Remedies against harassment by Recovery Agents


Posted On : February 18, 2021
Remedies against harassment by Recovery Agents
Court Precedent ICICI Bank vs Shanti Devi Sharma &Ors, 2008: In this landmark judgment, the Supreme Court emphasized its stand that banks can't send musclemen to recover advances from defaulters, subsequently compelling them to take their lives. A Bench consisting of Justices Tarun Chatterjee and Dalveer Bhandari stated that they considered it proper to remind the banks and other financial organizations that we live in a socialized country and are administered by the standard of law. While rejecting the ICICI Bank's plea, the court refused to delete the Delhi High Court's comments that considered the Bank and its musclemen liable for abetting a person to commit suicide by threatening him.
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There are numerous cases of the oppressive and illegal conduct of recovery agents attempting to recover pending dues for the banks' benefit. In the past few years there have been many such instances, to showcase an example, an 81-year-old woman was seriously threatened by recovery agents, she got 375 threatening calls concerning her child's unpaid bank dues. After that, she moved to the police, and a case was filed against these agents. Another incident quoted as per media reports stated that a private bus was halted, and 42 travellers were held hostage for three hours by recovery agents, who needed to recover money from the travel company that owned the bus. These cases affirm that recovery agents/offices are feared in India.  

A recovery agent seeks clients and organizations that owe installments to banks. Many of these recovery agents collect the banks' clients payment dues for a charge or a percentage of the total amount owed. These agents are generally a third-party as they are not a part of the original contract.  

The individuals not just face humiliation before family or friends, but also face actual dangers. There are a few situations where the clients have committed suicide or faced serious medical conditions because of the recovery agents' threatening conduct.  

 

Harassment  

What is considered harassing by a lender?

If the lender attempts to do any of the following, it could be viewed as harassment to recover the money owed. These actions include :

  • reaching people multiple times each day, or promptly in the first part of the day or the late evening.;
  • seeking people on social media platforms, for example, Twitter and Facebook;
  • putting pressure on people to sell their home or take out greater credit;
  • threatening or continuously contacting relatives of the borrower;
  • utilizing more than one debt collector, in turn, to pursue people for instalment;
  • using desk work or business logos that give off an impression of being official when they're not, for instance sending people letters that seem as though they represent court forms;
  • pressurizing people to pay all the money, or in bigger instalments when they can't afford to;
  • attempting to humiliate people in front of the general public;
  • telling another person about your debts or using someone else to pass on messages, for example, a neighbour or a relative.

 

What isn't considered harassing by a lender?

Not all activities that a lender conducts can be labelled as harassment. Leasers are permitted to find a way to get back the amount customers owe them. These include:  

  • sending updates and demands for instalment  
  • calling at customer's home, as long as this is at a sensible time  
  • making a court motion.   

In a judgment (Smart Security Secret Service Agency vs State Bank of India) the High Court of Kerala decided that solid arm strategies to recover credits by Banks and other Financial Institutions are unlawful. Expressing that the use of solid arm strategies was unlawful, deceptive and against the insurance of public interest, notwithstanding being against the general approach, the High Court guided financial organizations to adhere to the fair treatment of law in an authorized way. Likewise, this judgment was sent to the Governor of the Reserve Bank of India (RBI) to guarantee that similar occurrences would not happen later. Although the RBI has laid numerous principles against banks delegating these sorts of recovery agents, these agents are still appointed by the banks.  

