Calcutta High Court (Appellete Side)

5.09.2024 vs (A 50) Union Of India & Ors on 5 September, 2024

Author: Shampa Sarkar

Bench: Shampa Sarkar

Court No. 9                     WPA 11626 of 2024
(265711)


                                 Bimla Devi Sureka
05.09.2024
                                         Vs.
(A 50)                          Union of India & Ors.
(S. Banerjee)




                     Ms. N. Banerjee
                     Mr. Dipak Dey
                     Mr. Dipanjan Dey
                     Mr. Aniket Ojha
                     Ms. Sucheta Mitra
                                                       ...for the petitioner
                     Mr. Sauvik Nandy
                     Mr. Rishav Kumar Thakur
                                                              ...for the UOI




                1.   Let the affidavit of service filed in Court today be

                kept with the record.


                2.   The petitioner is aggrieved by the lookout circular

                ('LOC',   for   short)   issued   by    the    Bureau   of

                Immigration. The originating authority was the State

                Bank of India. The petitioner claims to be an

                employee of the borrower company, namely, Concast

                Steel and Power Limited (in liquidation) (hereinafter

                referred to as the 'said company').


                     3.    The petitioner's specific contention is that

                the petitioner was neither a director nor a promoter

                at any point of time and was not connected with the

                day to day operations and management of the

                company. He was a personal guarantor. The loan
                    2




account became an NPA and SARFAESI proceedings

had been initiated by the bank.


4.   An application was also filed under Section 9 of

the Insolvency and Bankruptcy Code, 2016 (IBC) by

an operational creditor. The company went into

liquidation by order dated September 26, 2018.


5.   It is contended by the petitioner that the bank

can recover the loans against the company and also

take   steps   against   the   personal   assets   of   the

borrowers/guarantors etc. but, a LOC cannot be

originated by the bank to realize such dues. The law

provides the mechanism by which the secured

creditor can recover the dues. Curtailment of personal

liberty of the petitioner, by restraining foreign travel,

is violative of Article 21 of the Constitution of India.

It is further clarified by the petitioner that the

allegation of fraudulent transfer which was made

against the borrower company and its officers, had

been rejected by the NCLT, inter alia, holding that

there was no fraudulent transfer whatsoever. The

other contention of the petitioner is that the Directors

and Promoters against whom FIRs had been lodged,

had also suffered similar LOC. Such LOCs were set

aside by a co-ordinate Bench, inter alia, on the

ground that unless the parameters laid down in the

memorandum of 2021 was satisfied in each and every
                   3




case, on the facts thereof, LOC could not be

originated.


6.   The facts which have been pleaded are not in

dispute. The respondents have not been able to

satisfy   the   Court   that    parameters    of   the

memorandum of 2021 were satisfied in this case,

requiring origination of the LOC by the bank and

issuance of the same by the Bureau of Immigration

('the Bureau', for short). The Bureau complied with

the request of the bank and did not enter into the

determination of the issues involved.


7.   Under such circumstances it is prayed that the

LOC be quashed.


8.   Learned advocate for the bank submits that

originally, recourse to LOC could be taken either in

case of commission of a cognizable offence under the

Indian Penal Code or other penal laws or by order of

Court, when the subject of LOC was either evading

arrest or a legal proceeding. An exception was made

in the policy. In the case of threat to the security of

the country and for larger interest of the country, the

originating banks and other authorities could take

recourse to such measure by requesting issuance of

LOCs by the Bureau. Sub-paragraph (j) of the policy

of 2010 was substituted accordingly in 2017 to
                        4




include certain situations which were considered to

be exceptional circumstances.


   9.        According to the bank, departure of the

petitioner would be detrimental, not only to the

bilateral trade relations, but also to the economic

interest of the country.


