HON'BLE SRI JUSTICE K. LAKSHMAN
WRIT PETITION No.20448 OF 2020
ORDER:
Heard Mr. T. Niranjan Reddy, learned Senior Counsel representing Mr. Vimal Varma Vasireddy, learned counsel for the petitioner, Mr. N. Nagendran learned Special Public Prosecutor for CBI appearing on behalf of respondent No.2 and Mr. Gadi Praveen Kumar, learned Deputy Solicitor General of India appearing on behalf of respondent Nos.1, 3 and 4.
2. The present writ petition is filed seeking to declare the action of the respondents in issuing a Look Out Circular (hereinafter referred to as 'LOC') against the petitioner herein as illegal and contrary to law. A consequent direction is also sought to withdraw the LOC issued against the petitioner.
3. Facts of the case
i) The petitioner is alleged to be the owner and head of management of the Sujana Group of Companies. It is alleged that the petitioner and his group of companies are involved in a large-scale fraud based on which an LOC was issued against him. 2
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ii) The LOC against the petitioner has its genesis in a first information report bearing No.RC-4(E)/2017-CBI/BS&FC/BLR dated 03.02.2017 registered by respondent No.2 herein under Section 120B r/w Sections 420, 468 & 471 of the Indian Penal Code, 1860. The said case was registered against M/s. Best & Crompton Engineering Projects Limited (hereinafter referred to as 'BCEPL'), persons involved in its management and unknown persons.
iii) It was alleged that BCEPL obtained loans from banks which were illegally diverted and misappropriated for purposes other than that for which it was sanctioned. Further, it was alleged that BCEPL along with other companies including the companies owned by the petitioner and in which he was a director were engaged in circular trading without there being any supply of goods. It is also alleged that to facilitate illegal trading, the petitioner's companies issued false invoices and also created other shell companies.
iv) According to respondent No.2, during the commission of the alleged scam, the petitioner herein was the director of various companies belonging to the Sujana Group. Therefore, suspecting him to be involved in the alleged scam, he was summoned for examination 3 KL,J W.P. No.20448 of 2020 under Section 160 of the Code of Criminal Procedure, 1973 (hereinafter referred to as 'Cr.P.C.') by respondent No.2 in the year 2019.
v) The petitioner herein filed W.P. No.9590 of 2019 challenging the issuance of summons. In the said writ petition, this Court granted interim order dated 30.04.2019 directing respondent No.2 herein to not arrest the petitioner under the guise of investigation and not to cause any metal or physical torture. Subsequently, the said writ petition was disposed of recording the submission of learned standing counsel for the respondent No.2 that the petitioner will be again summoned under Section 160 of the Cr.P.C., if any information is required. Liberty was granted to the petitioner to challenge the fresh summons, if any issued.
vi) Respondent No.2 submitted that, during the examination, the petitioner was evasive in his replies and did not provide satisfactory answers. Subsequently, it is alleged that respondent No.2 conducted searches at the official premises of Sujana Group and the petitioner herein and found incriminating material belonging to 4 KL,J W.P. No.20448 of 2020 BCEPL. During the search, respondent No.2 also found several original PAN cards, 278 rubber seals, bank letter heads, etc.
vii) Further, according to respondent No.2, Sujana Group controlled and managed by the petitioner is involved availing loans from various banks and defaulting the same. It is alleged that the loss caused to the banks by the alleged actions of the petitioner and his companies account to Rs. 5000 crores.
viii) Therefore, as the petitioner's role is being investigated in relation to the alleged fraud, to ensure his presence, respondent No.2 requested issuance of LOC against him.
ix) It is relevant to note that the petitioner was also summoned by the Directorate of Enforcement under Section 50(2) of the Prevention of Money Laundering Act, 2002 in relation to ECIR No. ECIR/CEZO/05/2016. The said summons were challenged by the petitioner herein before the Delhi High Court and the Court vide interim order dared 30.12.2018 directed Directorate of Enforcement not to take any coercive steps.
x) According to the petitioner, he came to know about the issuance of the LOC for the first time in the year 2019 and 5 KL,J W.P. No.20448 of 2020 immediately addressed a letter dated 18.12.2019 requesting respondent No.2 to withdraw the LOC. However, no action was taken on his representation.
xi) Challenging the issuance of LOC and continuance thereof, the petitioner has filed the present writ petition.
