The Bombay High Court on Tuesday ordered that public sector banks do not have the legal authority to issue Look Out Circulars (LOCs) against loan defaulters. After the court’s decision, all LOCs issued by such banks against defaulters will stand cancelled.
Hort said illegal
A division bench of Justice Gautam Patel and Justice Madhav Jamdar also termed as unconstitutional the section of the Central Government’s office memorandum in which chairpersons of public sector banks were empowered to issue LOC against loan defaulters. Advocate Aditya Thakkar, appearing for the central government, asked the court to stay its order, but the bench refused.
The court gave its verdict on several petitions challenging the validity of the said section. The bench said that the Bureau of Immigration will not act on such LOCs (issued by banks against defaulters). The court also said that its decision will not affect the orders of the tribunal or criminal court against any defaulter restraining him from traveling abroad.
Economic interests of the country and the bank are different
In 2018, the Center had amended the office memorandum to give public sector banks the right to issue LOCs in the economic interest of India. Under this, if a person’s going abroad can be harmful to the economic interest of the country, then he can be prevented from doing so. The petitioners argued that the phrase “economic interests of India” cannot be equated with the “financial interests” of any bank.
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