Holding

The Supreme Court held that the matter was a civil dispute, set aside the High Court’s order directing FIR registration, and directed the bank to release the vehicle upon payment of Rs 50,000 with interest waived, while condemning the use of forceful recovery agents.

Summary

The petitioner, Prakash Kaur, had taken a hire‑purchase loan from ICICI Bank for a truck and defaulted on instalments. The bank, through its agent Kartik Associates, forcibly seized the vehicle. The petitioner filed a writ petition seeking registration of a FIR against the bank and police for alleged criminal offences and the cancellation of the bank’s licence. The Allahabad High Court directed the police to register a case. On appeal, the Supreme Court held that the dispute was essentially civil, not criminal, and set aside the High Court’s direction. The Court ordered the bank to release the truck upon payment of Rs 50,000 and to reconcile the accounts, with the bank waiving interest and the petitioner agreeing not to encumber the vehicle. The Court also deprecated the practice of hiring musclemen as recovery agents, urging banks to use lawful procedures and suggesting the use of Lok Adalats for such disputes.

Issues considered

The nature of the dispute: whether it is civil or criminal for purposes of directing police to register an FIR.
Whether a High Court can issue a mandamus directing registration of a criminal case based on a writ petition.
The appropriate remedy for the seizure of the vehicle and recovery of the loan amount.
The legality and propriety of banks employing recovery agents or "musclemen" for loan recovery.
Whether the bank’s licence can be cancelled as a remedy in such disputes.

Legislation cited

Indian Penal Code, 1860s. 120B, s. 400, s. 403, s. 406, s. 409, s. 417, s. 418, s. 419, s. 420, s. 421, s. 422, s. 424, s. 466, s. 467, s. 468, s. 469, s. 511, s. 571
Prevention of Corruption Act, 1988s. 13

Subjects

loan recoveryvehicle seizurecivil vs criminal jurisdictionrecovery agentsbanking regulationsLok Adalatinterest waiverbank licence cancellationforced possession

Judgment

MANAGER, ICICI BANK LTD . A
..;.-
v.
PRAKASH KAUR AND ORS.

FEBRUARY 26, 2007

[DR. AR. LAKSHMANAN AND AL TAMAS KABIR, JJ.] B

Banks/Banking:

Recovery agents-Hiring of-For recovery of loan/possession of
vehicle-Held: (Altamas Kabir, J) : Practice of hiring recovery agents/ c
musclemen, deprecated--Banks must resort to procedure recognized by law
to take possession of vehicles where borrower defaults in payment of
instalments instead of taking resort to strong arm tactics-Held: (Dr. AR
Lnkshmanan, J): Suggestions to Banks not to resort to goondas to take
possession of vehicle by force-Disputes between customers and Banks- D
Suggested to be referred to Lok Adalats.

The respondent had obtained loan from ICICI Bank for purchase of
truck. She defaulted in payment of instalments and the Bank forcibly took
" possession of truck through their agents.
E
On 25.7.2006, the respondent wrote to the agents to provide the details
of the instructions given to them to seize the truck. She also sent legal notice
to the recovery agent, which was refused. According to the respondent, the
Bank and its officials had conspired to cheat her by advancing the loan for

.. -
purchase of truck and accordingly, she wrote to the police authorities on
3/4.9.2006 to register the FIR. No steps were taken by police. Aggrieved F
respondent filed writ petition before High Court praying for directions to
register FIR against the police officials and for recovery of truck illegally
taken from her possession and for direction to Union of India for cancellation
of licence of the Appellant-Bank. High Court directed the SSP to register
the case and hold investigation.
G
In appeal to this Court, appellant-Bank conveyed willingness to
\ compromise the matter by forgoing the interest which was payable on the
outstanding dues and that if the respondent makes payment of an initial sum
of Rs.50,000/-, the truck could be returned to her and upon final account.ing
253 H
254 SUPREME COURT REPORTS (2007] 3 S.C.R.

A the balance principal amount found payable by her could be paid off in suitable
instalments.

