Disposed

Avusali Raju, v. The Union of India

Telangana HC6 Sept 2024WP/22673/2024

Case brief

AI extract

What is this about?

The High Court disposed of a writ petition challenging aggressive loan recovery tactics by banking respondents. Relying on Supreme Court precedents, the court directed respondents to strictly adhere to RBI circulars prohibiting harassment and intimidation during debt collection.

What did the court decide?

Direction to respondents to strictly ensure agents follow RBI guidelines and Supreme Court judgments prohibiting harassment and intimidation in loan recovery.

Avusali Raju, Vs The Union of India — Consumer Protection | Telangana HC (2024)

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HIGH COURT FOR THE STATE OF TELANGAN,A AT HYDERABAD (Special Original Jurisdiction)

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FRIDAY ,THE SIXTH 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: 22673 oF 2024

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Between:

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4yu._rlj.^{Raju, S/o.AvusaliShankarappa,Aged 34 years,Occ. Business,} Rl/o.D.No.1B-1 1, Pedda Matam, Ancicjte Mindat, Jirgipei, Sanga Reddy District

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AND

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...pETrroNER

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The Union of lndia, Rep. by its Secretary, IVinistry of Finance, New Delhi 2. The Reserve Bank of lndia, Rep. by its Chief General Manager, 6, Sansad lMarg, New Delhi -1 1000'1

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Union Bank, Rep. by its Chief l,4anager, Union Bank Bhavan,239, Vidhan Bhavan [r,4arg, Nariman Point, Mumbai, Maharashtra, 4OOOZ1.

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Kinar.a.Qapital Pvt. Ltd., Rep. by its Chief Manager, 50, 2nd Floor, 100 Feet Ro.a-d l]A! 2nd Stage (Defence Colony), lndiranagar, Bangalore, Karnataka, lndia - 560038

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...RESPONDENTS

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Petition under Article 226 of lhe Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue Writ, Order or Direction more particularly one in the nature of Writ of [,4andamus 1)declaring the action of the respondent Nos.3 and 4 in high handedly, arbitrarily and illegally trying to recover the amounts from the petitioner by not following Circular dated 12.08.2022 vide RBll2O22- 23l1OB, DOR.ORG.REC.651 21 .04.15812022-23 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 RB|2022-231108,0R.ORG.REC.65121 .04.1581 2022-23 as iilegat, arbitrary and unco nstitutiona I for violating Art 14, 19, and 2'l of the Constitution of lndia, 2.direct the respondent nos. 3 and 4 to follow Circular dated 12.08.2022 vide RBll2O22-231 108, DOR.ORG. REC.65/2 1.04.15812022-23 issued by respondent no.2, 3.direct the respondent no.2 to duly enforce the Circular dated 12.08.2022

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vide RBll2O22-231 108, DOR.ORG REC.65 121 .04.15812022'2 to^protect the interests of the petitioner against the respondent Nos.3 and 4 4. direct the respondent no.2 to take stringent action against the errant official of the respondent Nos.3 & 4 in unlawfully, illegally and arbitrarily taking to recover the amounts from petitioner without following any due^process of law lA NO: 1 OF 2024

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Petition under Section^'1 5'1 CPC praying that in the circ,umstances stated in the affidavit filed in support of the^petition, the High Court nray be^pleased to direct the respondent nos. 3 and 4 to not take any coercive measures against the petitioner without following due process of law and mandatorily following Circular dated 12.08.2022 vide RBll2022 23l 1OB,DOR.ORG.REC.65/21 .04.15 812022-2 issued by respondent no.2^pending disposal of the writ^petition

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Counsel for the Petitioner: SRl. NAGESHWAR RAO PUJARI

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Counsel for the Respondent Nos. 1&2: SRI GADI PRAVEEN KUMAR DY. SOLICITOR GENERAL OF INDIA

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Counsel for the Respondent No.3: SRI N. DHANANJAY CHAVAN, SC Counsel for the Respondent No.4:^--

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The Court made the following: ORDER

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

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WRIT PETITION No.22673 of 2024

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ORDER:

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This Writ Petition, under Article²²⁶ of the^{Constitutionof} India, is filed by the petitioner, seeking^{the following reiief:}

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'.... ro issue Writ, Order or Direction^{morepartio)larlAone in the nature of} Wit of Mandamus:-

