In the High Court of Kerala at Ernakulam
WP (C) No. 4715 of 2017
Petitioner
Susheela
Respondent
The Director General of Police, Police Head Quarters and Ors.
Date of Judgement
16th July, 2019
Bench
Vinod Chandran and V.G. Arun, JJ.
Facts of the case
1. The petitioner was a Staff Nurse at Azjir, Central Hospital, Saudi Arabia and returned to Kerala in the year 2012. The petitioner had availed a loan from the Riyadh branch of the Al-Rahji Bank and According to the petitioner she repaid the entire amount and closed the loan account before leaving Saudi Arabia.
2. On 21.1.2017, two persons, came to the petitioner’s residence claiming to be Recovery Officers of the Al-Rahji Bank informing her that her loan account was in default and that unless an amount of 2500 Saudi Riyal is paid immediately towards the outstanding amount, the petitioner would be arrested and taken to Saudi Arabia, for which purpose, they claimed to have obtained warrant of arrest from the Indian Embassy. The intimidating tone in which the said persons spoke, caused apprehension of arrest and succumbing to the threat, the petitioner made arrangements at Saudi Arabia through her husband and relatives and remitted 2500 Saudi Riyal at the Al-Rahji Bank the next day. Thereafter, the said persons contacted the petitioner again and demanded that she should remit a further 50,000 Riyal to the loan account and threatened to arrest her if she failed to remit the amount. The repeated threat compelled the petitioner to approach the Police and thereafter, to file the writ petition.
3. The court ordered the government pleader instructions on the further action of the police as the court had doubts on the legality of the agents.
4. The state police were directed to file a report regarding the remedial measures, the State Police chief’s statement revealed, there was no proper investigation and the officers responsible for such laxity was being proceeded against departmentally.
5. The report further said that M/s. Bilkish Associates have been authorised by Al-Rahji Bank and other foreign banks to act on their behalf and that they, or their agents, are not collecting money for any foreign or multinational banks and are only acting as customer co- ordination centres for those banks. The agreement entered into between M/s. Bilkish Associates and KGM Associates revealed that KGM Associates is engaged for the purpose of debt collection services (both consumer and commercial) in Kerala.
6. The further investigation of the case was transferred to the CBCID.
Issues Raised
1. Can foreign banks engage recovery agents in India?
2. Can recovery agents act in impunity?
Ratio Decidendi
1. The Reserve Bank of India has issued a master circular which the state police referred, containing the guidelines for agents and agencies engaged by banks for recovery of debts. Specific reference is made to Clause 5.7.3 of Circular DBOD No. BP.40/21.04.158/2006-07 dated 3.11.2006, wherein it is provided that the banks and their agents should not resort to intimidation or harassment of any kind, either verbal or physical, against any person during their debt collection efforts, including acts intended to humiliate publicly or invade the privacy of the debtors family members and friends, making threatening and anonymous calls or making false and misleading representation.
2. The Guidelines mandate that recovery agents shall be engaged by banks only after a process of due diligence. That, whenever recovery is entrusted with an agency, the bank should inform the borrower the details of the recovery agency. The need for appropriate training to the recovery agents is also highlighted in the guidelines.
3. Relevant portion of the circular reads as follows-
“173. Complaints received by the Reserve Bank regarding abusive practices followed by a bank’s recovery agents would invite serious supervisory disapproval. The Reserve Bank would consider imposing a temporary ban (or even a permanent ban in case of persistent abusive practices) for engaging recovery agents on those banks where strictures have been passed/penalties have been imposed by a High Court/Supreme Court or against its Directors/Officers with regard to the abusive practices followed by their recovery agents.“
4. The Police are bound to ensure that no recovery agency, acting on behalf of a foreign bank, is permitted to perpetrate criminal offences for effecting such recovery.
Held
1. The Court while giving the final decision said that Any attempt to recover money from an Indian citizen, residing in India, can only be in accordance with the Indian laws, lest it would amount to a challenge to the administration of justice in our country and would violate the constitutional guarantee of equal protection of laws to every citizen of the country. If failure on the part of the borrower to pay back the amount due to the bank amounts to a criminal offence in the foreign country, the bank can initiate criminal action against the borrower through the diplomatic channel.
2. The strong-arm methods, for recovery from defaulters, adopted by the banks in our country, utilising the services of collection agents is not a diplomat way.
3. By statement of the State Police Chief that at present, the petitioner and her family, weren’t facing any threat from the recovery agents of Al-Rahji Bank and the statement that stringent action would be taken against any high-handed action from recovery agencies working on behalf of foreign banks and financial institutions. The writ petition is disposed of on the basis of these statements of the State Chief Police.
Edited by Sree Ramya
Approved & Published – Sakshi Raje