Allowing the appeal, the Court

HELD: Per Altamas Kabir, J 1. The appellant's suggestion is accepted
B and accordingly it is directed that upon deposit of a sum of Rs.50,000/- only,
the Bank shall forthwith release to the respondent-writ petitioner or her agent
the truck, which had been seized from the writ petitioner's possession. The
writ petitioner assisted by her agent, will sit with the Bank officials for the
purpose of reconciling the accounts and in the event it is found that she had
not been given credit for certain payments made by her, such payments are to
C be taken into account and the balance principal amount will then be paid by
the writ petitioner-respondent to the Bank in six equal monthly instalments,
the last instalment being for any broken amount, if any. The writ petitioner-
respondent undertakes not to encumber or dispose of the truck till the final
accounting is completed and all dues are cleared. In case of default in payment
D of subsequent instalments, if any, the Bank will be entitled to re-possess the
vehicle in accordance. with law. The Bank shall forego the interest said to be
payable by the writ petitioner and the writ petitioner will also not be entitled
to make any claim on account of any damage and wear and tear that may have
been caused to the writ petitioner's vehicle while in the custody of the Bank
and its officials. [Paras 13, 1411259-D, E, F, G]
E
2. The practice of hiring recovery agents, who are m usclemen, 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 instalments instead of taking
F

-.
resort to strong arm tactics. (Para 16] (260-A-B]

Per Dr. AR. lakshmanan, J. (supplementing):

1. The recovery of loans or seizure of vehicles could be done only
through legal means. The Banks cannot employ goondas to take possession
G by force. (Para 15] (267-G]

2. The entrance of the multi national banks into the country has spread
the culture of Credit Cards, Loans on an unimaginable level. Inadequate
information on the Credit Card application, Loan Applications, Advertisements
or even while meeting the bankers in person in respect of the lending rates
H and hidden charges, leads to this class of people being lured into the buying
MANAGER, ICICI BANK LTD r. PRAKASH KAUR 255
,•/ of the Credit Cards or taking of the home loan or educatiun loan without A
knowing the ramifications of non-payment and default. Once the credit card
or loan is taken and there appears a default, then the witch-hunt begins. The
first step to recovery of the money due is through the so called RECOVERY I
COLLECTION AGENTS. A very dignified term used for paid recovery agents
who are individual and independent contractors hired by the Banks to trace
the defaulters and to both physically, mentally and emotionally torture and
B
force them into submitting their dues. A man's self respect, stature in society

•. ....
are all immaterial to the agent who is only primed at recovery. This is the
modernized version of Shylock's pound of flesh. No explanation is given
regarding the interest charged and the bank takes cover under the guise of
the holder of the card or loan having signed the agreement whose fine print c
is never read or explained to the owner. Young and Old members of the family
are threatened on streets, institutions and also at home at godforsaken hours
by these agents who have the full support of their contractor bank. Using of
the abusive language for recovery is the norm of the day for most nationalized
or multi national bank or non-nationalized bank. The banks escape liability
since these agents are not sala~ied employees of the bank and hence not D
directly liable for anything. !Para i 11260-A, B, C, D, E, F, G j
>
., 3.1. Considering the difficulties of the customers as well as banks, the
concept to be developed is to create distinct and separate department for
recovery. This should be manned by persons who will not resort to violence
E
or force when they are in the process of recovery of the dues. [Para 81

3.2. While the fraudulent defaulters can be dealt with by taking the
Police help for such action, it is only when law is taken into the hands of the
so called recovery agents, who are appointed on contract basis, the issue gets
aggravated. A separate wing, wherein appropriate training is given in F
,> ..... accordance with RBI guidelines would facilitate the bank in its recovery
process and also would provide more responsibilities to the persons so
engaged. [Para 911266-F-GI

3.3. The Lok Adalat should be used as an effective machinery to resolve
the issues and concentrate with reference to keeping the fine balance between G
the Banks and Borrowers. [Para 1011267-AI
\
4. If the Agency System is inescapable, then the Agency must be coupled
with a license issued after conducting examination. Appropriate training
should be given to the agents who should have requisite qualification and
H
256 SUPREME COURT REPORTS [2007) 3 S.C.R.

A maturity to handle delicate and sensitive situation. Merely because the Agency \.-,
System is convenient to the banks, and has been approved by RBI, it should
not lead to lawlessness and conduct resulting in challenge to rule of law.
(Para 111 (267-BI

CRIMINAL APPELLATE JURISDICTION : Crimimrl Appeal No. 267 of
B 2007.

From the Judgment/Order dated 7.12.2006 of the High Court of Judicature
at Allahabad in Cr!. M.P. No. 11210/2006. ..
Harish N. Salve, Mukul Rohtagi, P.S. Shroff, Tejas Karia, Misha (for Ml
c s. Suresh A. Shroff & Co.) for the Appellants.
Manjeet Chawla and Javed Mahmud Rao for the Respondents.

