The Delhi High Court has ruled that a Look Out Circular (LOC) cannot be issued against a person merely because he was a non-executive or independent director of a company that defaulted on its bank loan, particularly when there is no allegation of fraud, fund diversion or financial misconduct against the individual.
In an important judgment delivered on 10 August 2026, Justice Jasmeet Singh set aside the LOC issued against Tushar Dey, a former independent and non-executive director of Birla Aircon Infrastructure Pvt Ltd (BAIPL). The Court also directed the Bureau of Immigration to communicate the order to the petitioner.
Background of the Case
The matter arose from a loan of approximately ₹19 crore obtained by BAIPL from the respondent bank on August 1, 2011. The company’s loan account was subsequently classified as a Non-Performing Asset (NPA) on March 31, 2014, with an outstanding amount of around ₹7.20 crore.
Tushar Dey had, however, resigned from the company’s Board on July 3, 2013, several months before the loan account was classified as an NPA.
The bank had initially claimed that Dey was a personal guarantor for the loan. During the proceedings, however, the bank admitted that this assertion was an inadvertent error and confirmed that Dey was not a personal guarantor.
Despite this, a Look Out Circular was issued against him.
Director Stopped at Delhi Airport
According to Dey, he became aware of the LOC only on June 4, 2026, when immigration authorities stopped him at Delhi airport while he was travelling abroad to visit his wife and daughter.
He contended that he had neither been informed about the LOC nor provided an opportunity to explain his position before his right to travel was restricted.
The bank defended the LOC as a preventive measure issued under the Ministry of Home Affairs Office Memorandum dated October 12, 2018.
Delhi High Court Protects Right to Travel
The High Court relied upon its earlier decision in Rajesh Kumar Mehta v. Union of India and reiterated that the right to travel abroad is a fundamental right protected under Article 21 of the Constitution of India.
The Court found no material suggesting that Dey had committed fraud, siphoned off borrowed funds or otherwise defrauded the bank.
Importantly, the Court also took note of the bank’s admission that Dey was not a personal guarantor of the loan.
The Bench observed that merely being a non-executive director of a company that failed to discharge its financial obligations cannot, by itself, justify the issuance of an LOC against that director.
Existing Recovery Proceedings Were Already Pending
Another significant factor considered by the Court was that the bank had already initiated appropriate recovery proceedings against BAIPL and its guarantors under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
The Court therefore found no justification for additionally restricting Dey’s right to travel when the bank was already pursuing statutory remedies for recovery of its dues.
The Court made it clear that an LOC cannot become a mechanism for imposing travel restrictions merely because a company has defaulted on its loan obligations.
Key Takeaway for Company Directors
The judgment provides important protection to independent directors, non-executive directors and other individuals associated with companies facing financial defaults.
A director’s association with a borrowing company does not automatically make that individual personally responsible for the company’s debts. Where there are no specific allegations of fraud, diversion of funds, cheating or other misconduct, and the individual is not a guarantor, merely holding a non-executive directorship cannot ordinarily justify an LOC.
The decision also reinforces the constitutional principle that restrictions on the right to travel abroad must have a legitimate and legally sustainable basis.
Accordingly, the Delhi High Court allowed the petition and cancelled the LOC issued against Tushar Dey.
Case Title: Tushar Dey v. Union of India & Ors.
Case No.: W.P.(C) 8120/2026
Court: Delhi High Court
Judge: Justice Jasmeet Singh