Facts of the case:

The petitioner, Harinder Singh borrowed a loan of Rs.19,17,997/- from IndusInd Bank (Respondent) to purchase  one Tip-Trailer from Ashok Leyland. The loan amount was to be repaid in 60 equal monthly installments (EMI’s) of Rs.45,700 each from June, 2016. The Bank had called for an arbitration proceeding in November, 2017. There was a default in payment of said installments from December, 2017.

The Respondent bank then sent musclemen to recover the vehicle due to default in the payment of instalments thereby seizing the vehicle.

The petitioner argued that the vehicle, which was illegally seized, was his sole source of income and livelihood. He pleaded IndusInd Bank to not send the musclemen to seize the vehicle. The respondent-bank stated that they were making recovery of the dues only in accordance with law as they had called for an arbitration proceeding before taking any action.

The issues raised in this case were whether the repossession and sale of the vehicle in question was in accordance with the law? And whether a lender can use any means possible in the process of recovery of loans?

Judgement:

the court held that the Bank should refrain from sending musclemen as recovery agents and should adhere to the proceedings according to the law. The court relied on the case of ICICI Bank v Shanti Devi Sharma and pointed out the following

“In the matter of recovery of loans, the lenders should not resort to undue harassment viz. persistently bothering the borrowers at odd hours, use of muscle power for recovery of loans, etc.”

The court further referred to The Code of Bank’s Commitment to the Customer stating

All members of the staff or any person representing the bank in collection or repossession will follow these guidelines

• You will be contacted at place of your choice.
• Identity and Authority of the representative would be made known at the first instance to the customer.
• Customer’s privacy will be respected.
• The interactions will be in a civil manner.
• Representatives will only contact the customer between 0700 to 1900 hours.
• Any request to avoid calls at a particular time will be honored.
• Time, number of calls and content will be documented.
• All assistance would be given to resolve disputes.

 Learnings from the case

Banks are responsible for the actions of their agents. They must make sure that the agents engage in the process of recovery of debts and dues strictly in accordance to the guidelines and instructions, including SARFAESI AND BCSBI.