Allowed

Perla Linga Swamy, v. The Union of India

Telangana HC2 Sept 2024WP/18549/2024

Case brief

AI extract

What is this about?

The High Court disposed of Writ Petition No. 18549 of 2024 in terms of an earlier order dated 25.04.2024 (W.P. No. 5200 of 2024) wherein the court directed banks to follow RBI guidelines regarding recovery agents after citing relevant Supreme Court precedents.

What did the court decide?

Writ petition disposed of in terms of order in WP No. 5200 of 2024 dated 25.04.2024. No order as to costs.

Perla Linga Swamy, Vs The Union of India — Banking and Recovery | Telangana HC (2024)

¶1

[^32e6 ]

¶2

¶3

HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction)

¶4

MONDAY, THE SECOND DAY OF SEPTEMBER TWO THOUSAND AND TWENTY FOUR

¶5

PRESENT

¶6

THE HONOURABLE SRI JUSTICE C.V. BHASKAR REDDY

¶7

WRIT PETITION o :18549 OF 2024

¶8

Between:

¶9

Perla Linga Swqfny S/o Perla Papaiah, Aged 46 years, Occ. pvt Employee, Rlo.8-1-279, Gollaguda, Near Chuich, Nalgbnda Nilgonda, - 508001

¶10

,..PETITIONER

¶11

AND

¶12

1 The Union of lndia, Rep. by its Secretary, Ministry of Finance, New Delhr

¶13

The Reserve Bank of lndia, Rep. by its Chief General Manager, 6, Sansad Marg, New Delhi -1 10001

¶14

a tJ SBI BANK, Rep by its Chief Manager, State Bank Bhavan, Madame, CamaMarg, Mumbai, Maharashtra 400d21

¶15

4 .BANK^OF _FAROqAT^Rep. !y^{its Chief Manager, Fatepura,Madavi,} Voadodara District, Gujarat - 390006.

¶16

E BAJAJ FINANCE Rep, by its Chief Manager, 6th Floor, Bajaj Finsery ggpgrate Office. Pune-Ahmednagar Road, Virian Nagar, purie, M'aharastra'_ 411014.

¶17

6 PAYTM, tep by its Chief Manager, Skymark One, Shop No.1, Ground Floor, Tower-D. Plot No H-108, Sectoag8, Noida, Uttar pradeih-2o1301.

¶18

7 IOIEI^{VIEW,Rep by_itsChief Manager, Ptot No. '17, 3rd Ftoor, Sy No. 1-} & ^9ir!"r^{Ring road,Kadubeesanahal.ii,Bellandur, Bengaluru, Ka'rnataka-} 560087

¶19

8 KREDITBEE,. Rgq Oy its Chief Manager, 16/3, Adarsh yelavarthy Center, Karnataka gpp t9 Frank - 560008.^Anthony School, Cambiidge Layout, Jogupalya, B-angalore,

¶20

9 RBL BANK LIMITED, Rep. by its Chief Manager, Registered Office, One World Center, Tower 28, 6th Floor, 841. Senapati Bapat Marg, Lower Parel West, Mumbai - 400013

¶21

Smart Coin Financials Pvt Ltd, Rep by its Chief Manager, lndique Gamma, No.293115/.1172,'1st Floor, Outer Ring'Road, Kadubeeianahalli, Bengaluru, Karnataka-560103

¶22

...RESPONDENTS

¶23

¶24

Petitton under Artrcle^{226 of the constitutionof lndia praying that in the} circumstances stated in^{the affidavit filedtherewith,the High court may be} pleased to issue writ order or^{Direction moreparticularlyone ln the nature of} Writ of Mandamus

¶25

1 declaring the action of^{the respondent Nos.3 to 10 in hrgh handedly'} arbitrarily and illegally^{trying to recoverthe amountsfrom the petitroner} by not following Circular^{daled 12 O82O22 videRBll2022-231108'} DOR ORG REC 65/²¹ .O4.158t2022-23^{issuedby respondentno'2 or} any due^process of^{law and the inactionof the respondentno 2 to} legitimately^protect the^{interest of the petitioner by duly enforcing} Circular dated 12 08 2022 vide RBll2022-

¶26

231108,OR ORG REC65121.04.1581^{2022'23 as illegal, arbitrary and} unconstitutional for^{violating Art 14, 19, and 21 ol the Constitution of} lndia,

¶27

direct the respondent^{nos. 3 to 10 to follow Circular daled12 08 2022} vide RBlt2O22-23t 108, DOR^{ORGREC.65121-O4.15812022-23 tssued} by respondent no^2,

¶28

J direct the respondent^{no.2 to duly enforce the Circulardated1z 08 2022} vide RBlt2022-23l108, DOR ORG^{REC 6512104.15812022-2to protect} the interests of the^{petitioner against the respondent nos 3 to 10,}