 

Legal Remedies  

Legal Remedies available to defaulter in the case of harassment by recovery agents

  •  Filing a complaint at the police station: A proper complaint should be filed against the Bank and the recovery office. However, if the police do not file a complaint, the magistrate can be approached.  
  • An injunction suit against the bank and recovery agents: A civil injunction suit with an ad-interim relief can be filed in the civil court against the bank and recovery organization. It should be possible to guarantee that bank authorities and recovery agents don't visit a person's home to recover the dues.  
  • File an objection with the Reserve Bank of India: After getting a few public objections against banks and seeing a few cases recorded against the harassing recovery method, the RBI prescribed certain norms for the recovery agents in order to govern the approach towards defaulters. In this manner, if the defaulters feel undermined, they have an option to contact the organization and file a legal complaint.
  • Defamation suit: If the debt recovery depends on incorrect data that prompted the deficiency of a person's CIBIL score, they can file a defamation suit against the bank and recovery organization.  
  • Trespass objection: On the off chance that the recovery agents of the Bank illegally invade someone's home without approved consent, at that point a trespass complaint can be filed against them for disregarding an individual's rights.  
  • Extortion grievance:If  the recovery agents forcefully recovered the money, an extortion case can be filed against. 
  • Complaint to your Bank: Practically all banks have a complaint department. The client can move that department and can communicate on this matter. Generally, after recording the grievance, the client needs to wait for 30 days to tackle the matter or get an answer.
  • The banking ombudsman: On the off chance that the Bank does not address the issue/grievance, within the specified days, the banking ombudsman can be approached. RBI selects such individual as a senior authority who redresses the grievances by clients. The ombudsman should give a lawfully binding decision to call for settlement between the Bank and the client. The complaints identified with credit cards are filed with the ombudsman whose territorial jurisdiction the client's billing address is found.


Legal remedies accessible to Banks and NBFCs for credit recovery

  • When a bank or financial institution needs to recover any individual's debts; it uses Original Application (OA) to the Debt Recovery Tribunal against such individual.
  • The secured lenders reserve a right to implement Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI ACT,2002). It allows banks or other financial institutions to auction private or business properties to recover credits. The provision of the SARFAESI Act, s applicable if the amount of the NPA loan amount surpasses INR One Lakhs and NPA credit account is more than 20% of the principal and interest.
  • Credit taken from the Bank is under an agreement between the Bank and the borrower; hence, the general laws like Law of Contract, Transfer of Property Act, Specific Relief Act, Specific Performance and so on, apply to all banking transactions relying on the nature of the transaction.
  • In India, the remedy accessible to moneylenders is to file an ordinary money suit for recovery against the defaulting borrower for the pending amounts.


Legal remedies accessible to corporates for advance recovery

  • If the borrower neglects to repay, the company can make legal moves against the borrowers. A summary suit can be instituted under Order 37 of Civil Procedure Court (CPC) in a competent court lying under the jurisdiction.
  • Likewise, the general laws like the Law of Contract, Transfer of Property Act, Specific Relief Act, Specific Performance and so forth, apply to all corporate transactions relying on the idea of the transaction.
  • As an external court settlement, the matter can likewise be settled through Arbitration, under the Arbitration and Conciliation Act, 1996.


Court Precedent

ICICI Bank vs Shanti Devi Sharma &Ors, 2008: In this landmark judgment, the Supreme Court emphasized its stand that banks can't send musclemen to recover advances from defaulters, subsequently compelling them to take their lives. A Bench consisting of Justices Tarun Chatterjee and Dalveer Bhandari stated that they considered it proper to remind the banks and other financial organizations that we live in a socialized country and are administered by the standard of law. While rejecting the ICICI Bank's plea, the court refused to delete the Delhi High Court's comments that considered the Bank and its musclemen liable for abetting a person to commit suicide by threatening him.

As indicated by the court, Reserve Bank's complaints concerning infringement of the above rules and adoption of oppressive practices followed by banks' recovery agents would be seen genuinely. Emphasizing the RBI Guidelines on Engagement of Recovery Agents, the court held that the Reserve Bank might consider forcing a restriction on a bank from engaging with recovery agents in a specific area, either jurisdictional or functional, for a limited period. If there should be an occurrence of tenacious break of the above rules, Reserve Bank may consider expanding the time of ban or the area of the ban.  

