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2021 (4) TMI 750 - HC - Companies LawSeeking permission for travelling abroad - Validity of Look Out Circular (LOC) issued against him by Respondent Nos 3 and 4 i.e., the Ministry of Corporate Affairs (MCA) and the Serious Fraud Investigation Office (SFIO) - case of Respondents is that the Petitioner is guilty of conniving and conspiring with the Promoters of M/s Techpro Systems Limited - HELD THAT - There is no criminal case pending against the Petitioner. His role is also yet to be ascertained by the investigating authorities. Phrases such as economic interest or larger public interest cannot be expanded in a manner so as to include an Independent Director who was in the past associated with the company being investigated, without any specific role being attributed to him, as in the present case. The Petitioner poses no flight risk given the fact that his wife and children are residents of Delhi/NCR. This Court is inclined to suspend the operation of the LOC, subject to the conditions imposed. The Petitioner shall present himself in the Indian Embassy in Oman on the 1st and 3rd Monday of every month - The Petitioner shall file an undertaking in this Court, which would be supported with an undertaking by his wife, that the Petitioner would be present before the authorities upon being issued 15 days notice. The Petitioner s wife shall not leave India without seeking leave from the Court - application disposed off.
Issues Involved:
1. Challenge to the Look Out Circular (LOC) issued against the Petitioner. 2. Legal validity and procedural compliance of the LOC. 3. Petitioner’s role and involvement in the alleged fraud. 4. Conditions for interim relief from the LOC. Detailed Analysis: 1. Challenge to the Look Out Circular (LOC) issued against the Petitioner: The Petitioner, a Chartered Accountant and former Non-Executive Independent Director of M/s Techpro Systems Limited, challenged the LOC issued by the Ministry of Corporate Affairs (MCA) and the Serious Fraud Investigation Office (SFIO). The Petitioner sought the quashing of the LOC, arguing that it curtailed his liberty to travel in and out of India. 2. Legal validity and procedural compliance of the LOC: The Petitioner argued that he was not provided a copy of the LOC and cited Office Memoranda dated 27th October 2010 and 5th December 2017, which require a reason for opening an LOC. The Petitioner relied on precedents such as *Sumer Singh Salkan v. Asst. Director & Ors.*, *Nitin Sandesara v. Directorate of Enforcement and Ors.*, and *Deept Sarup Aggarwal v. Union of India*, which establish that an LOC cannot be issued without a registered FIR or a cognizable offence being made out. The Court noted that the LOC issued against the Petitioner did not specify any reason, which is a significant procedural lapse. 3. Petitioner’s role and involvement in the alleged fraud: The Respondents alleged that the Petitioner, being part of the Audit Committee of M/s Techpro Systems Limited, was complicit in the fraud involving several thousands of crores. The Petitioner contended that he was only a Non-Executive Independent Director from 2007 to 2015 and had no involvement in the day-to-day management of the company. The Court observed that the investigation against the Petitioner was ongoing, and his role was yet to be ascertained. 4. Conditions for interim relief from the LOC: The Court considered whether the LOC should be stayed, noting that the Petitioner’s employment in Oman required him to travel back. The Court highlighted that the Petitioner’s family and immovable properties were in Delhi/NCR, reducing the flight risk. The Court decided to suspend the LOC operation, subject to conditions: - The Petitioner must present himself at the Indian Embassy in Oman twice a month. - The Petitioner and his wife must file undertakings ensuring his presence before authorities if given 15 days’ notice. - The Petitioner’s immovable properties listed must not be transferred or alienated. - The Petitioner’s wife must not leave India without court permission. The application was disposed of with these conditions, emphasizing that this order was specific to the Petitioner and not applicable to other Directors of M/s Techpro Systems Limited. Further Proceedings: - A counter affidavit is to be filed within six weeks, and a rejoinder within four weeks thereafter. - The case is listed for further hearing on 13th August 2021.
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