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Lookout Circular to be Issued Only in Exceptional Circumstances

The High Court of Delhi, in the case of Shalini Khanna v. Union of India, [2024 DHC 960], held on February 6, 2023, that the issuance of a Lookout Circular should be done only in exceptional circumstances and cannot be resorted to in every case of bank loan default. The court also held that the fundamental right of a citizen to travel abroad cannot be curtailed solely by the failure to repay a bank loan.

In the instant case, a company involved in garment manufacturing, sought cash credit facilities of Rs. 9 crore from the Respondent, Bank of Baroda through its Directors. The Petitioner executed a Deed of Guarantee for the repayment of the amount disbursed by these facilities. Subsequently, the company’s account was categorized as a Non-Performing Asset, with Rs 7.26 crore due and payable by the company. In accordance with a request made by the Respondent Bank, the Bureau of Immigration issued a Look Out Circular against the petitioner. The issuance of this Look Out Circular was challenged by the Petitioner in the present case.

The court observed that the issuance of a Look Out Circular was to be done only in exceptional cases where the authorities believed that the departure of a person would be detrimental to the country’s economic interests. Observing that the loan amount in the present case was not of such magnitude that it would have a significant impact on the country’s economic welfare and that the petitioner was not even arrayed as an accused in the case, the court quashed the Look Out Circular. The Court also held that the country’s fundamental right to travel abroad cannot be curtailed by default in loan payment and it should not be resorted to in every case of loan default.