Facts of the Case

Apurve Goel and Priyanka Goel, former directors of a company originally called Sharaji Duplex Board Limited (later AAA Paper Marketing Limited, then AAA Paper Limited), challenged Look Out Circulars (LOCs) issued against them at the instance of Bank of Baroda. The company had availed credit facilities of Rs. 5.25 crore (later enhanced to Rs. 28.50 crore) secured by mortgage and personal guarantees of its promoters/directors. Apurve Goel had resigned as director in 2019 (having joined in 2006) and Priyanka Goel in 2014 (having joined in 2010). Between 2015-2019, the company's operations were affected by, among other factors, the introduction of GST, leading to tax complexities, and the loan account was eventually declared a non-performing asset on 31.07.2019, triggering SARFAESI proceedings and invocation of the personal guarantees, on the basis of which LOCs were opened against the petitioners.

Issues Involved

  1. Whether the Look Out Circulars issued against the petitioners — former directors and personal guarantors who had resigned years before the loan default — were legally sustainable in the absence of any pending criminal case or specific allegation against them of siphoning funds.

Petitioner's Arguments

  • There was no criminal case pending against the petitioners, nor any suspicion at the time the LOCs were opened that they had siphoned off funds.
  • They were only guarantors and had not been involved in the company's day-to-day affairs for several years by the time of default.
  • A One-Time Settlement (OTS) had already been arrived at between the bank and the company, with the payment period extended.

Respondent's Arguments

  • Respondent No. 2/Bank of Baroda had sought the LOCs in the context of recovery proceedings following the loan default and invocation of personal guarantees.

Court Order / Findings

  • Relying on precedents (including Kartik Tayal v. CBI), the Court reiterated that an LOC can be opened only where a person is deliberately evading arrest or not appearing despite coercive process, coupled with a likelihood of leaving the country to evade trial — conditions the Court found absent here.
  • There was no criminal case against the petitioners, no allegation of siphoning of funds at the time the LOC was opened, and an OTS had already been reached with the bank.
  • The Court held the LOC against the petitioners unsustainable and quashed it, while clarifying this would not bar a fresh LOC if material later emerges implicating them, or if the OTS is not honoured, and directed the petitioners to cooperate with any investigation.

Important Clarification

GST is mentioned in this judgment only as one of several factors — alongside 'other factors' — that contributed to the company's financial difficulties leading to loan default; it played no role in the Court's legal reasoning, which turned entirely on the settled principles governing when a Look Out Circular can validly be opened against an individual.

Sections Involved

  • Ministry of Home Affairs Office Memorandum on Look Out Circulars (executive guidelines, not a standalone statute)
  • SARFAESI Act, 2002 (background recovery proceedings)

Decision – In Favour of

Decided in favour of the petitioners — the Look Out Circulars against Apurve Goel and Priyanka Goel were quashed, and the writ petitions were allowed.

Case Details

  • Court: High Court of Delhi at New Delhi
  • Case Nos.: W.P.(C) 5674/2023 and W.P.(C) 5675/2023
  • Coram: Justice Subramonium Prasad
  • Date of Judgment: 19 September 2023

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