Reshma Mittal v. Union of India & Anr.

10. Clause 6 of the Office Memorandum of 2021 states that an LOC can be issued at the instance of the Bank if the authorities are of the view that letting the person depart from the country will be detrimental to the economic interests of India. The scope of the term ‘detrimental to the economic interest of India’ has been dealt with by the various High Courts in various judgments. The Apex Court in Prateek Chitkara vs. Union of India and Others, 2023 SCC OnLine Del 6104 has observed as under:

48. The question before this court is, whether Clause L of the OM of 2021 would be legally valid, especially in respect of the phrase „detrimental to the economic interests of India‟ and in respect of other clauses which permit indefinite continuation of LOCs, noncommunication of reasons either prior or post issuance of the LOC and extension of LOC to such individuals who in the opinion of the authorities ought not to be permitted to travel on the ground of it being detrimental to the economic interests of India.

58. In Mr. Chaitya Shah v. Union of India [2021: BHCAS: 16392-DB], a ld. Division Bench of the Bombay High Court was dealing with a case where a substantial amount had been invested in a company called M/s. Gitanjali Gems of Rs. 50 crores and various banking operations and transfer of money was found. The Court observed that the words „economic interest of India‟ and „larger business interest‟ are not empty words. The relevant paragraph of the said judgment is extracted below: “xxx

32. In the present case the SFIO is investigating into the affairs of the aforementioned companies and its investigation overrides the investigations by other investigating agencies. Therefore recourse to LOC was not unfounded as the Petitioner has definite connection with the investigation as discussed hereinabove. From the facts of the case it is clear that Clause (L) of these Guidelines clearly covers the Petitioner's case as it is detrimental to the “economic interests of India” and that his departure ought not be permitted in the larger public interest. The words “economic interests of India” and “larger public interest” are not empty words in the context of the present case because as mentioned earlier the Petitioner is directly involved and was concerned with considerable share-holding of M/s. Gitanjali Gems Limited. It involves huge amount of almost Rs. Fifty Crores which requires serious explanation from the Petitioner in the background of the allegations that the money belonged to Mr. Mehul Choksi, who has left India and has not returned back. This transaction is an important part of the entire fraud involving huge amount. Sheer magnitude of the offence and its spread through various banking operations and transfer of money through different modes and different countries shows that it has definitely affected the economic interests of India and the larger public interest is definitely involved and affected. Therefore, we do not find that issuance of LOC against the Petitioner was unnecessary.”

59. In Vishambhar Saran v. Bureau of Immigration [WP No. 10241(W) of 2020, decided on 24th December 2021] [2021 SCC OnLine Cal 3074], the Calcutta High Court held that vague allegations of a persons travel being detrimental to the economic interest of the country or the quantum of the alleged default (Rs. 351 crores in this case), is not sufficient to issue a LOC thereby restricting the personal liberty of a person to travel. In the said petition, no civil or criminal proceedings were initiated against the Petitioner and thus the Petitioner was allowed to travel. This view was echoed in Vishambhar Saran v. Bureau of Immigration [WPA No. 6670 of 2022, decided on 31st January 2023]

60. In Vikas Chaudhary v. Union of India [W.P.(C) 5374/2021, decided on 12th January 2022], the Petitioner was a businessman engaged in the export of garments to a number of foreign countries. A LOC was issued against the Petitioner on the ground of undisclosed foreign assets and interests in foreign-entities liable for penalty and prosecution under the Income Tax Act, 1961, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 as also the proceedings under the Prevention of Money Laundering Act, 2002 having been commenced against the Petitioner. The Petitioner did not hold any foreign assets and any undisclosed assets.

61. In Vikas Chaudhary (supra), the Court primarily dealt with the question as to whether an LOC could be interfered with in a writ petition and what would be the circumstances which could be held to be detrimental to the economic interests of the country.

