In CWP-5492-2022 (O&M)-PUNJ HC- Non-supply of copy of Look out Circular to person travelling abroad is not fair and reasonable procedure, holds P&H HC Justices Ramachandra Rao & Harminder Singh Madaan [05-04-2022]

Read Order: Noor Paul v. Union of India & Others

Monika Rahar

Chandigarh, April 13, 2022: While dealing with a petition, wherein the petitioner was barred from travelling abroad owing to the issuance of a ‘Look Out Circular’ against her by the Bureau of Immigration, Ministry of Home Affairs for being a guarantor in respect of a loan advanced to a company of which she was a former director, the Punjab and Haryana High Court has held that that the non-supply of a copy of the LOC to the subject of the LOC at the time the subject was stopped at the airport for travel abroad, non-supply of reasons for issuing LOC, and absence of a post decisional hearing to the subject of the LOC, is not just, fair and reasonable procedure.

“So such a right to travel abroad cannot be deprived except by just, fair and reasonable procedure,” held the bench of Justices Ramachandra Rao and Harminder Singh Madaan. 

In this Writ Petition, the petitioner challenged a Look Out Circular (LOC) issued against her by the Bureau of Immigration, Ministry of Home Affairs, Govt. of India at the instance of the Bank of India on the basis of which she was prevented from travelling abroad to Dubai in February 2022 at the New Delhi Airport by the immigration authorities.

The petitioner was the former director of the fifth respondent-company, which took a loan from the second respondent for which she stood as a guarantor along with others. She resigned from the Board of the company but remained as the guarantor. There was a default in payment of the loan amount, leading the bank to issue a demand notice to the company and the guarantors. 

In the meanwhile, the petitioner was scheduled to travel to Dubai but at the airport, she was prevented from boarding the flight on the ground that a Look-Out Circular (LOC) was issued against her, her family members and associate directors of the Company by the Airport Immigration authorities. The LOC was issued by the Bank of India on December 28, 2021. 

The petitioner got admission to the MBA program of Boston University Questrom School of Business, Massachusetts, USA and she was apprehensive of the fact that in view of the LOC she would not be able to travel to the US for the same in August 2022. Thus, the High Court was approached with a prayer seeking quashing of the LOC. 

The High Court, considering the case of the petitioner, referred to Maneka Gandhi vs. Union of India wherein a 7-judge Bench of the Supreme Court in 1978 declared that no person can be deprived of his right to go abroad unless there is a law enabling the State to do so and such law contains fair, reasonable and just procedure. 

Further reference was made to  Satish Chandra Verma vs. Union of India & Others, (2019) SCC Online SC 2048 wherein the Supreme Court held that the appellant had a fundamental right to travel abroad and that right cannot be infringed on the ground that vigilance clearance has not been given. 

The limb of law expounded by the court was how there was a need for procedural safeguards in the matter of the issuance of LOC. 

At the very outset, the Court observed that the copy of the LOC was not furnished to the petitioner till it was filed for the first time by the second respondent along with its written statement in the court. Further, the Court observed that the office Memoranda produced by the respondents did not require a supply of a copy of the LOC to the subject of the LOC, a supply of reasons for issuing of the LOC or for even a post decisional hearing

Further, the court addressed the question of whether the respondents followed fair, just and reasonable procedure to deprive the petitioner of her fundamental right to travel abroad? Answering this question in the negative, the Court held, in light of the office Memoranda produced by the respondents which did not require the supply of a copy of the LOC to the subject of the LOC, that it may be that before issuing the LOC the respondents may not wish to issue a prior notice to the subject of the LOC like the petitioner because there is every possibility that, after receiving such notice, the subject may clandestinely leave the country. But, the Court added at the same time that it did not see any impediment to giving a post decisional opportunity to the petitioner by supplying to the subject of LOC, the copy of the LOC, and the reasons for issuing it so that the subject of the LOC can take legal recourse to challenge it.

The Court was of the opinion that the non-supply of a copy of the LOC to the subject of the LOC at the time the subject was stopped at the airport for travel abroad, non-supply of reasons for issuing LOC, and absence of a post decisional hearing to the subject of the LOC, was not just, fair and reasonable procedure. It was held to be violative of Art.21 of the Constitution of India, by the Court. 

Also, addressing the contention of the respondents justifying the issuance of the LOC on the ground that the petitioner was an ‘accused’, the Court held that the petitioner could not be termed as an ‘accused’ in the LOC as no criminal case was initiated in any court in the country against her. 

“When there is admittedly not even an FIR registered against the petitioner, and there is no question of her being accused of any non-cognizable offence, no LOC could have been issued by respondent No.3 to detain the petitioner”, held the Court.

Next, dismissing the respondents’ argument to the effect that the quantum of loan taken by the petitioner was huge, and thus if the petitioner were to leave India, there would be a substantial dent in the economic interest of the country, the Court held that this argument was baseless as the loan in question was not given to the petitioner rather was only a guarantor to the loan given to the fifth respondent-company. 

Also, on the aspect of the quantum of loan default, the Court opined that the quantum of the alleged default by the borrower by itself could not form the basis for seeking issuance of an extreme process like a LOC for restricting the personal liberty of the petitioner to travel outside the country without something more. 

“The OM itself does not draw any line about the quantum of default by a borrower to a financial institution which would be considered detrimental to the sovereignty or integrity of India or to the economic interest of India and a quantum of default which would not fall in the said category”, asserted the Court. 

It was also asserted that merely because the word ‘public’ is used in the exception clause in the OM, it does not elevate a mere default to an exceptional plane, and thus it cannot be said that the departure of the petitioner from the country would adversely impact the economy of the ‘country as a whole’ and de-stabilize the ‘entire economy’ of the country. 

Thus, in view of the foregoing discussions, the Court opined that the LOC was issued against the petitioner, in a mechanical manner without application of mind. The Court also added that the LOC issuing authority condoned the absence of any material to show that the petitioner would fall in the category of a person against whom a LOC is permitted to be issued by the guidelines framed in that regard by the first respondent. 

Additionally, the Court took judicial notice of the fact that businesses can fail for several reasons such as market conditions, labour unrest, lack of raw material, events like the Covid-19 etc, and thus merely looking at the quantum of loss caused to a banker, it cannot be presumed that there was a fraud committed by the borrower/guarantor, more so when no criminal case alleging fraud has even been filed against the borrower/guarantor. Suspicion cannot take the place of proof, held the Court. 

Thus, the LOC was set aside, and the loss of reputation and of ticket amount caused to the petitioner, the Court directed the respondent bank to pay compensation to the tune of Rs. I Lakh to the petitioner. The respondents were also directed to expunge any remarks/endorsements/entries that might have been entered in the records/Passport of the petitioner with respect to the LOC in a time-bound manner and also to permit the petitioner to travel abroad to pursue her studies. 

Lastly, while allowing the petition, the Court directed the respondents to serve a copy of the LOC and also reasons for issuing it to the person against whom it is issued as soon as possible after it is issued, and also to provide a post decisional opportunity to him. The Court held these requirements to be read into the OMs issued by respondents concerning the issuance of the LOCs.