Telangana High Court
Mathukumilli Sri Mani vs Union Of India on 3 June, 2024
Author: Surepalli Nanda
Bench: Surepalli Nanda
IN THE HIGH COURT OF TELANGANA AT HYDERABAD
W.P.No.15368 OF 2023
Between:
Mathukumilli Sri Mani
... Petitioner
And
Union of India & others
... Respondents
JUDGMENT PRONOUNCED ON: 03.06.2024
THE HON'BLE MRS JUSTICE SUREPALLI NANDA
1. Whether Reporters of Local newspapers : Yes
may be allowed to see the Judgment?
2. Whether the copies of judgment may be
marked to Law Reporters/Journals? : Yes
3. Whether Their Lordships wish to
see the fair copy of the Judgment? : Yes
_________________
SUREPALLI NANDA, J
2
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THE HON'BLE MRS JUSTICE SUREPALLI NANDA
W.P.No.15368 OF 2023
% 03.06.2024
Between:
# Mathukumilli Sri Mani
... Petitioner
And
$ Union of India & others
... Respondents
< Gist:
> Head Note:
! Counsel for the Petitioner : Mr.Pasham Mohith
^ Counsel for Respondents : Mr.Gadi Praveen Kumar,
Ld.Deputy Solicitor
General of India for R1,
R3 to R5
Ms.V.Dyumani, for R2
? Cases Referred:
(1) Judgment dated 06.03.2024 in WPA No.25242 of 2023
(2) Judgment dated 09.06.2023 in WPA No.22748 of 2022
(3) 2023 SCC Online Del 8349
(4) AIR 1978 SC 597
(5) 2019 (2) SCC Online SC 2048
(6) AIR 1967 SC 1836
(7) Judgment dated 31.01.2023 in WPA No.6670 of 2022
(8) 2022 SCC on P&H 3408
(9) 2022 SCC Online Cal.3536
(10) 2022 SCC Online P& H 1176
(11) 2013 SCC online Mad 4092
(12) 2022 SCC Online Del 961
(13) 2021 SCC online Tri 143
(14) 2018 SCC online Mad 2229
(15) Judgment in W.P.No.719 of 2020
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HON'BLE MRS JUSTICE SUREPALLI NANDA
W.P. No. 15368 of 2023
ORDER:
Heard Mr. Pasham Mohith, learned counsel appearing
on behalf of the Petitioner, Mr. Gadi Praveen Kumar,
learned Deputy Solicitor General of India appearing on
behalf of Respondent Nos.1, 3 to 5, and Ms.V.Dyumani,
learned Standing Counsel appearing on behalf of
respondent No.2.
2. Petitioner approached the Court seeking prayer as
under :
"...to issue a Writ, Order or Direction more particularly one
in the nature of Writ of Mandamus declaring the actions of
the Respondents in issuing and keeping a Look Out Circular
(LoC) pending against the Petitioner as illegal, arbitrary and
unconstitutional and set aside/ quash the same and
consequently direct the Respondents not to
obstruct/restrain the Petitioner from travelling to and fro
from the country vide Passport
No N4236897 and pass..."
PERUSED THE RECORD :
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3. The counter affidavit has been filed by the
Respondent - Bank and the relevant paragraph Nos.8, 11,
12, 13, 14 and 15, are extracted hereunder:
"8. It is submitted that the Government of India, Ministry
of finance, Department of Financial Services issued
proceedings no.25016/31/2010, dated 27.10.2010 the
guidelines for issue of Lookout Notice in respect of Indian
Citizens and Foreigners. Subsequently vide office
memorandum dated 04.10.2018 the Government of India
empowered the Bank Officers to issue the Lookout Notice.
A copy of the office memorandum is filed herewith. The
clause no. 1 (d) & 2 of the Office Memorandum is
reproduced is under.
(d) It is therefore, clear that the guidelines enable
LOCs against persons who are fraudsters/persons
who wish to take loans, wilfully 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 27.10.2020
and include in the list of authorities under Paragraph
8 (b) another category, as follows:
"(Xlv) Chairman (State Bank of India)/Managing
Directors and Chief Executive Officers (MD& CEOS) of
all other Public Sector Banks"
11. It is submitted that though the crystalized liability of
the borrower was settled under OTS, the bank guarantees
issued by the Respondent on behalf of M/s. Progressive -
Higleig Joint Venture in favour of M/s Tanzania National
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Roads Agency for "The Upgrading of Namtumbo - Tunduru
Road to Bitumen standard LOT A: Contract No.
