Kishan Dutt
Harassment by Credit Card / Bank Recovery Agents - Remedies Provided by Law
Kishan Dutt Kalaskar 17 Feb 2021

Harassment by Credit Card / Bank Recovery Agents - Remedies Provided by Law

There are numerous cases of the oppressive and illegal conduct of recovery agents attempting to recover pending dues for the banks' benefit. In the past few years there have been many such instances, to showcase an example, an 81-year-old woman was seriously threatened by recovery agents, she got 375 threatening calls concerning her child's unpaid bank dues. After that, she moved to the police, and a case was filed against these agents. Another incident quoted as per media reports stated that a private bus was halted, and 42 travellers were held hostage for three hours by recovery agents, who needed to recover money from the travel company that owned the bus. These cases affirm that recovery agents/offices are feared in India.  

A recovery agent seeks clients and organizations that owe instalments to banks. Many of these recovery agents collect the banks'clientspayment dues for a charge or a percentage of the total amount owed. These agents are generally a third-party as they are not a part of the original contract.  

The individuals not just face humiliation before family or friends, but also face actual dangers. There are a few situations where the clients have committed suicide or faced serious medical conditions because of the recovery agents' threatening conduct.  




What is considered harassing by a lender?

If the lender attempts to do any of the following, it could be viewed as harassment to recover the money owed. These actions include :

·         reaching people multiple times each day, or promptly in the first part of the day or the late evening.;

·         seeking people on social media platforms, for example, Twitter and Facebook;

·         putting pressure on people to sell their home or take out greater credit;

·         threatening or continuously contacting relatives of the borrower;

·         utilizing more than one debt collector, in turn, to pursue people for instalment;

·         using desk work or business logos that give off an impression of being official when they're not, for instance sending people letters that seem as though they represent court forms;

·         pressurizing people to pay all the money, or in bigger instalments when they can't afford to;

·         attempting to humiliate people in front of the general public;

·         telling another person aboutyour debts or using someone else to pass on messages, for example, a neighbour or a relative.


What isn't considered harassing by a lender?

Not all activities that a lender conducts can be labelled asharassment. Leasers are permitted to find a way to get back the amount customers owe them. These include:  

·         sending updates and demands for instalment  

·         calling at customer's home, as long as this is at a sensible time  

·         making a court motion.  


In a judgment (Smart Security Secret Service Agency vs State Bank of India) the High Court of Kerala decided that solid arm strategies to recover credits by Banks and other Financial Institutions are unlawful. Expressing that the use of solid arm strategies was unlawful, deceptive and against the insurance of public interest, notwithstanding being against the general approach, the High Court guided financial organizations to adhere to the fair treatment of law in an authorized way. Likewise, this judgment was sent to the Governor of the Reserve Bank of India (RBI) to guarantee that similar occurrences would not happen later. Although the RBI has laid numerous principles against banks delegating these sorts of recovery agents, these agents are still appointed by the banks.  


Legal Remedies


Legal Remedies available to defaulter in the case of harassment by recovery agents


·         Filing a complaint at the police station: A proper complaint should be filed against the Bank and the recovery office. However, if the police do not file a complaint, the magistrate can be approached.  

·         An injunction suit against the bank and recovery agents: A civil injunction suit with an ad-interim relief can be filed in the civil court against the bank and recovery organization. It should be possible to guarantee that bank authorities and recovery agents don't visit a person's home to recover the dues.  

·         File an objection with the Reserve Bank of India: After getting a few public objections against banks and seeing a few cases recorded against the harassing recovery method, the RBI prescribed certain norms for therecovery agents in order to govern the approach towards defaulters. In this manner, if the defaulters feel undermined, they have an option to contact the organization and file a legal complaint.

·         Defamation suit: If the debt recovery depends on incorrect data that prompted the deficiency of a person's CIBIL score, they can file a defamation suit against the bank and recovery organization.  

·         Trespass objection: On the off chance that the recovery agents of the Bank illegally invade someone's home without approved consent, at that point a trespass complaint can be filed against them for disregarding an individual's rights.  

·         Extortion grievance:If  the recovery agents forcefully recovered the money, an extortion case can be filed against. 

·         Complaint to your Bank: Practically all banks have a complaint department. The client can move that department and can communicate on this matter. Generally, after recording the grievance, the client needs to wait for 30 days to tackle the matter or get an answer.

·         The banking ombudsman: On the off chance that the Bank does not address the issue/grievance, within the specified days, the banking ombudsman can be approached. RBI selects such individual as a senior authority who redresses the grievances by clients. The ombudsman should give a lawfully binding decision to call for settlement between the Bank and the client. The complaints identified with credit cards are filed with the ombudsman whose territorial jurisdiction the client's billing address is found.