The Judgments of the Court was delivered hy

D ALT AMAS KABIR, J. 1. Leave granted.

2. This appeal has been filed by the Manager, I.C.l.C.I. Bank Ltd. against
the order dated 7th December, 2006, passed by the Allahabad High Court in
Criminal Miscellaneous Petition No. 11210/2006 disposing of the petition with t '
a direction upon the S.S.P. Allahabad, to ensure the registration of a case on
E the basis of Annexure VII to the Writ Petition and its investigation by a
competent police officer.

3. Before adverting to the subject-matter of the writ petition, it may be
pointed out that in the writ petition, the writ petitioner has chosen to implead
as respondents, not only the Union of India and other police authorities of
F Uttar Pradesh but also the President/Chairmen/Managing Director of the
,...
I.C.I.C.I. Bank, the General Manager, Loans, I.C.I.C.I. Bank, Branch Sardar '
Patel Marg, Civil Lines, Allahabad and M/s. Kartik Associates, Banaras
Automobiles, Kodopur, Ram Nagar, Varanasi, through its authorised Goonda
Officers and Goonda Employees and Institutions created against the law for
G doing work and persons of the Institutes, Criminals to do work for l.C.I.C.I.
Bank.
./
'
4. The subject matter of the writ petition r<:lates to a loan taken by the
writ petitioner from the l.C.I.C.I. Bank, Allahabad Branch for purchase of a
truck. It appears that the writ petitioner defaulted in payment of the instalments
H and in terms of the agreement entered into between the writ petitioner and
MANAGER, ICICI BANK LTD. v. PRAKASHKAUR[ALTAMASKABIR,J.] 257

the Bank, the writ petitioner's truck was taken possession of by the bank A
_..; authorities by use of force on 13th July, 2006. It also appears that the writ
petitioner requested the Chief Manager (Loans), I.C.l.C.I. Bank, Sardar Patel
Marg, Civil Lines, Allahabad, for release of the truck which was alleged to
have been forcibly taken possession of by Mis. Kartik Associates, acting as
the agents of the Bank. The writ petitioner appears to have also written to
the said agents on 25th July, 2006, requesting them to provide details of the B
instructions given to them to seize the petitioner's truck.

5. Since the truck was not returned to the writ petitioner, she caused a
legal notice to be served on Mis. Kartik Associates but the same was returned
unserved as having been refused. C
6. The writ petitioner contended that the Bank and its officials had
systematically conspired to cheat the writ petitioner by advancing the loan
for purchase of the truck and accordingly wrote to the police authorities on
3rd/4th September 2006, requesting them to register the First Information
Report of the alleged offences punishable under Sections 120-B, 4001 4031 D
4061 4091 417 I 4181 4191 4201 421/ 4221 4241 4661 467 I 4681 4691 571 and 511
IPC. It was also urged that since no steps had been taken by the police
authorities on the basis of the application dated 3rd/4th September, 2006, the
}
respondent Nos. I 2, 5, 6, 7 & 8, being the Union of India and other officers
of the U.P. Police, had committed offences punishable under Sections 1661
1671 2121 2171 2181 221/ 120-B IPC and Section 13 of the Prevention of E
Corruption Act.

7. On the basis of the aforesaid allegations, the writ petitioner, Jnter-alia
prayed for a direction upon the respondent Nos. 1, 2, 4, 5, 6, 7& 8 to register
a First Information Report in Civil Lines Police Station. Allahabad, against the F

.. respondent Nos. 9 to 13 and during the period of investigation, to save the
losses of the writ petitioner by recovering the truck along with all the
documents relating to the truck and to hand over the same to the writ
petitioner. The writ petitioner also prayed for a writ of mandamus to direct the
respondent Nos. 1 and 3 to cancel the licence of the l.C.I.C.I. Bank and for
other ancillary reliefs. G
8. On the basis of the aforesaid writ application, the Division Bench of
'
I the Allahabad High Court while disposing of the writ petition passed the
following order-

"The relief sought in this Writ Petition is for issuance of a direction H
258 SUPREME COURT REPORTS [2007] 3 S.C.R.

A for Registration of the case against the Respondents.

Heard learned counsel for the petitioner and the learned AGA for the
State and perused the record.

