Disposed

Godapally Kiran Kumar v. The Union of India

Telangana HC3 Sept 2024WP/22679/2024

Case brief

AI extract

What is this about?

A writ petition challenging aggressive loan recovery tactics by financial institutions. The High Court directed respondents to ensure their agents strictly follow RBI guidelines and Supreme Court precedents prohibiting intimidation during debt collection. The writ petition was disposed of without costs.

What did the court decide?

Directed respondents to ensure recovery agents strictly follow RBI guidelines regarding conduct during debt collection; petition disposed of without costs.

Godapally Kiran Kumar Vs The Union of India — Consumer Protection | Telangana HC (2024)

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[^32s6 ]

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HIGH COURT^FORTHE 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.^BHASKARREDDY

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WRIT PETITION NO 22679^{0F 2024}

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Between:

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Godapallv Kiran Kumar,^{S/o. LateRalaratnam.Aged 35 years,Occ Food} Delivtiry Boy, R/o. H No^{17lC, Sainagar,JagadgiriguttaHyderabad - 055'}

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...PETITIONER

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AND

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'l . The Union of lndia, Rep. by its Secretary, Ministry of Finance' New Delhi Z. fne nes-erve Bank^{of 'lndn, Rep by its Chre{General Manager,6, Sansad} llaro. New Delhi - 110001

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S Sgt"bnNf, Rep. by^{its Chief Manager. State Bank Bhavan, Madame,} CamaMarg, Mumbai, Maharashtra^{- 400021}

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a nXiS AANk, Rep. by its Chief^{Manager, SN 52, CS No. 1331 , Nathani} Heights, Dalal Estate,'Mumbai,^{Maharashtra,- 400008}

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MO"NEV VIEW, Rep. by^{its Chief Manager,3rd Floor,SurveyNo.-17,^14,} - Outer ning Rd,'Kadirbe6sanahalli, Bellandur, Bengaluru, Karnataka - 560087 O. FJonawitZ Fincorp, Rep.^{by its Chief Manager Olfice 201 and202,2ndfloor,} AP81, Koregaon Park^{Annex, Mundhwa, Pune- 4'1 I O,U}

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...*aTTONDENTS

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Petition under Article^{226 of lhe constitutionof lndia prayingthat in the} circumstances stated in the^{affidavitfiledtherewith,the High cgurt may be} pleased to issue writ, order or Direction^{more particularly one in the nature of} writ of Mandamus - 1. declaring^{the action of the respondentNos.3 to 6 in high} handedly, arbitrarily and^{illegally trying to recover the amountsfrom the petitioner} by not following circular^{daled 12. oB. 2022 vtdeRBll2022- 231108, DOR.ORG.} REC.65/ 21 .04. 15812022-^{23 issuedby respondent no.2oranydue process of} law and the inaction of^{the respondent no. 2 to legitimatelyprotect the interest of} the petitioner by duly^{enforcingcircular dated'12. 08.2022 videRBll2022-} 231108,0R. ORG. REC.^{65121 . 04 15Bl 2022'23as illegal, arbitraryand} unconstitutional for violating^{Art 14, 19, and 21 o',f the constitutionof lndia,2.} direct the respondent^{nos. 3 to 6 to follow circular dated 12. 08. 2022 vide} RBv2o22- 231108, DOR.^{ORG. REC 65/ 21 . 04 1581 2022- 23 issued by}

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respondent no 2.3. direct the respondent no. 2 to duly enforce the Circular daled 12 08 2022 vide RBv2022- 231108, DOR. ORG. REC 65 t21 04 15812022- 2 to protect the interests of the petitioner against the respondent Nos 3 to 6 4. direct the respondent no.2 to take stringent action against the errant official of the respondent Nos. 3 to 6 in unlawfully, illegally and arbitrarily taking to recover the amounts from petitioner without following any due process of law.

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lA NO:^'f OF 2024

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Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to direct the respondent nos. 3 to 6 to not take any coercive measures against the petitioner without following due process of law and mandatorily following Circular dated 12 08 2022 vide R8112022- 231 108,DOR. ORG. REC. 65/2i 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. 1to3: SRI GADI PRAVEEN KUMAR Dy. SOLICITOR GEN. OF INDIA

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Counsel for the Respondent Nos.4to6: --

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The Court made the following: ORDER

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

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WRIT PETITION No.22679 of 2024

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ORDER:

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Thjs Writ Petition is filed seeking the follorving rt'lief:

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". ...1o issue Wit, Order or Dredion more parlicularly one in t lp n.tlltre of Wit d tulendamus:

