2021 (2) TMI 1300 - HC - Indian Laws

Dismissed writ petition upholds bank's authority to issue Look-Out Circular

The court dismissed the writ petition, affirming the legality of the Look-Out Circular (LOC) issued against the petitioner. The court upheld the authority ... Validity of Look-Out Circular on a declared bankrupt - It is contended that the petitioner does not have any business with respondent no.3 but only with its Singapore Branch; as such, respondent no. 3, which is situated in India, cannot have any cause of action to lodge a complaint asking for an LOC to be issued against the petitioner - applicability of winding up and bankruptcy orders passed by the Singapore Court, under the law of Singapore on the Look-Out Circular - HELD THAT:- Admittedly, the petitioner's Company, which is the main source of business of the petitioner as per the averments made in the writ petition itself, was would up by the Singapore High Court. Even, on a personal level, the petitioner was declared to be bankrupt, albeit by the Singapore High Court. The premise of security for the loan taken by the petitioner from the Singapore Branch of respondent no.3 was thus denuded by such declarations. Although passed under the Singaporean law, such orders utterly jeopardized financial standing and integrity of the petitioner, which was sufficient to raise apprehension that the petitioner might not be in a position to repay the loan. No distinction can be drawn, merely on territorial grounds, between the UCO Bank of India (respondent no.3) and its branch at Singapore. The branches of a bank are, as the nomenclature suggests, outlets of the bank itself and not separate juristic entities. The transactions carried out through those branches are those which have, at their source, the parent branch which, in the present case, is the UCO Bank in India. Admittedly, the UCO Bank is a nationalized bank and a Government of India undertaking. Thus, the financial interests of the Singapore Branch of respondent no.3 are inextricably linked with those of the respondent no.3 itself and, consequently, with the interests of Indian public money - The winding up and bankruptcy orders were sufficient to freeze the business of the petitioner in Singapore, which was the source of repayment of loan by the petitioner to respondent no.3 through its Singapore branch. This, in turn, directly affected the Indian interests vested in respondent no.3. The only other sticking point, as regards authority of the bank officials to issue a request, was obliterated vide Office Memorandum dated October 12, 2018, which introduced Clause (xv), empowering the Chairman/Managing Directors/Chief Executive of all public sector banks to issue requests for LOCs. In the present case, the designated official of the respondent no.3-Bank issued the request which was, thus, valid in law. The present writ petitioner is not a mere sailor in a merchant vessel, whose livelihood depends on travels outside India and, has to have a steady income by dint of such travels to put money into his salary account as per any Division Bench direction of this Court; nor is the present wit petitioner a person against whom a specific offence has been alleged but the relevant FIR and other documents are admittedly not available on record, as were the facts of the judgment/order cited by the petitioner. The present petitioner is a declared bankrupt with his only company, disclosed in the writ petition, having been wound up by orders of a competent court of Singapore, which country is the admitted business base of the petitioner. Not only the economic interests of India but bilateral relations with Singapore (both of which are recognized in the relevant Office Memoranda as valid grounds of issuance of LOC) will suffer in the event the petitioner is permitted to leave India, thereby evading repayment of the huge loans taken by him from the Singapore branch of respondent no.3, a nationalized and Government undertaking bank of India. Without incriminating the petitioner in any future proceeding/challenge in any court of law against the winding up and bankruptcy orders, it can safely be observed that there was sufficient ground for apprehension to issue an LOC against the petitioner - petition dismissed. Issues Involved:1. Legality of the Look-Out Circular (LOC) issued against the petitioner.2. Authority of the bank officials to request the issuance of the LOC.3. Impact of the Singapore High Court's winding-up and bankruptcy orders on the LOC.4. Petitioner's right to travel under Article 21 of the Constitution of India.Detailed Analysis:Legality of the Look-Out Circular (LOC) Issued Against the Petitioner:The petitioner, a non-resident Indian with a Singapore-issued Permanent Resident Card, challenged the LOC issued by respondent no. 3 (UCO Bank, a Government of India undertaking). The petitioner argued that the LOC was unjustified as he was conducting business legally and had no direct dealings with respondent no. 3 in India. The petitioner contended that the winding-up and bankruptcy orders from the Singapore High Court should not influence the issuance of the LOC in India, as there was no violation of Indian law or threat to India's sovereignty, security, or economic interests.Authority of the Bank Officials to Request the Issuance of the LOC:Respondent no. 3 defended the LOC by citing relevant Office Memoranda issued by the Government of India, Ministry of Home Affairs, which authorize bank officials to request LOCs. The respondent argued that the transactions of its Singapore branch directly affect the bank's interests and, by extension, the economic interests of India. The Office Memorandum dated October 12, 2018, empowers the Chairman/Managing Directors/Chief Executive Officers of public sector banks to issue such requests, validating the LOC in question.Impact of the Singapore High Court's Winding-Up and Bankruptcy Orders on the LOC:The Singapore High Court had ordered the winding-up of the petitioner's company and declared the petitioner bankrupt. Respondent no. 3 argued that these orders jeopardized the petitioner's financial standing, raising concerns about the repayment of substantial loans taken from the Singapore branch. The court noted that the financial interests of the Singapore branch are linked to those of respondent no. 3 and, consequently, to the interests of Indian public money. The LOC was justified to prevent the petitioner from evading repayment by leaving India.Petitioner's Right to Travel Under Article 21 of the Constitution of India:The petitioner claimed that the LOC infringed on his personal liberty under Article 21 of the Constitution. However, the court held that public interest outweighs individual rights in this context. The economic interests of India and bilateral relations with Singapore would suffer if the petitioner were allowed to leave, thereby evading loan repayment. The court emphasized that Article 21(6) provides sufficient grounds to curtail the petitioner's right to travel in favor of public interest.Conclusion:The court dismissed the writ petition, affirming the legality of the LOC. It concluded that the LOC was issued with sufficient grounds, considering the petitioner's bankruptcy and the winding-up of his company in Singapore. The court upheld the authority of bank officials to request LOCs and emphasized the public interest in maintaining economic stability and bilateral relations. The petitioner's right to travel was deemed subordinate to these larger interests.