Lookout circular quashed, Delhi High Court frowns on its use by banks to recover money

A single-judge bench of Justice Subramonium Prasad held in its September 19 order– “The right to travel abroad is guaranteed under Article 21 of the Constitution of India which cannot be taken away in an arbitrary and illegal manner. This court is now coming across a large number of cases where banks are now insisting on opening of LOCs only as a measure for recovery of money without initiating any criminal proceedings.”

The court said banks can request for opening of LOCs in “exceptional circumstances” when it is felt that permission by the person to go abroad will affect the “economy of the country”.

Observing that LOCs cannot be opened merely on the request of banks, the HC said, “There has to be some application of mind by the authority concerned which is opening the LOCs, since opening of this circular results in restraining a person’s right to travel abroad. The authority opening the LOC must satisfy itself that the departure of a person against whom the circular has been opened would be detrimental to the sovereignty or security or integrity of India…”