TMI Blog2022 (10) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... his Court and this Court has territorial jurisdiction to entertain this Writ Petition under Clause (2) of Article 226 of the Constitution of India - thus, order is answered accordingly in favour of the petitioners and against the respondents. Whether respondents No.7 and 8, which are Indian entities of the Bank of Baroda and the State Bank of India can make a request for issuance of LOC to respondent No.2 in respect of dues owed to their sister entities incorporated in the UAE as per the Office Memorandums issued by the Ministry of Home Affairs from time to time? - HELD THAT:- LOCs were permitted to be opened essentially against persons involved in cognizable offences and who were evading arrest and not appearing in the trial Court despite NBWs or other coercive measures and there was a likelihood that they would leave the country to evade trial/arrest. It was intended as a coercive measure to make a person surrender to the investigating agency or Court of law - The originating agency can only request that they be informed about the arrival/departure of the subject in such cases. The Office Memorandum stated that the LOC would be valid for a period of one year from the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igration, New Delhi; respondent No.3 is the Bank of Baroda, Corporate Financial Services (Large Corporate) Branch, New Delhi; Respondent No.4 is Bank of Baroda, Deira Branch, Dubai, UAE; respondent No.5 is Additional Director, National Central Bureau (NCB) (Interpol), India; respondent No.6 is Additional Director (Investigation), Serious Frauds Investigation Office, New Delhi; respondent No. 7 is the Managing Director and CEO, Bank of Baroda, Mumbai; and respondent No.8 is the Chairman, State Bank of India, Corporate Center, Mumbai ( for short SBI ). It is not in dispute that both petitioners are Directors of the company by name M/s Asian Ispat FZ LLC (AIF) based in UAE and the said company had borrowed loan from the Bank of Baroda, Deira Branch, Dubai and the SBI, Dubai, UAE. The petitioners had stood as guarantors for the said loan. Both of them are also Directors of company by name M/s AGR Steel Strips (P) Ltd., India (for short AGR ) and M/s Asian Colour Coated Ispat Limited, India (for short ACCIL ). As against the petitioner No.1, the LOCs had been issued as under: - Sr.No. Issued by Date of Issuance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aryana belonging to the petitioners and their family members also stood released. As regards ACCIL, India, a Corporate Insolvency Resolution Process was initiated by the SBI by filing an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for short the IBC ) before the NCLT, Principal Bench, New Delhi. It was admitted on 20.07.2018 and the Resolution Professional admitted the debt owed by the said company to all respondents including the SBI, as financial debt. It is not in dispute that a resolution plan was submitted by M/s JSW Steel Coated Products Ltd. on 08.03.2019 and the Committee of Creditors approved the same on 17.06.2019 by 79.3% majority and the said resolution plan was also approved by the NCLT, New Delhi by order dt. 19.10.2020. It is not in dispute that the SBI entered into a debt assignment agreement dt. 27.10.2020 with M/s Hasaud Steel Ltd. and the SBI had also issued a No Due Certificate on 23.11.2020 in favour of the principal borrower clearly stating that no debt or payment is due or outstanding as on the said date from the principal borrower. Contentions of the counsel for the petitioners (i) RE: National Central Bureau (I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be sustained. They rely on the decisions of this Court in Poonam Paul Vs. Union of India 2022 SCC Online P H 1176 (DB) and in Noor Paul Vs. Union of India CWP-5492-2022 dt.05.4.2022 (DB) and contend that the right of the petitioners to travel abroad (which is guaranteed by Article 21 of the Constitution of India as per the decision of the Constitution Bench of the Supreme Court in Maneka Gandhi Vs. Union of India (1978) 1 SCC 248), cannot be taken away by the respondents in an arbitrary and illegal manner and in violation of the Office memorandums issued by the Ministry of Home Affairs from time to time. The stand of respondents No.1, 2, 5 and 6 (a) Stand of respondent no.s 1 and 2: In the reply filed by the respondents No.1 and 2, which has also to be treated as that of respondents 5 and 6, they contend that as per LOC Guidelines issued by the Ministry of Home Affairs, Govt. of India, an LOC is a secret document and the same cannot be shared with an accused or any unauthorized stakeholder. Further, the LOC cannot be provided or shown to the subject of LOC at the time of detention by respondent No.2/BOI, as it defeats the purpose of LOC for w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 8. The stand of respondent No.3,4 and 7 i.e the Bank of Baroda The respondent No.4 filed a reply along with Annexures. Though no separate reply/response is filed on behalf of respondent No.s 3 and 7, the reply filed by respondent No.4 is being treated as a reply by them as well. Annexure R11 to the reply filed by respondent no.4 is the letter dt.24.08.2020 addressed to respondent No.2 by nodal officer of the Bank of Baroda requesting for retention/continuance of LOCs opened against both the petitioners. In the said letter it is alleged by respondent No.4 that the petitioners are Directors/Promotors/Guarantors of M/s AIF, UAE which had been granted credit facilities from the