Delhi HC issues notice saying banks can’t use LOC as a measure to recover money | Business Upturn

Delhi HC issues notice saying banks can’t use LOC as a measure to recover money

Banks should refrain from using Look Out Circulars as a way to recover their money, the Delhi High Court has said.

Banks should refrain from using Look Out Circulars as a way to recover their 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 hard measure to make a person surrender before investigating authorities or a court of law and can only be issued at times when there are sufficient reasons to back it up. The court made the required observations while quashing the LOC issued at the insistence of 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 as a non-performing asset in November 2018, and in January 2022, the petitioner had also received a show cause notice from Bank of Baroda about having been declared a wilful defaulter. Justice Subramanium Prasad noted as per the CBI, the petitioner was not an accused in the matter and most of the transactions had initially taken place after his resignation. The court after hearing the matter said the petitioner sought to be kept as ‘a hostage in the country only for the purpose of recovery of money which is payable by the company’.

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The court further commented that the, “Phrases like ‘detriment to the economic interest of India’ cannot be permitted to be used without there being any substantial material before the Look Out Circular is opened.”