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    This LOC too is causing anguish, of a different kind

    Synopsis

    Most LOCs are only too real as a number of businessmen have been discovering to their discomfort.

    locAgencies
    According to top agencies, more than 150 LOC requests against business promoters and professionals have been issued in the past two years, marking a record of sorts.
    MUMBAI: A WhatsApp forward last month about a purported lookout circular (LOC) against a realty boss sent the group’s management into a tizzy as it rushed to answer media queries. The news was fake, the company said.

    It had possibly been floated to scuttle an ongoing transaction, said a person close to the management. “An LOC being issued against the chairman is just the news that would hamper the negotiation process,” he said. “News of LOCs being issued have become an easy and convenient way of causing instant damage.”

    But most LOCs are only too real as a number of businessmen have been discovering to their discomfort. India Inc says this heightens the climate of distrust amid a challenging economic environment; investigative agencies say those accused of wrongdoing need to be prevented from fleeing.

    According to top agencies, more than 150 LOC requests against business promoters and professionals have been issued in the past two years, marking a record of sorts. Earlier this year, more than 30 requests were sent by the ministry of corporate affairs alone, including those against Jet founder Naresh Goyal and his wife Anita; six former directors on the board of IL&FS and its subsidiaries, four of whom were later arrested; former ICICI MD Chanda Kochhar, her husband Deepak Kochhar and Videocon group chairman Venugopal Dhoot; and erstwhile directors and key managerial persons of CG Power and Industrial Solutions, including its ex-chairman Gautam Thapar.
    loc-info

    Last week, senior counsel Amit Desai, while defending HDIL promoters Rakesh and Sarang Wadhawan in the alleged Punjab & Maharashtra Cooperative (PMC) Bank loan default case, told a local court that India Inc has become scared of this tool.

    “Just because they have made a case of Nirav Modi and Vijay Mallya, they make everyone face a lookout notice... Not everyone is running away,” Desai argued.

    An official belonging to a federal investigative agency said extraditing persons has been difficult.

    “Once they flee the country, extraditing them becomes an uphill task and becomes the focal point of the case,” he said. “Investigation and collection of evidence to build a strong case take a backseat, thereby affecting the case. And in cases where these individuals flee to countries with which we don't have an extradition treaty, the task of getting them back becomes next to impossible.”

    An LOC is used to prevent a person traveling overseas. All law enforcement agencies and certain revenue agencies such as the income tax department, the Directorate of Revenue Intelligence (DRI) and the customs department can issue an LOC.

    However, in the aftermath of Vijay Mallya having left India, the government felt the need to include banks and the Serious Fraud Investigation Office (SFIO) of the ministry of corporate affairs (MCA) to the list of agencies empowered to issue a request for an LOC.

    More than a year after the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED) started probes against jewellers Nirav Modi and his uncle Mehul Choksi, they are facing applications citing ill health and “breakdown of law and order in the state” filed by the duo in the ED’s plea to declare them as fugitive economic offenders.

    “The same problem is being faced in the case of former Winsome Diamonds & Jewellery director Jatin Mehta,” said the official cited above. “In 2013, Mehta and his wife left the country and reportedly acquired the citizenship of St Kitts and Nevis the same year. With no formal treaty, the extradition request had to be made citing a Commonwealth convention which the two countries are signatory to, only dragging the case further.”

    Prevention through LOC is better than having to persuade Interpol to issue a red notice, which doesn’t always happen or can take years, officials said.

    The NIA and the ED are finding it difficult to extradite controversial televangelist Zakir Naik from Malaysia.

    The same is the case with the Sandesara brothers wanted in the Sterling Biotech case and said to be in Nigeria.

    LOCs have a validity of three months and have been withdrawn in some instances after individuals were questioned. Others are renewed.

    “This is not a tool used for harassment — these are issued only after criminal complaints are filed,” a top official said. “It is funny that people complain about harassment when they ought to have thought before fleecing the system.”

    Executives complain that the LOC has been deployed as yet another weapon of harassment. The climate of suspicion this engenders has hit business plans, bank lending and boardroom hiring, even as several sectors grapple with a challenging environment, they said.

    Frequent LOCs and tax raids are creating mistrust among wealth creators and employment generators, Ajay Piramal, industrialist and head of the Piramal Group, said at the World Hindu Economic Forum in Mumbai last week. “Today, I see there is a gap. There is mistrust between people who are in power and those who are wealth creators,” he said.

    But Maruti Suzuki chairman RC Bhargava said the government can’t be blamed for taking stringent action when directors in a company siphon off money and engage in money laundering.

    “If such crooks run away, they are criticised, and when the government takes tough measures, they are still criticised,” he said. “I feel honest taxpayers and businessmen who focus earnestly on growing business ethically have nothing to fear.”

    The chairman of a top Indian conglomerate said trust has to be earned by both sides.

    “The government should understand that it will have to support entrepreneurs with the right policies and business promoters should understand that the days of treating their group companies as a personal fiefdom are over. Those operating ethically have nothing to fear,” he said.


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