PNB scam: Court declares Nirav Modi fugitive economic offender

Syllabus subtopic: Challenges to internal security through communication networks, role of media and social networking sites in internal security challenges, basics of cyber security; money-laundering and its prevention

News: A special court Thursday declared diamantaire Nirav Modi, a “fugitive economic offender” under the Fugitive Economic Offenders Act, 2018 — enacted against those fleeing the country to evade the process of law. The court will now hear submissions for confiscation of his property.

Prelims and Mains focus: key features of the Fugitive Economic Offenders Act, PMLA, Enforcement Directorate

Context:

When Modi left India on January 1 last year, he was aware about payments that were due on January 25, 2018, to the Punjab National Bank on the Letters of Undertaking issued to his firms, and therefore he left the country in “suspicious circumstances”, the court said.

The special court, designated under the Prevention of Money Laundering Act, said the Enforcement Directorate had filed a plea to declare Modi a fugitive economic offender last year.

The ED had submitted Modi left the country due to his involvement in an alleged bank fraud to the tune of Rs 6,498.70 crore in connivance with the bank staff though the diamantaire claimed it was a business-related trip. The court accepted the contention that Modi left the country to avoid criminal prosecution. Modi was arrested in the United Kingdom and is currently facing extradition proceedings.

Definition: Fugitive Economic Offender

The fugitive economic offenders’ law came into force in August 2018. A person can be named an offender under this law if there is an arrest warrant against him or her for involvement in economic offences involving at least Rs. 100 crore or more and has fled from India to escape legal action.

The procedure:

• The investigating agencies have to file an application in a Special Court under the Prevention of Money-Laundering Act, 2002 containing details of the properties to be confiscated, and any information about the person’s whereabouts.

• The Special Court will issue a notice for the person to appear at a specified place and date at least six weeks from the issue of notice.

• Proceedings will be terminated if the person appears. If not the person would be declared as a Fugitive Economic Offender based on the evidence filed by the investigating agencies.

• The person who is declared as a Fugitive Economic Offender can challenge the proclamation in the High Court within 30 days of such declaration according to the Fugitive Economic Offenders Act, 2018.

Enforcement Directorate

Directorate of Enforcement is a specialized financial investigation agency under the Department of Revenue, Ministry of Finance, Government of India, which enforces the following laws:

• Foreign Exchange Management Act,1999 (FEMA) – A Civil Law, with officers empowered to conduct investigations into suspected contraventions of the Foreign Exchange Laws and Regulations, adjudicate, contraventions, and impose penalties on those adjudged to have contravened the law.
• Prevention of Money Laundering Act, 2002 (PMLA) – A Criminal Law, with the officers empowered to conduct investigations to trace assets derived out of the proceeds of crime, to provisionally attach/ confiscate the same, and to arrest and prosecute the offenders found to be involved in Money Laundering.

PMLA 2002

Prevention of Money Laundering Act, 2002 is an Act of the Parliament of India enacted to prevent money-laundering and to provide for confiscation of property derived from money-laundering.

• PMLA and the Rules notified there under came into force with effect from July 1, 2005.
• The Act and Rules notified there under impose obligation on banking companies, financial institutions and intermediaries to verify identity of clients, maintain records and furnish information.