The judgment pointed out an important fact that default might not always be a willful act and in such a case, the self-respect and honour of a borrower should not be taken away by publishing his photograph

The Calcutta High Court (Court) recently disposed of two writ petitions (WP) by passing an order restricting secured creditors to publish photographs of defaulting borrowers in newspapers/ magazines and termed the act as ‘impermissible’. The Court was of the opinion that such a common practice of the secured creditors is an act which resorts to ‘extra-legal means’ in the process of enforcing their security interest under the Securitisation and Reconstruction of Financial Asset and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
 

The much-awaited judgment of the Court came, while simultaneously hearing the matters of Ujjal Kumar Das & Anr v/s State Bank of India & Ors (WP 10315 (W) of 2013) and Allianz Convergence Pvt Ltd v/s The General Manager, State Bank of India & Anr (WP 9850 (W) of 2013). The subject matter of the petitions was that whether a secured creditor who has already initiated action under the SARFAESI Act for the enforcement of their security interest is allowed to publish photograph of the defaulting borrowers in newspapers/ magazines or not? While passing the judgment, Justice Dipankar Dutta strictly adhered to provisions of the SARFAESI Act and Security Interest (Enforcement) Rules, 2002 (Rules) regarding enforcement of security interest. The judgment was based on the following observations of the court:
 

• • Rule 8 of the Rules and Appendix IV stipulates the form in which the ‘notice of possession’ is to be given. But it does not authorize the secured creditor to publish the photograph of the defaulting borrower.
   
• • Publishing photograph of the defaulting borrower is neither explicitly mentioned in the provisions of the law nor by necessary implication.
   
• • Notice to the borrower and public at large can be given in newspapers/ magazines, which shall contain details of the borrower, the loan account and details of the secured asset. But the law does not authorize a secured creditor to publish photographs.
   
• • A ‘public authority’ cannot act on any particular matter until and unless expressly authorized by the law. A public authority cannot act merely on the fact that ‘something is not prohibited by the law can be enacted’.
   
• • A secured creditor can act to the extent it is empowered and authorized to act and in the manner as stipulated in the statute. As the Act stipulates the exact procedure for the enforcement of the security interest, any method adopted apart from that will be held as resorting to ‘extra-legal means’. Thus, if the Act does not permit the publication of photographs, such photographs cannot be published.
   
• • A borrower is entitled to an alternative remedy under section 17 (approaching the Debt Recovery Tribunal or DRT) of the SARFAESI Act only after the secured creditor has initiated action under section 13 of the Act. Now, if the DRT holds that the secured creditor has acted contrary to the provisions of the Act and orders restoration of possession to the borrower, the damage and prejudice caused to the borrower by such publication of his photograph is irreparable.
   

The Court separated itself from the judgment of the Madras HC (KJ Doraisamy v/s the Assistant General Manager, State Bank of India, Erode Branch, 2007 136 Comp. Case 568) and the Madhya Pradesh High Court (Archana Chauhan v/s State Bank of India, Jabalpur, AIR 2007 Madhya Pradesh 45)  given earlier on similar matters. Both these HCs upheld the contentions of the banks/ financial institutions of publishing photographs ‘permissible’ as it is not prohibited by the law. The Calcutta High Court strictly opined that dissemination of information by the secured credited about the borrower can be done only if it is a ‘public authority’ as per section 2(h) of the Right to Information Act, 2005, and banks being a public authority shall be entitled to such dissemination to the extent authorized by the SARFAESI Act.
 

“Public authority" means any authority or body or institution of self-government established or constituted-

              (a) by or under the Constitution;
              (b) by any other law made by Parliament;

 (c) by any other law made by State Legislature;
 (d) by notification issued or order made by the appropriate Government, and  includes any-

 (i) body owned, controlled or substantially financed;
(ii) non-Government organisation substantially financed, directly or indirectly by funds provided by the appropriate Government;

The judgment of the Court pointed towards one most important fact that default may not always be a willful act of the borrower and in such a case, the self-respect and honor of a borrower should not be taken away by publishing his photograph in the newspaper/ magazine like a criminal. Default in repaying a loan cannot in any way be regarded as a criminal offence as it is a civil wrong. In the process of enforcing the security interest under the SARFAESI Act, the possession of the secured asset in question is taken by the secured creditor and then the notice of possession is given by the secured creditor. In such a scenario, the borrower first loses his property as a result of his loan account being classified as non-performing asset (NPA) by the bank/ financial institution and thereafter has to face the embarrassment of the photograph published in a negative manner.
 

Default in paying a loan amount may result from a common person’s inability to pay at that moment of time. Once the photograph of a person is published in a newspaper/ magazine in such negative manner, the social life of that person gets affected. The shame and harassment he has to face is beyond imagination. There are several instances where such publications have resulted in unfortunate incidents. Protecting the privacy and dignity of the customers is the legal and moral responsibility of the banks/ financial institutions. But, the present practice of publishing their photographs depicts the lack of concern which has been rightfully curbed out by the decision given by the Calcutta High Court. Thus, the judgment stands as a landmark of the dynamism, progressive and just nature of our judiciary system. It is by far the first step taken by the system to protect the morale of a borrower who may not have defaulted willfully.
 

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