A bank-initiated LOC cannot continue without evidence of flight risk once investigation is complete.

Bank of Baroda lodged a complaint with the CBI concerning borrower entities whose loan accounts had been classified as non-performing assets and declared fraudulent. An FIR was registered against the petitioner, a former director of one borrower company, and others; the CBI later filed four charge sheets, and the Trial Court took cognizance.

The petitioner was granted bail subject to a requirement to seek permission before travelling abroad. Although the Trial Court permitted travel to Kazakhstan, immigration officials stopped him because of a separate Look Out Circular (LOC) issued at the Bank’s instance. The Trial Court temporarily stayed that LOC, allowing the petitioner to travel; he returned without misusing the permission.

The CBI-issued LOC had also been suspended following completion of the investigation. The petitioner sought quashing of the Bank-issued LOC.

1. Whether the LOC issued at the Bank’s instance should remain in force when the investigation was complete, the CBI-issued LOC had been suspended, and the petitioner’s foreign travel was subject to the Trial Court’s supervision.

2. Whether the Bank’s apprehension that the petitioner might leave the country, or its financial claim, was sufficient by itself to justify continuation of the LOC.

The Court stated that an LOC is a coercive measure and should not be issued or continued routinely merely because a person is facing trial; its issuance and continued operation must be justified by circumstances warranting restraint on the right to travel.

The Court further held that a creditor’s apprehension that a person may abscond, or the existence of a financial claim, cannot by itself justify keeping an LOC in force indefinitely.

The investigation had concluded, charge sheets had been filed, and cognizance had been taken, so the petitioner’s presence was no longer required for investigative purposes.

His foreign travel was subject to the Trial Court’s supervision and bail conditions, and he had previously travelled with permission without misusing it.

In the absence of material showing that he was likely to abscond, and given the suspension of the CBI-issued LOC, the Bank’s apprehension and financial claim did not justify continuing its LOC.

The quashing did not affect the pending criminal proceedings, the petitioner’s bail conditions, or the Trial Court’s power to regulate or restrict his travel; the petitioner remained bound by the Trial Court’s directions.

The petition and pending applications were disposed of, and the previously fixed date was cancelled.