Justice Bhandari, writing the Bench's decision, expressed that RBI had communicated its concern about the number of prosecutions recorded against the banks in the recent past for engaging with recovery agents who have purportedly abused the law. ICICI Bank had moved the Supreme Court looking for the deletion of certain paragraphs in the High Court order which had said that the general reason for the death of the deceased that drove him to commit suicide was because of humiliation brought about by the Bank. 

The High Court had noticed that the modus-operandi by the banks like ICICI for the acknowledgement of their advance money and for recovering the ownership of the vehicle against which advances are given extra-legitimate, and in no way, they can be allowed to utilize musclemen and hooligans for the recovery of their loan even from a defaulting party. The High Court order had gone ahead with an appeal filed by Shanti Devi Sharma, the deceased's mom, looking for a probe against the ICICI bank and its staff for the unlawful activity, which prompted the suicide of her 34-year-old child Himanshu Dev Sharma. Sharma committed suicide in October 2005 by hanging himself at his home after he was supposedly threatened and humiliated before his neighbours and family by recovery agents used by the Bank to recover the advance money taken to buy his motorcycle.


Conclusion and current norms

A bank and corporate organizations' performance analysis can't be exclusively founded on resources mobilized or advances made. Resource mobilization, the arrangement of resources, and reusing resources are three primary places of banking and corporate business tasks. In this way, recovery is similarly a significant action. Any deferral in recovery hampers the reuse of assets, and banks' capacity to restore the advances to financial institutions is also hindered, because of which honest borrowers suffer. Consequently, the quick recovery of credit for the proper working of a business is fundamental.

The Reserve Bank of India has issued rules under Asset Reconstruction Companies (ARCs) to prepare recovery agents not to disturb borrowers by setting up a fair practices code, and a complaint redressal system that will likewise be set up for quicker resolution of genuine objections made by the borrowers, as stated by the RBI. Additionally, RBI held that the ARCs should share the name and number of the assigned complaint redressal official with the borrowers. The mechanism will fundamentally review genuine complaints, which incorporates dealing with administrations furnished by the outsourced office alongside the recovery agents.

