A Look Out Circular For Byju Raveendran Amidst Ongoing Investigation? Yes, Says ED; Why The Same Should Be Sought In The Case Of Paytm And Learn From Our Past Mistakes

The Directorate of Enforcement (ED) has urged the Bureau of Immigration (BOI) to issue a lookout circular (LOC) against Byju Raveendran, the founder and CEO of the deeply troubled edtech company, Byju’s.

The action aims to prevent Raveendran from departing the country amidst an ongoing investigation.

The point to be noted here is that Inventiva has extensively covered the ongoing troubles with Byju’s, Paytm and many more startups and has written that the concerned authorities should take all necessary steps to ensure that ‘individuals’ with ‘troubled’ businesses should not leave the country as has happened in the past, cases in point – Nirav Modi, Vijay Mallya, Mehul Choksi, whose extradition has become next to impossible!

The Details
Previously, an LOC ‘on intimation’ had been initiated against Raveendran over a year and a half ago at the behest of the ED’s Kochi office. However, with the investigation subsequently being transferred to the Bengaluru office of the agency, it was deemed necessary to pursue a fresh LOC to ensure stricter monitoring of Raveendran’s movements.

The current LOC ‘on intimation’ merely notifies immigration authorities about an individual’s overseas travel without restraining them from leaving the country.

However, in light of the ongoing probe into alleged Foreign Exchange Management Act (FEMA) violations by the Bengaluru office, it has been deemed imperative to issue a revised LOC against Raveendran to prohibit his departure from the country.

According to informed sources, Raveendran has frequently travelled between Delhi and Dubai over the past three years, with recent sightings in Bengaluru and Delhi. In response to queries, Raveendran confirmed his current presence in Dubai, stating his plans to travel to Singapore the following day.

The decision to pursue a “revised” LOC from the BOI stems from considerations for the welfare of investors, as emphasized by one of the sources familiar with the matter.

Highlighting the significance of the LOC, a senior government official emphasized that even if Raveendran is currently abroad, the issuance of the LOC would restrict his departure upon his return, ensuring the protection of investor interests and facilitating the investigation process without hindrance.

The ED had issued show-cause notices in November last year to Byju’s parent company, Think & Learn Pvt Ltd, and Raveendran himself, pertaining to alleged FEMA violations amounting to Rs 9,362.35 crore.

The investigation was initiated based on several complaints regarding foreign investments received by Byju’s and its business practices, as stated by the ED in a previous statement.

During searches conducted at Byju’s premises and Raveendran’s residence in April last year, the agency seized pertinent documents related to the company’s foreign investments and overseas ventures.

The alleged violations primarily revolve around the company’s failure to repatriate proceeds from exports conducted outside India and the delayed submission of documents concerning foreign direct investments (FDI) and remittances made by the company abroad, as highlighted by the ED.

The Story Of The Lost Money
Byju Raveendran, the enigmatic figure in the realm of edtech, had once again demonstrated his remarkable audacity and a cunning demeanor reminiscent of a seasoned trickster, when he brazenly assured his lenders that the substantial funds were tucked away in a place they would never uncover.

The entire plot is revealed when the lenders embark on a mission to trace a substantial sum, the whereabouts of $533 million, from the accounts of Byju’s Alpha, the US subsidiary of the tech titan.

Though merely a fraction of the colossal $1.2 billion term loan casually secured by Byju’s, the vanishing act naturally raised significant concerns and peeked the lenders.

However, Byju Raveendran was not fazed, and his boldness was astounding, almost as if he challenged them to expose his financial manoeuvres while feigning innocence in the background.

Where has the money disappeared to?
Byju’s reliance on these funds for its day-to-day operations, compounded by the substantial costs associated with running an edtech empire and the need for discretion amidst layoffs and salary obligations, added complexity to the situation.

On May 8, 2023, Raveendran, accompanied by his legal counsel, convened with the lenders and their legal representatives. GLAS Trust, acting on behalf of the lenders, had already made moves by initiating legal proceedings in a Delaware civil court, alleging that Byju’s had concealed the money.

Did Raveendran flinch at the accusations?

Far from it. Instead, he maintained his bravado, staunchly resisting the lenders’ inquiries. His responses were so astonishing that the lenders’ advisor felt compelled to record them for posterity.

Raveendran’s actions effectively transformed what should have been a straightforward financial matter into a scandalous conspiracy.

As the legal skirmish intensified, the lenders alleged that Byju’s had failed to uphold certain terms of the loan agreement, including the submission of audited financials and securing guarantees from its subsidiary, Whitehat Jr.