The contention for the learned counsel for the petitioner is that a
B perusal of Application dated 03/09/06 (Annexure VII) to the Writ
Petition discloses commission of a cognizable offence. It was obligatory
on the part of the police to have registered the case and to proceed
with the investigation but it was not done. The petitioner is a lady and
she has approached this Court for the relief sought therein and in
support of his contention he has relied on Ramesh Kumari v. State
c (N. C. T of Delhi) & Ors., reported in (2006) I Crimes 229 SC wherein
the Apex Court was pleaed to issue direction for registration of the
case.

We have perused the application dated 03.09.2006 which shows the
alleged commission of cognizable offence. Consequently we direct the
D SSP Allahabad to ensure the registration of a case on the basis
Annexure-VII to the Writ petition and its investigation by a competent
police officer.

The Writ Petition stands disposed off accordingly."

E 9. Appearing for the appellant, Mr. Harish Salve, learned senior advocate
with Mr. Mukul Rohatagi, learned senior advocate, submitted that the disputes
between the parties, if any, were entirely of a civil nature relating to the
instalments payable by the writ petitioner on the loan taken by her from the
Bank and accounting of all payments actually made and there was no element
of criminal intent in the entire transaction. Mr. Salve submitted that while the
F Writ petition had been filed with the intension of exerting pressure on the
Bank and its authorities to release the truck, the High Court should have also
looked into the pleadings and the frame of the writ petition before passing
the impugned order dated 7th December, 2006. A glance at the pleadings
would make it quite clear that the dispute involved was of a purely civil nature
G and did not warrant any direction as has been given.

10. However, while make his submissions, Mr. Salve also conveyed the
Bank's willingness to compromise the matter by foregoing the interest which :
was payable on the outstanding dues which amounted to Rs. 1,62,917/- Mr.
Salve also submitted that in the event the writ petitioner had any doubts
H
MANAGER. ICICI BANK LTD.,._ PRAKASH KAUR [ALTAMAS KABIR. J] 259

regarding the payments made by her and credited to her account, she could A
>A sit with the officers of the Bank along with her agent and verify the accounts
and in the event it was found that any payment made by her had not been
credited to her account, she would be entitled to receive credit for the same.

11. Mr. Salve submitted that if the writ petitioner paid an initial sum of
Rs. 50,000/- (Rupees Fifty thousand) only, the truck could be returned to her B
and upon final accounting the balance principal amount found payable by her
could be paid off in suitable instalments .

• 12. On behalf of the writ petitioner/respondent, it was contended that
the amount said to be due towards principal was highly inflated since according
to the writ petitioner she had defaulted in making payment of only one c
instalment.

13. Be that as it may, we are inclined to accept Mr. Salve's suggestion
and we accordingly direct that upon deposit of a sum of Rs. 50,000/- (Rupees
Fifty thousand) only, the Bank shall forthwith release to the writ petitioner or
D
her agent the truck bearing registration No. UP-78-AN-1951 which had been
seized from the writ petitioner's possession. The writ petitioner assisted by
... her agent, will sit with the Bank officials for the purpose of reconciling the
accounts and in the event it is found that the writ petitioner had not be~n
' given credit for certain payments made by her, such payments are to be taken
into account and the balance principal amount will then be paid by the writ E
petitioner-respondent to the Bank in six equal monthly instalments, the last
instalment being for any broken amount, if any. The writ petitioner-respondent
undertakes not to encumber or dispose of the truck till the final accounting
is completed and all dues are cleared. In case of default in payment of
subsequent instalments, if any, the Bank will be entitled to re-possess the

-
F
vehicle in accordance with law.

14. The Bank shall forego the interest said to be payable by the writ
petitioner and the writ petitioner will also not be entitled to make any claim
on account of any damage and wear and tear that may have been caused to
the writ petitioner's vehicle while in the custody of the Bank and its officials. G
15. The appeal is accordingly allowed and the order impugned in the
\ appeal is set aside. If any First Information Report has already been registered
in terms of the impugned order, the same shall stand quashed along with the
investigation commenced thereupon.
H
260 SUPREME COURT REPORTS [2007] 3 S.C.R.

A 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
B of the instalments instead of taking resort to strong arm tactics.

