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Merely stating person's departure will 'affect country's economic interests' insufficient for LOC: Delhi HC [Read Judgment]

By Shreya Agarwal      29 December, 2023 04:13 PM      0 Comments

NEW DELHI:  “Merely using the phrase that departure of a person will affect the economic interests of the country alone is not sufficient to sustain an LOC”, the Delhi High Court has held while hearing a person's challenge to a Look Out Circular issued against him.

A single-judge bench of Justice Subramonium Prasad of the Delhi High Court held that this is especially so in the present case as the civil proceedings against the person have already culminated.

The Court was hearing a petition by one Hulas Rahul Gupta, erstwhile Managing Director and founder of a company named M/s Indosolar Ltd, seeking quashing of a Look Out Circular (LOC) issued against him by the Bureau of Immigration at the behest of the Union Bank of India (UBI).

Ruling in Gupta’s favour, the Court reasoned that there was no criminal case registered against Gupta, and loans were given to Gupta's company between 2008 and 2010.

“The loan account of the company was declared as NPA in the year 2013, and till the LOC was opened against the Petitioner in the year 2021, there was no allegation of siphoning off money or that the money has been misappropriated either by the company or by the guarantors,” the Court added.

It also took note of the fact that although recovery proceedings were initiated against Gupta on the ground that he was a guarantor, there was nothing on record to show that he was involved in the day-to-day affairs of the company.

Further, Gupta had initiated the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC) against himself which had culminated in the proceedings before the National Company Law Tribunal (NCLT).

Noting that, “the civil proceedings initiated by the Bank against the Petitioner have also culminated,” the Court held that, “Having failed to recover the money by resorting to the various remedies available under law, the Bank cannot now open the LOC.”

Facts of the case

The brief facts of the case are that UBI (as the lead bank) along with other banks as part of a consortium had extended certain credit facilities and loans to the said company, against which Gupta and his late father stood themselves as the Personal Guarantors.

A Guarantee Agreement was also executed in this regard.

However, the loan account of the Company was classified as a Non-Performing Asset (NPA) on July 1, 2013 and a demand notice under Section 13 (2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002) was issued against the company.

UBI also initiated proceedings under the Recovery of Debts And Bankruptcy Act, 1993 (RDB Act, 1993) by filing a case for the recovery of the outstanding amount of over Rs.280 crores before the Debt Recovery Tribunal (DRT).

Gupta was arrayed as a defendant in the said proceedings. The DRT passed a decree in favour of UBI for recovery of over Rs. 280 crores as on April 30, 2018 along with pendente-lite and future simple interest @ 10 % p.a., till realisation, from the date of the institution of its application.

However, Gupta initiated the Insolvency Resolution Process under IBC. Under this a Resolution Plan was approved.

The LOC in challenge was then issued against Gupta by the Bureau of Immigration in 2021 at the recommendation of UBI.

Gupta was stopped at the airport while he was travelling to Canada to see his mother owing to the LOC issued against him, challenging which he moved the Delhi High Court.

Cause Title: Hulas Rahul Gupta vs Bureau of Immigration & Ors


[Read Judgment]

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