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TMI Blog2023 (2) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... cord 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, SO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceed with the process of liquidation in the manner laid down in Chapter - 3 of the IBC. During the pendency of the proceedings before the NCLT Kolkata, one of the erstwhile directors of the company was refused passage by the officials at Chhatrapati Shivaji Maharaj International Airport, Mumbai. The said director was stopped at the immigration. On query, an immigration official intimated the said director that LOC had been issued against him and other directors of the company which was in liquidation, at the request of the respondent Nos. 2 and 3. The petitioner called upon the respondent No.1, i.e., Bureau of Immigration to recall, revoke and withdraw the LOC on various grounds. 6. On April 5, 2022, the respondent No.2 issued a letter informing the learned Advocate for the petitioner, that the request for LOC was originated by the competent authority of BOB, in reference to the NPA of the said company in liquidation. The bank stated that the respondent No.2 had the authority to make such a request before the competent authority. As the procedure relating to such request and the contents of such request were confidential in nature, the Bank did not disclose further details. 7. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Advocate, the thermal power project failed due to the cancellation of the coal block allocations. The petitioner could not be labelled either as a wilful defaulter or as a fraudster. The default in repayment of the loan would not ipso facto destabilize the economy of the country. Learned Advocate urged that request for issuance of LOC could not be used as a pressure device for recovery of the loan. The originating bank had other avenues to recover the amount by initiating different proceedings under the relevant laws, but the personal liberty of the petitioner and his right to freedom of movement could not be curtailed in any manner considering the facts of this case. 12. Strong reliance had been placed on the decision of this Court in WPA 10241(W) of 2020. It was submitted that once the LOC issued at the request of the lead bank had been quashed by a competent court of law, another member of the consortium could not make a similar request before the Bureau of Immigration, at a later stage. The attention of the Court was drawn to the various circulars and the Standard Operating Procedure (SOP) dated November 22, 2018 in this regard. Learned Advocate urged that even if the Mini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r members of the consortium of banks had been impleaded as party respondents in the proceeding, so that all the lenders and the immigration authorities before whom the request had been made, could contest the proceeding and make their submissions before the Court. None of the said respondents had come up in support of BOB. Learned Advocate prayed that the request for LOC be set aside and all other consequential steps that might have been taken by any of the respondents, more specifically the respondent Nos. 1 and 4, be quashed. 16. Mr. Kar, learned Senior Advocate appeared on behalf of the respondent No.2 and 3, i.e., the originating bank. He drew the attention of the court to paragraph-4 of the office memorandum dated October 27, 2010 which dealt with issuance of LOC in respect of Indian citizens and foreigners. Such memorandum was issued by the Government of India, Ministry of Home Affairs (Foreigners Division). According to Mr. Kar, initially, only the state and the central agencies had the authority to make a request for issuance of LOC. Referring to a decision of the Delhi High Court passed in WP (Civil) No.10180 of 2009, Mr. Kar submitted that it was for the Government of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... October 4, 2018 issued by the Deputy Director, Government of India, Ministry of Finance. By the said office memorandum, the heads of public sector banks were also included in the list of originating agencies. Relying on the objects and reasons for inclusion of the heads of the banks in the list of originating agencies, Mr. Kar submitted that by a letter dated September 24, 2018 the CBI suggested to the Department of Financial Services (DFS) that appropriate officers of the banks must also be empowered to make requests for opening of LOCs against economic offenders/defaulters in order to track down and identify economic offences. 21. According to Mr. Kar, as the CBI was of the opinion that wilful defaulters and money launderers were covered by the amendment of 2017 under sub-paragraph (j), of paragraph 8 of the memorandum of 2010, for proper identification of such economic offenders, the Chairman/Managing Directors and Executive Officers of all public sector banks were included in the list of originating agencies. It was urged that the CBI, itself, found it difficult to monitor such offenders and was of the view that the guidelines should include senior officers of public sector b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he specific belief that the petitioner who was the promoter/director had committed an offence detrimental to the economic interest of the country and for which the banking business had suffered greatly. Such loss had affected the bilateral relations of India with other countries. The originating bank also had reason to believe that the petitioner would leave India at any time to avoid the legal consequences of such default. 