It’s a case of shutting the stable door after the horse has bolted. Last Thursday, Finance Minister Arun Jaitley announced that the government would table the Fugitive Economic Offenders (FEO) Bill in the current Budget session. The government will also set up the National Financial Reporting Authority (NFRA) to police big scams and NPAs, including overseeing audit firms.
The move has obviously been triggered by the PNB scam, but what prevented the government from acting earlier? When the Satyam scandal broke in January 2009, it was found that auditors Pricewaterhouse Coopers (PwC) had helped Satyam honcho Ramalinga Raju falsify revenues by over $1.5 billion. PwC faced fines of $6 million imposed by US regulators, but the Indian government did little to check malpractices by audit firms. Setting up the NFRA was one of the key amendments proposed to the Companies Act in 2013, but these have not been notified for the last five years.
Even though it comes late, the FEO Bill has several positive features. Investigating agencies have been given summary powers to confiscate properties and benami assets of offenders. Court proceedings against the accused will be fast-tracked and ‘fugitives’ will not be able to pursue civil claims. But there are genuine fears that such summary processes could lead to draconian acts by policing agencies. There are dozens of existing options available to bring fugitive fraudsters to justice and recover their ill-gotten gains.
The Directorate of Enforcement can act against money laundering under the Foreign Exchange Regulation Act. Action can be taken against corruption and bribery of bank officials under the Prevention of Corruption Act, 1988. For listed companies and their directors, the Companies Act and SEBI Act have a host of ‘civil’ options including ban from trading and suspension of directors. The list can go on. Do we need one more piece of legislation or would strengthening of the Companies Act have sufficed?