Prashant Bothra And Another vs Bureau Of Immigrations
2023 Latest Caselaw 5910 Cal

                   In the High Court at Calcutta
                  Constitutional Writ Jurisdiction
                           Appellate Side

The Hon'ble Justice Sabyasachi Bhattacharyya

                       WPA No. 25668 of 2022

                    Prashant Bothra and another
                                Vs.
                      Bureau of Immigrations
                            and others

     For the petitioners      :     Mr. Sabyasachi Chowdhury,
                                    Ms. Rajashree Dutta,
                                    Mr. Sanjib Dawn

     For the Union of India   :     Mr. Billwadal Bhattacharyya,
                                    Mr. Narendra Prasad Gupta

     For the respondent no.2 :      Mr. Avishek Guha,

Ms. Akansha Chopra

For the respondent no.3 : Mr. Victor Dutta

Hearing concluded on : 24.08.2023

Judgment on : 05.09.2023

Sabyasachi Bhattacharyya, J:-

1. The petitioners have challenged Look-Out Circulars (LOC) issued

against them by the Immigration Authorities. The originators of

the two requests on the basis of which the same was issued were

respondent no.2, the Bank of Baroda (BoB) and respondent no.6,

the Serious Fraud Investigation Office (SFIO).

2. Learned counsel for the petitioners argues that the issuance of

LOCs against the petitioners was palpably de hors the law and

beyond the authority vested by the concerned Office

Memorandum dated February 22, 2021. It is argued that the

petitioners are neither threats to the economic interests of the

country nor, if the petitioners leave the country, there will be any

detriment to public interest.

3. It is argued that the petitioners‟ personal liberty is restrained

wrongfully and the petitioners are not being permitted to carry on

business abroad by travelling outside the country.

4. It is contended that the petitioner no.1 tried to visit Nepal on

June 9, 2022 for prospective business opportunities; however, he

was stopped from boarding the plane in the last minute by the

immigration authorities at the international airport at Kolkata

without any reason being assigned. On repeated demands, the

senior officer of the immigration office of the airport intimated the

petitioners that the restraint was on the basis of information

provided by the BoB and/or SFIO.

5. However, no LOC was furnished for the petitioners‟ perusal. On

the petitioners‟ sending letters dated August 13, 2022 to the

respondents, BoB replied on August 19 that the documents-in-

question were purely confidential.

6. It is contended that the criteria for requesting issuance of LOC

under ordinary circumstances are not met in the present case.

With regard to the request made by the BoB for issuance of LOC,

no cognizable offence under the Indian Penal Code (IPC) or other

penal laws has been cited. The petitioners place reliance on

paragraph 6(H) of the concerned Office Memorandum of 2021

which provides that in case of any such cognizable offence, the

LOC subject cannot be detained/arrested or prevented from

leaving the country.

7. The issuance of LOC would result in immediately curtailing a

person‟s fundamental right to travel under Article 21, it is argued,

which is a very high restriction, particularly as no criminal

offences have been disclosed against the petitioners.

8. The SFIO merely cites ongoing investigations against the

petitioners pertaining to Avoidance Transaction under the

Insolvency and Bankruptcy Code, 2016 (for short, "the IBC"). The

SFIO, for the first time in its affidavit-in-opposition dated July 30,

2023 has made out a case of defrauding creditors. The

investigation process of the SFIO commenced in 2020 but almost

three years have elapsed without any finding being arrived at

against the petitioners by the SFIO or its investigation team. It is

argued that even an ongoing investigation within the

contemplation of Section 212 of the Companies Act, 2013

(hereinafter referred to as, "the 2013 Act") does not entitle the

SFIO to issue a request for LOC, since such pendency does not

qualify as a pending criminal proceeding apropos any cognizable

offence.

9. The SFIO has disclosed in its affidavit that the entire web of

transactions involving the Company-in-question can be

unearthed and the complete picture of fraud and siphoning of

funds will come out. However, the proceedings of SFIO are still at

the stage of investigation under Section 212(4) of the 2013 Act.

Section 212 envisages that after investigation is completed, a

concrete finding is submitted to the Central Government in the

form of an investigation report as per sub-section (12) of Section

212, on receipt of which the Central Government may, after

examination of the same, direct the SFIO to initiate prosecution

against, inter alia, the Company and its officers or employees

under sub-section (14), following which the SFIO can file the said

investigation report before the Special Court established under

Section 435 for framing of charges under Section 212(15). Thus,

it is contended that the question of any cognizable offence can

only arise after the entire procedure laid down in Section 212 is

sequentially followed and the Special Court frames charges upon

examining the investigation report.

