The Allahabad High Court has directed the Chairman of ICICI Bank to explain the continued use of recovery agents despite a Supreme Court ruling that bars such practices. This order stems from concerns about the coercive tactics employed by these agents, which have often led to public outcry and legal challenges.
Background of the Case
The issue of recovery agents using aggressive and sometimes unlawful methods to recover loans has been a contentious one. The Supreme Court has previously ruled against the use of musclemen and coercive tactics for loan recovery. Notably, in the case of ICICI Bank vs. Prakash Kaur, the Supreme Court held that banks must adhere strictly to legal procedures and cannot resort to intimidation or violence for repossessing assets.
Court’s Directives
The Allahabad High Court’s directive comes in light of allegations that ICICI Bank’s recovery agents have continued to use such tactics, violating both the letter and spirit of the Supreme Court’s guidelines. The court has asked the ICICI Bank Chairman to provide a detailed explanation and ensure compliance with established legal norms and Reserve Bank of India (RBI) guidelines on fair practices for recovery.
Legal and Regulatory Framework
The use of recovery agents is governed by the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, and the Security Interest (Enforcement) Rules, 2002. These laws provide a framework for the lawful recovery of secured assets but do not sanction the use of force or intimidation. The RBI has also issued guidelines emphasizing the need for fair practices in the recovery of loans, which banks are required to follow strictly.
Implications
This order by the Allahabad High Court reinforces the need for banks to adhere to legal and ethical standards in loan recovery processes. It underscores the judiciary’s role in protecting borrowers’ rights and ensuring that financial institutions operate within the bounds of the law.