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o) l)eclaing1 the action of the respondent .lvos.s lo 6 in lltglt htlrcledlg, arbrtrailg and illegallg trying to recouer the amounts froil llp p.'titioner by not follotoirtg Circular dated 12.08.2O22 uide Rfll/)o)2 23/ 108, DOR.ORG.REC.65/ 21.O4.158/ 2022-23 issued bA the Reslxtrulent No.2 or rtrty due process of laut and the inaction of the Resprnulent No.2 to [eaitunotellJ protect the interest of the petitioner by tiulg en[orcingl Ciratlor dated 12.08.2022 uide RBI/2022-23/ 108, D()R. OI?G. R l.:C.65/ 21.04.158/2022-23 as illegal, arbitrary and unconstilutiottol lor utolotutq Artt.le 14, 19 and 21 of the Constitution of India, 195O;

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b) Direct Respondent Nos.3 to 6 to follont Cira ar dated 12.08.2022 urde RBI/ 2022-23/ 108, DOR.ORG.REC.65/ 21.O4.158/ 2022 23 is-sued Dy Respondent No.2,

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c) Dtrect the Respondent No.2 to duly enforce lhe Ctrcuiar doted 12.08.2022 uide RB1/ 2022-23/ 108, DOR.ORG.REC.65/ 21.04.1s8/ 2022 23 to protect the interests of the petitioner against the Respondetrt Nos. 4lo 15;

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d) Direct the Respondent No.2 to take stingent oction agaDsl the erront official of Respondent Nos.3 to 6 in unlaufully, illegattg ctd arbitrailg taking to recouer tfe amounts from petitioner uithout follotuttg arty clue process of laut;...."

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It is the case of petitioner that he availed personal loan from respondent Nos.3 to 6, 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 and only from July,2024 he '1

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CVBR, ] Wp 22679_2024

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could not pa-' th( ir-rstirlm<'r'tt. lt^is also case of^{the petitioner that} respondent Nos..l 1o^(r rvitl]out^foilowing the^{guidelinesof RBI, has} been sending tht' loan recovery^agents to his^{house and harassing to} pay the zrmounts riuc ;rs per the calculation of respondents.

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The grievancc' r,l tht petitioner is that the^{respondentsare} entitled to rt'cov('r' loan amount in terms of^{the loan agreements by} following the procedlrr-c established under law and they^{are not} having any right lo re( over the loan amount by using^force.

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The issucs ririsr:cl in this writ^petition are no longer^{res integra} as the Hon'ble Supreme Court in ICICI Bank Ltd. tts. Prakash Kaur and otherst, whilc dealing with the similar issues where the banks engaged the services of recovery/ collection agents to recover the loans, observed as follows:

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" 1 6. Before Luc parl uith this matter, u)e uish to make it clear tlut LUe do not c4tpreciale tlrc proced.ure adopted bg the Bank in remouing the uehicle from the possession of the urit petitioner, The practice of hiing recouery agents, utho ore musclemen, is deprecated arul needs ttt be di.scouraged. The Bank shanld resort to procedure recognbed by laut to take possession of vehiclesⁱⁿ cases where the borrouter may haue committed default in pagment of the instalments instead. of taking resort to strong-arm tactics.^"

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' lzoot'1^{z scc't rt}

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CVBR,^J Wp_22679-2024

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Aggrcssive^{rtcoverytactics adopted by the agents of Banks/} Financial^{Institutions lead to the landmark judgmentin ICICI Bank} us. Shanti^{DeuiSharrrroand other*,where the Honlrle Supreme} court directecl^{the Banks/ FinanciarlInstitutions to strictly followthe} guidelines issueci^{bv the'Re serveBankof India'}

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6 In thc abovc^{referrecl judgments, the Hon'ble SupremeCourt} condemnccl^{theproceclureadopted bytheBanks/ Financial} who are acting^as Institutions ln empioying^{recovery agents} middlemen for^{securingpossessionof vehicles/ secured assetsin} cases where^{the borrower commitsdefault' Itwas observedthat} Banks/Financial^{lnstitutionsinsteadof taking recourse to follow the} procedure recognized^{by law forsecuring the possessionof} vehicles/^{secured assetsin caseswherethe borrower commitsdefault} in repayment^{of loan/loan account is declared as NPA' are resorting} to strong-arm^{tactics'The Hon'lcle Supreme Court delineated the} guidelines issued^{by the Reserve Bank of India time and again on the} fair conduct^{by lenders, withreference to usage of services of} recovery agents'^{It also stated that the banks should be remindedof} the rule^{of law and strict action mustbe taken by the RBI in caseof} breach^{of such guidelines'}

