W.P.(C)/2049/2021 of AJAY KUMAR GUPTA Vs UNION OF INDIA THROUGH MINISTRY OF HOME AFFAIRS & ORS.

*INTHEHIGHCOURTOFDELHIATNEWDELHI+W.P.(C) 2049/2021 & CM APPLs. 6003/2021, 11844/2022, 696/20248720/2024

AJAY KUMAR GUPTA.....PetitionerThrough:Mr. Vikas Pahwa, Senior Advocatewith Ms. Neeha Nagpal, Mr. MalakBhatt, Ms. Aditi Shrivastava, Ms.NamishaJain,Ms.SanskritiShakuntala Gupta and Ms. SupriyaJulka, Advocates.Through:Mr. Vikas Pahwa, Senior Advocatewith Ms. Neeha Nagpal, Mr. MalakBhatt, Ms. Aditi Shrivastava, Ms.NamishaJain,Ms.SanskritiShakuntala Gupta and Ms. SupriyaJulka, Advocates.

versus

UNION OF INDIA THROUGH MINISTRY OF HOME AFFAIRS &ORS......RespondentsThrough:Mr.AnilSoni,CGSCwithMr.Devvrat Yadav, Advocate for UOI.Mr. Arun Aggarwal, Advocate for R-3.ORS......RespondentsThrough:Mr.AnilSoni,CGSCwithMr.Devvrat Yadav, Advocate for UOI.Mr. Arun Aggarwal, Advocate for R-3.

CORAM:HON'BLE MR. JUSTICE SANJEEV NARULAO R R

10.09.2024

1.Through the instant writ petition, the Petitioner lays challenge to thevires of Office Memorandums dated 27[th]October, 2010, 5[th]December 2017,19[th]July, 2018 and 12[th]October, 2018[1]issued by Respondent No. 1 -Ministry of Home Affairs, as well as quashing of Look Out Circular[2]issued against the Petitioner at the instance of Respondent No. 3 - Bank of

1 “Impugned OMs”

2 “Impugned LOC”

Baroda[3].

2.Mr. Vikas Pahwa, Senior Counsel for the Petitioner puts forth thefollowing case:

2.1.The Petitioner is Non – Resident Indian[4], and resident of Dubai,UAE. He holds an Indian Passport bearing No. Z5215351, issued in Dubaiand valid up to 20[th]January, 2033. The Petitioner does not have anybusiness activities in India and has been residing abroad for over 25 years.In the year 2020, the Petitioner was diagnosed with COVID-19 and hasfaced long term post COVID-19 ailments for which he needs to travel toIndia to consult his doctors at Medanta Medicity Hospital, Gurugram.Additionally, he has to travel to India on account of certain familycommitments.

2.2.On 7[th]March 2012, at the request of BOB, the Petitioner executed asuretyship agreement for an overdraft loan facility of approx. S.A. RAND81.9 Million (equivalent to approx. INR 40 Crores) obtained by M/s AnnexDistribution Pty Ltd., South Africa[5], from the Johannesburg branch of BOB.The account of ADPL is an overseas account of BOB which was held andmaintained in South Africa and not in India. ADPL is subsidiary group ofthe Sahara Group of companies which is owned and controlled by the familymembers of the Petitioner, which is the reason why he stood as surety forthe said company.

2.3.Since May 2017, the overdraft loan facility availed by ADPL hasbeen outstanding. In this regard, ADPL has sent representations to the BOB,Johannesburg proposing to repay the outstanding loan amount, however,

3 “BOB”4 “NRI”

they did not receive favourable response. In May 2020, BOB initiatedliquidation proceedings against ADPL in the High Court in South Africa forrepayment of their outstanding dues and even obtained provisionalliquidation order dated 14[th]May 2020 in the said case.

2.4.Eventually, BOB, Johannesburg and ADPL along with its groupcompanies entered into Settlement Agreement dated 7[th]July, 2020, underthe laws of South Africa and agreed to set timelines for making good on theoutstanding liabilities. As per the terms of the Settlement Agreement, BOB,Johannesburg agreed to withdraw the liquidation proceedings against ADPLin order to enable them to make the loan repayments. However, BOBJohannesburg did not honour the settlement terms by withdrawing theliquidation proceedings initiated by them. Nevertheless, ADPL never deniedor refused to repay the outstanding loans and continued to engage indiscussions with BOB to amicably settle the loan. Till date, about 1.35Million S.A. RAND has been paid to BOB under the Settlement Agreement.2.5.Pertinently, as surety of the said loan, no claim has been raisedagainst the Petitioner by BOB either in India or South Africa. However,since the loan amount continues to be outstanding, the Petitioner hasreasonable apprehension that there may be an LOC issued against him at thebehest of BOB. This apprehension was confirmed as an LOC dated 26[th]September, 2019 has been opened against the Petitioner by Respondent No.4 – Bureau of Immigration, at the behest of BOB.

