The High Court overruled the Lookout Circular issued due to loan default, reinforcing the fundamental right to travel.
The Delhi High Court Single-Judge Bench of Justice Subramonium Prasad, J. observed that a Lookout Circular (LOC) cannot be issued solely based on a bank's request due to default in loan repayment, as such action infringes on the Fundamental Right to travel under Article 21 of the Constitution of India, particularly when no criminal proceedings are pending against the petitioner and a settlement has been reached.
The Petitioner had challenged the Lookout Circular (LOC) issued against them by the Bureau of Immigration at the behest of the State Bank of India (SBI). The Petitioner served as the Managing Director of M/s PC Jewellers Limited, a prominent Indian jewellery company known for its extensive network of showrooms and franchisee stores. The company encountered significant financial difficulties in 2022, leading to proceedings under the Recovery & Bankruptcy Act and the Insolvency & Bankruptcy Code. The Debt Recovery Tribunal and the National Company Law Tribunal had been involved, with SBI filing a petition for insolvency against the company.
During the proceedings, a One Time Settlement (OTS) was reached, and the Petitioner deposited Rs.113.50 crore into SBI’s No Lien Account as an upfront payment on January 5, 2024. Subsequently, SBI sought permission from the National Company Law Tribunal to withdraw the insolvency petition, which was granted on April 30, 2024. The OTS was also accepted by other consortium banks, though approval from the remaining lenders was still pending.
The Petitioner argued that the issuance of the LOC, which restricted their ability to travel abroad, was unjustified. They cited various judgments asserting that a LOC cannot be issued solely due to financial default without criminal proceedings. The Court considered the guidelines set forth in the Ministry of Home Affairs Office Memorandums, including the conditions under which LOCs can be issued and the scope of the term "detrimental to the economic interests of India."
It was noted that previous judgments had emphasized that LOCs should not be used routinely in cases of financial default, especially when no criminal offences were involved. The Court found that the issuance of the LOC against the Petitioner, in light of the settlement and absence of criminal charges, was an infringement on their fundamental right to travel under Article 21 of the Constitution. Consequently, the Court quashed the LOC, acknowledging that the Petitioner’s fundamental rights could not be compromised solely due to financial difficulties without any criminal accusations.
The writ petition was allowed, and any pending applications were disposed of.
Subscribers can access the Case, including Case Analysis, Ratio Decidendi, Headnotes, Briefs, Case Research, Cited Case Laws, Case Law Cross-references, and the latest updates on Statutes, Notifications, Circulars, Guidelines Press Release and more.
Click on the Citation/Link to access these resources
Comments