Delhi High Court Sets Aside Bank-Issued LOCs Against Pomegranate Coaters Directors and Guarantors

The Delhi High Court on 18 February set aside Look Out Circulars (LOCs) issued by Bank of Baroda against the directors and guarantors of Pomegranate Coaters Pvt. Ltd.

Justice Purushaindra Kumar Kaurav was hearing petitions by the directors, promoters, and guarantors of Pomegranate Coaters, who had availed credit facilities from the bank.

Following defaults, the bank initiated recovery proceedings under the SARFAESI Act and the Recovery of Debts Due to Financial Institutions Act, and simultaneously requested LOCs against the guarantors. Challenging the LOCs, the guarantors approached the High Court.

Noting that no criminal investigation or FIR was pending, Justice Kaurav observed: “there is no question of their non-cooperation with any of the investigating agencies.”

The Court referred to the Bombay High Court's decision in Viraj Chetan Shah v. Union of India, which struck down the power of public sector banks to request LOCs, and its own ruling in Vineet Gupta v. Bureau of Immigration, where similar LOCs were set aside.

Finding no justification to continue the LOCs, the Court set them aside, while allowing the bank liberty to take any other lawful action.

For Petitioners: Advocates Prithu Garg, Shivam Singh, Ashutosh Arvind Kumar

For Respondents: Advocates Radhika Bishwajit Dubey CGSC, Gurleen Kaur Waraich, Kritarth Upadhyay, Amulya Dev Mishra, Ashish K Dixit CGSC, Chetan Jadon, Nishant Gautam CGSC, Kavya Shukla, Vineet Negi, Naman Sharma and Theresa