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TMI Blog2025 (1) TMI 436X X X X Extracts X X X X X X X X Extracts X X X X ..... ss purposes. During the course of proceedings, the Petitioner, through additional affidavits, modified his request to travel from 5th December, 2024 to 20th December, 2024. Although this period too has elapsed, the Petitioner persists in seeking suspension of the LOC, emphasizing the ongoing relevance of his business commitments and asserting that the meetings can be rescheduled if relief is granted, by this Court. 2. The present case necessitates a careful examination of the competing interests at play: the Petitioner's fundamental right to travel abroad and the State's imperative to ensure that ongoing investigations into serious allegations of financial impropriety are not thwarted. While the Petitioner asserts that his long-standing cooperation with investigative authorities and absence of criminal antecedents negate any apprehension of flight risk, SFIO and the Income Tax Department strongly oppose the request, citing the gravity of the allegations and the potential risk of evasion. PETITIONER'S CASE 3. Mr. Dayan Krishnan, Senior Counsel for the Petitioner, outlined the following facts that form the basis of the present petition: 3.1. The Petitioner's company, PLL, operate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , resolved to re-classify PLL's account as a "No Fraud" account. 3.8. Following this reclassification, IDBI Bank issued a fresh show cause notice dated 7th February, 2024 under the RBI Master Directions on Frauds-Classification and Reporting. The Petitioner responded on 31st May, 2024 and these proceedings remain pending. Investigation by SFIO under the Companies Act, 2013 3.9. On 22nd May, 2019, the Central Government, under Section 212 (1) (c) of the Companies Act, 2013, directed the SFIO to investigate PLL's affairs. 3.10. On 15th July, 2022, the Central Government issued directions directing the SFIO to initiate proceedings against the Petitioner and his son, Mr. Shiv Punj, under Sections 241 and 242 read with Sections 246 and 339 of the Companies Act, 2013. 3.11. Aggrieved by directions issued by the Central Government, on 25th September, 2023, the Petitioner preferred W.P.(Crl) 2847/2023 titled Atul Punj v. Union of India through Ministry of Corporate Affairs and Another inter alia seeking quashing of letters dated 22nd May, 2019 and 15th July, 2022. This Court vide order dated 31st October, 2023 restrained SFIO from taking any coercive action against Petitioner while di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeared before the SFIO on 9 occasions and submitted documents on 13 occasions. No allegations of tampering with evidence, influencing witnesses, or evading proceedings have been raised against him. 3.17. The Petitioner further asserts that the SFIO's investigation has remained inconclusive for over five years, with no clear end in sight. He argues that such prolonged delay, coupled with the issuance of an LOC, violates his fundamental rights under Article 21 of the Constitution of India, 1950, which guarantees the right to life and personal liberty. RESPONDENTS' CONTENTIONS 4. Counsel for SFIO and the Income Tax Department strongly opposed the Petitioner's request advancing the following arguments: Bar on Maintainability 4.1. The present writ petition is not maintainable being barred by principles of res judicata as it seeks relief identical to that has been previously denied. In W.P.(Crl.) 2332/2022, this Court refused to suspend the LOC after considering prima facie evidence of the Petitioner's involvement in fraudulent activities within PLL. The subsequent withdrawal of W.P.(Crl.) 359/2023, filed on similar grounds, further demonstrates the repetitive nature of the pleas u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with their affiliated companies. The outstanding balance from these fraudulent trading activities exceeded INR 3,000/- Crores, with approximately INR 2,400/- Crores linked to PLPL and PLIPL, both of which have defaulted on their repayments. The Petitioner, being a Director of these entities, is implicated in these financial irregularities. 4.4. The investigation also uncovered that PLL had made substantial investments in its group entities based in overseas jurisdictions. However, most of these foreign investments were eventually lost, having incurred significant financial losses. These losses were subsequently written off, leading to a substantial erosion of PLL's net worth. This caused loss of funds to the public sector banks and financial institutions who were the major lenders of PLL. Proceedings under the Black Money Act 4.5. Additionally, in the proceedings under Section 10 of the Black Money Act, on 20th February, 2024, a show cause notice was issued to Mr. Shiv Punj, requiring him to provide details and clarify his association with certain entities and bank accounts as the beneficial owner. In his response dated 16th March, 2024, Mr. Shiv Punj confirmed that Mr. Atul Pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding accountability and undermining the legal process. ANALYSIS AND FINDINGS 5. A Look Out Circular serves as a preventive measure to restrict an individual from leaving the country, particularly when there are reasonable grounds to believe that such departure may hinder legal proceedings or jeopardize investigations into serious transgressions. While the issuance of an LOC aims to safeguard the interests of justice, it must be reconciled with the constitutional guarantees of personal liberty. The right to travel abroad has been recognized as an integral aspect of the right to life and personal liberty enshrined under Article 21 of the Constitution of India. This principle was firmly established in the landmark judgments of Maneka Gandhi v. Union of India (1978) 1 SCC 248 and Satwant Singh Sawhney v. D. Ramarathnam, Assistant Passport Officer and Ors. AIR 1967 SC 1836 where the Supreme Court held that restrictions on such a right must be just, fair and reasonable, adhering to the requirements of procedural due process. 6. The Ministry of Home Affairs ["MHA"], as the nodal ministry responsible for issuing guidelines for international travel, has stipulated that an LOC may be issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting 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 suppression 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:- xx ... xx ... xx (H) Recourse to LOC is to be taken in cognizable offences under IPC or other penal laws. The details in column IV in the enclosed Proforma regarding 'reason for opening LOC' must invariably be provided without which the subject of an LOC will not be arrested/detained. (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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest of India," as mentioned in Clause 'L' of the 2021 Office Memorandum, has been interpreted narrowly by a Coordinate Bench of this Court in Prateek Chitkara v. Union of India 2023 SCC OnLine Del 6104. The Court observed: "82. The term "detrimental to economic interest" used in the Office Memorandum is not defined. Some cases may require the issuance of a look-out circular, 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 look-out circulars. However, issuance of look-out circulars cannot be resorted to in each and every case of bank loan defaults or credit facilities availed of 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." 