Insights
The evolution of look out circulars in India
September 17, 2024Introduction
- A Look Out Circular (“LOC(s)”) is essentially an administrative mechanism whereby certain designated authorities are permitted to issue requests to the immigration/emigration authorities to monitor and control the movement of individuals, whether they are Indian or freeing nationals, arriving or departing India at various points of entry and exit, such as airports, seaports, and land borders. The issuance of an LOC can have significant implications for the individual named, including restrictions on travel, potential detention, and legal proceedings.
- Guidelines for the issuance of LOCs have historically been prescribed through Office Memorandums (“OM(s)”) issued by the Ministry of Home Affairs (“MoHA”), from time to time. These OMs invariably set-out the circumstances in which an LOC may be issued, designates certain authorities as being permitted to request for the issuance of an LOC and provide the procedure by way of which an LOC may be issued by the immigration/emigration authorities.
- The issuance of an LOC typically involves coordination between multiple government agencies, including the police, intelligence agencies, MoHA and Bureau of Immigration (“BOI”). The process is initiated based on a request from an ‘originating/requesting’ agency such as the Superintendent of Police to the BOI to issue an LOC against an individual in case certain specific criteria i.e. reasons for opening LOC are met which justify the need to monitor or restrict an individual’s movement.
- Pursuant to receipt of such a request, the BOI will enter the LOC record into a comprehensive database of LOCs, which can be accessed by immigration officials, and which would provide the action required to be initiated by these officials. These actions may include informing the ‘originating/requesting agency of the arrival/departure of an individual, the destination details of an individual, detaining an individual, reestrict an individual from leaving the country or entering the country etc.’
Evolution of Look Out Circulars
- The framework for issuance of LOCs has evolved significantly over time through several amendments to the OMs. The earliest OMs from the years 1979 and 2000 are not available in the public domain[1]. However, it is understood that under these OMs, the designated ‘originating/requesting agencies included “the Ministry of Home Affairs, the Customs and Income Tax Department, Directorate of Revenue Intelligence, Central Bureau of Investigation, Interpol, Regional Passport Officers, Police Authorities in various States etc.” Furthermore, as per the 2000 OM, the request must be “with the approval of an officer not below the rank of Deputy Secretary Government of India/Joint Secretary in State Government/Concerned Superintendent of Police at district level.”[2]
- Subsequently, in 2010, in the decision of Vikram Sharma & Ors. vs Union of India & Ors, the Delhi High Court passed a direction to the MoHA to issue certain clarifications regarding the concerned authorities which can issue requests for LOCs. This direction was passed in the backdrop of the Court’s decision that the National Commission of Women was not authorized to request the issuance of an LOC.
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- Pursuant to this decision, the MoHA issued the OM of 27 October 2010 (“2010 OM”) which provided a comprehensive framework for the issuance, enforcement, and cancellation of LOCs. Some of the important guidelines under this OM are summarized below:
- Issuance Criteria: LOCs can be issued for individuals involved in cognizable offenses under the IPC or other penal laws. The guidelines specify the conditions under which an LOC can be initiated, ensuring that it is based on substantial evidence and justified reasons. In cases where there is no cognizable offence under IPC or other penal laws, the LOC subject cannot be detained/arrested or prevented from leaving the country and the originating agency can only request that they be informed about the arrival/departure of the LOC subject.
- Exceptional Circumstances for Issuance: The LOCs may also be issued in exceptional cases without complete parameters/case details against CI suspects, terrorists, anti-national elements etc. in the larger national interest.
- Authorized Originating Agencies: The guidelines stipulate thirteen officers from various originating agencies including the Police, Directorate of Revenue Intelligence, Research and Analysis Wing, Central Bureau of Investigation, Enforcement Directorate, Deputy Magistrate of District, Joint Secretary and Deputy Secretary level officers etc. who are authorized to request for issuance of an LOC. Furthermore, LOCs may also be issued as per the directions of any Criminal Court of India. It is stated that other statutory bodies such as National Commission for Woman, National Human Rights Commission may place a request before the relevant law enforcement agencies, who will assess the request and then issue a request for opening an LOC, in terms of the OM.
