Look Out Circulars Cannot Be Issued Merely for Loan Defaults Absent Cognizable Criminal Offences

This judgment common-disposes of 33 writ petitions challenging Look Out Circulars (LOCs) issued by the Bureau of Immigration at the behest of Public Sector Banks (PSBs), investigating agencies (CBI, ED, SFIO), and government departments (Income Tax, MCA).

The petitioners include erstwhile directors, guarantors, and family members of defaulting companies.

Many petitioners were restricted from traveling abroad despite having no criminal proceedings against them or having joined investigations where proceedings were pending.

The court categorized the cases into: (A) LOCs at the instance of financial institutions; (B) LOCs by investigating agencies; and (C) Cases where petitioners are relegated to the forum that issued the LOC.

1. Whether the issuance and continuation of Look Out Circulars is legally sustainable when it restricts the fundamental right to travel abroad under Article 21.

2. Whether Public Sector Banks/Financial Institutions possess the legal authority to request LOCs in the absence of a cognizable offence.

3. Whether the term "detrimental to economic interests of India" can be invoked for routine commercial loan defaults.

4. Whether a person should be relegated to the trial court/originating forum for relief when a chargesheet has already been filed.

The Court applied Article 21 of the Constitution, establishing the right to travel abroad as a facet of personal liberty.

It relied on the MHA Office Memorandum dated 22.02.2021, which restricts LOCs to cognizable offences.

The Bench followed Viraj Chetan Shah v. Union of India (Bombay HC), which quashed the power of PSB heads to request LOCs under Clause 6(B)(xv).

Sumer Singh Salkan v. Asst. Director, which defined LOCs as coercive measures of last resort applicable only in cases of deliberate evasion of arrest in cognizable matters.

The court noted that "economic interest" must involve grave systemic impact, not individual defaults.

The Court reasoned that since the right to travel is a fundamental right, any restriction via LOC must be founded on a law that is just, fair, and reasonable.

For Category A cases, the Court found that following the Viraj Chetan Shah and Sahil Chugh precedents, the empowerment of PSB officials to seek LOCs is void of legal authority; thus, LOCs issued for mere loan defaults without criminal proceedings are unsustainable.

For Category B cases involving agencies like SFIO, ED, or Income Tax, the Court observed that where petitioners had cooperated with investigations, provided security, or were not named as accused in chargesheets, the mechanical continuation of LOCs was disproportionate and arbitrary.

For Category C, where trial courts were already seized of the matter via chargesheets, the Court held that the principle in Sumer Singh Salkan required the petitioners to seek relief from those specialized forums rather than the Writ Court.

In 4 petitions (Category C: Neeraj Singal, Ritu Singal, Kunwer Sachdev, Dharamvir Singh), the Court relegated the petitioners to the concerned trial courts/agencies for relief, as chargesheets had been filed.

These petitioners were permitted to travel subject to notifying agencies 48 hours in advance and the Bureau of Immigration was directed to update its records accordingly.