Today(on 23rd April),Bombay High Court, with Justices GS Patel and Madhav Jamdar, prohibits public sector banks from issuing Look Out Circulars against Indian citizens and foreigners, citing Central government directives. This decision stems from petitions challenging LOCs for debtors seeking to travel abroad.
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MUMBAI: Today(on 23rd April),The Bombay High Court declared that public sector banks do not possess the authority to issue Look Out Circulars (LOCs) against Indian citizens and foreigners based on the office memoranda (OM) of the Central government.
The verdict was delivered by a Bench comprising Justice GS Patel and Madhav Jamdar, who were presiding over a series of petitions challenging the issuance of LOCs to individuals indebted to public sector banks and seeking to prevent them from traveling abroad.
The Court clarified that the OMs of the Central government were not in violation of the Constitution, but it deemed the subsequent empowerment of bank managers of public sector banks to issue LOCs as arbitrary.
Consequently, the High Court quashed and set aside all LOCs issued at the request of public sector banks in light of this judgment. However, it is important to note that the ruling does not affect any existing orders issued by tribunals or criminal courts restraining individuals from traveling abroad.
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LOCs, which are issued by the Union Ministry of Home Affairs’ Bureau of Immigration, grant immigration authorities the power to prohibit individuals from leaving India at any port of departure. The issuance of LOCs was based on a series of circulars or OMs, with the initial circular being issued on October 27, 2010.
These circulars were periodically amended, and one such amendment in September 2018 introduced a new ground for issuing LOCs, namely the “economic interest of India.” This provision essentially restricted individuals from traveling abroad if their departure was deemed detrimental to the country’s economic interest.
Another amendment in October 2018 empowered the Chairman of the State Bank of India and the Managing Director and Chief Executive Officers of all other public sector banks to request immigration authorities to issue LOCs. These OMs and subsequent amendments became the subject of multiple petitions before the Bombay High Court.
The petitions raised several contentions, including the argument that the circulars infringed upon fundamental rights, particularly the right guaranteed under Article 21 of the Constitution of India. Furthermore, it was asserted that the term “economic interest of India” should not be equated with the “financial interests” of any bank. The financial concerns of a public sector bank, regardless of whether it is equitable or otherwise, do not align with the broader “economic interests of India.”
The Ministry of Home Affairs (MHA) countered these arguments by stating that each bank was required to justify its actions when requesting an LOC. While acknowledging that a particular LOC could be invalidated, the MHA contended that it did not warrant the invalidation of the OMs or the power to issue them. The MHA argued that the OMs served a broader purpose, addressing concerns related to security, sovereignty, terrorism, and other national interests. It further emphasized that the OMs incorporated checks, balances, and safeguards, and that LOCs were not issued solely based on requests.
After being reserved for judgment over a year ago, the petitions were finally decided by the High Court. Senior Advocate Dr. Birendra Saraf, who is now the Advocate General of Maharashtra, represented the petitioners.
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Saraf was assisted by Parinam Law Associates and Advocates Gulnar Mistry and Subit Chakrabarti, who were briefed by Vidhii Partners. On behalf of the Union of India, Additional Solicitor General Anil Singh appeared along with Advocates Rui Rodrigues, Sandesh Patil, Aditya Thakkar, YS Bharti, and DP Singh.
Case Title:
Viraj Shah v. Union of India & Ors.