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2023 (2) TMI 142 - HC - Companies LawValidity of request for issuance of a Look Out Circular (in short LOC) made by the respondent No.2 - en-mass cancellation of coal block allocations - account declared as a Non-Performing Asset (NPA) by the lenders - HELD THAT - The general objective for issuance of LOC is to control the arrival/departure of persons against whom criminal cases are pending or who are either avoiding judicial proceedings or evading arrest or not co14 operating with the investigating agencies and there are specific inputs that such person(s), would flee the country - The first comprehensive policy was framed and found its release in the office memorandum dated October 27, 2010. The authorities who could issue LOC, the ingredients necessary for issuance of LOCs, the agencies who could make a request for issuance of LOCs and the various parameters required to be fulfilled before such request could be made, was provided therein. BOB requested the Bureau of Immigration to issue LOC. It is not on record whether such LOC has been issued or not. The Bureau of Immigration, Ministry of Home Affairs (Foreigners Division) and all the other members of the consortium of banks, apart from PNB were impleaded as respondents in this proceeding. None of these respondents have come up before the Court in support of the request of BOB - There is no evidence that on account of the default committed by the Visa Power Limited, the economy of India had been shaken. The bank has not provided any contemporaneous material against the petitioner which would satisfy the exceptions clause. The bank is also silent as to whether any input had been received from any agency that the petitioner was likely to flee the country and his departure would disrupt the economy. Admittedly, in the facts of this case, no investigation is pending before any authority. It is also not a case where the bank had come to a conclusion on the basis of inputs received from an intelligence agency or any other agency that the petitioner was trying to leave India in order to evade the consequences of the legal actions that may be taken against him, both under the civil and the criminal laws. In the case of SRI SOUMEN SARKAR, SON OF SRI GOPAL CHANDRA SARKAR, VERSUS , THE STATE OF TRIPURA, THE DIRECTOR GENERAL OF POLICE, THE SUPERINTENDENT OF POLICE, THE UNION OF INDIA, THE COMMISSIONER (IMMIGRATION) , 6. THE REGIONAL PASSPORT OFFICER 2021 (3) TMI 1405 - TRIPURA HIGH COURT , the High Court of Tripura on perusal of MHA's Office memorandum dated 31.08.2010, stated that the reasons for opening LOC must be given categorically. It was held that LOCs could not be issued as a matter of course, but only when reasons existed and the accused deliberately evaded arrest or did not appear in the trial court. The Delhi High Court in the case of Vikas Chaudhary V. Union of India, 2022 (1) TMI 553 - DELHI HIGH COURT quashed the LOC inter alia stating that mere suspicion of opening bank accounts in a foreign country, when such suspicion was based on some unsigned agreements and WhatsApp chats could not be a ground to restrain someone's fundamental right to travel abroad. In the case of Brij Bhushan Kathuria vs. Union of India Ors., 2021 (4) TMI 750 - DELHI HIGH COURT the Delhi High Court while setting aside the LOC issued against the Petitioner held that the phrases such as 'economic interest' or 'larger public interest' could not be expanded in a manner so as to restrict an independent director who was in the past associated with the company being investigated, from travelling abroad, without any specific role being attributed to him. The personal liberty and the fundamental right of movement guaranteed by the Constitution cannot be curtailed at the behest of BOB when the conditions precedent for making such request for opening an LOC, did not exist in this case - The freedom of movement of a citizen of India is a valuable right and cannot be infringed except by imposing reasonable restrictions. The court does not find any reasonableness in the action of BOB. The lead bank, PNB failed in its attempt to restrict the movement of the petitioner. No subsequent development has taken place which would justify a further request by BOB, on the self-same set of facts. Once the action of the lead bank was set aside by this court, BOB took a chance to restrain the freedom of movement of the petitioner by placing reliance upon the liquidation proceedings, the Forensic Audit Report and the complaint lodged by PNB. Such complaint was returned by the CBI - There is no allegation that the activity of the petitioner led to upheavals in the stock market, business activities, investments, trade, growth and development etc. There is no evidence that the petitioner had tried to escape to a foreign jurisdiction to avoid legal consequences of such action. The proceedings before NCLT were initiated in 2016. Since then no evidence could be submitted to implicate the petitioner in any criminal case. The petitioner contested the liquidation proceedings. A bald assertion that the petitioner s departure would be detrimental to the economic interest of the country and the LOC must be issued in larger public interest, cannot be due satisfaction of the existing preconditions required to be fulfilled before the originator can make such a request. The existence of such pre-conditions and the manner in which the action of the petitioner fell within the exceptions or had affected the country s economic interest had to be demonstrated from the records. The apprehension should be well-founded, backed by reasons and also supported by evidence - The bank acted in arbitrary exercise of the power vested in it by making a request for opening LOC which was an attempt to curtail the personal liberty and fundamental right of movement of a citizen guaranteed by the Constitution of India. Petition allowed.
