The Hon’ble High Court of Delhi expounded that Section 11A(2) of the IBC says that precedence is to be given to an application if the application under Section 54C already pending and application under Section 7, 9 or 10 is filed or if the application under Section 7, 9 or 10 is pending and the application under Section 54C is filed within 14 days of the filing of the said application then the precedence has to be given to the said application but Section 11A(3) cast an exception as it provides that where an application under Section 54C is filed after fourteen days of the filing of the application under Section 7, 9 or 10 then it has not to be given precedence rather the precedence has to be given to the application filed under Section 7, 9 or 10 of the IBC.

It was held that if the application under Section 7, 9 or 10 is already filed and then the Act of 2021 came into being then the applicant filing the application under Section 54C cannot take the help of this Section.

Brief Facts:

The Petitioner, Managing Director of M/s. PC Jewellers Limited has challenged the Lookout Circular issued against the Petitioner by the Bureau of Immigration at the request of the State Bank of India.

It was stated that in the year 2022, PC Jewellers faced financial turbulences and proceedings have been initiated by the State Bank of India and other members of the consortium of banks under Section 19 of the Recovery & Bankruptcy Act, 1993 and Original Applications have been filed against the company and the Petitioner herein before the Debt Recovery Tribunal, Delhi and the State Bank of India has also filed a petition under Section 7 of the Insolvency & Bankruptcy Code, 2016 (IBC) against the company before the NCLT.

Pursuant to the actions of lead bank of the consortium, i.e., State Bank of India, the other two consortium members, i.e., Karur Vysya Bank and Axis Bank had also accepted the OTS offer and the proposal submitted by the company through the Petitioner was pending for approval with the higher authorities of the remaining 11 lenders.

Since, proposal has been accepted, it has been requested that lookout circular is quashed.

Observations of the Court:

It was observed 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 was held that 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.

The decision of the Court:

Based on above findings, accordingly, the writ petition was allowed.  

Case Title: Balram Garg v. Union of India & Anr.

Case No.:  W.P.(C) 6739/2024

Coram: Hon'ble Mr. Justice Subramonium Prasad

Advocates for Petitioner: Advs. Mr Anil Kaushik, Mr Rajesh Sharma and Rajat Rana

Advocates for Respondent: Advs. Mr. Vikrant N Goyal, Mr. Adil Hussain Taqui, GP, Mr. Vikrant N Goyal, Mr. Rajat Srivastava, Advocates Mr. Rajiv Kapur and Mr. Akshit Kapur

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