Allowed

Chintalagatu Manikyamma v. The Union of India

Telangana HC3 Sept 2024WP/22672/2024

Case brief

AI extract

What is this about?

The High Court disposed of a writ petition filed by a petitioner against private bankers and financial institutions regarding aggressive loan recovery tactics. The Court issued directions to ensure agents follow RBI guidelines on fair conduct, citing Supreme Court precedents, and dismissed the subsequent petitions as withdrawn.

What did the court decide?

Direct respondents to ensure recovery agents follow RBI Circular dated 12.08.2022; no coercive measures pending; petitions later dismissed as withdrawn.

Chintalagatu Manikyamma Vs The Union of India — Banking and Recovery | Telangana HC (2024)

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

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TUESDAY, THE THIRD DAY OF SEPTEMBER TWO THOUSAND AND TWENTY FOUR

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PRESENT

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THE HONOURABLE SRI JUSTICE C.V. BHASKAR REDDY

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WRIT PETITION NO:22672 OF 2024

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Between:

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Chintalagatu Manikyamma, Wo.Godapally Kiran Kumar,^{Aged 35-years,Occ- Pvt-} Employee. R/o H No 17lC, Sainagar, Jagadgirigutta,^{Hyderabad - 055.}

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...PETITIONER

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AND

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1 The Unicn of lndia, Rep. by its Secretary,^{Ministryof Finance.New Delhi}

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2 The Reserve Bank of lndia, Rep.^{by its ChiefGeneral Manager.6, Sansad} Marg. New Delhi^-110001

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3 SBI BANK, Rep. by its Chief^{Manager,State BankBhavan, Madame,} Camalrlarg, Mumbai, Maharashtra^400021.

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4 BAJAJ FINANCE, Rep. by its^{Chief Manager,} -6th^{Floor' BalajFinsery} coipoi.i" oni."lprnelAnniednagar^{Road, Viman Nagar'Pune l/aharastra-} 411414

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KREDITBEE, centre. opp^Rep. to^{r,unx by its Chief inii,oni"Sii"dr' Manager,KreditBee' -citut'dge l613 Lavout' Adarsh YelavarthyJogupalva} Bangalore.'^{Karnataka 560008.}

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6 FINNABLE,^{Rep by its ChiefManager,+th.flgor' 82 Building' CerebrumlT} b;;i ,'i";;,^{aiIv. k'arvinr Nasar, Puie - 411014} lClCl BANK,^{Rep. by its ChiefM-anager'C-59' BandraKurla Complex' Bandra} E""Jt. rtarrori,^{Mahdrashtra-400051'}

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B PavU Finance^{lndia Pvt' Ltd, Rep. byitsChief lrilanaoer,Fourth Floor,} wittace Towers,^{cro.t'ng''t'5Jn'i'noao'Vire Parl6 East Mumbat'} niafraiasf,tra^{State - 400 057'}

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...RESPONDENTS

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PetitionunderArticle226ollheConstitutionoflndiaprayingthatinthe circumstances^{statedin the affidavit filed therewith' the High Court may be} pleased to^{issue Writ Order or Direction more particularlyone in the nature of} writ of^{Mandamus- i.decraringthe action o{ the respondentNos3 to 8 in h\qh}

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-'-

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handedly, arbitrarily anci illegally trying to recover the amounts from the petitioner by not following crrcutar dated 12 08.2022 vide RBll2022' 23t108. DOR.ORG.REC651 21 04 15812022-23 issued by respondent no.2 or any due process of law and the rnaction of the respondent no.2 to legitimately protect the interest of the petitroner by duly enforcing Circular daled 12.08.2022 vide RBll2022-23l10B,0R ORG REC 65/21 04 158/ 2022-23 as illegal, arbitrary and u nconstitutiona I for vrolating Art 14. 19. and 21 of the constitution of lndia, 2.direct the respondent nos 3 to 8 to follow Circular dated j2.08.2022 vide RBll2022-23t108. DOR ORG REC 65t21 04 158t2022-23 issued by respondent no.2, 3.direct the respondent no 2 to duly enforce the Circular daled 12.O8.2022 vide RBli2022-23/108 DOR ORG.REC65 121.04.15At2022-2 to protect the interests of the petitioner against the respondent Nos.3 to 8 4.direct the respondent no.2 to take stringent action against the errant official of the respondent Nos.3 to B in unlawfully, illegally and arbitrarily taking to recover the amounts from petitioner wrthoul following any due process oI law.

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lA NO: 1 oF 202a

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Petition under section^'151 cpc praying that in the circumstances stated in the affidavit fired in support of the petition, the High court may be preased to direct the respondent nos 3 to B to not take any coercive measures against the petitioner without fo'owing due process of raw and manc,atoriry forowing circurar dated 12r08t2022 vide RBt/2022- 23l'1 0B,DOR.oRG. REC.65/21 .04.15 8t2022_2 issued by respondent no 2 pending disposal of the writ petition.

