TMI Blog2021 (11) TMI 662X X X X Extracts X X X X X X X X Extracts X X X X ..... rds 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. Whether the original LOC issued against the Petitioner stands continued beyond its life of one year? - HELD THAT:- Since we were called upon to decide the competing interest, i.e. the right of the Petitioner and the power and duties of the authorities, our order is in respect of the legality, validity and justifiability of the impugned LOC and its extension for one year. The LOC is properly issued, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h September 2020 i.e. on the same day on which the summons was served upon him. The Petitioner was prevented from travelling abroad because LOC was issued against him by the Respondent No.3. 4. According to the Petitioner, he appeared before the Mumbai Zonal Office of the Respondent No.3 in compliance with the summons issued. The Respondent No.3 was investigating into the affairs of M/s. Gitanjali Gems Limited under Section 212(1)(c), (d) of the Companies Act, 2013. 5. On 11th September 2020 another summons was issued calling upon the Petitioner to appear in person before the office of the Respondent No.3 on 18th September 2020. On this occasion also the Petitioner duly attended and according to him he fully co-operated with the investigation. According to the Petitioner, he had purchased the shares of M/s. Gitanjali Gems Limited. One Mr. Mehul Choksi was one of its Directors against whom criminal proceedings were initiated by the Respondent No.3 and other investigating agencies. According to the Petitioner, he was a bonafide investor who had purchased 68,02,896 convertible warrants of M/s. Gitanjali Gems Limited worth ₹ 49,25,71,553/- between January 2015 and August 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Petition that the action on the part of the Respondents was illegal, arbitrary and unfair in curtailing the personal liberty of the Petitioner. In this background, apart from the main relief of quashing of the LOC, the Petitioner has sought other consequential reliefs. He has sought declaration that issuance of the LOC was highly arbitrary, illegal and without authority of law and was in violation of Articles 14, 19 and 21 of the Constitution of India. Through another prayer, the Petitioner is seeking declaration that the action on the part of the Respondent No.2 in issuing an endorsement of cancelled without prejudice on the passport of the Petitioner be declared as arbitrary, illegal and without authority and violating the same Articles of the Constitution of India. He is also seeking directions to the Respondent No.2 to permit the Petitioner to travel abroad. The Petitioner has also prayed for awarding costs. 8. The Petition is opposed by the Respondents. An affidavit-in-reply on behalf of the Respondent No.3 affirmed by the Assistant Director working with the Serious Fraud Investigation Office, Mumbai is filed. It is stated in the affidavit-in-reply that the Ministry of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d evade the course of investigation and that he was at flight risk, was not ruled out. Though his statement was recorded under oath by the Inspector under Section 217 of the Companies Act, 2013 on 25th August 2020, he has not cooperated in the investigating and had attempted to conceal the relevant information pertaining to the investigation. It is contended by the Respondent No.3 that the action of issuance of LOC was not taken in a casual manner. The investigation in the affairs of the Company and the investigation had started in February 2018. The LOC was not issued immediately but was issued only after examining the information and evidence collected during the investigation and upon examination of the role of the Petitioner. In this background, the Petition was strongly opposed by the Respondents. 10. We have heard Shri Aabad Ponda, the learned Senior Counsel for the Petitioner, Shri S.H. Halwasia, the learned Additional PP for Respondent Nos.1, 2 and 3 and Shri J.P. Yagnik, the learned APP for Respondent No.4-State. All the parties made their submissions with reference to various judgments and guidelines in respect of issuance of LOC. Submissions on behalf of the Peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd by other beneficiaries. The other investigating agencies have not named him as an accused in any of their investigations. 15. On legal issues regarding the LOC, Shri Ponda submitted that the LOC cannot operate endlessly and as per the Guidelines, its operation had come to an end after one year from its issuance. According to Shri Ponda if there is any change in policy during pendency of the LOC, even by this change of policy, the pending LOC cannot be extended for a further period as it was issued under the earlier Guidelines. As per the Guidelines, the satisfaction of the authorities should be in respect of his activities in future which could be detrimental to the financial interest of the country and not in respect of his past activities. 