Telangana High Court

Sriharsha Majety vs Union Bank Of India on 28 July, 2022

Bench: K.Lakshman

     THE HONOURABLE SRI JUSTICE K.LAKSHMAN

              WRIT PETITION No.23799 OF 2022

ORDER:

This Writ Petition is filed to declare the action of

respondent Nos.1 to 3 - Banks (hereinafter called as 'Bank')

in issuing Look Out Circular (LOC) against the petitioner i.e.

Sriharsha Majety, holding passport No.Z5620962 from

travelling abroad on 04.03.2022 as illegal, consequently

direct the respondent Nos.4 to 6 to expunge any remarks/

endorsements/entries that have been entered in the records/

passport of the petitioner in furtherance of LOC and also

declare inaction of the Bank in not considering the

representation of the petitioner made in person as well as

vide letter dated 28.03.2022, in a time-bound manner.

2. Heard Sri Vikram Pooserla, learned counsel for the

petitioner and Smt. V.Dyumani, learned Standing Counsel

appearing for respondent Nos.1 to 3, Sri V.T.Kalyan, learned

counsel, representing Sri Namavarapu Rajeshwar Rao, Asst.

Solicitor General of India for respondent Nos.4 to 6. Perused

the record.

FACTS OF THE CASE:-

3. The petitioner herein is a partner in M/s. Andhra

Oils and Fertilizers Owners Firm and M/s. Surendra Cotton

Oil Mills and Fertilizers Company (for short, 'the Firms')

which are engaged in warehousing business in Vijayawada. A

term loan of Rs.93 Crores was sanctioned to Minerva

Executive Apartments Private Limited (for short, 'MEAPL') by

the Bank for the propose of construction service apartments

and each of the firms independently provided a guarantee in

respect of the said term loan. The liability of the guarantors

was limited to Rs.17.50 Crores. The Firms also extended two

immovable properties located in Vijayawada to MEAPL. A

sanction letter dated 18.01.2011 was issued by the Bank in

which it was agreed that the liability of the guarantors would

be limited to Rs.17.50 Crores. Two letters of guarantee dated

28.09.2012 were extended by the Firms for Rs.10 Crores and

Rs.7.62 Crores. The said term loan account of MEAPL was

declared as (Non Performing Asset (NPA). The Bank issued a

demand notice, dated 23.12.2013 under Section 13(2) of the

Securitisation and Reconstruction of Financial Assets and

Enforcement of Securities Interest Act, 2002 (for short, 'the

SARFAESI Act') which was never received by the Firms and

the petitioner herein. The Bank has issued a possession

notice dated 29.09.2014 bringing the said fact to the

petitioner. The Bank preferred OA No.144 of 2014 before

Debt Recovery Tribunal, Hyderabad seeking recovery of

amounts allegedly due from MEAPL, which is pending

adjudication. E-auction sale notices were issued by the Bank

in respect of the collateral security properties. The same was

challenged by the petitioner and other partners before the

DRT, Visakhapatnam vide S.A.No.270 of 2016. The DRT,

Visakhapatnam was pleased to set aside the proceedings for

sale initiated by the Bank and declared the E-auction sale

notices and other demand notices as illegal. Earlier when the

petitioner intended to travel to United Arab Emirates with his

wife and child on 04.03.2022, he was prevented from

travelling abroad by 5th respondent at Bangaluru since LOC

is pending against the petitioner. Now the petitioner intends

to go to London for business purpose for a period of one

month from 02.08.2022 to 01.09.2022.

4. Learned counsel for the petitioner would submit that

while issuing LOC, the Bank has not followed the guidelines

issued by the Ministry of Home Affairs, from time to time

including the latest guidelines issued vide Office

Memorandum dated 22.02.2021 and it is abuse of process of

law. The right of the petitioner to travel abroad cannot be

deprived and it amounts to violation of Article 21 of the

Constitution of India. He has also placed reliance on several

judgments. Now the petitioner intends to go to London for

business purpose for a period of one month from 02.08.2022

to 01.09.2022 and he also undertakes to return to India. He

has also purchased Air Ticket. Due to pendency of LOC, the

petitioner herein is not in a position to travel abroad for the

said purpose. He has also placed reliance on several

judgments. With the said submissions, the petitioner sought

to declare the LOC issued against him as illegal.

