Karnataka High Court
Shri C Shivkumar Reddy vs Union Of India on 31 August, 2024
Author: Hemant Chandangoudar
Bench: Hemant Chandangoudar
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WP No. 7927 of 2023
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 31ST DAY OF AUGUST, 2024
BEFORE
THE HON'BLE MR JUSTICE HEMANT CHANDANGOUDAR
WRIT PETITION NO. 7927 OF 2023 (GM-RES)
BETWEEN:
1. SHRI C SHIVKUMAR REDDY
AGED ABOUT 59 YEARS
S/O C VEERA REDDY
R/AT NO 14, RAMANASHREE
29TH MAIN ROAD
BTM LAYOUT II STAGE
BANGALORE 560 078.
2. SMT R H KASTURI
AGED ABOUT 54 YEARS
W/O C. SHIVAKUMAR REDDY
R/T NO 14, RAMANASHREE
29TH MAIN ROAD
BTM LAYOUT II STAGE
BANGALORE 560 078.
3. MS C UMA REDDY
AGED ABOUT 62 YEARS
Digitally signed by B
D/O C V REDDY, R/AT NO 31-36
K II FLOOR, 1ST MAIN ROAD
MAHENDRAKUMAR
Location: HIGH 2ND STAGE, AREKERE MICO LAYOUT
COURT OF
KARNATAKA
BANNERGHATTA ROAD
BANGALORE 560 076.
...PETITIONERS
(BY SRI. SANDESH J CHOUTA, SENIOR COUNSEL FOR
SRI. SAMPREETH V, ADVOCATE)
AND:
1. UNION OF INDIA
BY MINISTRY OF HOME AFFAIRS
JAI SINGH MARG, HANUMAN ROAD AREA
CONNAUGHT PLACE, NEW DLEHI 110001
REPRESENTED BY ITS HOME SECRETARY.
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WP No. 7927 of 2023
2. BUREAU OF IMMIGRATION
MNISTRY OF HOME AFFAIRS
5TH FLOOR, A BLOCK TTMC
BMTC BUS STAND BUILDING
K H ROAD, SHANTHI NAGAR
BENGALURU 560 027.
3. BANK OF BARODA
(PREVIOUSLY WAS DENA BANK)
ZONAL OFFICE, VIJAYA TOWER
NO 41/2, M G ROAD
BANGALORE 560 001.
...RESPONDENTS
(BY SRI. SHANTHI BHUSHAN H, DSGI FOR R1 & R2;
SRI. T P MUTHANNA, ADVOCATE FOR R3)
THIS WP IS FILED THIS WRIT PETITION IS FILED UNDER
ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA
PRAYING TO DIRECTION TO THE RESPONDENTS TO PLACE
THE IMPUGNED LOOK OUT CIRCULAR BEFORE THIS HONBLE
COURT WHICH WAS PURPORTEDLY ISSUED BY
RESPONDENT NO. 3 AS AGAINST THE PETITIONERS AND
ETC.
THIS PETITION, COMING ON FOR ORDERS, THIS DAY,
ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE HEMANT CHANDANGOUDAR
ORAL ORDER
The petitioners herein challenge the Look-Out Circular (LOC) issued by respondent No.1, at the instance of respondent No.3 - Bank of Baroda (formerly Dena Bank), which restrains them from travelling abroad. The petitioners seek a direction to serve a copy of the LOC or, alternatively, to direct the respondents to place the LOC on record and to issue a Writ of Certiorari to quash and set aside the LOC. The petition was filed on 06.04.2023.
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2. The respondents are as follows: respondent No. 1 is the Ministry of Home Affairs, Union of India; respondent No. 2 is the Bureau of Immigration, Ministry of Home Affairs, Bengaluru; and respondent No. 3 is the creditor bank and the purported originator of the LOC.
3. Petitioners Nos. 1 and 2 are spouses and founders of Kaveri Telecom Products Ltd. (KTPL). Petitioner No. 3 is the sister of petitioner No. 1 and serves as an independent director on the board of KTPL. The company, a supplier of radio frequency products and antennas, was involved in the wireless applications sector for civilian, defence, and space industries until 2012.
