TaxTMI 
TaxTMI 
2022 (10) TMI 210
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....ration, New Delhi; respondent No.3 is the Bank of Baroda, Corporate Financial Services (Large Corporate) Branch, New Delhi; Respondent No.4 is Bank of Baroda, Deira Branch, Dubai, UAE; respondent No.5 is Additional Director, National Central Bureau (NCB) (Interpol), India; respondent No.6 is Additional Director (Investigation), Serious Frauds Investigation Office, New Delhi; respondent No. 7 is the Managing Director and CEO, Bank of Baroda, Mumbai; and respondent No.8 is the Chairman, State Bank of India, Corporate Center, Mumbai ( for short' SBI'). It is not in dispute that both petitioners are Directors of the company by name M/s Asian Ispat FZ LLC (AIF) based in UAE and the said company had borrowed loan from the Bank of Baroda, Deira Branch, Dubai and the SBI, Dubai, UAE. The petitioners had stood as guarantors for the said loan. Both of them are also Directors of company by name M/s AGR Steel Strips (P) Ltd., India (for short 'AGR') and M/s Asian Colour Coated Ispat Limited, India (for short 'ACCIL'). As against the petitioner No.1, the LOCs had been issued as under: - Sr.No. Issued by Date of Issuance Basis of Issuance 1 MD & CEO, Bank of Barod....
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....on plan was also approved by the NCLT, New Delhi by order dt. 19.10.2020. It is not in dispute that the SBI entered into a debt assignment agreement dt. 27.10.2020 with M/s Hasaud Steel Ltd. and the SBI had also issued a "No Due Certificate" on 23.11.2020 in favour of the principal borrower clearly stating that no debt or payment is due or outstanding as on the said date from the principal borrower. Contentions of the counsel for the petitioners (i) RE: National Central Bureau (Interpol) , India (Respondent No.5) It is contended by petitioners that respondent No.5 could not have requested for issuance of an LOC against them on the ground that there was a cheque dishonour case in the UAE in respect of cheques issued to AIF, UAE by the petitioners which ended in a conviction since the Office Memorandums issued by the Ministry of Home Affairs do not enable it to do so. (ii) RE: Serious Fraud Investigation Officer (SFIO) (respondent no.6): Petitioners contend that by virtue of final resolution plan, the entire debt of the principal borrower ACCIL, India alongwith the interest stood assigned to M/s Hasaud Steel Ltd and there is no debt in the books of the SBI and other....
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....e reply filed by the respondents No.1 and 2, which has also to be treated as that of respondents 5 and 6, they contend that as per LOC Guidelines issued by the Ministry of Home Affairs, Govt. of India, an LOC is a secret document and the same cannot be shared with an accused or any unauthorized stakeholder. Further, the LOC cannot be provided or shown to the subject of LOC at the time of detention by respondent No.2/BOI, as it defeats the purpose of LOC for which it was got issued by the LOC Originator (respondent No. 3 to 8) for various reasons as mentioned in the LOC Guidelines. That accused/subject of LOC cannot be provided any opportunity of hearing before the issuance of LOC, as a LOC is issued by various law enforcement agencies and respondent No.2 (BOI) can only act upon the requests made by the concerned agencies for issuance of LOC. The Bureau of Immigration (BOI)/respondent No.2, Ministry of Home Affairs issues Look Out Circular (LOC) on the basis of guidelines vide MHA's office Memorandum No.25016/31/2010 Imm dt. 27.10.2010 and subsequent amendments. The legal liability of the action taken by immigration authorities in pursuance of LOC rests with the originat....
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....the loan accounts had turned NPA on 27.06.2016 and outstanding amount of Rs. 290.62 crores has to be recovered from the said entity. It is also stated that the said entity had committed fraud and cheque bounce cases had been filed in Dubai against petitioner No.2 and he was convicted by a Dubai Court with imprisonment for three years and a commercial suit was also filed in Dubai which is awaiting judgment. It is stated that both petitioners had fled UAE and are staying in Delhi, India and they may leave India at any point of time to avoid legal actions and may not return to India; and so they should not be allowed to leave India by opening LOCs against them. It is stated that LOCs were opened against them on 26.06.2019, that they were due to expire on completion of one year validity, and they should be extended/continued against them. Reliance is placed on a letter dt.22.11.2018 of the Department of Financial Services advising that Chairman/Managing Directors/Chief Executives of all Public Sector Banks had been empowered to issue request for opening of LOCs against all persons covered under Office Memorandum dt.27.10.2010 of the Ministry of Home Affairs including fraudsters and per....
