The Scandal of Look Outs

The prevention of a well known advocate, CM Maniar, from boarding a British Airways flight puts a spotlight on some of the draconian legal provisions which could engender cronyism, nepotism and selective targeting which could harm honest people

On the eve of Diwali, CM Maniar, well-known advocate and former non-executive director of MCX Ltd, was stopped from boarding a British Airways flight because a look out circular (LOC) has been issued against him with regard to the National Spot Exchange Ltd (NSEL) scam. So a 78-year old man, on his way to comfort and help settle his recently widowed daughter, faced the ignominy of having his baggage unloaded and being turned back at the airport.

Wikipedia says, LOCs “are opened to trace absconding criminals and also to prevent and monitor effectively the entry or exit of persons who may be required by law enforcement authorities.” Shouldn’t the police have informed Mr Maniar not to leave the country without their permission? Why was information about his humiliation leaked to the media? Was it a warning to all MCX and FT directors? If so, the question is: Shouldn’t NSEL defaulters, their families and key personnel be the target of LOCs rather than independent directors of group companies?

India is a country where key players in major scandals, such as Warren Anderson of Union Carbide, Win Chadha and Ottavio Quattrochi of Bofors or even a Dinesh Dalmia of DSQ Software, leave the country without a hassle. They also make several trips back via Nepal without even using fake passports. So, when an investigation agency actually issues an LOC, the public sees it as an indicator of the government’s serious intent to bring wrongdoers to book. Is this true? Let’s examine Mr Maniar’s case, to arrive at some conclusions.

Mr Maniar was not a director of the controversial NSEL where a Rs5,600-crore scam took place. He was an independent director on two group companies—MCX and Financial Technologies—along with several powerful retired regulators, Union secretaries and industrialists who quickly resigned from their cushy assignments after the NSEL scam surfaced. Who were these other influential directors? They included former finance secretary Ashok Jha (director of MCX) and former SEBI chairman GN Bajpai, former SEBI chairman (director of MCX-SX, the currency trading segment of the group and advisor). Other directors of MCX-SX include SS Thakur, former controller of foreign exchange, BD Sumitra, former director of CCIL and MV Nair, former chairman Union Bank of India (all resigned in September this year). Then there is Venkat R Chary, IAS, a former secretary, government of India (GoI) and former chairman of the Forward Markets Commission. He was the chairman of MCX, FT and the Indian Energy Exchange of the same group. There is also Ravi Sheth of Great Eastern Shipping, one of the original directors of FT.

My inquiries in connection with Mr Maniar’s lookout notice reveal that 59 people have been put on the list in connection with the NSEL scam. And most of the truly powerful members of MCX-FT group named above are not on that list. The lookout notices issued by the Economic Offences Wing (EOW) (Mumbai) include all the NSEL officials who have been arrested. The group founder, Jignesh Shah, his brother and probably other family members; former CEO Anjani Sinha (now under arrest), his father and a few other senior officials of MCX-FT group such as Joseph Massey. Since information on LOCs is not in the public domain, others may face the same ignominy as Mr Maniar if they attempt to travel abroad without prior informal checking.

This column is not making a case for withdrawing the LOC against Mr Maniar. Neither does it argue that LOCs should be issued against the clutch of regulators, bankers and government secretaries on MCX-FT group companies who were certainly in a position to influence government departments to wink at the rules and grant the exemption that allowed NSEL to exist outside the commodity regulator’s supervision.

The only point we are making is that rules have to be fair, unambiguous and transparently applied. LOCs, like various draconian laws introduced by the government, have been grossly misused to trample over human rights and dignity. What is worse, neither powerful corporate lobbies (such as CII, FICCI or Assocham) nor NGOs have bothered to protest indiscriminate arrests and humiliations in a systematic manner.

They did not do so even when Nimesh Kampani of JM Financial Services, Minoo Shroff (former vice chairman of Raymond), AP Kurien, former executive trustee of UTI and a few others were on the run for most of 2009, because of the LOCs issued against them in connection with Nagarjuna Finance.

