Citizen’s Right to Travel Cannot be Curtailed on Account of Loan Default

In an order dated June 16, 2023, the Karnataka High Court in the case of Farooq Ali Khan v. Bureau of Immigration & Ors.(WP No.1235 of 2023) held that the fundamental right of the petitioner to travel cannot be curtailed on account of default in the repayment of loans by the company he is a guarantor for.

Since there were defaults in the repayment of the loans advanced to the company, Associate Décor Limited, the loans were declared as NPAs. Subsequently, recovery proceedings (before the Debt Recovery Tribunal) and insolvency proceedings (before the National Company Law Tribunal) were initiated against the said company. In addition to these proceedings, Look Out Circulars were sought to be issued to the personal guarantors of the company, including the petitioner.

A writ petition was filed by the petitioner before the Karnataka High Court, challenging the Look Out Circular issued against him which prevented him from travelling outside the country. It was highlighted that the petitioner is neither an accused in any crime nor is sought to be arrayed as an accused in any crime.

The Single Judge Bench of Justice M Nagaprasanna observed that even “if it is assumed that the petitioner is indeed the director of the company, it must be clarified that a bank cannot restrict the travel of a citizen solely on the basis of loan default”. Relying on case laws, the court reiterated that a person cannot be prevented from travelling abroad through a Look Out Circular or other means for the purpose of recovering outstanding debts owed to the banks.

Finally, the court held that the petitioner is authorized to travel abroad for a brief period provided that an affidavit of undertaking is filed stating that he would complete his work and come back to the country within 12 weeks from the date he starts his journey.