The CIC said information on defaulters shared by RBI with CIBIL cannot be denied to an RTI applicant and the central bank should display this info on its website. This is 159th in a series of important judgements given by former Central Information Commissioner Shailesh Gandhi that can be used or quoted in an RTI application

The Central Information Commission (CIC), while allowing an appeal, directed the Central Public Information Officer (CPIO) and chief general manager of Reserve Bank of India (RBI) to provide complete information about defaulters of nationalised bank. The CIC also directed the RBI governor to display this information on its website, in fulfilment of its obligations under Section 4 (1)(b)(xvii) of the Right to Information (RTI) Act.

While giving this judgement on 15 November 2011, Shailesh Gandhi, the then Central Information Commissioner said, “The CIC is aware that information on defaulters is being shared by Reserve Bank with an organisation called CIBIL. In such a situation, it is difficult to understand the reluctance to share this information with citizens using RTI. The RBI's circular of 1994- mentioned above- in fact appears to promise to share this information suo moto with the public.”

Samalkha (District Panipat, Haryana) resident PP Kapoor, on 16 August 2010, sought from the PIO information about money deposited by citizens in nationalised banks and defaulters of loan. Here is the information he sought under the RTI Act...

1. Total amount of money deposited by Indian citizens in nationalized Indian banks during the periods 2006, 2007, 2008, 2009 and 2010. Provide information for each year separately;

2.

(a) Information till date regarding total amount of loan taken but not repaid by industrialists from Indian nationalized banks and the total amount of interest accumulating on such unpaid loans; and

(b) Details of default in loans taken from public sector banks by industrialists. Out of above list of defaulters, top 100 defaulters, name of the businessman, address, firm name, principal amount, interest amount, date of default and date of availing loan.

(c) Steps being taken for putting information sought in query 2(a) and list of defaulters on the website of the Respondent - public authority.

The CPIO in a letter dated 14 October 2010 informed Kapoor, the applicant, that query no1 was transferred to Department of Economic Analysis and Policy (DEAP), queries 2(b) and (c) were transferred to Department of Banking Supervision (DBS) and query 2(a) was transferred to Department of Banking Operations and Development/DBS.

Again on 22 October 2010, the CPIO denied information on query 2(b) stating that the information was held in fiduciary capacity and was exempt from disclosure under Sections 8(1)(a) and (e) of the RTI Act.

Citing information provided by the CPIO as incomplete, Kapoor filed his first appeal. The First Appellate Authority (FAA) stated inter alia that the CPIO of DEAP had provided certain information vide letter dated 12 October 2010.

The FAA further said, "As regards the contention of the appellant with respect to his query at Point 2(b), which relate to the default in loans taken by industrialists from public sector banks and matters associated with them), I find that the CPIO, DBS has specified that the information received from banks in this regard is held by the Reserve Bank in a fiduciary capacity and as such it cannot be disclosed in terms of clauses (a) and (e) of Section 8(1) of the Act. There can be no doubt that the information on defaulters received from banks are held by the Reserve Bank in a fiduciary capacity and are confidential in nature. Therefore, the exemption claimed under Section 8(1)(e) is, without doubt, proper in the eyes of law. Whether the exemption provided by clause (a) of Section 8(1) would be attracted in a given case would depend upon the factual position. In this matter, since Section 8(1)(e) is clearly attracted, I do not propose to consider the other exemption which the CPIO, DBS has made use of for withholding the information.'

Kapoor, dissatisfied with order of FAA as information was not provided on Query 2 (b) and (c) approached the CIC with his second appeal.

During the hearing before the Bench of Mr Gandhi, the then CIC, the CPIO stated that that the information sought by the appellant in query 2 (b) was held by RBI in fiduciary capacity on behalf of the banks.

Mr Gandhi enquired whether the information is provided by banks to RBI in fulfilment of statutory requirements. The PIO admitted that banks were providing the information in fulfilment of statutory requirements.

The Bench pointed out that information provided in fulfilment of statutory requirements, cannot be considered to be information held in a fiduciary capacity. The PIO then submitted that information about customers is held by banks in a fiduciary capacity and hence disclosure of the same would violate the fiduciary - trust placed by borrowers of the banks."