¶29

4 direct the respondent no.2^{to take stringent action against the errant} official of the respondent^{nos.3 to 1 0 in unlawfully' illegally and} arbitrarily taking to^{recover the amounts from petitionerwithout} following any due^{process of law.}

¶30

lA NO: 1 OF 2024

¶31

Petition under section^{151 CPC praying that in the circumstances stated} in the affidavit filedⁱⁿ support^{of the petition,the High court may be pleased to} direct the respondent^{nos.3to 1O to not take any coercrve measures against the} petitioner without following due^{process of law and mandatorilyfollowing Circular} dated 12.08.2022 vide^{RBIt2022-23t I08,DOR ORG.REC 65/21 04.15812022-2} issued by respondent no.2^{pending disposal of the writ petition.}

¶32

{

¶33

-j

¶34

Counsel for the Petitioner:^{SRI NAGESHWAR RAO PUJARI}

¶35

Counsel for the^{Respondent No.1 & 2: SRI GADI PRAVEENKUMAR'} DY. SOLICITOR^{GEN'oF INDIA}

¶36

Counsel for the^{Respondent No.3:M's'P'M'SWAPNA}

¶37

Counsel for the^{Respondent No.5: SRI R'MANGULAL}

¶38

Counsel forthe^{Respondent No.8: SRIl'NAVEEN KUMAR}

¶39

The Court made^{the following:ORDER}

¶40

¶41

I I

¶42

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

¶43

WRIT PETITION No.18549 of 2024

¶44

ORDER:

¶45

This Writ Petition, under Article^{226 of the Corlstitution}

¶46

of India, is filed by the^{petitionerseekingthe following relief:}

¶47

"....ro issue WiL Order or Direction more^{partictl^rlyone in the nttture of} Wit of Mdnddiuts:'

¶48

declaing the dction of E^{respondenlNos. 3 Io la1)thigh} tandedly, atbilraily and illegally^{lrying to recouq the amouds} fntm^tle petitioner bA not lollouing Cira at dated 12.o8.2022^{uide RBU2022-2)/108'} CX)R.ORA.REC.65/ 21 04.158/2022'23^{issuedby respoidet tto.2 or dftA} dve process of lau and^{thein.tcltonoJ lhe respondetno-2lo legitiT ntelV} ptolcct ttle interest oJ the Petilione.r blJ dulll^{enlorcing Ciratlnr dotcd} 12.08.2022 uide RBI/2022^{2s/ 1o8, DOR.ORG.REC65/21.04 15a/2022'23} @s illegal, erbilrary antl^{uncnnstittllional} for^{molati\g Arl 14, 19 dnd2 I of tl@} Cotlstitlllion oI hrditt

¶49

direct the respondent rlo.s 3 Io 10^to follotu^{Circulordaled} 1 2.08.2022 vide RBU^{2022'23/1 08, DOR.ORG.REC-6 5/ 2 I Oa. I 58 / 2(t22 -2 3} issued bl| respondenl no.2

¶50

direct tlrc respondett no.2 to tlulg^{enforcetleCiranktr dated} 12.08.2022 uide RBI/2022-23/^{108,DORoRG.REC.65/21-04 158/,'022-2} to protecl the inlercsts^{of thepetitioner agoinst the respondentnos3 lo 1o}

¶51

direct the respondeftt no 2 to^lake stiwett^{aclionqgQittst lhe} endtut oltrcjal of th.e^{respondeftt4os-3} to^{10 nunlaurfullY, illegaLl\ and} afuitrailll tdking to recouer the amounts from^{petitiotteruithout} follouing ony due process of Lau ald^{pass.... ."}

¶52

This Court uide order dated 15.07.2024^perrnitted

¶53

learned counsel for the^petitioner to^{take out} Personal notice to respondent Nos.3 to^{1O and incompliance} thereof, learned counsel for the^{petitioner served noticeto} respondent Nos.3 to 1O and filed^{proof of servrce.}

¶54

¶55

Learned counsel appearing for the petitioner

¶56

submitted that issue raised in this Writ Petition is squarely covered by the order passed by this Court in W.P.No.S2OO of 2024 dated 25.04.2024 and therefore, the present Writ Petition also deserves to be disposed of in terms of the said order.

¶57

Learned counsel for the respondents has not disputed the said fact.

¶58

In view of the said submission, the Writ Petition is disposed of in terms of the order passed by this Court in W.P.No.5200 of 2024 dated 25.04.2024. There shall be no order as to costs

¶59

As a sequel, the miscellaneous petitions pending, if

¶60

any, shall stand clos9d._ _

¶61

//TRUE COPY//

¶62

SD/- C. PRAVEEN KUMAR ASSISTANT REqSf.RAR V'

¶63

SECTION OFFICER

¶64

To,

¶65

'1. The Secretary, Ministry of Finance, New Delhi, Union of lndia.

