LOC cannot be issued in every case by claiming that ‘economic interest’ or ‘larger public interest’ of India at stake: High Court of New Delhi
Phrases such as ‘economic interest’ or ‘larger public interest’ cannot be expanded in a manner so as to include an Independent Director who was in the past associated with the company being investigated, without any specific role being attributed to him, as in the present case. It is clear from a perusal of clauses (g) (h) and (j) of Office Memorandum that unless and until the conditions in these clauses are satisfied, prima-facie an LOC cannot be opened. This was held in BRIJ BHUSHAN KATHURIA v. UNION OF INDIA &amp; ORS. Through[W.P.(C) 3374/2021] in the High Court of New Delhi by a bench consisting of JUSTICE PRATHIBA M. SINGH. Facts are that the petitioner is a CA, who was inducted in the Board of M/s Techpro Systems Limited, as a Non-Executive Independent Director, CIRP was initiated against M/s Techpro Systems Limited, and on the Resolution Plan was approved by the NCLT. Petitioner in the petition has challenged the Look Out Circular issued against him by Respondents, the Ministry of Corporate Affairs and the Serious Fraud Investigation Office and has prayed for the same to be quashed. The counsel for the petitioner submitted that a copy of the LOC has not been given to the Petitioner. It is submitted that the settled position in law is that unless and until an FIR is registered or a cognizable offense is made out, the LOC would be liable to be quashed or set aside, as it curtails the liberty of the petitioner to travel in and out of India. Reliance is placed on three judgments including Sumer Singh Salkan v. Asst. Director &amp; Ors. The counsel for the respondents submits the Petitioner is guilty of conniving and conspiring with the Promoters of M/s Tech pro-Systems Limited. Petitioner is a Chartered Accountant and was part of the Audit Committee. Independent Directors have a greater obligation in such companies. Thus, it is submitted that the Petitioner ought not to be permitted to travel abroad, outside the jurisdiction of this Court. The court relied on the judgement of Delhi High court in, Sumer Singh Salkan v. Asst. Director &amp; Ors., and made the following observations, “The position prior to the issuance of the two Office Memoranda was that recourse to the LOC can only be taken when there is a cognizable offense under the IPC/other penal law. The reason for opening the LOC also had to be provided in the said LOC. The settled legal position, as per the judgment in Sumer Singh Salkan (supra) is that unless and until there is an FIR which is lodged or a criminal case which is pending, an LOC cannot be issued.” The court also referred to the judgement of Delhi High court in,  Nitin Sandesara v. Directorate of Enforcement and Ors., wherein the following observations were made, “…g) 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 regarding ‘reason for opening LOC’ must invariably be provided without which the subject of a LOC will not be arrested/detained. h) In cases where there is no cognizable offense under IPC or 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.” The court made reference to Office Memorandum dated 27th October 2010, as well as the amended Office Memorandum dated 5th December 2017 by which clause ‘j’ was amended, and set out herein below, which now states, “j) In exceptional cases, LOCs can be issued without complete parameters and/or case details against CI suspects, terrorists, anti/national elements etc. in the larger national interest.”
48 IN THE HIGH COURT OF DELHI AT NEW DELHI BRIJ BHUSHAN KATHURIA W.P.(C) 3374 2021 UNION OF INDIA & ORS. Date of decision: 12th April 2021 Petitioner Through Ms. Maninder Acharya Sr. Advocate with Mr. Siddharth Bhatli Mr. Abhishek Choudhary and Mr. Abhiyant Singh Advocates M: 9899423924 & 8860346700) Respondents Through Mr. Rakesh Kumar CGSC with Mr. Raghav Nagar Swasti Aggarwal Advocates for Respondents SFIO M: 9711588506) Mr. Nitin Srivastav Investigating M: 9599569957) JUSTICE PRATHIBA M. SINGH Prathiba M. Singh J.(Oral) This hearing has been done through Video Conferencing. CM APPL. 10253 2021The Petitioner in the present petition has challenged the Look Out Circularissued against him by Respondent Nos 3 and 4 i.e. the Ministry of Corporate Affairsand the Serious Fraud Investigation Office and prays for the same to be quashed. W.P.(C) 3374 2021 3. The brief background of the matter is that the Petitioner is a Chartered Accountant who was inducted in the Board of M s Techpro Systems Limited as a Non Executive Independent Director in the Annual General Meeting dated 26th September 2007. The Petitioner is working in Oman and relocated there on 24th October 2009. He is stated to have resigned from the post of Independent Director of M s Techpro Systems Limited on 13th January 2015 due to his full time employment in Oman and health concerns. In 2017 Corporate Insolvency Resolution Proceedings were initiated against M s Techpro Systems Limited and on 5th May 2019 the Resolution Plan was approved by the NCLT. 4. The case of the Petitioner is that he had travelled to India on 2nd February 2021 and was scheduled to fly back to Oman on 21st February 2021. However he was stopped at the airport and was intimated about the LOC which has been issued against him at the behest of the SFIO. The Petitioner was F. No. SFIO INV TSL 1304 2020 by the SFIO on 23rd February 2021 through WhatsApp to personally appear before the Investigating Officer on 2nd March 2021. This matter was heard in part on 17th March 2021. Ms. Maninder Acharya ld. Sr. Counsel submits on behalf of the Petitioner that a copy of the LOC has not been given to the Petitioner. Reliance is placed upon Office Memorandum dated 27th October 2010 and the amendments carried out therein vide Office Memorandum dated 5th December 2017. It is submitted that the settled position in law is that unless and until an FIR is registered or a cognizable offence is made out the LOC would be liable to be quashed or set aside as it curtails the liberty of the Petitioner to travel in and out of India. Reliance is placed on the following three judgments orders: • Sumer Singh Salkan v. Asst. Director & Ors. No. 1315 2005 decided on 11th August 2010] W.P.