2020 (10) TMI 1069 - HC - Insolvency and Bankruptcy

Stay to the Look Out Circular (LOC) issued against the Applicant/Petitioner - Permission to travel abroad at the earliest - HELD THAT - Admittedly, the Applicant has been at the helm of the affairs of the UIL since its incorporation as stated in para 5 of the Writ Petition. UIL has availed various credit facilities from consortium of Banks comprising of Respondent No.3-State Bank of India (Lead Bank), Central Bank of India, Bank of Maharashtra, Indian Overseas Bank, UCO Bank, Dena Bank, Andhra Bank, ICICI Bank, IDBI Bank, Bank of Baroda, Oriental Bank of Commerce. The financial facilities availed of by UIL were to the tune of ₹ 2,500 crores. The loan account of the UIL was classified as NPA on 2 October 2016 and the outstanding dues of UIL as of today are stated to be close to ₹ 3,300 crores. On further query as regards Mr. Prateek Gupta who is also one of Directors of UIL as also the guarantor (and against whom also the Complaint is filed by the Respondent No.3-SBI) and who is stated to be the son of the Applicant, it is stated that he is also residing abroad. Perusal of the medical papers of the Applicant shows that the Applicant is not suffering from any serious illness and which cannot be treated in Mumbai. If the Applicant is permitted to travel abroad, the likelihood of securing her presence in Mumbai seem remote, if investigation is to be carried out by CBI. In the Interim Application, the Applicant has averred in paragraph 17 that due to the suspension of Air Travel on account of Covid-19 pandemic, no family member of the Applicant was able to travel to Mumbai. Now that the Air Travel restrictions are easing and/or in the process of being eased, the Applicant s family members can travel to Mumbai to be with her. Interim Application is dismissed.

Summary

Issues:
- Application seeking stay to the Look Out Circular (LOC) issued against the Applicant/Petitioner and permission to travel abroad
- Quashing and setting aside the LOC
- Allegations of fraud, manipulation of accounts, and diversion of funds against the Applicant
- Impact of the Applicant's departure on the economic interest of India and larger public interest

Analysis:
1. The Applicant sought relief from the High Court to stay the Look Out Circular (LOC) issued against her to travel abroad. She claimed innocence regarding the financial distress faced by Ushdeo International Limited (UIL), where she served as Chairman. The company defaulted on credit facilities, leading to insolvency proceedings initiated by the State Bank of India. The Applicant argued that she was not involved in any criminal offenses and that the LOC was unjustified, emphasizing her right to free movement under Article 21 of the Constitution.

2. The Respondent No.3-State Bank of India presented evidence of serious financial irregularities at UIL, including diversion of funds, manipulation of accounts, and fraudulent transactions. A forensic audit report highlighted instances of fund diversion, non-recovery of advances, and misrepresentation of expenses. The Respondent filed a complaint with the Central Bureau of Investigation (CBI) based on these findings, alleging siphoning of public funds. The Applicant's decision to renounce Indian citizenship and become a citizen of another country raised suspicions regarding her intentions.

3. The High Court considered the potential impact of the Applicant's departure on India's economic interests and larger public interest. The Court noted the seriousness of the allegations against the Applicant, the significant outstanding dues of UIL, and the absence of assets in India belonging to the Applicant. It highlighted the need for the Applicant's presence in case of a CBI investigation and expressed concerns about her willingness to return to India if allowed to travel abroad.

4. Ultimately, the High Court dismissed the Applicant's Interim Application, stating that she could reapply for permission to travel abroad if her son, also involved in the allegations, was available in Mumbai. The Court emphasized the need to involve the CBI in the proceedings to ascertain their stance on the matter. The judgment underscored the importance of considering the broader implications of allowing the Applicant to leave the country amidst ongoing investigations and financial discrepancies.