2.6.Lastly, it is submitted that ADPL is South African entity, owned bySouth African nationals having business restricted to the territorialboundaries of South Africa. Further, the banking relationship between BOB,

5 “ADPL”

Johannesburg and ADPL is governed by the laws of South Africa.Moreover, the surety agreement by which the BOB is seeking to impose aliability on the Petitioner, was also executed under the laws of South Africa.Therefore, when the entire cause of action has arisen in South Africa, thereis no legal basis for BOB to restrain the movement of the Petitioner, by wayof the impugned LOC in India.

2.7.There are no legal processes initiated against the Petitioner as asurety, with respect to the said loan default in South Africa, reliance in thisregard is placed on the affidavit of the Petitioner’s legal team in SouthAfrica. Furthermore, no criminal complaint, criminal case or FIR is pendingagainst the Petitioner in India or outside India. Therefore, since the principaldebtor – ADPL never refused to make the loan repayment and has continuedto be in compliance of the Settlement Agreement with BOB Johannesburg,and since so far, the liability of the Petitioner as surety has not even beeninvoked by BOB Johannesburg, there is no basis in law or in fact for theissuance of the LOC against the Petitioner by BOB.

3.Per contra, Mr. Arun Aggarwal arguing counsel for Respondent No.3 – BOB, places reliance on their Counter Affidavit and argues as follows:3.1.The credit facilities were extended by BOB, Johannesburg to the mainborrower, M/s Confident Concept Pty. Ltd. along with others, includingADPL. The Petitioner being surety of ADPL has an obligation to makegood on the loan amounts payable by ADPL since they continue to be indefault, despite the Settlement Agreement dated 7[th]July, 2020 executedbetween the parties.

3.2.The Petitioner has tried to project that there has always been agenuine intention to pay the dues, however he has failed to show bona fides

for the same, hence disentitling the Petitioner from any relief. It is deniedthat the terms of the Settlement Agreement executed between the mainborrower and BOB have been implemented and rather no payment has beenmade thereinunder. Therefore, the agreement has elapsed.

3.3.In terms of the Petitioner’s liability under the Settlement Agreement,it is important to note that each term of the Settlement Agreement was notonly accepted by the main borrower, but also by the Petitioner who, onaccount of being surety, assumed the status of co-borrower at the time ofdefault of payment. As per the South African laws, the personal guarantor,in case of any default, would attain the status of co-borrower. It is not as ifthe Petitioner lacks the funds to repay the bank. On the basis of pleadingsand documents placed on record, it is apparent that the Petitioner isdeliberately avoiding paying the amounts due to BOB.

3.4.The LOC guidelines, under the Impugned OMs have been issued toput some check on defaulting borrowers/guarantors from escaping tocountries from where recovery of default amount would be jeopardised. Theissuance of the LOC is last resort when moneys due to BOB are not repaid.Considering the magnitude of the amounts, the attitude of the Petitioner iscallous and insincere. Therefore, BOB has rightly insisted on the issuance ofan LOC against the Petitioner as per the Impugned OMs.

4.The Court has considered the afore-noted contentions of the parties.

5.During the pendency of the present proceedings, the LOC issuedagainst the Petitioner dated 26[th]September, 2019 was deleted by RespondentNo. 4 – Bureau of Immigration on 13[th]December, 2021, as recorded in thisCourt’s order dated 6[th]April, 2023. However, during the hearing on 8[th]May,2023, the counsel for BOB strongly contended such deletion was

improper, urging that no instructions were given by the originator - BOBregarding such deletion. In this regard, fresh instructions were issued byBOB for re-opening the LOC, which was then reinstated on 6[th]November,2023.

6.Notwithstanding the reissuance of the LOC, it is pertinent to note thatthe Petitioner has been permitted to travel to and from India on six differentoccasions, with each travel being subject to specific conditions imposed bythis Court, all of which have been duly complied with by the Petitioner. Thiscompliance underscores that the risk of flight by the Petitioner issignificantly mitigated.

7.There are no ongoing criminal proceedings against the Petitioner inIndia. The only basis for issuing the LOC at the instance of BOB is theapprehension that the Petitioner may attempt to evade repayment of loanfor which he stood as surety. However, no proceedings have been initiatedby BOB to enforce Petitioner’s liability as surety. On this issue, thePetitioner, in his submissions has argued that such liability does not arisesince the principal borrower, ADPL, has not defaulted on the repayment ofthe loan and in fact has already commenced payments under the SettlementAgreement, as evidenced by the payment receipt dated 31[st]July, 2020[Annexure A-2 of the Petitioner’s rejoinder to BOB’s counter-affidavit].