5. Whereas, Mrs. V.Dyumani, learned standing counsel

appearing for the Bank, referring to the counter, would

submit that the Bank has followed the guidelines issued by

the Ministry of Home Affairs, Union of India, including the

guidelines dated 22.02.2021. There is an appeal pending

against the petitioner before the Debts Recovery Appellate

Tribunal at Kolkata and the same is pending. The petitioner

herein has defrauded the bank and caused wrongful loss to

the bank. The petitioner has availed loan facility from the

Bank and the same was later declared as NPA. There is every

likelihood of the petitioner to flee away to evade the debt if

permitted. The petitioner has to approach the officer who

ordered issuance of LOC and extend LOC wrongly. Instead of

doing so, he has filed the present writ petition and therefore

it is within the bank's right to issue LOC against the

petitioner herein. There is no irregularity in it.

6. The petitioner has filed rejoinder to the counter filed

by the Bank stating that as on today the steps taken by the

Bank have been rightly rejected by the appropriate forum.

Despite the petitioner is only a guarantor and not a borrower,

the Bank has illegally issued an LOC against him and the

same is an abuse of its powers. Though guarantor's liability

is co-extensive with that of the principal debtor/borrower, the

same is subject to the terms of the contract between the

lender and the guarantor. By virtue of the terms of the

contract between the parties, the petitioner and the other

partiers are collectively liable to pay only the guaranteed

amount.

7. Referring to the order dated 17.07.2018 passed by

DRT, Visakhapatnam, learned counsel for the petitioner

would submit that the liability of the petitioner is only

Rs.17.5 Crores. However, the learned standing counsel

appearing for the respondent Nos.1 to 3 - Banks would

submit that the Bank had already preferred appeal before the

DRAT and the same is pending. There are no criminal cases

pending against the petitioner herein. There is no

investigation pending with Directorate of Enforcement. Bank

had issued LOC as a precautionary measure considering that

the petitioner's case will fall under 'Economic Interest of

India' category. The property worth of Rs.65 Crores of the

petitioner is under mortgage with the bank.

8. There is no dispute that an application vide OA

No.144 of 2014 filed by the Bank before DRT, Hyderabad

seeking recovery of amounts from MEAPL, is pending

adjudication. E-auction sale notices issued by the Bank in

respect of the collateral security properties were challenged

by the petitioner and other partners before the DRT,

Visakhapatnam vide S.A.No.270 of 2016 and the same were

set aside, declared the said proceedings as illegal. Now the

petitioner intends to travel London for a period of one month

i.e. from 02.08.2022 to 01.09.2022 for his business purpose.

In proof of the same, the petitioner has filed certain

documents including Air Ticket. He also undertakes to return

to India and inform the respondents about his address and

other particulars of his stay in abroad.

9. In Menaka Gandhi Vs. Union of India1, it was held

by the Apex Court that no person can be deprived of his right

to go abroad unless there is a law enabling the State to do so

and such law contains fair, reasonable and just procedure.

Paragraph No.5 of the said judgment is relevant and the

same is extracted below:-

Thus, no person can be deprived of his right to, go abroad unless there is a law made by the State prescribing the procedure for so depriving him and the deprivation is effected strictly in accordance with such procedure. It was for this reason, in order to comply with the requirement of Article 21, that Parliament enacted the Passports Act, 1967 for regulating the tight to go abroad. It is clear from the provisions of the Passports, Act, 1967 that is lays down the circumstances under which a passport may be issued or refused or cancelled or impounded and also prescribes a procedure for doing so, but the question

1978(1)SCC 248

is whether that is sufficient compliance with Article

21. Is the prescription of some sort of procedure enough or must the procedure comply with any particular requirements? Obviously, procedure cannot be arbitrary, unfair or unreasonable. This indeed was conceded by the learned Attorney General who with his usual candour frankly stated that it was not possible for him to contend that any procedure howsoever arbitrary, oppressive or unjust may be prescribed by the law.

Therefore, such a right to travel abroad cannot be deprived

except by just, fair and reasonable procedure.

10. Referring to the said principle and also the

principles laid down by the Apex Court in several other

judgments, considering the guidelines issued by the Union of

India from time to time, the Division Bench of High Court of

Punjab and Haryana at Chandigarh in Noor Paul Vs. Union

of India2 held that a right to travel abroad cannot be

deprived except by just, fair and reasonable procedure.

Without communicating the LOC to the subject of LOC, the

authorities cannot seek to enforce it as it would not have any

effect in law.

