Cannot forbid businessman from travelling overseas just for having bank account abroad: Delhi High Court

Delhi High Court
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The Delhi High Court on Thursday held that that a mere suspicion of a person having opened a bank account in any other country or investing  in a foreign country cannot be a ground to forbid him to travel abroad.

A Bench comprising Justice Rekha Pillai passed the order on a petition seeking quashing of a Look Out Circular (LOC) issued against businessman Vikas Chaudhary, Director of two garment export companies based in Delhi, and having business ties in the US, Europe, South America and the UAE.

In February 2019, the Income Tax department carried several searches in his house on the warrant issued against the Kochar Group, in which some hard drives, papers and precious jewellery were found. The LOC was then issued by the government on the request of the Income Tax department.

The argument of the petitioner was that although several searches were conducted at various places related to Chaudhary, there was no complaint filed against him. The Court reinforced the point that an LOC lapses automatically in a year, if it is not renewed by authorities after producing a record for the same.

As per 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 now the LOC cannot be saved by an amendment introduced through OM dated February 2021, which states that the LOC shall stay in force till a deletion request is received from the originator, contended the petitioner.

In such a situation, the court said it had four issues for consideration:

Whether Court can interfere with the issuance of LOC

In the first issue, the High Court mandated that courts have a secondary role while considering a challenge to an LOC and as long as it is found that the decision is a reasonable one, the Court will circumspect.

Justice Palli conveyed this very clearly that 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.

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“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 should not review the decision to issue LOC. In fact, in the case, it is found that the decision of the authorities is without application of mind to the relevant factors,so the Court can come to the rescue of the individual.

Whether it is okay for court to issue a LOC without the person being accused of any cognizable offence

The Delhi High Court said a request was once  issued for the LOC against the petitioner in February 2019, as his case was covered by the memorandum of 2017  which provides for issuance of LOC even if the petitioner is not accused of any cognizable offence.

The Court further said that the petitioner was justified in saying that LOC is valid for only one year, but in his case the position changed due to the clause J of the office Memorandum of 2021 which said that the circular will remain in force till a request for completion is made

Does the case fall in the ambit of clause ‘detrimental to economic interest

As this was a very significant question, the court clearly stated that as the court knows that LOC issuance can curtail the rights of an individual to travel abroad but in the present case, the respondents belief was that petitioners departure was detrimental as they were waiting for the authorities in Dubai to proceed the petitioner under the Black Money Act 2015, Income Tax Act 1969 and the Prevention of Money Laundering Act 2002.

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The court said as the petitioner earns his livelihood by exporting, it is important for him to travel overseas for work. It further said that LOC does not only curtail his liberty but also his right to livelihood, as enshrined in the Constitution.

The court has concluded by saying that an issuance of LOC against the petitioner without any end in sight can cause irreparable losses and damage to his business.

Justice Palli, as a final word, reiterated the fact that issuance of a LOC is an extreme step and it should be used cautiously and only in exceptional circumstances.

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