2025 (11) TMI 213 - HC - Customs

Challenge to territorial jurisdiction rejected; forum conveniens refused; LOC quashed subject to petitioner's cooperation affidavit

Mr. Sandeep Dhanuka Versus Directorate of Revenue Intelligence & Anr.

HC held the respondent's challenge to territorial jurisdiction untenable and refused to invoke forum conveniens. The court found no subsisting SCN or ... Maintainability of petition - territorial jurisdiction to entertain a writ challenging a Look Out Circular (LOC) - principle of forum conveniens - seeking quashing of the Look Out Circular (LOC) issued - over-valuation and inferior quality of coal supplied - HELD THAT:- The plea of lack of jurisdiction raised by the respondent is found to be untenable. It would be inapposite to apply/invoke the doctrine of forum conveniens in the present case, to override a constitutionally conferred jurisdiction, particularly when nexus exists between the cause of action and the jurisdiction of this Court. On merits, it is noticed that there is no subsisting Show Cause Notice pending against the petitioner. The proceedings initiated pursuant to SCN bearing F. No. DRI/MZU/F/INT/154/2014/6666 dated 31.08.2016 were dropped by the Order in Original dated 29.11.2023. There is no cognizable offence pending against the petitioner. The proceedings arising out of the 2016 SCN have been conclusively dropped. The Order in Original in favour of the Petitioner has been upheld twice by the CESTAT. Though it is submitted that respondent no. 1 has filed a further appeal before the Supreme Court via Diary No. 47827/2025, it is undisputed that no stay has been granted on the operation of the Order in Original. With regard to the contention of the respondent that the petitioner had violated the Look Out Circular (LOC) issued in 2015 and had evaded the summons issued at that time, there is nothing on record to suggest that the petitioner was informed or made aware of the fact that any LOC had been issued against him. Moreover, the first LOC dated 06.11.2015 was issued in relation to the petitioner’s Indian passport, which had already been renounced on 09.04.2013 upon his relinquishment of Indian citizenship. Importantly, the petitioner has volunteered to give an undertaking on affidavit, affirming that he shall: (i) continue to cooperate in the investigation and appear before the investigating authority, as and when required or directed, and render full cooperation in any ongoing proceeding/s and investigation/s; and (ii) provide all material/documents requested from him by the investigating agencies, and as may be available within his power or possession. In the circumstances, subject to the petitioner filing the aforesaid undertaking on affidavit (with advance copy to the learned counsel for the respondents), the impugned LOC against the petitioner is quashed. Petition disposed off. ISSUES PRESENTED AND CONSIDERED 1. Whether this Court has territorial jurisdiction to entertain a writ challenging a Look Out Circular (LOC) where critical acts (detention, service of summons, recording of statement) occurred within its territorial limits despite originating authority being situate elsewhere. 2. Whether the impugned LOC, issued in connection with alleged mis-declaration/overvaluation of imported goods, was lawful in view of the consolidated Office Memorandum dated 22.02.2021 (OM-2021) which circumscribes grounds and procedure for issuance of LOCs - specifically clauses 6(H), 6(I) and the exception in 6(L). 3. Whether the existence of concluded adjudicatory orders in favour of the person (including upholding by appellate forum) and absence of any subsisting Show Cause Notice or stayed order precludes continuation of an LOC issued in relation to the same subject-matter. 4. Whether the issuance and continuation of the LOC was justified on grounds of flight risk, non-compliance with summonses, ongoing investigations in respect of related consignments, or pending further appeals by the issuing authority. 5. What relief, if any, should follow where an LOC is found to be improperly maintained - including the role and appropriateness of conditional quashing subject to undertakings. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Territorial jurisdiction to entertain challenge to LOC Legal framework: Article 226 (constitutional writ jurisdiction) and principles of situs of cause of action; precedents delineating when a High Court may be approached where part of cause of action arose within its territory. Precedent treatment: The Court relied on established authorities holding that a High Court has jurisdiction where a part of cause of action arises within its limits and that situs of originating authority is not exclusively determinative; doctrine of forum conveniens is discretionary and cannot override statutory/constitutional jurisdiction. Interpretation and reasoning: The Court identified that detention, service of summons and recording of statement occurred in the NCT of Delhi and that the DRI head office and investigating officers conducting inquiries are located in New Delhi. These factual links amount to a substantial part of the cause of action arising within this Court's territorial jurisdiction. Ratio vs. Obiter: Ratio - where a material part of cause of action (detention, service, investigation steps) occurs within a High Court's territorial limits, the High Court may entertain a writ challenging an LOC notwithstanding origination of LOC elsewhere. Obiter - remarks on forum conveniens and its limited applicability. Conclusion: The Court rejected the objection of want of territorial jurisdiction and held the petition maintainable before this Court. Issue 2 - Validity of LOC under OM-2021 (clauses 6(H), 6(I), 6(L)) Legal framework: OM-2021 sets consolidated guidelines: (H) recourse to LOC in cognizable offences under IPC/penal statutes; (I) in non-cognizable matters the LOC subject cannot be detained/arrested and originator can only seek intimation; (L) carve-out permitting LOC in exceptional cases where departure is 'detrimental to sovereignty, security, bilateral relations, strategic and/or economic interests' or larger public interest. Precedent treatment: The Court surveyed and applied prior decisions interpreting the OM-2010/2017/2021 regime (including cases holding LOCs impermissible absent cognizable offences except in exceptional, high-gravity circumstances; and that 'economic interest' invocation must show larger national