that the government would tackle smaller cases after resolving big ones.