Banks playing both judge, executioner: Bombay HC on LOCs
MUMBAI: Public sector banks had become judge and executioner at once in having look out circulars or LOCs issued against defaulters, said Bombay high court while quashing the powers granted by Centre to such banks ostensibly in larger public interest.
The fundamental rights under Article 21 of personal liberty and the right to travel abroad cannot be abrogated in this fashion by an executive action, a high court division bench of Justice Gautam Patel and Justice Madhav Jamdar said in its reasoned judgment uploaded on Thursday.
The fundamental rights under Article 21 of personal liberty and the right to travel abroad cannot be abrogated in this fashion by an executive action, a high court division bench of Justice Gautam Patel and Justice Madhav Jamdar said in its reasoned judgment uploaded on Thursday.
The judgment came on a large batch of petitions challenging the constitutional validity of LOCs issued by the ministry of home affairs at the instance of various public sector banks.
The power given to a public sector bank through its top brass also is manifestly arbitrary as it creates an invalid classification and thus violates the fundamental right to equality too, HC held.
The bank flouted two fundamental legal canons. One is that no person may be a judge in his own cause, the other is principles of natural justice — there was no prior hearing in the issuance of LOCs by them. “The fact that the public sector bank is directly concerned with the recovery of debt and is yet armed with this unilateral power only makes matters worse”, thus paving for a resultant bias.
The power given to a public sector bank through its top brass also is manifestly arbitrary as it creates an invalid classification and thus violates the fundamental right to equality too, HC held.
The bank flouted two fundamental legal canons. One is that no person may be a judge in his own cause, the other is principles of natural justice — there was no prior hearing in the issuance of LOCs by them. “The fact that the public sector bank is directly concerned with the recovery of debt and is yet armed with this unilateral power only makes matters worse”, thus paving for a resultant bias.
“The LOCs boil down to nothing but a strong-arm tactic to bypass or leapfrog what PSBs see as inconveniences and irritants — the courts of law,” it said. HC rejected the Centre’s argument of bank-triggered LOCs and power being issued in limited restriction for exceptional cases and in the public interest.
“No one denies that economic offenders must be brought to book. But no amount of public interest can substitute for a procedure established by law — by a statute, statutory rule or statutory regulation — in the matter of deprivation of the right to life and personal liberty guaranteed under Article 21 of the Constitution of India,” the court said.
HC struck down part of the office memorandum that empowered public sector bank CMDs and CEOs for being arbitrary, unreasonable, improper, and on grounds of excessive power. HC said the banks were silent on the next question. “Is it to be assumed by a court that just because a borrower is travelling abroad, therefore he is bound to settle abroad and flee the country?” it said.
HC said the 2018 Fugitive Economic Offenders Act, to deter economic offenders from evading Indian courts, has precisely the avowed objective of these public sector bank-driven LOCs and can be invoked by the banks.
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