Can a now resigned Independent Director be detained from leaving the country if a fraud case is initiated on his previous company?

Last updated: 05 May 2021

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Quick Summary

This case concerns a former independent director who resigned in 2015 and relocated abroad. In 2021, he was prevented from leaving India due to a Look Out Circular (LOC) issued at the request of the Serious Fraud Investigation Office (SFIO) concerning his former company. The director challenged the LOC, arguing it was issued unfairly after his resignation and relocation.

Court :
Delhi High Court

Brief :
The Petitioner in the present petition has challenged the Look Out Circular (hereinafter, ‘LOC’) issued against him by Respondent Nos 3 and 4 i.e., the Ministry of Corporate Affairs (hereinafter, ‘MCA’) and the Serious Fraud Investigation Office (hereinafter, ‘SFIO’) and prays for the same to be quashed.

Citation :
W.P.(C) 3374/2021

IN THE HIGH COURT OF DELHI AT NEW DELHI

Date of decision: 12th April, 2021

W.P.(C) 3374/2021

BRIJ BHUSHAN KATHURIA ..... Petitioner

Through Ms. Maninder Acharya, Sr. Advocate
with Mr. Siddharth Bhatli, Mr.
Abhishek Choudhary and Mr.
Abhiyant Singh, Advocates
(M: 9899423924 & 8860346700)

versus

UNION OF INDIA & ORS. ..... Respondents
Through Mr. Rakesh Kumar, CGSC with Mr.
Raghav Nagar, Swasti Aggarwal,
Advocates for Respondents/SFIO
(M: 9711588506)
Mr. Nitin Srivastav, Investigating
Officer
(M: 9599569957)

CORAM:
JUSTICE PRATHIBA M. SINGH

Prathiba M. Singh, J.(Oral)

1. This hearing has been done through Video Conferencing. CM APPL. 10253/2021 (for interim stay)

2. The Petitioner in the present petition has challenged the Look Out Circular (hereinafter, ‘LOC’) issued against him by Respondent Nos 3 and 4 i.e., the Ministry of Corporate Affairs (hereinafter, ‘MCA’) and the Serious Fraud Investigation Office (hereinafter, ‘SFIO’) and prays for the same to be quashed.

3. The brief background of the matter is that the Petitioner is a Chartered Accountant who was inducted in the Board of M/s Techpro Systems Limited, as a Non-Executive Independent Director, in the Annual General Meeting dated 26th September 2007. The Petitioner is working in Oman and relocated there on 24th October, 2009. He is stated to have resigned from the post of Independent Director of M/s Techpro Systems Limited on 13th January, 2015 due to his full time employment in Oman and health concerns. In 2017, Corporate Insolvency Resolution Proceedings were initiated against M/s Techpro Systems Limited, and on 5th May 2019, the Resolution Plan was approved by the NCLT.

4. The case of the Petitioner is that he had travelled to India on 2nd February, 2021 and was scheduled to fly back to Oman on 21st February, 2021. However, he was stopped at the airport and was intimated about the LOC which has been issued against him at the behest of the SFIO. The Petitioner was thereafter issued summons bearing F. No. SFIO/INV/TSL/1304/2020 by the SFIO on 23rd February 2021, through WhatsApp, to personally appear before the Investigating Officer on 2nd March, 2021.

To know more in details find the attachment file

FAQ :

Yes, even if an independent director has resigned and relocated abroad, an LOC can be issued against them if a fraud case is initiated against the company they were previously associated with.

A Look Out Circular is a notice issued by authorities to prevent an individual from leaving the country, typically in connection with an investigation or legal proceedings.

Corporate Insolvency Resolution Proceedings were initiated against M/s Techpro Systems Limited in 2017.

The petitioner resigned from his post as an Independent Director on 13th January 2015.

The petitioner challenged the LOC because he had resigned from his directorship in 2015, relocated abroad in 2009, and was prevented from returning to his home in Oman in 2021.