62. The Court noted that the phrase „detrimental to the economic interests of India‟ was introduced for the first time in the Office Memorandum (hereinafter “OM”) dated 5th December, 2017. The said phrase did not exist in the previous OM dated 27th October, 2010. However, it continues to exist in all the subsequent OM's. In this context, the Court observed as under: “xxx

36. However, the matter does not end here and the crucial issue which needs to be now determined is as to whether the Clause „detrimental to the economic interests of India‟ introduced vide the amendment in2017, with a specific rider that the same would be used only in exceptional circumstances, could have, in the facts of the present case, been resorted to, for issuing the impugned LOC, as also whether the impugned LOC could be continued for the last almost 3 years without any proceedings under the IPC or any other penal law being initiated against the petitioner. It has to be kept in mind, that the issuance of a LOC necessarily curtails the rights of an individual to travel abroad and therefore, I am of the view, that for invocation of this Clause, which, in any event, is meant to be used only in exceptional circumstances, a mandatory pre-condition would be a formation of a reasonable belief by the originating authority that the departure of an individual would be ‘detrimental to the economic interests of India’ to such an extent that it warrants curtailment of an individual's fundamental right to travel abroad…….. xxx

39. Merely because the OM dated 05.12.2017 permits the issuance of a LOC, in exceptional circumstances, even when the individual is not involved in any cognizable offence under the IPC or any other penal law, it has to be remembered that this power is meant to be used in exceptional circumstances and not as a matter of routine, it must therefore, be interpreted in a manner that indicates an offence of such a magnitude so as to significantly affect the economic interests of the country. Mere suspicion of a person opening bank accounts in other countries and of investing in a foreign company cannot, in my view, be accepted as the basis for holding that the petitioner being allowed to travel abroad would be „detrimental to the economic interest of India‟, when it is undisputed that this suspicion has remained a suspicion for such a long period of almost three years”

63. Thus, the conclusion of the Court was that exceptional circumstances could exist even if a person was not involved in any cognizable offence under the Penal Code, 1860 or under any other penal law. In the said petition, the LOC was quashed by the Court.

64. However, this judgment was subsequently challenged in LPA 78/2022 dated 3rd February 2022 titled Income Tax Dept. v. Vikas Chaudhary, wherein it was argued by the Income Tax Department that there was an investigation into the offences under the Black Money Act, 2015 which was ongoing and that an FIR, is not a prerequisite for the commencement of an investigation under special enactments such as this Act. The relevant paragraph is set out below: “Mr. Zoheb next contends that assessment for two Assessment Years being 2018-2019 and 2019-2020 for the individual is complete while the same is pending with respect to the companies. Ongoing investigation has revealed that there are proposed additions upwards of Rs. 14,83,93,68,371/- and penalties upwards of Rs. 2,66,13,000/-. It is also submitted that the Appellant is investigating into the offences under the Black money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 and has submitted FT&TR references to the authorities in Dubai and under special enactments such as this Act, an FIR is not a pre-requisite for commencement of the investigation and on a complaint being filed, it is treated as a complaint case. It is thus urged by the learned counsel for the, Appellant that if the impugned judgment quashing the LOC is not stayed, grave prejudice shall be caused to the investigation and if Respondent No. 1 is permitted to travel abroad, it shall be detrimental to the core economic interests of the country and will be a contravention of the very object for which OMs dated 05.12.2017 and 22.02.2021 have been issued. It is emphasised that the OM dated 05.12.2017 was issued by the Government of India, Ministry of Home Affairs- Foreigners Division (Immigration Section), amending the OM dated 27.10.2010 and expanding its scope to issue LOCS against persons impacting the economic interests of India and the OM dated 22.02.2021 was issued laying down fresh Guidelines for issuance of LOCS and it is clearly stipulated therein that no LOC shall be deleted automatically and shall remain in force till a deletion request is received from the Originator. xxx

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.” (emphasis supplied)