(C) 3374 2021 • Nitin Sandesara v. Directorate of Enforcement and Ors. 7559 2017 Order dated 29th August 2018] and • Deept Sarup Aggarwal v. Union of India 5382 2020 decided on 2nd December 2020]. It is further submitted that the Petitioner’s entire family resides in Delhi NCR. The wife of the Petitioner is a Senior citizen who lives in Delhi NCR. Both his daughters also live in Delhi NCR. Out of the two daughters one of the daughters is married. The younger daughter is unmarried and lives with the Petitioner and his wife. The Petitioner also has several immovable properties in Delhi NCR. Details of the bank accounts and bank statements of the Petitioner and his two daughters have already been submitted to the SFIO. 7. It is argued on behalf of the Petitioner that the Petitioner was only a Non Executive Independent Director in M s Techpro Systems Limited from 2007 to 2015 and has no role to play in the day to day management of the company. None of the allegations against the company or its promoters can be saddled upon the Petitioner. On behalf of the Respondents a note has been handed over in a sealed cover on the status of the investigation. This Court has perused the said note. The overall allegations being confidential in nature it is merely recorded that the investigation is currently on going. The Petitioner has also appeared before the SFIO on various dates and made detailed statements on oath which have also been placed on record. 9. The submission of Mr. Rakesh Kumar ld. counsel appearing for the Respondents is that the Petitioner is guilty of conniving and conspiring with the Promoters of M s Techpro Systems Limited. It is submitted that the W.P.(C) 3374 2021 Petitioner is a Chartered Accountant and was part of the Audit Committee. The fraud in the present case according to the Respondents is of several thousands of crores and accordingly the Petitioner ought not to be permitted to travel abroad. It is further submitted that there are six to seven LOCs which have been issued against the Promoters and Directors of M s Techpro Systems Limited and the LOC issued against the Petitioner is only one of them. M s Techpro Systems Limited is a listed company and Independent Directors have a greater obligation in such companies. Thus it is submitted that the Petitioner ought not to be permitted to travel abroad outside the jurisdiction of this Court. 10. At this stage the Court is merely considering the question as to whether the LOC deserves to be stayed i.e. whether the interim relief is to be granted. The pleadings are yet to be completed. The admitted facts insofar as the Petitioner is concerned are as under: The Petitioner is employed in Oman. His certificate of employment has been placed on record and he has been working there since 2009. ii) The Petitioner’s wife and children reside in Delhi NCR. iii) The Petitioner has several immovable properties in Delhi NCR a list of which has been submitted to the SFIO. iv) The Petitioner has been asked by his employer in Oman to immediately join back duty. 11. It is submitted that the Petitioner’s travel to India was part of his employment and he was stopped from travelling back to Oman on 21st February 2021. The LOC has admittedly been issued in January 2021. However the Petitioner was not given notice of the same. The Petitioner W.P.(C) 3374 2021 SFIO. entered India on his own volition and not in response to any summons by the 12. Heard. The MCA vide order dated 10th August 2020 commenced investigation against M s Techpro Systems Limited under Section 212 c) of the Companies Act 2013 pursuant to which the LOC was issued. Issuance of LOCs is currently under the Office Memorandum issued by the Ministry of Home Affairs i.e. dated 27th October 2010 along with the amendment dated 5th December 2017. The legal position in respect of LOCs is governed by the judgment of this Court in Sumer Singh Salkanwhich is relied upon by the Petitioner. The position prior to the issuance of the two Office Memoranda was that recourse to the LOC can only be taken when there is a cognizable offence under the IPC other penal law. The reason for opening the LOC also had to be provided in the said LOC. 13. A perusal of the LOC which had been placed on record in a sealed cover shows that in so far as the Petitioner is concerned no reason has been specifically mentioned in the LOC. 14. Office Memorandum dated 27th October 2010 is extremely clear that a reason has to be given for opening the LOC. The fact that there is no reason provided in the present case is quite telling. Moreover at this point of time there is also no FIR lodged against the Petitioner and even the role of the Petitioner is under investigation. Under such circumstances the question is whether the Petitioner’s everyday life can be put on a standstill. An LOC has the effect of seriously jeopardising the right to travel of an individual. The settled legal position as per the judgment in Sumer Singh Salkan supra) is that unless and until there is an FIR which is lodged or a criminal case which is pending an LOC cannot be issued. W.P.