4. Contentions of the petitioner i. There has been significant lapse of time since the crime was registered and the investigation is still pending. Continuance of LOC against the petitioner is illegal, more so when he is still not named as an accused. Further, the renewal of LOC was done without application of mind as there is no material against the petitioner and when he regularly cooperated with the investigating agencies.
ii. The petitioner was a non-executive director and was not involved in the management of the Sujana Group. Further, none of the companies belonging to the Sujana Group are the beneficiaries of loans obtained by BCEPL. 6
KL,J W.P. No.20448 of 2020 iii. The alleged incriminating material was seized from premises that was neither owned by the petitioner nor was ever taken on rent.
iv. The LOC was issued despite the interim orders dated 30.11.2018 and 30.04.2019 passed by the Delhi High Court and this Court not to take any coercive steps. v. The petitioner has always cooperated in the investigation and no NBW is pending against him. Further, the petitioner has no criminal antecedents. Therefore, LOC could not have been issued.
vi. LOC against the petitioner is violative of Office Memorandum bearing O.M. No. 25016/31/2010-Imm. dated 27.10.2010 (hereinafter referred to as 'O.M. dated 27.10.2010') and Office Memorandum bearing O.M. No. 25016/10/2017-Imm. dated 05.12.2017 (hereinafter referred to as 'O.M. dated 05.12.2017').
vii. LOC can only be issued where the accused is deliberately trying to evade arrest or not appearing during trial despite other coercive measures like issuance of non-bailable warrants. Reliance was placed on Sumer Singh Salkan v. Asstt. 7
KL,J W.P. No.20448 of 2020 Director1and Karti P. Chidambaram v. Bureau of Immigration2.
viii. Despite lapse of 1 year, the LOC against the petitioner has not been withdrawn.
ix. Right to travel abroad is a fundamental right and cannot be restricted without statutory sanction. Reliance was placed on Maneka Gandhi v. Union of India3 and Satish Chandra Verma v. Union of India4.
x. LOC cannot be continued on the ground of exceptional circumstances as O.M. No. 25016/10/2017-IMM (Pt.) dated 22.02.2021 (hereinafter referred to as 'O.M. dated 22.02.2021') is not applicable to the petitioner. In any case, respondent No.2 has failed to review the LOC on a quarterly and annual basis. xi. LOC cannot be issued when no criminal proceedings are pending. Reliance was placed on Kondaveeti Papamma v. Union of India5 and Noor Paul v. Union of India6. 1 . 2010 SCC OnLine Del 2699 2 . 2018 SCC OnLine Mad 2229 3 . (1978) 1 SCC 248 4 . 2019 SCC OnLine SC 2048 5 . MANU/TL/0751/2022 6 . 2022 SCC OnLine P&H 3408 8 KL,J W.P. No.20448 of 2020
5. Contentions of the respondent No.2 i. Respondent No.2 reiterated the allegations against the petitioner as stated hereinabove in the facts of the case. ii. Serious allegations exist against the petitioner based on which the LOC was issued. The crime is at the stage of investigation and the role of the petitioner is being investigated. The delay as alleged by the petitioner in conducting investigation is solely on the ground of Covid-19 pandemic. Further, the LOC was renewed time and again.
