LOC against guarantor quashed where no FIR is registered and no investigation is pending against the subject.

The Petitioner, a guarantor for loan facilities availed by M/s. Shri Vishnu Overseas Private Limited and M/s Shri Vishnu Eatables Private Limited from Punjab National Bank (PNB) and UCO Bank, sought disclosure and quashing of a Look Out Circular (LOC) issued against him.

The borrower companies were classified as Non-Performing Assets (NPA) in 2017.

Consequently, PNB requested an LOC (Case No. 219 2020 E 0001) to prevent the Petitioner from leaving India.

Although FIRs were registered against the principal borrowers and management, the Petitioner was neither named as an accused in the charge-sheet nor summoned by the CBI.

Furthermore, LOCs against co-guarantors in the same matter had previously been set aside by the Court.

Whether the subsistence of an LOC against a guarantor is legally sustainable when no FIR or investigation is pending against the individual.

Whether the continuation of an LOC violates the fundamental right to travel under Article 21 of the Constitution in the absence of a demonstrable requirement for restraint.

The Court relied on the principles governing LOCs as articulated in Vineet Gupta v. Union of India [2026:DHC:1616], which integrated precedents from Maneka Gandhi v. Union of India (Article 21 rights), Sumer Singh Salkan v. Asst. Director, and Viraj Chetan Shah v. Union of India.

The core doctrine established is that an LOC is a coercive measure impacting personal liberty and must be exercised sparingly, strictly in accordance with Office Memoranda, and only where a subject is evading a cognizable offence or poses a grave threat to national/economic interests.

Furthermore, LOCs issued solely at the instance of Public Sector Bank officials without statutory backing or pending investigation cannot withstand judicial review.

The Court applied the "proportionality and necessity" test to the facts, noting that while an LOC was opened at PNB's behest, the Petitioner was not involved in the day-to-day management of the defaulting companies and was not arrayed as an accused in the resulting FIRs.

The Court reasoned that since there is no pending investigation against the Petitioner and no allegation of obstruction to any inquiry, the "originating agency" failed to discharge the burden of justifying the necessity of the restraint.

Following the precedent in Vineet Gupta, the Court observed that continuing an LOC where the subject has not evaded the process of law constitutes an "unreasonable and unjustified restriction on personal liberty".

The Court quashed and set aside the LOC in question.

PNB was directed to communicate this withdrawal to the relevant authorities immediately, and the writ petition was disposed of accordingly.