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....urisdiction. But the counsel for respondent No.8 Mr.Ankur Mittal did not make any oral submissions on this point. According to respondent No.8 certain facilities had been granted by its Dubai branch to AIF, UAE with ACCIL, India as corporate guarantors and with the petitioners as personal guarantors. It is stated that the accounts of the borrower remained irregular and they were declared an NPA on 08.04.2016 and a demand notice dt.21.03.2017 was issued to the borrower to pay $20,457,963. It is stated that application under Section 7 of the IBC, 2006 had been filed against ACCIL and vide order dt.20.07.2018, the Corporate Insolvency Process commenced and a resolution plan submitted by the resolution applicant M/s JSW Steel Coated Products Limited was approved by the NCLT, New Delhi on 19.10.2020. It is stated that notwithstanding the same, the liability of the petitioners continues in respect of the personal guarantees executed by them for securing the loan liabilities. It is stated that a criminal complaint was also filed in Dubai on 28.11.2019 and is pending. It claimed that since the petitioners were not cooperating with it and they had fled from UAE in order to avoid....
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....ortgaged as can be seen from Annexure P24 dt.31.03.2021 which is a 'No Due Certificate' issued by it. Also the petitioners claim to the residents of Faridabad in the State of Haryana. It is the case of the respondents that money decree granted by by the Dubai court (Annexure R-9) against petitioners and M/s AIF, UAE will be enforced in India invoking Sec.44A of the CPC and the notification dt.17.1.2020 issued by the Govt. of India declaring the UAE to be a reciprocating country for purposes of Sec.44A CPC. So the decree holders intend to proceed against the properties of the petitioners located in the State of Haryana and also against the petitioners stated to be resident of Faridabad, State of Haryana. Therefore, though the respondents may be based outside Haryana, part cause of action arises within the jurisdiction of this Court and this Court has territorial jurisdiction to entertain this Writ Petition under Clause (2) of Article 226 of the Constitution of India. Therefore, the decisions cited by respondent No.4 and 8 are inapplicable to the instant case. The Supreme Court in Popatrao Vyankatrao Patil v. State of Maharashtra (2020) 19 SCC 241, at page 246, has held t....
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....ehalf. I am not indulging in any judicial homily but only echoing the dynamic national policy on State litigation evolved at a Conference of Law Ministers of India way back in 1957." ' 8. In Madras Port Trust v. Hymanshu International (1979) 4 SCC 176 this Court held : (SCC p. 177, para 2) '2. ... It is high time that Governments and public authorities adopt the practice of not relying upon technical pleas for the purpose of defeating legitimate claims of citizens and do what is fair and just to the citizens. Of course, if a Government or a public authority takes up a technical plea, the Court has to decide it and if the plea is well founded, it has to be upheld by the court, but what we feel is that such a plea should not ordinarily be taken up by a Government or a public authority, unless of course the claim is not well founded and by reason of delay in filing it, the evidence for the purpose of resisting such a claim has become unavailable.' 9. In a three-Judge Bench judgment of Bhag Singh v. State (UT of Chandigarh (1985) 3 SCC 737 this Court held : (SCC p. 741, para 3) '3. ... The State Government must do what is fair and just to the citizen....
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.... or cancelling LOC is commensurate with the jurisdiction of cancellation of NBWs or affirming NBWs. The said Office Memorandum mentioned a list of Officers of various Departments of the Government who can make a request for opening of the LOCs. Clause (h) of the above circular is relevant. It states: "(h) In cases where there is no cognizable offence under IPC or other penal laws, the LOC subject cannot be detained/arrested or prevented from leaving the country. The originating agency can only request that they be informed about the arrival/departure of the subject in such cases." Thus, LOCs were permitted to be opened essentially against persons involved in cognizable offences and who were evading arrest and not appearing in the trial Court despite NBWs or other coercive measures and there was a likelihood that they would leave the country to evade trial/arrest. It was intended as a coercive measure to make a person surrender to the investigating agency or Court of law. But where the subject of the LOC is not involved in any cognizable offence, he cannot be detained/arrested or prevented from leaving the country. The originating agency can only request that....
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....underlying debt in India with respect to Indian Public Sector Bank i.e. Bank of Baroda (respondent No.3) is already settled. Fraud declaration by respondent No.3 is challenged in CWP-34297-2019 and it has been stayed on 28.11.2019 (Annexure P8). There is no 'Willful Defaulter' or 'Fugitive Economic Offender' declaration against the petitioners. No investigation has been initiated or is continuing against the petitioners at the behest of respondents No.3 & 4. (ii) Respondent No.4 is not a Public Sector Bank or a Scheduled Commercial Bank registered with the Reserve Bank of India. Even so it had benefitted from the LOC issued and extended in the garb of and through its sister concern/branch, respondent No.3. (iii) No FIR is registered in India against the petitioners and it is not the case of the respondents that they are accused of any cognizable offence under Indian Laws. Respondent No.3-Bank's Branch at Mumbai and respondent No.8-Bank's branch at Mumbai were the ones which had issued to respondent No.2, the request for issuance and of extension of the LOCs alleging loan defaults by AIF, Dubai to the Deira Branch of the Bank of Baroda at Dubai and to the SBI, D....