However, such trifles seemed inconsequential to Byju’s, which deftly navigated the situation with multiple forbearance agreements, continuing its operations with little regard for the contractual specifics.

Then came a climactic moment.

In the midst of these alleged “non-monetary defaults,” Byju’s chose to transfer $533 million to a hedge fund named Camshaft Capital through a series of wire transfers in April and July 2022.

Following these transactions, Byju’s Alpha was left with a mere $100 million in its accounts, utilized for interest payments and undisclosed transfers to affiliated entities.

In the face of half a billion dollars gone astray, other financial obligations seemed to pale in comparison.

Unsurprisingly, this development triggered further legal turmoil.

The lenders sought to remove Riju Raveendran as the director of Byju’s Alpha, along with demanding changes in governance, equity ownership, and a thorough investigation into the elusive $533 million.

Efforts by the lenders to uncover the truth were somewhat impeded by the courts, gaining access to some bank statements but denied a deeper investigation into the fund transfer.

Despite their best efforts, the lenders couldn’t lay hold of the missing funds, leaving Byju Raveendran seemingly untouched by the setback.

Enter the Equally Enigmatic “John Doe”
Facing a formidable challenge, the lenders found themselves repeatedly outmaneuvered by Byju’s.

Even after tracing the $533 million to Camshaft Capital, they hit another dead end when the money was subsequently transferred to an entity known only as “John Doe.”

This convenient twist in the tale was accompanied by Byju’s lawyers’ claims of legality, leaving the lenders to ponder the hefty legal fees and the elusive nature of their quarry.

In their quest for answers, the lenders stumbled upon peculiar details about Camshaft Capital. Founded by a 23-year-old without formal investing training, its address led back to the International House of Pancakes (IHOP) in Miami.

Outsmarting the Legal System
The legal saga unfolded further, with the Miami court’s response to the lenders’ second lawsuit falling short of expectations. Byju’s appeared to have successfully slowed the legal proceedings, leaving the lenders disheartened and frustrated.

Hoping for a breakthrough in their pursuit of the $533 million, the lenders found themselves thwarted by Byju’s strategic maneuvers, prolonging the legal battle.

Amidst the courtroom drama, a ray of hope emerged as Byju’s proposed a plan to expedite the repayment of $300 million of its debt within three months.

Recognizing the folly of leaving half a billion dollars in limbo, Byju’s planned to divest two subsidiaries, Epic in the US and Great Learning in India, potentially generating $800 million to $1 billion in cash.

Negotiations for these divestments were well underway, with Epic securing a term sheet for $400 million and Great Learning in talks with a sovereign wealth fund for an acquisition valued at $600 million.

What Happened To Case
In November 2023, Byju’s lenders won the fight over loan default and control of the unit, and the Judge approved the lenders’ move to replace Byju’s Alpha director.

The Viewpoint
The proactive approach of concerned authorities in investigating individuals or owners of entities suspected of potential violations, such as scams, money laundering, and other illegal activities, is not only necessary but crucial for upholding the rule of law and ensuring justice.

High-profile cases, including those of Vijay Mallya, Nirav Modi, and Mehul Choksi, involved individuals accused of perpetrating large-scale financial frauds and subsequently fleeing the country to evade accountability.

These cases should be taken as lessons and reminders of the critical need for proactive measures to prevent suspects from absconding and leading comfortable lives abroad while the legal process unfolds.

First and foremost, allowing individuals accused of serious financial crimes to flee the country undermines the integrity of the legal system and erodes public trust in the authorities’ ability to deliver justice.

When individuals evade accountability by escaping jurisdiction, it not only emboldens them but also sends a dangerous message that those with power and resources can manipulate the system to evade consequences for their actions.

Hence, proactively issuing lookout circulars and taking steps to prevent suspects from leaving the country, authorities display their commitment to upholding the law and ensuring that justice is served.

Moreover, the financial ramifications of allowing individuals accused of financial crimes to escape are significant.

In cases like the Kingfisher Airlines, PNB scam, and others, the alleged frauds involved staggering sums of money that had devastating consequences for investors, creditors, and the broader economy.

Therefore, allowing perpetrators to flee the country not only absolves them of their responsibilities but also makes it more challenging to recover the misappropriated funds and provide restitution to the victims.

Furthermore, allowing individuals accused of financial crimes to evade justice sets a dangerous precedent and encourages others to follow suit. If perpetrators perceive that they can escape consequences by fleeing the country, it creates a perverse incentive for further misconduct and sabotages efforts to combat financial fraud and corruption.

Taking a proactive stance in investigating and prosecuting financial crimes, authorities send a clear message that impunity will not be tolerated and that those who engage in illegal activities will be held accountable for their actions.