'Only A Case Of Money Recovery And Non-Payment To Bank': Delhi HC Quashes Look Out Circular

The Delhi High Court quashed a Lookout Circular (LOC) issued against the ex-director of M/s Zinc Global Private Limited.

The Court noted that the LOC cannot be sustained as the case involved the only recovery of money and a failure to repay with no exceptional circumstances.

The Bench of Justice Subramonium Prasad observed, “In the present case, since there is no criminal case against the Petitioner and the facts of the case reveal that it is only a case of recovery of money and non-payment on account of the Petitioner to return the money to the bank, the lookout circular cannot be sustained. No extraordinary circumstances have been shown”.

Advocate Manohar Malik appeared for the Petitioner and Standing Counsel Anurag Ahluwalia with Government Pleader Kritagya Kumar Kait appeared for the Union.

The petitioner, previously holding the position of Director at M/s Zinc Global Private Limited, was involved in proceedings under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) due to the company's defaulted credit facilities. The Petitioner contended that the total group liability amounting to Rs. 383 crores does not pertain to him, as he served as a director in only one company.

The petitioner approached the High Court through a writ petition, specifically seeking the annulment of an office memorandum from the Immigration Department, Ministry of Home Affairs, along with the lookout circular (LOC). The Petitioner contended that the dispute was directed exclusively towards the issuance of the LOC, not questioning the validity of the mentioned office memorandum.

The Court noted that clause 6 of the 2021 Office Memorandum outlines that a LOC can be issued by the bank if authorities believe that allowing the person to leave the country would be harmful to India's economic interests. The Court referred to the case of Apurve Goel v Bureau of Immigration [2023 SCC OnLine Del 5917], whereby LOC was quashed because it was not deemed detrimental to India's economic interests, and there was no involvement of a preexisting condition.

In the case, the Bench noted that there is no criminal charge against the Petitioner and the matter revolves around the recovery of money and non-payment by the Petitioner to the bank. Therefore, the Bench held that LOC was not maintainable. However, the Bench held that if evidence emerges during the forensic audit indicating the petitioner's involvement in money siphoning or fraud, the bank retains the option to recommend issuing a fresh LOC to the concerned authorities.

Accordingly, the Court disposed of the Petition.

Cause Title: Reshma Mittal v Union Of India & Anr (2023:DHC:9351)

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