The Bombay High Court clarified that an ongoing investigation is not a sufficient ground to continue the Look Out Circular (LOC), especially when considerable time has passed without initiation of any criminal proceedings. Accordingly, the Court held that insistence on demanding US customs declarations is no justification for invoking the coercive measure like LOC, which trammels the fundamental right to travel under Article 21 of the Constitution.
The Court therefore quashed the LOC, pointing out that when the petitioners are neither accused of committing a cognisable offence, nor any criminal case was registered against them, then the essential parameters for issuing the LOC are not met.
The Division Bench comprising Justice Bharati Dangre and Justice Shyam C. Chandak observed that the recourse to an LOC is to be taken in cognizable offences under the IPC or other penal laws. Finding that the petitioners have strong business roots in the country, have been in business for forty years, own several immovable properties, and have always returned from their travels abroad, undertaken with court permission, the Bench negated the apprehension that the petitioners would flee the country, calling it ‘manifestly untenable’.
The Bench emphasised that the originating agency must review the LOCs on a quarterly and annual basis. Since it was conceded by the counsel for the DRI that there had been no review of the LOC issued against the petitioners since 2022, the continuation of the LOC would be illegal, as no attempt was made to review it, and it cannot remain in force indefinitely.
As the initiation of the LOC was contrary to the Office Memorandum dated 22 February 2021, and its continuation was illegal, the Bench set aside the LOC and its subsequent renewals, and also rejected the request for a stay of the order.
Briefly, the Directorate of Revenue Intelligence (DRI) initiated an investigation based on intelligence suggesting that the petitioners’ companies were involved in the fraudulent availment of higher duty drawback and other export incentives. The allegations involved mis-declaring the value and other particulars of goods, specifically carpets and fabrics, exported to the United States of America.
During the investigation, the business and residential premises of key persons were searched under the Customs Act, and statements of the petitioners were recorded. Later, the Department issued four separate show-cause notices, some of which have been adjudicated, while others are pending. The petitioners, who are Directors of Kaka Overseas Ltd. and Rugsotic Private Limited, therefore, filed petitions seeking to quash a Look Out Circular (LOC) issued against them and its subsequent renewals.
Appearances:
Senior Advocate Darius Shroff, along with Advocates Dr Sujay Kantawala, Anupam Dighe, Chandni Tanna, Prathamesh Chavan, and Aishwarya Kantawala, for the Petitioner
Advocates Jitendra B. Mishra, Sangeeta Yadav, Rupesh Dubey, Shehnaz V. Bharucha, and A.A. Ansari, for the Respondent