(2022) SCC online P&H 1176

11. On examination of the facts therein, it had declared

that issuance of LOC against the petitioner therein, a

Guarantor to the loans, as illegal and set aside the LOC

issued against the petitioner therein.

12. It is also relevant to note that the Bank of India,

respondent therein, the Originator of the LOC had preferred

Spl.Leave to Appeal (c) No(s). 7733 of 2022 wherein the Apex

Court, vide order dated 05.05.2022 declined to stay the

operation of said judgment except for the direction in the

operative part of the order that the respondent Nos.1, 3 and 4

therein shall serve a copy of the LOC and also reasons for

issuing it to the persons against whom it is issued as soon as

possible after it is issued, and also provide a post - decisional

opportunity to him and those requirements shall be read into

the OMs issued by the respondents concerning the issuance

of LOCs. The Apex Court also granted stay of the direction for

payment of costs. The Apex Court however directed the

Originator and custodian to ensure that the petitioner therein

shall not be prevented from travelling abroad to pursue her

studies by reason of the LOC. However, the Apex Court has

also directed the respondent No.1/Writ Petitioner therein to

give an undertaking to the Court not to dispose of her assets

if any. She shall also keep the Bureau of Immigration

informed of the dates of her departure from and entry into

India.

13. It is also relevant to note that in supersession of its

earlier Office Memorandum/guidelines, the Government of

India, had issued guidelines vide Office Memorandum, dated

22.02.2021 with regard to issuance of LOC. In the said

guidelines, the details of the Officers who have to issue LOC

and other procedures were explained. As per the said

guidelines, the Chairman/Managing Directors/Chief

Executive of all Public Sector Banks can request for opening

an LOC.

14. As per clause-6(J) of the Office Memorandum, dated

22.02.2021, the LOC opened shall remain in force until and

unless a deletion request is received by the BOI from the

Originator itself. No LOC shall be deleted automatically. The

Originating Agency must keep reviewing the LOCs opened at

its behest on quarterly and annual basis and has to 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. A guideline similar to that of the above

referred guideline is also there, in OM, dated 05.12.2017.

Therefore, the 1st respondent, Originating Agency, shall

review the said LOC.

15. In view of the above said guidelines and also law

laid down, coming to the case on hand as discussed supra,

the petitioner herein is a partner in the Firms. A term loan of

Rs.93 Crores was sanctioned to MEAPL by the Bank for the

propose of construction service apartments and the Firms

had stood as guarantors to the said term loan. The liability of

the guarantors was limited to Rs.17.50 Crores by DRT. The

Firms also extended two immovable properties located in

Vijayawada as collateral security to the said loan. The said

loan was declared as NPA. An appeal filed by the Bank

against the petitioner before the DRAT is pending. Due to

pendency of LOC, the petitioner is not in a position to travel

abroad. Now the petitioner intends to go to London for

business purpose for a period of one month from 03.08.2022

to 01.09.2022.

16. In view of the above said discussion, this Court is

not inclined to declare LOC issued against the petitioner

herein as illegal. However, as per the above said guidelines

dated 22.02.2021, the Originating Agency has to review the

said LOC on quarterly and annual basis but the Bank did not

do the said exercise. Counter filed by the Bank is silent with

regard to the same. The petitioner along with his family

members are permanent resident of India and conducts

majority of business operations from Bangaluru. Now he is

only seeking permission to travel abroad for a period of one

month from 02.08.2022 to 01.09.2022 for business purpose.

Therefore, this Court is inclined to suspend the LOC issued

against the petitioner herein for the above said period.

17. Considering the said principles and also in view of the above said discussion, this Writ Petition is disposed of with the following directions:-

i. LOC issued by the respondent Nos.1 to 3 - Banks against the petitioner is suspended for a period of one month from 02.08.2022 to 01.09.2022.

ii. The respondent Nos.1 to 3 - Banks shall inform/ communicate this order to other respondents in terms of Office Memorandum, dated 22.02.2021.

iii. The petitioner shall inform his arrival/departure to the respondents in terms of the said Office Memorandum, dated 22.02.2021.

iv. Respondent No.1 to 3/Banks/Originating Agency shall review LOC opened against the petitioner herein on quarterly and annual basis, submit proposals to delete LOC, if any, immediately after such a review in terms of the said Office Memorandum, dated 22.02.2021. They shall communicate the same to the petitioner herein.

v. Both the petitioner and the respondents are directed to comply with the guidelines issued by the Government of India vide Office Memorandum dated 22.02.2021.