The division bench also termed as unconstitutional the section of the Office Memorandum of the Central Government, in which chairpersons of public sector banks were given the right to issue LOC against loan defaulters.
Bank Rules: Have you also taken a loan from the bank and are facing look-out notice due to inability to repay it? In such a situation, a big news has come for you. The Bombay High Court on Tuesday ordered that public sector banks do not have the legal authority to issue Look Out Circulars (LOC) against loan defaulters. After the court’s decision, all LOCs issued by such banks against defaulters will be cancelled.
Chairpersons of banks had this right
The division bench of Justice Gautam Patel and Justice Madhav Jamdar gave this decision. The division bench also termed as unconstitutional the section of the Office Memorandum of the Central Government, in which chairpersons of public sector banks were given the right to issue LOC against loan defaulters.
What did the court say?
Advocate Aditya Thakkar, appearing for the central government, asked the court to stay its order, but the bench refused. The court gave its verdict on several petitions challenging the validity of the said section. The bench said that the Immigration Bureau will not take action on such LOC. The court also said that its decision will not affect criminal court orders against any defaulter barring him from traveling abroad.
The interest of banks is not the interest of the country.
In 2018, the Center had 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 for the economic interest of the country, then he can be stopped from doing so.
The petitioners argued that the phrase “economic interests of India” cannot be equated with the “financial interests” of any bank.