17. There shall be no order as to costs.

DR. AR. LAKSHMANAN, J. I had the privilege of perusing the judgment --t
proposed by my learned Brother - Hon'ble Mr. Justice Altamas Kabir. While
c respectfully concurring with the conclusion arrived by the learned Judge, I
would like to add the following few paragraphs:-

( 1) Regarding the role of Recovery Agents - Use of abusive language
- due process of law RBI guidelines.
D FACTORS:

The issue of Banks employing alternate means of recovery other
than by due process of law i.e., either through Courts, Tribunals, .....
Adalats or Commissions is an issue that has to be viewed from i
two angles (I) from the angle of the common man and (2) from
E the angle of the bank.

REASONS:

First of all, the entrance of the multi national banks into the
country has spread the culture of Credit Cards, Loans on an
F unimaginable level where rather than the rich, it is the middle
class, the lower middle class and the lower class who are at the
receiving end of the bonanzas promised by the Banks.
Inadequate information on the Credit Card application, Loan
Applications, Advertisements or even while meeting the bankers
r
-
G in person in respect of the lending rates and hidden charges,
leads to this class of people being lured into the buying of the
Credit Cards or taking of the home loan or education loan without
f ..
knowing the ramifications of non-payment and default.
The first mistake here is most definitely on the part of the bank
H who does not believe in educating the masses regarding the
MANAGER, ICICI BANK LTD. r. PRAKASH KAUR [LAKSHMANAN, J.] 261

promises. Once the credit card or loan is taken and there appears A
~1 a default, then the witch-hunt begins.
Now the bank is the aggressor and the public is the victim. The
first step to recovery of the money due is through the so called
RECOVERY/COLLECTION AGENTS. A very dignified term used
for paid recovery agents who are individual and independent B
contractors hired by the banks to trace the defaulters and to both
physically, mentally and emotionally torture and force them into
submitting their dues.
!--
A man's self respect, stature in society are all immaterial to the
agent who is only primed at recovery. This is the modernized c
version of Shylock's pound of flesh. No explanation is given
regarding the interest charge and the bank takes cover under the
guise of the holder of the card or loan having signed the agreement
whose fine print is never read or explained to the owner.
When a harassed man approaches the Court or the police station D
he is not armed with a recording phone and finds it difficult to
give evidence of the abuse he has suffered. Here the bank gets
away with everything. Young and Old members of the family
threatened on streets, institutions and also at home at godforsaken
hours by these agents who have the full support of their contractor
bank. The stance taken by the bank in any suit alleging such E
incidents is that no such agent has been appointed by them or
their agents do not misbehave in the manner aforesaid and if
found guilty the agents have to bear the cross and the bank gets
away scot free.
Using of the abusive language for recovery is the norm of the F
day for most nationalized or multi national bank or non-
...,
nationalized bank. Though some are smart enough to record the
abuse and proceed to establish the same through Court of Law,
most of them are unfortunate not to have recourse to it. Such
people form the majority and such litigations are pending in large
G
volumes before the Civil and Consumer Courts. Again the banks
escape liability since these agents are not salaried employees of
\ the bank and hence not directly liable for anything.
Taking it form the angle of the common man the in flow of
software money and high salaries has resulted in uncontrolled
H
262 SUPREME COURT REPORTS (2007] 3 S.C.R.

A expenditure. Rather.than utility it is a fashion to carry a the card
for it makes a statement depending on the type of card one
cam es.

To maintain ones image one pays the price of utilizing card
without realizing that even a single day's delay in payment results
B in more than I00 to 200 rupees being charged as default and
penalty charges, which if accumulates over a month , results in
the charges exceeding the actual payment due.
As for loans, when litigation is commenced by the customer
against the bank or an institution, then they refuse to divulge the
c true statement of account stating that it will be produced in court.
This gives ample scope for manipulation.

SUGGESTIONS

Chronic defaulters should mean a default of a maximum of three
months if intermittent payments have been made.
D
It is mandatory that the banks be held vicariously liable for such
acts of agents. These agents have to be identified as registered
agents of the bank and should be bought directly under the
purview of the RBI.

