Delhi High Court: In a case wherein petitioner had challenged a Look Out Circular (‘LOC’) issued by Respondent 1, Bureau of Immigration at the instance of Respondent 2, Bank of Baroda, Subramonium Prasad, J.*, quashed LOC and held that issuance of LOC could not be resorted in every case of bank loan default or credit facilities availed for business and fundamental right of citizens to travel abroad could not be curtailed only because of failure to pay bank loans.
Background
In June 2013, Metaphor Exports Private Limited, (‘the Company’), engaged in the business of garment manufacturing through its directors approached Respondent 2, Bank of Baroda to avail cash credit facilities of Rs 9 crore. It was stated that petitioner executed a Deed of Guarantee for repaying the amount disbursed by Respondent 2.
Respondent 2 submitted that cash credit facilities of Rs 7 crore were released and out of that Rs 5.95 crore were withdrawn by directors of the Company and the amount was misappropriated. The account of the Company was classified as a Non-Performing Asset on 30-06-2014 and on that date, Rs 7.26 crore was due and payable by the Company. Respondent 2 initiated proceedings under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 before the Debts Recovery Tribunal (‘DRT’). DRT held that Respondent 2 was entitled to recover Rs 2,95,74,316 along with interest. A complaint was registered by the Central Bureau of Investigation (‘CBI’) against petitioner and directors of the Company under Section 420 and 120-B of the Penal Code, 1860 read with Section 13(1)(d) and Section 13(2) of the Prevention of Corruption Act, 1988.
Petitioner submitted that she was not accused of any offence and that a property of petitioner was already sold by Respondent 2 and LOC could not be issued against petitioner only for recovery of money. It was submitted that the right to go abroad had been provided under Article 21 of the Constitution as a fundamental fight and thus, she sought to quash LOC.
Analysis, Law, and Decision
The Court opined that in the terms of Office Memorandum dated 22-02-2021 (‘OM’) issued by the Ministry of Home Affairs, LOC could be issued at the request of the Chairman, Managing Directors, or Chief Executive of all public sector banks, thus in the instant case legal liability with regard to LOC rested with Respondent 2. The Court opined that in the terms of OM, issuance of LOC even if an individual was not involved in any offence must be used in exceptional cases, if authorities were at a view that the departure of such person from India would be detrimental to economic interests of the Country. The Court relied on Prateek Chitkara v. Union of India, 2023 SCC OnLine Del 6104, and opined that the term ‘detrimental to the economic interests’ must be of such a magnitude that it could significantly affect the economic interest of the Country. However, in the present case, the loan amount disbursed was about Rs 7 crore and even after the addition of interest it would not affect the economic interests of the Country.
The Court held that issuance of LOC could not be resorted in every case of bank loan default or credit facilities availed for business and undamental right of citizens to travel abroad could not be curtailed only because of failure to pay bank loans. The Court further opined that after investigation, CBI opined that petitioner had no prior knowledge of the fraudulent acts or omission of the directors of the Company at the time of her giving collateral security and personal guarantee. Thus, the Court quashed LOC and opined that during criminal proceedings, petitioner was arrayed as an accused and Respondent 2 could make a request to the Bureau of Immigration to open a fresh LOC against petitioner.
[Shalini Khanna v. Union of India, 2024 SCC OnLine Del 837, decided on: 06-02-2024]
*Judgment Authored by: Justice Subramonium Prasad
Advocates who appeared in this case:
For the Petitioner: Hrishikesh Baruah, Kumar Kshitij and Anurag Mishra, Advocates
For the Respondents: Ajay Digpaul, CGSC; Kamal Digpaul, Ishita Pathak, Ashish Verma and Kartikey Bhargava, Advocates
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