Manager,
ICICI Bank Ltd Vs. Prakash Kaur & Ors [2007] Insc 210 (26 February 2007)
Dr. AR. Lakshmanan & Altamas Kabir
(Arising Out of SLP (Crl.) No. 15 OF 2007) Dr. AR. Lakshmanan, J.
I had the privilege of perusing the judgment proposed by my learned Brother
- Hon'ble Mr. Justice Altamas Kabir.
While respectfully concurring with the conclusion arrived by the learned
Judge, I would like to add the following few paragraphs:- 1) Regarding the role
of Recovery Agents use of abusive language due process of law RBI guidelines.
FACTORS:
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The issue of
Banks employing alternate means of recovery other than by due process of law
i.e., either through Courts, Tribunals, Adalats or Commissions is an issue that
has to be viewed from two angles (1) from the angle of the common man and (2)
from the angle of the bank.
REASONS:
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First of all, the
entrance of the multi national banks into the country has spread the culture of
Credit Cards, Loans on an unimaginable level where rather than the rich, it is
the middle class, the lower middle class and the lower class who are at the
receiving end of the bonanzas promised by the Banks.
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Inadequate
information on the Credit Card application, Loan Applications, Advertisements or
even while meeting the bankers in person in respect of the lending rates and
hidden charges, leads to this class of people being lured into the buying of the
Credit Cards or taking of the home loan or education loan without knowing the
ramifications of non-payment and default.
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The first mistake
here is most definitely on the part of the bank who does not believe in
educating the masses regarding the promises. Once the credit card or loan is
taken and there appears a default, then the witch-hunt begins.
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Now the bank is
the aggressor and the public is the victim. The first step to recovery of the
money due is through the so called RECOVERY/COLLECTION AGENTS. A very dignified
term used for paid recovery agents who are individual and independent
contractors hired by the Banks to trace the defaulters and to both physically,
mentally and emotionally torture and force them into submitting their dues.
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A man's self
respect, stature in society are all immaterial to the agent who is only primed
at recovery. This is the modernized version of Shylock's pound of flesh. No
explanation is given regarding the interest charge and the bank takes cover
under the guise of the holder of the card or loan having signed the agreement
whose fine print is never read or explained to the owner.
?
When a harassed
man approaches the Court or the police station he is not armed with a recording
phone and finds it difficult to give evidence of the abuse he has suffered.
Here the bank gets away with everything. Young and Old members of the family
threatened on streets, institutions and also at home at godforsaken hours by
these agents who have the full support of their contractor bank. The stance
taken by the bank in any suit alleging such incidents is that no such agent has
been appointed by them or their agents do not misbehave in the manner aforesaid
and if found guilty the agents have to bear the cross and the bank gets away
scot free.
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Using of the
abusive language for recovery is the norm of the day for most nationalized or
multi national bank or non-nationalized bank. Though some are smart enough to
record the abuse and proceed to establish the same through Court of Law, most of
them are unfortunate not to have recourse to it. Such people form the majority
and such litigations are pending in large volumes before the Civil and Consumer
Courts. Again the banks escape liability since these agents are not salaried
employees of the bank and hence not directly liable for anything.
?
Taking it from
the angle of the common man the inflow of software money and high salaries has
resulted in uncontrolled expenditure. Rather than utility it is a fashion to
carry a card for it makes a statement depending on the type of card one carries.
?
To maintain ones
image one pays the price of utilizing the card without realizing that even a
single day's delay in payment results in more than 100 to 200 rupees being
charged as default and penalty charges, which if accumulates over a month,
results in the charges exceeding the actual payment due.
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As for loans,
when litigation is commenced by the customer against the bank or an institution,
then they refuse to divulge the true statement of account stating that it will
be produced in court. This gives ample scope for manipulation.
SUGGESTIONS ? Chronic defaulters should mean a default of a maximum of three
months if intermittent payments have been made.
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It is mandatory
that the banks be held vicariously liable for such acts of agents. These agents
have to be identified as registered agents of the bank and should be bought
directly under the purview of the RBI.
?
It may be useful
that in view of the enormous amount of litigation pending and being filed
against the banks that the recovery agents be made employees of the bank and the
bank be held liable directly for all actions of such employees.