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Counsel for the petitioner : SRI NAGESHWAR RAO PUJARI

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Counsel for the Respondents No.1&2 : SRI GADI PRAVEEN KUMAR. Dy. SoLtCtTOR cEN. OF INDiA

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Counsel for the Respondents No.3tog : The court made the fo owing: ORDER

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

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WRIT PETITION No.2267 2 of 2024

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ORDER:

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This Writ I)crition. r_rnder Article 226 of the Constitution of India, is filed bv the pctirioner, seeking the following relief:

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"....1o issrre Wnt, t)td?r u Dvection rnore particularlg one in the nature of Wit of Marulturttts:

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a) Declaing tlx, acrtort o.[ the respondenl Nos.3 to 8 in high handedly, arbitrailg und ilerlally tnling lo recouer the amounts from the petitioner bg not follounrrg Circulor datecl 12.08.2O22 uide RBI/2O22-23/ 1O8, DOR.ORG.RDC.65/ 21.04.158/ 2022'23 issued bg the Respondent No.2 or ang due 7rrme.s.s of lcut, and the inaction of the Respondent No-2 to legttimatelll protect thc utlerest of the petitioner by dulg enforcing Ciranlar datetl 12.08-2U) uitle RBI/ 2022-23/ 1O8,^{DOR.ORG.REC.65/} 21.04.1 58/ 2022- )3 us illegot, arbitrarll ond^{Llrccnstitutional} for^violating Article 14, 19 an<l 21 of tlp Constilution^{of lndia, 1950;}

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b) Drect Respondenl^No,s.3 to^{B to} follotu^{Circular dated12.o8-2022 vide} Bnl/ ZOZZ-ZS/ tO8,^{DOR.ORG.REC.65/21.04.158/2022-23issuedbg} Respondent No.2,

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c) Drect ,he Resporrde,ll^{No.2 to duly enJorcethe,Cira-tlardated} iz.os.zozz uirte RBt/2022'2s/^{108,DoR.oRG.REc'65/21'04'158/} 2022-23 to^{protect lhe irltereslsof le petitioner against theRespondent} Nos.4to15;

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d) Drect lhe^{RespondetltNo.2 to take stingentactionagainstthe etdnt} iffciat of^{Respondent1Vo.s.3to 8 in unlarttfully, itlegatly.-andarbitraila} ' tiking to^{recovertlrc rLmottnts} frorn^{petitioierutithout follotuingangdue} process oflatu;...."

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It is the^{case of petitioner that she availed personal loan} from respondent^{Nos'3 to 8, who are the privatebankers and} financial institutions^{and utilisedthe amountsand she has} been prompt^{in repaying the same without fail'It is further} case of the^{petitione$hatever since she obtained loan' she has}

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)

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<br>

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been regularly paying the inst.rments in terms of the agreement ard only from July, 2024 sl-re could not pay the instalment. It is also case of the petitioner that respondent Nos.3 to B without following the guiderines of RBI, has been sending the loa,, recovery agents to her house and harassing to pay the amounts due as per tJre calculation of respondents.

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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 arrd they are not having any right to recover the loan amount by using force.

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This Court, vide order, dated 2g.Og .2024 directed the Iearned counsel for the petitioner to take out personal notice to respondent Nos.3 to g and in compliance with the directions of this Court, the learned counsel for the petitioner has taken out personal notice uid.e WPUSR No.g42t O of 2024 dated 03.09.2024. When the matter is taken up lbr hearing, except respondent No.7-ICIC Bank' no other respondents are present' considered the subrr of the reame respective partjes *, ,"""'o"" rd counse/ for the rerused the record.

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The issues raised in this writ petition are no ionger res integra as the Honble Supreme Court in ICICI Bank Ltd. vs. Prqkash Kqur and othersl, while dealin, g with the simirar issues where the ba nks engagecl the s611.1q.ss t_rf recovery/ collection agents to recover,the loans, observerj as follows:

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.16. Before ue part matter' ue uish to ntctke it creer that t1)e do not "oor"liln.lois remouing the r"ni"l the procedure rrlopted ba the Bonk in u i t p e t i t i o,, e r r he p r actice or hiin s' ::: : :;, :;::,,. ", :{ :.,, -.", .vl Il ' Llre nusclernen, is deprecated. and. needs ^ u] ^,."_ toprocedure,.."!""!,!r::::;t;'r::::::;":i;::,,i cases where the borrouer mag hr_tue comnitted cleJault in ,r::X:, of the *tatments insteaci of taking resort to strons arm

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Aggressive recovery tactics adopted by the agents of Banks/ Financial Institutions lead to the landmark judgment in ICICI Bank os. shanti Deui sharmq qnd others2,where the Honble Supreme Court directed the Banks/Financial Institutions to strictly follow the guidelines issued by the Reserve Bank of India.

