The Madras High Court has emphasised that a borrower’s constitutional right to travel cannot be curtailed via Look Out Circulars issued by banks, marking a significant judicial stance on the limits of financial coercion and constitutional protections.
The Madras High Court has said that a person who borrows from a bank, or stands guarantor for another borrower, does not surrender his constitutional rights simply by signing loan papers, in a ruling that sharply questioned the use of a Look Out Circular to restrain travel in a debt dispute.
Justice V. Lakshminarayanan made the comments while rejecting Bank of Baroda’s bid to review his August 24 order that had set aside a Look Out Circular issued against Kondepati Ganga Prasad, who had stood as guarantor for a large loan taken by GVR Infra Projects. The judge said the right to travel freely is protected under Article 21 of the Constitution and can be restricted only through law, not by a bank’s letter to immigration authorities. He warned that allowing a nationalised bank to do so could encourage other creditors and finance companies to seek similar restrictions.
The court said the guarantor had said he wanted to travel abroad to earn money and later return to repay the dues, while the bank insisted he clear the amount first. Justice Lakshminarayanan described that as a deadlock, saying the only practical way for the borrower to secure repayment might be to work overseas. He also noted that business ventures do not always succeed, that banks are aware loans can turn sticky, and that Bank of Baroda even has a stressed accounts branch to deal with such cases. The judge added that the bank had not lodged any criminal complaint of fraud against the guarantor or the bank officials involved in sanctioning the loan.
The reasoning builds on a wider judicial pattern in which high courts have treated Look Out Circulars in loan default cases with caution. Separate decisions by the Delhi and Karnataka High Courts, as reported by legal news outlets, have said such circulars cannot be used as a routine debt recovery tool and are not sustainable unless they are backed by proper legal authority and, in some cases, pending criminal proceedings. In that context, the Madras ruling reinforces the view that financial distress does not erase basic rights and that coercive measures affecting travel must still meet constitutional standards.
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