¶66

The Chief General^{Manager, Reserve Bank of lndia,6, Sansad Marg,New} Delhi -'l 10001

¶67

One CC to SRI NAGESHWAR^{RAO PUJARI, Advocate} [OPUC]

¶68

One CC to SRI I.NAVEEN^{KUMAR,Advocate} [OPUC]

¶69

One CC to M/s. P.M.SWAPNA,^Advocate [OPUC]

¶70

One CC to SRI R MANGULAL,^Advocate [OPUC]

¶71

One CC to SRI GADI^{PRAVEEN KUMAR,Dy SOLICITORGEN OF INDIA'} High Court for the State^{of Telangana d Hyderabad} [OPUC]

¶72

Two CD Copies

¶73

(Along with the copy of order dated^{25.04-2024,in W.P.No'S2OOoI 2O241} BSR

LS PY

HIGH COURT

DATED: 0210912024

ORDER

.i. -.,- ,/ ' )f ,- , .. ,.. .- :..
,:i/.. ' .... :,
t, 2x ij: ::,ri
,.
;

¶79

WP.No.18549 of 2024

¶80

DISPOSING OF THE WRIT PETITION,

WITHOUT COSTS

poo6"L
fr,

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

¶86

WRIT PETITION No.52OO of 2024

¶87

ORDER:

¶88

This Writ Petition, under Article 226 of the Constitution of India, is filed by the petitioner, seeking the following relief

¶89

"....to issue Wrtt, Order or Direction more particularlg one in the noture of Wit oJ Mandamus:

¶90

a) Declaing the action of the respondcnt Nos.4 to 7 in high handedly, arbttrarilg and illegally trying to recouer the amounts from the petitioner bg not follou.)ing Circular dated 12.08.2022 uide RBI/2O22-23/ tO8, DOR.ORG.REC.65/ 21.O4.158/ 2022 23 issued bA the Respondent No.2 or ang due process of laut and the inactton of the Respondent No.2 to iegitimatelg protect the interest of the petitioner bg dutg enforcing Arcular dated 12.08.2022 uide RBI/2O22-23/ 108, DOR.ORG.REC.6S/ 21.04.158/ 2022-23 as illegal, arbitrary and unconst[tutional for uiolating Arncle 14, 19 and2l of the Constitutton of India, 1950;

¶91

b) Direct Respondent Nos.4 to 7 to Jollollt Circular dated 12-08-2O22 uide RBI/2022 23/ 1O8, DOR.ORG.REC.65/ 21.04_158/ 2022-23 issued bg Respondent No.2,

¶92

c) Direct the Respondent No.2 to dulg enforce the Circular dated 12.O8.2022 uide RBl/2022-23/ 108, DOR.ORG.REC.65/ 21.04.158/ 2022-23 to protect the interests of the petitioner against the Respondent No. 4;

¶93

Q^{Arect the Respondent No.2} to^take stingent action against the errqnt offcial of Respondenl Nos.4 to 7 in unlaufully, itlegaltg and arbitrailg taktng to recouer the amounts from petitioner uithout foltowing ang due process of lanu;...."

¶94

It is the case of petitioner that he availed personal loan

¶95

from respondent Nos.4 to 7, 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 o6tained loan, he has been

¶96

¶97

¶98

CVBR, J w p_52Oo -2024

¶99

regularly paying the instalments in terms of the agroement and due to losses in his business, he could not pay the instalments from September, 2023. It is also case of the petitioner that respondent Nos.4 to 7 without following the guidelir-res of RBI, has been sending the loan recovery agents to his house and harassing to pay the amounts due as per the calr:ulation ol respondents

¶100

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

¶101

The issues raised in this writ petition are no longer res integra as the Hon'ble Supreme Court in ICICI Bank Ltd. us. Prakash Kaur and. otltersl, while dealing with the similar issues where the banks engaged the services of recovery/ collection agents to recover the loans, observed as follows:

¶102

" 16. Before uc part utith this matter, ue u.tish to make it clear that ue do not oppreciate the procedure adopted by the Bonk in

¶103

'^{(zootl z scc} ltt

CVBR, ] Wp-5200_2024

remouing the uehicle from^{the possession of the uit petitioner'TlLe} practice of hinng recouerA^{agents, u.;ho are musclemen'is} d.eprecoted and needs^{to be discouraged.The Bank should resort} to procedure recognised^{by latu to lake possession of uehiclesin} cases uhere the^{bonower mag houe committeddefaultin} paAment of the instalments^{insteadof taking resort to strong-arm} tactics.^"

