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2022 (10) TMI 210 - HC - Companies LawValidity of Look Out Circulars LOC issued and extended by respondent No.2 - territorial jurisdiction to entertain this Writ Petition - Indian entities of the Bank of Baroda and the State Bank of India can make a request for issuance of LOC to respondent No.2 in respect of dues owed to their sister entities incorporated in the UAE or not - Whether this Court has territorial jurisdiction to entertain this Writ Petition? - HELD THAT - It is the case of the respondents that money decree granted by by the Dubai court (Annexure R-9) against petitioners and M/s AIF UAE will be enforced in India invoking Sec.44A of the CPC and the notification dt.17.1.2020 issued by the Govt. of India declaring the UAE to be a reciprocating country for purposes of Sec.44A CPC. So the decree holders intend to proceed against the properties of the petitioners located in the State of Haryana and also against the petitioners stated to be resident of Faridabad State of Haryana - though the respondents may be based outside Haryana part cause of action arises within the jurisdiction of this Court and this Court has territorial jurisdiction to entertain this Writ Petition under Clause (2) of Article 226 of the Constitution of India - thus order is answered accordingly in favour of the petitioners and against the respondents. Whether respondents No.7 and 8 which are Indian entities of the Bank of Baroda and the State Bank of India can make a request for issuance of LOC to respondent No.2 in respect of dues owed to their sister entities incorporated in the UAE as per the Office Memorandums issued by the Ministry of Home Affairs from time to time? - HELD THAT - LOCs were permitted to be opened essentially against persons involved in cognizable offences and who were evading arrest and not appearing in the trial Court despite NBWs or other coercive measures and there was a likelihood that they would leave the country to evade trial/arrest. It was intended as a coercive measure to make a person surrender to the investigating agency or Court of law - The originating agency can only request that they be informed about the arrival/departure of the subject in such cases. The Office Memorandum stated that the LOC would be valid for a period of one year from the date of issue. The respondents No.7 and 8 which are Indian entities of the Bank of Baroda and the State Bank of India cannot make a request for issuance of LOC to respondent No.2 in respect of dues owed to their sister entities incorporated in the UAE as per the Office Memorandums issued by the Ministry of Home Affairs from time to time - issue decided in favour of the petitioners and against the respondents. Whether respondents No.5 and 6 are entitled to seek LOC against the petitioners? - HELD THAT - No provision of any Office Memorandum issued by the Ministry of Home Affairs empowering the SFIO to seek a LOC on the pretext of such investigation under Section 212(1) (c) of the Companies Act 2013 - it has to be held that neither respondent No.5 nor respondent No.6 were entitled to approach the respondent No.2 for issuance of an LOC or its extension in the facts and circumstances of the case. Whether the petitioners are entitled to any relief? - HELD THAT - The LOCs issued against the petitioners at the instance of respondents No.3 to 8 by respondent No.2 and which are said to have been extended at their request and are said to be subsisting as on date are all set aside; respondents No.3 to 8 shall communicate this order to respondent No.2; and officials/employees of respondents No. 1 2 are restrained from preventing the petitioners from travelling abroad. Petition allowed.
Issues Involved:
1. Territorial Jurisdiction 2. Issuance of Look Out Circulars (LOCs) by Indian entities for dues owed to foreign sister entities 3. Entitlement of National Central Bureau (Interpol) and Serious Fraud Investigation Office (SFIO) to seek LOCs 4. Petitioners' entitlement to relief Detailed Analysis: Point (a): Territorial Jurisdiction The Court examined whether it had jurisdiction to entertain the writ petition. The objection to territorial jurisdiction was raised by the Bank of Baroda and the State Bank of India but not argued. The Court, referencing the Supreme Court's decision in Kusum Ingots and Alloys Ltd. v. Union of India (2004), concluded that even a small fraction of the cause of action within its jurisdiction suffices. The petitioners' properties in Haryana and their residence in Faridabad provided sufficient grounds. The Court also cited the Supreme Court's stance in Popatrao Vyankatrao Patil v. State of Maharashtra (2020) that the government should not use technicalities to defeat legitimate claims. Thus, the Court held that it had jurisdiction. Point (b): Issuance of LOCs by Indian Entities for Dues Owed to Foreign Sister Entities The Court evaluated whether Indian entities of Bank of Baroda and SBI could request LOCs for dues owed to their UAE-based sister entities. The issuance of LOCs was governed by Office Memorandums (OMs) from the Ministry of Home Affairs, which did not explicitly cover foreign-incorporated entities. The Court noted: - The debt in India with respect to Indian Public Sector Banks was settled. - The Dubai branches of Bank of Baroda and SBI are distinct entities from their Indian counterparts. - Indian laws, including OMs, do not have extraterritorial application unless explicitly stated. The Court emphasized that the right to travel abroad, as recognized in Maneka Gandhi v. Union of India (1978), cannot be arbitrarily restricted. The Court found no exceptional case or adverse effect on India's economic interests due to the petitioners' actions. It held that the requests for LOCs were mechanically issued without proper consideration, thus violating the petitioners' fundamental rights. Consequently, the Court ruled that Indian entities could not request LOCs for dues owed to their foreign sister entities. Point (c): Entitlement of National Central Bureau (Interpol) and SFIO to Seek LOCs LOCs Issued by National Central Bureau (Interpol): The Court reviewed LOCs issued at the request of the National Central Bureau (NCB) for cheque dishonor cases in the UAE. The petitioners presented evidence that issuing cheques in bad faith was decriminalized in the UAE as of January 2, 2022. The Court accepted this argument, noting that the convictions in absentia could not serve as a basis for LOCs. The Court emphasized that under Indian law, dishonor of cheques is a non-cognizable offense, and thus, LOCs could not be issued for such cases. The LOCs issued by the NCB were deemed unsustainable. LOCs Issued by SFIO: The SFIO was investigating M/s ACCIL, India, under Section 212(1)(c) of the Companies Act, 2013. The Court noted that the debt of ACCIL was resolved through a Corporate Insolvency Resolution Process approved by the NCLT, and no adverse report or FIR was filed against the petitioners. The Court found no provision empowering SFIO to seek LOCs based on such investigations. Therefore, the Court held that neither the NCB nor SFIO were entitled to request LOCs against the petitioners. Point (d): Petitioners' Entitlement to Relief Based on the above reasoning, the Court set aside all LOCs issued against the petitioners at the instance of respondents No.3 to 8. The Court restrained officials from preventing the petitioners from traveling abroad and allowed the writ petition, disposing of pending applications. Conclusion: The High Court ruled in favor of the petitioners, setting aside the LOCs issued against them and affirming their right to travel abroad. The Court emphasized adherence to legal provisions and fundamental rights, rejecting the arbitrary issuance of LOCs by Indian entities for foreign dues and by investigative agencies without proper grounds.
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