Point of Law : Any action by State or any consequence resulting from the operation of any statute, unjustly and adversely affecting the creditworthiness of a citizen, would offend the fundamental right guaranteed to the citizen under Article 21 of the Constitution.

JUDGMENT :

The petitioner along with her husband, who is a Jawan working with the Border Security Force, applied for a home top-up loan from the 2nd respondent. The said application is not entertained by the 2nd respondent on the ground that the credit rating of the petitioner's husband is low.

2. The petitioner applied for a home top-up loan from the 2nd respondent-Bank. The petitioner's husband was a guarantor to an Educational Loan granted by the 1st respondent-Bank. The loanee to the Educational Loan defaulted and the said account became NPA. Subsequently, the 1st respondent-Bank entered into One Time Settlement with the said loanee. The petitioner's husband was not a party to the settlement nor was given any notice of settlement.

3. However, as the said Educational Loan was settled for a lower amount than the actual amount due to the 1st respondent-Bank, the Credit Ratings of the loanee as well as the petitioner's husband, who was a guarantor, went down. As a consequence, the 2nd respondent-Bank has denied home top-up loan to the petitioner and her husband.

4. The learned Standing Counsel for the 3rd respondent-Trans Union CIBIL Limited submitted that they are acting on the basis of reports given by the Banks and if proper information and reports are received, they can alter Credit Ratings in accordance with their rules.

5. The learned Standing Counsel for the 2nd respondent-Bank submitted that as long as the Credit Score of the petitioner's husband is low, they cannot sanction additional home loan by way of top-up to the petitioner.

6. The learned Standing Counsel for the 1st respondent submitted that in view of the rules prevailing, since the One Time Settlement with the loanee of the Educational Loan was for a lower amount, the Credit Ratings of the Educational loanee as well as the guarantors thereto, will remain low to that extent.

7. I have heard the learned counsel for the petitioner and the respective Standing Counsel appearing for respondents 1 to 3.

8. The petitioner's husband, was a guarantor to an Educational Loan disbursed by the 1st respondent. The 1st respondent settled the said loan account on receiving a reduced amount from the Educational loanee under a One Time Settlement. It is an admitted position that the petitioner's husband had no notice of the settlement and was not a party to the One Time Settlement. In such circumstances, can a One Time Settlement agreement entered into by the 1st respondent-Bank with its debtor, without notice to the petitioner who was a guarantor, reduce the Credit Score of the petitioner?

9. Credit Scoring is a system which enables a Credit Institution to assess the credit worthiness and capacity of a borrower to repay his loan and advances and discharge his other obligations in respect of credit facility availed or to be availed by him. Credit Rating is an opinion of a recognised Credit Rating Company on the relative credit worthiness of a borrower. It is an informed opinion on the relative degree of risk associated with timely payment of principal and interest on a debt instrument. In India, the regulatory frame work of Credit Information Companies can be found in the Credit Information Companies (Regulation) Act, 2005.

10. The Act, 2005 is intended to regulate Credit Information Companies, whose function is to collect, process and collate credit information of borrowers of Credit Institutions. In discharge of that function, whether a Credit Institution or Credit Information Company, can gather/share information and give Credit Scores to a person who is not a borrower himself but who has stood as a Guarantor to a loan, is the issue arising in this case. If the answer is 'No”, then it will raise serious questions relating to right to privacy of citizens, who are not debtors themselves, but who have stood as Guarantors to loans/advances made by Credit Institutions.

11. Section 14, Chapter V of the Credit Information Companies (Regulation) Act, 2005 enables Credit Information Companies t