'Not A Flight Risk, No Concrete Evidence For Coercive Action': Madras High Court Quashes Look Out Circular Against Rahul Surana

Madras High Court has quashed a Look Out Circular (LOC) issued against Rahul Surana, son of the Managing Director of Surana Industries Limited.

Dr Justice Anita Sumanth opined that the Serious Fraud Investigation Office (SFIO) on whose approval the Bureau of Immigration issued a LOC in December 2020 couldn't satisfy the settled parameters for issuing the same, let alone its extension.

Relying on Karthi P Chidambaram v. Bureau of Immigration (2018), the court observed that the respondent authorities have not placed any material justifying the extension of the Look Out Notice. The investigating agency only mentions prima facie materials and no concrete evidence has been placed to take coercive action in the nature of a Look Out Circular according to the court. The court also pointed out that there are no proceedings against Rahul Surana so as to implicate him in a criminal court or any other fora. Therefore, the court noted in the order as below:

 "No material is placed before the Court in support of the bald assertion that the petitioner is a flight risk and as a consequence, there is no tangible material available, admittedly, to deny the petitioner of his Fundamental Right."

The court also referred to the submissions made by CBI that there are no ongoing investigations against him. The single-judge bench also took note of the fact that the petitioner has not evaded any summons demanding his appearance till date.

Background

Though the LOC was issued against Rahul Surana in a case registered against the Promoters and Directors of SIL for alleged offences under Sections 120B r/w Sections 420, 467, 468, 471 of the Indian Penal Code and Section 13(2) r/w 13(1d ) of the Prevention of Corruption Act, the petitioner argued that he was not arrayed as an accused in the said case. He also contended that he was not a shareholder nor was he related to the administration of Surana Group. The Bureau of Immigration did not issue the LOC at the instance of CBI which had filed three cases against the Surana Group. According to the counter filed by CBI, Rahul Surana was not listed as an accused in any of the cases.

Even then, the petitioner was initially prevented from travelling abroad with his family for medical treatment of his wife. The High Court had later allowed him to travel with his wife provided that his children stay back in Madras.

Some of the Companies of Surana Group were listed before Stock Exchange and some are under liquidation after the orders of the National Company Law Tribunal.

Now, before the High Court, he argued that the restriction imposed on his travel via LOC in itself is illegal.

Court's Observations

Before the court, SFIO had submitted that there was prima facie evidence of large scale diversion and siphoning off funds borrowed from banks and financial institutions. Taking this into account, the investigating agency was currently looking into various entities of Surana, in terms of a reference made under Section 212 (1) (c) of the Companies Act, 2013. They contended that coercive against Rahul Surana was necessary for proper investigation. They also submitted a sealed cover elaborating the extent of the involvement of Rahul Surana in the alleged crimes of the Surana Group. Before the court, they also added that the investigation was at an 'advanced stage' and there is real danger of the petitioner absconding if his plea is allowed before the investigation is completed.

In the petition filed, one of the questions that required clarity was with regards to the validity of LOC issued in March 2019. One year was the period of validity contemplated for such Lookout Circular. However, SFIO took the stand that the LOC was still in force. They reasoned that once a LOC is opened, it will continue to be in force unless and until the originating agency who requested the LOC, i.e, SFIO, seeks the deletion of LOC to the Bureau of Immigration. A 2021 Corrigendum of the Ministry of Home Affairs was also relied upon to establish this point. Moreover, the LOC was extended till January 20, 2022, by the Bureau of Immigration as per SFIO's memo in 2020.

SFIO also relied on a January 2022 communication/ letter from the Bureau of Immigration stating the status of LOC will be altered only upon a request made by the originating authority and extension of LOC is at the discretion of the originating authority.

Even if it's possible that such action could be justified, the court opined that SFIO has not placed any order to indicate that the LOC would continue beyond 20th January.

About the SFIO's reliance on the 2021 Corrigendum, the court observed that it is an enabling measure to ensure that in cases where an extension of LOC is required, a methodology is available to facilitate such extension. However, the caveat in the corrigendum is that there must be a periodic exchange of communication between the originating entity and the Bureau of Immigration for the extension of any LOC. For that, the competent authority in SFIO should have firstly given sanction for an extension before the expiry of LOC. 

"...no sanction/approval has been received from the competent authority in the SFIO as on the date when the aforesaid letter has been sent, on which date the LOC in question has already expired. No such LOC is produced till the final date of hearing of the matter, which is 01.03.2022, Corrigendum dated 10.08.2021 is an enabling measure to ensure that in cases where an extension of LOC is required, a methodology is available to facilitate such extension", the court noted in the order.

Therefore, the court concluded that LOC from 2019 was extended only till 2022 and not beyond that in the absence of appropriate sanction/ approval.

The court referred to two office memorandums on Look Out Circulars (LOC) in respect of Indian citizens and foreigners, one issued in 1979 and the other in 2000. The gist of these two memorandums is that LOC is a coercive measure to make a person surrender to the investigating agency or Court of law. The LOC can be issued in cases of cognisable offences only when the accused is deliberately evading arrest or not appearing in the trial court despite Non-Bailable Warrants and other coercive measures, and there is a likelihood of the accused leaving the country to evade trial/arrest. An excerpt from the 2000 memorandum states as follows:

"...It is further provided that an LOC is valid for a period of one year. It can, however, be extended further before the expiry of the one year period. In case no request for extension of LOC is received before expiry of one year period, an LOC will automatically be closed by the Immigration Officer concerned after expiry of one year period."

The Memorandum from 2000 also mentions the guidelines laid down by the Delhi High Court in Sumer Singh Salkan Vs. Asstt. Director &Or (2010).

The 1979 memorandum also states that if the period is not specifically mentioned in a LOC, then it will be construed as having the validity of a year.

"A report has been filed by R1 [SFIO] on 17.0.2022 under the heading Role of Rahul Dinesh Surana in the case under investigation, setting out the details of various economic irregularities under investigation. The report concludes stating at para 39 that the investigation is in a crucial stage and that it is 'reasonably apprehended that the applicant would not return to the country and might attempt to evade the process of law, more so as investigation prima facie finds siphoning of large extent of funds to foreign entities."

The court remarked that though the investigation commenced in 2019, the agency only states that the investigation is at an advanced even on the last date of the court hearing. therefore, the court was not convinced that there was sufficient material to implicate Rahul Surana and impose a coercive measure such as LOC upon him.

Citing the above reasons, the court accepted the challenge to the LOC and allowed the petition.

Case Title: Rahul Surana v. The Serious Fraud Investigation Office & Ors.

Case No: W.P. No.2477 of 2020 and WMP Nos.2871 of 2020, 7332, 10903, 21891 and 3631 of 2022

Citation: 2022 LiveLaw (Mad) 102

Click Here To Read/ Download Order