iii. LOC can be issued in exceptional cases under the O.M. dated 22.02.2021 and the same also includes issuing LOC to protect the 'economic interests of India'. In the present case, there is an alleged fraud amounting to Rs.2000 Crores involving the petitioner's companies and various other companies. iv. The presence of the petitioner is required for fruitful investigation and there are chances that the petitioner might flee to any foreign country to evade investigation and trial. 9
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6. Findings of the Court
i) From the facts of the case and contentions raised by the parties, the only question before this Court is whether the issuance of LOC against the petitioner is maintainable.
ii) The primary contention of the petitioner is that LOC could not have been issued against him as he is not an accused in any criminal case involving cognizable offences. The said contention cannot be accepted in light of incorporation of the following clause in the consolidated LOC guidelines vide 'O.M. dated 05.12.2017':
"In exceptional cases, LOCs can be issued even in such cases, may not be covered by the guidelines above, whereby departure of a person from India may be declined at the request of any of the authorities mentioned in clause (B) above. if it appears to such authority based on inputs received that the departure of such person is detrimental to the sovereignty or security or integrity of India or that the same is detrimental to the bilateral relations with any country or to the strategic and/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 10 KL,J W.P. No.20448 of 2020 permitted in the larger public interest at any given point in time."
Therefore, the contention that LOC cannot be issued against a person without there being a criminal case cannot be accepted. LOC can also be issued against a person in exceptional circumstances which also includes protection of economic interests of India.
iii) The ancillary question then would be whether the case of the Petitioner falls within exceptional circumstances justifying the issuance of LOC.
iv) It is relevant to note that issuance of LOC is based on subjective satisfaction of the authority issuing such LOC. Nonetheless, the authority issuing LOC should apply its mind to the material before it and consider the factual background. The factual background being the seriousness of the alleged offence/circumstance, the alleged role of the person and the need to restrain him from travelling, the status of the accused (whether such person is highly influential including his financial influence) and other factors which justify issuance of such LOC.
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v) It is also relevant to note that any decision based on subjective satisfaction of any authority can only be tinkered with by the courts in absence of any material justifying such subjective satisfaction. In other words, courts cannot replace the opinion of the authority based on subjective satisfaction with its own opinion, unless there is no reasonable basis for the authority for forming such opinion. Therefore, issuance of an LOC can only be interfered with when the material relied upon by the authority cannot be countenanced as reasonable. Needless, to say that it depends on the facts and circumstances of each case whether the issuance of LOC was proper and whether circumstances warranting issuance of such LOC existed.
vi) At this stage, this Court finds it appropriate to refer to Bavaguthuraghuram Shetty v. Bureau of Immigration7decided by a division bench of the Karnataka High Court wherein it was held that LOC issued is based on subjective satisfaction and the court has limited judicial scrutiny. Further, the court held that non-pendency of a criminal case alone will not be a ground to quash LOC. Persons accused of economic offences cannot be treated with kid-gloves and nation's interest will trump the interest of an individual accused of 7 . 2021 SCC OnLine Kar 14863 12 KL,J W.P. No.20448 of 2020 committing serious economic offences. This Court agrees with the view expressed in Bavaguthuraghuram Shetty (supra) and the relevant paragraphs of the said decision are extracted below:
"29. Thus, respondent No. 3 and 4 being empowered to issue the LOCs by virtue of OM dated 22.11.2018 and "larger public interest", which also governs the "economic interests of India" same have been issued, which cannot be the subject matter of judicial scrutiny inasmuch as, the subjective satisfaction arrived at by respondent Nos. 3 and 4 based on objective assessment, being inconsonance with the extant OMs. The Courts not having technical competence, cannot sit in the arm chair of the respondent Nos. 3 and 4 to evaluate or ascertain whether such finding could have been arrived at. Even otherwise, the reasons which have been assigned to by the respondents in their statement of objections, defending the issuance of LOCs against the petitioner, cannot be said as either irrational or no person of ordinary prudence would have arrived at a conclusion for issuance of LOCs against the petitioner. We say so, for the reason that, petitioner had met the officials of the third respondent on 18.03.2020 in a meeting convened for the purposes of ascertaining as to how petitioner would be able to discharge his 13 KL,J W.P. No.20448 of 2020 debts, Minutes of the meeting was drawn vide Annexure-R 14 and it is duly signed by the petitioner and the officials of the third respondent-