Bank of Baroda, Deira Branch, UAE; that the loan accounts had turned NPA on 27.06.2016 and outstanding amount of Rs. 290.62 crores has to be recovered from the said entity. It is also stated that the said entity had committed fraud and cheque bounce cases had been filed in Dubai against petitioner No.2 and he was convicted by a Dubai Court with imprisonment for three years and a commercial suit was also filed in Dubai which is awaiting judgment. It is stated that both petitioners had fled UAE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money decree in UAE against them, and criminal proceedings are pending in Dubai for dishonour of cheques. According to respondent No.4, financial defaults are within the purview of LOCs after the latest amendment in 2019 to the original notification of 2010. It is contended that the presence of the petitioners in India is required to take steps to recover its dues. Stand of the State Bank of India (respondent No.8) Respondent No.8 filed a reply raising a technical objection about this Court entertaining the Writ Petition with regard to the LOCs contending that merely because petitioner No.1 is a resident of Faridabad, Haryana, he cannot invoke the jurisdiction of this Court, and only the Delhi High Court would have the jurisdiction. But the counsel for respondent No.8 Mr.Ankur Mittal did not make any oral submissions on this point. According to respondent No.8 certain facilities had been granted by its Dubai branch to AIF, UAE with ACCIL, India as corporate guarantors and with the petitioners as personal guarantors. It is stated that the accounts of the borrower remained irregular and they were declared an NPA on 08.04.2016 and a demand notice dt.21.03.2017 was issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppearing for respondent No.s 1,2,5 and 6 did not make any submissions on the point. But since it was raised in the pleadings by the Bank of Baroda and the SBI, we shall deal with it. In Kusum Ingots and Alloys Ltd. Vs. Union of India and Another (2004) 6 SCC 254, the Supreme Court held, by placing reliance on Clause (2) of the Article 226 of the Constitution of India and also Section 20(c) of the CPC, that even if a small fraction of cause of action accrues within the jurisdiction of the High Court, it would have jurisdiction in the matter. It is not in dispute that for the loans taken by AGR, India from the Bank of Baroda, Sansad Marg, New Delhi, properties belonging to the petitioners located in the State of Haryana had been mortgaged as can be seen from Annexure P24 dt.31.03.2021 which is a No Due Certificate issued by it. Also the petitioners claim to the residents of Faridabad in the State of Haryana. It is the case of the respondents that money decree granted by by the Dubai court (Annexure R-9) against petitioners and M/s AIF, UAE will be enforced in India invoking Sec.44A of the CPC and the notification dt.17.1.2020 issued by the Govt. of India declaring t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cern on immoral forensic successes so that if on the merits the case is weak, Government shows a willingness to settle the dispute regardless of prestige and other lesser motivations which move private parties to fight in court. The layout on litigation costs and executive time by the State and its agencies is so staggering these days because of the large amount of litigation in which it is involved that a positive and wholesome policy of cutting back on the volume of law suits by the twin methods of not being tempted into forensic showdowns where a reasonable adjustment is feasible and ever offering to extinguish a pending proceeding on just terms, giving the legal mentors of Government some initiative and authority in this behalf. I am not indulging in any judicial homily but only echoing the dynamic national policy on State litigation evolved at a Conference of Law Ministers of India way back in 1957. 8. In Madras Port Trust v. Hymanshu International (1979) 4 SCC 176 this Court held : (SCC p. 177, para 2) 2. It is high time that Governments and public authorities adopt the practice of not relying upon technical pleas for the purpose of defeating legitimate clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this respect. c) The person against whom LOC is issued must join investigation by appearing before IO or should surrender before the court concerned or should satisfy the Court that LOC was wrongly issued against him. He may also approach the officer who ordered issuance of LOC and explain that LOC was wrongly issued against him. LOC can be withdrawn by the authority that issued and can also be rescinded by the trial court where case is pending or having jurisdiction over concerned police station on an 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 Courts jurisdiction in affirming or cancelling LOC is commensurate with the jurisdiction of cancellation of NBWs or affirming NBWs. The said Office Memorandum mentioned a list of Officers of various Departments of the Government who can make a request for opening of the LOCs. Clause (h) of the above circular is relevant. It states: (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 originatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney and then escape to foreign jurisdictions, since such actions would not be in the economic interests of India, or in the larger public interest. But the threshold of the default by a person which would not be in the economic interests of India, or in the larger public interest is not mentioned in the said Office Memorandum. However