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 2
August hearing of Byjus insolvency proceedings. He made this comment about the delay in
issuing a Look Out Circular (LOC) against Byjus 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 utilised at immigration checkpoints in
international airports and seaports by immigration authorities.

In February, the ED issued an LOC against Raveendran, for alleged violations of Foreign Ex-
change Management Act (FEMA) norms. News reports indicate 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 a
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 wilful 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, criticised 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 prioritised by the ED, none of these individuals, from Mallya to
Raveendran, would have left the country.