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NEW DELHI: Banks cannot use Look Out Circulars (LOCs) to recover money, the Delhi high court has said, underlining that such a move affects a person’s right to travel abroad, which is a fundamental right under the Constitution.

An LOC, the high court said, is a measure to make a person surrender before investigating authorities or a court of law, and can be issued only when there are sufficient reasons for it.

“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. This court is now coming across a large number of cases where banks are now insisting on the opening of Look Out Circulars as a measure for recovery of money without initiating any criminal proceedings.”

The court’s observations came while it quashed the LOC issued at the insistence of Bank of Baroda against the former director of a private firm that is facing a CBI probe over certain transactions.

The court was informed that the company was declared a non-performing asset in November 2018, about 18 months after the petitioner had left the firm. In January 2022, the petitioner received a show cause notice from Bank of Baroda about having been declared a wilful defaulter, but he was not even an accused in any FIR.

Justice Subramonium Prasad noted that as per the Central Bureau of Investigation, the petitioner was not an accused in the matter and most of the transactions had taken place after his resignation. Despite that, he was sought to be kept in the country for the purpose of recovery of money which is payable by the company.

“A mere probability/possibility that a person might ultimately be made an accused cannot be the sole basis for opening an LOC, which has the effect of impeding the movement of a citizen. It takes away their right to travel abroad, which has been elevated as a fundamental right under Article 21 of the Constitution of India” said the court in a recent order.

The court said there was nothing in the present case to justify any input that the petitioner travelling outside the country was detrimental to the economic interest of India or that his departure from the country should not be permitted in the larger interest.

“Phrases like ‘detriment to the economic interest of India’ cannot be permitted to be used without there being any substantial material before the Look Out Circular is opened,” it added.

  • Published On Sep 25, 2023 at 08:06 AM IST

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