E It may be useful that in view of the enormous amount of litigation
pending and being filed against the banks that the recovery
agents be made employees of the bank and the bank be held
liable directly for all actions of such employees.
Also every statement sent by the bank should disclose clearly
F the rate of interest and the default interest and penalty charges
separately calculated and added to the amount pending and due
by the customer.
At the very first month of default, the card should automatically
be terminated by the bank to prevent further use/misuse.
G At the time of issuance of card itself, the issuance letter should
contain every single charge being made, explained in simple
terms and the penalty the customer will .bear for such non- /
payment.
These agents should be held responsible for every background
H
MANAGER,1CICIBANK LTD. v. PRAKASH KAUR [LAKSHMANAN '1 263

check done on the person to whom the card is issued and the A
,">-! defaulter should be made liable along with the agent this would
ensure that the agent does not source illegal or fraudulent
customer.
This is dealt with elaborately in the RBI guidelines issued on
21.11.2005 but which still remains only on paper and is not being B
followed.

(2) HIRE PURCHASE:

FACTORS:

Very many banks and more importantly banks like ICICI have extended liberal
c
credit facilities for purchase of vehicles whether two wheelers or four wheelers,
more the number the targets are achieved. This results in a certain amount
of default cases. The default can be two-fold - (I) genuine and (2) fraudulent.
Both in the case of genuine and fraudulent the method usually adopted by
thses institutions is to engage thug/hooligan/gangster for recovery or the D
two wheelers or four wheelers. Many times even notice is not given to them.
They seize the vehicles even in public places deliberately to cause
embarrassment. There is no codification till date. This requires immediate
attention. In all the case of hire purchase, advance cheques for a period of
)'
36 months or 48 months or 60 months are obtained and since there is no
proper collection process, they not only seize the vehicles but also continue E
to present the cheques merely to harass the customeres. A recent incident
has taken place when the Recovery Agent had gone and threatened a school
going child for the money due by the father.

Unless we have an effective supervisory system the abuse will continue. F
SUGGESTION

Most of the non-banking financial institutions adopt the arbitration route for
the purpose of getting a commissioner of the Court appointed for seizing the
vehicles.
G
The most important aspect would be a broad guidelines for fixing the targets,
whether they be for lending or for recovery. This would result in a proper
balance between the extreme differences of working conditions between the
Multinational Commercial Banks and Nationalized and Non-nationalized Bank
who are doing the very same credit business with dignity. H
264 SUPREME COURT REPORTS [2007) 3 S.C.R.

A (3) Agency systems to be abolished
\.(
FACTORS

Though there are voices raised stating that the agency system should be
abolished, this has to be examined from the view of the bank for whom this
B system has proved to be extremely productive in view of chronic and regular
defaulters and customers who have a premeditated intension of cheating the
bank. Such people are identified easily by the agents and produced physically
before the bank who resort to all means including the local police help to force
such customers to repay their dues. -1

C REASON

The delay in the Courts and the in-effective and corrupt police structure
enables the bank to seek the help of such agencies which proves to be cost
effective and less cumbersome.

D SUGGESTION

Abolition of the system is not the answer but effective control
over the agency by the respective banks is essential.
Even though, the Reserve Bank of India Guidelines permit the ·1

E use of an Independent Agency, no prescribed qualification or
licence is granted.
If there could be a guidelines only licensed rcovery agents would
be employed and misuse of the agents as against the borrowers
can be eradicated.
F License also should be granted after the respective agents get
through in a course conducted by the banks.
,....
In accordance with the RBI Guidelines, in any proven cases the
licence of the agent should be cancelled with penal consequences
on them.
G This could be the best alternative if the banks do not come
forward to employ their own personnel and depute them for
recovery of outstandings. !
(4) RBI Guidelines

H The widely published and circulated guidelines dated 21.11.2005
MANAGER, ICICI BANK LTD. v. PRAKASH KAUR [LAKSHMANAN,l] 265

has constitued a working group on regulatory mechanisms and A
for fair trade practices.
It came into effect as of 30th November, 2005 and covers a wide
area pretaining to the rights of the customers and right to privacy,
confidentiality, pratice of debt collections, Redressal of grievances
and monitoring systems to be implemented by the banks. B
Pursuant to. this certain knowledgeable persons/excutives
aggrieved by the agencies behaviour took recourse through the
Ombudsman.
Not many are aware of this forum and the banks continue to be
~ c
(5). Banking Regulations Act

