Research › Search › Judgment

Telangana High Court · body

2025 DIGILAW 646 (TS)

PolaKonda Sai Raj v. Union of India

2025-05-07

SUREPALLI NANDA

body2025
ORDER : (SUREPALLI NANDA, J.) Heard Sri Abdul Azam Khan, learned counsel appearing on behalf of the petitioner and Sri Gadi Praveen Kumar, Deputy Solicitor General of India appearing on behalf of the respondents. 2. The petitioner approached the Court seeking prayer as under: “….That this Hon'ble Court may be pleased to issue a Writ, Order or Direction, more particularly one in the nature of a Writ of mandamus declaring the action of the Respondents no.3 to 18 in sending recovery agents to the residence of the Petitioner and threatening him and his family with the dire consequences, if loans are not repaid as illegal, arbitrary and against Article 14, 19 & 21 of the Constitution of India and consequently to direct the Respondent No.3 to18 to forthwith stop sending recovery agents to the Petitioner's residence and follow procedure as contemplated by law to recovery any loans that may be due to the Respondents and pass such other Order or Orders as this Hon'ble Court deem fit and proper in the circumstance of the case...” PERUSED THE RECORD:- 3. The case of the petitioner in brief as per the averments made by the petitioner in the affidavit filed by the petitioner in support of the present writ petition is as under: It is the specific case of the petitioner that the petitioner comes from a respectable middle class family and is working in a software company earning decent salary and was leading a happy life along with his family members. The petitioner availed loans and credit card facilities from respondent Nos.3 to 19 and had been paying the due amounts promptly from time to time, petitioner along with his wife had started a clinic titled “True Charm Aesthetic clinic” (OPC) Private Limited on 04.04.2022, but incurred heavy losses and petitioner’s health also got seriously affected having been diagnosed with Hernia and Appendix in 2024 due to which petitioner became a defaulter having lost all his money. In view of the fact that entire savings of the petitioner got exhausted in repaying the loan amounts and petitioner’s monthly earnings not being sufficient enough to meet the day to day expenses of the petitioner and his family, the petitioner in spite of all his efforts was unable to pay the EMIs to the respondents from 2024 onwards. In view of the fact that entire savings of the petitioner got exhausted in repaying the loan amounts and petitioner’s monthly earnings not being sufficient enough to meet the day to day expenses of the petitioner and his family, the petitioner in spite of all his efforts was unable to pay the EMIs to the respondents from 2024 onwards. It is further the case of the petitioner that as the EMIs were not paid, the respondent Nos.3 to 18 started harassing the petitioner to clear the entire dues in one go for which petitioner requested the respondents to provide some time to mobilize the funds, however the respondents had entrusted the task of recovery of amounts from the petitioner to the recovery agents employed by them and the said recovery agents started trespassing into the house of the petitioner and started threatening the petitioner with dire consequences, if the entire outstanding dues are not paid immediately. The recovery agents are not allowing the petitioner to live in peace and are coming to petitioner’s house at late nights and are making calls at least 100 to 150 times per day and are sending threatening messages to the petitioner and petitioner’s wife and due to the said acts of the recovery agents of the respondents herein, the petitioner and his family members are facing serious humiliation. Aggrieved by the said action of respondent Nos.3 to 18 in sending recovery agents to the residence of the petitioner and threatening the petitioner and his family with dire consequences if loans are not repaid, the petitioner approached the Court by filing the present Writ Petition. DISCUSSION AND CONCLUSION:- DISCUSSION:- 4. The learned Counsel appearing on behalf of the petitioner mainly puts-forth the following submissions:- i) The practice of hiring recovery agents should not be resorted to by the Banks and the Banks should resort only to procedure recognized by law where the borrowers commit default in payment of the loan installments. ii) The recovery of loans by the Banks and Financial institutions cannot be done otherwise than without following due process of law. iii) The guidelines, dated 12.08.2022 issued by the Reserve Bank of India are not being followed by the respondents and the respondent Nos.3 to 18 are sending recovery agents to the residence of the petitioner and threatening him and his family with the dire consequences, if loans are not repaid. iii) The guidelines, dated 12.08.2022 issued by the Reserve Bank of India are not being followed by the respondents and the respondent Nos.3 to 18 are sending recovery agents to the residence of the petitioner and threatening him and his family with the dire consequences, if loans are not repaid. iv) The repayment of loans of the petitioner cannot be the ground to the respondent Nos.3 to 18, to deprive petitioner’s personal liberty. v) The procedure adopted by the respondent NOs. 3 to 18 for recovery of amounts from the petitioner is in clear violation of the rights guaranteed to the petitioner under Articles 14 and 21 of the Constitution of India. Based on the aforesaid submissions, the learned counsel appearing on behalf of the petitioner, contended that the Writ Petition should be allowed as prayed for. 5. The learned Deputy Solicitor General of India appearing on behalf of the respondents submits that the respondent Nos.3 to 18 are bound to follow the latest guidelines issued by the Reserve Bank of India on 12.08.2022 with regard to outsourcing of financial services-responsibilities of regulated entities employing recovery agents, which reads as follows:- “RBI/2022-23/108 DOR.ORG.REC.65/21.04.158/2022-23 August 12, 2022 Madam/ Sir, Outsourcing of Financial Services – Responsibilities of regulated entities employing Recovery Agents The Reserve Bank of India has from time to time advised regulated entities (REs) that the ultimate responsibility for their outsourced activities vests with them and they are, therefore, responsible for the actions of their service providers including Recovery Agents (hereafter referred to as ‘agents’). 