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declaing the action of the^{respondentNos.3and 4 in htgh han.dedly,} arbitrailg and ttlegaltg trying to^recouer the^amounts from^{ttLe petitioner} bg not follouing Circular dated^{12.08.2O22utdeRBI/2022-23/108'} DOR.ORG.REC.65/ 21.04.158/ 2022'23^issued. bg^{ResporuTent No.2 or} ang due process of law and the inaction^{of the Respondent No.2 to} legitimatelg protect the interest of the^{petitionerby dulg enforcing} Circutar d.ated. 12.08.2022^{utdeRBI/ 2022-23/ 108,DOR.ORG.REC.65/} 21 . O4.1 58/ 2022-23 as iLlegal, arbitrary and^{unconstitutional} for^uiotating Art 14, 19 and 21 of the Constitution^of India;

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direct the Respondent Nos.3 and 4 to JolloLU^{Circulardated} 12.o8.2o22 uide RBI/ 2o22-23/ 108,^{DOR.ORG.REC.65/ 21.O4.158/} 2022-23 issued by Respondent No.2,

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3- direct the Respond.ent No.2 to^{duIA enforce the Circwlardated} 12.O8.2022 uide RBl/2022-23/ 108,^{DOR.ORG.REC.65/21.04.158/} 2022-23 to^protect the interests of^{the petitioneragatlst terespondent} Nos.3 and 4-

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d.irect the respondent^No.2 to ktke^{stingentaction agatnsttheerrant} olf.cial of Respondent^Nos.3 and^{4 in unlaufullg, illegallg and arbitraiLg} taking to recouer the amounts from^{petttioneruithout} fotlowtng^{ang due} process of latu...."

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Heard Mr. Nageshwara Rao^{Pujari, learned counsel for the}

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petitioner, Mr. Gadi Praveen Kumar, learned Deputy^Solicitor General of India appearing for^{respondentNos. 1 and 2 and}

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Mr. N. Dhananjay Chavan, learned^{Standing Counsel appearing}

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for respondent No.3. Despite service^{of notice, there is no}

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CVBR, I W p _2267 3*2024

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representation for respondent No.4 nor any countor affidavit is filed on its behalf.

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It is the case of petitioner that he availed the credit card facility ald personal loan from respondent Nos.3 ald 4, who are the private bankers and utilised the amounts and he has been prompt in repaying the same without fail. It is further case of the petitioner that due to financial constraints, he could not pay the last instalment for the month of March, 2024. lt is also the case of the^petitioner is that respondent Nos.3 and 4 without following the guidelines of RBI, have been sending the loan recovery agents to his house and harassing to pay the amount due as^per the calculation of respondents.

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

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The issues raised in this writ petition are no longer res integra as the Hon'ble Supreme Court in ICICI Bo,nk Ltd, os.

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CVBR, J Wp_22673_2024

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Prakcsh Kaur^{and. othersr, while dealing with the similar} issues where^{the banksengagedthe services of recovery/} collection agents^{to recoverthe ioans, observed as follows:}

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"16. Before^{ue part with this matter, u)e uish to make it clear that} ue d.o not oppreciate^{the procedureadopted bg tle Bank in} remouing the^uehicle from^{the possession of the urit petitioner'TLe} practice of hiing recouery^{ogents, utho are musclemen' b} deprecated ond^{need-sto be discouraged.TheBank shnuldresorl} to procedure^{recognised by taut to fake possessionof uehiclesin} cases tuhere the^{borrotuermag haue committed defaultin} paAment of the instalments^{instead of tokingresortto strong-arm} tactics."

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Aggressive recovery^{tacticsadopted by the agents of} Banks/ Financial^{Institutionsled to the landmark judgment in} ICICI Bank as.^{Sholttti Deul Shortna ond otherg, where the} Honble Supreme^{Court directed theBanks/Financial} Institutions to^{strictly follow the guidelinesissued by the} Reserve Bank of^India.

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In the above^{referredjudgments, the Honble Supreme} Court condemned the^{procedureadopted by} the t {zooz) 2 scc ;rr ' izooai^{z sccBbf}

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CVBR, ] wp_22673_2024

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Banks/Financial Institutions in employing recovery agents who are acting as middlemen for securing possessiorr of vehicles/ secured assets in cases where the borrower commits default. It was observed that Banks/ Financial Institution s 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/loal account is declared as NPA, are resorting to strong-arm tactics. The Hon'ble Supreme Court delineated the guidelines issued by the Reserve Bank oOf India time ald again on the fair conduct by lenders, u,ith 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.