16. Shri Ponda submitted that the grounds raised in the affidavit-in-reply filed by the Respondent cannot justify issuance of the LOC against the Petitioner. Shri Ponda relied on various judgments in support of his contentions. He relied on the following judgments. His submissions with reference to these judgments are referred to in the following paragraphs. (i) Sumer Singh Salkan Vs. Asstt. Director and Ors. 2010 SCC OnLine Del 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign countries and the possibility of the Petitioner evading the course of investigation and being at flight risk could not be ruled out. 19. Shri Halwasia submitted that the Look Out Circular was issued on 8th September 2020. It was renewed on 2nd September 2021 by virtue of the Guidelines issued in February 2021 in that behalf. He submitted that it is a policy matter and cannot be equated with the change in the statute as far as the extension of LOC is concerned. There was nothing illegal or wrong in extending the LOC which was already existing. Reasoning : 20. Before considering the facts of this case it is necessary to refer to certain provisions under the statute and to the Guidelines issued in respect of the Look Out Circulars. Chapter XIV of the Companies Act, 2013 (for short, said Act ) makes provisions for inspection, inquiry and investigation in respect of the affairs of a company. Section 210 provides the circumstances under which the Central Government can order investigation into the affairs of the company. Section 211 of the said Act provides for establishment of Serious Fraud Investigation Office (SFIO), which the Central Government is empowered to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f these companies. 22. In this context it cannot be said that the Petitioner has absolutely no connection with the investigation which is being conducted by the SFIO. It cannot be mere a co-incidence that within a short span of time of the Petitioner selling his share holding, Mr. Mehul Choksi had left the country. It is case of the SFIO that the money used by the Petitioner actually belonged to Mr. Mehul Choksi and it was routed through different countries. The Petitioner has to explain these allegations and for that he has to fully co-operate with the investigation. It is a specific case of the Respondents that the Petitioner has not co-operated with the investigation. Merely attending the office of the SFIO will not mean that the Petitioner has fully co-operated with the investigation. 23. Shri Ponda in support of his arguments has relied on various judgments, as mentioned earlier. Sumer Singh Salkan s case (supra) was one of such judgments. The Delhi High Court in that case had considered the questions which were referred to that Court in respect of LOC. The said judgment refers to the concerned circular being Ministry of Home Affairs Circular No.15022/13/78-F.1 dated 5th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n application by the person concerned. D. LOC is a coercive measure to make a person surrender to the investigating agency or Court of law. The subordinate court s jurisdiction in affirming or cancelling LOC is commensurate with the jurisdiction of cancellation of NBWs or affirming NBWs. 24. Based on these Guidelines, the Foreigners Division of Ministry of Home Affairs, Government of India issued Office Memorandum No.25016/31/2010-Imm. dated 27th October 2010 incorporating these issues. The Guidelines were subsequently modified by further memorandums dated 5th December 2017, 19th September 2018, 12th October 2018 and finally on 22nd February 2021. The Guidelines issued in the year 2010 were referred to in the cases of Karti P. Chidambaram (supra) and Om Prakash Bhatt (supra). 25. In Karti P. Chidambaram s case (supra), a Division Bench of the High Court of Madras has observed that issuance of the LOC was a coercive measure to make a person surrender before the investigating agency or Court of law. 26. In Om Prakash Bhatt s case (supra), the Guidelines dated 5 th December 2017 were discussed. In the facts and circumstances of the case before a Division Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 BoI immediately so that liberty of the individual is not jeopardized. (K) xxxxxxxx (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 at the request of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... odes 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. 33. The next question that arises for consideration is as to whether the original LOC issued against the Petitioner stands continued beyond its life of one year. Shri Ponda submitted that as per the existing Guidelines, on the day on which the LOC was issued it could be issued only for one year and thereafter it had to lapse automatically. Shri Halwasia countered this argument by submitting that LOC was issued on 8th September 2020 and while it was pending fresh Guidelines were issued in February 2021 which gives powers to the authorities to extend the life of the LOC, pursuant to which it was renewed on 2nd September 2021 for one year. Clause (J) of the Guidelines dated 22nd February 2021, reproduced hereinabove, mentions that no LOC shall be deleted automatically and it shall remain in force unless and until a deletion request was received from the Originator itself. In this case, while the LOC was still in existence, such a re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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