No LOC on bank’s mere request, right to travel guaranteed in Constitution: Delhi HC

The right to travel abroad, which is guaranteed under the Constitution, cannot be taken away in an arbitrary and illegal manner and Look Out Circulars (LOCs) opened merely at a bank’s request without application of mind, the Delhi High Court has said.

Justice Subramonium Prasad observed that the “court was coming across a large number of cases where banks are now insisting on opening of LOCs only as a measure for recovery of money without initiating any criminal proceedings” when it can be done only in “exceptional circumstances” affecting the country’s economy or interests.

The judge emphasised there has to be some application of mind by the authorities concerned while issuing an LOC as it results in restraining a person from travelling abroad, which is their right, and causes social stigma.

“The authority opening the Look Out Circular must satisfy itself that the departure of a person against whom Look Out Circular has been opened would be detrimental to the sovereignty or security or integrity of India or that the same is detrimental to the bilateral relationship with any country or to the economic interests of India or departure of such a person ought not be permitted in the larger public interest at any given point in time,” said the court in an order dated September 19.

“It is well settled that the right to travel abroad is guaranteed under Article 21 of the Constitution of India which cannot be taken away in an arbitrary and illegal manner,” the court asserted.

The court’s order came on petitions by former directors of a company challenging the LOC issued against them at the instance of Bank of Baroda in connection with a loan default by the company.

The petitioners, who were the guarantors, contended that the opening of the LOC was mere blackmailing and arm-twisting tactics, and the bank only wanted to keep them as hostages in the country till the money has been paid.

The court concluded the opening of LOC against the petitioners was “not justified” and “wholly unsustainable”, and quashed it.

It noted there was neither any criminal case against the petitioners, who were not involved in the day-to-day affairs of the company for the last several years, nor a suspicion that they siphoned off funds, and time to make payment had also been extended till the end of September as part of a one-time settlement.

“There has to be a proper application of mind by the authorities on the facts of each case before opening of a Look Out Circular which not only impedes the right to travel but also casts an aspersion/stigma on the person in the society against whom the Look Out Circular has been opened,” the court said.

“By virtue of the Office Memorandums and their amendments from time to time, banks can request for opening of Look Out Circulars in exceptional circumstances when it is felt that the permission sought for by the person to go out of the country will affect the economy of the country,” stated the court.

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