Delhi High Court Quashes Look Out Circular Issued By Bank

07 May 2024 8:19 AM

By: Admin

New Delhi, August 17, 2023 — The Delhi High Court today rendered a decision in favor of Nipun Singhal, quashing the Look Out Circular (LOC) issued against him by the Bank of Baroda. Singhal had been accused of being a ‘wilful defaulter’ in a case related to financial irregularities of Lloyd Electric and Engineering Limited, where he once served as a Director.

Justice Subramonium Prasad, in his judgment, observed that “almost all the transactions mentioned in the [Forensic Audit] Report are post May, 2017,” which implies that Singhal had already resigned his directorship by the time the alleged financial misdeeds occurred.

The Court took note that Singhal had already resigned from the company in May 2017, and the transactions that led to the company being declared as a Non-performing asset (NPA) happened much later, after his resignation.

The judgment highlighted the counter-affidavit filed by Bank of Baroda, which included details from a Forensic Audit Report for the period from January 1, 2017, to December 31, 2018. Although the bank had argued that Singhal was a “Key Managerial Personnel,” the Court found that the transactions under scrutiny largely occurred after Singhal’s tenure at the company.

Singhal had initially approached the Court after being stopped at Mumbai Airport due to the LOC while he was planning to travel to Spain. The LOC prevented him from leaving the country, prompting him to challenge its issuance in court.

The Ministry of Corporate Affairs had filed a reply indicating that Singhal allegedly diverted 11.78 crores to his private companies through bogus consultancy bills. However, the Court found that these allegations were not sufficient to hold Singhal culpable as the transactions mentioned were post his resignation from the company.

In a significant development, the Court also mentioned that Singhal had cooperated fully with the CBI investigation, further strengthening his case.

The decision of the Delhi High Court sends a strong message regarding the due diligence needed before issuing Look Out Circulars and declaring individuals as wilful defaulters, especially when substantial evidence does not support such allegations.

Date of Decision: 17 August, 2023

NIPUN SINGHAL vs UNION OF INDIA & ORS