Case Note & Summary
The intra-court appeal arose from the dismissal of a writ petition that challenged two Look Out Circulars issued by Bank of Baroda and Punjab National Bank and a consequential endorsement by the Bureau of Immigration preventing the petitioner from traveling abroad. The petitioner, a 78-year-old promoter of companies in pharmaceutical, hospitality, healthcare, and foreign exchange, had stepped down from management between 2015–17, during which time the companies allegedly ran into financial irregularities and defaulted on loans worth about Rs.2800 Crores. The petitioner, a guarantor to these loans, visited India in February 2020 and could not return to the UAE due to the pandemic. When he attempted to fly out on 14.11.2020, immigration clearance was denied. Respondent banks had issued the Look Out Circulars on 08.05.2020 and 18.07.2020 after issuing a legal notice to the petitioner to comply with his guarantee obligations. The Bureau of Immigration later issued an endorsement on 08.12.2020 stating that the petitioner was stopped due to those circulars. The petitioner filed a writ petition questioning the circulars and the endorsement, contending that he was no longer responsible for the defaults and that the circulars were illegal. Respondent banks maintained that the petitioner was in egregious breach of his guarantees, had failed to disclose assets, and that the circulars were issued under valid Office Memoranda to prevent him from leaving the country as his financial position was severely distressed and he faced regulatory actions globally. The single judge noted that the petitioner admitted the loan defaults and conceded to the banks' power to issue the circulars; that banks were duty-bound to recover public money; and that the Look Out Circulars were justified. The Division Bench, after hearing the parties, reserved the appeal and on 12.05.2021 delivered the judgment dismissing the appeal, thus affirming the single judge’s order and the validity of the Look Out Circulars.
Headnote
A) Banking Law - Look Out Circulars - Power of Banks and Validity of LOCs - Office Memoranda on Look Out Circulars - The petitioner, a promoter and guarantor of companies that defaulted on loans of approximately Rs.2800 Crores, conceded to the banks’ power to issue Look Out Circulars. The single judge upheld the Look Out Circulars, observing that the petitioner’s companies suffered mismanagement leading to default, and the banks were entitled to recover public money; the Division Bench affirmed this view. Held that the issuance of Look Out Circulars was justified to prevent the petitioner from leaving India given the scale of default and pending legal proceedings (Paras 10-11).
Issue of Consideration
Whether the Look Out Circulars issued by respondent banks and the consequential endorsement preventing the petitioner from traveling abroad are legally valid and whether the single judge was justified in dismissing the writ petition.
Final Decision
The Division Bench dismissed the intra-court appeal and upheld the order of the single judge dated 12.02.2021, thereby affirming the validity of the Look Out Circulars and the endorsement preventing the petitioner from traveling abroad. The court agreed with the single judge that the petitioner had conceded the banks' power to issue LOCs and that the default of substantial public money justified the issuance of the LOCs.
Law Points
- Banks have power to issue Look Out Circulars
- LOCs can be issued based on OMs
- default of public money justifies travel restrictions
- petitioner conceded banks’ power
- LOCs not in violation of right to travel