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CVBR, J wp_22679_7024

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It is apt and appr()l)riatc t() extract latest guidelines issued by the Reserve Bank of Inclia r.,n \2.O82O22 with regarcl to outsourcing of Pinancial Service s -Rt'sponsil"lilities of regulated entities employing Recovery Agents, which rt'u rtls as lbllows:

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"RBI/2022-23/ 108

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DOR.ORG.REC.65/ 21 .o4.1s8/ 2022 23 Augast 12, 2022

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Mad.am/ Sir,

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Outsourcing of Financial Serrrices - Responsibilities of rcgrlated entittes emploging Recovery Agents

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The Reserue Bonk of Indio has from titne to time aduised' regulated. entities (REs) that the ultimate responsibilitg for their outsanrced actiuities uests tDith them and theg are, therefore, responsible for the uctions oJ' their seruice prouiders including Recouery Agents (hereafter refened to as 'agents').

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It has been obserucd that the agents emploged by REs haue been deuiating from the extant instruclions gouerning the outsourcing of financial -seruices. In uietu of concerns aising from tlte actiuities of thes<: oqents, it is aduked that the REs shalJ strictlg ensure that they or their agents do not resort tD intimidation or harassment of any kind, either uerbal or phgsical, against anA person in their debt collection efforts, including acts intended to humiliate publiclg or intrude upon the piuacg of the debtors' familg members, rekrees and fiendq sending inappropriate messages either on mobile or through social media, maktng threatening and"/ or anonymous calls, persistentlg 1 calling the borrower and/ or calling the borroruer before 8:00 a.m. and

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CVBR, J wp_22679_2024

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afier 7:0O p.m. for^recouery of ouerdut'^loans,making false^and misleading re^pre s^e nt ations, el c. 3. The instructions corttained itt^{para 2aboue shall} supplement and be read in conjurtction^{with the eisting} gaidelines/ directions issued by the Reserue^{Bank of Indio,as} amended from time to^{time, i'tcludirgtllose tabulated in Annex.} 4. Ang uiolation in this regard^{l;.q RE-s utill be uiewed} seiouslg.

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Appltcabilttg 5. This circalar shall opply to^the Jbllotutq^RDs: (a) All Commercial Banks (inctuding Local^{Area Banks, Regional} Rural Banks, ond Small^{FinantceBanks) excfuding Pagments} Banks; (b) All AllJndia Financial fnstitulions^(uiz. Eim^Bank,NABARD' NHB, SIDBI, and NaBFID); (c) All Non-Banking Financial Companies^{includingHousing} Finance Companies; (d) Alt Primary (Jrban) Co-operatiue Banks,^{State Co'operatiue} Banlcs, and Distict Central^{Co operative Banks; and} (e) All Asset Reconstruction Companies. 6, This circulor shall not applA to microfinance^{loans couered} toru under'Master Direction -^ReserueBanko f^Indio(R Frametuork for Micro fi.nance Loans) Directions, 2O 2'. dated March 14, 2O22. Yours faithfullg, (Sunil T. S. Nair) Chief General Manager"

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I I

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CVBR, J wp 22679 _2024

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In view of the above circulars, this Court deems it appropriatc to direct the respondents to ensure that the agents engagcd^by them lbr recovery of the loan amounts, shall strictly follorv the^guidelines and instructions issued by the Reserve Bank of lndia^{and erlsothe} jr..rdgments of the Hon'lele Supreme Court in ICICI Bank Ltd. us. Prakash Kauls case (1 supra) and ICICI Bcnk us.^{Sho,nti Derti} Sharma's case (2 supra).

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With the above direction, this Writ Petition is disposed of There shall be no order as to costs.

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As a sequel thereto, miscellaneous^petitions, if any,^pending shall stand closed.

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//TRUE COPY//

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sD/- v. KAyITHA ASSISTANT REGIiTRAR sEcrroN 3[r,"=*

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To,

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The Secretary,Union^{of lndia,fVlinistryof Finance, NewDelhi} z. ri.i" cnLib-eiierar^{Manager, Reserv6 Bank of tndia, 6, Sansad lvlarg,New} Delhi - 1 10001 a 5il"cc io-snr. NAGESHWAR^RAoPUJARI, 4qvoc-qle-t9P^U-ql ^- ;. o;; cc io shi. cADl^{PRAVEEN KUMAR,Dv sollclroR GEN oF} tNDIA OPUCI 5 Two CD Copies q'K BM LS

HIGH COURT

DATED:0310912024

ORDER

WP.No.22679 of 2024

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DISPOSING OF THE WRIT^PETITION WITHOUT COSTS