Banking Regulations Act does not, in any way, provide the
details of the conduct of the bank business.
It only contemplat the registration of a bank, incorporation of a D
bank thereafter puts the bank under the control of RBI.
While there are guideJ;nes both for lending and recovery which
} contemplates that no use of force or abuse is used in recovery
proceedings, the absence of an effective overseeing body, these
abuses continues. E
Since every bank should hold a license issued to carry on the
banking business in India by the RBI in accordance with the
conditions imposed by the RBI, if and when both nationalized
and MNB 's violate any of the rules and regulations consistently
over a period of time, then strictures ought to be imposed on F
... such digressing banks to curb their high handed activities and
to make them answerable to the general public.
Only this would reinstate the confidence of the masses in the
banking system who are already burdened with the population of
over 60 years of age having lost tremendously on the lowering G
of the interest rates.
,,. },
The banking procedures should be people friendly at the same
time, strict in its enforcement and educative enough to guide the
public on the benefits of prudent banking and savings and at the
same time, enlighten them on the pitfalls of borrowing or taking H
266 SUPREME COURT REPORTS [2007] 3 S.C.R.

A credit from institutions for various purposes, way beyond their
means.

6. Conclusion:

On an overall assessment of the system presently existing in India, the
B Multi National Banks score over the nationalized banks in terms of
convnectivity and ease in functioning, since they are highly automated and
efficient. The staff too is well trained and well paid also. The disadvantage
here is that the more the pay, the greater the pressure. Every facility is ~·
provided but work is extracted to the maximum irrespt:ctive of the age or
personal circumstances. In a nationalized bank, since there is no fear of
C immediate removal, the attitude of the staff is tolerant. No effort is made to
go a little more to help the masses. Burden is shifted easily at the lower level.
The middle management and higher management are under tremendous
pressure, since they are to achieve targets on par with the Multi National
Banks. Though there is job security and comfort in pension, there is no
D answerability. This leads to a recalcitrant cattitude and apathy.
7. As a conclusion, one can state that though efficiency is necesoary,
it should not be attained under pressure and this situation would only improve
if answerability is made the prime criteria in both the sectors. "'

E 8. Additional Inputs

Considering the difficulties of the coustomers as well as banks, the
concept to be developed is to create distinct and separate department for
recovery. This should be manned by persons who will not resort to violence
or force when they are in the process of recovery of the dues.
F
9. While the fraudulent defaulters can be dealt with by taking the Police
help for such action, it is only when law is taken into the hands of the so
called recovery agents, who are appointed on contract basis, the issue gets
aggravated. A separate wing, wherein appropriate training is given in
accordance with RBI guidelines would facilitate the bank in its recovery
G process and also would provide more reponsibilities to the persons so engaged.

IO. Yet another suggestion would be that of loans whether they are
Personal Loans or Credit Cards or Housing Loan with less than Rs. I 0 lakhs
exposure, can be referred to Lok Adalat which can be specially created for
resolving the issues between the banks and the borrowers. In fact, the Lok
H
MANAGER, ICICI BANK LTD."· PRAKASH KAUR [LAKSHMANAN, J.] 267

Adalat should be used as an effective machinery to resolve the issues and A
concentrate with reference to keeping the fine balance between the Banks and
Borrowers.

11. If the Agency System is inescapable, then the Agency must be
coupled with a license issued after conducting examination. Appropriate
training should be given to the agents who should have requisite qualification B
and maturity to handle delicate and sensitive situation. Merely because the
Agency System is convenient to the banks, and has been approved by RBI,
.. it should not lead to lawlessness and conduct resulting in challenge to rule
oflaw.

12. While performance of the banks are always co-related with reference c
to its growth, its assets utilization and finally profit in the balance sheet, that
and that alone cannot be relied upon, with reference to a country like India,
where there is enormous disparity in respect of various sections of the
society. These are all positive steps that would bring in the over all balance
in the working of all these institutions. D
13. Whether it is a bank, which concentrate on higher segment of
banking or it is a bank which concentrate upon middle class, lower middle
·~ class and such other segment of the Indian Public who look to and requires
the banking comfort, it is riot mere question of lending the money that
matters, but also the consequences thereafter. The social responsibility is E
larger than the banks profit and growth ratio alone.

14. Keeping in mind the social responsibility, it is absolutely necessary
to appoint a Special Committee who will look into the disparity in working
conditions, at least upto the managerial level and make such recommendations
to the RBI and Union of India for all remedial actions. F
15. In conclusion, we say that we are governed by a rule of law in the
country. The recovery of loans or seizure of vehicles could be done only
through legal means. The Banks cannot employ goondas to take possession
by force.
G
D.G. Appeal allowed.