“When there is no fraud, either at the instance of the petitioner or at the instance of the managerial staff of the bank, for the mere fact that the petitioner is a defaulter, he cannot be forced to stay within the four corners of this country in order to ensure that the amounts are re-paid,” the court said.

Justice V Lakshminarayanan observed that a person taking a loan is not mortgaging his constitutional rights with the bank and thus cannot be prevented from travel.

“For a mere fact that a citizen of this Country raises a mortgage loan does not mean that he has mortgaged his constitutional and legal rights, lock, stock and barrel, with the bank,” the court observed.

The court added that a person's travel should not be interfered with by issuing a Look Out Circular merely on a letter written to the Bureau of Immigration. The court remarked that the letter by the bank is not a law and if a nationalised bank is permitted to do such an act, every private creditor or NBFC will start approaching the police for issuing LOC to prevent debtors from going abroad.

“'Law' under Article 21 implies a legislation. A letter written by the Manager of the bank to the Bureau Of Immigration cannot be treated as “law”. If a Nationalized Bank is permitted to do this, then every private creditor or NBFCs would also be emboldened to approach the police for issuance of LOC to prevent their debtors from going abroad. God forbid the debtors from being thrown at the mercy of wolfs of creditors,” the court said.

The court was hearing a petition filed by Bank of Baroda seeking to review an earlier order of the court, revoking a Look Out Circular issued against a loan defaulter.

The bank's case was that the man, Kondepati Ganga Prasad, was a promoter director of an entity. The entity had taken a loan from Vijaya Bank, which later merged with Bank of Baroda (BoB). When the loan remained unpaid, BoB initiated IBC proceedings as a financial creditor. A resolution plan was approved by the NCLT, which was put in force and the debt against the principal debtor was satisfied.

Since the LOC against Prasad continued, he had approached the court seeking to revoke the same. The Central Government informed the court that the LOC was opened on the requisition of the Bank. The bank informed that though the loan account was closed pursuant to the resolution plan, it waned the LOC to continue. The court had thus removed the LOC.

Seeking review of the order, the Bank submitted that though debt against principal debtors had been extinguished, LOC should continue as Prasad was the guarantor. The bank also submitted that the resolution professional had advised it to initiate bankruptcy proceedings against Prasad and the same was being discussed with other consortium banks.

The court noted that as of today, the bank had not taken the advise of the resolution professional and when no further proceedings had been initiated, Prasad could not be accused of suppressing facts.

The court also noted that the Bank had neither raised a complaint with the CBI or which the local police claiming that activities of Prasad or his co-directors were fraudulent. In the absence of fraud, the court noted that Prasad could not be forced to stay in the country by way of LOC.

Thus, finding no error in the order revoking/removing the LOC, the court dismissed the review.

Counsel for Petitioner: Ms. Revathi Manivannan

Counsel for Respondent: Mr. Arvind Pandian, Senior Counsel for Mr. Sandeepkumar, Mr. G. Subramanian