The Bombay High Court declared that public sector banks lack the authority to recommend or request the central government for the issuance of Look Out Circulars (LOCs) against default borrowers, whether Indian citizens or foreigners. A division bench comprising Justices Gautam H Patel and Madhav J Jamdar delivered the judgment in response to a batch of petitions challenging the issuance of LOCs by public sector banks.
The court emphasized that while the Office Memoranda (OM) of the central government weren’t inherently unconstitutional or arbitrary, the delegation of power to bank managers to issue LOCs was deemed arbitrary. “We do not expect public sector banks to do this,” the bench remarked.
The ruling quashed and set aside the LOCs issued by public sector banks, restraining individuals indebted to them from traveling abroad. It further directed that the Bureau of Immigration would not act upon these LOCs.
The judgment comes a year and a half after the conclusion of hearings in July 2022, during which the court reserved its verdict. However, it clarified that existing restraint orders issued by Debt Recovery Tribunals or Criminal Courts would remain unaffected.
Moreover, the court upheld the fundamental right to travel abroad, asserting that it cannot be curtailed by executive or controlling statutes. The circulars enabling the issuance of LOCs were scrutinized, particularly amendments introduced in September 2018, citing the ‘economic interest of India’ as grounds for restriction on foreign travel.
Petitioners, represented by senior advocate Birendra Saraf (now Advocate General of Maharashtra), argued that these circulars infringed upon fundamental rights, including the right to life with dignity under Article 21 of the Constitution. They contended that the ‘economic interest of India’ cannot be equated with the financial interests of public sector banks.
However, the court’s decision didn’t invalidate the broader concept of the OM or circular empowering banks to recommend action. The then Additional Solicitor General, Anil Singh, representing the Ministry of Home Affairs, asserted that every bank must justify its request for LOCs. He maintained that while specific LOCs could be set aside, the overarching purpose of the circulars, issued for national interest, didn’t blanketly infringe upon fundamental rights.
This landmark ruling delineates the boundaries of authority concerning the issuance of LOCs, reaffirming the primacy of individual rights within the legal framework.