Legal remedies accessible to Banks and NBFCs for credit recovery

·         When a bank or financial institution needs to recover any individual's debts; it uses Original Application (OA) to the Debt Recovery Tribunal against such individual.

·         The secured lenders reserve a right to implement Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI ACT,2002). It allows banks or other financial institutions to auction private or business properties to recover credits. The provision of the SARFAESI Act, s applicable if the amount of the NPA loan amount surpasses INR One Lakhs and NPA credit account is more than 20% of the principal and interest.

·         Credit taken from the Bank is under an agreement between the Bank and the borrower; hence, the general laws like Law of Contract, Transfer of Property Act, Specific Relief Act, Specific Performance and so on, apply to all banking transactions relying on the nature of the transaction.

·         In India, the remedy accessible to moneylenders is to file an ordinary money suit for recovery against the defaulting borrower for the pending amounts.

Legal remedies accessible to corporates for advance recovery

·         If the borrower neglects to repay, the company can make legal moves against the borrowers. A summary suit can be instituted under Order 37 of Civil Procedure Court (CPC) in a competent court lying under the jurisdiction.

·         Likewise, the general laws like the Law of Contract, Transfer of Property Act, Specific Relief Act, Specific Performance and so forth, apply to all corporate transactions relying on the idea of the transaction.

·         As an external court settlement, the matter can likewise be settled through Arbitration, under the Arbitration and Conciliation Act, 1996.


Court Precedent

ICICI Bank vs Shanti Devi Sharma &Ors, 2008: In this landmark judgment, the Supreme Court emphasized its stand that banks can't send musclemen to recover advances from defaulters, subsequently compelling them to take their lives. A Bench consisting of Justices Tarun Chatterjee and Dalveer Bhandari stated that they considered it proper to remind the banks and other financial organizations that we live in a socialized country and are administered by the standard of law. While rejecting the ICICI Bank's plea, the court refused to delete the Delhi High Court's comments that considered the Bank and its musclemen liable for abetting a person to commit suicide by threatening him.

As indicated by the court, Reserve Bank's complaints concerning infringement of the above rules and adoption of oppressive practices followed by banks' recovery agents would be seen genuinely. Emphasizing the RBI Guidelines on Engagement of Recovery Agents, the court held that the Reserve Bank might consider forcing a restriction on a bank from engaging with recovery agents in a specific area, either jurisdictional or functional, for a limited period. If there should be an occurrence of tenacious break of the above rules, Reserve Bank may consider expanding the time of ban or the area of the ban.  

Justice Bhandari, writing the Bench's decision, expressed that RBI had communicated its concern about the number of prosecutions recorded against the banks in the recent past for engaging with recovery agents who have purportedly abused the law. ICICI Bank had moved the Supreme Court looking for the deletion of certain paragraphs in the High Court order which had said that the general reason for the death of the deceased that drove him to commit suicide was because of humiliation brought about by the Bank. 

The High Court had noticed that the modus-operandi by the banks like ICICI for the acknowledgement of their advance money and for recovering the ownership of the vehicle against which advances are given extra-legitimate, and in no way, they can be allowed to utilize musclemen and hooligans for the recovery of their loan even from a defaulting party. The High Court order had gone ahead with an appeal filed by Shanti Devi Sharma, the deceased's mom, looking for a probe against the ICICI bank and its staff for the unlawful activity, which prompted the suicide of her 34-year-old child Himanshu Dev Sharma. Sharma committed suicide in October 2005 by hanging himself at his home after he was supposedly threatened and humiliated before his neighbours and family by recovery agents used by the Bank to recover the advance money taken to buy his motorcycle.

Conclusion and current norms

A bank and corporate organizations' performance analysis can't be exclusively founded on resources mobilized or advances made. Resource mobilization, the arrangement of resources, and reusing resources are three primary places of banking and corporate business tasks. In this way, recovery is similarly a significant action. Any deferral in recovery hampers the reuse of assets, and banks' capacity to restore the advances to financial institutions is also hindered, because of which honest borrowers suffer. Consequently, the quick recovery of credit for the proper working of a business is fundamental.

The Reserve Bank of India has issuedrules under Asset Reconstruction Companies (ARCs) to prepare recovery agents not to disturb borrowers by setting up a fair practices code, and a complaint redressal system that will likewise be set up for quicker resolution of genuine objections made by the borrowers, as stated by the RBI. Additionally, RBI held that the ARCs should share the name and number of the assigned complaint redressal official with the borrowers. The mechanism will fundamentally review genuine complaints, which incorporates dealing with administrations furnished by the outsourced office alongside the recovery agents.

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