   10.       Learned advocate for the Bureau submits

that the authority had acted on the request of the

bank. Some of the directors and guarantors of the

borrower       company      challenged    the   LOCs   issued

against them. The coordinate Bench held that the

designated grounds for originating the request by the

bank were missing. Such observation in WPA 2002 of

2024, Ajay Sureka -Vs.- Union of India and Ors., are

quoted below:-


             "2. It transpires from the documents
        handed over in court today that there is no
        specific caption designated as grounds for the
        request. However, Row Nos. 16 and 17 of the
        said purported request are relied on by
        learned counsel for the Bank. Row No. 16 is
        captioned to be brief particulars of the fraud
        committed by the borrower etc. It is indicated
        that    "Sundry      Debtors   (including    related
        parties) have been adjusted with other parties
        without receipt of amount. Submission of
        inflated stock statements to avail higher
        drawing power/credit facilities. Inconsistency
        in     stock       statement     viz-a-viz   actual
                       5




      stock/inventories           and   book    debt    levels."
      Thirdly,       "preferential       transactions        with
      related parties which are not at arm's length
      leading to losses".

            3.      In Row No. 17 is captioned to be
      whether the fraud alleged to have been
      committed/perpetrated against the bank by
      the        borrower        has    been    prima     facie
      established           during       the     investigation
      conducted by the bank. Against the same, it
      is     stated       that     commission      of    fraud
      established through Forensic Audit/Special
      Audit       Report     provided      by   M/s.    M.     C.
      Bhandari and Company during CIRP under
      IBC, 2016."

   11.      In the opinion of this Court, the general

objective behind issuance of LOC is to control the

departure and arrival of persons against whom criminal

cases are pending or who are either avoiding arrest or a

legal proceeding, apart from cases of terrorists, CI

suspects     and     persons       whose    offences    affect      the

economy of the country and bilateral trade relations.


   12.      The first comprehensive policy was framed

and found its release in the office memorandum dated

October 27, 2010. The ingredients necessary for

issuance of LOC, agencies who could make a request

for issuance of LOCs and the parameters required to be

fulfilled before such request could be made, were laid

down. The policy also provided that an LOC could be
                      6




issued on the direction of a Court of law. A combined

reading of sub paragraphs (g) and (h) of the policy of

2010 indicate that recourse to LOCs could be taken

when      the   subject    was    guilty   of   commission    of

cognizable offices under the Indian Penal Code or other

penal laws. Column IV of the proforma enclosed

indicate that reasons should be provided. Without any

reason, the request for issuance of the LOC could not

be made. The policy of 2010 (pg 5) restricted the

reasons for opening an LOC to instances of pending

criminal    investigation    or    proceedings     relating   to

commission of any cognizable office under the Indian

Penal Code or other penal laws or by order of Court.

Sub    paragraph     (j)   made     an     exception   to   such

parameters. The same is quoted below:-

       "j. In exceptional cases, LOCs can be issued
without complete parameters and/or case against CI
suspects, terrorists, anti-national elements, etc. in
larger national interest."


    13.     Even where no criminal case was pending

with regard to commission of any cognizable offence, a

request for LOC could be made if the subject of the

LOC was either a CI suspect or a terrorist or an anti-

national.

    14.     By the amendment of 2017, larger public

interest was incorporated as one of the grounds for

issuance of an LOC. The amendment was brought in by
                     7




a memorandum dated December 5, 2017, which is

quoted below:-

      "In exceptional cases, LOCs can be issued even
in such cases, as would 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) of the above
referred OM, 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 the strategic and/or
economic interest 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 to be permitted in the larger
public interest at any given point in time.
Instead of:
      'in exceptional cases LOCs can be issued without
complete parameters and/or case details against CI
suspects, terrorists, anti-national elements, etc in
larger national interest.' "


    15.    The object of such amendment was to

prevent a person guilty of commission of offences which

were harmful to the bilateral relations of India or

detrimental to the strategic and economic interest of

the country, from fleeing the country.

