Government charts plan to stop loan defaulters from taking flight

NEW DELHI: The government has set up a committee to identify measures aimed at stopping defaulting promoters from fleeing the country and avoid a high-profile repeat of departures such as those of Nirav Modi and Vijay Mallya, said a top official. This will include a check on possible dual citizenship.

Headed by financial services secretary Rajiv Kumar, the committee has representation from the Reserve Bank of India, the ministries of home and external affairs, the Enforcement Directorate and the Central Bureau of Investigation.

It will suggest mechanisms and whether changes are required in existing laws. “We will focus on those promoters who have citizenship of any other country and have not declared the same,” the finance ministry official said.


If the loan accounts of these promoters are under stress or their companies have defaulted on payments, the government may also seek details of any overseas travel they’re planning, he said. A loan default takes some time to evolve into a non-performing asset and it’s even longer before any fraud is uncovered.

Dubious promoters take advantage of this to leave the country before they are discovered, said the official.

“We may not necessarily stop them but in cases where there are adverse reports from intelligence agencies or even banks, the government may choose to ask for details of their travel and other such required information,” he said.

Such promoters will only be barred from traveling or have their passports suspended if there is specific information that they could become fugitives from justice.

Banks have already sought the passport details of large borrowers to curb such risk.

Apart from Nirav Modi, who’s said to be involved in a Rs 14,000-crore fraud at Punjab National Bank, and Kingfisher Airlines founder Mallya, a number of promoters have fled the country before being declared wilful defaulters or accused of swindling money.

According to various reports, Jatin Mehta, promoter of Winsome Diamonds and Jewellery Ltd, and his wife have given up Indian citizenship and become nationals of St Kitts and Nevis. The firm owes Indian lenders around Rs 7,000 crore.

The government has also listed the Fugitive Economic Offenders Bill, 2018, in the upcoming parliamentary session. An ordinance had been promulgated earlier this year to give effect to the provisions of the proposed law.

This allows authorities to confiscate all assets of an offender declared to be a fugitive as a deterrent against those evading the law by remaining outside the jurisdiction of Indian courts.

The Enforcement Directorate has already approached courts seeking to declare diamond traders Nirav Modi and his uncle Mehul Choksi as “fugitive economic offenders.”

The agency moved a similar application against Mallya, following which a court recently issued a summons asking him to appear before it on August 27 under the new ordinance.