Look Out Circular Must Be Supplied To Person When Stopped At Airport: P&H HC Grants Rs 1 Lakh Compensation To Woman For Losing Foreign Trip

The Punjab and Haryana High Court has held that a Look Out Circular (LOC), which prevents one from travelling abroad, must be supplied to the person at the time of being stopped at the airport and that the reasons should be communicated to the affected party. The Court further stated that the person must be given an opportunity of post-decisional hearing against the LOC.

Noting that the Office Memorandum issued by the Ministry of Home Affairs is silent about these requirements, the Court read these safeguards into the OM.

The Court said that the authorities may not want to issue a prior notice to the subject of the LOC as the person may clandestinely leave the country. However, the Court added it saw no impediment to give a post decisional opportunity to the party and the reasons for issuing it so that the subject of the LOC can take legal recourse to challenge it.

A division bench comprising Justices MS Ramachandra Rao and Harminder Singh Madaan observed as follows :

"In our opinion, non-supply of a copy of the LOC to the subject of the LOC at the time the subject is 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. It is violative of Art.21 of the Constitution of India".

The bench stated that the Supreme Court has held in Satwant Singh Sawhney vs. D.Ramarathnam, Asstt. Passport Officer and Maneka Gandhi vs.Union of India cases that the right to travel abroad is a fundamental right and fair, just and reasonable procedure should be followed to deprive a person of such right.

"It is desirable that these requirements be read into the Office Memoranda relied upon by the said respondents since it is settled law, as held in Institute of Chartered Accountants v. L.K.Ratna , that unless there is a clear mandate to the contrary, principles of natural justice must be read into a law even if it is silent on the aspect," the bench added.

Bank of India abused its authority by requesting LOC; asked to compensate the petitioner

The LOC was issued at the request of the Bank of India over certain loan defaults by a company M/s Drish Shoes Ltd, for which the petitioner was a guarantor. The petitioner was travelling to join a US University to pursue a postgraduate MBA course on 90% scholarship. After noting that the LOC was issued with total non-application of mind and that the Bank of India abused it authority by making the request, the Court set it aside.

Further, the Court directed the Bank to pay her a compensation of Rupees One Lakh to her.

"Since the petitioner had suffered not only the loss of reputation but also lost the cost of the ticket bought by her for travelling from India to Dubai on 22.02.2022 as she was prevented from boarding the flight by respondents No.1, 3 & 4, she is entitled to be compensated by costs of Rs.1 lakh to be paid by respondent No.2- Bank which shall be paid to the petitioner within four weeks from the date of receipt of copy of this order".

Facts of the case

The Court was considering a writ petition filed by on Noor Paul, who was prevented from travelling abroad to Dubai on February 22 at the New Delhi Airport by the immigration authorities on the basis of an LOC issued at the instance of the Bank of India.

Challenging the LOC, the petitioner filed a writ petition before the High Court. She submitted that neither the copy of the LOC was supplied nor the reasons were communicated to her by the authorities. 

The petitioner got the copy of the LOC for the first time when the authorities filed it before the Court along with their written response. 

The Court noted that the petitioner is not an accused in any FIR and the LOC is solely on the basis of the loan defaults of the company.

"We do not understand how the petitioner can be termed as an 'accused' as is mentioned in the LOC when admittedly no criminal case has been initiated in any court in the country against her," the Court observed.

The Court also noted that as per the Office Memorandum, a person, against whom there is a non-cognizable offence, cannot be prevented from leaving the country.

The relevant extract of the OM is as follows :

" In cases where there is non-cognizable offence under the IPC and other penal laws, the LOC subject cannot be detained/arrested or prevented from leaving the country. The originating Authority can only request that they be informed about the arrival/departure of the subject in such cases."

In this backdrop, the Court noted :

"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. At best, the respondent No.3 could have only given information to respondent No.2 about the arrival/departure of the subject according to the OM dt. 22.02.2021".

The Court agreed that the LOC provides for detaining persons even if there is no FIR against them if there are inputs that their departure is detrimental to the sovereignty or security or integrity of India or its economic interest. However, in the instant case, no exceptional case or any adverse effect on the economic interest of India has been made out against the petitioner.

"We are of the opinion that the quantum of the alleged default by the borrower by itself cannot be the basis for seeking issuance of an extreme process like an LOC for restricting the personal liberty of the petitioner to travel outside the country without something more",the Court said.