8.Be that as it may, there are currently no proceedings pending againstthe Petitioner. The rationale behind issuing the present LOC is ostensibly tomonitor the Petitioner’s entry and exit from the country. However, theRespondents have not provided any material evidence before the Court todemonstrate any criminal culpability on the part of the Petitioner that wouldsuggest an intention to abscond. The mere apprehension that the borrower

company might default on its loan obligations cannot, by itself, justify theissuance of an indefinite LOC against the Petitioner. Such an actioneffectively restricts the movement of citizen, infringing upon the right totravel abroad, which has been recognized as an integral part of thefundamental right to personal liberty under Article 21 of the Constitution ofIndia, as observed by the Supreme Court in the landmark judgment ofManeka Gandhi v. Union of India[6]and Satwant Singh Sawhney v. D.Ramarathnam, Assistant Passport Officer and Ors.[7]

9.The primary purpose of issuing an LOC is to prevent person fromcrossing international borders and moving beyond the jurisdiction of Indianauthorities, particularly when there are reasonable and substantial grounds tobelieve that the person has committed serious offence and poses flightrisk.

10.The Ministry of Home Affairs[8], which is the nodal ministryresponsible for issuing guidelines for international travel, has noted that anLOC can be issued in cases of cognizable offences under the Indian PenalCode and other penal laws and only in exceptional circumstances, can itsscope be expanded. At this juncture, it would be apposite to reproduceClause ‘J’ of the Office Memorandum dated 27[th]October, 2010 and theamended Clause in Office Memorandum dated 05[th]December, 2017, whichreads as follows:

“Office Memorandum dated 27[th]October, 2010

"g) Recourse to LOC is to be taken in cognizable offences under IPC orother penal laws. The details in column IV in the enclosed proforma

6 (1978) 1 SCC 248

7 AIR 1967 SC 1836

8 “MHA”

regarding ‘reason for opening LOC’ must invariably be provided withoutwhich the subject of an LOC will not be arrested/detained.

h) In cases where there is no cognizable offence under IPC or other penallaws, the LOC subject cannot be detained/arrested or prevented fromleaving the country. The originating agency can only request that they beinformed about the arrival/departure of the subject in such cases.

j) In exceptional cases, LOCs can be issued without complete parametersand/or case details against CI suspects, terrorists, anti/national elementsetc. in larger national interest."Office Memorandum dated 27[th]October, 2010, as amended on 5[th]December, 2017

“Amendment-

“In exceptional cases, LOCs can be issued even in such cases, aswould not be covered by the guidelines above, whereby departure of aperson from India may be declined at the request of any of the authoritiesmentioned in clause (b) of the above-referred OM, if it appears to suchauthority based on inputs received that the departure of such person isdetrimental to the sovereignty or security or integrity of Indian or that thesame is detrimental to the bilateral relations with any country or to thestrategic and/or economic interests of India or if such person is allowed toleave, he may potentially indulge in an act of terrorism or offences againstthe State and/or that such departure ought not be permitted in the largerpublic interest at any given point in time.Instead of:

“In exceptional cases, LOCs can be issued without completeparametersand/orcasedetailsagainstCIsuspects,terrorists,anti/national elements etc. in larger national interest.”

11.Thereafter,MHAreleasedOfficeMemorandumbearingNo.25016/10/2017-Imm (Pt.) dated 27[th]October, 2010 which consolidates the

existing LOC guidelines as follows:

“6.The existing guidelines with regard to issuance of Look OutCirculars (LOC) in respect of Indian citizens and foreigners have beenreviewed by this Ministry. After due deliberations in consultation with variousstakeholders and in suppression of all the existing guidelines issued vide thisMinistry’s letters/ O.M. referred to in para 1 above, it has been decided withthe approval of the competent authority that the following consolidatedguidelines shall be followed henceforth by all concerned for the purpose ofissuance of Look Out Circulars (LOC) in respect of Indian citizens andforeigners:-

xx…xx…xx

(H) Recourse to LOC is to be taken in cognizable offences under IPC or otherpenal laws. The details in column IV in the enclosed Proforma regarding‘reason for opening LOC’ must invariably be provided without which thesubject of an LOC will not be arrested/detained.

(I) In cases where there is no cognizable offence under IPC and other penallaws, the LOC subject cannot be detained/arrested or prevented from leavingthe country. The Originating Agency can only request that they be informedabout the arrival/departure of the subject in such cases.

