2017 (10) TMI 461 - HC - FEMA

Detention at the airport at the instance of the Enforcement Directorate - Look Out Circular (LOC) was issued by the Enforcement Directorate - violation of FEMA - Proceedings under PMLA - Held that - In the present case, the LOC does not indicate any credible reason for issuing the same. Plainly, recourse to LOC cannot be taken as a matter of course; restricting the right of a citizen to travel is a serious imposition on his/her fundamental rights and even if it is assumed that such action is permissible in law, it can be taken only when necessary and for good reason. This Court also finds it difficult to understand the conduct of the officers of the Enforcement Directorate. Admittedly, the petitioner had joined the investigations and had appeared before the concerned officers as required by them. Notwithstanding the same, a request for LOC was issued and the petitioner was not even informed of such LOC. Notwithstanding the legality or validity of the LOC, the petitioner would have taken that into account before making his travel plans. The petitioner became aware of the LOC at 11.00 PM on 22.08.2017, when he was about to board a flight. Thus, insofar as the LOC issued is concerned, the same is wholly unsustainable. Accordingly, the LOC issued against the petitioner is set aside. However, considering that the Enforcement Directorate is continuing with the investigation and may require the attendance of the petitioner.

Summary

Issues:
- Setting aside a Look Out Circular (LOC) issued against the petitioner.

Analysis:
The petitioner filed a petition seeking to set aside the Look Out Circular (LOC) issued against them. The Enforcement Directorate had initiated investigations into alleged violations of the Foreign Exchange Management Act, 1999 (FEMA) by the petitioner. The petitioner had been cooperating with the investigation, yet a request for LOC was issued by the Enforcement Directorate, intending to detain the petitioner. The Court found this action to be without legal authority, as there was no statutory provision permitting such detention. The petitioner's detention at the airport was deemed unlawful, as it did not follow the provisions of the Prevention of Money Laundering Act, 2002 (PMLA). The Court noted that violation of FEMA is not a scheduled offence under the PMLA, and at the time of issuing the LOC, there was no belief that the petitioner was guilty of any PMLA offence.

The Court referred to an Office Memorandum setting guidelines for issuance of LOCs, emphasizing that LOCs should only be used in cognizable offences under penal laws. In this case, the LOC lacked credible reasons, and the petitioner was not even informed of its issuance before attempting to travel. The Court expressed difficulty in understanding the conduct of the Enforcement Directorate, especially since the petitioner had been cooperating with the investigation. The Court set aside the LOC issued against the petitioner, allowing them to travel but directing them not to leave the country until a specified date. The petitioner agreed to cooperate with the investigation and appear before the authorities as required. The respondents were permitted to take lawful steps but were prohibited from detaining the petitioner without complying with the law.

In conclusion, the Court found the LOC issued against the petitioner to be unsustainable and set it aside. The petitioner was allowed to travel within the country but was directed to cooperate with the ongoing investigation. The respondents were cautioned against unlawful detention of the petitioner and instructed to follow legal procedures. The petition was disposed of with these directions in place.