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loc: Banks can request LOCs against defaulters only in ‘exceptional’ circumstances: HC

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New Delhi: Banks can request for opening of look-out circulars (LOCs) against defaulters only in exceptional circumstances when questions affecting the country’s economy are involved and the authority concerned must satisfy itself before such circulars are issued, the Delhi High Court ruled on Friday.

Expressing displeasure over banks insisting on LOCs for recovery of dues without initiating any criminal proceedings, Justice Subramonium Prasad said there has to be some application of mind as these circulars result in restraining a person’s right to travel abroad. He further noted that the opening of an LOC also casts aspersions on the person against whom it is opened.

The judgment came on a petition by the two former directors of a company whose loan accounts were declared as NPA by Bank of Baroda in 2019. The LOC issued against the duo resulted in stopping them from boarding their flight.

The HC quashed the LOC on the grounds that the petitioners were only guarantors to the credit facilities and not involved in the day-to-day affairs of the company. Neither was there any criminal case against them nor any suspicion or allegation of siphoning of funds by them on the date of issuance of the circular, the HC observed. – Indu Bhan

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