4. The petitioners had availed loans totaling INR 75 crores from various banks between the years 2009 and 2011 for infrastructural development, which were fully repaid by the year 2018.
5. In December 2011, the petitioners were advanced another sum of INR 45 crores (referred to as "the said debt") by respondent No. 3 for the development of an Inbuilding Solutions (IBS) network. Due to the Supreme Court's cancellation of 122 cellular operators' licenses in the 2G Spectrum Scam and the overall downturn in the telecom sector due to policy paralysis, the IBS network did not achieve the expected adoption by cellular network operators.
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6. As a result, the petitioners faced a financial crisis and were unable to fully service the said debt, having repaid only INR 16 crores by the time of preferring this petition.
7. The Central Bureau of Investigation (CBI) registered a case R.C. No. 10(E)/2017 on 27.07.2017, leading to the XVII Addl. Chief Metropolitan Magistrate (Special CBI Judge), Bengaluru, taking cognizance of offences under Sections 120B, 420, 468, and 471 of the IPC, and issuing summons in C.C. No. 11606/2020.
8. This case was stayed by this Court on 10.12.2020 in W.P. No. 14431/2020, wherein it was observed that since respondent No. 3 is a private commercial entity, the CBI could not register the case under the provisions of the Delhi Police Special Establishment Act. The CBI could not file a final report as no public servant was involved. The Court also noted that respondent No. 3 had pursued other proceedings before the Debt Recovery Tribunal (DRT) in O.A. 16/2015, including criminal proceedings to recover the dues.
9. Subsequently, the CBI issued a Look-Out Circular against the petitioners, leading to petitioner No. 2 being stopped from boarding a flight to the USA on 20.09.2018 by respondent No.
2.
10. The Look-Out Circular was quashed by this Court on 21.04.2021 in W.P. No. 51087/2019, with a direction to the -5- NC: 2024:KHC:35705 WP No. 7927 of 2023 petitioners to furnish surety for future appearances before the Trial Court, and to inform the Trial Court of their travel itinerary.
11. On 02.04.2023, while petitioners Nos. 1 and 2 were scheduled to travel to Bangkok and return on 05.04.2023, they were stopped by respondent No. 2 on the grounds that an LOC had been issued by respondent No. 1, but they were refused a copy as it was considered an internal document. Aggrieved, the petitioners have now filed the instant petition seeking to quash the LOC originated by respondent No. 3 - Bank of Baroda.
12. Senior Counsel Shri Sandesh J. Choutha, representing the petitioners, has made the following submissions:
12.1. Public sector banks cannot initiate requests for the issuance of LOCs by the Ministry of Home Affairs, as it is considered arbitrary and an excessive delegation of powers, restricting the fundamental right to travel.
12.2. Multiple LOCs cannot be issued by different authorities for the same incident. This Court, in W.P. No. 51087/2019, had quashed a previous LOC issued by the CBI regarding the same default, making the issuance of a new LOC by the bank impermissible.-6-
NC: 2024:KHC:35705 WP No. 7927 of 2023 12.3. This Court had stayed proceedings related to the predicate offence in W.P. No. 14431/2020 and Crl.P. No. 7949/2020.
12.4. Petitioners Nos. 1 and 2 were granted bail on 29.06.2021 and petitioner No. 3 on 05.07.2021.
12.5. This Court in W.P. No. 19337/2022 had set aside an order of provisional attachment of properties under the PMLA, 2002, observing that a stay in the predicate offence proceedings would necessitate the quashing of the provisional attachment.
12.6. The issue of the LOC was rendered irrelevant when the Supreme Court, in Civil Appeal No. 1650 of 2020, affirmed the NCLT's moratorium order, halting liquidation proceedings.
12.7. The DRT, Bengaluru, in T.A. No. 634/2017 (O.A. No. 16/2015), had allowed the bank to proceed with recovery via sale of hypothecated and mortgaged assets. The bank's failure to act does not justify the issuance of an LOC.
