IMPORTANT POINT
Publication of photograph(s) of defaulting borrower(s)/guarantor(s) as a measure for recovery of loans has no sanction of law.

Dr. Manjula Chellur, C.J.—These two appeals arise out of common judgment and order dated 03.05.2013 in W.P. 10315 of 2013 and W.P. 9850 of 2013.

2. The controversy which got the attention of the Court where impugned judgment is coming from is whether a secured creditor who chooses course of action for enforcement of security in terms of provisions of securitization and reconstruction of financial asset and Enforcement of Security Interest Act of 2002 (hereinafter referred to as SARFAESI Act) is entitled to publish the photograph(s) of the defaulting borrower(s)/guarantor(s) in newspapers/magazines etc. In both the matters the secured creditor was the State Bank of India. The stand of the borrowers was to the effect that publication of photograph(s) of the defaulting borrower(s)/guarantor(s) as a measure for recovery of loans has no legislative sanction, therefore, the secured creditors must be restrained from proceeding in that direction. According to them, the proposed act to publish photographs, names and addresses of the defaulting borrowers is a coercive step and it fall within the meaning of mischief as defined under Section 15 of the Contract Act 1872. They further contend that proposed action attracts the definition of “defamation”.

3. So far as the stand of the respondent Bank/Appellant was that once the debtor defaulted in repayment of amounts borrowed by him, the consequence is, loan account being treated as non-performing assets (generally known as NPA). According to them the expression ‘public good’ and ‘public interest’ as defined in the dictionaries mean that an authority can act for public good/public interest for good reasons by publication of photographs, names and addresses of the defaulting borrower(s)/guarantor(s). According to the secured creditor, subsequent to taking over of the Imperial Bank of India by the Government, it is re-named as State Bank of India. Since Reserve Bank of India acquired substantial holding of shares, it is nothing but emergence of public ownership in the field of commercial Banks. The objective behind nationalisation of Banks clearly indicate, it was with the intention to serve better the needs of development of the economy. Therefore, if NPAs become more and more there be frustration and the very objectivity of nationalisation of Banks is lost.

They further contended that after observation of the Apex Court in AIR 2007 SCC 712 that non-performing asset being a cost to the economy, it became an obligation on the part of public sector banks to formulate different possible legal means and the ‘SARFAESI’ Act is one of such mechanism. Therefore, the effective and quicker procedure under the act for recovery of dues of the secured creditor, once borrowers account has been classified as non-performing asset has to be looked from an angle of public faith, public good and public interest. The proposal to publish photographs according to them was only to alert public so that they can refrain from extending credit facilities to such defaulting borrowers.

4. The appellant Bank placed reliance on AIR 2007 Madhya Pradesh 45 (Kumari Archana Chauhan v. State Bank of India) and so also (2007) 136 Company Cases 568 (Madrass) in the case of K.J. Doraiswamy.

5. Learned Judge after making a thorough analysis of the arguments and material-on-record opined that the two judgments have no persuasive value.

6. Apparently, there is no procedure for publication of photographs of the borrowers once the account of the borrower is treated as NPA. One is required to follow the procedure if such procedure is envisaged. Whether rule 8 read with appendix IV provides not only issuance of notice to the defaulting borrower but also notice to general public is to be seen. Rule 8 reads as under:

Rule 8 of the SARFAESI Rules reads as under:

“8. Sale of immovable secured assets:-

(1) Where the secured asset is an immovable property, the authorised officer shall take or cause to be taken possession, by delivering a