Can Assets of Family Members Involved in Cooperative Fraud Be Confiscated According to the Procedure?

Summary: The government has approved procedures to sell assets of family members who are divorced or hold shares related to individuals involved in cooperative fraud. Senior Advocate Prof. Dr. Gandhi Pandit expressed concerns that conflicts between these procedures and the Muluki Civil Code may pose challenges for implementation. Deputy Secretary of the Ministry of Cooperatives, Raghunath Mahat, stated that all measures are authorized to manage assets of problematic cooperatives.

Kathmandu, 17 Baishakh: The government has approved new procedures allowing the sale of property owned by divorced or shareholding family members of individuals involved in cooperative fraud to refund the savings of victims. This was included in the ‘Procedure for Establishing and Operating a Fund to Refund Savings of Members of Problematic Cooperatives 2083,’ approved at the cabinet meeting on 10 Baishakh. The procedure facilitates selling property related to cooperative fraud perpetrators even after divorce or shareholding.

However, Senior Advocate Prof. Dr. Gandhi Pandit noted that these procedures conflict with the Muluki Civil Code, which could complicate enforcement. While the Civil Code’s provisions related to offenses are comparatively stronger, the government’s new procedure attempts to override them. Section 256(b) of the Civil Code stipulates that property acquired after separation or divorce belongs privately to the individual. Likewise, Section 276 prohibits anyone from using another person’s property without permission. This implies that selling property registered in the name of family members after divorce or shareholding is not permissible, potentially disallowing the enforcement of the new procedure.

Prof. Pandit added that properties shared as joint shares cannot be sold by other members without consent. He said, “Without agreement from the concerned party, selling or transferring property is not possible. Even when individuals guilty of cooperative fraud distribute assets to family members as joint shares, it is not possible to sell such properties to recover funds.” He argued that issues arising from the Civil Code cannot be resolved by a single procedural directive.

According to Article 3 of the Procedure on Establishing and Operating the Revolving Fund, although the savings of depositors cannot be refunded through asset sales of directors or managers, investments recorded as joint shares or pledged can be frozen or auctioned by related family members. If it is not possible to return money to savers, claims equivalent to government demands can be made to recover funds from problematic cooperative directors, managers, their family members, and persons involved in misuse.

Experts note that reclaiming funds for cooperative victims is not simple. Former Secretary Gopinath Mainali said, “It is not easy to immediately sell property after divorce or shareholding arrangements as assets may be divided among individuals.” Since liability in cooperatives is limited, he believes the government’s new procedures will not be fully effective. He added, “Provisions preventing cooperative fraudsters from fleeing—such as withholding passports and freezing assets—are positive steps.”

Mainali also pointed out that fraudsters have transferred capital abroad by placing it under the names of wives or children. He accused the government of insufficient attention to legal complexities in the cooperative sector. “The government needs to trust cooperative campaigners. Nobody really knows the billions lost in cooperatives. It is not easy to recover funds considering these are organized entities treated like government funds,” he said.

He further analyzed that such issues were not considered during earlier lawmaking and that procedural amendments after new laws resulted in conflicts. However, Ministry of Cooperatives Deputy Secretary Raghunath Mahat clarified that management committees of problematic cooperatives are empowered to take all necessary measures to handle assets and liabilities.

He stated, “It is essential to examine when the separation or shareholding occurred and whether the offense was committed before or after that. Decisions will be made following the Civil Code’s process that the offender’s share cannot be exempted.”