12.8. The petitioners have not been declared wilful defaulters or fraudulent borrowers. The issuance of the LOC violates their rights under Articles 14 (freedom from arbitrariness), 19(1)(g) (freedom to conduct business), and 21 (right to travel) of the Constitution of India.
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1) Vijay Chetan Shah v. Union of India, 2024 SCC OnLine BOM 1195
2) Union of India v. Vijay Chetan Shah, SLP (C) Nos. 17194 -17230/2024
3) Siddharth Shah v. Bank of Baroda, 2024 SCC OnLine BOM 1415
4) Preet Kaur v. Bureau of Immigration, 2024 SCC OnLine Del 4798
5) Rajiv Jain v. Union of India, 2024 SCC OnLine Del 5510
6) Harshvardhan Rao v. Union of India, W.P. No. 12185/2022
7) Shayara Bano v. Union of India (2017) 9 SCC 1
13. In response, Shri Shanti Bhushan, Ld. Deputy Solicitor General, and Shri T.P. Muthanna, Ld. Counsel for respondent No. 3, justify the LOC by arguing that the petitioners pose a flight risk and may abscond, obstructing criminal investigative and judicial proceedings.
14. The issue for consideration is whether the petitioners have made a sufficient case to quash the impugned LOC originated by respondent No. 3 - Bank of Baroda.
15. The relevant facts are adequately captured in the preceding paragraphs and do not require further elaboration.
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16. It is noted that this Court had, in I.A. No. 2 of 2023, permitted petitioners Nos. 1 and 2 to travel abroad from 18.05.2023 to 17.06.2023. Similarly, in I.A. No. 4 of 2023, this Court had granted permission for a 6-week period of travel from 21.12.2023. Furthermore, in I.A. No.1 of 2024, this Court had suspended the LOC from 16.08.2024 to 15.10.2024.
17. The Hon'ble Supreme Court of India in the case of Maneka Gandhi v. UoI, AIR 1978 SC 597, reaffirmed that the fundamental right to life and personal liberty encompasses the right to travel abroad, which can only be restricted by a fair procedure established by law.
18. In the case of K.S. Puttaswamy v. Union of India, (2019) 1 SCC 1, the Apex Court observed that any executive action having the effect of depriving of life or personal liberty must adhere to a fair, just, and reasonable procedure, reflecting norms of fairness as per Article 14.
19. In the case of Shayara Bano v. Union of India, AIR 2017 SC 4609, the Apex Court held that administrative actions characterised by manifest arbitrariness or procedural impropriety are subject to being struck down.
20. In the case of Harshavardhana Rao K. v. Union of India, in W.P. No. 12185/2022, a coordinate Bench of this Court held that an individual subject to an LOC must be provided with a -9- NC: 2024:KHC:35705 WP No. 7927 of 2023 copy, only at the time when such individual were to be stopped from travelling, in accordance with principles of natural justice.
21. The facts of this case are:
• The petitioners are on bail;
• They have neither been declared as wilful defaulters nor fraudulent borrowers;
• This Court has previously stayed criminal proceedings, quashed an LOC, and allowed multiple travel permissions.
• The petitioners have cooperated with the law and have not evaded it.
22. In view of the above, it may be reasonably concluded that the petitioners have exhibited bona fide conduct by not evading the law and thereby causing no obstruction to criminal investigative or judicial proceedings. They have also duly cooperated with the investigating agency. Furthermore, the respondent-Bank ought not to have originated the impugned Look-out Circular (LOC) concerning the same cause of action when this Court had, on a prior occasion, quashed a Look-out Circular originated by the CBI through its order dated 21.04.2021.
23. Thus, the issuance of the impugned LOC is irrational and manifestly arbitrary, particularly given that the objective of an LOC is to ensure the surrender of the accused to the investigative agency or court to commence with and conclude criminal
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NC: 2024:KHC:35705 WP No. 7927 of 2023 investigative and judicial proceedings in respect of the alleged offence.
