Don’t use force to recover loan, SC tells banks

ICICI Asked To Pay Litigation Bill

The Supreme Court on Thursday came down heavily on banks for engaging musclemen for recovering loans from their customers.

While dismissing a petition of ICICI Bank, a bench comprising Justice Tarun Chatterjee and Justice Dalveer Bhandari said: ‘‘We deem it appropriate to remind the banks and other financial institutions that we live in a civilised country and are governed by the rule of law.’’

It also asked ICICI Bank to pay Rs 25,000 as costs of litigation to the respondents.

According to the court, complaints received by Reserve Bank of India (RBI) regarding violation of guidelines and use of abusive practices followed by recovery agents would be viewed seriously.

The court said that RBI had expressed its concern about the number of litigations filed against the banks in the recent past for engaging recovery agents who have purportedly violated the law.

Reserve Bank of India in a letter accompanying its April 24, 2008 ‘Guidelines on Engagement of Recovery Agents’ had stated that it might 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 of ban or the area of ban. Similar supervisory action could be attracted when the High Courts or the Supreme Court pass strictures or impose penalties against any bank or its directors/ officers/ agents with regard to policy, practice and procedure related to the recovery process,’’ the apex court stated.

The Times of India 16 May 2008 P.4 New Delhi
With thanks from The Time of India
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Bank ordered to pay compensation for forcibly seizing car

The state consumer commission has come down heavily on ABN Amro Bank for having forcibly seized a vehicle from a customer who had taken a loan from the bank to buy the vehicle and then selling the vehicle at a throwaway price. The bank will now have to pay a compensation of Rs 50,000 for the mental agony the consumer suffered. The complainant will also be refunded Rs 2.6 lakh, which was the margin money given by him, and the bank was asked to return all post-dated cheques submitted by the consumer.

Surender Chauhan, a resident of Gulabi Bagh and an advocate, had taken a loan of Rs 3.45 lakh for purchasing a Maruti Esteem in September 1995. By January 1998, he had already made a total payment of Rs 2.6 lakh to the bank. However in March, 1998 the bank forcibly seized the vehicle from outside the premises of Chauhan’s house, allegedly with the help of goons hired by it.
A report was lodged by the complainant in Pratab Nagar Police station. The car also contained Chauhan’s cell phone and stereo at the time that it was seized. Justice J D Kapoor observed that :‘‘The use of force through muscle men and recovering dues by publicly humiliating the debtor, beating him up and causing injuries is a serious violation of human rights. The method of recovery is illegal and not permissible under law.’’
Merely because, in the terms of the contract, the bank has the right to take back possession of the vehicle does not give it the right to do so by illegal methods. Justice Kapoor added :‘‘ Whenever the financer chooses to take possession of the vehicle through this method the consumer is entitled to get back all the margin money given by him as well as be returned the post dated cheques.’’

With thanks from The Times of India 14 May 2008 P.7 Delhi
With thanks from The Time of India
©All rights reserved with the Bennett Coleman & Co. Ltd

For any query:- legalpoint@aol.in