2022 (6) TMI 590 - HC - Insolvency and Bankruptcy

Travel Ban & LOC Upheld for Loan Guarantor: Legal Measures to Protect Public Funds

The Court dismissed the writ petition challenging the travel ban and Look Out Circular (LOC) against the petitioner, emphasizing his liability as a ... Imposition of travel ban on the petitioner - violation of Article 21 of the Constitution - contention of the petitioner was that as the entire loan amount was covered under the resolution plan, the petitioner was in no manner connected with the company - HELD THAT:- As per the Office Memorandum dt. 12.10.2018, the conspectus of the issuance of the LOC was broadened to include the economic offenders hampering the interests of India and as such, a lookout circular can be issued in larger public interest. As the respondent Bank initiated recovery proceedings against the petitioner and if lookout circular is lifted and if the petitioner disappears, the recovery proceedings would be brought to standstill and recovery of crores of public money would become impossible. Hence, it is considered fit to dismiss the petition. Writ petition dismissed. Issues:1. Travel ban imposed on the petitioner by authorities.2. Legality of travel ban under Article 21 of the Constitution.3. Issuance of Look Out Circular (LOC) against the petitioner.4. Liability of the petitioner as a personal guarantor for outstanding loan amount.5. Violation of fundamental rights of the petitioner.Analysis:1. The petitioner challenged the travel ban imposed on him by authorities, alleging it to be illegal, arbitrary, and in violation of Article 21 of the Constitution. The petitioner, a former Director cum Chairman of a company, was stopped from traveling to Maldives without prior notice or explanation provided by immigration authorities.2. The petitioner argued that as the resolution plan approved by the National Company Law Tribunal covered all loan amounts, he was no longer connected to the company and should not be subjected to a travel ban. The petitioner contended that imposing a travel ban without evidence of intent to abscond violated his fundamental rights.3. Respondent counsel stated that a Look Out Circular (LOC) was issued against the petitioner at the request of the company's creditors, as the petitioner, a personal guarantor, owed a substantial amount of Rs.226.02 Crores. The authorities acted to prevent the petitioner from fleeing the country to evade legal proceedings and recover public money.4. The liability of the petitioner as a personal guarantor was emphasized by respondent counsel, asserting that the petitioner's obligation remained despite the company's takeover. The bank continued recovery actions against guarantors, including the petitioner, to reclaim the outstanding amount owed.5. The Court examined past judgments on the right to travel abroad, emphasizing that restrictions must be lawful and fair. The issuance of the LOC against the petitioner was deemed necessary to safeguard public funds and prevent potential evasion of legal responsibilities. The broader scope of LOC issuance was justified in the interest of economic security and public welfare.In conclusion, the Court dismissed the writ petition, upholding the legality of the travel ban and the issuance of the LOC against the petitioner. The judgment highlighted the petitioner's ongoing liability as a guarantor and the authorities' actions to protect public funds and economic interests.