    16.    By the office memorandum dated October 4,

2018, the Ministry of Home Affairs was requested to

amend the office memorandum of 2010. The said

communication is quoted below:-
                           8




         "(a) Issuance of LOCs in respect of Indian citizens
   and foreigners is governed by Instructions contained in
   the Ministry of Home Affairs (MHA)'s OM dated
   27.10.2010,       as   amended       by   MHA's   OM   dated
   05.12.2017
         (b)   Paragraph      8   (b)   of   MHA's   Om   dated
   27.10.2010 lists those authorities of minimum rank,
   with whose approval the request for opening of LOC
   must be issued. The list does not include officers of
   banks at present.
         (c) As per the amended Paragraph 8(j) (amended
   through MHA's OM dated 05.12.2017),
         'In exceptional cases, LOCs can be issued even in
   such cases, as would 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) of the above-referred OM, 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 permitted in the larger public interest at any given
   point in time.'
(a) It is, therefore, clear that the guidelines enables LOCs
   against persons who are fraudsters/persons who wish
   to take loans, willfully default/launder money and then
   escape to foreign jurisdictions, since such actions
   would not be in the economic interests of India, or in
   the larger public interest.
         2. Therefore, as suggested by CBI, MHA is
   requested to kindly amend the OM dated 27.10.2010
                          9




and include in the list of authorities under Paragraph
8(b) another category, as follows:
        '(xiv) Chairman (State Bank of India)/Managing
Directors and Chief Executive Officers (MD & CEOs) of
all other Public Sector Banks'."


    17.     The        Chairman/Managing              Directors/Chief

Executive Officer of all Public Sector Banks were

included in the list of originating agencies, by an office

memorandum dated October 12, 2018, issued by the

Director    (Immigration)         under     clause     (xv)   of    sub-

paragraph 8(b).

18. The consolidated guidelines found its release in the

office memorandum dated February 22, 2021. The

guidelines       of    2010     which    was      modified/amended

subsequently,          was      reviewed.       Paragraph     6     sub-

paragraphs H to L provided the general circumstances

under      which       LOCs      could     be    requested    by     the

originating agency which included Chairman/Managing

Director/Chief Executive Officer of all public sector

banks. For convenience sub-paragraphs H, I and J are

quoted below:-

        "(H). Recourse to Loc is to be taken in cognizable
offences under IPC or other penal laws. The details in
column IV in the enclosed Proforma reading 'reason for
opening LOC' must invariably be provided without
which      the        subject    of   an        LOC    will   not    be
arrested/detained.
        (I). In cases where there is no cognizable offence
under IPC and other penal laws, the LOC subject
                    10




cannot be detained/arrested or prevented from leaving
the country. The originating agency can only request
that they be informed about the arrival/departure of
the subject in such cases.
      (J) The LOC opened shall remain in force until
and unless a deletion request is received by BoI from
the   Originator   itself.   No   LOC   shall   be   deleted
automatically. Originating Agency must keep reviewing
the LOCs opened at its behest on quarterly and annual
basis and submit the proposals to delete the LOC, if
any, immediately after such a review. The BOI should
contact the LOC Originators through normal channels
as well as through the online portal. In all cases where
the person against whom LOC has been opened is no
longer wanted by        the Originating    Agency or by
Competent Court, the LOC deletion request must be
conveyed to BoI immediately so that liberty of the
individual is not jeopardized."