¶108

Aggressive recovery^{tacticsadoptedby the agents of} Banks/ Financial Institutions^{lead to the Iandmarkjudgment in} ICICI Bank us. Sho:nti^{Deui Shanna and others2, where the} Hon'ble Supreme Court^{directed theBanks/Financial} Institutions to strictly^{lollow the guidelines issued by the} Reserve Bank^{of India.}

¶109

In the above^{referred judgments, the HonbleSupreme} the Court condemned^{theprocedure adopted by} Banks/Financial^{Institutions in employing recovery agents who} are acting as^{middlemenfor securingpossessionof vehicles/} secured assets^{in cases wherethe borrowercommitsdefault' It} was observed that^{Banks/FinancialInstitutions instead of} taking recourse^{to follow the procedurerecognized by law for} securing the^{possession of vehicles/secured assets in cases} ( '^{(zoo8) z sccs:z}

¶110

¶111

CVBR, J wp 52OO 2024

¶112

where the borrower commits default in repayment of loan/loan account is dec-lared 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 relerence 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.

¶113

It is apt and appropriate to extract latest gridelines issued by the Reserve Bank of India on 12.Og.2O22,*.ith regard to outsourcing of Financial Services _Responsiirilities ol regulated entities employing Recovery Agents, which reads as follows:

¶114

'RBI/2022 23/ r08 DOR.ORG.REC.65/ 21 .04. 158/ 2022_23 August 12, 2022 Madam/ Sir,

¶115

Outsourcing of Financial Serutces - R*ponsibilities oJ regulated entities employing Recovery Agents The Reserue Bank of Indio has from time to time adltised regulated entities (REs) that the ultimate responsibititg for their outsourced actiuities uests tuith therl and theg are, thcrt:fore,

CVBR, J Wp 5200_2024

:--=v

//t/'^{- '} '

responsible for the actions of their seruice prouiders including Recouerg Agents (hereafter refened to as 'agents,). 2. It has been obserued that the agents emploAed bg REs haue been deuiating from the extant instructions gouerning the outsourcing of fi.nancial seruices. In uieu_t of concerns arising from the actiuities of these agents, it is ad.uised that the REs shall strictlg ensure that theu or their agents d.o not resort to intimidation or harossment of ang kind, either uerbal or physical, agoinst anA person in their debt collection efforts, including acts intended to humiliate publicly or intrude upon the piuacg of the debtors' familg members, referees and fiends, sending inappropiate messages either on mobile or through social media, making threotening and/ or anonymous calls, persistentlA 1 calling the borouter and/ or calling the bonouter beJore 8:OO a.m. and_ afier 7:OO p.m. for recouery of ouerdue loans, making false and mis le oding rep re s e nt ations, etc.

¶121

The instructions contained in para 2 aboue shall supplement and be read in conjunction u-tith the eisting gaidelines/ directions issued bg the Reserue Bank of India, as amended from time to time, includirry those tabulated in Annex. 4. Ang uiolation in this regard by REs wilL be uietued. seiouslg.

¶122

Applicability

¶123

This circular sholl applg to the follouing REs: (a) All Commercial Banks (including Local Area Banks, Regional Rural Banks, and. Small Finance Banks) excluding Payments Banks;

¶124

(b) AII All-lndia Financial lnstitutions (uiz. Eim Bank, NABARD, NHB, SIDBI, and NaBFID);

)a-

CVBR, J W^p _5200_2024

¶129

(rl) AII Pirnarg (Urban) Co-operatiue Banks, State Co_operatiue Banks, and Distnct Central Co-operatiue Banks; and

¶130

(e) All Asset Reconstruction Companies.

¶131

This circular slnll not applg to microf.nance loans couered, und.er'!!gg4^,r Direction Reserue Bank of Ind.ia lRe ulatoru 2O22'. dated Frameuork br Microfinance l,oans)Di rections, March 14 2022

¶132

Yours faithfullg, (Sunil T. S. .&airl Chief General Manager"

¶133

For the afrrresaid reasons and as the procedure adopted by the respondent Nos.4 to 7 for recovery of loan amount from the petitioner, amounts to violation of the rights guaranteed under Articles 14 and 2l 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 Hon'ble Supreme Court in ICICI Bank Ltd. as. pro;korsh Kauls case (1 supra) and ICICI Bo;nk os. Shanti Deui Shcrzna's case (2 supra).

CVBR,.I Wp 52OO_2O24

g. With the above direction, this^{Writ Petition is disposed of'} There shall be no^{orderas to costs.}

¶138

lO. As a sequel thereto,^{miscellaneous petitions,ifany,} pending shall stand closed.

¶139

C.V. BHASKAR REDDY,^J

¶140

25.O4.2024