TaxTMI 
TaxTMI 
2021 (11) TMI 662
X X X X Extracts X X X X
X X X X Extracts X X X X
....g Indian Passport which was valid till 2nd May 2028. The Petitioner is a resident of Hongkong where he was residing with his wife and two daughters for the past nine years. He is the Managing Director of Chaitya Private Limited, which is a Company incorporated in Hongkong and which deals in the trade of diamonds and other precious stones. The Petitioner and his family were scheduled to travel from New Delhi to Hongkong on 10th September 2020 from New Delhi - Indira Gandhi International Airport. While the Petitioner was in the process of boarding the flight, he was denied permission to go past the immigration check. The Immigration Officer put a stamp "cancelled without prejudice" on the passport of the Petitioner and did not permit him to travel. The Petitioner was detained at the Airport. On the next day i.e. on 11th September 2020 he was served with a summons issued from the office of the Respondent No.3 directing him to appear in person in their Mumbai Zonal Office on 11th September 2020 i.e. on the same day on which the summons was served upon him. The Petitioner was prevented from travelling abroad because LOC was issued against him by the Respondent No.3. 4. According to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... regarding issuance of the LOC, copies of the same and requesting the Respondent No.3 to permit him to travel abroad and to Hongkong to attend to his business and to fulfill his duties towards his family. However, no response is received by him. The Petitioner thereafter has approached this Court with the present Petition. It is his case that he is being victimized on the basis of false and malicious charges. The action on the part of the authorities is in violation of Articles 14, 19 and 21 of the Constitution of India. His business and family are suffering because of his absence from Hongkong. His business activities and the banking transactions are adversely affected because of his continuous stay in India. Apart from these factual aspects, the Petitioner has raised grounds regarding the necessity and procedure for issuing LOCs. According to the Petitioner, his case is not covered by any of the contingencies on which the LOCs could be issued. It is submitted in the Petition that the action on the part of the Respondents was illegal, arbitrary and unfair in curtailing the personal liberty of the Petitioner. In this background, apart from the main relief of quashing of the LOC, th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate of filing of the affidavit, Mr. Mehul Choksi and Mr, Nirav Modi have collectively defaulted the amount of Rs. 20,600/- crores to the Banks. It was huge misappropriation of public money. 9. As far as the Petitioner is concerned, according to the Respondent No.3, he was knowing Mr. Mehul Choksi for many years. The funds from Mr. Mehul Choksi were taken on loan by the Petitioner and they were used by him to acquire 5.74% share holding in M/s. Gitanjali Gems Limited. His share holding was sold just before Mehul Choksi fled the country. It is the case of the Respondent No.3 that the Petitioner has not co-operated with the investigation and has failed to provide required documents pertaining to his overseas entities. It is specifically contended in the affidavit that the Petitioner is an NRI. He has substantial business interest in Hongkong and other foreign countries. Thus, he has ample connections abroad and, therefore, the possibility that he could evade the course of investigation and that he was at flight risk, was not ruled out. Though his statement was recorded under oath by the Inspector under Section 217 of the Companies Act, 2013 on 25th August 2020, he has not cooperate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....but the Petitioner who is not even an accused has to wait endlessly. This is arbitrary and malafide exercise of powers on the part of the Respondent No.3. 13. Shri Ponda submitted that the Petitioner had invested in M/s. Gitanjali Gems Limited and had sold his shares making a very small profit. He submitted that there was no connection between his investments and Mr. Mehul Choksi. The Petitioner had invested his own money and just because only a small profit was made, it cannot be assumed that the Petitioner was not a genuine investor. 14. Shri Ponda submitted that the Petitioner has deep roots in Mumbai. His parents reside in Mumbai. He has immovable properties in Mumbai and Gujarat. The Petitioner was willing to surrender the passports of his parents to show his bonafides that he would return to India if permitted to travel abroad. The Petitioner had nothing to do with the bank frauds allegedly committed by the Company of Mr.Mehul Choksi and by other beneficiaries. The other investigating agencies have not named him as an accused in any of their investigations. 15. On legal issues regarding the LOC, Shri Ponda submitted that the LOC cannot operate endlessly and as per th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the offence. 