Bank, whereunder petitioner has agreed to secure the exposure of the bank by providing an all out comfort by providing additional security/collateral to the bank. It was also agreed by the petitioner that;
(i) Various properties in Assam Tea Company, Mangaluru, Udupi, Bengaluru, etc. were proposed to be given as security;
(ii) he would give all the property documents to enable the bank to pay a charge on the properties;
33. It would be apt and appropriate to note that Courts exercising extraordinary jurisdiction, while examining the claim of a person who is alleged to have committed an economic offence, would not treat him with kid gloves. Non pendency of any criminal case, by itself would not be a ground on which the Look Out Notice/Circular not being issued. The extant circular in the instant case would clearly indicate that if it appears to the authorities based on inputs received that departure of a person is detrimental to the bilateral relations with any country or to the strategic and/or economic interests of India or if such person if allowed to leave the country, he may potentially 14 KL,J W.P. No.20448 of 2020 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, then in such circumstances his right to go abroad can be curtailed or restricted. Thus, emphasis is on the expression "economic interests of India" or "larger public interest". The Hon'ble Apex Court in the case of Nimmagadda Prasad v. Central Bureau of Investigation, (supra) after referring to State of Gujarat v. MohanlaljitamaljiPorwal, (supra) has observed:
"26) Unfortunately, in the last few years, the country has been seeing an alarming rise in white- collar crimes, which has affected the fiber of the country's economic structure. Incontrovertibly, economic offences have serious repercussions on the development of the country as a whole. In State of Gujarat v. Mohanlal JitamaljiPorwal, (1987) 2 SCC 364 this Court, while considering a request of the prosecution for adducing additional evidence, inter alia, observed as under:--
"5. ...The entire Community is aggrieved if the economic offenders who ruin the economy of the State are not brought to book. A murder may be committed in the heat of moment upon passions being aroused. An economic offence is committed with cool calculation and deliberate design with an 15 KL,J W.P. No.20448 of 2020 eye on personal profit regardless of the consequence to the Community. A disregard for the interest of the Community can be manifested only at the cost of forfeiting the trust and faith of the Community in the system to administer justice in an even handed manner without fear of criticism from the quarters which view white collar crimes with a permissive eye unmindful of the damage done to the national economy and national interest...."
34. The Hon'ble Apex Court in the matter of Mardia Chemicals Ltd. v. Union of India, (supra) while examining the validity of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), has observed that liquidity of finances and flow of money is essential for any healthy and growth oriented economy. It has been further held:
"34. Some facts which need be taken note of are that the banks and the financial institutions have heavily financed the petitioners and other industries. It is also a fact that a large sum of amount remains unrecovered. Normal process of recovery of debts through courts is lengthy and time taken is not suited for recovery of such dues. For financial assistance rendered to the industries by the financial institutions, financial liquidity is 16 KL,J W.P. No.20448 of 2020 essential failing which there is a blockade of large sums of amounts creating circumstances which retard the economic progress followed by a large number of other consequential ill effects. Considering all these circumstances, the Recovery of Debts Due to Banks and Financial Institutions Act was enacted in 1993 but as the figures show it also did not bring the desired results. Though it is submitted on behalf of the petitioners that it so happened due to inaction on the part of the governments in creating Debt Recovery Tribunals and appointing Presiding Officers, for a long time. Even after leaving that margin, it is to be noted that things in the concerned spheres are desired to move faster. In the present day global economy it may be difficult to stick to old and conventional methods of financing and recovery of dues. Hence, in our view, it cannot be said that a step taken towards securitisation of the debts and to evolve means for faster recovery of the NPAs was not called for or that it was superimposition of undesired law since one legislation was already operating in the field namely the Recovery of Debts due to Banks and Financial Institutions Act. It is also to be noted that the idea has not erupted abruptly to resort to such a legislation. It appears that a thought was given to the problems and Narasimham Committee was constituted which 17 KL,J W.P. No.20448 of 2020 recommended for such a legislation keeping in view the changing times and economic situation whereafter yet another expert committee was constituted then alone the impugned law was enacted. Liquidity of finances and flow of money is essential for any healthy and growth oriented economy. But certainly, what must be kept in mind is that the law should not be in derogation of the rights which are guaranteed to the people under the Constitution. The procedure should also be fair, reasonable and valid, though it may vary looking to the different situations needed to be tackled and object sought to be achieved."