10. On August 22, 2023, for the first time, the SFIO produced an

interim order dated February 7, 2023 passed by the National

Company Law Tribunal (NCLT), Kolkata Bench which carries a

prima facie ex parte finding that fraud has been established

beyond doubt and passes directions against the petitioners. It is

argued by learned counsel for the petitioners that, even assuming

but not admitting such prima facie finding is there, an ad interim

order pursuant to Section 241(2) dealing with cases of

oppression, etc. and not Section 212 of the 2013 Act, cannot be

construed as „pending criminal proceedings‟ apropos a cognizable

offence.

11. It is argued that no exceptional circumstances like detriment to

the economic interest of India or larger public interest is also met

in the present case and, as such, the LOCs, being de hors the

law, should be set aside.

12. Learned counsel for the SFIO seriously opposes the writ petition.

Several allegations are made against the petitioners including

that they are suspended Directors of one Kohinoor Power Private

Limited (KPPL) which is in liquidation before the NCLT, Kolkata.

During the Corporate Insolvency Regulation Proceeding (CIRP) of

KPPL, the Resolution Professional appointed a forensic auditor

who filed a report based on which an avoidance application has

been filed praying for an order on the respondent (petitioners

herein) for payment of Rs.3.5Cr. along with interest under Section

43 of the IBC. Allegations of serious fraud are there against the

petitioners, which are at present being investigated, and give rise

to a detriment to the public interest, it is argued. Learned

counsel places reliance on Section 212(1)(c), highlighting that

where the Central Government is of the opinion that it is

necessary to investigate into the affairs of the Company by the

SFIO, in the public interest, such investigation shall be directed.

Hence, public interest is involved.

13. Learned counsel places reliance on Sections 212(8) and 217(6)(i)

of the 2013 Act, highlighting the procedure and powers of

Inspectors under Section 212. If any Director or Officer of the

Company disobeys the direction issued by the Registrar or the

Inspector under Section 217, the said Director or Officer shall be

punishable with imprisonment which may extend to one year or

with fine which shall not be less than Rs.25,000/-, extending to

Rs.1,00,000/-. The Companies Act, 2013 is a special statute and

has an overriding effect on the Code of Criminal Procedure, 1973

and the SFIO is a specialized agency to investigate into frauds

committed under the 2013 Act.

14. It is also argued that the Supreme Court has laid down that there

is no mandatory timeline to complete investigation by SFIO in the

matter of Serious Fraud Investigation Office and others Vs. Sahara

Housing Investment Corporation Limited and others, reported at

(2022) 9 SCC 794.

15. A reading of the decision, it is argued, bolsters the contention of

SFIO that when an investigation is ongoing, the same ought not

to be interfered with.

16. The SFIO has already obtained orders from the NCLT on February

7, 2023 which demonstrates that clear fraud is committed by the

Company including the petitioners, attracting Section 447 of the

2013 Act. Thus, there is a prima facie case of commission of

cognizable offences by the petitioners and the issuance of request

by the SFIO was justified.

17. Heard learned counsel for the parties. On the direction of Court,

both the SFIO and BoB have handed over copies of their requests

for issuance of LOCs against the petitioners. Since those do not

disclose the identity of any source or something discreet which is

detrimental to the security or interest of the country, the relevant

portions of the same are discussed hereinbelow.

18. Insofar as BoB is concerned, under the head "Reason for opening

of LOC", it discloses that KPPL, of which the petitioners were

Directors, had availed credit facilities from the BoB. The

petitioners were Directors of the borrower-Company and also

guarantors.

19. Due to non-receipt of resolution plan in a CIRP initiated against

the borrower, the NCLT, Kolkata ordered liquidation of the

borrower on June 28, 2019. During CIRP, forensic audit was

assigned to a Company which pointed out certain alleged

irregularities in their forensic audit report.

20. Out of the said alleged irregularities, related party transactions

worth Rs. 10.11Cr. were allegedly identified, interest free deposit

of Rs.3.50Cr. was given by the borrower-Company for outright

purchase of land where the project was to be set up but it was

observed that the Company had taken the land on lease for

annual rent of Rs. 6 Lakh and thus, allegedly, cheated the Bank.