?
Also every
statement sent by the bank should disclose clearly the rate of interest and the
default interest and penalty charges separately calculated and added to the
amount pending and due by the customer.
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At the very first
month of default, the card should automatically be terminated by the bank to
prevent further use/misuse.
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At the time of
issuance of card itself, the issuance letter should contain every single charge
being made, explained in simple terms and the penalty the customer will bear for
such non-payment.
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These agents
should be held responsible for every background check done on the person to whom
the card is issued and the defaulter should be made liable along with the agent.
This would ensure that the agent does not source illegal or fraudulent customer.
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This is dealt
with elaborately in the RBI guidelines issued on 21.11.2005 but which still
remains only on paper and is not being followed.
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HIRE PURCHASE:
FACTORS:
Very many banks and more importantly banks like ICICI have extended liberal
credit facilities for purchase of vehicles whether two wheelers or four
wheelers, more the number the targets are achieved. This results in a certain
amount of default cases. The default can be two-fold (1) genuine and (2)
fraudulent. Both, in the case of genuine and fraudulent the method usually
adopted by these institutions is to engage thug/hooligan/gangster for recovery
or the two wheelers or four wheelers. Many times even notice is not given to
them.
They seize the vehicles even in public places deliberately to cause
embarrassment. There is no codification till date. This requires immediate
attention. In all the cases of hire purchase, advance cheques for a period of
36 months or 48 months or 60 months are obtained and since there is no proper
collection process, they not only seize the vehicles but also continue to
present the cheques merely to harass the customers. A recent incident has taken
place when the Recovery Agent had gone and threatened a school going child for
the money due by the father.
Unless we have an effective supervisory system the abuse will continue.
SUGGESTION Most of the non-banking financial institutions adopt the
arbitration route for the purpose of getting a commissioner of the Court
appointed for seizing the vehicles.
The most important aspect would be a broad guideline for fixing the targets,
whether they be for lending or for recovery.
This would result in a proper balance between the extreme differences of
working conditions between the Multinational Commercial Banks and Nationalized
and Non-nationalized Banks who are doing the very same credit business with
dignity.
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Agency systems to be abolished
FACTORS
Though there are voices raised stating that the agency system should be
abolished, this has to be examined from the view of the bank for whom this
system has proved to be extremely productive in view of chronic and regular
defaulters and customers who have a premeditated intention of cheating the
bank. Such people are identified easily by the agents and produced physically
before the bank who resort to all means including the local police help to
force such customers to repay their dues.
REASON The delay in the Courts and the in-effective and corrupt police
structure enables the bank to seek the help of such agencies which proves to be
cost effective and less cumbersome.
SUGGESTION ? Abolition of the system is not the answer but effective control
over the agency by the respective banks is essential.
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Even though, the
Reserve Bank of India Guidelines permit the use of an Independent Agency, no
prescribed qualification or licence is granted.
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If there could be
a guideline only licensed recovery agents would be employed and misuse of the
agents as against the borrowers can be eradicated.
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License also
should be granted after the respective agents get through in a course conducted
by the banks.
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In accordance
with the RBI Guidelines, in any proven cases the license of the agent should be
cancelled with penal consequences on them.
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This could be the
best alternative if the banks do not come forward to employ their own personnel
and depute them for recovery of out standings.
-
RBI Guidelines ? The widely published
and circulated guidelines dated 21.11.2005 has constituted a working group on
regulatory mechanisms and for fair trade practices.
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It came into
effect as of 30th November, 2005 and covers a wide area pertaining to the rights
of the customers and right to privacy, confidentiality, practice of debt
collections, Redressal of grievances and monitoring systems to be implemented by
the banks.
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Pursuant to this
certain knowledgeable persons/executives aggrieved by the agencies behaviour
took recourse through the Ombudsman.
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Not many are
aware of this forum and the banks continue to be safe.
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Banking Regulations Act ? Banking
Regulations Act does not, in any way, provide the details of the conduct of the
bank business.
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It only
contemplates the registration of a bank, incorporation of a bank and thereafter
puts the bank under the control of RBI.
