Prevention of Money Laundering Act, 2002
The Fugitive Economic Offenders Act, 2018
The PMLA ordinarily confiscates property only after a trial, and a trial needs an accused in court. An offender who flees abroad can stall both. The Fugitive Economic Offenders Act, 2018 closes that gap. Where a person wanted for a scheduled offence involving one hundred crore rupees or more leaves India or refuses to return, the ED may apply to the Special Court to declare him a fugitive economic offender, whereupon his property can be confiscated without a trial. This note explains the Act and its relationship with the PMLA and extradition.
From flight to forfeiture under the FEO Act, with the exit door, the effects of declaration, and comparison with the PMLA and extradition
1. Key Definitions
§ Who is a fugitive economic offender Fugitive economic offender. An individual against whom a warrant of arrest in relation to a scheduled offence has been issued by any court in India, and who has left India so as to avoid criminal prosecution, or, being abroad, refuses to return to India to face criminal prosecution. Scheduled offence. An offence specified in the Schedule to the Act, where the total value involved is one hundred crore rupees or more. The Schedule covers serious economic offences under the Penal Code, now the BNS, and special laws, including cheating, forgery, corruption, customs, tax, securities and companies offences, and money laundering. |
2. The Procedure
Step | What happens |
|---|---|
Application | The Director, or an officer authorised, files an application before the Special Court under the PMLA, with reasons for believing the person is a fugitive economic offender, and details of property |
Attachment | Property may be attached provisionally, with the Special Court's permission, or in urgency, pending the proceedings |
Notice | The Special Court issues notice requiring the person to appear at a specified place and time, not less than six weeks ahead |
Termination | If the person appears in person before the declaration, the Special Court terminates the proceedings under the Act |
Declaration | If not, after hearing, the Special Court may declare the person a fugitive economic offender |
Appeal | An appeal lies to the High Court within thirty days |
3. The Effect of Declaration
§ What the declaration does • Confiscation of proceeds. The proceeds of crime in India or abroad, whether or not owned by the offender, are confiscated. • Confiscation of other property. Any other property or benami property of the offender in India or abroad may also be confiscated. • Vesting. The confiscated property vests in the Central Government, free from encumbrances; the Government may appoint an Administrator to manage and dispose of it. • Bar on civil claims. A court or tribunal may disallow the offender, or a company in which he is a promoter, key managerial person or majority shareholder, from putting forward or defending any civil claim. |
4. The FEO Act, the PMLA and Extradition
Basis | PMLA | FEO Act | Extradition |
|---|---|---|---|
Aim | Punish laundering; confiscate proceeds | Deprive the absconder of assets; compel return | Bring the person back for trial |
Confiscation | On conviction, or under s. 8(7) | On declaration, without trial | Not its purpose |
Threshold | Any scheduled offence | Scheduled offence of Rs 100 crore or more | Extraditable offence; dual criminality |
Forum | Special Court | The same Special Court | Courts of the requested State |
5. In Practice
i. Origin. Enacted after high-profile economic offenders left India during investigations into bank frauds and defaults; an Ordinance in April 2018 was replaced by the Act later that year.
ii. First declarations. Vijay Mallya was the first person declared a fugitive economic offender, in January 2019; Nirav Modi was declared later in 2019.
iii. Challenges. Constitutional challenges have been raised, including to the bar on civil claims and to confiscation without trial; check their current status.
6. Frequently Asked Questions
Who is a fugitive economic offender?
An individual against whom an arrest warrant has been issued for a scheduled offence of one hundred crore rupees or more, who has left India to avoid prosecution or refuses to return.
Can property be confiscated without a trial under the FEO Act?
Yes. On declaration by the Special Court, proceeds of crime and other property of the offender may be confiscated without a trial.
Can the proceedings be stopped?
Yes. If the person appears before the Special Court before the declaration, the proceedings are terminated.