TMI Blog2021 (12) TMI 1388X X X X Extracts X X X X X X X X Extracts X X X X ..... In the present case, there is no allegation that the CBI has an arrest-warrant against the petitioners and/or the petitioners' personal participation in the CBI enquiry is of utmost necessity at the present juncture. In the present case, the respondent no. 2-bank has brought in unwarranted and unsupported comparison of the petitioners to other cases of infamous fraudsters, without there being any semblance between the attending circumstances of the present case with the cases of the said persons. As revealed by the LoC and even the affidavits-in-opposition of the respondent no. 2, no cogent reason has been shown for the request of the LoC. Even the respondent-authorities acted in an unlawful manner in blindly issuing the LoC without even ascertaining whether the request by the respondent no. 2 revealed any exceptional case as envisaged in the amended Office Memorandum No. 25016/31/2010-Imm dated October 27, 2010. It is incumbent upon the issuing authority of the LoC to ascertain at least whether the grounds disclosed in the LoC and/or the request for LoC fall within the four corners of the exceptional cases as defined in the Office Memorandum - the LoC dated February 29, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the alleged basis on which the Bank proceeded, that is, the petitioner being a guarantor, was misconceived and was de hors the records. 5. Learned counsel further submits that no case of fraud or any attempt to flee the country has been made out against the petitioner. There is no indication in the pleadings of the respondent no. 2 in the present writ petition as well regarding how the economic interest of India or larger public interest could suffer if the petitioners departed from India unless LoC was issued against the petitioners. 6. The account of the borrower-Company became NPA on March 31, 2016 in view of the power project becoming unviable due to de-allocation of the Coal Block earlier allocated to the Company pursuant to the order of the Supreme Court. Mere debt or default by reason of the account being NPA does not trigger the ingredients to make a request for LoC, it is argued. 7. No 'exceptional case' and/or anything 'detrimental to economic interest of India' was established at all from the materials-on-record, pleadings and/or the LoC itself, it is submitted. 8. Since the petitioner is neither a borrower nor a guarantor, the Circulars dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... departure/travel of the petitioner would adversely impact the share market or the economy of the country as a whole which destabilizes the entire economy of the country , the LoC is liable to be quashed. For such proposition, learned counsel places reliance in an unreported judgment passed by this Court in RVW 23 of 2020 arising out of WP No. 23412 of 2019 (UCO Bank vs. Dr. Siten Saha Roy and others). 14. Next relying on another unreported judgment of this court in Mritunjay Singh Vs. Union of India and others, reported at WP No. 105 of 2020, learned counsel submits that, in order to affect the economic interest of the country as well, the case should be of a much higher magnitude, which shakes the economic stability or finance of the country or is of such nature that the banking system of the country is under threat in the event the petitioner leaves the country. 15. In Imperial Chemical Industries Limited and another vs. Registrar of Trade Marks, Bombay and another, reported at AIR 1981 Del 190, the Delhi high Court held that, merely to parrot the language of the empowering statute does not comply with the requirement to give reasons and the cryptic nature thereof canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igations mentioned in the Circular, was not required to disclose the reasons of travel to the Bank. Moreover, such apprehension of the petitioner escaping from India is misconceived and not based on facts and evidence in terms of the IBA Circular. It is submitted that the appeal was dismissed by the NCLAT at the threshold, thereby effectively letting the NCLT Order achieve finality. 26. As regards Hemanta Kumar Banka Vs. UCO Bank, relied on by the respondent no. 2, the petitioner contends that the facts in the said case were different, since the matter pertained to a defaulter in Singapore, who had left the country and was also trying to leave India for a job in Tanzania in order to evade the Indian bank, which had international ramification. 27. Distinguishing Om Prakash Bhatt, also relied on by the respondent no. 2, it is argued that the writ petition was allowed in the said case and the petitioner was allowed to travel abroad on condition that the petitioner would disclose his travel details, including the date of return, to the CBI. Such order was passed in view of the request for LoC being at the instance of CBI and pending proceedings pertaining to Kingfisher Airlines, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade with regard to the report. 34. It is submitted that the willful defaulter proceeding and the proceeding under the relevant provisions of the IBC are different in nature. The willful defaulter proceeding is guided by the Master Circular dated July 1, 2015, where the scope and ambit of the proceeding is different than that under the relevant provisions of the IBC. 35. That apart, the quantum of above Rs. 350 crores owed by a company in liquidation is sufficient basis for issuance of LoC. 36. It is submitted further by learned counsel for respondent no. 2 that the quantum of more than Rs. 350 crores of default, the grounds of investigation by the CBI on the basis of the second request for LoC and the on-going willful defaulter proceeding are sufficient to comprise of exceptional circumstances detrimental for the country and its socio-economic condition. 37. The Bank, it is contended, is not aware as to whether the petitioner has an evading tendency, but there is sufficient justification for apprehension that the petitioner might escape from India. 38. The public interest aspect, it is contended, has been overlooked in the petitioners' arguments. 39. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere alleged by the respondent no. 2-bank in its request for the LoC. In fact, both the LoC as well as the request by the bank for issuance of such LoC were cryptic with regard to the ground of issuance. 48. By using affidavits-in-opposition, the respondent-bank have sought to rely upon the show-cause notice for identification as willful defaulter issued inter alia against the petitioners. However, such subsequent notice could not have justified the prior issuance of the LoC. 49. It has merely been alleged in a vague manner that, in the event the petitioners left the boundaries of the country, such departure would be detrimental to the economic interests of India. 50. The limited grounds, as it stands amended, as mentioned in the relevant Office Memorandum are as follows: 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 any of the authorities mentioned in clause (b) of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect such recovery in any manner, detrimental or otherwise. 54. As such, the LoC was unfounded and lacked any cogent contemporaneous or prior act of the petitioners. 55. Rather, in the present cases, the respondent no. 2-bank has abused its authority to request for opening a Lookout Circular at the behest of the Chairman/Managing Director/Chief Executive, in the capacity of a Public Sector Bank, thereby substituting a regular proceeding for recovery of the debt in the process. The issuance of LoC cannot be an alternative for initiating recovery proceedings against the borrower itself, let alone a director of the borrower-entity. 56. As far as the judgments of Hemanta Kumar Banka (supra), Om Prakash Bhatt (supra) and UCO Bank vs. Dr. Siten Saha Roy and others (supra) are concerned, the facts of the said cases were entirely different from the present circumstances. None of the said judgments revealed similar circumstances and paucity of ground as in the present cases. 57. Rather, the ratio laid down in Karti P. Chidambaram (supra) by the Supreme Court is apt to fit the description of the present cases insofar as the proposition of the legality and/or validity of a Lookout ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he request for LoC fall within the four corners of the exceptional cases as defined in the Office Memorandum. Although it would be going too far to extend such logic to the extent that the authorities issuing the LoC shall ascertain the merits/demerits of the allegations made in the request, at least ingredients justifying the issuance of LoC has to be looked into prima facie by the issuing authority. 63. In the present case, no exercise of such sort was resorted to by the respondent no. 1. 64. As a matter of fact, no objective parameter is found from the records for the issuance of the LoC against the petitioner. However, no occasion has arisen before this Court to go into the question of validity and lawfulness of the show-cause notice for identification of wilful defaulter issued subsequently against the petitioner. As such, the said question need not be dealt with within the ambit of the present writ petition. 65. In view of the aforesaid observations, the LoC dated February 29, 2020 issued against the petitioner was unlawful and de hors the relevant provisions and the Office Memorandum dated October 27, 2010 (as amended). Thus, the LoC cannot stand judicial scrutiny u ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