taking advantage of the said Office Memoranda, requests for LOCs are being made by Public Sector Banks against persons defaulting in payment of loan dues to them. The following are facts to be taken note of while considering whether respondent No.7 and 8 could have made a request for issuance of LOCs to respondent No.2: (i) Admittedly, the underlying debt in India with respect to Indian Public Sector Bank i.e. Bank of Baroda (respondent No.3) is already settled. Fraud declaration by respondent No.3 is challenged in CWP-34297-2019 and it has been stayed on 28.11.2019 (Annexure P8). There is no Willful Defaulter or Fugitive Economic Offender declaration against the petitioners. No investigation has been initiated or is continuing against the petitioners at the behest of respondents No.3 4. (ii) Respondent No.4 is not a Public Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve separate and distinct personalities. The Ministry of Finance, Department of Financial Services has no doubt issued an Office Memorandum No. F.No.6/3/2018 on 04.10.2018 (Annexure R-1, filed along with the reply of respondent No.8) empowering Heads of Public Sector Banks to issue request for opening of LOCs to respondent No.2 against economic offenders/defaulters. It is not the case of the respondents No.1 to 5, 7 and 8 that Dubai entities of the Bank of Baroda and SBI, which are incorporated in UAE, and are governed by the laws of the said country, would come within the ambit of the term Public Sector Banks of India . It is not their case that funds of the Government of India are invested in the Dubai entities of the Bank of Baroda and the SBI, for them to come under the umbrella of the term Public Sector . (c) In the Office Memorandum dt.22.11.2018 (Annexure R-3), there is a reference to the earlier Office Memorandum dt. 27.10.2010 and it s amendments from time to time and in particular to paragraph 8 (j) of the said Office Memorandum which states as under:- Para 8(j): .. In exceptional cases, LOCs can be issued even in such cases, as would not be covere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er from the country would adversely impact the economy of the country as a whole and destabilize the entire economy of the country. (h) Since the right to travel abroad flows from Article 21 of the Constitution of India, a very high threshold is mandated by the Office Memorandums themselves to deny such a right to an Indian citizen. Such a threshold is not met in the instant case. It also appears that respondent No.2 has not applied its mind to the request for issuance of LOC made by the Indian entities of Bank of Baroda and the SBI and did not consider whether the grounds disclosed by them fall within the four corners of the OMs issued in that regard, though it may not be able to go into the merits/demerits of the allegations made against the petitioners by the said entities. It appears that mechanically the respondent No.2 had issued the LOCs at the instance of the Indian entities of the Bank of Baroda (respondent No.7) and the SBI (respondent No.8). Similar views have been expressed by this Court in Noor Paul (2 Supra) and Poonam Paul (1 Supra). It was further held in those decisions that non supply of the LOC to the subjects of the LOC at the time of issuance of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 2020 (amending the provisions of Federal Law No.18 of 1993 as issued by Sheikh Khalifa bin Zayed Al Nahyan on September 27, 2020 and published in Issue No.687 (Supplement) of the Official Gazette on September 30, 2020) with effect from January 2, 2022 and criminal sanctions may only be used in case of specific acts added by the Federal Decree by virtue of Article (641) Bis (2) and Article (641) Bis (3) added to the Federal Law No.(18) of 1993 concerning Commercial Transaction Law. Such specific acts added by the Federal Decree by virtue of Article (641) Bis (2) are as follows: i. Ordering or asking the drawee, prior to due date, not to pay the value of a cheque he has issued. ii. Closing the amount or withdrawing all available fund therein before issuing the cheque or before presenting the cheque for payment or if the account has been frozen; and iii. Deliberately writing or signing the cheque in a way that makes it unpayable. The Federal Decree Law No.14 of 2020 which came into force on 02.01.2020 is filed as Annexure A2 by petitioners No.1 2. Petitioners contend that as per the aforesaid Federal Decree, issuance of a cheque in bad faith has been decriminal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the accused deliberately evades arrest or does not appear before the trail courts despite non-bailable warrants or there is likelihood of the accused to leave the country to evade trial/arrest. As per Indian Law, offence of dishonour of cheques is a non-cognizable offence. As per Clause (h) of the Office Memorandum dt.27.10.2010 extracted above (clause (I) of the latest Office Memorandum No.25016/10/2017-IMM dt.22.02.2021), 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. In the instant case, when the petitioners are not alleged to have committed any cognizable offence, they could not have been prevented from leaving the country by respondents by issuing LOCs and such action is clearly violative of the Office Memorandums dt.27.10.2010 and dt.22.02.2021. RE: LOCs issued at the instance of SFIO (respondent No.6) Coming to the case of the Serious Fraud Investigation Office (SFIO) (respondent No.6), it is said to be conducting an investiga ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