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It is apt and appropriate to extract iatt:st guidelines issued by the Reserve Bank of India on l2.OB.2Ot).2 with regard to outsourcing of Financial Services -Responsibilities of regulated entities employing Recovery ents which reads as follows:

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CVBR, J W^p_2267 3_2024

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-RBU 2022-2s/ 108

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DOR.ORG.REC. 65/^{21. 04.1 58/ 2022-23} August 12, 2022

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Madam/ Sir,

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Outsourcing oJ Financial^{Seruices 'Responsibilitiesof} regulated entities emploging^{RecolteryAgents} The Reserue Bank of India^has from^{time to time adubed} regulated entities^(REs) thot^{the ultimote responsibility} for^their outsourced actiuities^{uests rttith them and thegare, therefore,} responsible for the actions of^{theirseruiceprouiders including} Recouery Agents^{(hereafierrekmed to as 'agents').}

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It has been obserued^{that the agents emplogedbg REs haue} been d.euiating from^{the extant irt-structions gouerningthe} outsourcing of financiat^{seruices.In uieu of concernsaising} from the actiuities of these^{agents,it is aduisedtlut the REs shall} strictly ert sure that^{theg or their agents do not resort to} intimidation or harassment^{of ang kind, either uerbal or phgsical,} against anA^person in^{their debt mllection efforts,including acts} intend.ed- to humiliate^{publicly or intrudeupon the piuacyof the} d.ebtors' familg members,^{referees and} fiends,^sending inappropiate^{messageseitler on mobile or throughsocial media,} making threatening and/^{or anonAmous colls, persi,stentlg1 calting} the borrouer^{and/ or calling the bonotuer before8:00 a'm. and} afier 7:0O p.m. for re@uery^{of ouerdue loans, making} fal'se^ond misle ading repre se ntatio^ns,etc. 3. Tte instructions contained^{inpara 2aboue shall} supplement and be read^{inconjunctionwith tlrc exbting} guidelines/ directions bsued^{bg the Reserue Bank of India,as} amended. from^{time to time, includingthose tabulated in Annex} 4. Ang uiototion in this^{regord by REs uillbe uieued} seiouslg

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CVBR, J W p_2267 3t2OZ4

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Applicabilitg

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Tltis circular shatl apply to the following REs: (a) All Cornmercial Banks (including Local Area Bank:;, Reqional Rural Banks, and Small Finance Banks) excluding Payments Banks;

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(b) All All India Financial Institutions (uiz. Exim Bank, NABARD, NHB, SIDBL and NaBFID);

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(d) Ail Pnmary (Urban) Co-operatiue Banks, State C'o-operatiue Banks, artd District Central Co-operatiue Banks; and (e) All Asset Reconstntction Companies.

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Thts circular shall not applg to microfinance loans couered under 'Master Direction - Reserue Bank of India (Requlatoru Frameuork for Micro finonce Loansl Directions- 2022'- dated March I 4^)nc.) Yours faithftlly,

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(Sunil T. S. Nair)

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Chtef General Manager"

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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 arnounts, shall strictly follow the guidelines and instructions issued by the Reserve Bank of India and also t-he judgments of the Hon'ble Supreme

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Court in Prakash Kaufs case (1 supra) and Shanti Devi

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Shcrma's case (2 supra).

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CVBR, J wp 22673_2024

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With the above direction,^{this Writ Petition is disposedof'}

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As a sequel thereto, miscellaneous^{petitions,ifany,}

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pending shatt stand closed.^{There shall be no order as to costs'}

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SD/-V.KAVITHA

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ASSISTANT R GISTRAR

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//TRUE COPY// SE ON OFFICER

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To, 1. The Secretary,Union of lndia, Ministry of Finance,.New Delhi 2. The Chief General Manager, Reserve Bank of lndia, 6, Sansad [vlarg, New Delhi - 1^'1000'1

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1. The Chief Manager,Union Bank, Union Bank Bhavan, 239, Vidhan^Bhavan Marg, Nariman Point, Mumbai, Maharashtra, 400021.

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1. One CC to SRl. NAGESHWAR RAO PUJARI, Advocate [OPUC] 5. One CC to SRl. GADI PRAVEEN KUMAR , DY. SOLICITOR GENERLA^OF rNDrAloPUCl

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1. One CC to SRl. N. DHANANJAY CHAVAN, SC [OPUC] 7. Two CD Copies BM GJP

HIGH COURT

DATED:0610912024

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ORDER

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WP.No.22673 of 2024

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DISPOSING OF THE WRIT PETITION WITHOUT COSTS Cr)cePi4

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I'L

Avusali Raju, v. The Union of India

Case brief

What is this about?

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Avusali Raju, v. The Union of India

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