Public Sector Banks Can Seek Look Out Circulars Against Defaulters Only If Detrimental To Economic Interest Of India

Case: Shinas A. Firdaus v. Union of India & Ors and D. Pradeep Kumar v. Union of Indian & Ors.

Coram: Justice V.G. Arun

Case No.: WP(C) NO. 15649 OF 2022

Court Observation: “The expressions ‘economic interest of India’ and ‘larger public interest’ will not take in violations of commercial contracts between a bank and its customer. Such an interpretation will result in liberty being sacrificed to safeguard the commercial interest of banking institutions. There cannot be such a constructed interpretation of the dynamic concept of ‘liberty’ enunciated and guaranteed by the Constitution of India”

“It is not as if the OMs authorize the banks to seek issuance of look out circulars against every defaulting account holder. Even if for the sake of argument it is accepted that the Banks can request for opening of LOC against willful defaulters, that can only to be against a person declared as willful defaulter, after following the procedure prescribed in the Master Circular issued by the Reserve Bank of India”

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Keywords

Public Sector Banks, Circulars Against Defaulters, Economic Interest Of India