Sir, another point which is very relevant here is that such money besides the hawala cases which is quite a normal practice for people living abroad, transferring their money in that form another very ingenious way of using this money is by over-invoicing the general exports. There were two instances in the recent past which exposed a practice like this. One was, basing my information on news items appeared in the newspapers, regarding the export of large amount of fountain pens from our country. Nothing really was there. The other case was of nail polish being exported to Russia.
Again it was over-invoicing. I do not know what could possibly be the route but certainly when the general exports are over-invoiced, that procedure, that system is used again to launder money which is connected with plugged. That is the reason why, to begin with, I had said that the Schedule enumerating certain offences therein is just not enough to tackle the situation, the enormity of the situation that we face.
Sir, the two pieces of legislation which we are discussing are to an extent inter-related in so far as the problem which we intend to tackle is concerned. While the changed economic scenario, the on-going process of liberalisation warrant a liberal law like the Foreign Exchange Management Bill in place of the earlier FERA, which today could be termed, in retrospect harsh. It was enacted to deal with the situation that prevailed then in the country. In a changing, moving and a dynamic society such as ours, laws cannot really be static. Law is the manifestation of people's will expressed through their representatives in the Parliament.
1647 hours (Shri Basu Deb Acharia in the Chair)
Therefore, today, in the new economic scenario, a law like the Foreign Exchange Management Bill, which is before us today, is needed. But here again, Sir, I rise to suggest only a few amendments if the hon. Minister considers them.
I think that institution of the Special Director (Appeals) should be totally done away with. I find here that if the adjudicating authority is of a status below a particular rank, the appeal would go to the Special Director (Appeals) and against the Order of the Special Director (Appeals), there would be an appeal to the Appellate Authority and as in the other Act, against the Order of the Appellate Authority, there would be an appeal to the High Court. So, there are three appeals. Thereafter, of course, there is Special Leave, etc. to the Supreme Court. To what extent you can protract, stretch the procedure. I think--this is my humble submission--it may be provided that the adjudicating authority shall not consist of Officers below a particular rank and thereafter the appeal should straightaway go, in all cases, to the Appellate Authority and further, the same procedure be followed. Of course, by reiteration of my earlier suggestion that in the case of the Central Government, the right to appeal should come to an end with the decision of the Appellate Authority because up to that extent it is good enough for the Government and thereafter only if an individual feels aggrieved against the Order, he may file an appeal in the High Court. That will not only cut down the period of litigation but that will also mean less of expenditure on this. Today, when the Government is committed, when we are all committed, when we all want--that is the general feeling of the people--what is required is downsizing the Government. Through these measures, which are well intended measures, we are unwittingly expanding the system of Government.
Again, I find the word `Authority' is not defined in the Prevention of Money Laundering Bill. Subsequently in Sections 47, 48 and 52, we go to say that the Government can appoint authorities. Now, there is a long list of officers under different other laws who could be summoned to assist the authorities under this Act. That could, while working, lead to certain problems because you only say the police officers are hereby empowered. I think that is not the way of doing it. I again humbly submit that you may say, though it is a very small amendment otherwise, that these officers are empowered. Then, further, after providing all those things, finally you again say "whomsoever the Government may appoint." We do not know what would be the limit or the nature of duties assigned to different officers drawn from different Departments. When we are taking these two Bills together for discussion, I think, it could have been worthwhile if the Government had adopted an integrated approach to the problem. It is because, as I said, there is a slight interrelation because certain crimes are committed across the borders. The money may flow in here. The money may be utilized here for abetting, for triggering off certain type of activities in our country. If there had been one integrated approach to the problem and we had one piece of
legislation, thereby this multiplicity of authorities could have also been, to an extent, checked. These powers of the adjudicating authority could have been given to the same people and subsequently to the Appellate Authority also.
When I talk of the Appellate Authority, there is one very small amendment which I would again suggest. It says that the Appellate Authority shall consist of the Chairman and two other Members. I think it should be the Chairman and two or more Members because subsequently you talk of various Benches also. The Benches will be part and parcel of the Appellate Authority itself because the Chairman is empowered to transfer those people from one place to another or to fix the Benches to decide cases. In certain cases, he could even ask two Members of the Appellate Tribunal to decide the cases.
MR. CHAIRMAN : Shri Pawan Kumar Bansal, you can conclude now.
SHRI PAWAN KUMAR BANSAL : The Chairman could ask the other Members to take the matter singly or sitting in a Bench of two. I find from the financial memorandum that the Government proposes to set up such Benches at three places. That itself contradicts the earlier thing. So, I think if the Bill were to provide that the Appellate Authority shall consist of the Chairman and two or more Members, that could meet the situation like that.
