On this episode of Digging Deeper, we look into why was it so easy for Vijay Mallya to leave the country unchecked.
As the Vijay Mallya extradition saga unfolds, analysts continue to ponder over the question if more stringent laws can change the perception that economic fugitives can easily defraud India of its money.
On this edition of Digging Deeper with Moneycontrol, we will try to answer that question and go over the Vijay Mallya story once again to understand just how and why was it so easy for him to leave the country unchecked. This is after all a country where impoverished farmers kill themselves over sums that are paltry in comparison to the crores owed by Mallya.
On December 11, 2018, Raghav Pandey and Neelabh Bist wrote a piece in Firstpost to understand the legal aspect of the latest developments where the London Westminster Magistrates Court ordered for the extradition of Vijay Mallya to India. Chief Magistrate Judge Emma Arbuthnot found a prima facie case against Vijay Mallya for fraud, conspiracy and money laundering.
However, we need not celebrate prematurely, as Mallya still has 14 days to appeal against the decision and which is only recommendatory and has to be then implemented by the Home Secretary who has the final authority on the issue.
But how did he get away in the first place?
Before the law could catch up with Mallya in India, he fled to the UK in March 2016, knowing very well that he would have to be proven guilty in the courts of the UK for the process of extradition to be initiated. He was betting on putting forward a strong case in front of the Magistrates Court, and knew that only if he was found guilty, would he be extradited.
What was working in his favour, says Firstpost, was UK' s Immigration Act, 1971, according to which, a person can continue to remain in the country even if their passport is revoked as long as their passport was valid when they were granted an entry to the country. Mallya had a UK residency permit since 1992, he could have remained there for an indefinite period.
Before we set out correcting the loopholes back home, we need to ask also why the laws in other countries that are increasingly becoming restrictive and unwelcoming to political asylum seekers and refugees displaced by humanitarian crises, are so tolerant of economic fugitives.
We quote Firstpost, "Therefore, the law there needs a revision wherein a clear and not ambiguous provision can be added stating that a non-resident would not be given residency permit if he is an economic offender or a fraudster in some other country. This will help resolve the abuse of the process of law in the UK because of which there is an indefinite delay in the enforcement of sentences passed in a foreign country."
It was not easy to even come this far for lawyers arguing against Mallya. As First Post says and we quote, “In the Westminster Magistrate's Court, the lawyers arguing for the Government of India successfully passed the tough road of the Extradition Treaty, 1993 signed between the UK and India wherein under Article 9 several grounds are listed as a defence against extradition. Punishment on account of race, religion, nationality or political opinion in the home country together with the accusations not being made in good faith in the interests of justice could stand as a ground for the refusal of extradition."
The piece points at the vagueness in the language in the Extradition Treaty. "The terms ‘political’, ‘good faith’, ‘interests of justice’ can be swayed either way to justify the actions of any person. This was what was exploited by the lawyers of Vijay Mallya as they argued that Mallya is sought for political considerations in India. The argument so raised, ironically, is directly against the discourse which is perpetuated in India that the dispensation is protecting him and in fact aided his escape from India."
Moreover, it was also argued by the disgraced tycoon's lawyers that Mallya was likely to be subjected to unfair ‘media trials’, and that he was recovering from a “genuine business failure” and his human rights would be infringed upon in the dilapidated Indian prisons.
Firstpost reminds us of precedents where lawyers of Sanjeev Kumar Chawla, the key accused in the cricket match-fixing scandal of 2000 had argued similarly in UK that the lack of proper infrastructure of Indian jails could be cited as the reason for non-extradition, despite the Court holding him guilty.
Not to forget the fact that Westminster Magistrates' Court in London ruled in favour of not just Sanjeev Kumar Chawla on October 16, 2017 but also discharged a fraud case against a British Indian couple, Jatinder and Asha Rani Angurala. Jatinder's extradition was denied as there was an inordinate delay of almost 25 years in making a request.
The piece suggests that proper development of the criminal justice system and infrastructure in India could prevent fraudsters like Mallya and Sanjeev from conveniently citing their abysmal conditions to protect themselves from extradition.
While Chief Magistrate Judge Emma Arbuthnot found there was "clear evidence of dispersal and misapplication of the loan funds" and ruled there was a case of fraud and a conspiracy to money laundering against Mallya, she also dismissed any impediments to extradition on the grounds of the prison conditions.
She accepted the Indian government's assurances that he would receive all necessary medical care at Barrack 12 in Mumbai's Arthur Road Jail, according to multiple reports. The judge said that Barrack 12 had been recently redecorated and Mallya would have access to personal medical care to manage his diabetes and coronary problems. There was no ground at all to believe that he faces any risk in jail, the judge further ruled.
