Lookout circular not appropriate for every bank loan default: Delhi HC

New Delhi: The Delhi High Court has said that the issuance of a Lookout Circular (LOC) cannot be indiscriminately employed in cases of bank loan defaults or credit facilities availed for business purposes.

Justice Subramonium Prasad held that a citizen’s fundamental right to travel abroad cannot be restricted solely due to failure to repay a bank loan, especially when the individual has not been accused of misappropriating or siphoning off loan amounts.

The court made these observations while quashing an LOC issued against Shalini Khanna at the behest of Bank of Baroda.

The case revolved around Khanna’s execution of a Deed of Guarantee for cash credit facilities availed by directors of a company, including her husband. While the bank alleged misappropriation of funds, Khanna had not been accused of any offence related to it.

Despite the bank’s recovery proceedings before the Debts Recovery Tribunal and a complaint registered by the Central Bureau of Investigation (CBI), the court ruled that the issuance of the LOC was unjustified.

It said that the loan amount in question, around Rs 7 crores, did not pose a significant threat to the country’s economic interests.

While quashing the LOC against Khanna, the court clarified that if she is accused during the criminal proceedings, the bank can request the Bureau of Immigration to issue a fresh LOC against her.