11. Further in the case of Apurve Goel vs. Bureau of Immigration and Another, 2023 SCC OnLine Del 5917, the LOC was quashed by this Court as it was not detrimental to the economic interest of India and no preexisting condition was involved. Relevant portion of the said Judgment reads as under: “23. A Co-ordinate Bench of this Court in the case of Vikas Chaudhary v. Union of India, (2022) 1 HCC (Del) 124 has observed as under:

24. The High Court of Punjab and Haryana in the case of Kartik Tayal v. Central Bureau of Investigation, 2020 SCC OnLine P&H 1618 has observed as under:

13. This answer has also been reproduced in office memorandum dated 27.10.2010 issued by the Ministry of Home Affairs. Thus, there can be no doubt that according to the prevailing instructions, an LOC can be opened against an accused person who is (a) deliberately evading arrest, (b) not appearing in the trial Court despite non-bailable warrants and other coercive measures. Coupled with either of these conditions should be a likelihood of the accused leaving the country to evade trial/arrest. Neither of these conditions exist in the instant case. The petitioner is not evading arrest. In fact, he has appeared before the investigating agency whenever required to do so and the investigating agency has not thought it proper to arrest him. Since the investigation is still pending and challan has not been presented, there is no question of any trial Court issuing/adopting coercive steps to ensure the presence of the petitioner. This requirement of law has been recognized by the Bombay High Court in the case of Afzal Jaffer Khan (supra). The fact that the petitioner has travelled abroad on six occasions and has never violated the terms of the permission granted by the CBI Court, shows that the apprehension of the respondent is illusory.

14. In view of the above, it is evident that the conditions which must pre-exist before a request can be made for opening of an LOC, do not exist in the present case. Thus, the continuation of an LOC for more than 3 years against the petitioner is a violation of his fundamental right to life and personal liberty. It is, thus, liable to be withdrawn.

25. A perusal of the above cases shows that there has to be a proper application of mind by the authorities on the facts of each case before opening of a Look Out Circular which not only impedes the right to travel but also cast an aspersion/stigma on the person in the society against whom the Look Out Circular has been opened.

26. In the present case, there is no criminal case against the Petitioners till now and on the date of opening of the Look Out Circular, there was no suspicion or allegation against the Petitioners that the Petitioners have siphoned off funds. Proceedings are pending before various forums and a One-Time Settlement (OTS) has been arrived at between the Respondent No. 2/Bank of Baroda and the company. Time to make payment has been extended till 30.09.2023 by the Respondent NO. 2/Bank of Baroda. The Petitioners are only guarantors and were not involved in the day-to-day affairs of the company for the last several years. Therefore, the opening of Look Out Circular is not justified against the Petitioners. However, it is made clear that if any material is unearthed against the Petitioners showing that the Petitioners have been an accomplice in diversion and siphoning off funds and the fact that the present petition has been disposed of, the same will not be a bar for opening of a fresh Look Out Circular against the Petitioners. The Petitioners are also directed to cooperate with the investigation and appear before the Investigating Officer as and when required and give all the details as sought for by the Investigating Officer which are in their knowledge and in their possession. This Court has not made any observations on the right of the Respondents to open a fresh Look Out Circular if the company does not honour the One-Time Settlement arrived at with the Respondent No. 2/Bank of Baroda.

12. In the present case, since there is no criminal case against the Petitioner and the facts of the case reveal that it is only a case of recovery of money and non-payment on account of the Petitioner to return the money to the bank, the lookout circular cannot be sustained. No extraordinary circumstances have been shown. The lookout circular is, therefore, quashed. However, if it is found that the Petitioner is involved in siphoning off the money or that has indulged in any kind of fraud and if such facts are revealed in the forensic audit that is undertaken it is always open for the bank to make one more recommendation to the concerned authorities for issuing fresh LOC.

13. The petition is disposed of along with pending application(s), if any.

SUBRAMONIUM PRASAD, J DECEMBER 15, 2023