Kummari Shekar vs The Union Of India
2024 Latest Caselaw 3520 Tel

Citation : 2024 Latest Caselaw 3520 Tel
Judgement Date : 30 September, 2024

Telangana High Court

Kummari Shekar vs The Union Of India on 30 September, 2024

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

                  WRIT PETITION No.24331 of 2024
ORDER:

This Writ Petition, under Article 226 of the Constitution of

India, is filed by the petitioner, seeking the following relief:

"....to issue Writ, Order or Direction more particularly one in the nature of Writ of Mandamus:

1. declaring the action of the respondent Nos.3 to 8 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 the respondent no.2 to legitimately protect the interest of the petitioner by duly enforcing Circular dated 12.08.2022 vide RBI/2022-23/108, OR.ORG.REC.65/21.04.158/2022-23 illegal, arbitrary and unconstitutional for violating Art 14, 19, and 21 of the Constitution of India,

2. direct the respondent nos. 3 to 8 to follow Circular dated 12.08.2022 vide RB1/2022-23/108, DOR.ORG. REC.65/ 21.04.158/2022-23 issued by respondent no.2,

3. direct the respondent no.2 to duly enforce the Circular dated 12.08.2022 vide RBI/2022-23/108, DOR.ORG.REC.65/21.04.158/ 2022-23 to protect the interests of the petitioner against the

4. direct the respondent no.2 to take stringent action against the errant official of the respondent Nos.3 to 8 in unlawfully, illegally and arbitrarily taking to recover the amounts from petitioner without following any due process of law ...."

2. Considered the submissions of learned counsel for the

petitioner, Sri M.Vijay Kumar Goud, learned Senior Standing

Counsel for Central Government appearing for respondent No.1 and

perused the record. Despite service of notice, there is no

representation for respondent Nos.2 to 8 nor any counter affidavit is

filed on their behalf.

3. It is the case of petitioner that he has availed personal loan

from respondent Nos.3 to 8, who are the private bankers and

financial institutions and utilised the 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 until July, 2024

and due to heavy loss in the business he could not pay the

instalments on time. It is also case of the petitioner that respondent

Nos.3 to 8 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.

4. 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.

5. 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

(2007) 2 SCC 711

engaged the services of 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."

6. 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.

7. 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 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

(2008) 7 SCC 532

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.

8. 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, 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"

9. In view of the above circulars, 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 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).