The Bench then reserved its verdict.

During the hearing on 15 November 2011, Mr Gandhi said based on perusal of papers and submission of parties, it appeared that no information had been provided in relation to query 2(c), despite the order of the FAA. Regarding query 2(b), the CPIO contended that the information sought was exempt under Section 8(1)(a) and (e) of the RTI Act.

The Bench said, the CPIO claimed exemption under Section 8 (1)(a) but not explained how this would apply. The FAA also had not given any comment on this. No justification was offered at the time of hearing as well. 

Section 8 (1)(a) exempts, 'information, disclosure of which would prejudicially affect the sovereignty and integrity of India, the security, strategic, scientific or economic interests of the State, relation with foreign State or lead to incitement of an offence;'.

"It appears that the PIO is claiming that the economic interests of the State would be prejudicially affected. It is impossible to imagine that any of the other interests mentioned in the provision could be affected. This Bench rejects the contention of the PIO that the economic interests of India would be affected by disclosing the names and details of defaulters from public sector banks. If it means that such borrowers would not bank with public sector banks for fear of exposure, it would in fact be in the economic interest of the Nation. This Bench does not accept the claim of exemption under Section 8 (1) (a) by the PIO," Mr Gandhi said.

The PIO also claimed exemption under Section 8(1)(e) of the RTI Act.

Section 8(1)(e) of the RTI Act exempts from disclosure "information available to a person in his fiduciary relationship, unless the competent authority is satisfied that the larger public interest warrants the disclosure of such information".

Mr Gandhi reiterated the definition of a fiduciary relationship. "An equally important characteristic for the relationship to qualify as a fiduciary relationship is that the provider of information gives the information for using it for the benefit of the one who is providing the information. All relationships usually have an element of trust, but all of them cannot be classified as fiduciary. Information provided in discharge of a statutory requirement, or to obtain a job, or to get a license, cannot be considered to have been given in a fiduciary relationship," he said.

Information provided by banks to RBI is done in furtherance of statutory compliances. In fact, where RBI requires certain information to be furnished to it by banks and such banks have no choice but to furnish this information, it would appear that such requirement of RBI is directory in nature. Moreover, no specific benefit appears to be flowing to the banks from RBI on disclosure of the information sought by the Appellant. Consequently, no fiduciary relationship is created between RBI and the banks, the Bench noted.

The CPIO also argued that information about customers is held by banks in a fiduciary capacity and hence disclosure of the same would violate the fiduciary - trust placed by borrowers of the banks. The CIC said it found some merit in this argument.

Mr Gandhi said, "Information of customers is held by banks in a fiduciary capacity. If this information is disclosed to the RBI and subsequently furnished to the citizens under the RTI Act- it may violate the fiduciary relationship existing between the customers and the banks. Therefore, the information sought in query 2(b) is exempt from disclosure under Section 8(1)(e) of the RTI Act."

"However," the Bench said, "if a customer defaults in repayment, should the information about the default also be considered as information held in a fiduciary capacity, is a moot question. The lender is likely to take all measures including filing suits to recover the money due, and these actions would mean publicly disclosing the default amounts. In such circumstances the Bank would make these details public, and not feel fettered by the fiduciary nature of the relations."

Mr Gandhi said, when the Bench comes to the conclusion that the exemptions of Section 8 (1) of the RTI Act apply, it needs to consider the provision of Section 8(2) of the RTI Act which stipulates as follows:

"Notwithstanding anything in the Official Secrets Act, 1923 (19 of 1923) nor any of the exemptions permissible in accordance with sub- section (1), a public authority may allow access to information, if public interest in disclosure outweighs the harm to the protected interests."

According to P Ramanatha Aiyar's, The Law Lexicon (2nd edition; Reprint 2007) at page 1557, "public interest" 'mean those interests which concern the public at large'.

Mr Gandhi noted, banks and financial institutions in India heavily finance various industries on a routinely basis. "However, it is a fact that large sums of such amounts are sometimes not recovered. In some cases, loans availed of are not repaid despite the fact that the industrialist(s) may actually be in a financial position to pay. Where financial assistance is given to industries by banks, in the absence of financial liquidity, it would result in a blockade of large funds creating circumstances that would retard socio-economic growth of the nation," he said.

