Knowledge Nugget | Nirav Modi, Vijay Mallya among 21 FEOs: What is a Fugitive Economic Offender?

Mehul Choksi (Express Archive)

— However, the report added, decisions to declare diamond trader Mehul Choksi, Islamic preacher Zakir Naik, and Mahadev app promoters Sourabh Chandrakar and Ravi Uppal as FEOs under the Fugitive Economic Offenders Act (FEOA) remain sub judice in courts.

In this context, let’s revisit Fugitive Economic Offenders Act (FEOA).

Key Takeaways:

Who is a FEO?

— An FEO is an individual against whom a warrant for arrest in relation to a scheduled offence, where the total value involved in such offence or offences is Rs 100 crore or more, has been issued by any court in India, and who has left India to avoid criminal prosecution or being abroad, refuses to return to India to face criminal prosecution. 

— Some of the key offences listed in the schedule are: (i) counterfeiting government stamps or currency, (ii) cheque dishonour, (iii) money laundering, and (iv) transactions defrauding creditors.   

What is the procedure of application?

— A director or deputy director (appointed under the Prevention of Money-Laundering Act, 2002) may file an application before a special court (designated under the 2002 Act) to declare a person as a fugitive economic offender.  

What does the application contain? 

(a) the reasons to believe that an individual is a fugitive economic offender

(b) any information about his whereabouts

(c) a list of properties believed to be proceeds of a crime for which confiscation is sought

(d) a list of benami properties or foreign properties for which confiscation is sought

(e) a list of persons having an interest in these properties

What are the proceedings? 

— Upon receiving an application, the special court issues a notice to the individual requiring him to appear at a specified place on a date.

— If an individual fails to appear, it will result in him being declared a fugitive economic offender.  

— The director or deputy director may attach any property mentioned in the application with the permission of a special court. 

— Authorities may provisionally attach any property without the prior permission of the special court, provided that they file an application before the court within 30 days.  The attachment will continue for 180 days, unless extended by the special court.

— After hearing the application, the special court may declare an individual as a fugitive economic offender. 

What properties can be confiscated? 

(a) properties which  are proceeds of crime

(b) properties which are benami properties in India or abroad, and 

(c) any other property in India or abroad. 

What else?    

— The Act disallows any civil court or tribunal to disallow a person, who has been declared a fugitive economic offender, from filing or defending any civil claim.  

— It should be noted that any company or limited liability partnership where such a person is a majority shareholder, promoter, or a key managerial person (such as a managing director or CEO), may also be barred from filing or defending civil claims

— The director or deputy director will have the powers vested in a civil court which includes entering a place on the belief that an individual is a fugitive economic offender, and directing that a building be searched, or documents be seized

— Appeals against the orders of the special court will lie before the High Court.

BEYOND THE NUGGET: The Directorate of Enforcement (ED)

It was established in 1956 and entrusted with enforcing laws relating to foreign exchange management and anti–money laundering.

Over the decades, the Directorate has steadily evolved in line with India’s economic, legal and regulatory environment—transitioning from the administration of FERA to FEMA.

Today  it leads the enforcement of the Prevention of Money Laundering Act (PMLA) and the Fugitive Economic Offenders Act (FEOA).

The Foreign Exchange Management Act (FEMA), 1999, is the primary Indian legislation regulating foreign exchange transactions, cross-border trade, and investments. Enacted to facilitate external trade and manage the foreign exchange market, it replaced the restrictive FERA with a more liberalized framework, shifting from criminalizing violations to imposing monetary penalties.

The Prevention of Money Laundering Act, 2002 (PMLA) is an Indian law enacted to prevent money laundering, combat terror financing, and confiscate property derived from criminal activities. Effective since July 1, 2005, it empowers the Enforcement Directorate to investigate, seize assets, and arrest individuals involved. It carries strict penalties of 3–7 years imprisonment, extendable to 10 years for certain offenses. 

Post Read Question

Consider the following statements:

1. A Fugitive Economic Offenders is an individual against whom a warrant for arrest in relation to a scheduled offence, where the total value involved in such offence or offences is Rs 100 crore or more, has been issued by any court in India, and who has left India to avoid criminal prosecution or being abroad, refuses to return to India to face criminal prosecution. 

2. While Central Bureau of Investigation leads the enforcement of the Prevention of Money Laundering Act (PMLA), Enforcement Directorate leads the Fugitive Economic Offenders Act (FEOA).

Which of the above statements is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2