2. It has been observed that the agents employed by Res have been deviating from the extant instructions governing the outsourcing of financial services. In view of concerns arising from the activities of these agents, it is advised that the Res shall strictly ensure that they or their agents do not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude upon the privacy of the debtors' family members, referees and friends, sending inappropriate messages either on mobile or through social media, making threatening and/or anonymous calls, persistently1 calling the borrower and/or calling the borrower before 8:00 a.m. and after 7:00 p.m. for recovery of overdue loans, making false and misleading representations, etc. 3. 3. The instructions contained in para 2 above shall supplement and be read in conjunction with the existing guidelines/directions issued by the Reserve Bank of India, as amended from time to time, including those tabulated in Annex. 4. Any violation in this regard by REs will be viewed seriously. Applicability 5. This circular shall apply to the following REs: (a) All Commercial Banks (including Local Area Banks, Regional Rural Banks, and Small Finance Banks) excluding Payments Banks; (b) All All-India Financial Institutions (viz. Exim Bank, NABARD, NHB, SIDBI, and NaBFID); (c) All Non-Banking Financial Companies including Housing Finance Companies; (d) All Primary (Urban) Co-operative Banks, State Co- operative Banks, and District Central Co-operative Banks; and (e) All Asset Reconstruction Companies. 6. This circular shall not apply to microfinance loans covered under ‘Master Direction – Reserve Bank of India (Regulatory Framework for Microfinance Loans) Directions, 2022’, dated March 14, 2022. Yours faithfully, (Sunil T. S. Nair) Chief General Manager CONCLUSION:- 6 . The issues raised in this writ petition are no longer res integra as the Hon’ble Supreme Court in ICICI Bank Ltd. vs. Prakash Kaur and others reported in (2007) 2 SCC 711, while dealing w ith the similar issues w here the banks engaged the services of recovery/ collection agents to recover the loans, observed as follows : “16. Before we part with this matter, we wish to make it clear that we do not appreciate the procedure adopted by the Bank in removing the vehicle from the possession of the writ petitioner. The practice of hiring recovery agents, who are musclemen, is deprecated and needs to be discouraged. The Bank should resort to procedure recognised by law to take possession of vehicles in cases where the borrower may have committed default in payment of the instalments instead of taking resort to strong-arm tactics.” 7. Aggressive recovery tactics adopted by the agents of Banks/ Financial Institutions lead to the landmark judgment in ICICI Bank vs. Shanti Devi Sharma and others reported in (2008) 7 SCC 532 , where the Hon’ble Supreme Court directed the Banks/Financial Institutions to strictly follow the guidelines issued by the Reserve Bank of India. 8. In the above referred judgments, the Hon’ble Supreme Court condemned the procedure adopted by the Banks/Financial Institutions in employing recovery agents who are acting as middlemen for securing possession of vehicles/ secured assets in cases where the borrower commits default. 8. In the above referred judgments, the Hon’ble Supreme Court condemned the procedure adopted by the Banks/Financial Institutions in employing recovery agents who are acting as middlemen for securing possession of vehicles/ secured assets in cases where the borrower commits default. It was observed that Banks/Financial Institutions 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/loan account is declared as NPA, are resorting to strong-arm tactics. The Hon’ble Supreme Court delineated the guidelines issued by the Reserve Bank of India time and again on the fair conduct by lenders, with 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. 9. This Court opines that the respondent Nos.3 to 18 and their agents should strictly follow the guidelines and instructions issued by the Reserve Bank of India, dated 12.08.2022 (referred to and extracted above) and also the observations in the judgments of the Apex Court in ICICI Bank Ltd. vs. Prakash Kaur and others and ICICI Bank vs. Shanti Devi Sharma and others ( referred to and extracted above) 10. Taking into consideration:- a) The aforesaid facts and circumstances of the case. Taking into consideration:- a) The aforesaid facts and circumstances of the case. b) The submissions made by the learned counsel appearing on behalf of the petitioner and learned Deputy Solicitor General of India appearing on behalf of the respondents and, c) The law laid dow n by the Apex court in the Judgments (referred to and extracted above) and again enlisted below : i) ICICI Bank Ltd. vs. Prakash Kaur and others reported in (2007) 2 SCC 711 ii) ICICI Bank vs. Shanti Devi Sharma and others reported in (2008) 7 SCC 532 The Writ Petition is disposed of, directing the respondent Nos.3 to 18 and their recovery agents to strictly follow the Circular guidelines and instructions, dated 12.08.2022 issued by the Reserve Bank of India(referred to and extracted above) and also the observations in the judgments of the Apex Court (referred to and extracted above) and not harass the petitioner and his family members with dire consequences by sending recovery agents to the residence of the petitioner and follow due process of law for recovery of amounts due to the respondent Banks and Financial Institutions from the petitioner. However, there shall be no order as to costs. Miscellaneous applications, if any, pending shall stand closed.