LIVE Course on Transfer Property Law | Price Hike in 4 days | Grab it now!
LCI Learning

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

Bank Cannotissue LOC Unless It Effects Economic Interest Of The Country: Karnataka HC

Sravika Reddy Kohir ,
  30 June 2022       Share Bookmark

Court :
Karnataka High Court
Brief :

Citation :
WP 11213/2022

CASE TITLE:
Mrs. Leena Rakesh Vs Bureau of Immigration Ministry of Home Affairs

DATE OF JUDGEMENT:
20 June, 2022.

BENCH:
Justice SG Pandit

PARTIES:
Petitioner – Mrs. Leena Rakesh
Respondent – Bureau of Immigration Ministry of Home Affairs.

SUBJECT

The writ petition was filed in the High Court of Karnataka as to challenge the arbitrary power exercised by the bank and violating Article 14,19,21 of the Indian Constitution.

IMPORTANT PROVISIONS

ARTICLE 14

Article 14 of Indian Constitution deals with equality and equal before the law concept. That is everyone has equal protection under the law and they are equal before it. It also puts forth that any act of arbitrariness either by the legislature or executive negates the concept of equality.

ARTICLE 19

Article 19 of the Indian Constitution deals with protection of rights regarding freedom and expression etc., under 19(d) citizens are provided to move freely without any restrictions.

ARTICLE 21

Article 21 of the Indian Constitution deals with the right to life and personal liberty. No person under this Article shall be deprived of his own life and personal liberty unless with regards to the procedure established by the law.

ARTICLE 226

Article 226 deals with the power conferred to High Court to issue orders writs and directions to any Government authority or person.

OVERVIEW

  • In the present case, the petitioner was travelling from Philippines to India for a pending matrimonial matter and after the same was completed while her way back to Philippines she was stopped from leaving the country.
  • The Foreign Regional Registration Officer, stopped the petitioner from travelling by issuing a LOC as per the instructions of respondent 03(the bank).
  • The Petitioner filed for a writ of Mandamus for the arbitrary action of the respondents in violation of Articles 14,19,21.

ISSUES RAISED

  • whether the bank is justified by its act of preventing the petitioner from travelling abroad and to be issued an LOC.

ARGUMENTS ADVANCED BY THE PETITIONER

  • The Petitioner argued that the act of the Respondents in stopping the Petitioner from travelling abroad amounts to the arbitrary action and thus does violate Articles 14,19,21 of the Indian Constitution.
  • That the counsel further argued that the issuance of such LOC is not a recovery proceeding and the Respondents have already initiated recovery proceedings to realize the dues from the petitioner by means of the security submitted.
  • He further argues that there were no criminal or non-cognizable offences against the petitioner and under the Official Memorandum an LOC can be issued only if the petitioner if permitted to travel would affect the economic interest of the country.
  • It was also submitted that the valuation of security is more than that of the amount due and also relied upon decisions of the Divisional Bench of Punjab and Haryana High Court at Chandigarh and contended that just the default in payment does not itself lead to issuance of LOC and preventing a person from travelling abroad.

ARGUMENTS ADVANCED BY THE RESPONDENT

RESPONDENTS NO.1 AND 2

  • The Respondents 1 & 2 submit that the said LOC was issued as per the request of the Respondent 3.
  • It was further contended that whenever bank is of the opinion that there shall be a fraud or default by the borrower and there by escaping from the territory to avoid recovery in such a case it shall be requested to issue LOC and the Respondents 1&2 are supposed to take action with respect to the same.
  • It further relied upon the judgement in the case Dr. Bavaguthuraghuram Shetty vs Bureau of Immigration and Others, where it states that the criminal case is not necessary and if the bank is of the opinion that such an issue of LOC is necessary when it finds that if the person leaves abroad without paying dues then it shall be having an effect on the economic interest of that country.

RESPONDENT NO.3

  • The Respondent 3 submits that when the Petitioner failed to pay back the loan a recovery proceeding was initiated and there were also instances wherein the Respondent tried to sell the secured property but it was unsuccessful as the same was in the possession of tenant.
  • The Respondent submits that the Petitioner if left to travel abroad then the recovery of the same due might be impossible, this authorizes the Respondent bank to issue the LOC and thus the same was issued and requested to Respondents 1 & 2.

JUDGEMENT ANALYSIS

  • The court relies upon the O.M. dated 22.02.2021 and under clause 6(L) it provides for the authority to issue LOC when such person when permitted would cause adverse impact on the country’s economic interest.
  • It also lays out thatnot letting a person travel abroad for recovering amount does not fall under the above clause to issue LOC.
  • It also contented that just because the bank has such a power, they cannot use it arbitrarily.
  • And also, the Respondent 1 & 2 cannot just be based on the request of the respondent 3 issue LOC they should re-check with the clauses of the O.M. and act arbitrarily.
  • The court also denied the relevance upon the case Bavaguthuraghuram case as the facts of the case are different to that of the present case and the amount to be recovered in this case definitely results in disturbance of economic interest of the country.
  • Thus, the court allowed the writ petition of the Petitioner and directed the Petitioner to deposit an amount of 10,00,000/- for adjustment of dues, also to withdraw LOC and to also allow the Petitioner to travel abroad.

CONCLUSION

The High Court after hearing both the parties has allowed the writ petition also directed that the banks do not have the authority to exercise arbitrarily. The court directed that the bank’s do not have power to issue the LOC unless there is some effect to the economic interest of the country.

Learn the practical aspects of CrPC HERE, CPC HERE, IPC HERE, Evidence Act HERE, Family Laws HERE, DV Act HERE

Click here to download the original copy of the judgement

 
"Loved reading this piece by Sravika Reddy Kohir ?
Join LAWyersClubIndia's network for daily News Updates, Judgment Summaries, Articles, Forum Threads, Online Law Courses, and MUCH MORE!!"



Published in Others
Views : 347




Comments








Post a Suggestion for LCI Team
Post a Legal Query