Finally, bowing to your directions to conclude, I would support these two Bills. But at the same time, I would caution the Government not to be complacent about it. The problem of money laundering is a very grave one which, as the Minister in his opening remarks as also in the Statement of Objects and Reasons has said, not only threatens your economy but it at times tends to destabilize the society itself. It impinges upon your political system. It threatens security, sovereignty and integrity of our country. As I
said, India is only a conduit in this. For that reason, what scheme could be prepared when a particular drug starts its journey from say, South America or from the Golden Crescent or Golden Triangle that I have mentioned, before finding its way to Europe and America, what havoc it plays enroute with our economy here, are all points which we have to ponder over and be ever vigilant. Thank you very much.
SHRI ANADI SAHU (BERHAMPUR, ORISSA): Mr. Chairman, Sir, I rise to support the Foreign Exchange Management Bill and grudgingly, of course, the Prevention of Money Laundering Bill.
By any stretch of imagination, I am not able to know as to how the FEMA Bill and the Prevention of Money Laundering Bill could go together except for a few provisions like Clauses 11, 13 and 14 where there could be presumption that money is laundered and is being used by foreign persons.
I will start with FEMA. Before starting with FEMA, I crave your indulgence to recite a Rubaiyat from Omar Khayyam:
"Before the phantom of False morning died,
Methought a Voice within the Tavern cried,
"When all the Temple is prepared within,
Why nods the drowsy Worshipper outside?"
We are bringing in a new dawn of millennium. The new millennium is a millennium which is ushering in liberalisation in attitude, in behaviour, in trade, in merchandise, etc. So, when you are thinking of the new dawn, the nodding person outside the tavern should not feel drowsy. He should come forward, be active and take part in new system of work that is being ushered in.
Sir, in 1947, the FERA was enacted because of difficulties in foreign exchange reserves and other things. That man I do not know who he is. Shri S.P. Jain's, soul must be squirming in the ether because of the penalty of Rs. 55 lakh which was imposed on him for violation of keeping about Rs. 19,000 in the Deutsche Bank. That is because of the FERA. In 1973, after the Law Commission's advice and after taking into consideration the prevailing economic situation the FERA was enacted with very harsh provisions. At that time, it was necessary because of the difficulty in foreign exchange reserves and other things. Things have changed now and we are going in for liberalisation in a broad way. That is why, there is a necessity of the Foreign Exchange Management Act. Any regulatory function with a criminal will prick the conscience of a person and regulatory functions create problems for human beings. It is said in Latin Summum Jus Summa Injuria too much of legislations, too much of regulations create problems for a man.
Now, it is good that the Government has brought in a new Act where management will be done of foreign exchange and when you are managing things, there must be cooperation, there must be give-and-take basis and a belief and feeling that we go together.
My friend, who spoke earlier, was speaking of different stages of appeal and all related matter. Since we are managing things, the management has to be in a broad manner. Now, that is why, the liberal Management, the FEMA has come. In the present scenario, we have very high foreign exchange reserves which the hon. Minister of Finance has told about it yesterday itself. There is a new investment regime. When there is a new investment regime, there must be liberal views. That is why, things have changed in the FEMA which has been taken up. He has dealt with them in detail. I am not going into the details. But in FEMA also some of the provisions of the FERA have been incorporated. But the harsh provisions have been softened, softened with a view to allow a better management of foreign exchange. The punitive provisions have been diluted. That is a very good thing which has been done because a person who was violating the FERA laws and all those things was being incarcerated and lots of punishment was there. When there is some trade, there might be a little bit of criminal action or civil violation and all those things. But one should not be stringent in his attitude when there is a little bit of trade violations and all that. That is why, the punitive provisions have been deleted and there will be no criminal proceedings.
It is a very important provision which has been incorporated in the FEMA. The most important is the process of adjudication before imposition of penalty. Since there is the process of adjudication, that is why it is management. And when there is the process of adjudication, the adjudication and the appellate matters could go together in a sense that at different stages, the adjudicating authority, the appellate authority and the special appellate authority can take different views to help the persons involved and to allow them to keep their money. But there are certain provisions which are too liberal. I invite the attention of the Finance minister to certain provisions which are too liberal. The second proviso to Clause 19 reads:
"Provided further that where in any particular case, the Appellate Tribunal is of the opinion that the deposit of such penalty would cause undue hardship to such person, the Appellate Tribunal may dispense with such deposit subject to such conditions as it may deem fit to impose so as to safeguard the realisation of penalty."
I do not know how they would be able to safeguard the realisation of the penalty when they have allowed the money to be taken. There are certain other very liberal provisions which I think need to be thought of before giving a final shape to this Act.
