The Delhi High Court held that a Look Out Circular cannot restrict the travel of an independent director without a cognizable offence, modifying the LOC to allow free travel subject to periodic reporting and undertakings.
Full Text
Translation output
2023:DHC:2220
W.P.(C) 3374/2021 HIGH COURT OF DELHI Date of Decision: 24th March, 2023
W.P.(C) 3374/2021 & CM APPL. 32126/2021 BRIJ BHUSHAN KATHURIA ..... Petitioner Through: Ms. Maninder Acharya, Sr. Advocate with Mr. Siddharth Bhatli & Ms. Lashita Dhingra, Advocates. (M: 9953208487)
VERSUS
UNION OF INDIA & ORS. ..... Respondents Through: Mr. Rakesh Kumar, CGSC along with advocate Mr. Shriram Tiwary, Mr. Salman Razi and Mr. Nitin Agnihotri, Advocates for SFIO. (M: 8860658903)
CORAM:
JUSTICE PRATHIBA M. SINGH Prathiba M. Singh, J.(Oral)
JUDGMENT
1. This hearing has been done through hybrid mode.
2. The Petitioner in the present petition has challenged the Look Out Circular (hereinafter, ‘LOC’) issued against him by Respondent Nos. 3 and 4 i.e., the Ministry of Corporate Affairs (hereinafter, ‘MCA’) and the Serious Fraud Investigation Office (hereinafter, ‘SFIO’) and prays for the same to be quashed.
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 thereafter issued summons bearing 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.
5. Detailed arguments were heard in this matter in the stay application by the Court on 12th April, 2021. Submissions were made both on behalf of the Petitioner and on behalf of the Respondents who had informed the Court that an SFIO investigation is going on against the Petitioner. The case of the Petitioner was that he was an independent Director and had no role in the running of the company. The SFIO’s case to the contrary was that he was one of the longest serving Directors of the company and a member of the Audit Committee as well.
6. The Court after considering the submissions made, held as under:
“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:-
(i) 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
(iii) The Petitioner has several immovable properties in Delhi/NCR, a list of which has been submitted to the SFIO.
8,259 characters total
(iv) The Petitioner has been asked by his employer in Oman to immediately join back duty. XXX
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
(ii) 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.
(iii) Insofar as the immovable properties are concerned, the immovable properties in the list emailed to the Court Master today i.e., at times 1 and 4, shall not be transferred/alienated by the Petitioner/his family, who may have rights in the same. Copies of documents relating to the properties shall be filed in Court in a sealed cover within two weeks.
(iv) The Petitioner’s wife shall not leave India without seeking leave from the Court.
7. The investigation has since continued. Today a status report of the investigation has also been shown to the Court. After perusing the status report, it is noted that the SFIO itself has vide its communication dated 18th January, 2022 issued to the Bureau of Immigration, modified its stand in respect of the Petitioner as under: “To, The Assistant Director/SIC Bureau of Immigration (BOI) East Block-VIII, Sector-1, RK Puram, New Delhi-110066 Subject: Renewal of existing ‘Look Out Circular’ (LOC) with partial modification Sir. Please refer to the earlier reference vide file no.- SFIO/INV/TSL/1304/2020 dated 20.01.2021 and email by the undersigned dated 20.01.2021 wherein Look Out Circulars (LOCs) were issued against each of the person present in the below mentioned list in order to prevent them to flee out of the country. Sr. No. Name Date of Birth Father’s Name Passport No. X XXX XXX XXX XXX
2. In this regard, it is requested to retain the LOCs against all the mentioned persons after completion of one year which is completing on 19.01.2022
3. Further, the duly filled prescribed proforma in respect of each person are enclosed for necessary action at your end.
4. This issues with approval of the competent authority.” XXXXX (b) INFORM ARRIVAL/DEPARTURE OF SUBJECT (BUT NO OTHER ACTION TO BE TAKEN)”
8. After having perused the report and the communication dated 18th January, 2022, and the latest proforma which the SFIO has issued to the Bureau of Immigration, this Court is of the opinion that the present case would fall under Clause (i) of the Office Memorandum dated 22nd February, 2021 which reads as under:
“6. The existing guidelines with regard to issuance of
Look Out Circulars (LOC) in respect of Indian citizens
and foreigners have been reviewed by this Ministry.
After due deliberations in consultation with various
stakeholders and in supersession of all the existing
guidelines issued vide this Ministry's letters/ O.M.
referred to in para 1 above, it has been decided with
the approval of the competent authority that the
following consolidated guidelines shall be followed
henceforth by all concerned for the purpose of issuance
of Look Out Circulars (LOC) in respect of Indian
citizens and foreigners:-
XXX
(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.”
9. In terms of the above extract from the Office Memorandum and in view of the SFIO’s own stand, it is directed that the immigration authorities shall inform the SFIO about the entry and exit of the Petitioner from time to time. No other embargo would exist on the Petitioner for his travel from and into India. It is clarified that the Petitioner would have no obligation to inform the SFIO about his travel outside India. The obligation would be of the immigration authorities to inform the SFIO.
10. The above change in the status of the LOC, shall be subject to the following conditions: i. The Petitioner shall present himself in the Indian Embassy in Oman on the first Monday of every month. ii. The Petitioner’s undertaking filed in compliance of order dated 12th April, 2021 that he shall present himself before the Authorities upon a 15 days' notice, shall continue.
11. All the remaining conditions imposed on the Petitioner vide order dated 12th April, 2021 shall stand discharged.
12. With these observations, the present petition, along with all pending applications, is disposed of.
13. It is made clear that if the investigation is not concluded by the SFIO within a year, the Petitioner is permitted to approach this Court for modification/discharge of the conditions.
PRATHIBA M. SINGH
JUDGE
MARCH 24, 2023 dj/sk
Upgrade to Pro
This feature is available on the Pro plan. Upgrade to unlock full AI summaries, PDF downloads, and more.