35. In the matter of Indian Bank v. Bluejaggers Estates Ltd., (supra) has held that public sector banks are trustees of public funds and it cannot compromise public interest for benefiting private individuals. It has been also held:
"25. The Court cannot lose sight of the fact that the bank is a trustee of public funds. It cannot compromise the public interest for bene fitting private individuals. Those who take loan and avail financial facilities from the bank are duty bound to repay the amount strictly in accordance with the terms of the contract. Any lapse in such matters has to be viewed seriously and the bank is not only entitled but duty bound to recover the amount by adopting all legally permissible methods. The 18 KL,J W.P. No.20448 of 2020 Parliament enacted the Act because it was found that legal mechanism available till then was wholly insufficient for recovery of the outstanding dues of banks and financial institutions. Reference in this connection deserves to be made to the judgments of this Court in Delhi Transport Corporation v. D.T.C. Mazdoor Congress, (supra), Central Bank of India v. State of Kerala, (2009) 4 SCC 94 and United Bank of India v. SatyawatiTondon,."
Thus, while considering the prayer for the Look Out Circular being quashed, which prohibits a person like the petitioner from going abroad or in other words, leaving the territory of India, the Courts will have to weigh the individual right visa-vis the interest of the Country. We are reminded of the celebrated quote of Vidhuraneethi-Chapter 5, Shloka No. 17:
"tyajedekamkulasyarthegramasyarthekulamtyaj etgramamjanapdasyarthehyatmartheprthivimtyajet "
"Renounce one person for the sake of family, a family for the sake of village; Village for the sake of country and even the (Kingdom of) earth for one s own sake."
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KL,J W.P. No.20448 of 2020 In other words, "renounce smaller selfish interest for the sake of bigger good".
36. Thus, the national interest is paramount and all other interests including the individual interest will have to yield or kneel before the national interest. In fact, the economic offences constitute a class by itself and the approach to said issue has to be from a wider angle, as economic offence if it goes unchecked, it would lead to serious consequences affecting the economy of the country as whole and it would pose a serious threat to the financial stability of the country. This Court cannot lose sight of the fact that cause of the community deserves equal treatment at the hands of the Courts. The Hon'ble Apex Court in the case of Mohanlal Jitmalji's case, referred to supra has observed: "the community or the state is not a person-non grata whose cause may be treated with disdain. The entire community is aggrieved if the economic offenders who ruin the economy of the state are not brought to books."
vii) Now coming to the facts of the case, according to this Court, issuance of LOC against the petitioners was justified. Respondent No.2 based on investigation has categorically made serious allegations of a fraud involving an amount of Rs.2000 crores. 20
KL,J W.P. No.20448 of 2020 The reply of the petitioner to such allegations is entirely factual and cannot be considered by this Court under Article 226 of the Constitution of India.
viii) According to this Court, where serious factual aspects involving an alleged fraud are raised by both, the party challenging the issuance of LOC and the authority defending issuance of such LOC, the Courts shall lean in favour of the authority and continue such LOC.
ix) The authorities investigating a case cannot possibly know all the persons involved in a case. Authorities may have serious suspicion on certain people who might be involved in a case. The authorities have the power to issue LOC citing their reasons and justifying them under the O.M. dated 22.02.2021 to prevent such suspects from leaving the country.