- Legal Liability: Legal liability of action taken by the immigration authorities in pursuance of the LOC rests with the originating agency.
- Cancellation and Review: The LOC will be valid for a period of one year from the date of issue and name of the subject shall be automatically removed from the LOC thereafter unless the originating agency requests for its renewal within a period of one year.
- In the years that followed, there were a number of further amendments to the 2010 OM. On 5 December 2017, the 2010 OM was amended to the extent that the exceptional cases where an LOC can be issued even in cases not covered by the OM was enlarged to include cases where the departure of a person is detrimental to the sovereignty, security, integrity of India, bilateral relations with any country or to the strategic and/or economic interests of India or if such person, if allowed to leave may indulge in terrorism or offences against the State and/or that such departure ought not to be permitted in the larger public interest.
- In 2018 and 2019, there were a number of further amendments, significantly, the Serious Fraud Investigation Office was authorized to trigger LOC requests, as were the Chairman (State Bank of India)/Managing Directors/Chief Executive Officers of Public Sector Banks (“PSBs”), if departure of a particular person is perceived to be detrimental to the economic interests of India or if the departure of such person from India ought not be permitted in the larger public interest. On 22 February 2021, the 2010 OM was once again amended (“2021 OM”), amongst other things, stipulated that an opened LOC would not automatically lapse and would instead remain in force until and unless a deletion request is received from the BoI from the originating agency itself.
Issuance of LOCs by PSBs
- As mentioned above, the 2018 amendment to the 2010 OM permitted certain officers of PSBs to request for the issuance of LOCs. The inclusion of such officers can be traced to a specific request for the same from the Ministry of Finance dated 4 October 2018 to the MoHA. Pursuant to the amendment, the Ministry of Finance also communicated the said amendment to all the PSBs and instructed them to ‘strictly comply with the OM against wilful defaulters’.
- It is important to note that the Reserve Bank of India publishes a “Master Circular on Willful Defaulters”, which is amended from time to time, which provides the mechanism and certain parameters for identifying/declaring whether a loan default by an individual, business enterprise etc. ought to be categorized as a wilful default. Generally, a default is considered as a wilful default in the event that a borrower defaults in meeting payment/ repayment obligations to the lender, despite having the capacity to honour the said obligations or if a borrower has diverted the funds availed under the credit facility from a lender, or siphoned off the funds availed under the credit facility, or disposed of immovable or movable assets provided for the purpose of securing the credit facility without the approval of the lender, or where a borrower or the promoter has failed in its commitment to the lender to infuse equity despite having the ability to infuse the equity.
- As per an article published by the Indian Express earlier this year[3], banks have categorized 17,713 accounts involving loans to the tune of INR 3,53,129 Crores as being in the wilful default category as of December 2023. The article also mentions that six PSBs, who had responded to Right to Information Applications filed by the newspaper, had issued 1071 LOCs against defaulters in the last 5 years. Therefore, it is evident that the PSBs have been exercising the power to submit requests to the BOI for issuance of LOCs and the BOI is acting on such requests.
Recent Judicial Decisions passed by the Bombay and Delhi High Courts
- The recent judgement by the Division Bench of the Bombay High Court in the case of Viraj Chetan Shah v. Union of India & Anr[4] provides critical insights into the legal and procedural aspects of LOCs being issued by the PSBs. This decision was passed in relation to thirty-eight different cases wherein LOCs issued by PSBs were being challenged. The Court considered the limited challenge to the amendment to the OMs that permitted PSBs to request for the issuance of an LOC against individuals said to be in default.
- The primary grounds of challenge were that the amendment was ultra vires of Article 21 of the Constitution of India, without the authority of law and that the field of regulating travel is already fully occupied by the Passport Act, 1967. On the other hand, the PSBs argued that the LOCs were required as the individuals against whom LOCs were issued have defaulted on repaying loans to the PSBs, which comprise of public funds. These individuals pose a flight risk and in case they leave the jurisdiction of India, it would be difficult to pursue legal action against them and hence allowing these individuals to travel freely would be detrimental to the economic interests of India.