23. Thus, learned counsel submitted that the decision of the NCLT which was affirmed by the NCLAT could not act as a deterrent to the request made by BOB for issuance of LOC. Referring to the consolidated guidelines issued on February 22, 2021, Mr. Kar emphasized that the request for issuance of LOC by a bank could be made even if there was no pending criminal case or warrant against the defaulter and even if the defaulter was not wanted in any judicial proceeding. The movement of the petitioner who was the promoter/director of the said company in liquidation and who was at the helm of affairs of the company in liquidation, should be restricted so that recovery of public money could be made more effectively. He urged the Court to consider the request for LOC is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrol 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. 30. 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. 31. Paragraph 8 (a) and (b) of the office memorandum dated October 27, 2010 are quoted below:- "a) The request for opening an LOC would be made by the originating agency to Deputy Director, Bureau of Immigration (BoI), East Block VIII, R.K. Puram, New Delhi - 66 (Telefax: 011-2619244) in the Proforma enclosed. b) The request for opening of LOC must invariably be issued with the approval of an officer not below the rank of i. Deputy Secretary to the Government of India; or ii. Joint Secretary in the State Government; or iii. District M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... val/departure of the subject in such cases." 34. A combined reading of sub-paragraph (g) and (h) of the said 2010 policy indicates that recourse to LOCs could be taken when the subject was guilty of commission of a cognizable offence under the Indian Penal Code or other penal laws. The details in Column IV of the Proforma enclosed regarding the reasons for opening of LOC were to be provided without which the subject of an LOC could neither be arrested nor detained. If there were no allegations of commission of any cognizable offence, the LOC subject could not be detained or prevented from leaving the country. In such cases, the originating agency could only request that they be informed about the arrival/departure of the subject in such cases. 35. In a general sense, the policy of 2010 restricted the reasons for opening an LOC to cases of pending criminal investigation or proceedings relating to commission of any cognizable offence under the Indian Penal Code or other penal laws. Sub-paragraph (j) of Office Memorandum of 2010 made an exception to such parameters. The same is set out herein below:- "j. In exceptional cases, LOCs can be issued without complete parameters and/or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strialization, investments, business activities, the strength of the currency, the position of the sensex etc. The expression 'economic interest' in the 2017 amendment cannot be given a narrow interpretation to mean individual banking relationship between the borrower and the bank and non payment of the borrowed sum. The expression should be read in the context of bilateral relations and strategic interest of India. 39. At the request of the CBI to DFS in the letter No. 125/3/3/HO2/BS&F2/2018 dated September 24, 2018, public sector banks were empowered to request for opening of LOC. CBI was of the view that economic offenders, wilful defaulters and fraudsters who took loans from the banks and used the same for illegal business activities should be closely monitored. The CBI suggested that the Chairman and/or Managing Directors of Public Sector Banks should be empowered to make requests for opening LOCs against economic offenders/defaulters. By office memorandum dated October 4, 2018 issued by the Deputy Director, BOI, the Ministry of Home Affairs was requested to include sub-paragraph (xiv) to paragraph 8(b) of the memorandum of October 27, 2010. 40. The office memorandum dated O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sovereignty or security or integrity of India or detrimental to the bilateral relations of India with any country or harmful to the strategic and/or economic interest of India, could request for opening a LOC. 42. This Court has already observed earlier that the expression 'economic interest' cannot be read in isolation but must be read into the context in which it has been used in the policy of 2010 as amended. It cannot be given a narrow interpretation to mean and include the conduct of business between the bank and a defaulter. In the absence of any input that such borrower was likely to flee India and such departure would disrupt or adversely affect the economy of the country or jeopardize the bilateral business relationship and/or the strategic relationship of India with other countries, such request could not be made. Sub-paragraph (j) of paragraph 8 had to be satisfied. 43. The consolidated guidelines for issuance of LOC in respect of Indian citizens and foreigners found its final expression in office memorandum dated February 22, 2021. The guidelines of 2010 which were modified in 2018 were reviewed. Paragraph 6 sub-paragraphs H to L provide the general circumstances und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or economic interests of India or if such person is allowed to leave, he may potentially indulge in an act of terrorism or offences against the State and/or that such departure ought not be permitted in the larger public interest at any given point of time." 45. The bank had to establish that the departure of the petitioner on the basis of intelligence reports would be detrimental to the sovereignty, security and integrity of India, detrimental to the bilateral relation of India with any other country or detrimental to the economic interest of India. Although clause (d) in the office memorandum dated October 4, 2018 issued by DFS, Ministry of Finance, Government of India provided that those persons who were fraudsters or had taken loans, wilfully defaulted in repayment of the same or laundered money and then tried to escape to a foreign jurisdiction should be included in the category of subjects whose departure would be harmful to the economic interest of India, the policy of 2021 did not make a separate category under the exception clause for such persons who were either fraudsters or wilful defaulters and had laundered money and were trying to escape to foreign jurisdiction. Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia, there is nothing on record to indicate that the recovery of any amount of default, if committed at the behest of the petitioners by the borrower-company, would affect such recovery in any manner, detrimental or otherwise. 54. As such, the LoC was unfounded and lacked any cogent contemporaneous or prior act of the petitioners. 55. Rather, in the present cases, the respondent no.2-bank has abused its authority to request for opening a Lookout Circular at the behest of the Chairman/Managing Director/Chief Executive, in the capacity of a Public Sector Bank, thereby substituting a regular proceeding for recovery of the debt in the process. The issuance of LoC cannot be an alternative for initiating recovery proceedings against the borrower itself, let alone a director of the borrower-entity. : : : : : : : : : : : : : : 62. As revealed by the LoC and even the affidavits-in-opposition of the respondent no.2, no cogent reason has been shown for the request of the LoC. Even the respondent-authorities acted in an unlawful manner in blindly issuing the LoC without even ascertaining whether the request by the respondent no.2 revealed any exceptional case as envisaged in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quest for issuance of LOC should be fact-based, made carefully, judiciously and on objective parameters supported by evidence. Here, the reasons under Serial No. (1) to (6) of paragraph 4 of the request which was separately mentioned by BOB did not make out an exceptional case. The same are quoted below:- 4. REASON FOR OPENING OF LOC M/s Visa power Limited, engaged in Greenfield Project on Power Generation availed credit facilities from our India Exchange Branch, Kolkata under Consortium Lead Bank Punjab National Bank. 1) Mr. Subrato Trivedi, 2) Mr. Gummalla Rangarao, 3) Mr. Brajesh Chandra Bhattacharya, 4) Mr. Rajinder Sharma, 5) Mr. Vishambhar Saran, Directors and/or guarantors to the credit facilities availed by Borrower Company. Grounds for issuing LOC: 1) This account turned NPA on 30.09.2015 having balance outstanding Rs. 100.46 Crores with our bank. 2) The unit of Borrower Company is closed. The Borrower Company is under Liquidation. 3) Auditor has conducted transaction review of Borrower Company and submitted report on 24.08.2018 wherein auditor has made various observations. There is undervalued transaction of Rs. 22.75 Crore which was given as security de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry 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. They have not contested the proceedings. Clause 3.1 of the SOP (Annexure P2, Page no. 26 of Writ petition) states that the responsibility for requesting issuance of LOC in respect of a defaulter would be on the leader of the consortium of banks or on the holder of the biggest share or exposure amongst them. In this case, the LOC originated by the lead bank, having the highest exposure has been quashed by a Co-ordinate Bench for the reasons which have already been quoted hereinabove. Default of the borrower cannot be read into the expression "detrimental to the economic interest of the country". In order to cause injury to the economic interest of the democracy of India, the commission of alleged offence of default must be of high degree so as to shake the growth, financial stability, business transactions, bilateral trade relations, investments, stock markets etc. There is no evidence that on account of the default committed by the Visa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, represented by the Secretary, Home Department & Ors., reported in 2021 SCC OnLine Tri 143, 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. 54. In the case of Karti P. Chidambaram vs. Bureau Of Immigration, reported in 2018 SCC OnLine Mad 2229, the Hon'ble Madras High Court held as follows:- "73. As observed above, the issuance of Look Out Circulars is governed by executive instructions as contained in the Office Memoranda Nos. 25022/13/78-F1 dated 05.09.1979 and 25022/20/98-FIV dated 27.12.2000, as modified by Office Memorandum dated 27.10.2010. Such LOCs cannot be issued as a matter of course, but when reasons exist, where an accused deliberately evades arrest or does not appear in the trial Court. The argument of the learned Additional Solicitor General that a request for Look Out Circular could have been made in view of the inherent power of the investigating authority to secure attendance a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Even assuming that the same has been extended for which no materials are placed before the Court, the respondents has not been in a position to establish that the settled parameters justifying the issue of an LOC are satisfied in this case. The mandamus, as sought for, is issued and this writ petition is allowed. MPs are closed with no order as to costs." 56. The Delhi High Court in the case of Vikas Chaudhary V. Union of India, decided in W.P.(C) 5374/2021 & CRL.M.(BAIL) 605/2021, 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. 57. In the case of Brij Bhushan Kathuria vs. Union of India &Ors., W.P.(C) 3374/2021,reported in MANU/DE/0737/2021 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 travell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the loan and the dues of the bank, cannot be equated to an act of destabilizing or affecting the economic interest of the country. 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. 60. 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. The forensic report was analyzed by the NCLT and thereafter the NCLAT, leading the fora to arrive at a finding that the forensic report did not show any fraudulent, under-valued and preferential transfer. Thus, even if the CBI proposed an amendment in the policy, to include the Chairman/Managing Director and heads of public sector banks as originating agencies to con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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