LOC Issuance: A Matter of Reason, Not Routine

Introduction

The High Court of Bombay has, in the matter of Siddhartha Sudhir Moravekar v. Serious Fraud Investigation Officer[i], quashed the lookout circular (‘LOC’) issued by the Serious Fraud Investigation Officer (‘SFIO’) and observed that it could not be issued in a routine and continuous manner.

Brief Facts

• An LOC was issued against Siddharth Sudhir Moravekar (‘Petitioner’) at the behest of the FIR lodged by the Economic Offences Wing (EOW) against certain persons, including Petitioner’s father, which led to the subsequent filing of the prosecution complaint against Pancard Clubs Pvt. Ltd. (‘Company’) by the Securities Exchange Board of India (‘SEBI’)

• The aforementioned complaints were filed against the Company and its Directors, and it was admitted that the Petitioner was neither a Director nor a shareholder of the said Company. Further, the Petitioner was not arrayed as an accused by SEBI in any of the complaints they filed.

• Even though the Petitioner had admittedly cooperated with the SFIO during the investigation and fully complied with the terms and conditions imposed on him during the suspension of his LOC, the SFIO opposed the cancellation/quashing of the LOC as the Court had yet to take cognisance of the present complaint. This compelled the Petitioner to file the said petition.

Held

The High Court, while quashing and setting aside the LOC issued qua the Petitioner, observed that an LOC could not be used as an instrument to terrorise the Petitioner indefinitely, especially in circumstances wherein his cooperation in the investigation has substantially been proved.

Through his conduct, the Petitioner established his willingness to cooperate in the investigation at all stages. Thus, an LOC cannot and should not be invariably used to deprive the Petitioner or any other person of his fundamental right to travel freely.

Our Analysis

The issuance of an LOC has been introduced as a punitive measure to prevent economic offenders from escaping prosecution and trial. Over the years, the commission of economic offences has become more frequent, with graver and far-reaching consequences, and thus, the issuance of an LOC is seen as the first safeguard to secure the interest of the exchequer.

However, the practice wherein LOCs are issued for an indefinite period is detrimental, considering that the personal liberty of the person was compromised for prolonged periods by regulatory agencies, only being fearful of the fact that an accused might abscond. In such cases, the intelligible differentia of higher statutory bodies must prevail. They could look and act beyond the fear of flight and relax the boundaries imposed on a person against whom an LOC has been issued based on the corporation and conduct he shows/might have shown during the investigation against the person.

End Note

[i] [2024] 164 taxmann.com 718 (Bombay).

Authored by Anshi Bhatia, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.