Several such alleged irregularities on the part of the Company

and its Directors have been insinuated in the report, substantial

portions of which have been quoted in the request for opening of

LOC. That apart, based on the observations in the forensic audit

report, the account was allegedly declared as fraud on November

5, 2020 and also reported as such. In the report, it is disclosed

that the Bank has also filed CBI complaint in January, 2021 and

that it is apprehended that the Directors/guarantors are likely to

escape the country to avoid legal prosecution and recovery

measures and opening/issuance of LOC against the

Director/guarantor in particular, the petitioners no.2, was

recommended.

21. The very premise of the request was a forensic audit report

allegedly authored by a particular concern. The said report, at

best, is a piece of evidence in the liquidation proceeding and is in

no manner conclusive proof of evidence of any illegality

committed by any entity. In fact, it is common experience that

each and every such forensic audit report contains several

disclaimers, restricting the operation of the same to the

proceeding in which they are filed, as well as confined to the

impression of the authors thereof on the basis of the documents

which are available to them.

22. Under no stretch of imagination can such a report be conclusive

proof of the allegations against the petitioners.

23. Classification of an account as fraud is an entirely different

proceeding from a criminal action or a recovery proceeding,

contemplated under the relevant Circulars of the Reserve Bank of

Indian (RBI) and do not tantamount to a cognizable offence at all.

24. Admittedly, the Bank filed a CBI complaint in January, 2021 but

there is not an iota of evidence or indication that the CBI

complaint has yielded any fruitful result against the petitioners

till date. Thus, the grounds shown by BoB do not disclose any

cognizable offence against the petitioners and/or anything to

indicate that the impact of the petitioners leaving the country

would be to adversely affect the economic interest of the country

as a whole or the public interest at large.

25. The SFIO has sought to assume an aura of sanctity which the law

does not confer on it. The premise of the submissions of the SFIO

is that mere subsistence of investigation at the behest of the

SFIO, on the direction of the Central Government, is unflinching

proof of the petitioners‟ guilt for some offence. Let us consider

the relevant provisions of the 2013 Act, which are relied on by

both parties, in the backdrop of such claims of the SFIO.

26. Section 447 of the 2013 Act provides punishment for fraud.

However, the punishment for fraud is only meted out if and when

a person is found guilty of fraud beyond reasonable doubt. In

cases of fraud involving public interest, the term of imprisonment

shall not be less than three years.

27. However, to arrive at a verdict that fraud has been committed by

the petitioners beyond doubt, several paraphernalia are to

precede, which are not found in the present case.

28. Much reliance has been placed on Section 217 of the 2013 Act by

the SFIO. The said Section merely provides a road map for

functioning of Inspectors. The procedure and powers, etc. of the

Inspectors have been laid down in Section 217. For example, it

shall be the duty of all officers and employees and agents of a

Company which is under investigation in accordance with the

provisions contained in the said Chapter, where the affairs of any

body-corporate or a person are investigated under Section 219, of

all officers and other employees and agents, etc. to preserve and

to produce to an Inspector all books and papers related to the

Company or other concerned body-corporate and otherwise to

give to the Inspector all assistance in connection with the

investigation which they are reasonably able to give.

29. Under sub-section (2) of Section 217 the Inspector may require

any body-corporate to furnish such information as he may

consider necessary. Certain other powers are also conferred on

the Inspectors.

30. Notably, in the instant case there is not a single allegation that

the petitioners have ever refused to cooperate with the Inspectors

in any manner at any instance. Rather, the petitioners reiterate

that they have all along been cooperating with the Inspectors.

31. During arguments, an insinuation has been made by learned

counsel for the SFIO that one of the Directors of the Company

has escaped to Nepal and has gone in hiding.

32. The said argument, however, is only of prejudicial value, since the

petitioners have pointed out that the said Director has his home

in Nepal. Moreover, the isolated incident of a Director, who is a

resident of Nepal, going to the said country, does not in any

manner operate as a deterrent to the petitioners going abroad.

33. Importantly, Section 212 of the 2013 Act comes under the

scanner in the context of the present case.

34. The SFIO has repeatedly argued that it is still at the stage of

conducting investigations. Thus, as rightly pointed out by learned

counsel for the petitioners, the investigation has apparently not

crossed the stage of Section 212(4). Sub-section (1) of the Section

217 provides that where the Central Government is of the opinion

that it is necessary to investigate into the affairs of a Company by

the SFIO, for any of the reasons as stipulated therein, including

in the public interest, the Central Government may, by order,

assign the investigation into the affairs of the Company to the

SFIO.