TRD/HQ/1039/2010/11 Namtumbo - Kilimasera Section
(60.70 Km)" and "The Upgrading of Namtumbo Tunduru
Road to Bitumen Standard; LOT B: Contract No
TRD/HQ/1040/2010/11 Kilimasera Mtemanga Section
(68.20 Km)" to the tune of USD 2,18,21,972.00 (approx.
Rs.180.43Crore) These BGs have expired during Sep'2013
& June'2014. The Borrower was awarded 3 Road Projects
in Tanzania and subsequently all 3 projects terminated on
27.12.2012 citing the reasons for Slow Progress/Borrower
failed to perform the works as per Contract. It is submitted
that the beneficiary, vide their letters dt.14.01.2013 had
submitted invocation letters. But the Borrower has
approached Courts and obtained stay order on invocation
of BGs by Banks and court also directed the Respondent
Bank not to invoke the BGs till the matter is disposed off.
Hence, the Respondent has not invoked the BGs.
Beneficiary vide letter dt. 03.10.2022, again submitted the
invocation letters stating that vide order dated 13.09.2022
court has vacated the stay order.
12. It is submitted that the Borrower vide their letter dt.
12.10.2022 informed that the cases before Hon'ble High
Court of Telangana Hyderabad are still pending for final
adjudication and final arbitration award copies, not
received and requested not to honour the payment. The
Borrower has informed that they filed another application
before the Hon'ble High Court of Telangana seeking stay on
the invocation of the BGs. The Hon'ble High Court vide
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order date 08.11.2022 in International Commercial
Arbitration passed a status quo Order which is continuing
till date. The case was last heard on 16.06.2023 where the
Hon'ble court directed that "Interim order, granted earlier,
to continue till the matter is listed before appropriate
bench". It is submitted that the BG invocation matter is
sub judice and involves huge amount USD 2,18,21,972.00
(approx. Rs.180.43Crore). It is submitted further that the
securities available are not sufficient to cover the BG
exposure.
13. It is submitted that the Petitioner is frequently
visiting abroad which is allowed by the Hon'ble court
by LOC suspensions for specific period. So, there is
an apprehension that the Petitioner may flee out of
India so as to be out of reach of the law of the
country. Presently to protect and serve the interest
of the Respondent bank, the Competent authority of
the bank has continued LOC on the Petitioner.
14. It is submitted that the Petitioner is a guarantor for
the said credit facilities and the Respondent apprehends
that at any moment, the Petitioner may leave the country
with malafide intention to avoid payment to the
Respondent Bank. If the Petitioner is allowed to leave the
country, it will cause grave injustice and irreparable loss to
the Respondent Bank. It is submitted that the Respondent
is a Public Sector bank and money mobilized from the
public by way of deposits is lent to the borrower.
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15. It is incorrect to state that the Petitioner does not fall
in any of the categories laid out in the guidelines issued by
the Ministry of Home Finance and the Petitioner has not
defaulted on any dues that are owed to the Respondent
Bank and it will not justify the issuance of LOC against the
Petitioner. It is incorrect to state that the Respondent Bank
issued notice with oblique motive to harass the Petitioner.
It is humbly submitted that the Respondent Bank is
interested to recover its dues and it has no intention to
harass the Petitioner. It is humbly submitted that the
Judgements referred by the Petitioner are not relating to
the notices issued by bank and facts of the said cases and
the facts of this case are entirely different."
4. The case of the Petitioner in brief as per the
averments in the affidavit filed by the Petitioner in support
of the present writ petition, is as under :
i) It is the case of the petitioner that, M/s. Progressive
Constructions Limited (hereinafter referred to as 'Borrower
Company') is a company incorporated under the provisions of the
Companies Act and is engaged in the business of infrastructure
construction and developmental activities, since 1966.During the
course of its business, the Borrowing Company had availed loan
facilities from Andhra Bank, Sultan Bazar, Hyderabad. Further,
the Borrowing Company had also availed another loan from
Corporation Bank, MG Road Branch amounting to Rs. 105 Crores.
