SC bars employment of goondas for loan recovery

New Delhi, Feb 6 (UNI) The Supreme Court today came down heavily on banks and financial institutions employing musclemen and goondas for making recoveries and also for forcibly taking away vehicles purchased under hire-purchase system.

The court made it clear that no bank can be permitted to use musclemen for harrassing, intimidating and humiliating the loanees.

A bench comprising Justices A R Lakshmanan and Altamas Kabir, however, stayed the arrest of Allahabad branch manager of ICICI bank.

According to the petitioner bank the respondent Prakash Kaur had taken a loan of Rs eight lakh for purchasing a commercial vehicle on May 31, 2002 and hypothecated a LPT 2515 truck and defaulted in making the very first instalment by 36 days and continued to default in payment of future instalments also.

The court ordered the bank to place on record ''collection manual'' and RBI guidelines for recovery of loans within four weeks.

The court also made it clear that in case of default, recourse should be taken to the due process of law instead of taking the law into one's own hands.

Senior counsel Mukul Rohtagi, appearing for the bank, however, contended that since public money was involved and the legal process takes a very long time it was not possible for the bank to adopt such a cumbersome process.

The court did not agree.

The bank had appealed against the Allahabad High Court judgement directing the registration of a criminal case against the bank officials.

The bank contended that the bank association's guide lines permitted the appointment of agents.

The High Court in its judgement dated December 7, 2006 had also ordered the registration of a case against the chairman, general manager (loans), civil lines, Allahabad branch of ICICI bank besides ordering the registration of cases against Messrs Kartik Associates and Banaras Automobiles for employing goondas to make recoveries illegally.

UNI