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' 1zoot1 z sgat n ' lzoosl fScc stz

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In the^{abovc referred judgments'the Hon'bleSupreme} procedure^{adoPted bv} thc Court^{corldemned the} Banks/Financial^{lnstitutions in employing recovery agentsr'vho} are acting^{as middlemenfor securing possession of vehicles/} secured^{assets in cases where the borrower commits default' lt} u.as observed^{that Banks/Financial Institutions instead of} to foliow^{the procedurerecognizedbv lau' for} taking^recourse securing^the Possessron^{of vehicles/ securedassets lncases} u,here the borrower^{commits default in repayment of loan/ioan} account is^{declared as NPA, are resorting to strong-arm tactics'} TheHon'bleSupremeCourtdelineatedtheguidelinesissuedby the Reserve Bank^{of Inciia time and again on the fair conductby} lenders, with reference^{to usage of servicesof recoveryagents' it} also stated that the banks^{should be remindedof the rule of la'"r'} and strict action must^{be talenby the RBI in case of breach of} such guidelines.

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B. It is apt and appropriate to^{extract latest guidelines} issued by the Reserye Bank of India on 72.08.2022 with regard _.-ts^outsourcing ", j:ur,"r^ Sernces _Responsibi/ities 0f ,/--

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regulatecl cntities employing^{RecoveryAgents, u'hichreads as} fo ll ou's:

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"RB|/ 2022 23/ 108

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DOR.ORG. REC. 65/^{2 1. 04.1 58/ 2022-23} Attgtrtst 12, 2O22

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Macltnn/ Sir,

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Outsourcing of Flno:nclal^{Serrrlces-Responsibilitiesof} regulatecl entities enploging^{Recovery Agents}

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'l'he Reserue Bank of India hns from time to little^aduisctd requlated entities^(REs) that^{the ultimateresponsibilitll} for^their ontsourcerl actiuities^{uests ruiththemond theg are, thereJbre,} responslble for the actions^{of tleir seruice prouidersirtcludirlSl} Recoue4y Agents^{(hereafiet referredto as 'agents')'}

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It hcLs been obserued that^{the agents emploged by REs haue} been deuiating from the^{ertant instnrctions gouemingtlrc} outsourcing of fi.noncial^{seruices. In uieut of concerns aising front} the actiuities of these^{agents,it is aduised that the REs 'sha//} stictla ensure that theg^{or their agents do not resortto} intimtdation or harassment^{of ang kind, eitheruerbolor physicc,} against^{(mA person in their debt collectionefforts, including acts} intended to lu:miliate^{publiclgor intrude upon the piuacy of the} debfors' familg^{members, referees and fiends'sending} inoppropiate^{messages eitlrcron mobile or through socialmedia'} making threatening^{and/ or anongmous cdlls' persistently 1 calling} the borrouer^{and/ or calling the bonottter before 8:0oa'm' and} after 7:00^p.m. for^{recoueryof ouerdue loans' making false and} misle acling^{re p resentations,etc'} 3. The instructiorts^{contained inporo 2} aboue shall supplement^{and be read' inconjunctionuith} the existing

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Widelines/^{direc.liotts is-srr,:r.l l:sy the ReserueBank of India, as} amended from tirne^{lo ltnle. inciudingthose tabulated' in Annex'} 4. Anu otolrtlrttn ln lhis^{regard bg REs tttill be uiewed} seriorrsly. Applicabilitg 5. 'l"ltis ctrculnr slrull crpptlt to the follouing RLs: (a) All Comntcrcial^{Errrtl':-s(ntclutlingLocalAreaBanks, Regionol} Rural Banks. and 'snroil^{Finunce Bonks) excluding Pagments} Banks; (b) All An lntlkt Firtctrtcitt I /nslitulions^{(uiz- Exim Ba;nh NABARD'} NHB, SIDBI, and^NtrllltlD); (c) Alt Nctn-Banktry1 L-tronciat^{CompaniesincludingHousing} Finance Companies; (d) Nl Pnmary fi-]rban) Co-operatiue^{Banks,State Co-operatiue} Banks, antl Dislrict^{Cetttral Co'operotiueBank's; and} (e) All Asset Reconstructiotl Companies. 6. This circular shall nol^{applA to microfinan-e loanscouered} under 'Masler Ditectton - Reserue^Bank of^India Frameutork for Micro tt0nce Loans) Di 2O22'. dated March I 4 2022. Yours faithJullg, (Sunil T. S. Nair) Chief General Manager"

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g. 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 tJ:e loan €rmounts, 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

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ICICI Bank Ltd. us. prakrrsh Kauls case (1 supra) and ICIC, Bank us. Shanti Deui Shclrma,s case (2 supra).

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With the abor.e direction, this Writ petition is disposed of. There shall be no order as to costs.

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As a sequel thereto, miscelianeous petitions, if any, Pending shall stancl closed.

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To,

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SD/. N.CHANDRA SEKHAR o ASSISTANT REGI RAR ITRUE COPYII SECTION FFICER

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l.^{One CC to SRt NAGESHW.AR} E49^pUJ4Rt, Advocate. tOpUCl 2. One CC to SRt GAD| PRAVEEN KUIVAR, fOepuiv Soticitor Geierat of tndia) ^^{lign C_ourtfor rhe Stale of Telangana at Hyberiba'd.tOp0dt-} 3. Two CD Copies. BSK

HIGH^COURT

DATED:0^3l}gl2024

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ORDER

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WP.No.22672^o12024

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