Banks Cannot Defame defaulters with Pictures

Swati Deshpande, TNN Oct 27, 2013, 02.48AM IST

MUMBAI: In a rapidly rising trend that experts term disquieting, unauthorized, even defamatory, many public sector banks publish photographs of defaulters and guarantors of loans in the media as public notices. Defaulters of commercial loans and even personal and educational loans increasingly run the risk of finding their pictures in print. The name and shame operation that so far the public sector banks, consider necessary to recover their money, lacks the backing of any specific legal provision say lawyers, citing a recent judgment of the Kolkata high court.

The Kolkata HC had this May prohibited the State Bank of India in two cases from publishing pictures of loan defaulter or their guarantors. It had differed with the ”unfounded” view taken in 2006 by two other high courts—in Mardras and Madhya Pradesh—and said the banks by publishing photographs without any legal sanction damaged the reputation of guarantors.

The practice of the banks however remains unabated. It had led to an outcry and protests a few months ago in South India, and has now led to experts to question the regulatory mechanism governing bank loans. Advocate Ashok Paranjpe of MDP & Partners said despite the Kolkata HC order and the fact that there is no provision in any law or guideline to allow banks to print by way of public notice the photographs of defaulters or guarantors, the SBI had a few months ago sent his client a seven-day notice that it would do just that if it failed to repay its long outstanding loan. He wrote to the bank to desist from taking such ”inappropriate, unlawful and arbitrary steps” or to issue such ”misconceived threats” and the bank desisted. It was not a willful default he said.

But others who do not respond to notices which the banks send, are not as lucky. The photographs of the defaulters where no other information apart from names, pictures and amount pending is displayed in print are “completely wrong” said lawyers. Amit Desai, senior counsel in Mumbai said, “even where notices speak of ‘symbolic possession’ of properties taken by a bank, there is no need for photographs of defaulters since names and particulars of properties are given.”

“These types of advertisements do not seem to be in keeping with any type of circulars,” said Desai. “What if there is a valid disputed claim? If there is a final decree from a tribunal or court too the photographs are not essential to be printed.” He said, “This kind of a unilateral pre determination of defaulters’ status appears to be wholly unjustified because it gives an impression that the person is not credit worthy and could amount to defamation, especially since the counter point of the person alleged to be defaulting has not been put across.”

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The public sector banks which appear to have started and continue the trend however don’t see anything wrong, illegal or arbitrary about what they do. One senior officer of a government bank, not willing to be quoted, said, “We take due precaution by sending the defaulter a prior notice before printing the names and pictures.” He said, “We also included it in loan agreements now.” He admitted that there ” is no specific legal provision that stipulates such publication of photographs with names” but added, ”there is no provision that prohibits the banks either.” While loan agreements which contain such clause of displaying defaulter’s picture may put a defaulter in a bind, the question is about earlier loans which had no such clause.

In such a scenario, where thousands of crores are due to banks in outstanding loans, solicitor M V Kini who represents more than 50 banks said, “Banks have the discretion to act for the public good to ensure swift recovery of loans.” He said main objective of the two enactments The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) Act of 2002 and the Debt Recovery Tribunal law was to secure and recover bad debts quickly.

Kini said, “Summary proceedings by DRT and quasi judicial proceedings by the Authorized Officer under the SARFAESI Act, are intended to recover the bad debts with certain amount of coercion and that is the intention of the legislature.” He said, “Public notice with defaulter’s picture thus cannot be faulted with,” and said the Kolkata HC had erred in its findings.

But the Kolkata judgment, which is said to be in appeal, has clearly held against publishing a photograph in public good. “Since publication of photograph of a

defaulting borrower or guarantor has the potential of exposing him to irreparable loss, injury and prejudice, such publication cannot be resorted to in the absence of an express power or an agreed term in this behalf.

The Kolkata HC verdict by Justice Dipankar Datta said Madras HC view that a bank cannot be prohibited in its performance of a public duty does not appear to be legally sound. He said, “It is not the public duty of a secured creditor to publish photograph of a defaulting borrower.”

Important points
The Indian Banks Association had, in October 2003 said genuine borrowers need to be separated from those who willingly and purposely take loans and do not repay them on time

Reserve Bank of India in 2007 informed the State Bank officials that there is no provision in the SARFAESI Act which was enacted to help recovery of bank loans without court orders that permits publication of photographs of the borrowers in the newspapers or magazines.

Only details and particulars of names and addresses of borrowers and properties can be put on public notice to alert interested parties dealing in the secured property that any such transaction would be subject to the secured creditors right in the property in case of non- payment of dues by the borrowers.

Expert speak:

Advocate Ashok Paranjpe , MDP: Banks publish photographs of defaulters even before an appeal is decided under the law. What if the borrower wins the appeal, the publication would have already defamed and caused him irreparable loss. The practice has is misconceived the RBI needs to come out with fresh guidelines on defaulting borrowers.

