2026 (3) TMI 345 - HC - Indian Laws

Look-Out Circulars must be sparingly used and may be quashed absent material showing deliberate evasion; travel subject to court permission.

Look-out Circulars are coercive administrative measures limiting the right to travel and must be used sparingly; they are lawful only where tangible ... Seeking suspension of the LOC(s) - legal explication of the regulatory framework governing the issuance of LOCs - Right to travel abroad - freedom of movement - requirement of cognizable offence and tangible material to issue LOC - narrow construction of exceptional power under Clause 6(L) of OM dated 22.02.2021 - inability of public sector bank principals to seek LOCs - Violation of right to life and personal liberty under Article 21 of the Constitution - constitutional validity of amendments which enabled the Chairmen, Managing Directors, and Chief Executive Officers of public sector banks to seek issuance of LOCs against defaulting borrowers, thereby restraining their right to travel abroad. Sole basis for issuance and continuation of the LOC(s) is their alleged association as Promoters/Directors of M/s Parabolic Drugs Ltd. ('PDL'), - availed credit facilities from a consortium of banks, including Respondent Nos. 2 and 3 - accounts of PDL were declared as 'fraud' by the said respondents on 03.05.2016 and 18.05.2018, pursuant to which complaints were filed before the Central Bureau of Investigation ('CBI'). Look-out circular as a coercive executive measure - Lawfulness and limits of issuance and continuance of Look-Out Circulars (LOCs) - HELD THAT: - The right to travel and freedom of movement has been recognised as an intrinsic facet of the fundamental right to life and 'personal liberty' under Article 21 of the Constitution of India. [Maneka Gandhi v. Union of India, 1978 (1) TMI 161 - SUPREME COURT]. The Supreme Court has held that while this freedom is not expressly enumerated under any articles, it nonetheless commands constitutional protection and may be restricted only by a procedure established by law that is just, fair, and reasonable. The Court held that an LOC is a coercive executive measure which substantially impacts the fundamental right to travel guaranteed by Article 21 and therefore must be exercised sparingly and strictly in accordance with law. Ordinarily an LOC may be issued only in cases involving a cognizable offence where specific, tangible material shows deliberate evasion of arrest or a proximate likelihood of absconding. The exceptional power under Clause 6(L) of the Office Memorandum dated 22.02.2021 must be narrowly construed and reserved for rare and compelling cases where departure poses a clear and grave threat to sovereignty, security, integrity, or national/systemic economic or strategic interests, or the larger public interest. Mere commercial defaults, civil remedies or routine revenue consequences do not justify an LOC; continuance must be periodically reviewed and justified by the originating agency. The Court articulated that LOCs are exceptional restraints on personal liberty and can be issued or continued only upon satisfaction of the stringent criteria stated above. Inability of public sector bank principals to seek LOCs - Validity of LOCs issued at the instance of public sector bank principals in the present context - HELD THAT: - Relying on and applying the reasoning in recent precedents, the Court observed that LOCs issued at the behest of Chairmen/Managing Directors/Chief Executive Officers of public sector banks would not withstand judicial scrutiny because their inclusion under the Office Memoranda amounts to an arbitrary and unguided conferment of power. The Court treated requests by public sector bank principals to open LOCs as impermissible in the absence of statutory guidance and procedural safeguards, and noted the binding effect of co-ordinate decisions quashing that competence. LOCs sought at the instance of public sector bank principals are vulnerable to being quashed and cannot be sustained in the present factual matrix. Look-out circular as a coercive executive measure - Application of law to the petitioners' LOCs and consequent relief - HELD THAT:- The Court found no justification for continuing the LOCs against the petitioners, who were associated with the company under investigation but were not shown to have been charged with or established as involved in cognizable offences or to have evaded the process of law. The Court noted prior orders permitting travel and orders of Special Judges which had closed or not sustained certain LOCs, and concluded that continuation of the LOCs here amounted to arbitrary and disproportionate restriction of personal liberty. The LOCs issued against the petitioners were quashed, subject to conditions that the petitioners execute undertakings to cooperate with investigation and obtain prior permission of the competent trial Courts for future foreign travel. Final Conclusion: The writ petitions were disposed by quashing the impugned LOCs: the Court restated and applied strict legal limits on issuance and continuance of LOCs (requiring cognizable offence/tangible material or narrow exceptional circumstances), held LOCs at the instance of public sector bank principals to be unsustainable, and granted relief to the petitioners on terms of undertakings to cooperate and obtain prior trial-court permission for future travel. Issues: Whether the Look-Out Circulars (LOCs) issued and continued at the instance of respondent banks against the petitioners are legally sustainable, and whether such LOCs should be quashed and permission to travel abroad granted.Analysis: The Court examined the governing framework for issuance and continuation of LOCs, including Article 21 of the Constitution of India, the consolidated Office Memorandum dated 22.02.2021, and relevant precedents holding that LOCs are coercive executive measures affecting the fundamental right to travel and must be exercised sparingly and in accordance with law. The jurisprudence requires that LOCs ordinarily be limited to cases involving cognizable offences where tangible material shows deliberate evasion or a proximate likelihood of absconding, and that the exceptional power under Clause 6(L) of the Office Memorandum be narrowly construed for grave national or systemic threats. The Court reviewed authorities holding that requests for LOCs by principal officers of public sector banks lack lawful foundation and that mere commercial defaults or association with an accused, without concrete material of complicity, do not justify LOCs. Applying these principles to the record, the Court noted absence of material demonstrating that the petitioners were deliberately evading process, that their continued departure would threaten sovereignty, security, integrity, bilateral relations, or national economic interests in the exceptional sense required, and that the petitioners had cooperated and previously complied with conditions imposed by courts.Conclusion: The Look-Out Circulars issued against the petitioners are quashed. The petitioners are directed to furnish undertakings to the trial Special Judges confirming continued cooperation and to obtain prior permission from the competent trial courts for future foreign travel.