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Office memoranda of Ministry of Home Affairs authorising heads of banks to issue LOCs have no statutory backing: Karnataka High Court


The office memoranda (OMs) on lookout circular (LOC), issued by the Bureau of Immigration of the Ministry of Home Affairs, which also authorises the heads of the public sector banks to issue LOCs, is not valid in the eyes of law, the High Court of Karnataka said.

“There can be no delegation to any other entity like the Chairman/Managing Director/Chief Executive of public sector banks to issue the LOC,” the court said while pointing out that Section 21 of the Passports Act, 1967, enables the Central government to delegate its power only to any officer subordinate to the Central govt. or to the State govt. or to an officer subordinate to the State govt. or to officer of the Indian Consul abroad.

Justice Krishna S. Dixit made these observations while keeping in suspended animation the LOCs issued by the heads of the Punjab National Bank and the Bank of Baroda against India-born Emirati entrepreneur Bavaguthu Raghuram Shetty (popularly known as B.R. Shetty). Mr. Shetty is facing proceedings initiated for recovering ₹2,324 crore due to the banks in his personal capacity and as a personal guarantor to various borrowings of his companies.

“Power to delegate cannot be broadly interpreted to rope in those which Parliament itself did not intend,” the court observed while also pointing out that OMs on LOC have not been issued in the official Gazette as the delegation can be made only by a notification published in the official Gazette.

The court also noted that OMs are not shown to have been issued under any provisions of the Passports Act or any other statute.

Not set aside

However, the court did not strike down the OMs as there was no specific challenge to the validity of the OMs as the petitioner had only questioned the LOCs, which are operating against him since 2000, and sought permission to leave for Dubai.

While noticing the verdicts of other High Courts, which have already held that LOCs cannot be issued for recovery of debt, the court said that banks’ interest can be taken care of from the Mareva injunction order, which has been already secured by the banks that prohibits him from alienating, encumbering or otherwise dealing with any of his properties/assets, whether disclosed or undisclosed.

Conditions

While allowing Mr. Shetty to go abroad if no other restriction exists for his travel abroad other than these LOCs, the court directed him to file an affidavit giving an undertaking not to alienate or meddle with his properties anywhere in the globe, disclosed or undisclosed, and to come back to India whenever needed for legal proceedings, and not to leave the country without the prior permission.

No criminal proceedings

Noticing that the banks have not initiated any criminal proceedings against him so far, the court said Mr. Shetty should not resist, on any ground, if any proceedings that may be instituted under the provisions of the Fugitive Economic Offenders Act of 2018, the Extradition Act, 1962, or such other law, or any extradition/rendition proceedings are taken up abroad.



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