2024 (11) TMI 705 - HC - Indian Laws

Challenge to Lookout Circular issued against the Petitioner by the Bureau of Immigration at the request of the State Bank of India - Fundamental Right to travel abroad under Article 21 of the Constitution of India - parties have arrived at a One Time Settlement and the proposal has been accepted by the lead member of consortium, i.e., the State Bank of India - HELD THAT - Clause L of the Office Memorandum of 2021 states that in exceptional cases, an LOC can be issued at the instance of the Bank if the authorities are of the view that letting the person to depart from the country will be detrimental to the economic interests of India. The Courts have also laid down the scope of the term 'detrimental to the economic interest of India' used in Office Memorandum bearing No.25016/10/2017-Imm (Pt.) dated 22.02.2021, which is the last of the guidelines issued by the Ministry of Home Affairs for issuance of Lookout Circulars, which cannot be resorted in every case of Bank default and the citizen's right to travel abroad, which is a Fundamental Right guaranteed under Article 21 of the Constitution of India, cannot be taken away and persons cannot be deprived of their liberty and right to travel abroad only because of their inability to repay the amounts due to Banks. It is well settled that merely because the Office Memorandum permits the issuance of a lookout circular in exceptional circumstances, even when an individual is not involved in any offence under the IPC or any other penal law, the said power should be used in exceptional circumstances and not as a matter of routine - It is well settled that mere inability to pay money without there being a criminal case cannot be a reason to take away the Fundamental Right guaranteed under Article 21 of the Constitution of India. Right to travel abroad has been held to be a Fundamental Right under Article 21 of the Constitution of India which cannot be taken away in an arbitrary and illegal manner. The issuance of lookout circular cannot be resorted to in every case of bank loan defaults or credit facilities availed for business and the Fundamental Right of a citizen of the country to travel abroad cannot be curtailed only because of failure to pay a bank loan more so when the person against whom the lookout circular is opened has not been even arrayed as an accused in any offence for misappropriation or siphoning off the loan amounts. In view of the fact that an amicable settlement has been arrived at and the Petitioner has already deposited a sum of Rs. 113.50 crore with the State Bank of India, which is the lead member of the consortium, and in view of the fact that there is no criminal case pending against the Petitioner, this Court is of the opinion that the Lookout Circular issued against the Petitioner which has the effect of taking away the Fundamental Right guaranteed under Article 21 of the Constitution of India cannot be permitted to sustain and the same is hereby quashed. Petition allowed.

Summary

Issues Involved:

1. Legality of the Lookout Circular (LOC) issued against the Petitioner.
2. Fundamental Right to travel abroad under Article 21 of the Constitution of India.
3. Interpretation of "detrimental to the economic interests of India" in the context of LOC issuance.
4. Validity of guidelines empowering Public Sector Banks to request LOCs.

Issue-wise Detailed Analysis:

1. Legality of the Lookout Circular (LOC) Issued Against the Petitioner:

The Petitioner challenged the LOC issued by the Bureau of Immigration at the request of the State Bank of India (SBI), which was the lead bank in a consortium that provided credit facilities to the Petitioner's company, PC Jewellers Limited. The LOC was issued amidst financial difficulties faced by the company and subsequent legal proceedings initiated by SBI and other banks under the Recovery & Bankruptcy Act, 1993, and the Insolvency & Bankruptcy Code, 2016. However, a One Time Settlement (OTS) was reached, and the SBI moved to withdraw its petition from the National Company Law Tribunal (NCLT), which was dismissed as withdrawn. The Court noted that the issuance of LOCs should not be routine and must involve an application of mind by the authority concerned, ensuring that the departure of a person is indeed detrimental to national interests.

2. Fundamental Right to Travel Abroad Under Article 21 of the Constitution of India:

The Petitioner argued that the LOC violated their Fundamental Right to travel abroad, as guaranteed under Article 21 of the Constitution of India. The Court reiterated that the right to travel abroad is a Fundamental Right and cannot be arbitrarily curtailed. It emphasized that mere inability to repay debts does not justify the issuance of an LOC, especially in the absence of any criminal proceedings. The Court cited precedents where it was held that LOCs cannot be opened solely on the basis of financial defaults without a criminal case.

3. Interpretation of "Detrimental to the Economic Interests of India":

The Court examined the scope of the term "detrimental to the economic interests of India" as used in the guidelines for LOC issuance. It highlighted that this term should not be invoked in every case of bank default and must be reserved for exceptional circumstances where the individual's actions significantly impact the economy. The Court referred to various judgments that clarified that the phrase is not an empty word and should be interpreted in a manner indicating a substantial threat to economic interests. The Court concluded that the Petitioner's case did not meet this threshold, as no criminal proceedings were pending, and an amicable settlement had been reached.

4. Validity of Guidelines Empowering Public Sector Banks to Request LOCs:

The Court addressed the guidelines issued by the Ministry of Home Affairs and the Ministry of Finance, which empowered Public Sector Banks to request LOCs. It noted the recent judgment by the High Court of Bombay, which quashed the clause allowing bank heads to request LOCs, thereby indicating that such requests should not be made lightly or routinely. The Court observed that the power to issue LOCs should be exercised with caution and only in cases where there is a clear and present threat to national interests.

Conclusion:

The Court quashed the LOC issued against the Petitioner, emphasizing that the Fundamental Right to travel cannot be curtailed without due process and in the absence of criminal proceedings. The writ petition was allowed, and the pending applications were disposed of. The judgment underscores the importance of balancing national interests with individual rights, ensuring that LOCs are not misused as a tool for coercion in financial disputes.