x) LOCs cannot be quashed solely on the ground that exceptional circumstances have been disputed by raising factual aspects or on the ground that the person has not been made an accused. Depending on facts of each case, courts can refuse to quash LOC where highly factual aspects are raised to dispute the existence 21 KL,J W.P. No.20448 of 2020 of exceptional circumstances, if it is satisfied that such LOC was issued on reasonable grounds. In other words, where existence of exceptional circumstances like 'economic interests' are factually disputed and need adjudication and where the role of the person against whom LOC was issued is being investigated, the Court can refuse to quash the LOC.
xi) It is true and trite that right to travel abroad is a fundamental right. However, such right is subject to reasonable restrictions which include the exceptional circumstances which are stated in O.M. dated 05.12.2017 and the subsequent O.M.s including the latest O.M. dated 22.02.2021. The restriction on a person, alleged to have been involved in a cognizable offence, to travel abroad is not absolute. Such person against whom an LOC is issued is not prohibited from travelling abroad, but he is only restricted to travel abroad without the permission of the court. A person against whom LOC is pending can approach the competent court and show his reasons to travel abroad. Further, the interests of the person against whom an LOC is issued are adequately safeguarded as such LOC is reviewed on a quarterly and 22 KL,J W.P. No.20448 of 2020 annual basis. Such person can always approach this Court if such LOC is not reviewed as per law.
xii) At the cost of repetition, this Court is aware that LOC is a coercive measure. However, where the cases of economic interest involving the country are involved, such interests of the country will trump individual interests. In any case, the individual interests are adequately safeguarded under law and the doors of this Court are always open when the law is misused.
xiii) Therefore, in the present case, the issuance of LOC is justified and the same cannot be said to have been issued without any material on record.
xiv) The other contention raised by the petitioner that the LOC was issued contrary to the orders passed by this Court and Delhi High Court directing not to take any coercive steps cannot be accepted. The interim order dated 30.12.2018 passed by the Delhi High Court not to take any coercive steps was against the Directorate of Enforcement whereas the request for issuance of LOC was made by respondent No.2 herein. Therefore, LOC was not issued contrary to the order dated 30.12.2018 passed by the Delhi High Court. 23
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xv) Further, this Court vide 30.04.2019 in W.P. No.9590 of 2019 never granted an order not to take any coercive steps. The relevant portion of the said order is extracted below:
"Therefore, without expressing any opinion on the merits of the case, at this stage, this Court feels that it would be just and proper if a direction is issued to the petitioner to appear before respondent No.2 between '10.00 a.m. to 5.00 p.m. on 27th and 28th May,2019 with one hour Lunch break between 1.00 p.m. and 2.00 p.m. The petitioner shall cooperate with the investigation. He is at liberty to have the company of his counsel during the said period of investigation and the same shall be permitted by respondent No.2. However, it is made clear that under the garb of investigation under Section 160 Cr.P.C., respondent No.2 shall not arrest or subject the petitioner to physical or mental torture. It is needless to observe that respondent No.2 would complete investigation on the above two days."
Therefore, LOC against the petitioner was not issued contrary to orders passed by this Court.
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KL,J W.P. No.20448 of 2020 xvi) The contention that the LOC against the petitioner lapsed after one year since it was issued cannot be accepted as the same was renewed time and again.
xvii) As stated above, the other issues raised by the parties are highly factual and as investigation is pending no opinion can be expressed.
7. Conclusion:
Therefore, in light of the aforesaid discussion, the present writ petition is liable to be dismissed and is accordingly dismissed. However, liberty is granted to the petitioner to approach the competent court and seek permission to travel aboard. In the circumstances of the case, there shall be no order as to costs.
As a sequel thereto, miscellaneous petitions, if any, pending in the writ petition shall stand closed.
_________________ K. LAKSHMAN, J 24th April, 2023 Mgr