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In furtherance of the said loans, the Petitioner herein stood as a
guarantor to the Borrower Company.
ii) Subsequently, the Borrower Company had
approached Andhra bank for a One Time Settlement and the
same was agreed for INR 54 Crores. The Borrower Company
repaid an amount of INR 10 crores. However, subsequently, the
said amounts could not have been paid and the OTS proposal
stood cancelled.
iii) In the year 2020, both Andhra Bank and Corporation
Bank were merged with Union Bank of India, i., the 2nd
Respondent herein and the Borrower Company vide a Letter
bearing No. PCI/HO/UBI/OTS/FY 2022-23/003 dated 06.10.2022
put forth a request before the 2nd Respondent seeking for a One
Time Settlement offer as against both the loans availed by them
and proposed to pay an amount of Rs. 95 crores towards the
same. On 02.11.2022 a meeting was conducted by the officials
of the 2nd respondent and it had been agreed between the
parties that the total OTS amount payable was agreed to be
Rs.121 crores.
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iv) Subsequently, the Borrower Company had made a
payment of INR Rs.90 crores to the Bank and the balance
amount of Rs. 31 Crores was due to be paid by the company on
or before 30.06.2023 and the same was acknowledged by the
2nd respondent vide communication dated 14.12.2022.
v) Pursuant to the default by the Borrower Company in
repayment of the loans, the 2nd Respondent had caused the
issuance of an LOC against the guarantors of the said company,
including the Petitioner herein and that the Petitioner herein is
only a guarantor to the said loan availed by the borrower
company and is not a beneficiary to the loan. The 2nd respondent
herein has not intimated the petitioner that the Respondent has
requested for issuance of LOC against the petitioner. The
Borrower Company had also addressed a letter dated 09.02.2023
to the 2nd respondent requesting the authorities to withdraw the
LOC issued in the name of the petitioner.
vi) It is the case of the petitioner that, on 28.03.2023
the Petitioner had paid amounts to the tune of Rs.
15,00,00,000/- vide RTGS transfer No.
SBINR52023032840203618 and INR Rs. 16,17,45,000/- vide
RTGS transfer No. SBINR52023032840188445. Therefore,
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the Borrowing Company had remitted a sum of INR Rs.
31,17,45,000/- which included amounts payable towards interest
and other legal expenses to the 2nd Respondent and the same
was duly intimated to the 2nd Respondent that the borrowing
company had paid a sum of Rs. 31,17,45,000/- towards
outstanding OTS dues through letter dated 28.03.2023.
vii) As things stood thus, the Borrower Company made a
request to the Respondent bank to lift the LOC issued against its
guarantors. However, the Respondent Bank had issued letter
dated 01.06.2023 intimating the Company that it has not
considered request for withdrawal of LOC issued against the
promoters' guarantors/directors on flimsy grounds that
non-fund-based credit limits still exists in the account. As on
date, the borrower company has fully discharged its obligations
towards any outstanding liabilities and no further dues are
payable by the Company to Respondent Bank. Therefore, the
LOC pending against the Petitioner is illegal and is liable to be
quashed. Aggrieved by the action of the respondents in not
lifting the LOC against the petitioner, the present Writ Petition is
filed.
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5. The learned counsel appearing on behalf of the
Petitioner mainly puts-forth the following submissions :
(i) In the event of encashment of Bank Guarantees and
subsequent crystallization of debt against the borrowing
company and further upon any default of the borrowing
company to repay such a debt would then bring upon any
liability on the guarantors, including the Petitioner.
(ii) While entering into One Time Settlement, there was
a clear understanding between the parties that the OTS
was not only with regards to the outstanding amounts
towards the "Fund Based Facilities", but also with regards
to the terms and conditions for the Non-Fund based Credit
Facilities that remained, i.e. Bank Guarantees.
(iii) No new circumstances have arisen since then for any
recovery or action to be taken by the Bank against the
Company and its Guarantors.
(iv) Clause No. 6 of the OTS letter clearly contemplates
that the bank shall open a fresh bank account separately
for enchased BGs and then declare them as NPA and
thereafter initiate proceedings under the SARFESI Act
seeking recovery by way of the collaterals already
furnished for the bank guarantee and as per Clause 7 and
13 of the OTS letter itself, it is clearly contemplated that
the debt should first be crystallized in favour of the
borrower company and after the borrower company
defaults to pay, fresh recovery actions will be initiated.
