This Article is written by Vedant Tapadia, student of Hidayatullah National Law University.
The Supreme Court on April 9, 2019, in the matter of Satish Chandra Verma vs. Union of India, has reiterated that right to travel abroad is an important basic human right. A Bench comprising of Justice M.R. Shah was adjudging an appeal filed by IPS Officer Satish Chandra Verma, who was denied permission to travel abroad on account of a pending departmental inquiry against him. The bench while dismissing the appeal referred to the judgment in Maneka Gandhi vs. Union of India and upheld its decision on “right to travel abroad” .
The Apex court of India held that “The right to travel abroad nourishes independent and self- determining creative character of the individual, not only by extending his freedoms of action, but also by extending the scope of his experience.” So, can such an essential fundament right relating directly with the freedom and liberty of an individual is absolute or can it be reasonably restricted? Answering the question the Madras High Court said, the ‘right to travel abroad’ though is a fundamental right, but it is “not an absolute one,” and it is subject to certain reasonable limitations. Certain acts of economic offenders such as Vijay Mallya and Nirav Modi, fleeing out of the country after defaulting, makes it evident that the right to travel abroad, though is a fundamental right essential to an individual to enjoy his liberty, can also be used as an evasion tool to escape prosecution against the financial default.
FUGITIVE ECONOMIC OFFENDERS BILL, 2018
In order to deter economic offenders from evading the process of Indian law by remaining outside the jurisdiction of Indian courts, Government has introduced the Fugitive Economic Offenders Bill, 2018 in Parliament. The Bill provides for attachment of property of a fugitive economic offender, confiscation of such offender’s property, and disentitlement of the offender from defending any civil claim.
Since the Fugitive Economic Offenders Bill, 2018 provides for recovery and rectification of the said defaults in payments of debts and loans owed, the question now remains that how can these “Fugitive economic offenders” be detected by their creditors and moreover if the need be, how can these defaulters be stopped from fleeing the country in the first place?
The government is presently planning to amend Passport Act, 1967 to prevent economic offenders from fleeing out of the country. For this purpose, the government had formed a committee headed by Secretary of Financial Services Rajeev Kumar. The committee has suggested amendments in Passport Act under which a person with “a very high amount of financial risk” would be asked to stay back if banks ‘red flag’ any case. The Panel recently submitted its report to the Home Ministry regarding amendments that will specify well-defined criteria to identify cases according to different classification of financial risks. It will prevent the offenders from fleeing the country due to ‘look-out notice’ issued by the authorities. In addition to this, the Home Ministry issued two circulars recently, authorising Chief Executive Officers and Chairman-cum-Managing Directors of Public Sector Banks (PSB’s) and the Serious Fraud Investigation Office (SFIO) to request designated authorities to generate a ‘Lookout Circular’ (LOC) against any willful defaulter or fraudster if they think the person may flee the country on defaulting.
The government has advised all Public Sector Banks to obtain a certified copy of the passport of the promoters/directors and other authorised signatories of companies availing of loan facilities of Rs. 50 crore and above. The advisory further states that, in existing cases, where loans of Rs. 50 crore and above are given, banks may collect passport details. And if the need be the Government has also empowered PSU banks to request for lookout circulars against willful defaulters and fraudsters. The Home Ministry of India has also authorised the Serious Fraud Investigation Office (SFIO), a statutory corporate fraud investigation agency, to request for lookout circulars (LOCs) and to alert immigration check posts to stop anyone leaving India if it feels the suspect may escape from India. Any Chief Managing Director or a Chief Executive Officer of a Public Sector Bank as well as the Serious Fraud Investigation Office can now ask the Home Ministry, the Ministry of External Affairs, the Customs and Income Tax Departments, the Directorate of Revenue Intelligence, the CBI, the Regional Passport Officers and the Police to issue an LOC to alert immigration check posts to stop any defaulter or fraudster from leaving India. A Lookout Circular (LOC) is valid for a year unless its duration is specified.
Until today, investigating agencies would request LOCs in cognisable offences under the IPC or other laws in case the accused evaded arrest or did not appear before court despite the generation of the non-bailable warrants and other coercive measures and there was a likelihood of the accused leaving the country to escape arrest. However, witnessing the modern evasion tactics being used by Indian defaulters and fraudsters it had become sine qua non for the banks and the fraud investigation offices to have the power and a due process in place to specify well-defined criteria to identify cases according to different classification of financial risks for issuing a legal lookout notice against the suspected defaulter. Therefore, even though it is a restriction of a fundamental right provided to us under Article 21 of the Indian constitution, it acts as a guardian of the economy as well as the protector of the recovery rights of the financial creditors of our country by preventing the ‘Economic Offenders’ from taking a piece of the economy with them in the form of defaulted money and avoid prosecution against their defaults and escape due payments by fleeing to a foreign country instead.
Hence, this proposed amendment of the Passport Act, 1967 is of utmost need and importance and will be a major achievement in commercial law in India providing security to the financial creditor and above all strengthening the economy against the acts of these fugitive defaulters.
- Satish Chandra Verma v. Union of India, CIVIL APPEAL NO.3802 OF 2019
- Maneka Gandhi v. Union of India, (1978) 1 SCC 248
- Fugitive Economic Offenders Bill, 2018, Act Number 17 of 2018
- Passport Act, 1967, Act Number 15 of 1967
- P Jain, Indian Constitution Law (6th Ed. Reprint 2012, Lexis Nexis Butterworth Wadhwa, Nagpur).
- Dr Durga Das Basu, Introduction to the Constitution of India, LexisNexis (21st ed. 2013).
- Dr .J. N. Pandey, The Constitutional Law of India (Central Law Agency, Allahabad, 46th Edition 2009)
- Granville Austin, Indian Constitution Cornerstone of a Nation, Oxford Publication.