Written By:
Kishan Dutt Kalaskar

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Dear Sir, Remedies against harassment by Recovery Agents Written By : Kishan Dutt Kalaskar Retired Judge There are numerous cases of the oppressive and illegal conduct of recovery agents attempting to recover pending dues for the banks' benefit. In the past few years there have been many such instances, to showcase an example, an 81-year-old woman was seriously threatened by recovery agents, she got 375 threatening calls concerning her child's unpaid bank dues. After that, she moved to the police, and a case was filed against these agents. Another incident quoted as per media reports stated that a private bus was halted, and 42 travellers were held hostage for three hours by recovery agents, who needed to recover money from the travel company that owned the bus. These cases affirm that recovery agents/offices are feared in India. A recovery agent seeks clients and organizations that owe instalments to banks. Many of these recovery agents collect the banks'clientspayment dues for a charge or a percentage of the total amount owed. These agents are generally a third-party https://www.legalserviceindia.com/legal/article-4865-remedies-against-harassment-by-recovery-agents.html You may get issue a strong legal notice from my office or file a Suit for Permanent Injunction against Recovery Agents and Bankers. ICCI Bank Limited vs. Prakash Kaur case, The Supreme Court in a landmark judgement reiterated its earlier stand that banks cannot deploy musclemen for recovery of loans from defaulters thus forcing them to end their lives. "We deem it appropriate to remind the banks and other financial institutions that we live in a civilised country and are governed by the rule of law," a bench comprising Justices Tarun Chatterjee and Dalveer Bhandari said. The court while dismissing the ICICI Bank's plea refused to delete the Delhi High Court's remarks that held the bank and its musclemen responsible for abetting a youth to commit suicide by humiliating him and taking away his motorcycle financed by the largest private sector bank. It also asked the ICICI Bank to to pay Rs 25,000 as cost of this litigation to the respondents within three weeks and directed the Delhi Police to conclude the investigation against the bank expeditiously within three months, keeping in view the gravity of the allegations. The court also directed the concerned Deputy Commissioner of Police to submit the investigation report in the Delhi High Court. According to the court, complaints received by Reserve Bank regarding violation of the above guidelines and adoption of abusive practices followed by banks recovery agents would be viewed seriously. Reiterating the RBI Guidelines on Engagement of Recovery Agents, the court said, "The Reserve Bank may consider imposing a ban on a bank from engaging recovery agents in a particular area, either jurisdictional or functional, for a limited period. In case of persistent breach of above guidelines, Reserve Bank may consider extending the period of ban or the area of ban." "RBI had expressed its concern about the number of litigations filed against the banks in the recent past for engaging recovery agents who have purportedly violated the law," Justice Bhandari, writing the verdict for the bench, stated. RBI in a letter accompanying its April 24, 2008 Guidelines had stated that it might consider imposing a ban on a bank from engaging recovery agents in a particular area, either jurisdictional or functional, for a limited period. ICICI Bank had moved the apex court seeking deletion of some paragraphs in the High Court order which had said that "...the proximate cause of death of the deceased that led him to commit suicide was on account of humiliation caused by the Bank people from where loan was taken by him." "The modus-operandi employed by the banks like ICICI for realisation of their loan amount and for recovering the possession of the vehicle against which loans are given is extra legal and by no stretch of imagination they can be permitted to employ musclemen and goons for recovery of their dues even from a defaulting party," the High Court had observed. The High Court order had come on a petition filed by Shanti Devi Sharma, the deceased's mother, seeking a probe against the ICICI bank and its staff for the unlawful action, which led to the suicide of her 34-year old son Himanshu Dev Sharma. Sharma had committed suicide in October 2005 by hanging himself at his house after he was allegedly intimidated and humiliated in front of his neighbours and family by recovery agents employed by the bank for recovering the loan amount taken for his motorcycle. The ICICI Bank had contended that it was within its rights to recover loans and had followed the required procedure for recovering dues. Keep these rules in mind while facing a loan recovery agent Know the facts Banks may have an in-house collection department or they may outsource the job to a third-party collection agency. Keep in mind that no bank likes non-performing assets, or bad debts, on their balance sheet. A debt becomes bad when it’s not paid for three consecutive months. “Usually if the debt is unpaid for a month, the collection team sends reminders or calls up the customer for recovery. However, the delay in payment could just be an oversight on the borrower’s part,” said a senior banker with a private sector bank, who did not want to be named. “But when the debt becomes 90 days overdue, we initiate recovery agent visits.” This, however, depends on a bank’s policy. In case you are unable to repay on time, it’s best to tell the bank about your situation. If you have a genuine reason, the bank may be willing to work towards a solution. This also depends on the bank’s policy. “A credit card debt can be easily converted into an EMI instead of total loan outstanding amount,” said the senior banker cited above. “The bank may even restructure a loan in some cases. Of course, this also depends on your past payment record.” Handling agents Keep in mind that at times recovery agents have big targets to achieve and may also have incentives