The Calcutta High Court has held that the economic interest of the country cannot be read synonymously with the financial health of a bank and there is no reason to restrain the petitioner-director from travelling abroad.
The bench of Justice Shampa Sarkar has observed that default of a borrower cannot be read into the expression “detrimental to the economic interest of the country”. The commission of the financial offence should be of high degree which was likely to shake the stability, growth and business dealing of the country. The bank has not provided any contemporaneous material against the petitioner which would satisfy the exception clause in the policy, requiring the restriction of movement of the petitioner.
The bench noted that the bank is required to establish that based on the intelligence report and inputs, the departure of the petitioner from India, would be either detrimental to the sovereignty, security or integrity of India or detrimental to the bilateral relations of India with other countries, which would have a cascading effect in the downfall of the economy. Although, the memorandum of 2018 talks about fraudsters and wilful defaulters to be treated as a subject for issuance of Look Out Circulars (LOC), the policy of 2021 does not include category of persons.
The petitioner is a erstwhile Director of Visa Power Limited. The petitioner contended that he was never a whole time director of the company. The company was undergoing liquidation by order dated October 11, 2018, passed by the National Company Law Tribunal, Kolkata Bench. The company had availed of credit facilities from a consortium of banks, with Punjab National Bank (PNB), as the lead Bank. The respondent was also a part of the consortium.
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The credit facilities were availed by the company for setting up a thermal power project at Raigarh district of Chhattisgarh. The loan was sanctioned sometime in March, 2010. Due to en-masse cancellation of coal blocks by the Supreme Court, the thermal plant could not be established and made operational. The whole purpose of the project was to provide power to those contractors who had been given the coal block allocations.
In 2017, Bank of Maharashtra filed an application under Section 7 of the Insolvency and Bankruptcy Act, 2016 against the company. By an order, the application was admitted and a corporate insolvency resolution process was initiated. Ms/. Deloitte Touche Tohmatsu India, LLP was appointed as an auditor to carry out a forensic audit. On the basis of the forensic audit report, upon taking approval from the committee of creditors, the liquidator filed an application before the NCLT, Kolkata against the suspended board of directors alleging that the company had entered into preferential, undervalued and fraudulent transactions, under Sections 45, 46 and 66 of the Indian Insolvency and Bankruptcy Act, 2016.
The allegations in the said application were duly considered by the NCLT and by order dated July 25, 2019, the application was rejected. The order was affirmed by the National Company Law Appellate Tribunal.
The petitioner wanted to travel from New Delhi to Dubai, but he was refused passage. The petitioner was informed that on account of a Lookout Circular (LOC) initiated by the respondent-bank, he could not be allowed transit.
On March 11, 2023, the petitioner came to know about such LOC. The petitioner asked for a copy of it, which was refused. Finding no other alternative, the petitioner filed the writ petition.
The petitioner contended that the conditions laid down in the office memorandum dated October 27, 2010 issued by the Government of India, Ministry of Home Affairs (Foreigners Division), had not been satisfied before such request was made by the respondent. The categories of cases in respect of which an investigating agency or any other agency including a bank could seek recourse to such a harsh and restrictive measure, were entirely different. No cognizable offence either under the Indian Penal Code or under any other penal statue had been committed by the petitioner.
The petitioner argued that although the Ministry of Home Affairs by a memorandum dated October 12, 2018 had authorized the Chairman/Managing Director/Chief Executive Officer of all Public Sector Banks, to make requests for opening of an LOC in respect of Indian citizens and foreigners, the originating banks were required to strictly confirm to the instructions contained in the memorandum dated October 27, 2010 as amended from time to time.
The bank contended that the writ petitioner was the promoter and the key managerial person of the borrower company. The audited financial statements of the borrower would reflect that a sum of Rs.60.08 crores and Rs.15.60 crores had been paid by the borrower to the Visa Reality Limited (VRL) as capital advance in the years 2011-12 and 2012-13 respectively. The capital advance had been utilized by VRL to buy equity and preference shares in the related parties of VRL and the borrower, that is, Visa Minmetal Limited. Allegations were that the borrower had diverted the funds of the Public Sector Banks and misappropriated the same. The promoter/writ petitioner was involved in all such acts, which were fraudulent. Thus, cognizable offences under the criminal law had been committed. Moreover, the loss caused to the consortium of Public Sector Banks, were detrimental not only to the sovereignty, security and integrity of India, but also detrimental to bilateral relations which the country enjoyed with other foreign sovereigns. Such action of the petitioner and the loss caused to the Public Sector Banks, were injurious to the economic interest of India.
The court noted that a mere apprehension that the petitioner would flee India and no steps could be taken to recover the money was not enough. The law provides for other mechanisms to recover money from a borrower whose loan account had become a NPA. The company is already in liquidation. As of now, it is not clear whether any investigation is pending against the petitioner. Default of a borrower cannot be read into the expression „detrimental to the economic interest of the country‟. The commission of the financial offence should be of high degree which was likely to shake the stability, growth and business dealing of the country. The bank has not provided any contemporaneous material against the petitioner which would satisfy the exception clause in the policy, requiring the restriction of movement of the petitioner.
The court while allowing the petition, held that the bank has not provided any contemporaneous material against the petitioner which would satisfy the exception clause in the policy, requiring the restriction of movement of the petitioner.
Case Title: Vishambhar Saran Versus Bureau Of Immigration & Ors.
Case No.: W.P.A. NO. 9339 OF 2023
Date: 26/07/2024
Counsel For Petitioner: Sabyasachi Chowdhury
Counsel For Respondent: Dharmendra Tiwari
