In the season of bank frauds, NDA govt’s anti-corruption crusade goes into overdrive

The Fugitive Economic Offenders Bill 2018, which will be tabled when the budget session of Parliament resumes, provides for proclaiming an economic offender who has fled the country as a fugitive, issuing an arrest warrant against the person and confiscating his or her assets before conviction.

business Updated: Mar 02, 2018 10:17 IST
Gireesh Chandra Prasad
Gireesh Chandra Prasad
Livemint, New Delhi
Punjab National Bank,PNB fraud,Nirav Modi
A Nirav Modi jewellery showroom in the Defence Colony area of New Delhi. The billionaire diamantaire, his uncle Mehul Choksi and associates are at the heart of a Rs 12,636 crore fraud at Punjab National Bank. Both Modi and Choksi are believed to have left India early in January. (PTI)

The Union government on Thursday signalled a zero-tolerance approach to white-collar crime, approving a new law targeting economic offenders fleeing the country, and creating a regulator for chartered accountants and audit firms.

The actions, coming two weeks after Punjab National Bank (PNB) went public with a multi-billion dollar fraud, are part of a series of steps the government has initiated to mitigate the financial and political fallout.

These include banking and bankruptcy reforms, disqualification of directors of errant companies, striking shell companies off the records and stringent action taken by various regulators in the last few weeks against those who allegedly duped banks. Thursday’s cabinet decisions are expected to create a deterrent to economic offenders fleeing the country and make auditors more accountable for their actions.

The Fugitive Economic Offenders Bill 2018, which will be tabled when the budget session of Parliament resumes, provides for proclaiming an economic offender who has fled the country as a fugitive, issuing an arrest warrant against the person and confiscating his or her assets before conviction.

Finance minister Arun Jaitley, who briefed reporters about the decision, said that the bill provides for confiscating all assets of such offenders including any benami assets (held by proxies), not just the proceeds of crime. “In future, there will be a mechanism for international cooperation too. We will need an appropriate arrangement with other nations to confiscate overseas assets of such offenders,” Jaitley said.

Only offences above Rs 100 crore will be pursued under the Fugitive Economic Offenders Bill 2018 in order to prevent overcrowding of courts.

At the same time, the government has decided to set up a National Financial Reporting Authority (NFRA) to regulate auditors. Creating such a body was first proposed in the Companies Act, 2013.

Once it is created, NFRA can impose a penalty of up to five times the fee received in the case of professional or other misconduct by individual chartered accountants and up to 10 times the fees received in the case of audit firms. It can also bar an auditor for up to 10 years. NFRA will probe professional misconduct of auditors in all listed companies and in large unlisted companies, the size of which will be specified in the rules, an official statement said.

Over the past few weeks, the Central Bureau of Investigation (CBI), the Enforcement Directorate (ED) and the income-tax department, among others, have frozen bank accounts and seized properties of jewellery designer Nirav Modi and his uncle Mehul Choksi. Companies linked to Modi and Choksi are allegedly involved in the PNB fraud, the size of which has been now revised to Rs 12,636 crore. Separately, investigative agencies have seized assets of Rotomac group, which has defaulted on Rs 3,695 crore worth of loans.

On Thursday, ED attached 41 properties worth Rs 1,217 crore belonging to Choksi and his Gitanjali group.

Modi, Choksi and liquor magnate Vijay Mallya, all of whom are wanted by one investigative agency or the other, have fled the country. Mallya’s spokesperson and Choksi’s lawyer declined to comment for the story. Calls and messages to the lawyer representing Nirav Modi remained unanswered till press time.

“Clearly, the current regulations have not been successful to get auditors to work independently. This body (NFRA) and the rules framed should achieve this objective. This should reinstate confidence in audits and financial statements of companies and financial institutions,” said Daksha Baxi, executive director of law firm Khaitan & Co.

Meanwhile, on Thursday, CBI arrested former PNB chief manager Bishnubrata Mishra. He was responsible for concurrent audit at the bank during 2011-2015.

Shaswati Das and Remya Nair contributed to this story.

First Published: Mar 02, 2018 10:16 IST