Issues Involved:
1. Validity of the Look Out Circular (LOC) request by Bank of Baroda (BOB) against the petitioner. 2. Compliance with procedural requirements and guidelines for issuing LOCs. 3. Examination of the grounds cited by BOB for the LOC request. 4. Impact of prior judicial decisions on similar LOC requests. 5. Fundamental rights and personal liberty of the petitioner in the context of LOC issuance. Detailed Analysis: 1. Validity of the Look Out Circular (LOC) request by Bank of Baroda (BOB) against the petitioner: The petitioner, a former director of Visa Power Limited, challenged the LOC request initiated by BOB. The LOC was requested due to the company's liquidation and outstanding dues. The petitioner argued that the request was unjustified, as the company was already under liquidation, and the creditors could approach the liquidator for recovery. The court examined whether the LOC request met the criteria outlined in the relevant guidelines and found that BOB's request did not satisfy the necessary conditions. 2. Compliance with procedural requirements and guidelines for issuing LOCs: The court reviewed the guidelines for issuing LOCs, particularly the office memorandum dated October 27, 2010, and subsequent amendments. The guidelines required specific conditions to be met, such as the involvement in cognizable offenses or evasion of legal proceedings. The court found that BOB's request did not provide sufficient evidence or meet the exceptional circumstances required for issuing an LOC. The reasons cited by BOB, such as the company's NPA status and forensic audit report, were not adequate to justify the LOC. 3. Examination of the grounds cited by BOB for the LOC request: BOB cited several grounds for the LOC, including the company's NPA status, liquidation, forensic audit findings, and the apprehension that the petitioner might flee the country. The court found that these reasons were not supported by sufficient evidence. The forensic audit report, which alleged undervalued transactions and fund diversion, was not accepted by the NCLT and NCLAT. Furthermore, the CBI had returned the complaint filed by PNB due to a lack of details indicating a cognizable offense. The court concluded that BOB's reasons did not meet the criteria for issuing an LOC. 4. Impact of prior judicial decisions on similar LOC requests: The court considered a prior judgment in WPA 10241(W) of 2020, where an LOC issued at the request of PNB was quashed. The court noted that the current request by BOB was based on similar grounds and facts. The prior judgment emphasized that mere default or NPA status was not sufficient to justify an LOC. The court found that BOB's request did not present any new or exceptional circumstances that would warrant a different outcome. 5. Fundamental rights and personal liberty of the petitioner in the context of LOC issuance: The court highlighted the importance of personal liberty and the right to freedom of movement, as guaranteed by the Constitution. It emphasized that these rights could not be curtailed without reasonable grounds and evidence. The court found that BOB's request for an LOC was an arbitrary exercise of power and an attempt to restrict the petitioner's fundamental rights without sufficient justification. The court concluded that the LOC request did not meet the necessary legal and procedural requirements and quashed the request. Conclusion: The court allowed the writ petition, setting aside and quashing the LOC request by BOB dated November 29, 2021, and any subsequent steps taken based on that request. The court emphasized that the bank could request immigration authorities to inform them of the petitioner's entry and exit from the country but could not restrict his movement without meeting the stringent conditions for issuing an LOC. The decision underscored the need for careful and judicious application of LOC guidelines, ensuring that fundamental rights are not infringed without valid reasons.
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