Look Out Circulars issued by Public Sector Banks are legally unsustainable and liable to be quashed.

The Petitioner is a Director and personal guarantor for Gupta Power Infrastructure Ltd., which availed credit facilities from a consortium of banks (Respondent Nos. 3-14).

Following proceedings initiated by the lenders, the Petitioner was orally informed in April 2025 that Look Out Circulars (LOCs) were being issued against him, though no written details were provided.

The Petitioner’s request for information regarding the LOC under the RTI Act was denied by the Ministry of Home Affairs on July 8, 2025, citing exemptions under Section 8(1)(g).

Consequently, the Petitioner approached the High Court seeking the disclosure and quashing of the LOC.

1. Whether an LOC issued at the instance of Public Sector Banks against a personal guarantor is legally sustainable.

2. Whether the Petitioner is entitled to the quashing of the LOC based on the principles established in previous judicial precedents.

The Court primarily applied the principles governing the issuance and judicial review of LOCs as articulated in *Vineet Gupta v. Union of India* (2026:DHC:1616).

These principles dictate that LOCs are coercive measures impacting the fundamental right to travel under Article 21 of the Constitution and must be exercised sparingly.

Specifically, the rule establishes that LOCs issued solely at the instance of high-ranking officials of Public Sector Banks (Chairman/MD/CEO) cannot withstand judicial scrutiny and are liable to be quashed unless they meet the strict "economic interests" or "national interest" criteria defined in the Office Memorandum dated 22.02.2021.

The Court observed that the Petitioner’s situation—acting as a personal guarantor for a company in default—was factually "almost similar" to the case of *Vineet Gupta*.

Applying the six guiding principles from the *Vineet Gupta* precedent, the Court reasoned that the power to restrict an individual's liberty via an LOC must be proportionate and legally backed.

In this instance, since the LOC was initiated by the Respondent Banks in a manner inconsistent with the requirement for "tangible material" of evading justice or a "grave threat" to national economic interest, it failed the test of legality.

The Court emphasized that the burden of proof for justifying the necessity of the restraint lies with the originating agency, which was not met here.

The Court ordered the quashing of the LOC issued by Respondent No. 2 against the Petitioner.

However, the Court granted the Respondent Banks the same liberty as provided in the *Vineet Gupta* case to pursue alternative legal remedies or fresh LOC requests if specific statutory conditions are later met.