Court Invalidates Look Out Circular, Upholds Right to Travel Abroad

Rajesh Kumar Agarwal & ors. and Kapil Singhal Versus Regional Director (E), Ministry of Corporate Affairs, Kolkata & ors.

Rajesh Kumar Agarwal & ors. and Kapil Singhal Versus Regional Director (E), Ministry of Corporate Affairs, Kolkata & ors. - TMI Issues Involved:
1. Legality and justification of the Look Out Circular (LOC) issued against the petitioners.
2. Allegations of non-compoundable offenses and flight risk.
3. Petitioners' cooperation with the investigation.
4. Fundamental rights of the petitioners to travel abroad.
5. Compliance with guidelines for issuing LOC.

Detailed Analysis:

1. Legality and Justification of the LOC:

The petitioners challenged the LOC issued against them, claiming it was contrary to the Ministry of Home Affairs' guidelines and various court judgments. The court noted that the LOC was issued based on a whistleblower's complaint alleging that the petitioners, key members of M/s. Utkal Galvanizers Ltd., were planning to settle outside India after taking substantial loans from banks. However, the court found no concrete material or prima facie evidence to justify the LOC, as the offenses involved were compoundable under Section 441 of the Companies Act.

2. Allegations of Non-Compoundable Offenses and Flight Risk:

The respondents argued that the petitioners posed a flight risk and that the investigation was ongoing. They claimed the petitioners were involved in several companies and had taken significant loans, which raised concerns about their potential to flee. However, the court found no specific allegations or evidence of non-compoundable offenses or default on loans. The court emphasized that bald assertions without tangible evidence could not justify the LOC.

3. Petitioners' Cooperation with the Investigation:

The court acknowledged that the petitioners had fully cooperated with the investigation, attending inspections and responding to queries. The respondents did not provide any evidence of non-cooperation by the petitioners. The court noted that the inspection involving M/s. Utkal Galvanizers Ltd. and other companies was completed, and the reports were submitted to the Ministry of Corporate Affairs.

4. Fundamental Rights of the Petitioners to Travel Abroad:

The court highlighted that the right to travel abroad is a fundamental right. The LOC, which restricted the petitioners' movement, had already affected their ability to participate in international trade fairs, leading to business losses. The court referred to various judgments, including the Delhi High Court's decision in Sumer Singh Salkan v. Assistant Director, which emphasized the need for concrete reasons to justify an LOC.

5. Compliance with Guidelines for Issuing LOC:

The court examined the consolidated guidelines for issuing LOCs, particularly Clauses-H and I, which prescribe that LOCs should be issued in cognizable offenses under the IPC or other penal laws. In cases of non-cognizable offenses, the subject cannot be detained or prevented from leaving the country. The court found that the LOC against the petitioners did not comply with these guidelines, as the offenses involved were compoundable and there was no evidence of non-compoundable offenses.

Conclusion:

The court declared the LOC against the petitioners as bad in law and inoperative, emphasizing that the allegations were speculative and lacked concrete evidence. The court imposed conditions for the petitioners' overseas travel, including providing travel plans, producing a bank guarantee, and cooperating with any further investigation. The writ petitions succeeded, and no costs were awarded.