Banks can’t use LOC as measure to recover money: Delhi HC

Banks cannot use Look Out Circulars as a way to recover money, the Delhi High Court has said. Holding LOCs can’t be opened on the mere possibility of a person being made an accused in a criminal case as they take away a person’s right to travel abroad, which is a fundamental right under the Constitution.
A Look Out Circular (LOC), the high court said, is a measure to make a person surrender before investigating authorities or a court of law and can be issued only when there are sufficient reasons for it. The court made the observations while quashing the LOC issued at the insistence of the Bank of Baroda against Nipun Singhal, a former director at Lloyd Electric and Engineering Limited, which is facing a CBI probe over certain transactions. The court was informed that about 18 months after the petitioner had left the company, it was declared a non-performing asset in November 2018, and in January 2022, the petitioner received a show cause notice from Bank of Baroda about having been declared a wilful defaulter. Justice Subramonium Prasad noted that, as per the CBI, the petitioner was not an accused in the matter, and most of the transactions had taken place after his resignation.