LOCs Against Loan Guarantor Quashed Under Article 21 Right to Travel Abroad

The Punjab and Haryana HC quashed LOCs issued against a petitioner who was a guarantor for defaulted loans. The court held that the right to travel abroad under Article 21 requires a very high threshold to deny, which was not met since the petitioner committed no cognizable offense. LOCs are meant for persons evading arrest in criminal cases, not civil loan defaults. The court distinguished between criminal offenses and mere commercial defaults, ruling that loan guarantor status alone cannot justify travel restrictions. The petitioner was permitted to travel abroad for two months upon depositing Rs. 50 lakhs as security, to be returned upon producing passport after return to India.

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Issues Involved:
1. Validity of the Look Out Circulars (LOCs) issued against the petitioner.
2. Petitioner's right to travel abroad under Article 21 of the Constitution of India.
3. Compliance with principles of natural justice in issuing LOCs.
4. Banks' entitlement to seek LOCs against loan guarantors under Office Memorandums.

Issue-wise Detailed Analysis:

1. Validity of the Look Out Circulars (LOCs) issued against the petitioner:
The petitioner sought a writ of Certiorari to quash the LOCs issued by the Bureau of Immigration at the request of Indian Bank and Bank of Baroda. The petitioner, a guarantor for loans taken by M/s. SEL Manufacturing Company Ltd. and M/s. SEL Textiles Ltd., contended that she was not provided a copy of the LOCs nor informed on whose behest they were issued. The Court noted that the debt owed by M/s. SEL Manufacturing Company Ltd. had been resolved through the Corporate Insolvency Resolution Process (CIRP), making it doubtful if the petitioner could be proceeded against by the banks. The Court held that the LOCs were issued mechanically without proper application of mind by the Bureau of Immigration, and thus, could not be sustained.

2. Petitioner's right to travel abroad under Article 21 of the Constitution of India:
The petitioner argued that her right to travel abroad, a facet of Article 21, was violated. The Court referenced the Supreme Court's recognition of this right in Maneka Gandhi Vs. Union of India and Satish Chandra Verma Vs. Union of India. The Court emphasized that denying this right requires a very high threshold, which was not met in this case. The Court concluded that the issuance of LOCs against the petitioner, who was not involved in any cognizable offence, was a violation of her fundamental right to travel abroad.

3. Compliance with principles of natural justice in issuing LOCs:
The petitioner contended that she was denied a hearing before the issuance of the LOCs, violating principles of natural justice. The Court noted that the LOCs were issued without providing the petitioner an opportunity for a post-decisional hearing to explain why the LOCs should be withdrawn or canceled. The Court found this to be arbitrary and illegal, following similar views expressed in previous decisions (Poonam Paul and Noor Paul). The Court held that the non-supply of the LOCs to the petitioner and the denial of a hearing were not in accordance with fair, just, and reasonable procedures.

4. Banks' entitlement to seek LOCs against loan guarantors under Office Memorandums:
The respondents argued that the banks were entitled to seek LOCs against the petitioner as per the Office Memorandum dated 22.11.2018, which allows LOCs against fraudsters/willful defaulters. However, the Court noted that the amount of default by a person which would be detrimental to the economic interests of India was not specified in the Office Memorandums. The Court held that merely being a guarantor for loans does not meet the high threshold required to curtail the fundamental right to travel abroad. The Court concluded that the banks' requests for LOCs were not justified under the Office Memorandums, and the LOCs issued against the petitioner were set aside.

Conclusion:
The Court allowed the writ petition, permitting the petitioner to travel abroad for two months subject to depositing a sum of 50 Lakhs with the Registrar (General) of the Court. The LOCs issued against the petitioner were set aside, and officials of respondents were restrained from preventing the petitioner from traveling abroad. The Court emphasized the importance of adhering to principles of natural justice and the high threshold required to curtail fundamental rights under Article 21.

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