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(v) Admittedly, in the present case, none of the
proceedings as contemplated under Clause 6, 7 or 13 have
been initiated since no occasion has arisen for the
Respondent bank to initiate such proceedings. Therefore,
the submission of the bank that the Bank Guarantees are
still existing and based on assumption that the borrowing
company will default and thus, the present LOC must
continue is liable to be rejected and the LOC is liable to be
quashed
(vi) Assuming that there will be default in payment of the
bank guarantee amounts by the borrowing company, the
2nd Respondent bank can initiate appropriate proceedings
before the DRT, NCLT or any other forum and can seek
recovery of monies by pressing into service, the collaterals
given to the bank towards the bank guarantees. Therefore,
in light of the same, there shall be no crystallization of
liability in favour of the borrowing company, much less the
guarantors, including the petitioner.
(vii) Further, it was the Respondent Bank itself who had
prescribed the security to be furnished for securing the
remaining Non-Fund based Credit facility vide OTS letter
dated 14.12.2022 and the same was accepted by the
Borrowing Company. Therefore, the Respondent Bank has
always admitted sufficiency of the collaterals furnished by
the Borrowing Company for securing the fund-based
liability. However, the Respondent Bank failed to
substantiate as to how the collaterals are not sufficient and
up to what extent the bank guarantees amounts are
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secured. Therefore, from the above, it is submitted that
there exists no liability on the borrower company and
hence no liability can be fasted on the guarantor, i.e. the
Petitioner herein. Hence, the contention of the Respondent
bank is far-fetched and is merely based on assumptions.
Such contention is therefore liable to be rejected.
(viii) No criminal action was initiated against the
Borrowing Company upon the alleged fraudulent
classification of the bank account as contemplated under
Frauds classification and reporting by commercial banks
and select FIs directions dated 01.07.2016.
(ix) As per the Counter affidavit filed by the Respondent
Bank in the present Writ Petition, the classification of the
bank account of Borrowing Company as fraudulent is based
on forensic audit report. However, the said report is not
enclosed with the counter and the Counter selectively
extracts one para from the forensic audit report.
(x) In the present case, the Petitioner has settled the
outstanding amounts with all of its banks, including the 2nd
Respondent bank. Therefore, there is no outstanding claim
by any financial institution. Moreover, the Petitioner had
fully repaid amounts due to the Respondent Bank by the
way of One Time Settlement.
(xi) It is further the case of the petitioner that, the
petitioner had neither challenged nor disputed the
authority of the 2nd Respondent Bank to seek origination of
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LOC as per the office memorandum. Further, the action of
the 2nd Respondent bank in seeking to maintain the
present LOC under the guise of the alleged non-fund based
facilitates (as contended by the bank by its letter dated
01.06.2023) is also contrary to the provisions of law.
(xii) Mere issuance of LOC itself is violative of
Fundamental Rights that applies unreasonable restriction
on the travel of the Petitioner though the Respondent
seeks to confine its argument to clause (I) of Office
Memorandum dated 01.07.2022 whereby intimation of
travel is sought by them. As per clause (I) of Office
Memorandum dated 01.07.2022, intimation of travel is
sought which clearly impinges upon the fundamental right
of the Petitioner guaranteed under Article 21 of the
Constitution of India which guarantees the right to travel.
Therefore, the said actions would also be in violation of
Article 14 and 19 of the Constitution of India.
(xiii) The 2nd Respondent bank had contended that it
does not have any objection if the Petitioner is
permitted to travel, while on the other hand the
Respondent contends that LOC should be continued
so that the Bank is intimated of the travel of the
Petitioner. However, the 2nd Respondent bank failed
to intimate this Court about any outstanding
crystalized liability against the Petitioner.Therefore,
for the said reasons, the contention of the 2nd
Respondent bank that it can request for opening of
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an LOC at any point in time is illegal, arbitrary and
contrary to law.
(xiv) To the extent of fund-based liability default, One Time
Settlement was entered into between the borrowing
company, the respondent bank along with the bank
guarantees and amounts have been paid. Therefore, the
Respondent Bank was aware that there was no default with
respect to non- fund-based liability thus, OTS Letter dated
01.06.2023 factors in procedure shall be followed in case
there is a default with respect to non-fund based liability.
6. The learned counsel appearing on behalf of the
petitioner placed reliance on few judgments of the Apex
Court and other High Courts and contended that the writ
petition should be allowed as prayed for.
The following judgments relied upon on behalf of the
petitioner that:
(1) Judgment dated 06.03.2024 in WPA No.25242 of
2023 in "Sunil Krishna Khaitan Vs. Union of India and
Others", in particular, at paras 29, 33 and 34, read as
under:
"29. However, none of the above grounds qualify as
sufficient for a request to issue LOC against the
petitioner within the purview of the extant Office
Memoranda of the MHA governing the issuance of LOCs.
