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2022 (8) TMI 331 - HC - Companies LawSeeking quashing of Lookout Circular - providing sufficient causes shown make - HELD THAT - This Court finds, there is no dispute that the Petitioners include Managing Director, Directors and CFO of the Company, M/s.Utkal Galvanizers Ltd. There is also no dispute that there exists a complain against the Petitioners by a Whistle Blower received by the Competent Authority and there was initiation of inspection of 15 nos. of Companies including that of M/s.Utkal Galvanizers Ltd. in this State under the direction of the Ministry of Corporate Affairs. LOC involved here appears to be on no concrete material and even on prima facie material. On perusal of the documents available at Pages-91 to 115 of the Brief, this Court finds, either the Company or the Petitioners have been several time rewarded for their best performance. Offences entangled the Petitioners as of now remain maximum within the frame working of Section 441 of the Companies Act, as clearly disclosed from Annexure-14 series. This Court finds, even though there involves allegation all through that there is information of the Petitioners fleeing away after taking 600 crores to 700 crores from different banks even after a preliminary counter affidavit and an additional affidavit by the Department, there is even no specific allegation on actual loan involved the Petitioners and their Company and any default therein. It is needless to observe here that there is no declaration of NPA involving any account involving the Petitioners by any bank as of now. Allegation at this stage appears to be speculative and imaginary and in the circumstance, there cannot be taking away liberty of any of the Petitioners - The investigation even after so much lapse of time failed in bringing any concrete evidence to implicate any of the Petitioners or framing any of them charges under any penal law. There is even no material produced as of now in support of assertion of the Department, the Petitioners have flight risk, thus the allegation is bald and without any substance. Considering that investigation involving all Establishments is over and the Department is waiting for the further advice of the Ministry, this Court is imposing certain conditions for the overseas travel involving each of the Petitioners as follows - I. Each of the Petitioners if undertaking overseas travel, while providing such intimation, has also to produce his overseas travel plan with photocopy of Visa approval with the Company Registrar in the State of Odisha. II. In the event of necessity of foreign visit of any of the Petitioners, he/she while providing the travel plan under Condition-I herein above shall also be required to produce a bank guarantee to the extent of Rs.5,00,000/- (rupees five lakh) in favour of the R.O.C., Odisha to remain valid for a period of six months at least. III. Each of the Petitioners shall co-operate the Department whenever their presence will be sought for by the Department. IV. Each of the Petitioners shall co-operate in any further investigation and/or inspection. Petition allowed.
Issues Involved:
1. Legality and justification of the Look Out Circular (LOC) issued against the petitioners. 2. Allegations of non-compoundable offenses and flight risk. 3. Petitioners' cooperation with the investigation. 4. Fundamental rights of the petitioners to travel abroad. 5. Compliance with guidelines for issuing LOC. Detailed Analysis: 1. Legality and Justification of the LOC: The petitioners challenged the LOC issued against them, claiming it was contrary to the Ministry of Home Affairs' guidelines and various court judgments. The court noted that the LOC was issued based on a whistleblower's complaint alleging that the petitioners, key members of M/s. Utkal Galvanizers Ltd., were planning to settle outside India after taking substantial loans from banks. However, the court found no concrete material or prima facie evidence to justify the LOC, as the offenses involved were compoundable under Section 441 of the Companies Act. 2. Allegations of Non-Compoundable Offenses and Flight Risk: The respondents argued that the petitioners posed a flight risk and that the investigation was ongoing. They claimed the petitioners were involved in several companies and had taken significant loans, which raised concerns about their potential to flee. However, the court found no specific allegations or evidence of non-compoundable offenses or default on loans. The court emphasized that bald assertions without tangible evidence could not justify the LOC. 3. Petitioners' Cooperation with the Investigation: The court acknowledged that the petitioners had fully cooperated with the investigation, attending inspections and responding to queries. The respondents did not provide any evidence of non-cooperation by the petitioners. The court noted that the inspection involving M/s. Utkal Galvanizers Ltd. and other companies was completed, and the reports were submitted to the Ministry of Corporate Affairs. 4. Fundamental Rights of the Petitioners to Travel Abroad: The court highlighted that the right to travel abroad is a fundamental right. The LOC, which restricted the petitioners' movement, had already affected their ability to participate in international trade fairs, leading to business losses. The court referred to various judgments, including the Delhi High Court's decision in Sumer Singh Salkan v. Assistant Director, which emphasized the need for concrete reasons to justify an LOC. 5. Compliance with Guidelines for Issuing LOC: The court examined the consolidated guidelines for issuing LOCs, particularly Clauses-H and I, which prescribe that LOCs should be issued in cognizable offenses under the IPC or other penal laws. In cases of non-cognizable offenses, the subject cannot be detained or prevented from leaving the country. The court found that the LOC against the petitioners did not comply with these guidelines, as the offenses involved were compoundable and there was no evidence of non-compoundable offenses. Conclusion: The court declared the LOC against the petitioners as bad in law and inoperative, emphasizing that the allegations were speculative and lacked concrete evidence. The court imposed conditions for the petitioners' overseas travel, including providing travel plans, producing a bank guarantee, and cooperating with any further investigation. The writ petitions succeeded, and no costs were awarded.
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