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2021 (12) TMI 1388
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....peared to the concerned authority (MD & CEO of respondent no. 2), on the inputs received, that departure of the petitioner would be detrimental to the economic interest of India and larger public interest. The inputs, which were the alleged basis of such opinion, were not disclosed in the LoC itself. Learned counsel for the petitioners argues that merely parroting the provisions of the statute or the Office Memorandum (OM) dated October 27, 2010, as amended on December 5, 2017, does not amount to giving reasons. As such, it is contended that the LoC, being in contravention of Articles 14, 19(1)(g) and 21 of the Constitution of India, ought to be set aside inter alia on the ground that the same was devoid of reason. 4. It is argued that mere reference to the account of the Visa Power Limited becoming NPA on March 31, 2016 in view of the balance due on December 31, 2019 being in excess of Rs. 351 crores, does not entitle the respondent no. 2 to request for issuance for LoC in respect of the petitioner; more so, when the petitioner is neither the borrower nor the guarantor. It was the Visa Power Limited which was the borrower-Company and the alleged basis on which the Bank proceede....
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....support of the above proposition, learned counsel appearing for the petitioner cites certain judgments. 11. The first such judgment was rendered in Mritunjay Singh vs. the Union of India and others, reported at MANU/D/2186/2020 on the proposition that the mere mention of power in the counter-affidavit or A.O. cannot take the place of giving reasons for exercising such power by issuing LoC. 12. Learned counsel next cites Karti P. Chidambaram. Vs. Bureau of Immigration and others, reported at 2018 SCC OnLine Mad 2229, in support of the proposition that LoCs are coercive measures to make a person to surrender to an investigating agency or a court below and would necessarily have to contain reasons for such request. 13. For the proposition that no exceptional case or any adverse effect on the economic interest of India has been made out either in the original request for issuance of LoC or even in the affidavit-in-opposition, recourse could not be taken to the higher remedy of issuance of LoC. Merely because the word "public" is involved does not elevate a mere default to an exceptional plane. No case having been made out that the departure/travel of the petitioner would....
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....der under Sections 35, 43, 45 and 66 of the IBC, against which an appeal, preferred before the NCLAT, met with dismissal. 20. It is submitted by learned counsel for the petitioners that the scope of operation of the said provisions of the IBC and declaration of willful default under the RBI Master Circular are completely different and cannot be mixed up in the context. 21. As regards the alleged quantum of debt, that is, Rs. 350 crores, learned counsel submits that such quantum is not a criterion under the Circular for issuance of LoC. 22. It is further argued by the petitioner that the CBI has already returned the complaint against the Company for want of particulars. The alleged subsequent complaint dated August 18, 2020 as alleged in the notes of arguments, is not a part of the affidavit affirmed by the respondents. 23. As such, the said contention cannot be relied upon by the Court, it is contended. 24. In any event, it is submitted that the Bank did not disclose the subsequent letter to CBI and cannot be permitted to rely on the same by inserting it suddenly in the notes of arguments. 25. The petitioner, as per the obligations mentioned in the Circular, was n....
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....ld create a substantial dent in the economy of the country as well. 31. Respondent no. 2 next relies on the O.M. issued by the Government of India, Ministry of Finance dated October 4, 2018, Clause 2 of which indicates that the Chairman of the respondent no. 2-Bank is the competent authority at whose behest a Look-Out Circular could be issued. The IBA Circular dated March 16, 2019 is based upon the O.M. as discussed above, enunciating how a Public Sector Bank can make a request for issuing an LoC, it is contended. 32. Clauses 3.3-(A), (B), (C) of the IBA Circular annexed to the affidavit-in-opposition of the respondent no. 2 highlights that a person or entity against whom LoC is issued has to be a borrower or guarantor of a PSB. The petitioners, by virtue of being non-whole time Directors of the borrower-Company, also fall within the purview of such provision. 33. It is contended on behalf of the respondent no. 2 that the Audit Report was never turned down or set aside either by the NCLT or the NCLAT. The dismissal by NCLT was only due to lack of certain ingredients and documents in the Audit Report; no observations, however, were made with regard to the report. 34. It ....
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....), an exceptional case had to be made out against the petitioners, which has not been done in the present instance. 44. The premise of issuance of the LoC could at best be the prior request of the CBI, which option is negated in view of the CBI having returned the first complaint dated August 8, 2019 made by the Bank subsequently on December 28, 2020 and the impugned LoC being issued on February 29, 2020. In any event, no such complaint was disclosed in the LoC at all. 45. Moreover, the willful defaulter notice was issued much later, that is, on June 24, 2020. Hence, the said notice to show-cause for identification as willful defaulter antedated the LoC and could not be a ground for issuance of the LoC. 46. As regards the alleged reason sought to be projected by the petitioners for the default committed by the borrower-company, while deciding the present challenge under the LoC, it would be beyond the purview of this Court's enquiry to examine such ground on the touchstone of factual evidence. 47. Undoubtedly, Rs. 351 crores is a substantial amount of money, but the Lookout Circular was silent as to why extraordinary circumstances were alleged by the respondent no. ....
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.... economic interests of India and one which is not. 53. In the present case, the respondent-authorities have failed to justify rationally as to why the departure of the petitioners from India would, in any manner, be detrimental to the sovereignty or security or integrity of India or to the bilateral relations with any country or to the strategic and/or economic interests of India as a whole. The mere subsistence of an allegation of default could not trigger the issuance of the LoC at the drop of a hat. As such, the expression "detrimental to the economic interests" of India ought not to be an excuse to restrain citizens of India from leaving the country without any convincing ground being disclosed for such restraint. In the present case, there is no allegation that the CBI has an arrest-warrant against the petitioners and/or the petitioners' personal participation in the CBI enquiry is of utmost necessity at the present juncture. That apart, even if the petitioners were to leave India, there is nothing on record to indicate that the recovery of any amount of default, if committed at the behest of the petitioners by the borrower-company, would affect such recovery in any man....
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.... 60. Even the affidavits-in-opposition which, in any event, have been filed much subsequent to the issuance of the LoC, merely disclose "restrictive measures" as a reason for making the request for LoC. As rightly argued on behalf of the petitioner, such a ground is absent from those envisioned as necessary ingredients for the issuance for LoC in the relevant Office Memoranda. 61. As far as the facts of Deept Swarup Agarwal (supra) are concerned, in the said case there were sufficient findings on the elusive and evasive actions of the petitioner. In the present case, factors of similar nature are absent. 62. As revealed by the LoC and even the affidavits-in-opposition of the respondent no. 2, no cogent reason has been shown for the request of the LoC. Even the respondent-authorities acted in an unlawful manner in blindly issuing the LoC without even ascertaining whether the request by the respondent no. 2 revealed any exceptional case as envisaged in the amended Office Memorandum No. 25016/31/2010-Imm dated October 27, 2010. It is incumbent upon the issuing authority of the LoC to ascertain at least whether the grounds disclosed in the LoC and/or the request for LoC fall with....