Introduction
This article examines the power of a Public Sector Bank (“PSB”) to get Look-Out Circular (“LOC”) issued through Bureau of Immigration (“BOI”) against a borrower who defaults in repaying the loan. Such LOCs are administrative instruments by which PSBs monitor and restrict mobility of the defaulters within and beyond the territorial limits of India. Thus, LOCs directly impacts a defaulting borrower’s right to travel which is a fundamental right protected under Article 21 of the Constitution of India and there has often been a subject-matter of judicial scrutiny, the latest one being Viraj Chetan Shah v. Union of India, 2024 SCC OnLine Bom 1195 (“Viraj Chetan Shah case”) where the Division Bench of High Court of Bombay held PSBs power to issue LOC as unconstitutional, set aside all such LOCs issued against various Petitioners before it and delivered a detailed judgment balancing national interests with individual liberties. The said judgment is under challenge before Hon’ble Supreme Court of India (“Supreme Court”) in Union of India v. Viraj Chetan Shah, SLP(C) No. 17194-17230/2024.
Legal Foundation of LOCs
The issuance of LOC is not governed by a specific statute. Rather, it is regulated by the Guidelines issued by Ministry of Home Affairs (“MHA”), Government of India in the form of an Office Memorandums (“OM”) which are revised from time to time. The first such OM was issued on 05.09.1979. These OMs inter-alia mention the “originating agency” i.e., the government entity which can request BOI for issuance of LOC. Pursuant to Delhi High Court’s order in Sumer Singh Salkan v. Asstt. Director & Others, (2010) ILR 6 Delhi 706, the MHA issued an elaborative OM in 2010 laying down circumstances justifying such LOC and the procedure to be followed therein. In 2018, the Chairman/ MDs/CEOs of PSBs got identified as an “originating agency” under 2010 OM and can in “exceptional cases” restrict a defaulter’s right to travel if doing so is “detrimental to the sovereignty or security or integrity of India” or “bilateral relations with any country” or “strategic and/or economic interests of India” or “if such person is allowed to leave, he may potentially indulge in an act of terrorism or offences against the State and/or that such departure ought not be permitted in the larger public interest”.
Further, in 2021, the OM was revised whereby the LOCs were to get automatically renewed, unless the originating agency at whose behest it was issued requested for deletion. This was contrary to the erstwhile provision which provided one-year lifespan to such LOC.
Judicial Interpretation and Constitutional Safeguards
While the Hon’ble Supreme Court is yet to deliver its verdict on the challenge to Viraj Chetan Shah case, various High Courts have time and again interpreted these OMs and have come to the rescue of the borrowers / guarantors. For instance, Hon’ble Delhi High Court in Vikas Chaudhary v. Union of India, 2022 SCC OnLine Del 97 held that PSBs must resort to LOCs only when they have a reasonable belief that if the borrower departs, it will be detrimental to economic interest of India to an extent which justifies curtailment of his mobility and that LOCs should not be issued in a routine and mechanical manner. Similar findings were recorded by Kerala High Court in Pinnacle Vehicles and Services Private Limited v. Union of India, 2022 SCC OnLine Ker 1841. On the nexus between amount of loan and “economic interest of India”, Hon’ble Punjab & Haryana High Court in Poonam Paul v. Union of India & Others, 2022 SCC OnLine P&H 1176 held that quantum of loan is irrelevant for issuing an LOC as the OMs are silent on that aspect.
Similar protection has been provided to the personal guarantors by Hon’ble Delhi High Court in Sunny Mittal v. Union of India & Others, 2023 SCC OnLine Del 1048 and Apurve Goel v. Bureau of Investigation and Anr., WP(C)5674/2023, decided on 19.09.2023, Shalini Khanna v. Union of India & Anr., W.P.(C) No. 10951 of 2022 decided on 06.02.2024 and by Calcutta High Court in Mannoj Kumar Jain v. Union of India, 2022 SCC OnLine Cal 3230. Further, the Calcutta High Court in UCO Bank v. Dr.Siten Saha Roy &Ors, 2020 SCC OnLine Cal 3255 cautioned PSBs against attempting to equate their economic interest with the “economic interest of India”.
While passing all the above-noted judgments, the High Courts have always upheld the spirit of the rulings in Satwant Singh Sawhney v. D. Ramaratham, Assistant Passport Officer, Government of India, AIR 1976 SC 1836 and Maneka Gandhi v. Union of India & Others, (1978) 1 SCC 248 as the Hon’ble Supreme Court in Satwant Singh Sawhney read the right to travel abroad as being protected under Article 21 of the Constitution of India and held that it could not be curtailed except as per procedure established by law, the Maneka Gandhi ruling settled the law that the procedure established by law must be just, fair and reasonable.
Conclusion
The jurisprudence around LOCs reveals a consistent judicial trend i.e., while national interest can override individual liberty in exceptional cases, it must not be at the cost of fairness, proportionality, or due process. The courts have robustly defended citizens’ rights against arbitrary restrictions imposed on their mobility through LOCs, especially when the issuing of such LOCs is not in accordance with the mandate of the OMs. The PSBs therefore, have been time and again directed to exercise extreme caution and act within the constitutional framework when requesting LOCs.
Disclaimer: This article is for academic and informational purposes only and does not constitute legal advice.