Mumbai: High Court gives big order on government banks, LOCs issued against loan defaulters will be cancelled
Mumbai: A division bench of Justice Gautam Patel and Justice Madhav Jamdar also termed as unconstitutional the section of the Central Government's office memorandum in which chairpersons of public sector banks were given the power to issue LOC against loan defaulters.
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Public sector banks do not have the legal authority to issue Look Out Circulars (LOCs) against loan defaulters. Bombay High Court said this in one of its orders on Tuesday. After the court's decision, all LOCs issued by public sector banks against defaulters will be cancelled.
A division bench consisting of Justices Gautam Patel and Madhav Jamdar further declared the portion of the Central Government's office memorandum that gave chairpersons of public sector banks the authority to issue LOCs against loan defaulters to be unconstitutional.
The bench rejected the central government's request for the court to pause its ruling, made by attorney Aditya Thakkar. On multiple petitions contesting the legality of the section in question, the court rendered a decision.
The bench said that the Bureau of Immigration will not act on such LOCs (issued by banks against defaulters). The court also said that its decision would not affect the orders of the tribunal or criminal court against any defaulter restraining him from travelling abroad.
In 2018, the Center amended the office memorandum to give public sector banks the right to issue LOC in the economic interest of India. Under this, if a person's going abroad can be harmful to the economic interest of the country, then he can be prevented from doing so.
The petitioners argued that the phrase "economic interests of India" cannot be equated with the "financial interests" of any bank.