What the high courts held:

Against the banks

May 2013: In Ujjal Kumar Das Vs. State Bank of India and Messrs Allianz Convergence Private Limited vs State Bank of India the Calcutta High Court differed from the decisions given by the Madras and Madhya Pradesh High Court.

It held that the Publication of photographs in newspapers, magazines is not permissible under the SARFAESI Act, 2002, and its rules or any other rules or guidelines

The threat to publish photographs borders on extra-legal means, not legal means, to recover the dues.

It prohibited the bank from publishing photographs of defaulters.

There is no legal provision that authorized banks to publish photographs although the defaulters’ name and address and loan and asset details could be notified to the public.

  • The publication of photograph of a defaulting borrower or guarantor has the potential of exposing him to irreparable loss, injury to reputation and

prejudice, hence publication of photograph cannot be resorted to in the absence of an express power or an agreed term in this behalf.

The views taken earlier by other HCs is ”not legally sound”

In favour of banks:

March 2006: In the case of Archana Chauhan vs State Bank of India the Madhya Pradesh High Court held in favour of the publication of photographs.

The Bank said that the publication of photographs of borrowers, in newspapers or magazines, cannot be said to be impermissible.

It dismissed a petition challenging such publication of photographs and held it was neither arbitrary nor illegal.

November 2006: In Doraisamy vs Doraisamy the Madras High Court held, ”if the borrowers could find newer and newer methods to avoid repayment of the loans, the Banks are also entitled to invent novel methods to recover their dues.”

It dismissed a petition against a bank after holding that there was “no violation of any right or legal provision in the threat held out by the Bank to publish the photographs of the borrower and the surety for the non repayment of the loan”


You are a Consumer of the services provided by the Banks and the Bank can not adopt un-fair trade practices by Defaming the defaulters.




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  • Azad says:

    Sir, I have taken loan for two private sectors bank in 2007 not exceeding 1 lac and I did pay the EMI till 2009 then I lost my job and job less for many year so I could not pay the EMI and for the survival of my family I started taking credit from my friends and one year back I got a job. since I got the job and started earning, I had to pay back to my friends who had helped me to save my family from starving and I am still paying to them. I would like to pay back to banks also remaining also but due to insufficient and little income I am not able start paying to banks. can the banks publish my photo and name in the news paper ? I have shifted to my native village so they don’t have access to my address to contact me. i would like to contact them once i am done with friends credits. but i know bank will not buy this story at all. what i can do and what bank can to do me ? can you advice what is the solution ? thanks for your help in advance. Azad.

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  • Kurien Mathew says:

    Sir, I was offered a cash on call loan of Rs.1Lakh by HDFC Bank based on the usage of my credit card with them. I had been told by the tele executive over phone that I am eligible for cash loan without any documents or mortgage. The tenure of the loan was for 48 months and the interest was around 13% reducing. Before me accepting the loan my conditions were that I would not pay any processing fees and I am not in a position to pay start my EMI in the next month. She said okay no processing fees and the first EMI to be paid only in December 2009 and again since I requested her she asked me to hold the line and after consulting her seniors she told me the EMI paying to be done in the month of December only again I asked her is it confirmed she answered yes you need to start paying the EMI only from December 2009. As a result, The cash on call was given credit to my savings account in the month of October 2009, subsequently the amortisation schedule was received and to my surprise the first EMI falls due in November 2009, immediately I called up the customer care of HDFC credit card and informed them about the mistake they said they will look into. As usual the monthly statement as per the billing cycle was received where in it was debited with processing fees and the first EMI was also debited.
    I immediately objected and called them also send a mail, they finally reversed the processing fees and the wrong EMI debited was not reversed. This kept on adding and I used to send mails and calls and it lingered on, in the meantime I went on paying the EMI and the transactions I did. When things went worse they send me a letter of regret saying sorry for the inconvenience and would see that such instances would not be repeated. But they haven’t reversed the wrong debit of the EMI billed. In between they put a block on savings account and taken the full balance though I pleaded with them and to the Grievance officer not do so as the mistake of dues occurred out of their mistake. I informed them prior to their actions the repercussions, they did not listen, as a result three of my other payments got bounced due to their unilateral actions, never in my banking history my cheques has been bounced but due to this that also happened. I stopped operating the account and closed it. But kept on paying my EMI till all the payments due has been paid of Rs.129248.67. After this I asked them NO LIABILITY CERTIFICATE which they are not issuing and now asking to pay again Rs.40000/- plus. They have harassed me a lot over phone, sending emissaries or agents for collection not giving peace of mind at all.
    Today I received a letter from an advocate calling me for conciliation or face the court of law for the recovery of Rs.40189/-. I seek justice. I am no way a defaulter and has paid the dues in full.

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