Mere Apprehension That Borrowers Will Flee Country & Not Return To Repay Loans Cannot Be Uniform Rationale For Issuing Look-Out Circulars: Telangana HC

The Telangana High Court set aside a look-out circular issued against two persons by a bank for non-payment of a loan.

In that context, the Bench of Justice Surepalli Nanda observed that, "as on date no criminal proceedings are initiated against the Petitioners by the Respondent Bank the LOC issued against the Petitioners cannot be continued, the Respondent Bank can only request that they be informed about the Petitioner’s arrival/ departure."

In light of the same, it was observed that, "On the basis of apprehension that the Petitioners would flee the country and not return to repay their outstanding loans cannot become the uniform rationale for issuing lookout circulars against the Petitioners and to continue them for years together."

Senior Counsel Vikram Poosarala appeared for the petitioners, while Dy Solicitor General M Shalini appeared for the respondents.

In the past, Dr. Venkata Ramana Rao Maganti and Mrs. Usha Rani Maganti, a married couple, had challenged a bank's lookout circular through writ petitions. The circular, issued against them, was contested on grounds of being contrary to guidelines from 22.02.2021. The petitioners, Indian citizens residing in Hyderabad, frequently traveled to the USA for personal and professional reasons.

Dr. Venkata Ramana Maganti had borrowed Rs.75 lakhs from the bank, with his wife as a guarantor. The bank initiated proceedings under the SARFAESI Act due to non-repayment, claiming outstanding dues of Rs.6,36,32,384.21. The petitioners asserted a settlement of Rs.3,75,00,000 based on a one-time settlement proposal.

Travel plans for both petitioners were disrupted by the lookout circulars. Dr. Venkata Ramana Maganti was prevented from attending the Consumer Electronic Show in the USA, and Mrs. Usha Rani Maganti faced travel restrictions to visit her family. Previous legal attempts secured interim orders allowing limited travel.

The bank defended the circulars as necessary to protect its interests, portraying the petitioners as chronic defaulters. The petitioners argued that the circulars violated guidelines, lacked grounds for issuance, and infringed upon their fundamental right to travel. Legal proceedings ensued, with the bank justifying the circulars to safeguard its economic interests. The Deputy Solicitor General clarified the custodianship of the lookout circulars held by the fourth respondent.

The High Court placed reliance on the case of Poonam Kaur vs Union of India, wherein it was reiterated that the right to travel abroad which is guaranteed by Article 21 of the Constitution of India, and that it could not be taken away by the Respondents in an arbitrary and illegal manner.

With that background, it was further observed that there was no evidence to prove that the Petitioners leaving the country for a specific period would affect the economic interests of India. In that context, it was said that, "The ground used against the Petitioners herein is evidently economic interests of India. There is no evidence on record to prove that the Petitioners herein leaving the country for a specific period of time would affect the economic interests of India, in view of the fact as borne on record that the Petitioners have not been declared as fraudsters or money launderers."

In light of the same, the Court set aside the look-out circulars issued against the petitioners.

Cause Title: Dr Venkata Ramana Rao Maganti vs UCO Bank & Others

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