Look-Out Circular cannot be issued against a person where no cognizable offence is pending

Delhi High Court Quashes Look-Out Circular Against Businessman Amidst Legal Controversy. Court rules that LOC issued against Sandeep Dhanuka is unsustainable; directs continued cooperation with investigation.

In a significant legal development, the Delhi High Court has quashed the Look-Out Circular (LOC) issued against Mr. Sandeep Dhanuka by the Directorate of Revenue Intelligence (DRI). The LOC was initially issued due to allegations of overvaluation and misdeclaration in coal imports linked to Mr. Dhanuka's company, Century Exports Limited (CEL), based in Hong Kong.

The court, presided over by Justice Sachin Datta, found that no cognizable offence was pending against the petitioner. It noted that Mr. Dhanuka had cooperated with the investigation and provided necessary documents. The court emphasized that the proceedings under the Show Cause Notice (SCN) had been conclusively adjudicated in favor of the petitioner, with the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Mumbai upholding the earlier findings in favor of Mr. Dhanuka.

The judgment highlighted that the LOC could not be justified under the guidelines, as laid out in the Office Memorandum dated 22 February 2021. These guidelines stipulate that an LOC can only be issued in cases involving cognizable offences under the Indian Penal Code or other penal laws, or in exceptional cases where the departure of a person might be detrimental to the economic interests of India or the larger public interest. The court found that such exceptions were not applicable in this case.

Moreover, the court addressed the issue of territorial jurisdiction, affirming its authority to hear the petition as the cause of action partially arose within its jurisdiction. Mr. Dhanuka was detained in Delhi, and his statement was recorded there, further solidifying the court's jurisdiction in this matter.

Mr. Dhanuka, represented by Senior Advocate Mr. Sidharth Luthra, had consistently argued that he was not a flight risk and had deep-rooted connections in India, including family ties and substantial assets. The court acknowledged his commitment to continue cooperating with the authorities, subject to an undertaking to this effect.

The court's decision underscores the importance of adhering to procedural guidelines when issuing LOCs, especially in cases where the alleged offences are non-cognizable. It also reiterates the necessity of protecting individuals' right to travel, which is a fundamental right under Article 21 of the Indian Constitution.

Bottom Line:

Look-Out Circular cannot be issued against a person where no cognizable offence is pending, the subject has cooperated with investigations, and proceedings under related Show Cause Notice have been conclusively adjudicated in favor of the subject.

Statutory provision(s): Customs Act, 1962 Sections 111, 112, 114AA, 124; Constitution of India, 1950 Article 226; Office Memorandum dated 22.02.2021 Clauses (H), (I), (L).

Mr. Sandeep Dhanuka v. Directorate of Revenue Intelligence, (Delhi) : Law Finder Doc Id # 2803604