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33. In view of the above consideration, the request
made by the Bank for issuance of LOC against the
petitioner is vitiated and de hors the MHA guidelines in
that regard, as contained in the various Office
Memoranda issued by the MHA from time to time.
34. Consequently, the LOC issued merely on the
premise of such request also cannot withstand the
scrutiny of judicial review."
(2) Judgment of the Calcutta High Court dated
09.06.2023 in WPA No.22748 of 2022 in "Mannoj Kumar
Jain & Another Vs. Union of India and Others", in
particular, relevant portion at paras 10 and 12, read as
under:
"10. Look Out Circulars are issued where the concerned
persons are considered as flight risks, that is, it is
apprehended that they will fail to return to India. The
originator of a Look Out Circular, which is the entity at
whose instance the Circular is issued, usually takes
recourse to pending criminal cases against the person or an
ongoing proceeding where the continuous presence of the
person is required. The apprehension is that the person
concerned cannot be allowed to travel since the person,
presumably in search of a safe haven, will not return to
India for the logical culmination of the proceedings. The
recent trend however is of banks issuing Look Out Circulars
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as a recovery mechanism for outstanding monetary dues.
The reasoning of the Bank is that the person may frustrate
settlement of the dues by not returning to India. The logic
put forth is that the person's bona fides in repaying the
dues is best ensured if the person remains within reach,
i.e. in the territory of India.
12. Look Out Circulars which have the effect of restricting a
person's free movement and the right to travel should only
be issued in exceptional circumstances. Look Out Circulars
cannot be issued at random and at the slightest
provocation particularly at the instance of a Bank who
seeks restriction on travel as a buffer to payments
outstanding to the Bank. The only acceptable logic albeit
with some effort is that a person may flee the country and
not return to repay his/her outstanding loan. This however
cannot be the rule across the board and a borrower's
credentials and circumstances for making payment must be
taken into account.
(3) The Judgment of the Apex Court reported in 2023
SCC Online Del 8349 in "Hulas Rahul Gupta Vs. Bureau of
Immigration and Others", in particular, relevant portion at
paras 19, 21, 22 and 23, read as under:
"19. It is now a settled law that opening of an LOC has a
very serious effect on a person's fundamental right to
travel abroad which is on the face of Article 21 of the
Constitution of India and the said right to travel cannot be
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curtailed without following due process. It is also settled
law that recourse to LOC can be taken by the Investigating
Agencies primarily when there is a cognizable offence
under IPC or in any other penal laws or where the accused
is deliberately evading the arrest and not appearing before
Court despite summons being served on him or issuance of
non-bailable warrants or when other coercive measures
have been taken by the Court to ensure his appearance in
the Court and that there is likelihood of the accused to
leave the country to evade such trial or arrest.
21. ...11. The Banks' apprehension may be founded on a
real threat of the person leaving the country forever and
the Banks' loans being written off. This reasoning however
cannot apply across the board for all borrowers without
exception. The criteria for assessing the credit-worthiness
of a borrower and his/her bona fides for repayment must
be determined on a case-to-case basis. The individual
circumstances of a borrower's ability and willingness to pay
or the mode and manner of repayment must be assessed
before the fundamental right of a person to travel is
denied.
12. Look Out Circulars which have the effect of
restricting a person's free movement and the right to
travel should only be issued in exceptional circumstances.
Look Out Circulars cannot be issued at random and at the
slightest provocation particularly at the instance of a Bank
who seeks restriction on travel as a buffer to payments
outstanding to the Bank. The only acceptable logic - albeit
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with some effort - is that a person may flee the country
and not return to repay his/her outstanding loan. This
however cannot be the rule across the board and a
borrower's credentials and circumstances for making
payment must be taken into account."
22. A perusal of the aforesaid judgments also
indicates that merely stating that a person's travel
would become detrimental to the economic interests
of the country on the ground of misappropriation of
money cannot be a reason to open an LOC curtailing
a person's right to travel.
23...83. The term 'detrimental to economic interest' used
in the OM is not defined. Some cases may require the
issuance of a LOC, if it is found that the conduct of the
individuals concerned affects public interest as a whole or
has an adverse impact on the economy. Squandering of
public money, siphoning off amounts taken as loans from
banks, defrauding depositors, indulging in hawala
transactions may have a greater impact as a whole which
may justify the issuance of LOCs. However, issuance of
LOCs cannot be resorted to in each and every case of
bank loan defaults or credit facilities availed for
business etc. Citizens ought not to be harassed and
deprived of their liberty to travel, merely due to their
participation in a business, whether in a professional
or a non-executive capacity. The circumstances have
to reveal a higher gravity and a larger impact on the
country."