(C) 3374 2021 15. In Nitin SandesaraOffice Memorandum dated 27th October 2010 was considered by a learned Single Judge. The ld. Single Judge of this Court had in the said case also observed as under: “11. Mr Kripal learned counsel for the petitioner has also drawn the attention of this court to the Office Memorandum dated 27.10.2010 which refers to the judgement dated 11.08.2010 passed by this court in Sumer Singh Salkan v. Asst director & Ors: W.P. no. 1315 2008 and sets down the guidelines for issuance of LOC. Paragraph 8(g) and of the said OM are relevant and are set out below: In accordance with the order dated 26.7.2010 of the High Court of Delhi the matter has been discussed with the concerned agencies and the following guidelines are hereby laid down regarding issuance of LOCs in respect of Indian citizens and foreigners: xxxx xxxx xxxx g) 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 regarding reason for opening LOC must invariably be provided without which the LOC will h) In cases where there is no cognizable offence under IPC or other penal laws the LOC subject cannot be detained arrested or prevented from leaving the country. The originating agency can only request that they W.P.(C) 3374 2021 be informed about the arrival departure of the subject in such cases. Xxxx xxxx xxxx" 12. In the present case the LOC does not indicate any credible reason for issuing the same. Plainly recourse to LOC cannot be taken as a matter of course restricting the right of a citizen to travel is a serious imposition on his her fundamental rights and even if it is assumed that such action is permissible in law it can be taken only when necessary and for good reason. 13. This Court also finds it difficult to understand the conduct of the officers of the Enforcement Directorate. Admittedly the petitioner had joined the investigations and had appeared before the concerned officers as Notwithstanding the same a request for LOC was issued and the petitioner was not even informed of such LOC. Notwithstanding the legality or validity of the LOC the petitioner would have taken that into account before making his travel plans. The petitioner became aware of the LOC at 11.00 PM on 22.08.2017 when he was about to board a required by 16. Recently in Deept Sarup Aggarwalthe amendment dated 5th December 2017 to the Office Memorandum dated 27th October 2010 which contains the amended clause was also considered by the Court. The Court held that an LOC cannot be issued in every case by claiming that the same would affect the ‘economic interest’ of India. 17. The relevant clauses of the Office Memorandum dated 27th October W.P.(C) 3374 2021 2010 as well as the amended Office Memorandum dated 5th December 2017 by which clause ‘j’ was amended are set out herein below: Office Memorandum dated 27th October 2010 “g) 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 regarding reason for opening LOC must invariably be provided without subject of an LOC will not be h) In cases where there is no cognizable offence under IPC or other penal laws the LOC subject cannot be detained arrested or prevented country. The originating agency can only request that they be informed about the arrival departure of the subject in such cases. j) 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.” “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 clauseof 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 Indian 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 Office Memorandum dated 27th October 2010 as amended on 5th December 2017 “Amendment W.P.(C) 3374 2021 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.” It is clear from a perusal of clauses(h) andthat unless and until the conditions in these clauses are satisfied prima facie an LOC cannot be opened. 18. There is no criminal case pending against the Petitioner. His role is also yet to be ascertained by the investigating authorities. Phrases such as ‘economic interest’ or ‘larger public interest’ cannot be expanded in a manner so as to include an Independent Director who was in the past associated with the company being investigated without any specific role being attributed to him as in the present case. The Petitioner poses no flight risk given the fact that his wife and children are residents of Delhi NCR. This Court is inclined to suspend the operation of the LOC subject to the following conditions: i) The Petitioner shall present himself in the Indian Embassy in Oman on the 1st and 3rd Monday of every month. The Petitioner shall file an undertaking in this Court which would be supported with an undertaking by his wife that the Petitioner would be present before the authorities upon being issued 15 days’ notice. Insofar as the immovable properties are concerned the immovable properties in the list emailed to the Court Master today W.P.(C) 3374 2021 i.e. at items 1 to 4 shall not be transferred alienated by the Petitioner his family who may have rights in the same. Copies of the documents relating to the properties shall be filed in Court in a sealed cover within two weeks. seeking leave from the Court. iv) The Petitioner’s wife shall not leave India without 19. Application is disposed of. This order has been passed in the peculiar facts of this case and shall not be taken as being applicable to any other Director of M s Techpro Systems Limited. W.P.(C) 3374 2021 20. Counter affidavit be filed within six weeks. Rejoinder be filed within four weeks thereafter. 21. Both the sealed envelopes shall be retained in sealed covers and tagged with the physical record. The same shall not be scanned. 22. List on 13th August 2021. APRIL 12 2021 corrected and released on 15th April 2021) PRATHIBA M. SINGH W.P.(C) 3374 2021 