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Public sector banks do not have power to issue Look Out Circulars, rules Bombay HC

A Bench of Justice GS Patel and Madhav Jamdar pronounced the verdict in a clutch of petitions challenging the LOCs issued to restrain people who are indebted to public sector banks from travelling abroad.

Public sector banks do not have power to issue Look Out Circulars, rules Bombay High Court gcw
First Published Apr 23, 2024, 11:42 AM IST

The Bombay High Court on Tuesday held that public sector banks do not have power to issue Look Out Circulars (LOCs) against Indian citizens and foreigners under the office memoranda (OM) of the Central government. A bench consisting of Justices GS Patel and Madhav Jamdar rendered decisions in a number of cases contesting the LOCs issued to prevent individuals with debts to public sector banks from traveling overseas.

The Court clarified that while OMs of the Central government were not ultra vires the Constitution, the subsequent empowerment of bank managers of public sector banks to issue LOCs was arbitrary. In light of this judgment, all LOCs issued at the request of public sector banks were quashed and set aside by the High Court today. 

The Bench did clarify, though, that this decision did not supersede any prior orders from criminal courts or tribunals prohibiting anyone from leaving the country.

LOCs issued by the Union Ministry of Home Affairs' Bureau of Immigration allow the immigration authorities at any port of departure to prevent a person from travelling outside India. Following a sequence of circulars or OMs, the first of which was published on October 27, 2010, LOCs were issued.

Each bank was required to provide an explanation for its activities when obtaining a Letter of Credit (LOC), as the Ministry of Home Affairs (MHA) noted. It was argued that while a specific LOC may be quashed and set aside in the worst case scenario, the OM itself and the authority to issue them should not be invalidated due to the propriety of a specific request made by a certain public sector bank.

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