The Delhi High Court has said that Look Out Circulars (LOCs) cannot be issued on the mere request of banks and must be based on careful consideration of circumstances.Justice Subramonium Prasad was dealing with petitions challenging LOCs issued .
The court's order came on petitions by former directors of a company challenging the LOC issued against them at the instance of Bank of Baroda in connection with a loan default
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The court’s order came on pleas by former directors of a company challenging the LOC issued against them at the instance of the Bank of Baroda in connection with a loan default by the company after the loan account of the company was declared a non-performing asset by the bank.
The Delhi High Court has ruled that banks can only request the opening of look-out circulars (LOCs) against defaulters in exceptional circumstances that affect the country s economy. The court expressed dissatisfaction with banks using LOCs for debt recovery without initiating criminal proceedings, stating that there must be an application of mind before issuing such circulars.