In that case, too, we believe the action was politically motivated. Nimesh Kampani was the only real target (he also faced an arrest warrant), due to his connection with Reliance Industries; but other directors suffered collateral damage. The 80-year old Minoo Shroff was stuck in London for months on end and advocate LVV Iyer could not attend his son’s graduation abroad because of the LOCs issued to the 23 international airports and exit points. Consider a few more facts.
   The Supreme Court has asked Subrata Roy of the Sahara group to submit property documents by 11th November. He has still to deposit Rs20,000 crore ordered to be paid to SEBI for repaying lakhs of people who invested in its debentures. Yet, the group founder is allowed to travel abroad. In fact, a moot question is: Why are Sahara’s so-called investors so docile, even though the sums involved are four times the entire NSEL scam.
    LOCs are rarely issued against the biggest bank defaulters even when the bad debts run into thousands of crores of rupees and are backed by personal guarantees of industrialists. A prime example is Vijay Mallya, Member of Parliament, who has not paid salaries and dues to employees or even statutory dues.
    LOCs can be issued by a superintendent of police at the district level or a deputy secretary of the government (source wikipedia) and are misused by influencing these officials. Petty fights, business rivalries or domestic issues are reason enough to have LOCs issued. In fact, the gross misuse of power has led to a decision that LOCs can only be issued by officers of the rank of a deputy commissioner of police (DCPs).
    There are several instances where LOCs suddenly appear on immigration computers 10 years after a problem; or where persons are arrested on their return to India (where there is no question of fleeing the country); or harassed at immigration even while travelling abroad with court permission. Do you know that even film-star Shilpa Shetty had an LOC issued against her after someone objected to Hollywood star Richard Gere kissing her at a public event in a choreographed act?
    Stringent legal provisions meant to protect women are also being unscrupulously misused to the extent that there is an entire website devoted to warning NRIs on how to ‘survive’ LOCs and arrests under Section 498a of the Indian Penal Code. Reading the website suggests that there are as many victims of Section 498a combined with Interpol Red Corner notices as there are battered and deserted wives of non-resident Indians. Many have paid hefty sums of money in blackmail to avoid arrest and humiliation with police officials sharing the loot.

This overarching power of police and investigation agencies can affect anybody at anytime. As with most laws in India, these powers will usually be used against those who are relatively weak, defenceless or law-abiding or as part of vendetta unleashed by the State against whistleblowers. NSEL is a rare example when the same grounds on which an LOC was issued against Mr Maniar are also applicable to a set of powerful former regulators and IAS officials. Now is the time to press for reform, transparency and fairness in the application of draconian legal provisions which cause lasting damage to the lives of honest persons.

Sucheta Dalal is the managing editor of Moneylife. She was awarded the Padma Shri in 2006 for her outstanding contribution to journalism. She can be reached at [email protected]

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    7 years ago

    LOC per se is ok in general; but efforts must also be made so that the person gets intimated about it without being humiliated in the airport. Ofcourse, if she is not available at the address, nothing much can be done about it.


    7 years ago

    Speaking of "look outs", Standard Chartered, instead of acting on my request and cancelling my Credit Card when I moved to Nairobi in 1995 hit me with renewal fees and interest thereon. They sent their dogs after my Dad who paid the 50 % in full settlement demanded by them without checking with me. When I came back to India in 2000, they set their dogs on my Dad again for accrued renewal fees and interest since the last settlement. I went to their office with my Dad and threatened action under the Consumer Court after which they gave me a letter exonerating me from all dues. Three years later, I was declined a Credit Card because Standard Chartered had put a credit warning out against my name! Luckily, having been a Banker, I was able to get a print out of the Credit Advisory (not available to ordinary mortals) and had to threaten Standard Chartered with legal action to get it lifted!


    7 years ago

    I have had a horrendous experience on British Airways for no valid reason. In 1998 I was travelling from Nairobi to Cincinnati via London and Pittsburgh. The London-Pittsburgh flight was almost empty and I was sitting at the tail section and being pampered by the air hostesses as they had nobody else to serve. The Head Air Hostess strolled back from First Class and taking umbrage at this, radioed ahead to Pittsburgh. The immigration officer there held me up for two hours (I still remember his name: "Valarsa") I have never travelled British Airways since then. I have also never travelled Lufthansa after a Delhi-Hanover flight (Business Class!) in 1991 when I was shown to a seat covered by puke by the Air Hostess. She simply refused to have it cleaned or do anything about it. I refused to sit and had to walk up to the Cockpit to finally get a clean seat!


