Delhi High Court upholds quashing of Look Out Circulars issued at Bank of Baroda’s request against borrowers

The appellant, Bank of Baroda, was part of a consortium of lenders that had extended credit facilities to M/s Parabolic Drugs Limited.

Respondent Nos. 1 and 2 were promoters/directors of the borrower company.

The loan account was classified as a non-performing asset on 30 March 2013 and declared fraudulent on 30 May 2016.

CIRP proceedings were initiated against the borrower before the NCLT, Chandigarh, and admitted on 30 August 2018.

Following a complaint by the consortium, the CBI registered an FIR against the borrower company and Respondent Nos. 1 and 2 on 29 December 2021; the Enforcement Directorate subsequently registered an ECIR on 6 January 2022.

On the bank’s request, a Look Out Circular (“LOC”) was issued against Respondent Nos. 1 and 2 on the apprehension that they might leave India.

The respondents challenged the LOCs in W.P.(C) 7850/2025.

The learned Single Judge quashed the LOCs, while directing the respondents to cooperate with the investigation and trial and to obtain prior permission from the competent courts before travelling abroad.

The Bank filed the present intra-court appeal against that decision.

1. Whether an LOC issued at the request of the Chairman, Managing Director, or Chief Executive Officer of a public sector bank could legally be sustained against the respondents.

2. Whether the safeguards imposed by the learned Single Judge—submission of undertakings, cooperation with investigation and trial, and prior judicial permission for foreign travel—adequately protected the bank’s interests.

3. Whether the learned Single Judge erred in quashing the LOCs on the ground that the power to issue an LOC is an exceptional coercive measure affecting the fundamental right to travel.

The Court applied the principle that the power to issue an LOC is an exceptional coercive measure which directly interferes with an individual’s fundamental right to travel and must therefore be exercised with due care, caution, and only in exceptional circumstances; absent compelling reasons, a person should not be deprived of the right to travel abroad, as held in Bank of Baroda v. Surender Kumar Bansal, 2026 SCC OnLine Del 4574.

The Court also relied on Viraj Chetan Shah v. Union of India, 2024 SCC OnLine Bom 1195, which quashed, to the relevant extent, provisions of the applicable Office Memorandums permitting the Chairman, Managing Director, or Chief Executive Officer of a public sector bank to request issuance of an LOC; the Delhi High Court noted that the judgment had not been stayed by the Supreme Court.

Accordingly, an LOC issued merely at the instance of such bank officials could not withstand judicial review.

The Court held that the LOCs were requested by the appellant bank on the apprehension that the respondents might flee abroad, but the bank’s status as a public sector lender and the existence of loan-related criminal and insolvency proceedings did not, by themselves, satisfy the stringent legal standard governing deprivation of the right to travel.

Applying Surender Kumar Bansal and Viraj Chetan Shah, the Court concluded that LOCs issued at the request of the Chairman, Managing Director, or Chief Executive Officer of a public sector bank were legally unsustainable.

The Court further found that the Single Judge had imposed adequate safeguards: the respondents were required to undertake continued cooperation with the investigation, appear before the trial courts when required, assist in expeditious disposal of the trial, and obtain prior permission from the competent courts before travelling abroad.

These directions sufficiently protected the appellant’s interests without continuing an unlawful restraint on the respondents’ travel.

It held that the LOCs issued at the appellant’s request were liable to be quashed and that the safeguards requiring undertakings, cooperation with the proceedings, and prior permission for foreign travel were adequate.

The appeal was accordingly dismissed, and all pending applications were disposed of without any order as to costs.