Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2022 Supreme(P&H) 1425

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
M.S. Ramachandra Rao, Harkesh Manuja, JJ.
Vikas Aggarwal & Anr. - Appellants
Versus
Union Of India & Ors. - Respondents
CWP-12712-2022 (O&M)
Decided On : 28-09-2022

Advocates Appeared:
Mr.Anand Chhibbar, Sr. Advocate assisted by Mr. Nitin Kaushal, Mr. Tanuj Sud, Mr. Ajay Kumar and Mr. Harshita Ahluwalia, Advocates, for the Appellant; Mr.Satya Pal Jain, Additional Solicitor General of India with Ms.Shweta Nahata, Advocate, for respondents No.1 & 2-UOI. Mr.Gaurav Goel, Advocate, for respondents No.3&4-Bank of Baroda. Mr.D.K. Gupta, Mr.Abhay Gupta and Mr.J. Shivam Kumar, Advocates, for respondent No.8-State Bank of India., for the Respondent

The main legal point established in the judgment is that Look Out Circulars (LOC) cannot be issued arbitrarily and must be based on valid grounds. The judgment also emphasized that the issuance of LOCs must adhere to the guidelines and legal provisions, and that the right to travel abroad is protected under Article 21 of the Constitution of India.

Headnote:
LOC - Challenge to Look Out Circulars - Office Memorandum No.25016/31/2010 Imm - Federal Decree Law No.14 of 2020 - Circular No.9 of 2021 - LOCs issued at the instance of National Central Bureau and Serious Fraud Investigation Office - LOCs set aside
Fact of the Case:

The petitioners challenged Look Out Circulars (LOC) preventing them from traveling abroad, issued by respondent No.2 at the behest of respondents No.3 to 8. The petitioners were Directors of companies in India and UAE, and had stood as guarantors for loans. The companies had settled their debts, and insolvency resolution processes were initiated. The petitioners contended that the LOCs were issued without proper grounds and violated their right to travel abroad.
Finding of the Court:

The Court found that the LOCs issued against the petitioners were not valid. It held that the Indian entities of the Bank of Baroda and the State Bank of India could not request LOCs for dues owed to their sister entities in the UAE. The Court also found that the issuance of LOCs by the National Central Bureau and the Serious Fraud Investigation Office was not justified. The Court set aside the LOCs and restrained officials from preventing the petitioners from traveling abroad.
Issues: Territorial jurisdiction of the Court, validity of LOC requests by Indian entities, entitlement of National Central Bureau and Serious Fraud Investigation Office to seek LOCs, and relief for the petitioners.
Ratio Decidendi: The Court held that it had territorial jurisdiction to entertain the Writ Petition. It found that Indian entities could not request LOCs for dues owed to their sister entities in the UAE. The Court also determined that the National Central Bureau and the Serious Fraud Investigation Office were not entitled to seek LOCs against the petitioners. The Court set aside the LOCs and restrained officials from preventing the petitioners from traveling abroad.
Final Decision: The Court allowed the Writ Petition, set aside the LOCs issued against the petitioners, and restrained officials from preventing the petitioners from traveling abroad. No costs were awarded.

JUDGMENT

M.S. Ramachandra Rao, J. - In this Writ Petition the petitioners have challenged the Look Out Circulars [LOC] issued and extended by respondent No.2 at the behest of respondents No.3 to 6 & 8 preventing them for travelling abroad.

2. Respondent No.1 in the Writ Petition is the Ministry of Home Affairs, Union of India; respondent No.2 is the Bureau of Immigration, New Delhi; respondent No.3 is the Bank of Baroda, Corporate Financial Services (Large Corporate) Branch, New Delhi; Respondent No.4 is Bank of Baroda, Deira Branch, Dubai, UAE; respondent No.5 is Additional Director, National Central Bureau (NCB) (Interpol), India; respondent No.6 is Additional Director (Investigation), Serious Frauds Investigation Office, New Delhi; respondent No. 7 is the Managing Director and CEO, Bank of Baroda, Mumbai; and respondent No.8 is the Chairman, State Bank of India, Corporate Center, Mumbai ( for short' SBI').

3. It is not in dispute that both petitioners are Directors of the company by name M/s Asian Ispat FZ LLC ( AIF) based in UAE and the said company had borrowed loan from the Bank of Baroda, Deira Branch, Dubai and the SBI, Dubai, UAE. The petitioners had stood as guarantors for the said loan.

4. Both of them are also Directors of company by name M/s AGR Steel Strips (P) Ltd., India ( for short 'AGR') and M/s Asian Colour Coated Ispat Limited, India (for short 'ACCIL').

5. As against the petitioner No.1, the LOCs had been issued as under: -

Sr. No.	Issued by	Date of Issuance	Basis of Issuance
1	MD & CEO, Bank of Baroda/Respondent No.3	26.08.2019 [Continued in the year 2020 and 2021)	Promotor/guarantor of Asian Ispat FZ LLC ('AIF')
2	Chairman, State Bank of India /Respondent No.8	18.11.2019 (Continued in the year 2020 and 2021)	Promotor/guarantor of AIF
3	Additional Director, SFIO/Respondent No. 6.	04.08.2021	Crucial role in the running of Asian Colour Coated Ispat Limited ('ACCIL')
4	AD Interpol, Central Bureau of Investigation/ Respondent No.5	15.01.2021	Amounts owed to the AIF, UAE.- dishonour of cheques

As against petitioner No.2, the LOCs had been issued as under:-

Sr. No.	Issued by	Date of Issuance	Basis of Issuance
1	MD & CEO, Bank of Baroda/Respondent No.3	26.08.2019	Promotor/guarantor of AIF
2	Chairman, State Bank of India/Respondent No.8	18.11.2019 (Continued in the year 2020 and 2021)	Promotor/guarantor of AIF
3	Additional Director, SFIO/Respondent No.6.	04.08.2021	Crucial role in the running of Asian Colour Coated Ispat Limited ('ACCIL')
4	AD Interpol, Central Bureau of Investigation/ Respondent No.5	03.04.2019 and 06.09.2021	Amounts owed to the AIF, UAE - dishonour of cheques

6. AGR had borrowed loans from the Bank of Baroda and the South Indian Bank but OTS had been sanctioned by the said Banks to the said companies on 25.02.2021 and 03.03.2021 and thereafter 'No Dues Certificates' have been issued by the said Banks after payment of entire OTS amount and the charge held by the lenders on the assets of the said company as well as the guarantees furnished by the petitioners stood released. The mortgages on the secured assets located in the State of Haryana belonging to the petitioners and their family members also stood released.

7. As regards ACCIL, India, a Corporate Insolvency Resolution Process was initiated by the SBI by filing an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for short 'the IBC') before the NCLT, Principal Bench, New Delhi. It was admitted on 20.07.2018 and the Resolution Professional admitted the debt owed by the said company to all respondents including the SBI, as financial debt. It is not in dispute that a resolution plan was submitted by M/s JSW Steel Coated Products Ltd. on 08.03.2019 and the Committee of Creditors approved the same on 17.06.2019 by 79.3%