The Delhi High Court emphasizes citizens’ right to travel abroad, advising against automatic lookout circular issuance for bank loan defaults or credit mismanagement in business transactions.
The Delhi High Court has recently emphasized the fundamental right of citizens to travel abroad, emphasizing that the issuance of a lookout circular (LOC) should not be automatically invoked solely based on instances of bank loan defaults or mismanagement of credit facilities in business transactions.
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Justice Subramonium Prasad, while delivering the judgment, stated,
“… the Fundamental Right of a citizen of the country to travel abroad cannot be curtailed only because of failure to pay a bank loan, more so when the person against whom the lookout circular is opened has not been even arrayed as an accused in any offence for misappropriation or siphoning off the loan amounts.”
Shalini Khanna, against whom the Bureau of Immigration had issued an LOC at the request of the Bank of Baroda. Khanna, accused of executing a Deed of Guarantee for the repayment of cash credit facilities availed by directors of a company, including her husband.
In June 2013, Metaphor Exports Private Limited, a garment manufacturing company, approached the Bank of Baroda seeking cash credit facilities amounting to Rs. 9 crores. Shalini Khanna, the petitioner, played a pivotal role by executing a Deed of Guarantee for the repayment of the disbursed amount. The guarantee was meticulously limited to Rs. 2.63 crores, aligning with the fair value of a mortgaged property in Gurgaon.
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The bank alleged that out of the sanctioned Rs. 7 crores in cash credit facilities, a substantial sum of Rs. 5.95 crores was misappropriated by the company directors. This led to the classification of the company’s account as a Non-Performing Asset (NPA). The bank subsequently initiated recovery proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act before the Debts Recovery Tribunal (DRT), securing a favorable judgment.
The Central Bureau of Investigation (CBI) registered a complaint against Shalini Khanna and the company directors, invoking various sections of the Indian Penal Code and the Prevention of Corruption Act.
The Bank of Baroda then sought the issuance of a Lookout Circular against Shalini Khanna, adhering to the guidelines outlined in the Ministry of Home Affairs’ Office Memorandum. However, the Delhi High Court meticulously scrutinized the grounds for issuing LOCs, emphasizing that such measures should only be taken if the departure of the individual poses a tangible threat to the sovereignty, security, bilateral relations, or the strategic and economic interests of the country.
Justice Prasad’s judgment not only quashed the LOC against Khanna but also provided a comprehensive framework for the criteria governing the issuance of such circulars. The court underscored that LOCs should only be issued if the departure of the individual poses a threat to the sovereignty, security, bilateral relations, or the strategic and economic interests of the country.
The court clarified that if Shalini Khanna is later implicated as an accused in the ongoing criminal proceedings, the Bank of Baroda retains the right to request the Bureau of Immigration to issue a fresh LOC against her.