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7. Learned counsel for the Respondent - Bank mainly
puts forth the following submissions:
(i) The Bank Guarantees given by the Petitioner had
been invoked and the same are pending for encashment.
(ii) The respondent bank herein is holding the money as
a custodian and therefore, there may be a liability arising
in favour of the respondent bank, in case the Borrowing
Company defaults in repayment of the monies and hence
the Guarantors may then become liable. Therefore, in
order to protect the respondent bank in case of such an
eventuality, the LOC must be continued.
(iii) The Account of the Borrowing Company was declared
fraudulent and owing to the same the LOC opened against
the Petitioner must be continued.
(iv) If the petitioner leaves the country to avoid payment
of dues, the same would be detrimental to economic
interest of the country.
(v) The Office Memorandum was watered down and
banks were allowed to open LOC. However, in the present
case the Respondent Bank here in is seeking intimation of
travel in terms of Office Memorandum dated 01.07.2022 of
the petitioner and thus, there is no violation of
fundamental rights of the petitioner.
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Based on the aforesaid submissions the learned Counsel for
the Respondent-Bank contends that the Writ Petition needs to be
dismissed.
8. Learned counsel for the Respondent - Bank relied
upon the following judgments:
(1) Bavaguthuraghuram Shetty Vs. Bureau of
Immigration Ministry of Home Affairs, Government of
India and others in W.A.No.315 of 2021.
(2) Garikapati Venkateswara Rao Vs. Union of India
in W.P.No.6892 of 2022.
(3) Haridas Ramesh Vs. The Union of India and
others in W.P.No.44404 of 2022.
DISCUSSION AND CONCLUSION:
9. A bare perusal of the averments made in the counter
affidavit filed by the Respondent - Bank clearly indicates the
reasons for opening the Look Out Circular against the petitioner
dated 06.05.2022 and continuing the same indefinitely are as
under:
(i) To protect and serve the interest of the Respondent
bank, the Competent authority of the bank has continued
LOC on the Petitioner.
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(ii) The petitioner is a guarantor for the said credit
facilities and the Respondent apprehends that at any
moment, the Petitioner may leave the country with
malafide intention to avoid payment to the Respondent
Bank. If the Petitioner is allowed to leave the country, it
will cause grave injustice and irreparable loss to the
Respondent Bank.
(iii) The Respondent Bank is interested to recover its dues.
(iv) The Petitioner is frequently visiting abroad, so there is
an apprehension that the Petitioner may flee out of India so
as to be out of reach of the law of the country.
10. The observations of the Apex Court in few matters
relating to Look Out Circulars are extracted hereunder.
11. The Apex Court in "MANEKA GANDHI VS. UNION OF
INDIA AND ANOTHER" reported in AIR 1978 SC 597, and
in "SATISH CHANDRA VERMA v. UNION OF INDIA (UOI)
AND OTHERS" reported in 2019 (2) SCC Online SC 2048
very clearly observed that the right to travel abroad is a
part of a personal liberty and the right to possess a passport
etc., can only be curtailed in accordance with law only and not on
the subjective satisfaction of anyone. The procedure must
also be just, fair and reasonable.
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12. The Apex Court way back in 1967, in Judgment
reported in AIR 1967 SC 1836, in "Satwant Singh Sawhney
v. D. Ramarathnam, Assistant Passport Officer held that
the right to travel abroad falls within the scope of personal
liberty enshrined under Article 21 of the Constitution of
India and that no person can be deprived of his right to
travel except according to the procedure established by
law.
13. The Apex Court in Vishambhar Saran v Bureau of
Immigration held that mere quantum of alleged default of
a loan by a citizen cannot be the basis for the extreme
measure of restricting the personal liberty of a
borrower/guarantor to travel inside or outside India and
accordingly set aside the LOCs issued against the
petitioners therein inter alia, on the ground that no
objective parameter were found for the issuance of LOCs
against the petitioners. Nothing detrimental to the
economic interest of India or exceptional was established
in the said case, it was held.
