In a significant legal development, the Delhi High Court has issued a judgment regarding the quashing of a Look Out Circular. The case addresses concerns related to individual liberties and the interpretation of phrases like ‘detrimental to the economic interests of India’. The Court’s decision has implications for the protection of fundamental rights and legal oversight in such matters.
Facts
- The Petitioner has approached the Court under Article 226 of the Constitution of India to challenge the Look Out Circular issued by Bank of Baroda.
- The Look Out Circular was issued against the Petitioner by Bank of Baroda.
- The Petitioner is seeking relief from the Court against the Look Out Circular.
- Complaint against Original Name not clearly mentioned elements of fraud/criminality
- No FIR against Original Name as per Status Report
- Question of sustainability of LOC against Original Name raised
- Original Name permitted to travel abroad by Court in previous orders
- LOC issued at Bank’s request based on complaint by consortium Banks
- MPBCDCL siphoned off large sums of money borrowed from various banks
- Original Name served as nominee Director at MPBCDCL
- Original Name issued Show Cause Notice for being declared wilful defaulter
- Account of MPBCDCL declared as non-performing asset
- Review of LOC issuance guidelines by Ministry of Home Affairs
Issue
- The issue in this judgment pertains to the legality of clause L of the Office Memorandum of 2021.
- The key question is whether the phrase ‘detrimental to the economic interests of India’ in the said clause is legally valid.
- The other clauses under consideration include those allowing indefinite continuation of look-out circulars, lack of reasons provided prior or post issuance of the circular, and extension of the circular to individuals deemed harmful to India’s economic interests.
- The court will determine the validity and legality of these clauses in the context of the broader issue at hand.
Analysis
- The issuance of a Lookout Circular (LOC) against the Petitioner was based on the inability of MPBCDCL, in which the Petitioner is only a nominee Director, to repay the loan.
- The power to issue an LOC should be used in exceptional circumstances and not as a routine measure, even if the individual is not involved in any criminal offense under the IPC or other penal laws.
- The term ‘detrimental to the economic interests’ must have significant magnitude to affect the economic interest of the country, which was not sufficiently established in the Petitioner’s case.
- The amount involved in the loan default by the Petitioner, approximately Rs. 7 crores, is not of such magnitude to significantly impact the economic interests of India.
- The clause ‘detrimental to the economic interests of India’ was introduced in an amended guideline in 2017 but should only be resorted to in exceptional circumstances. It raises questions on the continuous use of the LOC against the Petitioner for almost three years without any criminal proceedings initiated.
- The inability to repay a loan without a criminal case cannot justify infringing on the fundamental rights guaranteed under Article 21 of the Constitution of India.
- The requirement for three identifying parameters for opening an LOC ensures proper identification of the individual involved.
- The review and deletion process of LOCs should be proactive to prevent unnecessary harassment to individuals.
- Courts may endorse orders regarding LOC suspension, deletion, or quashing, emphasizing the importance of legal oversight in such matters to safeguard individual liberties.
- The right to travel abroad is a fundamental right under Article 21 of the Constitution and cannot be taken away arbitrarily.
- The term ‘detrimental to economic interest’ in the Office Memorandum is vague and undefined.
- Actions like squandering public money, siphoning off loans, defrauding depositors, and engaging in hawala transactions may justify the issuance of look-out circulars.
- Merely suspicion of a person’s activities such as opening bank accounts in other countries cannot be a sufficient basis to restrict their travel.
- Exceptional circumstances may exist even if a person is not directly involved in any punishable offense, justifying the issuance of a look-out circular.
- The issuance of a look-out circular must be based on a reasonable belief that the individual’s departure would significantly harm India’s economic interests.
- The power to issue look-out circulars should be used in exceptional circumstances and not as a routine procedure.
- The term ‘detrimental to the economic interest of India’ should be interpreted to indicate offenses of significant magnitude affecting the country’s economic interests.
- The liberty of the Petitioner to travel abroad cannot be curtailed solely due to the lack of payment by MPBCDCL to the banks.
- The Petitioner is only a nominee Director in MPBCDCL and should not be held personally liable for the company’s financial obligations.
- Financial issues of MPBCDCL should not restrict the Petitioner’s freedom to travel.
Decision
- The Writ Petition is allowed.
- The Petitioner is permitted to travel to Singapore from 01.05.2024 till 30.05.2024.
- The Petitioner has given an undertaking to return on 30.05.2024.
- The Petitioner must abide by this condition.
- The fact that the LOC against the Petitioner has been quashed does not exempt the Petitioner from violating the undertaking given to the Court.
- The LOC is quashed.
- Pending application(s), if any, are disposed of.
Case Title: RAJIV AGGARWAL Vs. UNION OF INDIA & ORS. (2024:DHC:4351)
Case Number: W.P.(C)-7093/2022
