Calcutta High Court | A single bench comprising of Moushumi Bhattacharya*, J., held that banks cannot issue LOC in an indiscriminate manner just because few persons have defrauded and fled from India.
“Look Out Circulars which have the effect of restricting a person’s free movement and the right to travel should only be issued in exceptional circumstances. Look Out Circulars cannot be issued at random and at the slightest provocation particularly at the instance of a Bank who seeks restriction on travel as a buffer to payments outstanding to the Bank.”
Factual Matrix
In the instant matter, the petitioners had obtained loans for the expansion of businesses from various Banks and settled the claims of all the Banks except for respondent 8. The petitioners were prevented by the Immigration Authority to travel to the U.K. by reason of a LOC based on a request made by the Indian Overseas Bank. Aggrieved by the action taken by the Immigration Authority, the petitioners preferred a writ petition before this Court and prayer for permission to travel to the U.K. on account of the academic compulsions of the petitioners’ son. The petitioners later amended the writ petition and sought for quashing of the LOC.
Moot Point
Whether LOC can continue to prevent the petitioners from travelling outside India or should be quashed on the facts which have been brought to the notice of the Court?
Contentions
The respondents contended that the writ petition cannot be amended to seek the quashing of the LOC. The respondents further contended that the Central Bureau of Investigation (CBI) should be impleaded as a necessary party to the proceedings.
Court’s Observations
In the light of facts and circumstances of the present case, the Court observed that the petitioners could not have challenged the LOC in the original writ petition, as the petitioners were made aware of the LOC after the filing of the writ petition. Rejecting the contentions of the respondents that the writ petition cannot be amended, the Court opined that such an objection to the amendment is untenable, illogical and contrary to law.
“The law with regard to permitting amendments is liberal and appropriately so since the purpose of an amendment under Order of the , is to determine the real questions of controversy between the parties.”
While rejecting the respondents’ contention regarding addition of CBI as a necessary party, the Court observed that the petitioners have not raised any grievance against the CBI either before or after the amendment; moreover, the CBI Court had many times granted permission to the petitioner 1 to travel abroad.
The Court observed that the LOCs are issued where there is a pending criminal cases or an ongoing proceeding against the concerned person and his/her continuous presence of the person is required or where the concerned persons are considered as flight risks, i.e. there is an apprehension that they will fail to return to India.
The Court observed that the banks are issuing LOCs as a recovery mechanism for outstanding monetary dues as they are apprehensive that the person may frustrate settlement of the dues by not returning to India. The Court further observed that though the banks’ apprehension may be founded on a real threat of the person leaving the country forever but the same “cannot apply across the board for all borrowers without exception.”
While explaining the criteria for assessing the credibility of the borrowers, the Court stated that “the criteria for assessing the credit-worthiness of a borrower and his/her bona fides for repayment must be determined on a case-to-case basis. The individual circumstances of a borrower’s ability and willingness to pay or the mode and manner of repayment must be assessed before the fundamental right of a person to travel is denied.”
The Court observed that deboarding a person from an aircraft or handing a piece of paper at the last minute before deboarding, that to without being informed of the reason is “against the principles of natural justice and fair play in action where the fundamental right to travel and the right to life is inexorably compromised and with impunity.” The Court opined that the banks are given “untrammeled powers to issue, use and exploit the lock-in power of a Look Out Circular” without providing sufficient recourse to the person at the receiving it, therefore, issuing of a LOC must be regulated to give it form and certainty and not be made the norm for recovery of outstanding payments to the banks.
The Court observed that in the present case there is no evidence to show that the economic interest of India will be affected from a brief departure of the petitioners for the country for a specific period, moreover, the petitioners are not declared fraudsters or money-launderers or even economic offenders. The Court further observed that LOCs not only cause immediate and irrevocable violation of a person’s fundamental right of movement but also have an inexplicably long shelf-life.
“Once a Look Out Circular is issued, it remains alive and kicking for almost all times to come. This spells dangerous repercussions on the person’s right to freely move across and beyond the country and remain mobile.”
Court’s Verdict
The Court quashed the impugned LOC issued by the bank and held that the interference imposed by way of the LOC on the petitioners is arbitrary and without any rational basis
[Mannoj Kumar Jain v. Union of India, WPA 22748 of 2022, order dated 09-06-2023]
*Judgment by Justice Moushumi Bhattacharya
Advocates who appeared in this case :
Mr. Sudip Deb, Mr. Riju Ghosh, Mr. Sumitava Chakraborty, Mr. Aranyak Saha and Ms. Ipsita Ghosh, Counsel for the Petitioners;
Mr. Billwadal Bhattacharya, Ld. DSG. And Mr. Narendra Prasad Gupta, Counsel for the Union of India;
Mr. Suhrid Sur, Counsel for the Respondent No. 6;
Mr. Shiv Mongal Singh and Ms. Moriam Sanfui, Counsel for the Respondent No. 8/Bank.
The post appeared first on .