19. This Court has already held in WPA 6670 of 2022,

that the expressions 'bilateral relations', 'strategic

relations' could not be given a narrow interpretation to

mean a relationship between the borrower and lender

and non-payment of the borrowed sum. The expression

'economic interest' should be read in the context of

bilateral relations and strategic interest of India. The

relevant portions of the decision are quoted below:-

"59. In my opinion, 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
affidavit-in-opposition does not disclose that the
Managing Directors/Executive Officers had applied his
mind or had received information or input from any
                   11




investigating or intelligence agency to come to the
conclusion that the petitioner was trying to flee from
India in order to evade the legal consequences of such
default. It is also a matter of record that the proceeding
with regard to wilful default is still pending and the
bank has not disclosed any material to show that any
other proceeding under any applicable law be it civil or
criminal, has been initiated. Non-payment 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 control and monitor offences of
wilful default, fraud and money laundering, the
respondents have not been able to convince the court
with material evidence that exceptional situation had
arisen in this case, which led to such request. In the
absence of the pre-existing conditions contained in
sub-paragraph (L) of paragraph 6 of the 2021
memorandum, the bank could not have issued the
request for LOC. The affidavit-in-opposition does not
disclose how the default by the said company could
affect the economic interest of the country. No offence
has been attributed to the petitioner. Merely because
the accounts of the company was NPA and the
petitioner was a promoter direction, the petitioner
could not be levelled as a fraudster who had indulged
in money laundering activities, and disrupted the
economy of India. 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
                   12




then no evidence could be submitted to implicate the
petitioner in any criminal case. The petitioner contested
the liquidation proceedings.
...

62. Considering the materials on record, the averments in affidavit-in-opposition and documents annexed thereto, this Court comes to the conclusion that the conditions which must pre-exist as per the existing policy of the government for opening LOC, are absent in this case.

63. 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 decision of Karnataka High Court in Dr. Bavaguthu Raghuram Shetty (supra) also does not apply in the facts of this case. With due respect, this Court does not agree with the conclusions arrived at in the said judgment, especially with regard to the comparison between the quantum of the loan and the annual budget of a state. Whether the outstanding loan with interest, would be more than the budgetary allocation of a particular state or not, in my opinion, is not one of the parameters to be considered."

20. Thus, upon analyzing the policies which existed

from 2010 onwards, the Court is of the view that only

in exceptional cases, LOCs can be issued even if the

parameters quoted above are not covered. Sub-

paragraph (L) of the 2021 policy lays down the

exceptions. The same is quoted below:-

"(L) In exceptional cases, LOCs can be issued in such cases, as 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 permitted in the larger public interest at any given point of time."

21. The bank is required to establish that based

on the intelligence report and inputs, the departure of

the petitioner from India, will be either detrimental to

the sovereignty, security or integrity of India or

detrimental to the bilateral relations of India with other

countries, which will have a cascading effect in the

downfall of the economy. Although, the memorandum

of 2018 talks about fraudsters and wilful defaulters to

be treated as a subject for issuance of LOC, the policy

of 2021 does not include such category of persons.

22. The quantum of the money due or unpaid, cannot

be a ground for issuance of LOC. Some relevant

decisions are discussed herein below.

23. In the decision of E.V. Perumal Samy Reddy v.

State, reported in 2013 SCC OnLine Mad 4092, the

Madras High Court while setting aside an LOC, held as

under:-

"9. It is basic that merely because a person is involved in a criminal case, he is not denude of his Fundamental Rights. It is the fundamental of a person

to move anywhere he likes including foreign countries. One's such personal freedom and liberty cannot be abridged.[See : Article 21 Constitution of India]. In the celebrated in MENAKA GANDHI v. UNION OF INDIA [(1978) 1 SCC 248 : AIR 1978 SC 597], the Hon'ble Supreme Court upheld the constitutional right of persons to go abroad. The phrase no one shall be deprived of his "life and liberty" except procedure established by law employed in Article 21, had deep and pervasive effect on fundamental right and human right. MENAKA GANTHI (supra) ushered a new era in the annals of Indian Human Rights Law. It had gone ahead of American concept of 'Due Process of Law'. 10. But, the fundamental right to move anywhere including foreign countries could be regulated. Where persons involved in criminal cases are wanted for investigation, for court cases, persons, who are anti-social elements their movements can be regulated. Need may arose to apprehend persons, who have ability to fly, flee away the country. So, L.O.C. orders are issued. It is an harmonius way out between a person's fundamental right and interest of the society/state. But, in any case, it must be fair and reasonable. It should not be indiscriminate without any reason or basis.

