PSBs are not permitted to publish alerts

The Bombay High Court declared on Tuesday that PSBs (public-sector banks) are not legally permitted to issue Look Out Circulars (LOCs) against borrowers who are in arrears. All LOCs given by these banks against defaulters will be annulled as a result of the HC’s decision. A provision in an office memorandum issued by the federal government that gave chairpersons of public-sector banks the authority to issue letters of credit (LOCs) against defaulting borrowers was declared illegal by a Division Bench of Justices Gautam Patel and Madhav Jamdar. In an appearance on behalf of the Union government, advocate Aditya Thakker asked the HC to set aside its ruling, but the Bench turned him down.

The court rendered a decision in response to many petitions contesting the legality of the aforementioned provision.The Bench declared that such LOCs (issued by banks against defaulters) would not be acted upon by the Bureau of Immigration.

The court also declared that its ruling would not impair any orders that a criminal court or tribunal had made prohibiting a defaulter from leaving the country.

The HC said that while the office memo issued by the Center did not go beyond the bounds of the Constitution, the provision granting the chairman of a public sector bank the authority to issue a letter of credit was “arbitrary and without power in law.”

With a 2018 revision to the Center’s office memorandum, public-sector banks were given the authority to issue LOCs in the “economic interest of India.” This effectively prohibited someone from leaving the nation if their departure may be harmful to its economic interests.