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Delhi High Court Asserts Fundamental Right to Travel Abroad Cannot be Restricted Solely for Loan Default

LI Network

Published on: February 9, 2024 at 16:15 IST

The Delhi High Court has emphasized that the issuance of a lookout circular (LOC) should not be a common practice for every instance of defaulting on bank loans or availing credit facilities for business purposes.

Justice Subramonium Prasad held that the fundamental right of a citizen to travel abroad cannot be curtailed merely due to failure in repaying a bank loan, especially when the individual in question has not been accused of misappropriation or siphoning off loan amounts.

The Court made these observations while quashing an LOC initiated by the Bureau of Immigration against Shalini Khanna, prompted by the Bank of Baroda.

The bank accused Khanna of executing a Deed of Guarantee for the repayment of funds disbursed to the directors of a company, including her husband. The bank claimed that out of the released Rs. 7 crores, Rs. 5.95 crores were withdrawn by the directors, alleging misappropriation.

Legal proceedings were initiated under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions before the Debts Recovery Tribunal (DRT), which ruled in favor of the bank’s entitlement to recover a substantial sum from Khanna. Additionally, a complaint was filed by the Central Bureau of Investigation (CBI) against Khanna and the company directors under various sections.

Justice Prasad emphasized that the LOC issuance should be in line with the Union Government’s Official Memorandum, permitting banks to request an LOC only if the person’s departure poses a threat to the sovereignty, security, bilateral relations, or strategic and economic interests of the country.

The Court noted that the loan amount involved in this case, approximately Rs. 7 crores, did not meet the threshold to significantly impact the country’s economic interests.

The Court concluded by quashing the LOC against Khanna and stated that if she is later accused during criminal proceedings, the bank can request the Bureau of Immigration to issue a fresh LOC.

The ruling underscores the need for proportionality in restricting fundamental rights based on financial defaults.

Case Title: SHALINI KHANNA v. UNION OF INDIA & ANR.