Courts can't assess whether material to open LOC was sufficient: Delhi High Court

The Delhi High Court has held that courts cannot assess whether the authority issuing Look Out Circulars (LOCs) had sufficient material to justify its decision. 

A Division Bench of Justices C Hari Shankar and Om Prakash Shukla has held that courts cannot sit in appeal over the subjective satisfaction of the authority issuing the LOC. 

“While judicial review of the decision to issue the LOC is not inexorably foreclosed, the Court cannot sit in appeal over the subjective satisfaction of the authority issuing the LOC or assess, for itself, whether the material on the basis of which the decision has been taken is sufficient to justify the decision,” the Bench observed. 

It clarified that in a case where the material is only speculative, or appears to the court to be “no more than moonshine”, the court should ensure that the fundamental right of the citizen is not jeopardised.

“The Court cannot, however, quite clearly, assess, for itself, whether the material on which the authority issuing the LOC has acted, and done so, is qualitatively or quantitatively sufficient to justify the decision,” the Bench underscored. 

It reasoned that the sufficiency of the material has to fundamentally remain within the “province of the authority issuing the LOC”. 

“The Court cannot don the cloak of a super-executive authority,” it added. 

The Bench rendered these findings while setting aside a single-judge's order quashing a LOC issued against garment exporter Vikas Chaudhary. The LOC was issued at the instance of the Income Tax Department. 

Notably, the LOC against Chaudhary alleged undisclosed foreign assets and interests, including a purported acquisition of 10 percent shares in a Dubai-based entity, Centurion International Limited.

The single judge had held that the case against Chaudhary rested on an unsigned draft agreement and inconclusive WhatsApp chats, and that continuing the LOC for nearly 3 years without registering any case under the Income Tax Act, the Black Money Act, or the Prevention of Money Laundering Act (PMLA) was impermissible, especially given Chaudhary's livelihood as an exporter requiring overseas travel. 

Disagreeing, the Division Bench held that judicial review of a decision to issue an LOC cannot extend to assessing the sufficiency of material relied upon by the executive. 

It referred to amended paragraph 8(j) of the 2010 Office Memorandum (OM) clause, which referred to issuance of LOCs against persons whose departure from India “was detrimental to the economic interests of India” to hold that subjective satisfaction envisaged in the provision is that of the issuing authority. 

“Unless and until, therefore, the Court is satisfied that there was no material on the basis of which the authority issuing the LOC could have arrived at the satisfaction regarding the existence of one, or more, of the factors envisaged in the amended para 8(j), or that, for the sake of argument, the material available was such as would never persuade any right thinking person to issue an LOC, the Court would, to our mind, not be justified in interfering with the decision to issue the LOC merely because, in its estimation, the material available was not sufficient to merit issuance of the LOC,” the Court concluded.

Senior Standing Counsel Indruj Singh Rai along with Advocates Sanjeev Menon, Rahul Singh, Priya Sarkar and Gaurav Kumar represented the Income Tax Department. 

Advocates Shadman Ahmed Siddiqui, Kartik Pandey, Vaibhav Prasad Singh, Anushka Srivastava, Akshara Pareek and Daniyal appeared for Vikas Chaudhary. 

Central Government Standing Counsel (CGSC) Farman Ali with Advocates Usha Jamnal and Tanya represented the Union government.

[Read Judgment]