14. It is observed at paras 62 to 66 in the Judgment
dated 31.01.2023 in W.P.A.No.6670 of 2022 in the said
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case of "Vishambhar Saran v. Bureau of Immigration" as
under:
"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
pre- conditions 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
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particular state or not, in my opinion, is not one of
the parameters to be considered.
64. The bank acted in arbitrary exercise of the power
vested in making a request for opening LOC which
was an attempt to curtail personal liberty and
fundamental right of movement of a citizen
guaranteed by the Constitution of India.
65. The request of BOB for issuance of LOC dated 29
November, 2021 and all steps taken thereafter, if any, are
set aside and quashed. The bank is at liberty to request
the immigration authorities to intimate the entry and
exit of the petitioner to and from the country.
66. Accordingly, the writ petition is allowed.
15. In the judgment dated 05.04.2022 in Noor Paul v
Union of India and others reported in 2022 SCC on P&H
3408 referring to an LoC issued to a guarantor it is
observed as under:
"(a) The action of the respondent No.2 Bank in seeking
issuance of a LoC to prevent the petitioner from leaving the
country on the ground that she was a guarantor to
respondent No.5's loan and there was more than Rs.100
crores owed to respondent No.2 is arbitrary, illegal and
violative of Article 21 of the Constitution of India and
accordingly the same is set aside.
16. In the judgment dated 07.11.2022 in W.P.A.No.9007
of 2022, in Suchita Dinodya v Union of India reported in
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2022 SCC Online Cal.3536 the High Court of Calcutta held
as under:
"The petitioner is not subjected to any criminal case,
nor is the sovereignty or security or integrity of India
to suffer ex facie if the petitioner leaves India. The
mere quantum of the loan recoverable is Rs.73
crores, by itself cannot be sufficient to tag the claim
to be 'for larger public interest' and/or deemed to
affect' the economic interest of the country as a
whole'. The LOC issued in respect of the petitioner is
not justified at all and the W.P.A.No.9007 of 2022 is
allowed thereby setting aside the LoC issued in
respect of the petitioner."
17. In the judgment dated 02.06.2022 in Poonam Paul v
Union of India and others reported in 2022 SCC Online P&
H 1176 the High Court of Punjab and Haryana at
Chandigarh, dealt with a case of issuance of circular and
observed as under:
"Merely looking at the quantum of loss caused to a banker,
it cannot be presumed that there was a fraud committed by
the borrower/guarantor more so when no criminal case
alleging fraud has even been filed against the
borrower/guarantor suspicion cannot take the place of
proof and further clearly observed "the action of the
respondent No.2 Bank in seeking issuance of an Loc
to prevent the petitioner from leaving the country on
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the ground that she was a guarantor to respondent
No.5's loan and there was more than Rs.100 crores
owed to respondent No.2 is arbitrary illegal and
violative of Article 21 of the Constitution of India.
18. In the case of E.V.Perumal Samy Reddy v State,
reported in 2013 SCC online Mad 4092, the Madras High
Court while setting aside an LOC, observed 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 Vs. UNION OF INDIA[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
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anti-social elements their movements can be
regulated. Need may arise to apprehend persons,
who have ability to fly, flee away the country. So,
L.O.C. orders are issued. It is an harmonious 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.
19. In the case of Rana Ayyub v Union of India and
another W.P. (CRL) 714/2022, reported in 2022 SCC
Online Del 961 the Delhi High Court at paras 12 and 13 of
the said judgment observed as under:
"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
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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.
20. In the case of Soumen Sarkar v State of Tripura,
represented by the Secretary, Home Department and
others 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.
21. In the case of Karti P.Chidambaram v Bureau of
Immigration, reported in 2018 SCC online Mad 2229, the
Hon'ble Madras High Court observed as under:
"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
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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.
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22. This Court opines that the judgments relied upon by
the learned counsel for the respondent bank have no
application to the facts of the present case.
23. This Court opines that the pleas put forth by the 2nd
respondent i.e., Union Bank of India in the counter
affidavit for opening the LOC against the petitioner and
continuing the same indefinitely cannot be the grounds,
since there is no plea in the counter affidavit filed on
behalf of the 2nd respondent that the sovereignty or
security or integrity of India would suffer ex facie if the
petitioner leaves India. The plea in the counter affidavit
that the Respondent bank is interested to recover its dues
cannot be the reason since the Respondent Bank cannot
issue the LOC against the petitioner herein as a recovery
mechanism for outstanding monetary dues only with a
view to that repaying the dues is best ensured if the
petitioner remains within reach, i.e. in the territory of
India, on the basis of apprehension that the Petitioner
would flee the country and not return so as to be out of
reach of the law of the country, as specifically stated at
Para 13 of the counter affidavit filed by the Respondent
bank and the respondent Bank cannot be unilateral,
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irrational while issuing LOC against the petitioner and
continue the same for years together.