35. At the outset, a misconception of the SFIO is required to be

cleared on such aspect. SFIO has cited the expression in Clause

(c) of sub-section (1) of Section 212, "in the public interest", on an

equal footing as „public interest‟ as used in the concerned Office

Memorandum of 2021 for issuance of LOCs. Clause (c) in sub-

section (1) merely contemplates the stage of formation of an

opinion by the Union which, if it were to be conclusive, would not

require any further investigation at all. It is not the law that the

mere opinion of the Central Government will operate as a final

and conclusive verdict of guilt against the concerned persons or

company. Such opinion is a mere stimulus for an investigation

which is being undertaken in the present case.

36. The subsequent provisions provide the modalities of such

investigation. Sub-section (4) provides that the Director, SFIO

shall cause the affairs of the Company to be investigated by an

Investigating Officer who shall have the power of the Inspector

under Section 217. We have already discussed Section 217 and

the connotations thereof.

37. Sub-section (6) of Section 212 provides that notwithstanding

anything contained in the Code of Criminal Procedure, an offence

covered under section 447 of the 2013 Act (which we have also

discussed above) shall be cognizable and no person accused of

any offence under those sections shall be released on bail or on

his own bond unless the Public Prosecutor has been given an

opportunity to oppose the application for such release and where

the Public Prosecutor opposes the application, the court is

satisfied that there are reasonable grounds for believing that he is

not guilty of such offence and that he is not likely to commit any

offence while on bail.

38. Detailed paraphernalia of the subsequent actions in case of arrest

of a person have also been provided in Section 212.

39. In the present case, as rightly pointed by learned counsel for the

petitioners, the stage of investigation within the contemplation of

Section 212(1) - (4) of the 2013 Act is not yet over. Thus, as of

today, whatever may the allegations against the petitioners or the

Company of which they were Directors and guarantors, the same

cannot tantamount to a cognizable offence against the petitioners.

40. Insofar as classification of an account as fraud is concerned, the

same was disclosed only subsequently and does not find place in

the SFIO request to the Immigration Authority for issuance of

LOC.

41. Even if the allegations of the SFIO are taken at the highest,

although those were disclosed post facto issuance of the request,

no ground as contemplated in the concerned Office Memorandum

of 2021 can be found to have disclosed till date.

42. An ad interim order by the NCLT in an oppression and

mismanagement proceeding cannot by any stretch of imagination

prove "guilt" against the petitioners on any count whatsoever.

The entire context of such observation is different from a

proceeding under Section 212 of the 2013 Act and, as such, a

stray observation in such an ad interim order, that too ex parte,

cannot be a valid reason for issuance of an LOC.

43. So long we have considered the alleged offences of the petitioners

disclosed by the SFIO in its opposition and arguments. Let us

now see whether the high ground of issuance of LOC has been

made out at all by the SFIO in its request for issuance of LOC.

44. Surprisingly, precious nothing is disclosed in the said request to

qualify as a ground for issuance of LOC. The only Section of law

mentioned in the proforma for issuance of an LOC is Section

212(1)(c) of the 2013 Act which provision mentions, among other

factors, "public interest", merely in the context of opinion-

formation by the Central Government as a prelude to initiate an

investigation. Hence, the entire edifice of the SFIO‟s case, built

on the premise of a cognizable offence having been committed by

the petitioners, is proved to be bloated, subject to be pierced by a

mere perusal of the Section itself. Initiation of an investigation

under Section 212 of the 2013 Act cannot be equated with a

person being guilty of a cognizable offence or any offence for that

matter.

45. In the absence of a single allegation in the records that the

petitioners are not cooperating in the investigation or a single

instance that the petitioners did not comply with any request or

direction of the Investigating Officers, there is nothing on record

to justify the arbitrary curtailment of the petitioners‟ personal

liberty.

46. Clause (4)(a) of the concerned Office Memorandum dated

February 22, 2021, which has been cited by the SFIO, is merely a

part of an order of the Delhi High Court in a particular matter.

The question formulated by the Delhi High Court was - what are

the categories of cases in which the Investigating Agency can seek

recourse of Look Out Circular and under what circumstances.

The answer given by the said High Court to the said question in

the judgment dated August 11, 2010 was that the recourse to

LOC can be taken by Investigating Agency in cognizable offences

under IPC or other penal laws, where the accused was

deliberately evading arrest or not appearing in the trial court

despite Non Bailable Warrant (NBW) and other coercive measures

and there was likelihood of the accused leaving the country to

evade trial/arrest.

