IN THE HIGH COURT OF DELHI AT NEW DELHI
Anu Malhotra, J.
Deputy Director Of Income Tax (Inv) Unit - 4(3) - Appellant
Versus
Xiongwei LI - Respondent
Crl. M.C. 4492 of 2022 & Crl. M.A. 18282 of 2022
Decided On : 20-09-2022
| Table of Content |
|---|
| 1. setting aside of impugned order and issues around look out circular. (Para 1) |
| 2. background facts and company ownership structure. (Para 2 , 4 , 6) |
| 3. legal framework surrounding look out circular issuance. (Para 10 , 19) |
| 4. discussion of procedural compliance and ongoing investigations. (Para 12 , 15 , 36) |
| 5. judicial review of look out circular and implications for economic interests. (Para 38 , 78 , 80) |
| 6. concluding order on the issuance and conditions associated with the look out circular. (Para 90) |
JUDGMENT
1. The petitioner, i.e., the Deputy Director of Income Tax (Inv) Unit-4(3), New Delhi, vide the petition Crl. M.C. No. 4492/2022 seeks the setting aside of the impugned order dated 29.8.2022 of the Court of the learned ACMM, Special Acts, Tis Hazari Courts, and vide Crl. M.A. No. 18282/2022 seeks the stay of the operation of the impugned order dated 29.08.2022 whereby the application filed by the respondent herein seeking a quashing of the Look Out Circular (LOC) issued against him at the request of the Income Tax Officer (ITO) represented now by the present petitioner was allowed with conditions imposed thereby to the effect that in case of resignation, retirement or cessation of employment etc. of the respondent herein from the company M/s Huawei Telecommunications (India) Company Private Limited (HTICPL) (hereinafter referred to as the Company, of which the respondent herein was stated to have been the CEO), was directed to withhold the Severance Pay/Severance Package and other incentives/emoluments payable to respondent herein, which were directed not to be released without prior permission of the learned Trial Court, and an undertaking to this effect was directed to be submitted by the respondent from the said company to be filed with the Court under intimation to the Deputy Director of Income Tax (Inv) Unit-4(3), Delhi, i.e., the petitioner herein, with it having been directed that on filing of the said undertaking, the DDIT (Inv) Unit-4(3), Delhi was directed to take appropriate steps for withdrawing the lookout circular against the applicant and the same was directed to be withdrawn/recalled within 7 days of filing of the undertaking by the applicant. The respondent, in terms of the impugned order dated 29.08.2022 of the Court of the learned ACMM, Special Act, Central District, Tis Hazari, is stated to have submitted the undertaking. The aspect of the undertaking being in the form of compliance of directions dated 29.08.2022, is a matter to be ascertained by the learned Trial Court itself.
2. The petitioner i.e., the Deputy Director of Income Tax (Inv), has submitted through its petition that the respondent was the CEO of the said company, and that the said company was incorporated on 23.07.2002 and 90.11 % of its shares are held by the Netherland based Huawei Technologies Cooperatief U.A. (100% owned by Huawei Investment and Holding Co. Ltd.) and the remaining 9.89% by another Huawei Tech Investment Co. Ltd. The shareholding pattern of the said company has been put forth by the petitioner as being to the effect:-
Sl. No. | Name of the Shareholder | Country | No. of Equity Shares Held | % |
1. | Huawei Technologies Cooperatief U.A. | Netherlands | 54,06,605 | 90.11 |
2. | Huawei Tech. Investment Company Limited | Hong-Kong | 5,93,395 | 9.89 |
|
| Total | 60,00,000 | 100 |
3. The petitioner has further submitted that the Bangalore entity is also held by the group companies as per the shareholding pattern given below:
No. | Name of the Shareholder | Country | No. of Equity Shares Held | % |
1. | Huawei Tech. Investment Company Limited | China | 34119600 | 99.999955 |
2. | Huawei Technologies Netherlands BV | Netherlands | 16 | 0.00005 |
|
| Total | 34119616 | 100 |
4. The petitioner submits that the HTICPL is stated to be engaged in the business of assembly and trading of telecom network equipment and providing installation, commissioning and other support services to the various customers in India, with international transactions with its associated enterprises summarized by
Bharat Amratlal Kothari v. Dosukhan Samad khan Sindhi; (2010) 1 SCC 234
Mohinder Singh Gill and Anr. v. The Chief Election Commissioner
The issuance and continuation of a Look-Out Circular must be justified by compelling reasons, specifically regarding flight risk or evading justice; lack of fresh evidence can render it arbitrary.
The issuance of a LOC must be based on exceptional circumstances and supported by substantial evidence. Mere suspicion is not sufficient to curtail an individual's right to travel abroad.
The issuance of Look-Out Circulars must be justified by valid grounds such as cognizable offences or compelling economic interests; mere allegations without formal charges do not suffice.
The court emphasized the authority of the Serious Fraud Investigation Office (SFIO) and the necessity of the Petitioner's presence for effective investigation into the affairs of Gitanjali Gems Limit....
Look Out Circulars must adhere strictly to legal frameworks and cannot deny fundamental rights without justifiable grounds.
The judgment establishes the exceptional circumstances under which Look Out Circulars (LOC) can be issued, emphasizing the need for credible material and reasons to support the issuance of an LOC.
The central legal point established is the requirement for valid grounds and periodic review of Look Out Circulars (LOCs) as per the Office Memorandum, and the absence of prosecution under the releva....
The issuance of a Look-Out Circular against the petitioner was quashed due to insufficient grounds and a violation of the right to personal liberty under Article 21 of the Constitution.
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