- In this Judgment, the Bombay High Court provided extensive analysis regarding the constitutionality of the provision in the OM which enables PSB’s to request for an LOC to be issued. The Court inter alia held that:
- The OMs are merely executive actions and neither constitute law as per Article 13 of the Constitution of India (“Constitution”) nor procedure established by law as stipulated under Article 12 of the Constitution.
- Further, the Court held that the OMs cannot sustain if they are violative of fundamental rights or are not in conformity with the requirements of procedural fairness.
- The Court struck down Clause 8(b)(xv) of the 2010 OM (equivalent to Clause 6(b)(xv) of the 2021 OM) as being ultra vires of Article 14 of the Constitution as being impermissible and invalid classification given that the same only empowers PSBs to make requests for LOCs and not other private banks.
- That being said, the Court also held that it was not persuaded that the OMs are generally without the authority of law, arbitrary or illegal per se and went onto note that “there are many situations, diverse purposes and varied actions that might legitimately form the basis of a specific LOC.”
- The Delhi High Court has passed multiple decisions which have held in relation to the issuance of LOCs “when an individual is not involved in any offence under the IPC or any other penal law, the said power should be used in exceptional circumstances and not as a matter of routine.[5]” In the case of Balram Garg vs Union of India & Anr.[6]the Delhi High Court analyzed the issuance of LOCs by PSBs in exceptional cases basis the “detrimental to the economic interest of India” exception in the 2010 OM. The High Court held that in view of the decision of the Bombay High Court in Viraj Chetan Shah (Supra), the Chairman/Managing Director/Chief Executives of Public Sector Banks cannot make a request for issuance of an LOC.
- Notably, the decision in Viraj Chetan Shah (Supra) has been recently challenged before the Supreme Court of India by way of Special Leave Petitions[7] and the same are presently pending. On 12 August 2024, the Supreme Court passed an interim direction that the petitioners before the Bombay High Court shall seek permission from the High Court in the event that they wish to travel abroad. The Supreme Court also clarified that the pendency of the Special Leave Petitions shall not come in the way of the formulation of a fresh OM, if necessary.
Conclusion
These recent decisions provide an important perspective into the balance that needs to be maintained between the fundamental right to locomotion and the executive’s ability to restrict travel for the sake of law enforcement and national security. Over the last few decades, there has been a rapid increase in international travel with millions of travelers entering and leaving India every year. During this period, the framework surrounding LOCs has also gradually evolved with a number of modifications which have enlarged the circumstances in which LOCs can be issued and the authorities who can request for issuance of LOCs. The Ministry of Home Affairs has stated before Parliament that, between January 2018 to December 2020, there were 40,735 LOCs issued against foreigners alone. This clearly demonstrates the relevance of LOCs in modern times. Given the prevalence of the use of LOCs, it might be prudent for the Government to evaluate whether this mechanism ought to be governed by a formal statutory framework which includes provisions to safeguard principles of natural justice and constitutional rights.
Footnote
[1] Viraj Chetan Shah v. Union of India, 2024 SCC OnLine Bom 1195
[2] Vikram Sharma v. Union of India, 2010 SCC OnLine Del 2475
[3] https://indianexpress.com/article/business/banking-and-finance/six-psu-banks-issued-1071-look-out-circulars-against-defaulters-in-last-5-years-9370321/#:~:text=In%20their%20bid%20to%20recover,filed%20by%20The%20Indian%20Express.
[4] 2024 SCC OnLine Bom 1195
[5] Preet Kaur v. Bureau of Immigration, 2024 SCC OnLine Del 4798; Rajesh Kumar Mehta v. Union of India, 2024 SCC OnLine Del 4153
[6] 2024 SCC OnLine Del 4807
[7] Petitions for Special leave to Appeal (C) No(s). 17194-17230/2024
This article was originally published in Mondaq on 17 September 2024 Co-written by: Aditya Malhotra, Partner; Anuj Loya, Associate. Click here for original article
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Contributed by: Aditya Malhotra, Partner; Anuj Loya, Associate
Disclaimer
This is intended for general information purposes only. The views and opinions expressed in this article are those of the author/authors and does not necessarily reflect the views of the firm.