    7 years ago

    This is a superb article.

    It shows the media - the fourth estate - is the only bulwark against a state that is proving increasingly murky and shady.

    Beria, Stalin's secret policeman once said, " Show me a man and I will tell you what he is guilty of". This seems to be the prevailing attitude of large parts of the Indian state.

    The legal system is increasingly an exercize in power and not justice.

    Suggestion to Ms Dalal. Why don't you team up with a lawyer or legal journalist and expose the terrible scandal taking place at the intersection of the legal and financial systems. If India awarded a Pulitzer, you'd get one for that expose.


    7 years ago

    Very good and relevant article. I do hope that the people of India wake up and get themselves a govt that works.

    Desai Bhavesh

    7 years ago

    Reading your article made me speechless. Agree with 100%.Dont want to add my 2 cent. Jain Hind!


    7 years ago


    THIS IS THE SAME "saarey jahan se achha hinduatan hamara (jo aaj bilkul hee nahi hai)"!



    7 years ago

    Kudos to you Sucheta for highlighting a very important issue of 'Unfair Discrimination' and selective targeting.

    It is an open secret that powerful people in India, particularly those in politics and civil services, always manage to exercise undue influence to save their skin when the things go wrong. The use or rather mis-use of LOC is just one such example.

    By the way, what were the former Chairmen of SEBI and FMC doing on the Board of NSEL? Perhaps helping NSEL to break the law and get away? And when the ship started to sink they ran away.



    In Reply to shivkumar 7 years ago

    A correction, it is MCX and not NSEL

    Supreme Court stays Gauhati HC verdict on CBI
    The apex court has stayed an order from the Gauhati HC that struck down the resolution through which the CBI was set up 
    The Supreme Court on Saturday stayed an order passed by the Gauhati high court, which declared the setting up of Central Bureau of Investigation (CBI) as unconstitutional.
    Hearing the matter at his residence, Chief Justice P Sathasivam stayed the order of Gauhati HC. The case is scheduled for next hearing on 6th December. Notices were also issued to all parties involved in the case.
    In a curious judgement, the Gauhati High Court had on Thursday struck down the resolution through which the CBI was set up and held all its actions as “unconstitutional”.
    The judgement by the division bench comprising Justices IA Ansari and Indira Shah came on a writ petition filed by one Navendra Kumar challenging an order by a single judge of the High Court in 2007 on the resolution through which the CBI was set up.
  • User 


    arnav jaiswal

    1 year ago


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    please suggest sir.
    Mayank Tanna


    3 years ago

    I have purchased a office from builder in december 2017 and when i went to the propsed c0-op society to admit me as member they are denying and saying u need to pay 25000/- as transfer fee and 26000/- as building repair fund then only u can be admitted as member of proposed society .
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    awaiting ur reply

    Govt to appeal against Gauhati HC order on CBI

    The Indian government’s resolution on formation of CBI has been held valid by the Supreme Court time and again in a number of judgements

    A day after the Guwahati High Court order held as unconstitutional the setting up of Central Bureau of Investigation (CBI) the union government on Friday said it will appeal against the verdict in the Supreme Court.


    “...The Department of Personnel and Training (DoPT) intends to file an appeal. So an appeal will be filed against the order (in the Supreme Court),” Law Minister Kapil Sibal told reporters.


    DoPT is the administrative ministry for CBI. Sibal said DoPT has discussed the issue with him and it was decided to file an appeal.


    In a curious judgement, the Guwahati High Court had on Thursday struck down the resolution through which the CBI was set up and held all its actions as “unconstitutional”.


    The judgement by the division bench comprising Justices IA Ansari and Indira Shah came on a writ petition filed by one Navendra Kumar challenging an order by a single judge of the High Court in 2007 on the resolution through which the CBI was set up.


    Earlier in the day, minister of state for personnel V Narayanasamy met Prime Minister Manmohan Singh apparently to discuss the fallout of the verdict.


    “The judgement is patently wrong. It is bound to be set aside. We are certainly going to challenge it and the appeal is likely to be filed in the Supreme Court latest by Monday,” Additional Solicitor-General PP Malhotra had told PTI. He had appeared before the HC in the case.

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