India’s first-of-its-kind auction of a fugitive billionaire’s art collection is intended to show that authorities are getting serious about recouping unpaid taxes and improving the country’s business climate.
Tax authorities have organized an auction March 26 to sell artwork that belonged to Nirav Modi, a celebrity jeweler who fled to London last year, accused of 114 billion rupees ($1.7 billion) in bank fraud.
The government is increasingly turning to measures like these after being rocked by a series of scandals involving wealthy fugitives. Last year it passed the Fugitive Economic Offenders Act, which gave authorities sweeping new powers to seize and sell suspected wrongdoers’ assets in their absence.
“This is a new trend. Art has never been seen by the taxman as an asset worth considering,” said Arvind Vijaymohan, chief executive of Artery India, an art sales advisory firm. “Now they realize the things hanging on the wall could potentially be worth a lot.”
Mumbai-based auction house Saffronart will sell 68 pieces of art that belonged to Modi. Among them are works by major Indian artists such as V.S. Gaitonde and Raja Ravi Varma that the auction house expects to fetch millions of dollars each.
Chetan Daga, a Pune-based chartered accountant, said the government’s ability to crack down on financial fraud is crucial to making India a better place to do business. India is currently 163rd in the World Bank’s global contract-enforcement rankings, a potential red flag to investors concerned about a lack of recourse if they’re cheated.
“It will send a very positive signal to the economy,” he said. “No matter who you are, if you default on bank loans the government is willing to go very hard on you.”
Nirav Modi was arrested March 19 in the U.K., from where Indian authorities want to have him extradited. While Modi hasn’t yet been declared a fugitive economic offender under the Act, various government bodies, including tax authorities, have sought to start selling his assets.
Indian tax laws already have provisions for such measures. But legal practitioners say that the Act increases the speed and expands the scope for government agencies to conduct these sales. “This particular provision of the Act can act as a huge deterrent to any offender,” said Sandeep Grover, a partner at IndusLaw.
The tax department is seeking to recoup 959 million rupees ($13.8 million) in unpaid taxes from Camelot Enterprises Pvt. Ltd., a Modi-owned company. Saffronart expects the total collection to fetch 300 million to 500 million rupees ($4.3 million to $7.2 million).
Art-market consultants say the auction will provide collectors with an enticing opportunity to acquire works that are hard to find in the open market, like Raja Ravi Varma’s 1881 oil painting of an encounter between the Maharaja of Travancore and British colonial authorities. Saffronart estimates that the piece will go for between $1.8 million and $2.6 million.
“It could be a good auction for an astute collector, given that they are works which are in the public eye,” said Farah Siddiqui, a curator who had previously examined some of Modi’s collection.
It is unclear whether the tax department’s high-profile gambit will pay off. Some art advisers question whether the circumstances around the auction could scare off potential buyers concerned about subsequent legal complications or who are simply superstitious about the owner’s notoriety.
Lawyers also question whether the government’s broader push to pursue funds from fugitive moguls will stand up to scrutiny. For example, said Aarshi Tirkey, a lawyer and researcher at think-tank the Observer Research Foundation, the Act is largely untested. She said aspects of the law, such as provisions that prevent offenders from filing civil claims, could yet be found unconstitutional.
For Dinesh Vazirani, Saffronart’s chief executive, the quality of the pieces on offer will trump any potential qualms. “We believe that the collection’s intrinsic value will garner a positive response,” he said. “This auction offers a unique opportunity.”