No bar in issuance of Look Out Circular against Personal Guarantor of a Loan from Public Sector Bank,

 

The single-judge bench of Justice G. Radha Rani dismissed an appeal in which a public sector bank had made request for issuance of LOC as huge amount of Rs.226.02 Crores was due and the petitioner had given a personal guarantee to the said outstanding amount.

Brief Facts of the Case

The director cum chairman of GVR Infra Projects Ltd.is the petitioner in this case, his company had taken a loan from erstwhile Vijaya Bank which later emerged with the Bank of Baroda which is the
respondent in this case along with the branch which had advanced the loan, after this proceeding were initiated against this company under provisions of Insolvency and Bankruptcy code, 2016. A resolution plan was also approved by National Company Law Tribunal (NCLT), Chennai via an order dated 20.07.2020. under this resolution plan, resolution applicant UV Asset Reconstruction Company Limited and WL Structures Private Limited Consortium had taken over the management of the company.

 

The director had booked a flight to travel to Maldives on 7th of October 2021 with 5 others and planned to return after 3 days, he was holding a valid passport but when he reached the airport, he
was stopped by the immigration authorities but the 5 other members were allowed to travel.

According to the authorities a ban of foreign travel was imposed on him and no prior notice or information about the ban was provided to him. Later on he found out that the ban was imposed upon him by the Bank of Baroda and the branch which advanced the loan but the entire loan amount was covered under the resolution plan and the resolution applicant had taken over M/s GVR Infra Projects Ltd.

High Court's Observation

The petitioners relied upon the judgement of High Court of Bombay in Om Prakash Bhatt v. State of Maharashtra where it was held that “...Petitioner not aware about any Lookout Circular (LOC) issued against him and basis of same – Petitioner not having arraigned as accused for cognizable offence and was merely called for questioning only once by CBI in connection with case of Kingfisher Airlines, travel restrictions could not have been imposed upon him – Petitioner entitled to travel abroad for his personal and professional obligations with certain conditions.”

The Court refused to entertain this argument by stating that in the present case a public sector bank had made request for issuance of LOC as huge amount of Rs.226.02 Crores was due and the
petitioner had given a personal guarantee to the said outstanding amount.  

 The petitioner's reliance on Satwant Singh Sawhney Vs. D. Ramarathnam, Assistant Passport Officer, Government, 1967 Latest Caselaw 103 SC was also rejected as the Court pointed out that after the said decision was rendered the Passport Act 1967 was enacted by Parliament and it laid down the circumstances under which passport may be issued or refused or cancelled or impounded and also prescribed the procedure for doing so.

The court took the held of the case of Maneka Gandhi Vs. Union of India, 1978 Latest Caselaw 16 SC  wherein it held that “No person can be deprived of his right to go abroad unless there is a law enabling the State to do so and such law”

It also mentioned P CHIDAMBARAM vs. CENTRAL BUREAU OF INVESTIGATION, 2019 Latest Caselaw 1026 SC in which the court stated that “Legality and / or validity of an LOC is dependent upon the circumstances prevailing on the date on which the request for issuance of the LOC has been made contains fair reasonable and just procedure."

 

After all of this the court dismissed the writ petition and it was stated by Justice G. Radha Rani that "As the respondent Bank initiated recovery proceedings against the petitioner and if lookout
circular is lifted and if the petitioner disappears, the recovery proceedings would be brought to standstill and recovery of crores of public money would become impossible. Hence, it is considered fit to dismiss the petition."

Case Title: Garikapati Venkateswara Rao v. Union of India & ors.

Case Details: Writ Petition No.6892 OF 2022

 Coram: Justice G. Radha Rani

 

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