He said, "I wish government and its instrumentalities would remember that all information held by them is owned by Citizens, who are sovereign. Further, it is often seen that banks and financial institutions continue to provide loans to industrialists despite their default in repayment of an earlier loan."

The Supreme Court of India in UP Financial Corporation vs Gem Cap India Pvt Ltd (AIR 1993 SC 1435) has noted that "Promoting industrialisation at the cost of public funds does not serve the public interest; it merely amounts to transferring public money to private account".

"Such practices have led citizens to believe that defaulters can get away and play fraud on public funds. There is no doubt that information regarding top industrialists who have defaulted in repayment of loans must be brought to the citizens' knowledge; there is certainly a larger public interest that would be served on disclosure of the same. In fact, information about industrialists who are loan defaulters of the country may put pressure on such persons to pay their dues. This would have the impact of alerting Citizens about those who are defaulting in payments and could also have some impact in shaming them," the Bench observed.

RBI had by its circular DBOD No. BC/CIS/47/20.16.002/94 dated 23 April 1994 directed all banks to send a report on their defaulters, which it would share with all banks and financial institutions, with the following objectives:

1. To alert banks and financial institutions (FIs) and to put them on guard against borrowers who have defaulted in their dues to lending institutions.

2. To make public the names of the borrowers who have defaulted and against whom suits have been filed by banks/FIs.

Many Revenue departments publish lists of defaulters and All India Bank Employees Association (AIBEA) has also published list of bank defaulters.

While discussing whether a private contract between the borrower and the financing institution or bank can be interfered with the Supreme Court in Mardia Chemicals Ltd vs Union of India (decided on 8 April 2004) observed:

"…it may be observed that though the transaction may have a character of a private contract yet the question of great importance behind such transactions as a whole having far reaching effect on the economy of the country cannot be ignored, purely restricting it to individual transactions more particularly when financing is through banks and financial institutions utilizing the money of the people in general namely, the depositors in the banks and public money at the disposal of the financial institutions. Therefore, wherever public interest to such a large extent is involved and it may become necessary to achieve an object which serves the public purposes, individual rights may have to give way. Public interest has always been considered to be above the private interest. Interest of an individual may, to some extent, be affected but it cannot have the potential of taking over the public interest having an impact in the socio-economic drive of the country." (Emphasis added)

"There are times when experts make mistakes, other times when corruption influences decisions," Mr Gandhi said, adding, "Asymmetry of information deprives the citizens of an opportunity to take proper decisions. The Commission is aware that the RBI is sharing information on defaulters with an organisation called CIBIL. In such a situation, it is difficult to understand the reluctance to share this information with citizens using RTI."

The CIC said, it is of the considered view that the details of defaulters of public sector banks should be revealed since it would be in larger public interest. The Bench is convinced that the benefits accruing to the economic and moral fibre of the country far outweigh any damage to the fiduciary relationship of bankers and their customers if the details of the top defaulters are disclosed, it added.

While allowing the appeal, the CIC directed the CPIO to provide complete information as per records on queries 2(b) and 2(c) to Kapoor before 10 December 2011.

The Bench, using its powers Section 19 (8)(a)(iii) also directed the governor of RBI to display this information on its website, in fulfilment of its obligations under Section 4 (1) (b) (xvii) of the RTI Act before 31 December 2011 and update it each year.

CENTRAL INFORMATION COMMISSION

Decision No. CIC/SM/A/2011/001376/SG/15684

https://ciconline.nic.in/cic_decisions/CIC_SM_A_2011_001376_SG_15684_M_70436.pdf

Appeal No. CIC/SM/A/2011/001376/SG

Appellant                                            : PP Kapoor,

                                                                  Samalkha - 132101 - 03,

                                                                  District Panipat, Haryana

Respondent                                        : Dr N Krishna Mohan,

                                                                   PIO & Chief General Manager,

                                                                  Reserve Bank of India,

                                                                  Dept. of Banking Supervision,
                                                                  Central Office, Centre - I,

                                                                  Cuffe Parade, Colaba, Mumbai - 400005