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....t of India are invested in the Dubai entities of the Bank of Baroda and the SBI, for them to come under the umbrella of the term "Public Sector". (c) In the Office Memorandum dt.22.11.2018 (Annexure R-3), there is a reference to the earlier Office Memorandum dt. 27.10.2010 and it's amendments from time to time and in particular to paragraph 8 (j) of the said Office Memorandum which states as under:- "Para 8(j): ..... In exceptional cases, LOCs can be issued even in such cases, as would not be covered by the guidelines above, whereby departure of a person from India may be declined at the request of any of the authorities mentioned in clause (b) of the above referred OM, if it appears to such authority based on inputs received that the departure of such person is detrimental to the sovereignty or security or integrity of India or that the same is detrimental to the bilateral relations with any country or to strategic and/or economic interests of India or if such person is allowed to leave, he may potentially indulge in an act of terrorism or offences against the State and/or that such departure ought not be permitted in the larger public interest at any given....
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.... it may not be able to go into the merits/demerits of the allegations made against the petitioners by the said entities. It appears that mechanically the respondent No.2 had issued the LOCs at the instance of the Indian entities of the Bank of Baroda (respondent No.7) and the SBI (respondent No.8). Similar views have been expressed by this Court in Noor Paul (2 Supra) and Poonam Paul (1 Supra). It was further held in those decisions that non supply of the LOC to the subjects of the LOC at the time of issuance of the same and denial of opportunity to the subjects of the LOC, a post decisional hearing to explain why such LOC issued against them should be withdrawn/cancelled by the Bureau of Immigration (respondent No.2), is arbitrary and illegal, and it cannot be said to have followed fair, just and reasonable procedure to deprive the subject of the LOC of his or her fundamental right to travel abroad. We follow the said decisions rendered by the Division Benches of this Court and hold that respondents No.7 and 8, which are Indian entities of the Bank of Baroda and the State Bank of India, cannot make a request for issuance of LOC to respondent No.2 in respect of dues owed to t....
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....as issued. ii. Closing the amount or withdrawing all available fund therein before issuing the cheque or before presenting the cheque for payment or if the account has been frozen; and iii. Deliberately writing or signing the cheque in a way that makes it unpayable. The Federal Decree Law No.14 of 2020 which came into force on 02.01.2020 is filed as Annexure A2 by petitioners No.1&2. Petitioners contend that as per the aforesaid Federal Decree, issuance of a cheque in bad faith has been decriminalized and is therefore no longer a criminal offence in UAE, apart from the exceptions added. In the present case, Petitioners No.1&2 do not fall within any of the exceptions provided above. According to the petitioners the amendment results in abrogation of the erstwhile provisions of the Penal Code governing the offence of bounced cheque. Petitioners have also filed Circular No.9 of 2021 dt. 19.12.2021 issued by the office of the Attorney General of the UAE as Annexure A4 which deals with disposing cases for giving a cheque in bad faith and refusing to pay, for which the criminalization is abolished. As per the Attorney General Circular, travel ban and the ....
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..../departure of the subject in such cases. In the instant case, when the petitioners are not alleged to have committed any cognizable offence, they could not have been prevented from leaving the country by respondents by issuing LOCs and such action is clearly violative of the Office Memorandums dt.27.10.2010 and dt.22.02.2021. RE: LOCs issued at the instance of SFIO (respondent No.6) Coming to the case of the Serious Fraud Investigation Office (SFIO) (respondent No.6), it is said to be conducting an investigation into the affairs of M/s ACCIL, India, a company in which the petitioners are Directors and Guarantors for loans advanced by several lenders including SBI. The said investigation is only under Section 212 (1) (c) of the Companies Act, 2013 initiated on 04.10.2019 by the Ministry of Corporate Affairs. The debt of the said company has admittedly got resolved pursuant to an order dt. 19.10.2020 of the NCLT, New Delhi which had approved the resolution plan submitted by the resolution applicant M/s JSW Steel Coated Products Ltd. on 08.03.2019. Thereafter the SBI had entered into a debt assignment agreement dt.27.10.2020 with M/s Hasaud Steel Ltd. and had also issue....