linked to the number and volume of collection. So they are a motivated lot and handling them isn’t easy. Know the rules: You, as a debtor, have certain rights. Knowing those rights will help you handle a recovery agent. Identity: You can ask the recover agents to show their identity cards issued by the bank or under the authority of the bank. Privacy: You have a right to privacy. The recovery agent cannot discuss the debt to another person. So don’t panic if he threatens to tell neighbours or co-workers about your debt. If he does so, you can file a complaint against him with the bank. Time: The recovery agent should contact you between 7am and 7pm. However, if your working hours or work shift does not permit this, you may be contacted beyond this time limit. Calls: You can choose the place and time for receiving recovery calls. You can also request them to not call you at a particular place or time. For instance, if you don’t want to receive calls at work, specify the same to the agent or the bank. Keep in mind, they will respect your request only till they feel you are not avoiding them. Decency: The recovery agent has to talk to you in a decent and civilized manner. No abusive language should be used. Also, the written communication sent by the banks should be easy to understand. Investigation: If you file a complaint against a recovery agent, the bank needs to investigate the matter. This makes recovery agents accountable for their collection practice. Inappropriate occasions: If there is a death in your family or any such event, you can tell the agent not to call you or make visits for a few days. Records: Banks document the content of conversations between customers and agents along with the time and number of calls. Banks also need to keep all copies of communications sent to customers. Disputes: If you face any dispute or differences regarding dues, seek assistance of the lender. Seeking help There could be various reasons for you not being able to pay instalments on time— medical conditions, job loss or a twin-income family becoming a single-income household. Macroeconomic factors such as high inflation or rising interest rates, too, can be the reasons. If the reason for non-payment is not temporary, it’s best is to approach credit counselling agencies and seek help. “We provide free credit counselling for those who are struggling to get out of debt,” said Narayanan Raja, chief executive, BCSBI. Debt counselling agencies such as Abhay and Disha also offer such services for free. If you are uncomfortable going to these centres, you can avail counselling over telephone which also is provided without any cost. Recourse if harassed If you think the agent is not following any of the above mentioned rules, you should file a complaint. Raja said, “If a borrower thinks he is being harassed, he should first approach the bank, and if not satisfied by its response, he should get in touch with the banking ombudsman.” Though rules have been laid down to assist borrowers, it is best to rework household budget and make provisions to accommodate the unseen change in the repayment amount. The bank can sue you on defaulting the credit card payment. It cannot amount to criminal liability as it would be considered as non payment of loan which will constitute as a civil act by nature. The Banks and Financial Institutions can lend money even without security, normally, the Banks and Financial Institutions insist for security for the repayment of loan. The fixed assets, receivables etc. can be securities acceptable to the Banks and Financial Institutions for sanctioning the loans. The loan entitlements, the procedure for sanctioning the loan, the security issues etc, are exclusively governed by the guidelines/norms issued by the Reserve Bank of India. Loan being an agreement or understanding between the Bank and the borrower, the general laws like Law of Contract, Transfer of Property Act, Specific Relief Act, Specific Performance etc., are applicable to all banking transactions depending upon the nature of transaction. When a borrower fails to repay the money to the Bank, what the Bank can do for recovering the loan is to file a civil suit earlier. in India the remedy available to lenders has been to file an ordinary money suit for recovery against the defaulting borrower for the outstanding amounts or to file a summary suit as provided for under Order 37 of Code of Civil Procedure 1908 RBI CIRCULARS LINK - Recovery Agents engaged by Banks https://www.rbi.org.in/CommonPerson/english/scripts/Notification.aspx?Id=347 Complaints against the bank / its recovery agents 3. Banks, as principals, are responsible for the actions of their agents. Hence, they should ensure that their agents engaged for recovery of their dues should strictly adhere to the above guidelines and instructions, including the BCSBI Code, while engaged in the process of recovery of dues. 4. Complaints received by Reserve Bank regarding violation of the above guidelines and adoption of abusive practices followed by banks’ recovery agents would be viewed seriously. Reserve Bank may consider imposing a ban on a bank from engaging recovery agents in a particular area, either jurisdictional or functional, for a limited period. In case of persistent breach of above guidelines, Reserve Bank may consider extending the period of ban or the area of ban. Similar supervisory action could be attracted when the High Courts or the Supreme Court pass strictures or impose penalties against any bank or its Directors/ Officers/ agents with regard to policy, practice and procedure related to the recovery process. *****
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Dear Client Draft a formal complaint letter addressed to the Canara Bank Regional Manager, detailing the issue comprehensively and requesting an immediate resolution. Ensure to include all relevant details such as dates, loan account numbers, and interactions with the recovery agents.Consider reaching out to higher authorities within Canara Bank, such as the Chief Manager or the Grievance Redressal Officer, if the issue remains unresolved after contacting the Regional Manager.