impact). It followed and applied those precedents rather than distinguishing them. Interpretation and reasoning: The Court emphasised that OM-2021 retained the core protection against indiscriminate use of LOCs and that clause (L) is a narrow exception requiring high gravity and demonstrable detriment to national/strategic/economic interests. The Court found no material showing that the exceptional threshold under clause (L) was satisfied. Mere revenue implications or commercial disputes with limited or private economic impact do not, without more, justify detention or preventative measures that curtail the fundamental right to travel under Article 21. Ratio vs. Obiter: Ratio - LOCs in non-cognizable, revenue or regulatory matters cannot be used to detain/prevent departure unless the exceptional and narrowly-construed criteria of OM-2021(6)(L) are established; economic detriment must be of sufficient gravity to warrant curtailment of travel. Obiter - general observations on evolution of OM regime and comparative cases. Conclusion: The impugned LOC, insofar as relied upon to detain and prevent travel in the absence of cognizable criminal proceedings or demonstrable exceptional detriment, was contrary to OM-2021 and not justified on the facts. Issue 3 - Effect of concluded adjudication and appellate affirmations on continuance of LOC Legal framework: Principles of finality of adjudicatory orders, effect of appellate affirmations and absence of stay; administrative measures must give proper weight to finalized adjudication; powers of investigating agencies vis-à-vis persons against whom proceedings were dropped. Precedent treatment: The Court considered that administrative action cannot indefinitely restrain fundamental rights where adjudicatory forums have exonerated a person and such orders have been upheld on appeal, absent statutory basis to continue restrictive measures. Interpretation and reasoning: The Court recorded that the Show Cause Notice proceedings were dropped by the Adjudicating Authority and that first appellate forum (CESTAT) upheld that order. A subsequent appellate order made specific findings that proceedings as framed against the individual were without jurisdiction. No stay on operation of the order was placed. The Court reasoned that continuation of an LOC in relation to concluded proceedings raises serious questions of necessity and proportionality, particularly after multiple affirmations in favour of the person. Ratio vs. Obiter: Ratio - where adjudicatory proceedings in relation to the same subject-matter have been dropped and affirmed on appeal (with no stay), continuation of preventive measures such as LOC requires clear justification; absent such justification, the LOC is not maintainable. Obiter - comments on pending further appeals by the issuing authority not automatically sustaining an LOC. Conclusion: The prior favorable adjudications and appellate affirmations materially undermine the legal basis for continuing the LOC in relation to the same transactions. Issue 4 - Allegations of flight risk, non-compliance with summonses and ongoing investigations as justification for LOC Legal framework: OM-2021 conditions for LOC in cases of evasion; criteria for assessing flight risk; requirement of reasoned request and details when seeking detention; procedural fairness in issuance and renewal of LOCs. Precedent treatment: The Court relied on authorities that LOC should be used when there is deliberate evasion (e.g., failure to appear despite NBWs or coercive measures) or where departure would frustrate criminal proceedings; mere frequency of travel or commercial nature of allegations is insufficient. Interpretation and reasoning: The Court examined factual claims of non-compliance and prior travel during earlier LOC period. It found absence of evidence that the person had been made aware of the earlier LOC, noted the renunciation of earlier citizenship rendering prior passport basis inapt, and recorded the petitioner's subsequent cooperation (appearances, document production, assistance to retrieve records). The alleged ongoing investigations into related consignments and pending Letters Rogatory or appeals do not, without satisfying OM-2021 thresholds or demonstrating reasonable apprehension of absconding, justify preventive detention by LOC. The Court also noted that the banks were unable to produce older records due to extraterritorial retention rules, weakening the assertion of non-cooperation. Ratio vs. Obiter: Ratio - absence of deliberate evasion, presence of cooperation, and pragmatic impediments to document production diminish the justification for an LOC based on flight risk; frequency of pre-LOC travel and commercial transactions do not by themselves establish flight risk. Obiter - observations on interplay between overseas evidence gathering and LOC necessity. Conclusion: On the facts, the respondent failed to establish that the petitioner was a flight risk or that non-compliance justified continuation of the LOC. Issue 5 - Appropriate relief and conditions for quashing LOC Legal framework: Powers of Court to quash administrative coercive measures and to impose conditional orders (undertakings) to secure continued cooperation and protect investigation; contempt consequences for breach. Precedent treatment: The Court applied prior decisions permitting conditional quashing subject to undertakings where the person offers to cooperate and there is no demonstrated risk of absconding. Interpretation and reasoning: Balancing the fundamental right to travel and the State's interest in investigation, the Court accepted a proffered affidavit undertaking to cooperate, appear when required and provide documents, noting that such undertaking aligns with precedent (including Puja Chadha). The Court conditioned the quashing upon filing the undertaking and cautioned that breach would attract contempt and other legal consequences. Ratio vs. Obiter: Ratio - quashing of LOC is appropriate where (a) OM-2021 conditions are not met, (b) prior adjudication/appeals negate basis for LOC, and (c) the person furnishes a binding undertaking to cooperate; conditional quashing preserves investigatory interest while restoring liberty. Obiter - enforcement warnings for breaches. Conclusion: The LOC was quashed subject to the petitioner filing an affidavit undertaking to cooperate and produce documents; any breach would have severe consequences including contempt proceedings.