Division Bench holds expired LOC cannot be revived through a bank’s request, stresses that financial liability alone cannot justify indefinite travel restrictions, and lays down safeguards for issuance and continuation of LOC.
Jaipur: The Rajasthan High Court has held that a person’s right to travel abroad cannot be curtailed indefinitely merely at the instance of a bank over financial liabilities, particularly when there are no criminal proceedings or other exceptional circumstances justifying such a restriction.
A Division Bench of Justice Arun Monga and Justice Ashutosh Kumar dismissed an appeal filed by Bank of Baroda challenging an order quashing a Look Out Circular (LOC) issued against a personal guarantor in connection with a credit facility of USD 1.5 million extended by the bank’s Hong Kong branch.
The Court noted that the original LOC, issued on September, 2019, expressly remained valid only until September, 2020.
USD 1.5 Million Credit by Bank of Baroda’s Hong Kong branch
The case concerned a personal guarantor for a USD 1.5 million credit facility sanctioned by Bank of Baroda’s Hong Kong branch. After the borrower company defaulted, the guarantor was adjudged bankrupt by the High Court of Hong Kong, following which the bank sought an LOC against him.
The bank subsequently sought its continuation till October,2020.
But, the Court held that the bank’s letter, by itself, could not revive the LOC after its expiry and that no valid order continuing or issuing a fresh LOC had been established.
The Court further held that the revised LOC guidelines issued by the Ministry of Home Affairs in 2021 could not operate retrospectively to breathe life into an LOC that had already expired.
Right to Travel a Fundamental right
The Bench further noted that there was no FIR, criminal complaint or investigation pending against the respondent, nor were there proceedings for impounding his passport.
The Court also noted that no material to show that his departure from India would adversely affect the country’s sovereignty, security, foreign relations, strategic interests or economic interests.
The Court observed that financial liability or foreign bankruptcy proceedings may give rise to appropriate civil, recovery or insolvency remedies, but cannot by themselves justify an indefinite restriction on a person’s foreign travel.
Bank appeal dismissed
While dismissing the bank’s appeal and upholding the quashing of the LOC, the Division Bench also laid down safeguards governing the issuance and continuation of Look Out Circulars.
Court also observed that such travel restrictions cannot be imposed casually and must remain subject to reasons, periodic review and procedural safeguards.