IMPORTANT POINT
The main legal point established in the judgment is the requirement for a proper application of mind before opening a Look Out Circular, especially when there is no criminal case against the individuals and when they are not directly involved in the management of the company.

JUDGMENT

1. The Petitioners, by way of the present writ petitions, seek to challenge the Look Out Circular (LOC) issued at the instance of Respondent No.2/Bank of Baroda against the Petitioners.

2. It is stated Sharaji Duplex Board Limited was incorporated under the Companies Act, 1956. The name of the said company was later changed to AAA Paper Marketing Limited and was further changed to AAA Paper Limited (hereinafter referred to as `company'). The company availed credit facilities amounting to Rs.5.25 crores from Respondent No.2/Bank of Baroda. The said facilities were secured by way of mortgage of an immovable property as well as Personal Guarantees of the Promoters/Directors. It is stated that the Petitioners were made to sign a document styled as `Personal Guarantee Bond' in favour of the Respondent No 2/Bank of Baroda.

3. It is pertinent to mention here that the Petitioner in W.P.(C) 5674/2023 was appointed as a Director of the company in the year 2006. He resigned as the Director of the company in the year 2019. The Petitioner in W.P.(C) 5675/2023 was appointed as a Director of the company in the year 2010 and she resigned as Director of the company in the year 2014.

4. It is stated that the credit facilities were enhanced to Rs.28.50 crores by the Respondent No 2/Bank of Baroda. It is stated that between 2015-2019, the business operations of the company were severely hit due to the introduction of GST and other factors due to which the company was trapped in a vicious cycle of tax complexities. On 31.07.2019, the loan account of the company was declared as non-performing asset (NPA) by the Respondent No 2/Bank of Baroda. It is stated that, thereafter, proceedings under the SARFAESI Act were initiated against the company and demand notice was issued to the company for repayment of its outstanding dues. The Respondent No 2/Bank of Baroda also issued demand notice invoking the personal guarantees.

5. It is stated that the company and the personal guarantors, including the Petitioners herein initiated proceedings before the Senior Civil Judge, Tis Hazari Court, Delhi by filing Civil Suit No.2182/2021 challenging the invocation of guarantees. It is stated that on 13.12.2021, the Senior Civil Judge partly allowed the application for interim relief and restrained the Respondent No.2/Bank and the Forensic Auditor from taking any action invoking personal guarantees till the disposal of the suit.

6. It is stated that on 01.07.2022, proceedings were initiated by Respondent No.2/Bank against the company before the National Company Law Tribunal, New Delhi for initiation of Corporate Insolvency Resolution Process. On 23.08.2022, the Respondent No.2/Bank issued a demand notice against the Petitioners in Form B under Rule 7(1) of the IBBI (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019.

7. It is stated that the Petitioners along with his family members and a large group of friends and business associates/colleagues planned a leisure trip to Phuket, Thailand but the Petitioners were stopped from boarding their flight by the Immigration Officials at the IGI Airport, New Delhi purportedly on account of an LOC issued against them.

8. The Petitioners, thereafter, have approached this Court by filing the instant writ petitions challenging the opening of Look Out Circular at the instance of Respondent No.2/Bank of Baroda.

9. Notice was issued in the writ petitions on 02.05.2023. Counter affidavit has been filed by Respondent No.2/Bank of Baroda. It is stated in the counter affidavit that the Petitioners have stood guarantee to the credit facilities obtained by the company from the Bank. The Counter affidavit reflects that Respondent No.2/Bank of Baroda has issued Look Out Circular against the Petitioners on the following grounds:

"8. Thereafter, on the following grounds, the respondent No. 2 Bank had also requested the concerned authorities for issuance of Lock Out Circ