47. The said citation by the SFIO is not relevant in the present case.

In the present case, no "trial" has started and/or any arrest has

been made or sought to be made. There is no issuance of NBW at

all in the present case or even warrant, for that matter. Clause

4(a) of the Office Memorandum, quoting the Delhi High Court,

clearly envisages that there has to be a cognizable offence where

the accused was deliberately evading arrest or not appearing in a

Trial Court despite NBW and other coercive measures and there

was likelihood of the accused leaving the country to evade

trial/arrest. None of the said criteria are met in the present case.

On the contrary, Clause 6 of the Office Memorandum dated

February 22, 2021 provides that the existing guidelines with

regard to issuance of LOC were being superseded and it was

decided as provided thereafter. The said consolidated guidelines,

thus, are spelt out in Clause 6.

48. Clause B of the same provides that the request for opening of

LOC must invariably be issued with the approval of an

Originating Agency that shall be "an Officer not below the rank of

...", including an officer of SFIO not below the rank of Additional

Director. The said Clause, however, does not provide the grounds

for issuance of LOC but merely speaks about the authority of

particular officers for the issuance of a request for LOC. It is

nobody‟s case that the issuance of such request by the SFIO was

without authority. The question which arises here is whether

under the governing guidelines/Office Memorandum, the LOC

could be issued at all or any ground was made out for such

issuance.

49. Clause 6(H) of the Office Memorandum provides that recourse to

LOC is to be taken in cognizable offences under IPS or other

penal laws. The said provision is not met in the present case.

Clause 6(L) envisages that in exceptional cases, LOCs can be

issued in certain cases, including where it appears to the

Originating Authority, based on inputs received, that the

departure of the person is detrimental to the sovereignty or

security or integrity or 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

permitted in the larger public interest at any given point of time.

50. Here, none of the said grounds are fulfilled at all. Also, nothing

has been disclosed in the request or in the arguments of the

Originating Agencies concerned, that is, BoB and SFIO, that they

had received any inputs justifying the request, which is also a

mandate under Clause 6(L). The said Originating Agencies in the

present case merely acted on a knee-jerk reaction, thereby

seeking to use a request for issuance LOC as an alternative

procedure to recovery of debts.

51. Several High Courts as well as the Supreme Court, time and

again, have deprecated the practice of Originating Agencies

resorting to the serious measure of issuance of LOC as a mere

alternative to recovery proceeding.

52. However, such observations have apparently fallen on deaf ears

every time.

53. It has to be kept in mind that the high grounds which are

required to be made out for restraining the personal liberty of a

person as guaranteed under Article 21 of the Constitution and

the right of a person to move within the country under Article 19,

a necessary corollary of which is the right to travel abroad, have

to be on a much elevated footing than mere pendency of an

investigation or allegations of financial frauds against the

concerned person.

54. The mere paranoia of the authorities whenever a person against

whom allegations are levelled seeks to leave the country cannot

be sufficient for issuance of LOCs and curtailing the person‟s

personal liberty to travel abroad.

55. In fact, Clause 6(I) of the Office Memorandum dated February 22,

2021, relied on by both parties, in no uncertain terms provides

that in cases where there is no cognizable offence under IPC and

other penal laws, the LOC-subject cannot be detained/arrested or

prevented from leaving the country. The original agency can only

request that they be informed about the arrival/departure of the

subject in such cases. Hence, even if an LOC is issued but no

cognizable offence under any penal law of the country is made

out, the LOC-subject cannot be detained/arrested or prevented

from leaving the country.

56. Such rider ought to be instilled in the mind of the Originating

Agencies, including the BoB and the SFIO in the present case.

57. Hence, no ground has been made out for issuance of LOC against

the petitioners and/or restricting them from travelling abroad.

58. Accordingly, WPA No.25668 of 2022 is allowed, setting aside the

Look Out Circular(s) issued against the petitioners and

restraining the respondent-Authorities from preventing the

petitioners from travelling abroad in any manner on the strength

of the said quashed LOC(s). The respondent-Authorities shall

immediately arrange for communication of this order and the fact

of the LOCs having been quashed, by causing necessary

publication of the same and intimating about the same to all

authorities who were intimated about the LOCs in the first place,

to ensure that the petitioners are not restrained unduly from

leaving the country on the basis of the quashed LOCs.

59. There will be no order as to costs.

60. Urgent certified server copies, if applied for, be issued to the

parties upon compliance of due formalities.

( Sabyasachi Bhattacharyya, J. )

Later

At this juncture, an order of stay is prayed for.

In view of the nature of the order, stay of operation of the

same is granted for a fortnight to enable the SFIO to prefer a

challenge against this order.

( Sabyasachi Bhattacharyya, J. )