Back
IN THE HIGH COURT OF JUDICATURE AT CALCUTTA
MANJULA CHELLUR, JOYMALYA BAGCHI, JJ.
State Bank of India & Ors. - Appellants
Vs.
Ujjal Kumar Das & Ors. - Respondents
MAT 868, 951 of 2013; CAN No. 6110 & 7289 of 2013
Decided On : 05-05-2016
SARFAESI ACT - PUBLICATION OF PHOTOGRAPHS OF DEFAULTING BORROWERS - PUBLIC GOOD AND INTEREST - RIGHT TO PRIVACY - INTERPRETATION OF RULES AND GUIDELINES - JUDICIAL REVIEW The Court held that the publication of photographs of defaulting borrowers/guarantors in newspapers/magazines etc. is not specifically provided for under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act of 2002 (SARFAESI Act) and the rules framed thereunder. However, the Court opined that in certain circumstances, such publication may be justified in the interest of public good and to protect the rights of innocent people. The Court emphasized that the right to privacy is not absolute and can be restricted in the interest of preventing crime, safeguarding the interest of innocent people, disorder, or protection of health or morals or protection of rights and freedom of others. The Court also considered the guidelines issued by the Reserve Bank of India (RBI) on the issue of publication of photographs of willful defaulters and held that such publication should not be resorted to as a routine procedure but only in cases where the borrower has committed acts of misfeasance or diversion of funds.
Fact of the Case:
The State Bank of India (SBI) proposed to publish the photographs of defaulting borrowers/guarantors in newspapers/magazines etc. as a measure to recover loans. The borrowers challenged this action, contending that it violated their right to privacy and was not authorized by law. The High Court upheld the decision of SBI, but the borrowers appealed to the Supreme Court.
Finding of the Court:
The Supreme Court held that the publication of photographs of defaulting borrowers/guarantors is not specifically provided for under the SARFAESI Act and the rules framed thereunder. However, the Court opined that in certain circumstances, such publication may be justified in the interest of public good and to protect the rights of innocent people. The Court also considered the guidelines issued by the Reserve Bank of India (RBI) on the issue of publication of photographs of willful defaulters and held that such publication should not be resorted to as a routine procedure but only in cases where the borrower has committed acts of misfeasance or diversion of funds.
Issues: 1. Whether the publication of photographs of defaulting borrowers/guarantors in newspapers/magazines etc. is specifically provided for under the SARFAESI Act and the rules framed thereunder? 2. Whether such publication is justified in the interest of public good and to protect the rights of innocent people? 3. Whether the right to privacy is absolute or can be restricted in certain circumstances?
Ratio Decidendi: 1. The Court held that the publication of photographs of defaulting borrowers/guarantors is not specifically provided for under the SARFAESI Act and the rules framed thereunder. 2. The Court opined that in certain circumstances, such publication may be justified in the interest of public good and to protect the rights of innocent people. 3. The Court emphasized that the right to privacy is not absolute and can be restricted in the interest of preventing crime, safeguarding the interest of innocent people, disorder, or protection of health or morals or protection of rights and freedom of others.
Final Decision: The Court modified the impugned judgment and orders to the extent that the publication of photographs of defaulting borrowers/guarantors should not be resorted to as a routine procedure but only in cases where the borrower has committed acts of misfeasance or diversion of funds.
Manjula Chellur, 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 photographs of the defaulting borrowers/guarantors 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 photographs of the defaulting borrowers/guarantors 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 would 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 would mean that an authority can act for public good/public interest for good reasons by publication of photographs, names and addresses of the defaulting borrowers/guarantors. 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 nationalization of Banks would 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 would be frustration and the very objectivity of nationalization of Banks is lost. They further contended that after observation of the Apex Court in AIR 2007 SC 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 Vs. State Bank of India) and so also 2007 136 Company Cases 568 (Madras) 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:
7. 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 authorized officer shall take or cause to be taken possession, by delivering a po
AI
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