10. Thus, mere inability to rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner has done substantial investment in DLCL, registered in overseas jurisdiction as stated in the status report. 9. It is alleged M/s. Chirag Techno FZCO is in actual control of the petitioner and it is nothing but a camouflage for hiding diverting assets, funds and evading legal and law enforcement consequences after duping public sector banks money borrowed by PLL. It has been found the amount receivable from vendors of PLL has been directly remitted to DLCL instead of receiving such amount in trust and retention account. The reports states the payment to DLCL had been made prior to making the payments to the secured creditors. It has also come to the notice payments of huge amounts have been made to number of entities in the name of consultancy fee in overseas from PLL and its group companies and also to the promoters of PLL i.e., the petitioner and his son. Further it is stated the petitioner is associated with M/s. Cawdor Enterprises Limited registered in British Virgin Islands (BVI), which is a major shareholder of PLL whose beneficiary is the petitioner herein and he has received a huge amount as dividend from PLL. 10. Though the petitioner herein has bank account with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Code of Civil Procedure, 1908, precludes a Court from adjudicating an issue that has been directly and substantially decided in a prior proceeding between the same parties. However, the doctrine of res judicata does not rigidly apply to writ proceedings, especially in cases where ongoing violations of fundamental rights are alleged. Even the principle of constructive res judicata which is often applied to ensure judicial finality, cannot prevent the enforcement of fundamental rights when the cause of action has undergone change. When subsequent developments alter the factual or legal matrix, courts retain the flexibility to revisit and adjudicate such matters to ensure justice. [See also: Devilal Modi v. States Tax Officer, Ratlam and Others, 1964 SCC OnLine SC 17]. In such cases, courts must adopt a pragmatic approach, balancing the need for judicial finality with the imperative to protect constitutional rights in light of new and compelling circumstances. Thus, the doctrine of res judicata or constructive res judicata cannot be stretched to perpetuate restrictions on fundamental rights, particularly when the justification for such restrictions has dissipated. 14. In the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RBI and to approach the CBI or the Police for appropriate proceedings against the Petitioner, in accordance with law. Pursuant to this liberty, IDBI Bank submitted a Financial Monitoring Report dated 18th July, 2024, to the RBI. According to the SFIO, IDBI Bank is yet to file a formal complaint with the CBI, though this step is anticipated. 18. While these proceedings signal the gravity of the allegations, they remain at a preliminary stage. As of now, no formal complaint has been filed by IDBI Bank, nor any FIR has been registered against the Petitioner or PLL. This lack of conclusive action demonstrates that the allegations have yet to translate into definitive findings of wrongdoing. 19. Furthermore, the reliance placed on the RBI's guidelines on Fraud Classification must be tempered by the recognition that such classifications, while indicative, do not constitute judicial or quasi-judicial findings. The Supreme Court in State Bank of India v. Jah Developers Pvt. Ltd. (2019) 6 SCC 787 observed that the classification of an account as fraudulent under the RBI framework carries significant consequences for borrowers and associated individuals. Such classifications are intended a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner that could potentially derail the investigation. In such circumstances, the indefinite continuation of the LOC imposed on the Petitioner cannot be justified. As observed in multiple judgments, including Maneka Gandhi v. Union of India (1978) 1 SCC 248, any restriction on personal liberty must meet the test of proportionality and be reasonably connected to the legitimate aims sought to be achieved. Here, the prolonged nature of the investigation, coupled with the absence of tangible progress or imminent charges, raises questions about the necessity and proportionality of continued restrictions on the Petitioner's movement. 24. In sum, while the SFIO's concerns regarding the gravity of the allegations cannot be dismissed outright, investigations must not become an instrument for imposing indefinite constraints on an individual's fundamental rights, particularly when no substantive evidence has been presented to establish non-cooperation or obstruction by the Petitioner. Discharge from Personal Guarantees 25. Another significant development that merits mention is the discharge of the Petitioner from his personal guarantees. The DRT, New Delhi, in two separate orders dated 5th M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dom for a period of 15 days commencing from 1st February, 2025 i.e., till 15th February, 2025, subject to following conditions: (a) Petitioner shall deposit, by way of a security, an FDR amounting to INR 5 Crores with the Registrar General of this Court, which shall be kept on an auto-renewal mode. (b) Petitioner shall deposit the original title deeds of the property (valued at INR 53.89/- Crores), which is in the name of his wife, with the Registrar General of this Court. This security shall be accompanied by an undertaking submitted by the Petitioner's wife that she would have no objection in case the afore-noted property is forfeited in the event any of the aforesaid conditions imposed on Petitioner are violated. In the undertaking to be submitted before the Registrar, Petitioner's wife shall also specifically undertake that she shall not alienate or mortgage the afore-noted property without the permission of the Court, subject to further orders. (c) Petitioner shall file a detailed affidavit disclosing his complete itinerary, including his stay at various locations abroad as well as telephone numbers and residential/ hotel addresses. He shall also file an undertaking that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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