24. The Circular Memorandum dated 01.07.2022, in
particular, Sub-paras I, J and L, read as under :
"(I) 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 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 Bol
immediately so that liberty of the Individual is not
jeopardized.
(L) In exceptional cases, LOCs can be issued even in such
cases, as may not be covered by the guidelines above,
whereby departure of a person from India may be declined
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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 in time.
25. A bare perusal of Sub-para I of the guidelines dated
01.07.2022 (referred to and extracted above) specifically
provide that in case where there is no cognizable offence,
LOC subject cannot be prevented from leaving the country
and the originating agency can only request that they be
informed about the arrival/ departure of the LOC subject.
In view of the fact as borne on record that as on date no
criminal proceedings are initiated against the Petitioner by
the Respondent Bank, the LOC issued against the
Petitioner cannot be continued, the Respondent Bank can
only request that they be informed about the Petitioner's
arrival/ departure.
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26. A bare perusal of Sub-para J of Circular Memorandum
dated 01.07.2022 (referred to and extracted above)
mandates that a LOC shall remain in force until and unless
a deletion request is received by the Bureau of
Immigration from the Originator and that no LOC shall be
deleted automatically. Although these clauses cast an
obligation on the originating agency to review the LOC on
a quarterly/annual basis and submit proposals for deletion
of the same, the same however is not followed seriously
by the authorities concerned. In the present case the LOC
have been issued in the years 2021-2022 and since then
they have been alive till as on date for no valid reasons.
27. A bare perusal of Sub-para L of the circular dated
01.07.2022 (referred to and extracted above) clearly
indicates that LOCs could be issued in exceptional cases
where the departure of the person concerned will be
detrimental to the sovereignty, security and integrity of
India or is detrimental to the bilateral relations with any
country or to the strategic and/or economic interests of
India or that person may potentially indulge in an act of
terrorism or offence against the State, if such person is
allowed to leave or where travel ought not be permitted in
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the larger public interest at any given point of time. This
Court is of the firm opinion that lookout circular can be
issued on the specific grounds stated in Sub-para L of the
Circular Memorandum dated 01.07.2022 (referred to and
extracted above). The ground used against the Petitioner
herein is evidently economic interests of India. There is no
evidence on record to prove that the Petitioner herein
leaving the country for a specific period of time would
affect the economic interests of India, in view of the fact
as borne on record that the Petitioner has not been
declared as fraudster or money launderer.
28. The look out circular issued against the petitioner is
contrary to sub-para I, J and L of the Circular
Memorandum dated 01.07.2022 and therefore, this Court
opines that the Respondent Bank cannot have any
continuing reasons to interfere with the Petitioner travel
outside the country. This Court is of the firm opinion that
there is no reason to allow the impugned lookout circulars
issued against the Petitioner (Ref.No.25106/10/2017-
Imm(Pt), herein by the Respondent Bank to remain or be
used against the Petitioner in the absence of any
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acceptable apprehension let alone evidence shown on
behalf of the Bank.
29. In the Judgment of the High Court of Judicature at
Bombay reported in "Viraj Chetan Shah v. Union of India
and another" and connected matters in W.P.No.719 of
2020, in particular at para 176, it is observed as under:
"176. The LOC all fail both the Wednesbury and
proportionality tests. In their origins and issuance
they are ex facie arbitrary, unreasonable, unguided
and unsupervised; and they are wholly
disproportionate in what they seek to do and for
what reason."
30. Taking into consideration the aforesaid facts and
circumstances of the case and as per the discussion and
conclusion as arrived at as above and duly taking into
consideration the view, the observations and the law laid
down by the Apex Court and various other High Courts in
various judgments (referred to and extracted above), and
the averments of the Respondent No.2 in the counter
affidavit (referred to and extracted above), the Writ
Petition is allowed as prayed for. However, there shall be
no order as to costs.
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Miscellaneous petitions, if any, pending shall stand closed.
__________________
SUREPALLI NANDA, J
Date: 03.06.2024
Note : L.R. Copy to be marked.
B/o.Yvkr
