The Delhi High Court has asserted that Look Out Circulars (LOCs) cannot be issued solely at the request of banks. Instead, there must be a thoughtful evaluation before taking such action.

Justice Subramonium Prasad noted that the Court had been encountering numerous instances where banks were demanding the issuance of Look Out Circulars (LOCs) purely as a means to recover debts without commencing any criminal proceedings.

In light of the guidelines provided by the Union Ministry of Finance regarding the issuance of Look Out Circulars (LOCs) by Public Sector Banks, the Court emphasized that banks are allowed to make requests for LOCs but should do so only in exceptional situations where issues impacting the country's economy are at stake.
Furthermore, the Court pointed out that the issuance of a Look Out Circular (LOC) not only restricts an individual's freedom to travel but also raises doubts and suspicions about the person for whom it is initiated.

The Court made these remarks while addressing specific petitions that contested the issuance of Look Out Circulars (LOCs) against former directors of AAA Paper Limited, which were initiated at the request of the Bank of Baroda.

In 2019, the bank classified the company's loan account as a non-performing asset (NPA), and subsequently, actions were taken under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act).

The two petitioners were recently prevented from boarding their flight at the Indira Gandhi International Airport (IGI) in New Delhi due to a Look Out Circular (LOC) issued against them. The bank asserted that these individuals had provided guarantees for the credit facilities acquired by the company in question.

Justice Prasad remarked that the petitioners had no criminal cases filed against them, and at the time the Look Out Circulars (LOCs) was issued, there were no suspicions or allegations of them being involved in diverting funds.

The Court determined that the petitioners were solely guarantors and had not been engaged in the day-to-day operations of the company for a considerable number of years.

Considering the circumstances outlined above, the Court has concluded that the Look Out Circular (LOC) issued against the petitioners lacks a valid basis and should be nullified. Therefore, the Court has quashed the LOC in question.

Case: Apurve Goel V. Bureau of Immigration & Anr W.P.(C) 5674/2023 & CM APPLs. 22213/2023, 27602/2023