In clause 40, a very liberal attitude has been taken. The Central Government has been given powers to render it necessary that any protection granted or restriction imposed by his Act should cease to be granted or imposed. That is a very liberal view which has been taken by the Central Government and by a notification, many of the provisions can be stopped for the time being. That is in keeping with the requirement of the time, the requirement of the trade, the requirement of the foreign trade and investments. As the scenario has been changing everyday, it would be necessary to keep such provision in the Act. It may look a little ridiculous now but it is absolutely necessary and may prove to be corrected later.
In view of these things, I would like to say that this is a very good Bill which has been brought. I am very precise on this FEMA Bill and I support it.
But so far as the Prevention of Money-Laundering Bill is concerned, this is a very peculiar legislation which is being enacted. The Civil procedure Code, 1908 and the Criminal Procedure Code of 1973 (Act 2 of 1974) are being clubbed together. I do not know how the provisions of the Civil Procedure Code and the Criminal Procedure Code can be taken together and the Prevention of Money-laundering Bill can have its teeth, or it would not become cumbersome. So far as I understand, in the Prevention of Money-Laundering Bill, the first thing is that a crime has been committed under the Schedule. Part I of the Schedule deals with offences under the Indian Penal Code, Part II deals with offences under the Immoral Traffic (Prevention) Act, Part III deals with offences under the Arms Act, and Part IV deals with offences under the Narcotic Drugs and Psychotropic Substances Act and Part V deals into Prevention Corruption Act. Now, the crime has to be committed and a charge-sheet has to be placed. That is the import of this Prevention of Money-laundering Bill. If you kindly see clause 16, it is stated there:
"Provided that no search shall be conducted unless, in relation to an offence under--
(a) Part I, Part II, Part III or Part V of the Schedule, a report has been forwarded to a Magistrate under section 173 of the Code of Criminal Procedure, 1973; or
(b) Part IV of the Schedule, a police report or a complaint has been filed for taking cognizance of an offence by the Special Court constituted under sub-section (1) of section 36 of the Narcotic Drugs and Psychotropic Substances Act, 1985."
The Narcotic Drugs and Psychotropic Substances Act provides very harsh punishment and also requires lots of stipulations in the Act itself, but the investigation is almost very simple so far as other agencies are concerned. But so far as the police investigation under the Narcotics Drugs and Psychotropic Substances Act is concerned, it is very cumbersome. That is why many persons always try to get the offences under Narcotics Drugs and Psychotropic Substances Act to be charge-sheeted or the charges to be framed by persons other than the policemen.
A policeman always has to send a report first to the Magistrate and he cannot take the written statement and all those things. The Narcotic Drugs and Psychotropic Substances Act is better handled by other agencies than policemen. But the first thing is that a chargesheet has to be placed. Then only the authorities will swing into action. There are many other things in Clause 15. It also says :
"Where it has been indicated that the authorities will record the statement of any person present in the place which may be useful for or relevant to any proceedings under this Act".
It says 'record their statement'. At some places it is said seizure is to be done. At some places it has been said inventory is to be done. These are the things which would create problem at the time of taking steps in the Act. At the time of implementation problems may arise.
Now, when a chargesheet has been placed under Section 173 of the Criminal Procedure Code, Clause 15 says that the authorities will make a survey and then give in writing for entry and search and seizure. Once a chargesheet has been placed under Section 173 Cr.P.C. all these search, seizure etc. have been completed. Under Section 170 of the Criminal Procedure Code, a person has been remanded to custody and in Section 173 Cr.P.C. the officer incharge of the police station or the investigating officer, with the consent of the officer incharge of the police station, writes who are the persons who have been chargesheeted as in the case of Rajiv Gandhi's case where a lot of storm has been raised.
Once a chargesheet has been placed, records have been seized, how is it possible for the Authority himself to act under clause 15 to take steps which will create lots of confusion at a later stage. There might be double jeopardy. That is why I said about the clubbing of the Criminal Procedure Code and the Civil Procedure Code which would create problem.
Now, take the special courts. I do not know whether the special courts under the Prevention of Corruption Act, under the Narcotic Drugs and Psychotropic Substances Act will be the same as the special court in this Prevention of Money-Laundering Bill. If there is a separate court for this purpose and a person has been tried in the Narcotic Drugs and Psychotropic Substances Act in the special court, even under the Immoral Traffic Act, there might be contradiction and there might be difficulties if somebody has been tried by a special court with special procedure and later on to try him in this Act. As my Hon'ble friend was saying, there might be some tooth in the initial stage but the tooth might have been uprooted because of caries. This is the most important thing which has to be taken into account.