Clipping fleeing fraudsters' wings

The Ministry of Corporate Affairs (“MCA”) is deliberating the proposal of gathering the information related to the passports of the persons acting as directors on board of directors of Indian companies with the objective to restrain the fraudsters from absconding the nation to foreign territories.

This proposal has garnered prominence following the flurry of incidents of corporate fraudsters absconding the nation amidst the fear of getting imprisoned for default on bank loan payments and / or siphoning the funds.

It is envisaged that the implementation of the proposal will facilitate authorities in keeping a check on the movement of suspected fraudsters and thwart them from fleeing the nation.

Apart from this proposal, last year the central government as part of its efforts to curb illegal channelizing of financial funds and black money via shell firms de-registered 2.26 lakh companies and disqualified more than 3 lakh directors.

As per the official reports, there are numerous instances of financial fraudsters absconding the nation to escape the jurisdiction of the Indian courts in anticipation of initiation of criminal proceedings against them.

To firmly deal with such cases, the central government has issued an ordinance (Fugitive Economic Offenders Ordinance, 2018) empowering the authorities to attach and confiscate the financial assets and properties of the financial fraudsters.

Another aspect to be noted here is that special courts are empowered to declare certain persons as the Fugitive Economic Offenders and pass the orders to attach the assets and properties of such Fugitive Economic Offenders to realize the default loan amounts.

It is a positive sign that the central government is consolidating strong laws to firmly deal with fraudsters. However, more emphasis is required on strict implementation of these laws; then only the objectives of the laws will be accomplished.

It is hoped that gathering the director passport details will facilitate authorities to monitor the movement of the suspected directors and take necessary steps to thwart the efforts of the fraudsters from fleeing the nation and get them to face the Indian courts and some accountability will be ensured in the corporate system. 

Research inputs by Paruchuri Baswanth Mohan