TaxTMI 
TaxTMI 
2023 (2) TMI 142
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....mpany availed of credit facilities from a consortium of several banks. One such bank was the respondent No.2. A term loan was sanctioned by the said consortium sometime in 2010. The lead bank was the Punjab National Bank (in short PNB). Such loan was for the purpose of setting up a thermal power project in Raigarh. 3. The project viability and the financial closure were based on the captive coal block allocation made in favour of the said company by the Government of India. According to the petitioner, due to the en-mass cancellation of coal block allocations by the Hon'ble Supreme Court by an order dated September 24, 2014, the said company could not commence operations and its account was declared as a Non-Performing Asset (NPA) by the lenders on March 31, 2016. 4. The Bank of Maharashtra filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (in short 'IBC') before the NCLT, Kolkata. By an order dated December 22, 2017, the application under Section 7 of the IBC was admitted and Corporate Insolvency Resolution Process (CIRP) was initiated. On October 11, 2018, the NCLT passed the order of liquidation. A liquidator was appointed and a direction to ....
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....nsortium of banks as respondent Nos. 5 to 9 respectively. The originating bank is represented by the respondent Nos. 2 and 3. 10. Mr. Choudhury, learned Advocate for the petitioner submitted that the company was already in liquidation. The creditors/banks would be at liberty to approach the liquidator as per law for recovery of the dues. The parameters laid down in the office memorandum dated October 27, 2010 issued by the Government of India, Ministry of Home Affairs (Foreigner Division), had not been satisfied before the request was made. There were no grounds for such request. The categories of cases in respect of which an investigating agency or any other agency including a bank could seek recourse to such a harsh and restrictive measure, were entirely different. Neither any cognizable offence under the Indian Penal Code or other penal statutes had been committed by the petitioner, nor had the petitioner deliberately tried to evade arrest and other legal proceedings. Further, learned Advocate contended that in the absence of any input from intelligence agencies that the petitioner was likely to flee the country without paying the dues of the bank and such departure, would af....
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....ent No.2 could not have issued the request for LOC. 14. Referring to the affidavit-in-opposition filed by the Chief Manager, BOB, Stressed Assets Management Branch, the learned Advocate contended that the request of LOC was not in the proper format. Separate reasons for opening of the LOC, was provided as column No.4 of the request under serial nos. 1 to 6 thereof. Actual Column IV of the Proforma enclosed to the memorandum could not been filled in, as there were neither any criminal proceedings nor any judicial proceeding, pending against the petitioner. By incorporating its own reasons, contrary to the format, the bank had tried to provide a legal flavour to such request. Such reasons were based on the forensic audit report and the findings with regard to undervalued transactions, diversion of funds etc. Those allegations had been disbelieved by the NCLT, Kolkata and the order of the NCLT was upheld by the National Company Law Appellate Tribunal (in short NCLAT). Moreover, the complaint filed by PNB on behalf of the consortium of banks, before the Central Bureau of Investigation (in short CBI) had been returned on the ground of lack of details indicating commission of a cogniz....
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....ines of 2010, and departure of a person from India could be declined at the request of any of the authorities mentioned in sub-paragraph (b) of paragraph 8 of the policy of 2010, under the following situations:- (a) if it appeared to the authority based on inputs received, that the departure of such person would be detrimental to the sovereignty or security or integrity of India; (b) that the departure would be detrimental to the bilateral relations with any country; (c) the departure would cause harm to the strategic or economic interest of India; (d) if such person was allowed to leave, he would potentially indulge in terrorist activities or offences against the state; and (e) the departure of such person could not be permitted in larger public interest. 19. The essence of Mr. Kar's submission was that in view of a series of economic offences which had been committed by businessmen and business houses between 2010 to 2017, the Central Government thought it fit to put further restrictions on the movement of such persons who were economic offenders and who had indulged in illegal business dealings. Such activities were considered to b....
