Bank loan

Failure to pay cannot be construed as fraud: High Court of Punjab and Haryana : The Tribune India


Tribune press service

Saurabh Malik

Chandigarh, June 18

The High Court of Punjab and Haryana has made it clear that loan default cannot be construed as fraud on the part of the borrower as businesses can fail for several reasons.

The bench also clarified that the quantum of the alleged default by itself could not be the basis for requesting the issuance of an extreme process like a “monitoring circular” (LOC) to restrict the personal freedom of the borrower. to travel abroad.

Bench of Justice MS Ramachandra Rao and Judge Harminder Singh Madaan also ruled that the LOC cannot be issued by the Bureau of Immigration, MHA, to detain a person while it is true that even an FIR cannot had not been registered against her and “there is no question of her being ‘charged’ with any unrecognized offence”.

The decision was made following a petition from the director of a shoe manufacturing company run by her husband and others. The bench was informed that the company had benefited from a loan from a bank for which the claimant had acted as guarantor, together with others.

The petitioner claimed that her eldest child, settled in Australia, was due to give birth in July last week and that she wanted to be with her during the prenatal and postnatal period. But she received a cautionary motion filed at the bank’s instance, citing that a surveillance circular had been issued against her, her family and associated directors by airport immigration authorities.

The bench claimed that the defendant bank appeared to be of the view that the default on the loan resulting in the account becoming a non-performing asset was solely due to fraud by the borrower. “This court can take note of the fact that businesses can fail for several reasons such as market conditions, social unrest, lack of raw materials, events like Covid-19, etc. By simply looking at the quantum of loss caused to a banker, it cannot be presumed that there was fraud committed by the borrower/guarantor, especially since no criminal prosecution alleging fraud has even been lodged against the guarantor. Suspicion cannot replace evidence,” the bench said.

Welcoming the plea, the Chamber added that it was of the view that the MHA, the Bureau of Immigration and the Bureau of Foreign Regions Registration failed to follow a fair, just and reasonable procedure in depriving the petitioner of his fundamental right to travel abroad.

The bench added that they did not follow the principles of natural justice and did not even provide him with the copy of the LOC despite his request. Quashing the LOC against the claimant, the bench ordered the relevant respondents to allow her to travel to Australia to be with her daughter until the end of August.

The plaintiff was guarantor

The decision was made following a petition from the director of a shoe manufacturing company run by her husband and others. The bench was informed that the company had benefited from a loan from a bank for which the claimant had acted as guarantor, together with others.