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While there are
guidelines both for lending and recovery which contemplates that no use of force
or abuse is used in recovery proceedings, in the absence of an effective
overseeing body, these abuses continues.
?
Since every bank
should hold a license issued to carry on the banking business in India by the
RBI in accordance with the conditions imposed by the RBI, if and when both
nationalized and MNB's violate any of the rules and regulations consistently
over a period of time, then strictures ought to be imposed on such digressing
banks to curb their high handed activities and to make them answerable to the
general public.
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Only this would
reinstate the confidence of the masses in the banking system who are already
burdened with the population of over 60 years of age having lost tremendously on
the lowering of the interest rates.
?
The banking
procedures should be people friendly at the same time, strict in its enforcement
and educative enough to guide the public on the benefits of prudent banking and
savings and at the same time, enlighten them on the pitfalls of borrowing or
taking credit from institutions for various purposes, way beyond their means.
CONCLUSION:
On an overall assessment of the system presently existing in India, the
Multi National Banks score over the nationalized banks in terms of connectivity
and ease in functioning, since they are highly automated and efficient. The
staff too is well trained and well paid also. The disadvantage here is that the
more the pay, the greater the pressure. Every facility is provided but work is
extracted to the maximum irrespective of the age or personal circumstances. In
a nationalized bank, since there is no fear of immediate removal, the attitude
of the staff is tolerant. No effort is made to go a little more to help the
masses. Burden is shifted easily at the lower level. The middle management and
higher management are under tremendous pressure, since they are to achieve
targets on par with the Multi National Banks. Though there is job security and
comfort in pension, there is no answerability. This leads to a recalcitrant
attitude and apathy.
As a conclusion, one can state that though efficiency is necessary, it
should not be attained under pressure and this situation would only improve if
answerability is made the prime criteria in both the sectors.
ADDITIONAL INPUTS Considering the difficulties of the customers as well as
banks, the concept to be developed is to create distinct and separate
department for recovery. This should be manned by persons who will not resort
to violence or force when they are in the process of recovery of the dues.
While the fraudulent defaulters can be dealt with by taking the Police help
for such action, it is only when law is taken into the hands of the so called
recovery agents, who are appointed on contract basis, the issue gets
aggravated. A separate wing, wherein appropriate training is given in
accordance with RBI guidelines would facilitate the bank in its recovery
process and also would provide more responsibilities to the persons so engaged.
Yet another suggestion would be that of loans whether they are Personal
Loans or Credit Cards or Housing Loan with less than Rs.10 lakhs exposure, can
be referred to Lok Adalat which can be specially created for resolving the
issues between the banks and the borrowers. In fact, the Lok Adalat should be
used as an effective machinery to resolve the issues and concentrate with
reference to keeping the fine balance between the Banks and Borrowers.
If the Agency System is inescapable, then the Agency must be coupled with a
license issued after conducting examination. Appropriate training should be
given to the agents who should have requisite qualification and maturity to
handle delicate and sensitive situation. Merely because the Agency System is
convenient to the banks, and has been approved by RBI, it should not lead to
lawlessness and conduct resulting in challenge to rule of law.
While performance of the banks are always co-related with reference to its
growth, its assets utilization and finally profit in the balance sheet, that
and that alone cannot be relied upon, with reference to a country like India,
where there is enormous disparity in respect of various sections of the
society. These are all positive steps that would bring in the over all balance
in the working of all these institutions.
Whether it is a bank, which concentrate on higher segment of banking or it
is a bank which concentrate upon middle class, lower middle class and such
other segment of the Indian Public who look to and requires the banking
comfort, it is not mere question of lending the money that matters, but also
the consequences thereafter. The social responsibility is larger than the banks
profit and growth ratio alone.
Keeping in mind the social responsibility, it is absolutely necessary to
appoint a Special Committee who will look into the disparity in working
conditions, at least upto the managerial level and make such recommendations to
the RBI and Union of India for all remedial actions.
In conclusion, we say that we are governed by a rule of law in the country.
The recovery of loans or seizure of vehicles could be done only through legal
means. The Banks cannot employ goondas to take possession by force.
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