The Bombay High Court
has said that issuance of a Look Out Circular (LOC) at the instance of public
sector banks against alleged default borrowers in the absence of a statute or
law is violative of a person's fundamental rights.
The court made the
observation on April 23 while quashing the Centre's decision empowering such
banks to seek issuance of LOCs.
A division bench of
Justices Gautam Patel and Madhav Jamdar had on April 23 held as
unconstitutional the clause of an Office Memorandum issued by the Central
government empowering the Chairman, Managing Directors and Chief Executive
Officers of public sector banks to seek issuance of LOCs against default
borrowers or even persons who stood guarantee for such borrowers.
In its 289-page judgment made available on Friday, the bench
said an executive function cannot substitute a statute and the executive cannot
in any event contravene the Constitution.
"For the executive to encroach upon the private rights of a
citizen, there must be some specific legislation. Even if an executive action
is backed by a specific legislation, it is still liable to be struck down if it
involves the infringement of fundamental rights," the bench said.
The high court said the Office Memorandums are "ex facie
not law and are by no stretch of imagination a procedure established by
law".
"It is inconceivable that the OMs - purely executive
instructions or a framework or guidelines - can ever curtail the fundamental
right to travel abroad," it said.
"Is it to be assumed or pre-supposed that just because a
borrower is travelling abroad therefore, he or she is bound to settle abroad and
flee the country," the court questioned.
The bench also said it was incomprehensible as to how the
chairman, managing directors and chief executive officers of public sector
banks are given the power to request for issuance of LOC without any other mechanism
in place.
The bench said with such powers, the public sector banks become
judge and executioner at once.