The
Bombay High Court on Tuesday ruled that public sector banks do not have the
power in law to issue Look Out Circulars (LOCs) against default borrowers.
The
HC's verdict would render all LOCs issued by such banks against defaulters as
quashed.
A
division bench of Justices Gautam Patel and Madhav Jamdar held as
unconstitutional the clause of an office memorandum issued by the central
government empowering the chairpersons of public sector banks to issue LOCs
against default borrowers.
Advocate
Aditya Thakker, appearing for the Union government, sought the HC to stay its
order but the bench refused.
The
court passed its verdict on a bunch of petitions challenging validity of the
said clause.
The
bench said the Bureau of Immigration shall not act upon such LOCs (issued by
banks against defaulters).
The
court also said its judgment would not affect the orders issued against any
defaulter by a tribunal or a criminal court restraining them from travelling
abroad.
While
the office memorandum issued by the Centre was not ultra vires the
Constitution, the clause empowering the chairperson of a public sector bank to
issue LOC was "arbitrary and without power in law", the HC said.
The
Centre's office memorandum, in an amendment made in 2018, empowered the public
sector banks to issue LOCs in the "economic interest of India".
This
essentially restrained a person from travelling abroad if his/her departure
could be detrimental to the economic interest of the country.
The
petitioners contended that the words "economic interest of India"
cannot be equated with the "financial interests" of any bank.