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..... The entire money could never be recovered through the liquidation proceedings. The amounts were utilized by the petitioner and the co-directors. The company went into liquidation. The amount still remained outstanding. The banking business of the consortium of banks suffered and the losses which were incurred by the public sector banks had affected the economy of the country. 22. Controverting Mr. Choudhuri's argument that the NCLT and NCLAT had categorically found that the corporate debtor/Visa Power Limited had not indulged in any fraudulent, under-valued or preferential transaction, Mr. Kar contended that the scope of the proceedings before the NCLT and the NCLAT were limited to the provisions of Sections 43, 44 and 45 of the 'IBC'. Learned Advocate submitted that the liquidator filed an application before the NCLT for orders upon the corporate debtor to make contributions in terms of Sections 44 and 45 of the IBC. Such prayer was made on the basis of a forensic audit report. The NCLT decided that no order could be passed asking the corporate debtor to make such contributions, solely on the basis of the observation in the forensic audit report. Learned Advocate further cont....
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....ted that the learned single Judge had proceeded on a misconception that mere debt or default or a declaration of the account as an NPA would not be sufficient ingredients to enable the bank to make a request for issuance of LOC. Paragraph (d) of the said memorandum had not been considered. 26. Pointing out the factual differences in the subject matter of challenge in WPA 10241(W) of 2020 and in the present writ petition, Mr. Kar urged the court to apply the provisions of the amended circular of 2017 and 2018 and the objects and reasons for those amendments, to the facts of the present case. Learned Advocate also submitted that quashing of the LOC issued at the request of the lead bank (PNB), would not limit the authority of BOB to make a further request in respect of its individual claim. Mr. Kar submitted that PNB had made the request in respect of their unpaid loan of about Rs.300 crores and had not made the request on behalf of the members of the consortium. 27. Reliance was placed in the decisions of the Delhi High Court in the matter of Shri Subrato Trivedi vs. Union of India & Anr. in W.P. (C) 6269/20221 and the Karnataka High Court in the matter of Dr. Bavaguthu Raghur....
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....ry of the Government of India; or xiii. Designated officer of Interpol." Sub-paragraph (b) of paragraph 8 did not include the heads of public sector banks at the relevant point of time. 32. The policy also provided that LOCs could be issued on the direction of a Court in India. Sub-paragraph (c) provided the parameters and the details to be filled up including the reasons in Colum IV of the Proforma enclosed to such policy. Column IV is quoted below:- "REASON FOR OPENING OF LOC: a. CRIMINAL CASE: i) FIR NO. ii) DATE (specify full details) iii) SECTION OF LAW (Where applicable): iv) POLICE STATION: v) DISTRICT: vi) STATE: b. WANTED BY ANY OTHER COURT/JUDICIAL AUTHORITY: i) NAME OF THE COURT: ii) ORDER BY WHICH SUBJECT IS WANTED: c. LOC RETENTION DATE: (As per MHA guidelines. LOC will remain valid for at most one year)" 33. Sub-paragraph (g) and (h) of the same laid down the conditions under which opening of LOCs could be made. The same are set out below:- "g. Recourse to LOC is to be taken in cognizable offences under IPC or other penal laws....
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....n 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 the strategic and/or economic interest 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 point in time. Instead of: 'In exceptional cases LOCs can be issued without complete parameters and/or case details against CI suspects, terrorists, antinational elements, etc in larger national interest.' " 37. The object of such amendment was to prevent persons guilty of offences which were harmful to bilateral relations of India with other countries or detrimental to the strategic and economic interest of the country,....
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.... 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 the strategic and/or economic interests of India or if such person is allowed to leave, he may potentially indulged 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 point in time.' (d) It is, therefore, clear that the guidelines enable LOCs against persons who are fraudsters/persons who wish to take loans, willfully default/launder money and then escape to foreign jurisdictions, since such actions would not be in the economic interests of India, or in the larger public interest. 2 Therefore, as suggested by CBI, MHA is requested to kindly amend the OM dated 27.10.2010 and include in the list of authorities under Paragraph 8(b) another category, as follows: '(xiv) Chairman (State Bank of India)/M....