24. In the case of Soumen Sarkar v. State of

Tripura, 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.

25. 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 and cooperation of an accused is contrary to the aforesaid circulars and thus, not sustainable. 74. It is, in the view of this Court, too late in the day to contend that whether or not to issue an LOC, being a executive decision, the same is not subject to judicial review. It is now well settled that any decision, be it executive or quasi-judicial, is amenable to the power of judicial review of the writ Court under Article 226 of the Constitution of India, when such decision has adverse civil consequences. An LOC, which is a coercive measure to make a person surrender and consequentially interferes with his right of personal liberty and free movement, certainly has adverse civil consequences. This Court, therefore, holds that in exercise of power of judicial review under Article 226 of the Constitution, the writ Court can interfere with an LOC. The question is whether the writ Court should exercise its discretionary jurisdiction to interfere with the impugned LOC.

26. In the case of Rahul Surana vs. The Serious Fraud

Investigation Office & Ors., reported in

MANU/TN/1605/2022, the Hon'ble Madras High Court

held as follows:-

"28. The investigation, even after the elapse of three years, is stated to reveal only prima facie materials and no concrete evidences are stated to have been found been found to implicate the petitioner or frame charges. Admittedly, however there are no proceedings against the petitioner so as to implicate him before the Criminal Court or in any other fora to justify the restrictions under which he has been placed.

29. Admittedly, there have been no instances when the petitioner has evaded summons/notices calling for his attendance/appearance. The Central Bureau of Investigation (CBI) has confirmed that there are no investigations that are ongoing in the case of the petitioner, though reserving their right to initiate appropriate action at an appropriate juncture in future.

30. No material is placed before the Court in support of the bald assertion that the petitioner is a flight risk and as a consequence there is no tangible material available, admittedly, to deny the petitioner of his Fundamental Right. ............. .............

32. In the light of the discussion as aforesaid, I am of the considered view that the petitioner's challenge to the LOC dated 09.12.2020 is liable to be accepted. 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.

27. 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.

28. 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 travelling abroad, without any specific role being

attributed to him.

29. In the case of Rana Ayyub vs. Union of India &

Anr.,W.P.(CRL) 714/2022, reported in 2022 SCC

OnLine Del 961 the Delhi High Court held as follows:-

"12. In the particular facts of the case, it becomes evident that the LOC was issued in haste and despite the absence of any precondition necessitating such a measure. An LOC is a coercive measure to make a person surrender and consequentially interferes with petitioner's right of personal liberty and free movement. It is to be issued in cases where the accused is deliberately evading summons/arrest or where such person fails to appear in Court despite a Non-Bailable Warrant. In the instant case, there is no contradiction by the respondent to the submission of the petitioner that she has appeared on each and every date before the Investigating Agency when summoned, and hence, there is no cogent reason for presuming that the Petitioner would not appear before the Investigation Agency and hence, no case is made out for issuing the impugned LOC. 13. The impugned LOC is accordingly liable to be set aside as being devoid of merits as well as for infringing the Human right of the Petitioner to travel abroad and to exercise her freedom of speech and expression. For the reasons discussed above, the impugned LOC is set aside and quashed. However, a balance has to be struck qua the right of the investigation agency to investigate the instant matter as well as the fundamental right of the petitioner of movement and free speech."

30. Request for LOC has to be fact based,, made

carefully, judiciously and on objective parameters. A

mere apprehension that the petitioner will flee India

and no steps can be taken to recover the money, is not

enough. The law provides for other mechanisms to

recover money from a borrower whose loan account

had become a NPA. The company is already in

liquidation. As of now, it is not clear whether any

criminal investigation is pending against the petitioner.

Default of a borrower cannot be read into the

expression 'detrimental to the economic interest of the

country'. The commission of the financial offence