24. Pertinently, the Hon'ble DRT II, Bengaluru, in T.A. No. 634/2017 (O.A. No. 16/2015), vide order dated 27.03.2017, had granted the respondent-Bank liberty to proceed with the recovery of loans through the sale of hypothecated assets and mortgaged properties, should the petitioners fail to pay a sum of INR 52,12,49,438.60/-. However, the respondent-Bank has failed to proceed with recovery in compliance with the said order.
25. In the case of Vijay Chetan Shah v. Union of India [2024 SCC OnLine Bom 1195], a Division Bench of the High Court of Bombay summarised the guidelines for issuing Look-out Circulars as follows:
1. LOCs may only be issued by the investigative agency in cognizable offences under the Penal Code, 1860, or other penal laws where the accused is deliberately evading arrest or not appearing in the Trial Court despite the issuance of non-bailable warrants and other measures. The LOC is used when there is a likelihood of the accused leaving the country to evade trial or arrest.
2. The investigating officer must make a written request to the officer notified by the Ministry of Home Affairs, detailing the reasons for the LOC. Only the competent officer can authorise the issuance of the LOC.
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3. The person against whom the LOC is issued must cooperate with the investigation by appearing before the investigating officers, surrendering to the court, or showing that the LOC was wrongly issued against them. Such a person may also approach the authority who issued the LOC to explain its wrongful issuance. The LOC may be withdrawn by the authority that issued it or rescinded by the Trial Court or a court with jurisdiction over the police station on application by the concerned individual.
4. The LOC is a coercive measure to compel a person to surrender to the investigating agency or court. Subordinate courts have jurisdiction similar to their role in affirming or cancelling non- bailable warrants.
26. Furthermore, regarding whether public sector banks (PSBs) have the authority to request an LOC against admitted defaulters, the Division Bench of the High Court of Bombay noted that the latest amendment to the Ministry of Home Affairs Office Memorandum (dated 22.02.2021) includes Cause 8(j), which permits denial of emigration in exceptional cases if authorities receive information that the departure of any person would be detrimental to India's economic interests.
27. However, the Court opined that the justification for issuing LOCs overlaps with the objectives of the Fugitive Economic Offenders Act, 2018, which addresses evasion of Indian law by
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NC: 2024:KHC:35705 WP No. 7927 of 2023 economic offenders and provides measures for preventing absconding or refusal to return to face prosecution. The Court criticised the absence of procedural fairness in the MHA Office Memorandums, leading to the conclusion that LOCs issued at the instance of PSBs are arbitrary and unreasonable, thereby violating Articles 14 and 21 of the Constitution of India. This decision is under challenge before the Supreme Court in SLP (C) Nos. 17194- 17230/2024, and is pending consideration.
28. Relying on the above, another Division Bench of the High Court of Bombay in the case of Siddharth Shah v. Bank of Baroda [2024 SCC OnLine Bom 1415], the Single Bench of the High Court of Delhi in the case of Preet Kaur v. Bureau of Immigration and Ors. [2024 SCC OnLine Del 4798], and in the case of Rajiv Jain v. Union of India [2024 SCC OnLine Del 5510], have held that LOCs issued at the instance of PSBs are unsustainable. The High Court of Delhi in the case of Rajiv Jain further observed that LOCs cannot be issued for every bank default or credit facility issued, and a citizen's fundamental right to travel abroad cannot be curtailed solely due to failure to repay a bank loan.
29. This proposition is directly applicable to the present case. A public sector bank, lacking governmental oversight and uniform guidelines, should not have the coercive power of the State, especially when it subverts principles of natural justice and contravenes Articles 14 and 21 of the Constitution of India.
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30. In this case, the issuance of the impugned LOC is not only redundant in light of the order dated 27.03.2017 in T.A. No. 634/2017 (O.A. No. 16/2015, DRT - II, Bengaluru), but also constitutes a glaring abuse of the legal process due to the repeated issuance of LOCs concerning the same cause of action against the petitioners, thereby warranting the interference of this Court.
31. In view of the above, the instant Writ Petition is allowed and the purported Look-Out Circular originated by the respondent-Bank is hereby quashed.
Sd/-
(HEMANT CHANDANGOUDAR) JUDGE BKM