Look Out Circular | Directors Of Company Can't Be Denied 'Right To Travel Abroad' In Absence Of Any Non-Compoundable Offence: Orissa High Court

The Orissa High Court has recently held that Directors/office bearers of a company cannot be deprived of their fundamental right to visit abroad by issuing Look Out Circular (LOC) when there exists no prima facie non-compoundable offence against them. Further, mere bald allegations, without any rigid substance to substantiate the same, cannot be made basis for issuing LOC. While quashing the LOC issued against the petitioners herein, a Single Judge Bench of Justice Biswanath Rath noted, "There is no complaining of non-cooperation against any of the Petitioners. Further as of now there is no existence of the Petitioners' involvement in any non-compoundable offence. In the circumstance, this Court finds, continuance of LOC may be dangerous, as it had already affected the Fundamental Rights of the Petitioners to travel abroad for promotion of their business. The entire inspection is already over and any of the Petitioners movement to abroad can very well be controlled by setting out terms and conditions involving each of the Petitioners." Factual Background: The petitioners are Directors/officer bearers of M/s. Utkal Galvanizers Ltd. Opposite Party No. 2, the ROC-cum-OL, Odisha forwarded a complaint on 5.11.2020 made by one whistle-blower through email dated 21.10.2020. The petitioners denied the contents in the complaint in their email response dated 9.11.2020. While the matter stood thus, almost after a hiatus of five months, O.P. No. 2 on 13.4.2021 issued a letter to M/s. Utkal Galvanizer Ltd. disclosing therein that there has to be an inspection of the company under Section 206(5) of the Companies Act, 2013 under the direction of the Ministry of Corporate Affairs, Government of India. In the meanwhile, the Company Secretary of M/s. Utkal Galvanizer Ltd. was prevented from travelling abroad at New Delhi International Airport by the Immigration Authorities. She was verbally informed by the Authorities that Look Out Circulars (LOC) were issued against all the key managerial personnel pending inspection of the records and accounts of the company. Finding unnecessary harassment, the Managing Director of the company, petitioner no. 1, vide letter dated 2.3.2022 requested O.P. 1 to reconsider the decision to impose restrictions on overseas travel of the Company Directors and key managerial personnel. In the said letter, it was shown that there is urgency for some of the petitioners, as they were to participate in a business of export dealing through trade scheduled to take place in the USA between 26th to 28th April, 2022. Petitioner No. 1 had also enclosed supportive documents while claiming such relief. It was alleged, despite such request, there was no response. Taking recourse to the Office Memorandum dated 27.10.2010 of the Ministry of Home Affairs, the petitioners claimed that restricting their movement as well as issuing LOC are contrary to the circular issued by the Ministry itself. They pleaded that there are violations of their invaluable fundamental rights and also there has been unnecessary harassment to each of the petitioners in absence of their involvement in any non-compoundable offence as of now. The petitioners claimed that there is no material whatsoever available showing their involvement in any non-compoundable offence. They also highlighted that they were cooperating all through. Thus, they prayed for quashing the LOC through the writ petitions. Contentions of the Petitioners: Mr. M.K. Mishra, Senior Advocate appearing for the petitioners did not dispute that there is an investigation undergoing under Section 207(3) of the Companies Act. He asserted that there has been full cooperation by each of the petitioners representing the company till date. He further contended that even though the inspection proceeding involving the petitioners commenced on 13.4.2021, offences whatever alleged to have been committed by the petitioners' company remained compoundable. Taking through the preliminary affidavit and the additional affidavit of the Competent Authority, he argued for quashing the LOC on the premises that whole submission and the process of investigation is to reveal any non-compoundable offence under any provision of law against the company. Further, he highlighted that the petitioners have been thoroughly cooperative on the issue and in the meantime, almost one and half years have elapsed. He brought to the notice of the Court that petitioners have already suffered for their inability to participate in the International Trade Fairs, which has been detrimental to their business. Thus, if the restrictions on the petitioners in travelling abroad continues, he vehemently argued, there will be a huge loss to the company, which cannot be compensated otherwise. Contentions of the Respondents: Mr. P.K. Parhi, Assistant Solicitor General of India for the respondents, attempted to justify...

Look Out Circular | Directors Of Company Can't Be Denied 'Right To Travel Abroad' In Absence Of Any Non-Compoundable Offence: Orissa High Court

Jyoti Prakash Dutta

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