(J) The LOC opened shall remain in force until and unless deletion requestis received by BOI from the Originator itself. No LOC shall be deletedautomatically. Originating Agency must keep reviewing the LOCs opened atits behest on quarterly and annual basis and submit the proposals to deletethe LOC, if any, immediately after such review. The BOI should contact theLOC Originators through normal channels as well as through the onlineportal. In all cases where the person against whom LOC has been opened isno longer wanted by the Originating Agency or by Competent Court, the LOCdeletion request must be conveyed to BOI immediately so that liberty of theindividual is not jeopardized.

(K) On many occasions, persons against whom LOCs are issued, obtainOrders regarding LOC deletion/ quashing/ suspension from Courts andapproach ICPs for LOC deletion and seek their departure. Since ICPs haveno means of verifying genuineness of the Court Order, in all such cases,orders for deletion/ quashing/ suspension etc. of LOC, must be communicatedto the BOI through the same Originator who requested for opening of LOC.Hon'ble Courts may be requested by the Law Enforcement Agency concernedto endorse-/convey orders regarding LOC suspension/ deletion/ quashing etc.to the same law enforcement agency through which LOC was opened.(L) In exceptional cases, LOCs can be issued even in such cases, as may notbe covered by the guidelines above, whereby departure of person fromIndia may be declined at the request of any of the authorities mentioned inclause (B) above, if it appears to such authority based on inputs receivedthat the departure of such person is detrimental to the sovereignty orsecurity or integrity of India or that the same is detrimental to the bilateralrelations with any country or to the strategic and/or economic interests ofIndia or if such person is allowed to leave, he may potentially indulge in anact of terrorism or offences against the State and/or that such departureought not be permitted in the larger public interest at any given point intime.”

12.The above makes it clear that only in exceptional cases can LOC beissued, without fulfilling the parameters. This is because person’s right to

travel freely is an expression of their fundamental right to personal libertyenshrined under Article 21 of the Constitution. Therefore, such right canonly be restricted under strict parameters and in accordance with theprocedure established by law.

13.Furthermore, as has been held by the Coordinate Bench of this Courtin Prateek Chitkara v. Union of India[9], the scope of the term ‘detrimentalto the economic interest of India’, as mentioned in Clause ‘L’ of the OfficeMemorandum dated 22[nd]February, 2021, must be narrowly construed. Therelevant extracts of the judgement are as follows:

82. The term “detrimental to economic interest” used in the OfficeMemorandum is not defined. Some cases may require the issuance of look-out circular, if it is found that the conduct of the individuals concernedaffects public interest as whole or has an adverse impact on the economy.Squandering of public money, siphoning off amounts taken as loans frombanks, defrauding depositors, indulging in hawala transactions may have agreater impact as whole which may justify the issuance of look-outcirculars. However, issuance of look-out circulars cannot be resorted to ineach and every case of bank loan defaults or credit facilities availed of forbusiness, etc. Citizens ought not to be harassed and deprived of their libertyto travel, merely due to their participation in business, whether in aprofessional or non-executive capacity. The circumstances have to reveala higher gravity and larger impact on the country.”

14.It is also well settled in law, as held in multiple judgements by thisCourt, that mere inability to repay dues to Bank without there being anycriminal liability, cannot be reason to take away the fundament right totravel guaranteed under Article 21 of the Constitution of India. Reliance inthis regard is placed on W.P.(C) 14837/2022.[10]

15.To conclude, an LOC has been issued against the Petitioner for thereason that the company for which he stood as surety was unable to repay

9 2023 SCC OnLine Del 6104

10 titled Vikas Goel v. Union of India

its debts. The Petitioner is not an accused in any cognizable offence andthere are no criminal proceedings pending against him in India or in SouthAfrica. Therefore, Banks ought not to be permitted to use an LOC as ameans to recover debts. In such circumstances, there is no material on recordwhich can justify Respondent No. 3 - BOB to insist that the Petitioner’sright to travel should be restricted and he should not be allowed to departfrom the country.[11]

16.Thus, having regard to the aforenoted facts and the judgments referredabove, in the opinion of the Court, LOC issued against Petitioner at thebehest of BOB cannot be sustained. Accordingly, the writ petition is allowedand the LOC issued against the Petitioner is quashed.

17.Since the writ petition is being allowed, the Petitioner’s request forreturn of the fixed deposit receipt, furnished as security in terms of orderdated 22[nd]March, 2021, as modified on 24[th]March, 2021, is accepted. TheRegistry is directed to return the same to the Petitioner.18.In light of the above, the writ petition is allowed and disposed of,along with pending applications.

SEPTEMBER 10, 2024

SANJEEV NARULA, J

11 See also: Rajesh Kumar Mehta v. Union of India, 2024:DHC:4548