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....iginating agency can only request that they be informed about the arrival/departure of the subject in such cases. (J) The LOC opened shall remain in force until and unless a deletion request is received by BoI from the Originator itself. No LOC shall be deleted automatically. Originating Agency must keep reviewing the LOCs opened at its behest on quarterly and annual basis and submit the proposals to delete the LOC, if any, immediately after such a review. The BOI should contact the LOC Originators through normal channels as well as through the online portal. In all cases where the person against whom LOC has been opened is no longer wanted by the Originating Agency or by Competent Court, the LOC deletion request must be conveyed to BoI immediately so that liberty of the individual is not jeopardized." 44. Thus, analysing the policy which existed from 2010 and which were amended from time to time and ultimately found its expression in the memorandum dated February 22, 2021, this court is of the view that only in exceptional cases LOCs could be issued even if the parameters quoted hereinabove were not covered. Sub-paragraph (L) of the 2021 policy lays down the exceptions....
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.... but the same was set aside in the matter of Vishambhar Saran vs. Bureau of Immigration and others, decided in W.P.No. 10241(W) of 2020 by a coordinate Bench. His Lordship held as follows:- "52. In the event the authorities seek to resort to the quantum of alleged default for restricting citizens' departure outside the country, it is obvious that the quantum is relative and the amount of Rs.350 crores can be exorbitant or meagre, depending merely on the whims of the authorities or the perspective of the judge. As such, in the absence of any stipulation in that regard in the relevant Office Memorandum, no cut-off line can be drawn between an amount which is detrimental to the sovereignty or security or integrity of India or to the 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....
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....In the present case, no exercise of such sort was resorted to by the respondent no.1. 64. As a matter of fact, no objective parameter is found from the records for the issuance of the LoC against the petitioner. However, no occasion has arisen before this Court to go into the question of validity and lawfulness of the show-cause notice for identification of wilful defaulter issued subsequently against the petitioner. As such, the said question need not be dealt with within the ambit of the present writ petition. 65. In view of the aforesaid observations, the LoC dated February 29, 2020 issued against the petitioner was unlawful and de hors the relevant provisions and the Office Memorandum dated October 27, 2010 (as amended). Thus, the LoC cannot stand judicial scrutiny under Article 226 of the Constitution of India. 66. Hence, W.P.A. No.10241 of 2020, W.P.A. No. 10247 of 2020 and W.P.A. No. 10249 of 2020 are allowed and all the connected applications are hereby disposed of, thereby setting aside the LoC dated February 29, 2020 issued in respect of the petitioners in all the writ petitions by the Immigration Authorities on the request of the respondent no.....
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....ing FMR No. BOB2001-0011 dated 16.01.2020. 4) FIR was lodged with CBI by lead Bank Punjab National bank on behalf of consortium on 18.08.2020. 5) Company is having huge debt in the market as well from Nationalized Banks. 6) It is apprehended that directors and/or guarantors is likely to escape from India. Hence, opening of LOC against Mr. Vishambhar Saran is recommended. 48. The forensic audit report was relied upon as one of the reasons to establish wilful default and fraud. NCLT had refused to pass orders on such report at the request of the liquidator on the ground that merely on the forensic report which had gone beyond a period of two years from the date of such audit, fraudulent, under-valued or preferential transaction could not be established. The allegation of fraudulent transactions against the said company made by the liquidator was disbelieved. Mere pendency of liquidation proceeding for recovery of debts by the secured creditors cannot ipso facto be a reason for issuance of LOC as the same would not fall under the exceptional cases clause. 49. Reference to the complaint filed by the lead bank (PNB) before the CBI, has no merit in view of the fact that....
