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Why in the News?
- The Bombay High Court recently ruled that banks cannot use Look Out Circulars (LOCs) to prevent defaulting borrowers from traveling abroad without statutory backing.
Look out circular is a letter used by authorities in India to check whether a traveling person is required/wanted in some legal issue by an authority. |
Key Points:
- Background: The court’s decision came in response to LOCs issued by the Bureau of Immigration on behalf of public sector banks (PSBs) to stop debtors from leaving the country.
- Legal Challenge: The LOCs were challenged in the Court.
- Court’s Observation: The court observed that these LOCs were used as coercive measures to bypass legal processes, thereby infringing on fundamental rights.
- Legal Implications:
- Article 14 and 21 Violations: The court held that the use of LOCs by PSBs without proper legislative backing violates the equality before the law guaranteed by Article 14 and the right to life and personal liberty under Article 21.
- The court invalidated the LOCs in question but stated this would not affect any restraint orders issued by competent authorities or under statutory provisions.
- The judgment allows banks to seek legal avenues like approaching courts or tribunals to restrain individuals from travelling abroad if necessary.
What Happens Next?
- The court denied the Centre’s request to stay the verdict, though the Centre may appeal to the Supreme Court.
- The ruling clarifies that the invalidation of these specific LOCs does not interfere with other legal processes that may be in place to address the issues of default and economic offences.
