IMPORTANT POINT
The court established that Lookout Circulars cannot be issued solely based on financial default; there must be evidence of criminal activity or a legitimate risk of flight.

JUDGMENT :

SHAMPA SARKAR, J.

1. The writ petition has been filed by an erstwhile Director of Visa Power Limited (hereinafter referred to as the ‘company in liquidation’). The petitioner contends that he was never a whole time director of the company. The company was undergoing liquidation by order dated October 11, 2018, passed by the learned National Company Law Tribunal, Kolkata Bench. The company had availed of credit facilities from a consortium of banks, with Punjab National Bank (PNB), as the lead Bank. The respondent no.2 was also a part of the consortium. The credit facilities were availed by the company for setting up a thermal power project at Raigarh district of Chhasttisgarh. The loan was sanctioned sometime in March, 2010. Due to en-masse cancellation of coal blocks by the Hon’ble Supreme Court by its order dated September 24, 2014, the thermal plant could not be established and made operational. The whole purpose of the project was to provide power to those contractors who had been given the coal block allocations.

2. In 2017, Bank of Maharastra filed an application under Section 7 of the Insolvency and Bankruptcy Act, 2016 against the company. By an order dated December 22, 2017, the application was admitted and corporate insolvency resolution process was initiated. Ms/. Deloitte Touche Tohmatsu India, LLP was appointed as an auditor to carry out forensic audit. On the basis of the forensic audit report, upon taking approval from the committee of creditors, the liquidator filed an application before the NCLT, Kolkata against the suspended board of directors alleging that the company had entered into preferential, undervalued and fraudulent transactions, under Sections 45, 46 and 66 of the Indian Insolvency and Bankruptcy Act, 2016.

3. The allegations in the said application were duly considered by the NCLT and by order dated July 25, 2019, the application was rejected. The order was affirmed by the National Company Law Appellate Tribunal.

4. The petitioner wanted to travel from New Delhi to Dubai, but he was refused passage. The petitioner was informed that on account of a Lookout Circular (LOC) initiated by the respondent nos.2 and 3, he could not be allowed transit.

5. On March 11, 2023, the petitioner came to know about such LOC. The petitioner asked for a copy of the same, which was refused. Finding no other alternative, the petitioner filed this writ petition.

6. It is contended that the LOC which was issued at the instance of PNB, was quashed by a coordinate Bench in WPA No.10241 of 2020. It also appears that the proceeding to declare the petitioner as a wilful defaulter was also withdrawn by PNB. The Bank of Baroda as one of the members of the consortium also initiated a request for issuance of a Lookout Circular. Such request was challenged in WPA 6670 of 2022. In the said writ petition, the Bank of Maharastra, UCO Bank, Union Bank of India, Central Bank of India and Bank of India, were all impleaded as respondents. The respondent nos.2 and 3 herein, however, were not parties to the proceedings. The request of the Bank of Baroda for initiation of LOC and all consequential steps were quashed. The other members of the consortium who were the respondents in WPA 6670 of 2022, did not express any intention to originate Look Out Circulars. When all the other members of the consortium failed to ensure denial of transit to the petitioner to any foreign location, the State Bank of India initiated a similar request before the Bureau of Immigration.

7. The petitioner’s contentions are that once the lead bank was unsuccessful in sustaining the LOC and some of the other members of the consortium, apart from the respondent nos.2, also failed in a similar attempt to prevent the petitioner from travelling abroad, the same fate should befall the attempt of the State Bank of India to restrain the movement of the petitioner by requesting issuance of an LOC.

8. According to Mr. Chowdhury, learned advocate for the petitioner, the con