India's legal landscape has evolved rapidly, with a slew of new regulations as well as guidelines. The ambit of 'economic offenses' has widened considerably with time, and enforcement agencies have acquired more teeth. Today, evading punishment by attributing it to reasons such as commercial decisions or business losses is no longer acceptable. Recently enacted and amended laws, and the consequential punishment that is imposed highlights a loud and clear message to the offenders - organizations are not just looking to recover the money. They are willing to pursue individual (and sometimes criminal) prosecutions. This means the ones proved guilty will end up spending a pretty good amount of time in jail.
A close look at deterrents to evade prosecution Recent rulings:
A recent judgment by a Central Bureau of Investigation (CBI) Court in Mumbai has been an eye opener in many ways. The verdict was a rigorous move wherein bank loan defaulters and bank officers were sentenced to a life imprisonment term for fraudulently sanctioning a loan. In this case, the loan amount of a few odd crores sanctioned by the bank to a family business establishment, and subsequent failure in repayment would have resulted in (minimum) punishment of three years. Under Section 467 of the Indian Penal Code (IPC), the punishment for forgery is up to 10 years. However, this section also has a provision of life imprisonment, which is the maximum. It has been observed that increasingly, the courts are having no qualms in imposing harsher rulings, making it a true deterrent to curb criminal behavior and activities.
Today, offenders (alleged or otherwise) fleeing the country to escape prosecution may not find it very simple anymore. The Fugitive Economic Offenders Act, 2018 has been enacted with the provision to confiscate properties and assets of economic offenders who attempt to circumvent prosecution by leaving the jurisdiction of the Indian courts. For instance, a recent case had a special Prevention of Money Laundering Act (PMLA) court declaring an individual as a "fugitive economic offender" and leading to subsequent confiscation of its properties.
But this was not the case earlier. Perpetrators were not bound by such stringent laws and could easily "enjoy"
the spoils of their crime by staying abroad and avoiding legal action. But now, current laws allow enforcement
agencies to seize their tangible assets (in their name as well as related parties). Hence, there is a higher chance of them surrendering to the courts and facing prosecution. Confiscation of assets under the new Fugitive Economic
Offenders Act is fairly draconian, and hits criminals where it hurts the most. In most cases, unethical acts are done to amass assets; depriving offenders of these assets no longer makes it a lucrative deal as these have to be driven by profit. The adage, "crime must not pay" holds merit in this case.
To give an example, let's take the recent case reported by the media about a bank and how certain individuals defrauded the institution, and fled the country to avoid prosecution. They have been declared "fugitives" under the Fugitive Economic Offender Act, and reports highlight that assets worth over thousands of crores have been seized.
On the other hand, the Prevention of Corruption Act (POCA) has been amended with new provisions to prosecute the bribe giver. Previously, POCA did not include a separate provision for individuals who might (or promise to) give an undue advantage. But now, it makes these advantages given to public servants an offense that is punishable by seven years imprisonment or fine, or both. Section 16A to 16J also empowers the authorities to seize, attach and confiscate perpetrator's property which would have been amassed by unethical means and ill-gotten money.
Government departments taking the lead
India's buoyant regulatory scenario has even income tax evaders facing the heat, instead of just getting away by
paying a penalty. As per data released by the Government, department has initiated prosecution in close to 7700 cases (2017-18) – this was about three times the number in comparison to the previous year.
Prosecution cases filed:
• 2018-19 – 4500
• 2017-18 – 1252
• 2018-19 - 75
• 2017-18 - 16
The department is also increasingly using data mining and Big Data analytics to catch tax evaders by accessing the information through social media that can potentially
identify mismatches between spending patterns and declaration of income.
Thus, economic offenses are no more an "economically viable" option for perpetrators as new and improved provisions of the law, harsher punishment and subsequent confiscation of ill-gotten money will prove to be a major impediment.
Disclaimer – The views expressed in this article are the personal views of the authors and are purely informative in nature.
Partner and Head - India and Emerging Markets, Forensic & Integrity Services, EY India
Partner, Forensic & Integrity Services, EY India
Senior Advisor, Forensic & Integrity Services, EY India