Dismissal of Petitions Challenging Lookout Circulars Emphasizes Repayment Obligations

The court dismissed the writ petitions challenging the Lookout Circulars issued by two banks, emphasizing the petitioner's liability to repay substantial loans and the banks' duty to recover public funds. The decision highlighted the balance between the petitioner's right to travel and the obligation to repay public debts, especially when significant sums are at stake, impacting the national economy. The court advised the petitioner to address the alleged wrongful issuance of the Lookout Circulars with the bank authorities.

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Issues Involved:
1. Legality of Lookout Circulars (LOCs) issued by Bank of Baroda (BOB) and Punjab National Bank (PNB).
2. Jurisdiction of Indian Banks over transactions and guarantees executed in the UAE.
3. Petitioner's right to travel and its conflict with the issuance of LOCs.
4. Procedural requirements and validity of issuing LOCs without prior notice.
5. Petitioner's liability as a guarantor.

Issue-wise Detailed Analysis:

1. Legality of Lookout Circulars (LOCs):
The petitioner, a non-resident Indian, challenged the LOCs issued by BOB and PNB, which prevented him from traveling to Abu Dhabi. The LOCs were issued due to the petitioner’s involvement as a guarantor for loans taken by companies he promoted, which defaulted on repayments. The petitioner argued that the LOCs were issued without prior notice, making them arbitrary and illegal, violating Articles 14, 19, and 21 of the Constitution of India.

2. Jurisdiction of Indian Banks:
The petitioner contended that the loans were taken in the UAE, and the guarantees were also executed there, hence Indian Banks had no jurisdiction to invoke his personal guarantees in India. However, the court noted that the Guarantee Agreement provided for initiation of proceedings in multiple jurisdictions, including India. BOB had already filed a suit for specific performance in the Commercial Court, Bengaluru, and the court had ordered status quo.

3. Petitioner's Right to Travel:
The petitioner claimed a fundamental right to travel, essential for defending cases in the UAE, settling disputes, and carrying out his livelihood. The court acknowledged this right but emphasized that the petitioner’s liability to repay substantial public funds (Rs. 2800 Crores) to the banks must also be considered. The court highlighted the duty to repay public money and the significant impact on the country's economy due to the default.

4. Procedural Requirements and Validity of LOCs:
The petitioner argued that LOCs were issued without prior notice, which is against the principles of natural justice. The court referred to the Official Memorandum dated October 27, 2010, and its amendment on December 5, 2017, which empowered bank chairmen to issue LOCs in exceptional cases. The court held that prior notice would defeat the purpose of LOCs, which are coercive measures to ensure compliance with legal processes. The court found the argument for prior notice incongruous and rejected it.

5. Petitioner's Liability as a Guarantor:
The petitioner admitted to being a guarantor for the loans, which, under Section 128 of the Contract Act, 1872, makes his liability coextensive with that of the principal debtor. The court cited precedents affirming that a guarantor is equally liable to repay the debt and cannot dictate terms to the creditor. The court dismissed the argument that the petitioner’s role as a guarantor limited his liability.

Conclusion:
The court dismissed the writ petitions, emphasizing the petitioner’s liability to repay the substantial loans and the banks' duty to recover public funds. The court advised the petitioner to approach the bank authorities to explain the alleged wrongful issuance of LOCs. The decision underscored the balance between an individual's right to travel and the obligation to repay public debts, particularly when large sums are involved, impacting the national economy.

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