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....uts received from an intelligence agency or any other agency that the petitioner was trying to leave India in order to evade the consequences of the legal actions that may be taken against him, both under the civil and the criminal laws. 52. In the decision of E.V. Perumal Samy Reddy v. State, reported in 2013 SCC OnLine Mad 4092, the Madras High Court while setting aside an LOC, held as under:- "9. It is basic that merely because a person is involved in a criminal case, he is not denude of his Fundamental Rights. It is the fundamental of a person to move anywhere he likes including foreign countries. One's such personal freedom and liberty cannot be abridged.[See : Article 21 Constitution of India]. In the celebrated in MENAKA GANDHI v. UNION OF INDIA [(1978) 1 SCC 248 : AIR 1978 SC 597], the Hon'ble Supreme Court upheld the constitutional right of persons to go abroad. The phrase no one shall be deprived of his "life and liberty" except procedure established by law employed in Article 21, had deep and pervasive effect on fundamental right and human right. MENAKA GANTHI (supra) ushered a new era in the annals of Indian Human Rights Law. It had gone ahead of Ame....
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....il consequences. An LOC, which is a coercive measure to make a person surrender and consequentially interferes with his right of personal liberty and free movement, certainly has adverse civil consequences. This Court, therefore, holds that in exercise of power of judicial review under Article 226 of the Constitution, the writ Court can interfere with an LOC. The question is whether the writ Court should exercise its discretionary jurisdiction to interfere with the impugned LOC." 55. In the case of Rahul Surana vs. The Serious Fraud Investigation Office &Ors., W.P. No. 2477 of 2020, reported in MANU/TN/1605/ 2022, the Hon'ble Madras High Court held as follows:- "28. The investigation, even after the elapse of three years, is stated to reveal only prima facie materials and no concrete evidences are stated to have been found been found to implicate the petitioner or frame charges. Admittedly, however there are no proceedings against the petitioner so as to implicate him before the Criminal Court or in any other fora to justify the restrictions under which he has been placed. 29. Admittedly, there have been no instances when the petitioner has evaded summons/n....
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....nsequentially interferes with petitioner's right of personal liberty and free movement. It is to be issued in cases where the accused is deliberately evading summons/arrest or where such person fails to appear in Court despite a Non-Bailable Warrant. In the instant case, there is no contradiction by the respondent to the submission of the petitioner that she has appeared on each and every date before the Investigating Agency when summoned, and hence, there is no cogent reason for presuming that the Petitioner would not appear before the Investigation Agency and hence, no case is made out for issuing the impugned LOC. 13. The impugned LOC is accordingly liable to be set aside as being devoid of merits as well as for infringing the Human right of the Petitioner to travel abroad and to exercise her freedom of speech and expression. For the reasons discussed above, the impugned LOC is set aside and quashed. However, a balance has to be struck qua the right of the investigation agency to investigate the instant matter as well as the fundamental right of the petitioner of movement and free speech." 59. In my opinion, personal liberty and the fundamental right of movement ....
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....isclose how the default by the said company could affect the economic interest of the country. No offence has been attributed to the petitioner. Merely because the accounts of the company was NPA and the petitioner was a promoter direction, the petitioner could not be levelled as a fraudster who had indulged in money laundering activities, and disrupted the economy of India. There is no allegation that the activity of the petitioner led to upheavals in the stock market, business activities, investments, trade, growth and development etc. There is no evidence that the petitioner had tried to escape to a foreign jurisdiction to avoid legal consequences of such action. The proceedings before NCLT were initiated in 2016. Since then no evidence could be submitted to implicate the petitioner in any criminal case. The petitioner contested the liquidation proceedings. 61. The decision of the Delhi High Court in Subrato Trivedi (supra) cited by Mr. Kar, does not apply in this case as the same was an interim order passed by the court. 62. Considering the materials on record, the averments in affidavit-in-opposition and documents annexed thereto, this Court comes to the conclusion that ....