Recovery agents must adhere to RBI guidelines and cannot use intimidation or harassment in loan recovery, as mandated by Articles 14 and 21 of the Constitution.

ORDER:-

This writ petition is filed under Article 226 of the Constitution of the India seeking the following reliefs:-

“issue an appropriate writ order or direction particularly one in the nature of writ of Mandamus declaring the action of the Respondent Nos.3 to 14, who are attempting to recover loan amounts from the petitioner by sending recovery agents to the petitioner‟s residence without adhering to the Circular issued by Respondent No.2 vide RBI/2022-23/108 DOR.ORG.REC.65/21.04.158/2022-23, dated 12.08.2022. Such actions are illegal, arbitrary and in violation of Articles 14 and 21 of the Constitution of India and Consequently direct Respondent Nos.3 to 14 to immediately stop sending recovery agents to the petitioner‟s residence and to strictly adhere to the Circular issued by Respondent No.2 vide RBI/2022-23/108 DOR.ORG.REC.65/21.04.158/2022-23 dated 12.08.2022 while recovering any outstanding loans and to pass such other order or orders...”

2. Heard learned counsel for petitioner and learned counsel for the respondents.

3. The grievance of the petitioner is that the respondents are entitled to recover loan amount in terms of the loan agreements by following the procedure established under law and they are not having any right to recover the loan amount by using force.

4. The issues raised in this Writ Petition are no longer res integra as the Hon’ble Supreme Court in ICICI Bank Ltd. vs. Prakash Kaur and others, [(2007) 2 SCC 711], while dealing with the similar issues where the banks engaged the services of recovery/collection agents to recover the loans, observed as follows:

“16. Before we part with this matter, we wish to make it clear that we do not appreciate the procedure adopted by the Bank in removing the vehicle from the possession of the writ petitioner. The practice of hiring recovery agents, who are musclemen, is deprecated and needs to be discouraged. The Bank should resort to procedure recognized by law to take possession of vehicles in cases where the borrower may have committed default in payment of the installments instead of taking resort to strong-arm tactics.”

5. Aggressive recovery tactics adopted by the agents of Banks/Financial Institutions lead to the landmark judgment in ICICI Bank vs. Shanti Devi Sharma and others, [(2008) 7 SCC 532] , where the Hon’ble Supreme Court directed the Banks/Financial Institutions to strictly follow the guidelines issued by the Reserve Bank of India.

6. In the above referred judgments, the Hon’ble Supreme Court condemned the procedure adopted by the Banks/Financial Institutions in employing recovery agents who are acting as middlemen for securing possession of vehicles/secured assets in cases where the borrower commits default. It was observed that Banks/Financial Institutions, instead of taking recourse to follow the procedure recognized by law for securing the possession of vehicles/secured assets in cases where the borrower commits default in repayment of loan/ loan account is declared as NPA, are resorting to strong-arm tactics. The Hon’ble Supreme Court delineated the guidelines issued by the Reserve Bank of India time and again on the fair conduct by lenders, with reference to usage of services of recovery agents. It also stated that the banks should be reminded of the rule of law and strict action must be taken by the RBI in case of breach of such guidelines.

7. It is apt and appropriate to extract latest guidelines issued by the Reserve Bank of India on 12.08.2022 with regard to outsourcing of Financial Services – Responsibilities of regulated entities employing Recovery Agents, which reads as follows:

“RBI/2022-23/108 DOR.ORG.REC.65/21.04.158/2022-23 August 12, 2022 Madam/ Sir,

Outsourcing of Financial Services - Responsibilities of regulated entities employing Recovery Agents

The Reserve Bank of India has from time to time advised regulated entities (REs) that the ultimate responsibility for their outsourced activities vests with them and they are, therefore, responsib