Mr.Navjodh Singh Khandooja vs The Union Of India

Telangana High Court

Mr.Navjodh Singh Khandooja vs The Union Of India on 3 May, 2024

     THE HON'BLE SRI JUSTICE C.V. BHASKAR REDDY

              WRIT PETITION NO.12919 OF 2024

ORDER:

This Writ Petition is filed praying this Court to declare the action of respondent Nos.3 to 11 in high handedly, arbitrarily and illegally trying to recover the amounts from the petitioner by not following Circular, dated 12.08.2022 vide RBI/2022-23/108, DOR.ORG.REC.65/21.04.158/2022-23 issued by respondent No.2 or any due process of law and the inaction of respondent No.2 to legitimately protect the interest of the petitioner by duly enforcing Circular, dated 12.08.2022, as illegal and arbitrary and also direct respondent Nos.3 to 11 follow the said Circular and direct respondent No.2 to duly enforce the said circular to protect the interest of the petitioner and take stringent action against respondent Nos.3 to 11.

2. It is the case of petitioner that he availed personal loan from respondent Nos.3 to 11, who are the private bankers and financial institutions and utilised the 2 amounts and he has been prompt in repaying the same without fail. It is further case of the petitioner that ever since he obtained loan, he has been regularly paying the instalments in terms of the agreement and only from April, 2024, he could not pay the instalment. It is also case of the petitioner that respondent Nos.3 to 11, without following the guidelines of RBI, has been sending the loan recovery agents to his house and harassing to pay the amounts due as per the calculation of respondents.

3. The grievance of the petitioner is that the respondents are entitled to recover loan amount in terms of the loan agreements by following the procedure established under law and they are not having any right to recover the loan amount by using force.

4. The issues raised in this Writ Petition are no longer res integra as the Hon'ble Supreme Court in ICICI Bank Ltd. vs. Prakash Kaur and others 1, while dealing with the similar issues where the banks engaged the services of 1 (2007) 2 SCC 711 3 recovery/collection agents to recover the loans, observed as follows:

"16. Before we part with this matter, we wish to make it clear that we do not appreciate the procedure adopted by the Bank in removing the vehicle from the possession of the writ petitioner. The practice of hiring recovery agents, who are musclemen, is deprecated and needs to be discouraged. The Bank should resort to procedure recognised by law to take possession of vehicles in cases where the borrower may have committed default in payment of the instalments instead of taking resort to strong-arm tactics."

5. Aggressive recovery tactics adopted by the agents of Banks/Financial Institutions lead to the landmark judgment in ICICI Bank vs. Shanti Devi Sharma and others 2, where the Hon'ble Supreme Court directed the Banks/Financial Institutions to strictly follow the guidelines issued by the Reserve Bank of India.

6. In the above referred judgments, the Hon'ble Supreme Court condemned the procedure adopted by the Banks/Financial Institutions in employing recovery agents who are acting as middlemen for securing possession of vehicles/secured assets in cases where the borrower 2 (2008) 7 SCC 532 4 commits default. It was observed that Banks/Financial Institutions instead of taking recourse to follow the procedure recognized by law for securing the possession of vehicles/secured assets in cases where the borrower commits default in repayment of loan/loan account is declared as NPA, are resorting to strong-arm tactics. The Hon'ble Supreme Court delineated the guidelines issued by the Reserve Bank of India time and again on the fair conduct by lenders, with reference to usage of services of recovery agents. It also stated that the banks should be reminded of the rule of law and strict action must be taken by the RBI in case of breach of such guidelines.

7. It is apt and appropriate to extract latest guidelines issued by the Reserve Bank of India on 12.08.2022 with regard to outsourcing of Financial Services - Responsibilities of regulated entities employing Recovery Agents, which reads as follows:

"RBI/2022-23/108 DOR.ORG.REC.65/21.04.158/2022-23 August 12, 2022 Madam/ Sir, 5 Outsourcing of Financial Services - Responsibilities of regulated entities employing Recovery Agents The Reserve Bank of India has from time to time advised regulated entities (REs) that the ultimate responsibility for their outsourced activities vests with them and they are, therefore, responsible for the actions of their service providers including Recovery Agents (hereafter referred to as 'agents').

2. It has been observed that the agents employed by REs have been deviating from the extant instructions governing the outsourcing of financial services. In view of concerns arising from the activities of these agents, it is advised that the REs shall strictly ensure that they or their agents do not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude upon the privacy of the debtors' family members, referees and friends, sending inappropriate messages either on mobile or through social media, making threatening and/or anonymous calls, persistently1 calling the borrower and/or calling the borrower before 8:00 a.m. and after 7:00 p.m. for recovery of overdue loans, making false and misleading representations, etc.

3. The instructions contained in para 2 above shall supplement and be read in conjunction with the existing guidelines/directions issued by the Reserve Bank of India, as amended from time to time, including those tabulated in Annex.

4. Any violation in this regard by REs will be viewed seriously.

Applicability

5. This circular shall apply to the following REs:

(a) All Commercial Banks (including Local Area Banks, Regional Rural Banks, and Small Finance Banks) excluding Payments Banks;

(b) All All-India Financial Institutions (viz. Exim Bank, NABARD, NHB, SIDBI, and NaBFID);

(c) All Non-Banking Financial Companies including Housing Finance Companies;

(d) All Primary (Urban) Co-operative Banks, State Co-

operative Banks, and District Central Co-operative Banks; and

(e) All Asset Reconstruction Companies.

6. This circular shall not apply to microfinance loans covered under 'Master Direction - Reserve Bank of India (Regulatory Framework for Microfinance Loans) Directions, 2022', dated March 14, 2022.

Yours faithfully, (Sunil T. S. Nair) Chief General Manager"

8. For the aforesaid reasons and as the procedure adopted by the respondent Nos.3 to 11 for recovery of loan amount from the petitioner, amounts to violation of the rights guaranteed under Articles 14 and 21 of the Constitution of India, this Court deems it appropriate to direct the respondents, to ensure that the agents engaged by them for recovery of the loan amounts, shall strictly follow the guidelines and instructions issued by the Reserve Bank of India and also the judgments of the 7 Hon'ble Supreme Court in ICICI Bank Ltd. vs. Prakash Kaur's case (1 supra) and ICICI Bank vs. Shanti Devi Sharma's case (2 supra).

9. With the above direction, this Writ Petition is disposed of.

There shall be no order as to costs. Miscellaneous applications, if any, pending shall stand closed.

___________________________ C.V. BHASKAR REDDY, J 3rd May 2024 RRB