Karnataka HC allows businessman, barred by LOC against him, to fly abroad

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The Karnataka High Court has permitted a businessman to travel to the United Arab Emirates and Saudi Arabia on a business tour terming the look out circular (LOC) issued against him by a public sector bank as unjustifiable.

Karnataka HC

Bank of Baroda had issued the LOC against businessman Himayath Ali Khan in March 2022, which was executed by the Bureau of Immigration, restricting his travel abroad.

Khan claimed to have been a non-functional Director of Associate Décor Limited, a company dealing with wood products.

The company had obtained 199 crore as finance from the bank by mortgaging his properties. A proceeding for recovery of the debt is pending before the Debts Recovery Tribunal.

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Khan claimed that since he was not party to the proceedings and did not have anything to do with the borrowings of the company, the LOC issued against him was illegal.

The single judge bench of Justice M Nagaprasanna allowed him to travel abroad saying: “The petitioner who is described as Director has produced abundant material to demonstrate that he is only a non-functional Director. The list of guarantors is also extracted hereinabove. The petitioner is not shown as a guarantor to any kind of loan advanced. If the petitioner has no role to play in the entire transaction, issuance of LOC against him can hardly be justified.”

In the verdict given out recently, the court noted that Khan was not party to the borrowings or the proceedings pending before the tribunal.

“The issuance of LOC which comes about on 07-03-2022 with the second respondent being the originator is bereft of reasons as to why the Bank wants curtailment of travel of the petitioner. The afore-quoted excerpts of the loan document nowhere indicates that the petitioner is the borrower; no criminal proceedings are pending against him; there is an embargo ordered by the court for him to travel, nor that the petitioner is likely to evade trial if he is permitted to travel to UAE,” the court said.

The court, however, has not set aside the LOC notice issued to the businessman. Khan has only been allowed to go abroad in the brief window given to him and must return back to India.

The court said issuing LOC has serious repercussions. “The petitioner, even if it is construed to be that he is the Director of the Company, the travel of a citizen cannot be curtailed by the Bank on the ground that he is in default of loan amount. Issuance of LOC has serious repercussions, first of which is that he will not be able to move out of the shores of the nation, notwithstanding any embargo placed by any Court of law,” the court maintained.

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