An extract from The Asset Tracing and Recovery Review, 8th Edition

Seizure and evidence

In situations where an organisation has reasonable grounds to believe that a borrower is resorting to fraudulent means, an investigation can be carried out to assess the existence of any foul play. This can involve extensive searches on various local and international databases, comprehensive public domain checks and checks on local government websites with a view to collating information and correlating it with financial data. In addition, a combination of strategies can be used to trace an asset. For instance, a money trail could be followed to trace the flow of an asset to its conclusion. In a reverse approach, discreet checks can be conducted on an individual who is the target of an asset recovery enquiry to gather intelligence on his or her lifestyle with an objective of understanding the source of funds for maintaining this lifestyle and tying it back to the asset under investigation. These strategies can be further extended to identify friends and relatives of the target and their corresponding holdings and directorships in other entities or companies. A correct blend of such strategies can yield excellent results even in cases where round-tripping is suspected. For multijurisdictional cases, a discreet multijurisdiction asset discovery investigation can be performed.

i Securing assets and proceedsCivil law

The most common method in relation to securing assets is to seek a temporary injunction through the court. The law in relation to the same is captured in Order 39 Rules 1 and 2 of the Civil Procedure Code. Broadly stated, the court relies on a three-principle test of a prima facie case, a balance of convenience and irreparable harm or injury to determine whether a party seeking a temporary injunction should be granted the injunction.

Further, the parties to a civil action may also seek attachment of a property before judgment or the appointment of a receiver for the protection or preservation of a property. It may be kept in mind that attachment of a property before judgment or the appointment of a receiver is an uncommon relief resorted to only in rare circumstances where a party is able to establish that the defendant is about to dispose of or remove the property from the jurisdiction of the court to evade the execution of any decree that may be passed against him or her. Further, such attachment does not protect the attached property from the right of a third party to seek liquidation of an asset to recover his or her debts.

It must be kept in mind that the onus for the production of evidence or the burden of proof in support of a claim, including fraud, is upon the party bringing an action to court. Further, a foreign party seeking relief in India may have to establish the cause of action or its locus to seek relief before the concerned court. Accordingly, a party seeking relief under any civil law must discharge the burden based on the information available to it and that it may secure through the aid of a court process.

Criminal law

The process under criminal law generally empowers the investigation authorities to seize and attach property during an investigation under the Code of Criminal Procedure, 1973 (Code of Criminal Procedure). It is also relevant to note that certain special statutes also empower the investigation authorities to seize and attach properties pending an investigation. Broadly, the investigating authorities are empowered to undertake search without notice and to take possession of any property that is suspected to be stolen property. The courts are also empowered after the conclusion of a trial to order the delivery of property to the person entitled to possession thereof.

ii Obtaining evidenceCivil law

The Civil Procedure Code provides for the rights of parties in securing information from private individuals in an adjudication before the courts. It provides various rights to seek information from individuals including:

  1. issuing interrogatories;
  2. serving notice upon any other person to produce any document or record proved to be within his or her possession; and
  3. serving notice to an individual to appear as a witness and disclose information within his or her knowledge.

In cases where a party to a civil action fails to produce a document or disclose information that is reasonably believed to be in his or her knowledge or possession, an adverse inference may be drawn by the courts in relation to said document or information.

However, in practical terms it may be difficult to secure the presence of a third-party witness, as the service of summons upon him or her may be time-consuming, and the witness may even successfully evade service. Further, the party is required to discharge the burden of relevancy of the witness to justify the co-related time delay in the adjudication of the matter. Notwithstanding the same, the tools can be effectively used along with private efforts for a successful judgment or execution.

Criminal law

The rules for obtaining evidence are encapsulated within the Code of Criminal Procedure. The investigation authorities have been given vast powers to, inter alia, compel the production of persons and documents before the Investigation Officer, and search premises and persons without notice. However, it should be kept in mind that statements given before the investigation authorities are not admissible as evidence, and witnesses are required to testify in court for their testimony to be treated as evidence.