A proactive step
So far so good, but what has shifted the balance in favour of India in this particular case is the enactment of the Fugitive Economic Offenders Act, 2018 . This is finally a welcome step in tilting the scales towards justice. Through this law, all the assets of absconders like Mallya, which have or not been attached by the Enforcement Directorate under the Prevention of Money Laundering Act (PMLA), can be immediately confiscated.
Says Firstpost, "The drafting of the law suggests that it has been enacted for big fish like Mallya so that history doesn’t repeat itself. It is only through a change in policies and laws like these can it be ensured that businessmen don’t take the country for a ride. A stricter regime of law as well as working on our inefficiencies can change the dynamics of the economic frauds committed in broad daylight in the country."
So what is the Fugitive Economic Offenders Bill 2018?
In July this year, The Indian Express published a follow-up piece to answer this question.
The Fugitive Economic Offenders Bill was first introduced in Lok Sabha on March 12 during the Budget Session of the Parliament but could not be passed due to a logjam over various issues.
The Lok Sabha, informed the piece, finally cleared the Fugitive Economic Offenders Ordinance, 2018 during the monsoon session of Parliament. The bill, empowers authorities to attach and confiscate properties and assets of economic offenders like loan defaulters who flee the country.
The piece contextualises the Ordinance in the recent financial frauds especially the Rs 13,000 crore PNB scam where diamante Nirav Modi and Mehul Choksi fled the country. We quote, "it became apparent that the existing civil and criminal provisions are not entirely adequate to deal with the severity of the problem. The absence of offenders during investigations poses problems for the probing agencies apart from undermining the law of the country. "
What the Ordinance, hopes to achieve is to strengthen the rule of law and to force the accused to return to India and face trial for their offences. "This would also help the banks and other financial institutions to achieve higher recovery from financial defaults committed by such fugitive economic offenders, improving the financial health of such institutions."
Further, the piece explains the Ordinance makes provisions for a court (‘Special Court’ under the Prevention of Money-laundering Act, 2002) to declare a person as a ‘Fugitive Economic Offender.’ "A Fugitive Economic Offender is a person against whom an arrest warrant has been issued in respect of a scheduled offence and who has left India so as to avoid criminal prosecution, or being abroad, refuses to return to India to face criminal prosecution.
A scheduled offence refers to a list of economic offences contained in the Schedule to this Ordinance. Further, in order to ensure that courts are not over-burdened with such cases, only those cases where the total value involved in such offences is Rs 100 crore or more, is within the purview of this ordinance."
The piece outlines other provisions under the ordinance and we share them here:
(i) making an application before the special court for a declaration that an individual is a fugitive economic offender;
(ii) attachment of the property of a fugitive economic offender and proceeds of crime;
(iii) issue of a notice by the special court to the individual alleged to be a fugitive economic offender;
(iv) confiscation of the property of an individual declared as a fugitive economic offender or even the proceeds of crime;
(v) disentitlement of the fugitive economic offender from defending any civil claim
(vi) appointment of an administrator to manage and dispose of the confiscated property under the act.
Further, if at any point of time in the course of the proceeding prior to the declaration, the alleged Fugitive Economic Offender returns to India and submits to the appropriate jurisdictional court, proceedings under the proposed Act would cease by law.
"All necessary constitutional safeguards in terms of providing hearing to the person through counsel, allowing him time to file a reply, serving notice of summons to him, whether in India or abroad and appeal to the high court have been provided for."
Meanwhile the country's largest lender State Bank of India (SBI) said this week, that the extradition of fugitive liquor baron Vijay Mallya from the UK to India will speed up the recovery of over Rs 9,000 crore of loans.
SBI chairman Rajnish Kumar told reporters that a higher recovery of loans is now a possibility. He said and we quote, "The message is very loud and clear. What we have to understand is that it (extradition) is a message that you just can't default and run away from the country. Lending is an important business for both lenders and borrowers as we need investment in the country. But the message is that you have to do clean banking and you have to be very careful about what is the purpose of the money lent."
In the past few weeks, the 62-year-old former owner of the now defunct Kingfisher Airlines has been tweeting his innocence and claiming that he has been falsely dubbed as a defaulter back home. As we reported before, he has also offered to pay back the full amount of the principal loan he owes to multiple banks.
What seems likely now is that if Mallya’s extradition is carried out successfully, it will pave the way for the extradition of Nirav Modi and Mehul Chowksi, wanted in the biggest-ever banking fraud of over Rs 13,000 crore at Punjab National Bank.
Mallya on the other hand has said that after Monday's verdict, he is considering all his options.
The UK Home Office in the meanwhile, has confirmed the receipt of the Westminster Magistrates' Court verdict in favour of Vijay Mallya's extradition to India.The decision now lies with Home Secretary Sajid Javid, to formally order the extradition and he has two months at his disposal to weigh the pros and cons of an outcome though further appeals could derail the prospect of a speedy extradition.