18. Shri Halwasia submitted that the Petitioner claimed to be a businessman and yet he had invested almost Rs. 50 Crores for a long period only for a meager profit of 2%. This itself is unbelievable. Shri Halwasia strongly submitted that the investigation has revealed that it was the money of the absconding accused Mr. Mehul Choksi who has left the country. The money was routed through different countries through different means and it was necessary to find out how it was done exactly. However, the Petitioner was not answering the key questions and there was total non co-operation on his part. He relied on the affidavit filed by Respondent No.3 and in particular referred to paragraphs-6 and 7 thereof. The contents of these paragraphs are already referred hereinabove. He also relied on the averments in the affidavit-in-reply wherein it was stated that the Petitioner was an NRI, he has substantial business interest in Hongkong and other foreign countries and the possibility of the Petitioner evading the course of investigation and being at flight risk could not be ruled out. 19. Shri Halwasia submitted that the Look Out Circular was issued on 8th September 2020. I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ect the SFIO to initiate prosecution against the company, its officers, employees or any other person directly or indirectly connected with the affairs of the company. 21. Thus, Shri Halwasia is right in his submissions that special procedure is prescribed and special powers are conferred on the authorities conducting investigation under these Sections of the Companies Act, 2013. The SFIO consists of various experts on different subjects. The investigation entrusted to the SFIO on many occasions involves complex questions and, therefore, the entire process takes longer time than other investigations under the Cr.P.C.. In the present case, the SFIO is investigating into the affairs of M/s. Gitanjali Gems Limited and other group companies involving huge amount which is employed and deployed through various means and through various routes. Therefore, naturally the SFIO is required to be given sufficient time and opportunity to unearth the illegal affairs of these companies. 22. In this context it cannot be said that the Petitioner has absolutely no connection with the investigation which is being conducted by the SFIO. It cannot be mere a co-incidence that within a short span o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... other penal laws, where the accused was deliberately evading arrest or not appearing in the trial court despite NBWs and other coercive measures and there was likelihood of the accused leaving the country to evade trial/arrest. B. The Investigating Officer shall make a written request for LOC to the officer as notified by the circular of Ministry of Home Affairs, giving details & reasons for seeking LOC. The competent officer alone shall give directions for opening LOC by passing an order in this respect. C. The person against whom LOC is issued must join investigation by appearing I.O. or should surrender 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 & 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 court's jurisdiction in aff....
X X X X Extracts X X X X
X X X X Extracts X X X X
....), the Delhi High Court had observed that there was no criminal case pending against the Petitioner in that case. The phrases such as "economic interest" and "larger public interest" cannot be extended in a manner so as to include an Independent Director who was in the past associated with the company being investigated. It was observed that the Petitioner posed no flight risk because his wife and children were residents of Delhi. On that basis, the Petitioner therein was permitted to travel abroad. 30. All these judgments and submissions of Shri Ponda will have to be looked in the background of the Office Memorandum dated 22nd February 2021. The relevant important clauses in those Guidelines are as follows: "(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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ite connection with the investigation as discussed hereinabove. From the facts of the case it is clear that Clause (L) of these Guidelines clearly covers the Petitioner's case as it is detrimental to the "economic interests of India" and that his departure ought not be permitted in the larger public interest. The words "economic interests of India" and "larger public interest" are not empty words in the context of the present case because as mentioned earlier the Petitioner is directly involved and was concerned with considerable share-holding of M/s. Gitanjali Gems Limited. It involves huge amount of almost Rs.Fifty Crores which requires serious explanation from the Petitioner in the background of the allegations that the money belonged to Mr. Mehul Choksi, who has left India and has not returned back. This transaction is an important part of the entire fraud involving huge amount. Sheer magnitude of the offence and its spread through various banking operations and transfer of money through different modes and different countries shows that it has definitely affected the economic interests of India and the larger public interest is definitely involved and affected. Therefore, we d....