Travel Of A Citizen Cannot Be Curtailed By Bank On Ground That He Is In Default Of Loan Amount: Karnataka HC

The Karnataka High Court has held that the travel of a citizen cannot be curtailed by the bank on the ground that he is in default of a loan amount and said that issuance of LOC (Look Out Circular) has serious repercussions.

A Single Bench of Justice M. Nagaprasanna observed, “The petitioner, even if it is construed to be that he is the Director of the Company, the travel of a citizen cannot be curtailed by the Bank on the ground that he is in default of loan amount. Issuance of LOC has serious repercussions, first of which is that he will not be able to move out of the shores of the nation, notwithstanding any embargo placed by any Court of law.”

The Bench relied upon the case of Rana Ayyub v. Union of India 2022 SCC OnLine Del 961 wherein the Delhi High Court held that the personal liberty to travel cannot be taken away except in accordance with the law that permits the travel of the petitioner therein.

Senior Advocate K. Shashikiran Shetty appeared for the petitioner while DSG H. Shanti Bhushan and Advocate Nagaraj Damodar appeared for the respondents.

Facts -

The petitioner was before the High Court calling in question a LOC issued by the Bank of Baroda and executed by the Bureau of Immigration and sought a consequent direction declaring that the action of the Bank in issuing LOC is arbitrary and illegal. The petitioner claimed to be having certain business operations in Bangalore in wood products for over 35 years.

The petitioner had assets and businesses both in India and abroad particularly in the United Arab Emirates (UAE) and the Kingdom of Saudi Arabia (SA) for which purpose he frequently travelled both the places. The curtailment of his travel on the ground that recovery proceedings were pending against him led to the petitioner approaching the Court raising a challenge to the LOC so issued by the respondents.

The High Court in view of the above facts noted, “The issuance of LOC which comes about on 07-03-2022 with the 2nd respondent being the originator is bereft of reasons as to why the Bank wants curtailment of travel of the petitioner. The afore-quoted excerpts of the loan document nowhere indicates that the petitioner is the borrower; no criminal proceedings are pending against him; there is an embargo ordered by the Court for him to travel, nor that the petitioner is likely to evade trial if he is permitted to travel to UAE.”

The question before the Court was whether the Bank could have otherwise curtailed the fundamental right of the petitioner to travel abroad, except in accordance with the law.

“The High Court of Delhi in the case of RANA AYYUB holds that the LOC is issued against the petitioner therein in the hottest haste as he is not the accused in any crime so registered. … would unmistakably emerge is, taking recourse to LOC against persons like the petitioner if they have a role to play in the alleged episode of default of payment of loan to the tune of several crores. But, the issue would be whether the 2nd respondent/Bank has demonstrated that the petitioner has any role to play in the borrowal account and the default”, said the Court.

The Court noted that all that the petitioner is asking is, to travel to UAE and Saudi Arabia for the purpose of business and seek back to the shores of the nation and it is his grievance that the LOC has come his way.

“...deem it appropriate to permit the petitioner to travel for a brief period and come back to the shores of the nation, after conclusion of his work at UAE and Saudi Arabia”, held the Court.

The Court asserted that the petitioner is authorized to travel to both nations for a brief period, which is made subject to filing an affidavit of undertaking before the Court that he would complete his work and come back to the shores of the nation within the time as indicated in the said affidavit from the date he starts his journey.

“The petitioner shall intimate his date of travel and arrival to the originating agency who shall communicate it to the Bureau of Immigration on every occasion. It is not permission but information. Such information is to be given by the petitioner so long as the LOC is in operation”, directed the Court.

Accordingly, the Court disposed of the plea.

Cause Title- Himayath Ali Khan v. Ministry of Home Affairs & Ors.

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