The Court also noted that there are no proceedings to declare borrower company or any of the guarantors as 'willful defaulters' have been initiated by the Bank of as of date, much less filing of a criminal case against the petitioner or others.

"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. 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".

It was held that the LOC was issued without any application of mind merely at the request of the Bank of India.

"The respondent No.2-Bank seems to be of the opinion that if a borrower commits a default in payment of loan, and the loan account becomes an NPA, such an event has occurred only because of a fraud committed by the borrower.This Court can take judicial notice of the fact that businesses can fail for several reasons such as market conditions, labour unrest, lack of raw material, events like pandemic of Covid-19 , etc.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, moreso when no criminal case alleging fraud has even been filed against the borrower/guarantor. Suspicion cannot take the place of proof".

The Court did not appreciate the contention of the Bank that the petitioner can pursue education in India and foreign travel was unnecessary.

"The stand taken by respondent No.2 in its counter-affidavit that a foreign education is a luxury than a necessity and that the petitioner ought to have pursued her higher studies in India only and not abroad, in our opinion, is in poor taste and is perverse. It ought to be a matter of pride that an Indian citizen has secured an MBA seat in a prestigious US University and also a 90% scholarship for study of the MBA course. The bright future of the petitioner cannot be jeopardized in this manner by the respondents".

The Court set aside the LOC after finding that it was issued by the authorities and directed that any adverse remarks in her Passport be expunged.  

Allowing the writ petition, the Court made the following declarations:

(i)The action of the respondent No.2-Bank in seeking issuance of an LOC to prevent the petitioner from leaving the country on the ground that she was a guarantor to respondent No.5's loan and there was more than Rs.100 crores owed to respondent no.2, is arbitrary, illegal and violative of Article 21 of the Constitution of India.

(ii)The action of respondent No.3(Bureau of Immigration, Ministry of Home Affairs, Govt. of India) in issuing the LOC against the petitioner in a mechanical way on 28.12.2021 is also arbitrary, illegal, unreasonable and violative of Article 14 of the Constitution of India.

The Court granted the following reliefs :

(i)The LOC dt. 28.12.2021 issued by respondents No.1, 3 & 4 against the petitioner at the instance of respondent No.2 is set aside.

(ii) Since the petitioner had suffered not only the loss of reputation but also lost the cost of the ticket bought by her for travelling from India to Dubai on 22.02.2022 as she was prevented from boarding the flight by respondents No.1, 3 & 4, she is entitled to be compensated by costs of Rs.1 lakh to be paid by respondent No.2- Bank which shall be paid to the petitioner within four weeks from the date of receipt of copy of this order.

(iii) Respondents No.1 to 4 shall expunge any remarks/endorsements/entries that might have been entered in the records/Passport of the petitioner with respect to the LOC dt. 28.12.2021 within one week from the date of receipt of copy of this order and they are directed to permit the petitioner to travel abroad to pursue her studies.

(c) The respondents No.1, 3 and 4 shall serve 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 provide a post decisional opportunity to him and these requirements shall be read into the OMs issued by respondents concerning the issuance of the LOCs.

Case Title. : Noor Paul vs Union of India and others

Citation  : 2022 LiveLaw (PH) 69

Headnotes

Look Out Circular - In our opinion, non-supply of a copy of the LOC to the subject of the LOC at the time the subject is 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. It is violative of Art.21 of the Constitution of India -It is desirable that these requirements be read into the Office Memoranda relied upon by the said respondents since it is settled law that unless there is a clear mandate to the contrary, principles of natural justice must be read into a law even if it is silent on the aspect. (Para 57, 59)

Look Out Circular - We are of the opinion that the quantum of the alleged default by the borrower by itself cannot be the basis for seeking issuance of an extreme process like an LOC for restricting the personal liberty of the petitioner to travel outside the country without something more. (Para 69)

Look Out Circular -It is incumbent upon the issuing authority of the LOC to ascertain at least whether the grounds disclosed in the LOC and/or the request for LOC fall within the four corners of the OM issued in that regard prima facie, though it may not be able to go into the merits/demerits of the allegations made against the subject by the originating authority. (Para 72)

Present: Mr. Manish Jain, Advocate for the petitioner Mr. Satya Pal Jain, Additional Solicitor General of India with Ms. Shweta Nahata, Advocate for respondents No.1, 3 & 4 Mr. Vinish Singla, Advocate for respondent No.2 Mr. Mayur Kanwar, Advocate for respondent No.5

Click here to read/download the judgment