Suspicion of opening foreign bank account, investing in foreign company not grounds to stop person from travelling abroad: Delhi High Court

The Delhi High Court has held there is no blanket bar on courts’ power to examine the decision of government authority to issue a look out circular (LOC) and if it is found that the LOC was issued without application of mind, courts should come to the rescue of the individual [Vikas Chaudhary v Union of India and Ors]..Pertinently, single-judge Justice Rekha Palli held that a mere suspicion of a person opening bank accounts in other countries and of investing in a foreign company cannot be a ground to restrict such person from travelling abroad."Mere suspicion of a person opening bank accounts in other countries and of investing in a foreign company cannot, in my view, be accepted as the basis for holding that the petitioner being allowed to travel abroad would be ‘detrimental to the economic interests of India’, when it is undisputed that this suspicion has remained a suspicion for such a long period of almost three years,” the Court said.The Court was hearing a petition seeking quashing of LOC issued against a businessman named Vikas Chaudhary..Vikas Chaudhary was represented by Senior Advocate Vikas Pahwa with Advocates Shadman Ahmed Siddiqui, Mr.Samjyor Lepcha and Mr.Kushagra Raghuvanshi. .Union of India was represented by Anurag Ahluwalia, Zoheb Hossain, Parth Semwal, JSC and Tulika Gupta. .Chaudhary, a director of two companies based in Delhi, was involved in the business of exporting garments to the US, Europe, South America and the UAE. The Income Tax department carried out several searches at his house in February 2019 on the basis of warrants of arrests issued against the Kochar Group. The agencies recovered some hard drives as well as papers and seized jewelry as well. On February 25, 2019 a LOC was finally issued by the government at the instance of the Income Tax department.The petition argued that despite conducting several searches at various locations related to Chaudhary, the authorities have not filed any complaint against him. The Court was told that the LOC automatically lapsed after a period of one year as the authorities did not produce any record to suggest that the same was renewed.Chaudhary argued that under the Office Memorandums (OM) dated October 2010 and December 2017, it was upon the Income Tax department to make a request for renewal of the LOC after one year and because this request was never made, the present LOC cannot subsist. The LOC cannot be saved by an amendment introduced through OM dated February 2021 which states that the LOC will remain in force till a deletion request is received from the originator..The Court, therefore, had four issues for consideration. First, whether it can interfere with the issuance of LOC. Second, whether LOC can be issued even without the person being accused of any cognisable offense. Third, did the LOC lapse after completion of one year. Fourth, whether the case of the petitioner fell within the ambit of the clause ‘detrimental to the economic interests of the country’..On the first aspect, the High Court said it is beyond doubt that courts have a secondary role while considering a challenge to a LOC and as long as it is found that the decision is a reasonable one, the Court will be circumspect..However, Justice Palli said there can never be any blanket ban on the Court’s powers of judicial review to examine the authority’s decision to issue the LOC..“In the light of the adverse effects that the issuance of a LOC can have on the individual’s life, the respondent’s plea that the Writ Court under Article 226 of the Constitution of India should not review the decision to issue LOC cannot be accepted. In fact, in case, it is found that the decision of the authorities is without application of mind to the relevant factors, the Court can, and in fact, should come to the rescue of the individual. I, therefore, find no merit in the respondent’s plea that this Court should not examine the legality of the impugned LOC,” the judgment said. .On the second aspect, however, the Court said that once a request for issuance of the LOC against the petitioner was made in February 2019, his case was covered by the memorandum of 2010 along with all the up-to-date amendments including the 2017 one which provides for issuance of LOC in the petitioner’s case even if he is not accused of any cognisable offense..The Court further held that while petitioner is justified in saying that LOC is valid for only one year, unless specifically renewed, but this position has changed once the OM Of 2021 came into effect as clause J of the said document reversed the position and said that the circular will remain in force till a request for completion is made.“The concept of an automatic deletion of a LOC no longer exists. No doubt, respondent no.3, the originating agency in the present case, is expected to periodically review the LOCs issued at its behest. However, the fact remains, that in the present case, it is the respondents’ categoric stand that the LOC opened in February, 2019, was in force on 20.02.2021, when the new guidelines were issued. The petitioner has failed to show anything to the contrary. There is, therefore, absolutely no reason to disbelieve the respondents’ plea that the impugned LOC was extended from time to time, and was in existence on 22.02.2021 when these consolidated guidelines came into effect,” the Court held..Finally, on the issue whether petitioner’s case fell within the ambit of the clause ‘detrimental to economic interests of India’, the Court said that it has to be kept in mind that the issuance of a LOC necessarily curtails the rights of an individual to travel abroad. Therefore, for the invocation of a clause which is meant to be used in exceptional and rare circumstances, a mandatory pre-condition would be a formation of a reasonable belief by the authority that the departure of the individual would be ‘detrimental to the economic interests of India’ to such an extent that it warrants curtailment of an individual’s right to travel abroad..The Court noted that in the present case, the respondents’ belief that petitioner’s departure would be ‘detrimental to the economic interests of India’ hinges on an unsigned draft agreement and some WhatsApp chats, which even in their own view, is not conclusive. It further said that they are still awaiting a response from authorities in Dubai to proceed against the petitioner under the Black Money Act 2015, Income Tax Act 1969 and the Prevention of Money Laundering Act 2002.“It is important to note that the petitioner herein earns his livelihood by exporting garments to the United States of America, Europe, South America, the United Kingdom and the United Arab Emirates; an integral part of such business is overseas travel. The LOC does not only curtail his right to personal liberty but also his right to livelihood, as enshrined in Article 21 the Constitution of India," the Court opined. Thus, it concluded that the issuance of a LOC against the petitioner, without any end in sight, would definitely cause irreparable and considerable damage to the business interests of the petitioner.”Justice Palli said that it also has to be kept in mind that the issuance of a LOC is an extremely severe step and the authorities must tread with caution when issuing it and it should be done only in exceptional circumstances.‘Merely because the OM dated 05.12.2017 permits the issuance of a LOC, in exceptional circumstances, even when the individual is not involved in any cognizable offense under the IPC or any other penal law, it has to be remembered that this power, is meant to be used in exceptional circumstances and not as a matter of routine, it must therefore, be interpreted in a manner that indicates an offense of such a magnitude so as to significantly affect the economic interests of the country,” the Court said. .The Court therefore quashed the LOC terming it wholly unsustainable. The judge, however, directed the petitioner to inform the Income Tax department as and when he decides to leave the country for the next one year..[Read Judgment]