Thursday, June 1, 2023

SC asks petitioner to approach Centre for law to regulate micro-finance institutions, banks, NBFCs in recovery of loans

A three-judge bench led by Justice R.F. Nariman, Justice Hemant Gupta and Justice B.R. Gavai asked the petitioners to withdraw plea and approach the concerned ministry.

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The Supreme Court on Tuesday asked the petitioner to approach the Centre for enacting a law for the conduct of micro-finance institutions, banks/NBFCs, to regulate and stop them from using illegal, harassing and violent methods against their customers for recovery. 

A three-judge bench of Justice R.F. Nariman, Justice Hemant Gupta and Justice B.R. Gavai said petitioners can make a representation to the concerned Ministry to redress their grievances. “The Writ Petition is dismissed as withdrawn,” noted the bench in its order. 

During the hearing, Advocate Vishal Tiwari submitted that micro finance institutions, banks, non-banking finance companies (NBFCs), use force and muscle for recovery of loans. There is no specific law or strict guidelines to check them. People are committing suicide because of their harassment and vehicles, which are on finance, are taken by force by the lending institutions.

The Court was hearing the plea seeking issuance of specific directions to enact law for the conduct of MFIs/NBFCs and for directions to the RBI and Government to regulate and restrain the money lending (MFI) from using harassing and illegal methods for recovery from the borrowers and to ban such MFIs which are not registered with the RBI.

The petition was filed by Vikram Sharma, Dheerendra Shukla, Rajesh Sharma and NGO Save Them India Foundation, which had also sought for a direction to the government to enact a law in Parliament in compliance and implementation of suggestions put forth by the Supreme court of India in the case of of ICICI versus Prakash Kaur and ors. in criminal Appeal No. 267 of 2007 judgment dated 26-2-2007, to regulate the conduct of Micro finance Institutions including Digital lending Apps and NBFCs.

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It had further urged to direct the government to prevent the violent and harassing methods used by the banks (MFIs/NBFCs) and take strict action against them. It has asked to ensure that there is strict delivery of instructions and sanction on such institutions to restrict such unconstitutional and arbitrary practices which are violative of the directions and guidelines issued by the Ministry of Finance.

The petitioner had submitted that the inaction of the financial authorities along with its unchecked policies pertaining to the Micro Finance and other banks regulations has led to arbitrary and exploitative practices being played on the borrowers. The high amount of interest rates along with exorbitant hidden and additional cost in the form of margin money and insurance premium has imposed a serious financial burden on the borrowers. Such imposed costs on the principal amount has burdened up the disposable income of the citizens.

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“Therefore, default on such installments by the borrowers has been countered by serious humiliation and threat call for the loan recovery mechanism by these institutions. Such existing practices has led to the violation of Right to Dignity and Livelihood under Right to Life (Article 21) and has been seriously infringed by the State entity,”

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