Alenjith K Johny | August 23, 2024
Enforcement Directorate is bolting the door after the horses are bolted, said Krishnendu Datta, Senior Advocate representing the Board of Control for Cricket in India (BCCI), during the August 2024, hearing of Byju’s insolvency proceedings. He made this comment about the delay in issuing a Look Out Circular (LOC) against Byju’s promoter Byju Raveendran. Datta’s observation underscores a critical issue in the effectiveness of enforcement practices especially, in high-profile cases.
A Look Out Circular (LOC) is issued to prevent an individual who is absconding or sought by law enforcement from leaving the country. It is primarily utilized at immigration checkpoints in international airports and seaports by immigration authorities.
In February, the Enforcement Directorate (ED) issued an LOC against Raveendran, for alleged violations of Foreign Ex-change Management Act (FEMA) norms. News reports said that Byju Raveendran was in Dubai on that day.
This raises the question; why would a central agency wait for someone to leave the country before issuing a LOC?
In December 2020, the ED’s Kochi office first issued an LOC for Raveendran, but the investigation was transferred to the Bengaluru office. It took three months for the ED to issue an LOC after filing an enforcement case information report.
This is not the first time when delayed notices have allowed defaulters to escape.
Nirav Modi fled India in January 2018, a month before an LOC was issued. Mehul Choksi left for Antigua on 22 May 2018, a day before the LOC, and Vijay Mallya departed for the UK on 2 March 2016, a week before the LOC. This raises concerns about the timing of these measures.
LOCs can be initiated by authorized officers, including deputy secretary, joint secretary, district magistrate, superintendent of police, Interpol, Serious Fraud Investigation Office (additional director), and the Ministry of Corporate Affairs. In 2018, the government empowered the heads of public sector banks to directly request the issuance of an LOC against willful defaulters to prevent them from leaving the country. Consequently, an officer not below the rank of chairman, managing director, or chief executive of any public sector bank can now make such a request.
In April, a division bench of the Bombay High Court, comprising Justices Gautam S. Patel and Madhav J. Jamdar, criticized the Fugitive Economic Offenders (FEO) Act of 2018. The court pointed out that, while the Act aims to address economic offenders, it fails to provide a robust mechanism to unilaterally prevent them from leaving the country.
The FEO Act has fallen short in practice despite its intentions. Cases like those of Modi, Choksi and Mallya demonstrate how delays in enforcement have allowed offenders to escape justice. The failure to prevent their departure exposes the loophole in the Act.
It also reveals broader issues with the ED’s functioning and potential conflicts of interest in handling high-profile cases.
If issuing LOCs were prioritized by the ED, none of these individuals, from Mallya to Raveendran, would have left the country.