SC no to loan recovery agents

Times of India, 16th May 2008
Dismisses ICICI Bank’s Petition For Softening Stand On Use Of Musclemen

New Delhi: The Supreme Court on Thursday reiterated its earlier stand that banks cannot deploy musclemen to recover loans from defaulters, thus forcing them to end their lives.
“We deem it appropriate to remind the banks and other financial institutions that we live in a civilized country and are governed by the rule of law,” a bench comprising Justices Tarun Chatterjee and Dalveer Bhandari said.
The court while dismissing ICICI Bank's plea refused to delete the Delhi HC’s remarks that held the bank and its musclemen responsible for abetting a youth to commit suicide by humiliating him and taking away his motorcycle that had been financed by ICICI, the country’s largest private sector bank.
It also asked the bank to to pay Rs 25,000 as litigation costs to the respondents within three weeks and directed the Delhi police to conclude the investigation against the bank expeditiously within three months, keeping in view the gravity of the allegations. The court also directed the concerned deputy commissioner of police to submit the investigation report in the Delhi HC.
According to the court, complaints received by the Reserve Bank regarding violation of the above guidelines and adoption of abusive practices followed by banks recovery agents would be viewed seriously.
Reiterating the RBI guidelines on engagement of recovery agents, the court said, “The Reserve Bank may consider imposing a ban on a bank from engaging recovery agents in a particular area, either jurisdictional or functional, for a limited period. In case of persistent breach of above guidelines, the RBI may consider extending the period or area of the ban.”
“The RBI had expressed its concern about the number of litigations filed against banks in the recent past for engaging recovery agents who have purportedly violated the law,” Justice Bhandari, writing the verdict, stated.
ICICI Bank had moved the apex court seeking the deletion of some paragraphs in the high court order which had said that “...The proximate cause of death of the deceased that led him to commit suicide was on account of humiliation caused by people of the bank from where a loan was taken by him.”
“The modus-operandi employed by the banks like ICICI for realization of their loan amounts and for recovering the possession of the vehicles against which loans are given is extra-legal and by no stretch of imagination can they be permitted to employ musclemen and goons for recovery of their dues, even from a defaulting party,” the HC had observed.
The HC order had come on a petition filed by Shanti Devi Sharma, the deceased's mother, seeking a probe against ICICI Bank for the unlawful action which led to the suicide of her 34-year-old son Himanshu Dev Sharma. AGENCIES