BENGALURU: Expressing concern over the safety of people as several borrowers have died by suicide, unable to bear the harassment of representatives of mobile loan apps operated by Chinese entities or individuals, the Karnataka High Court rejected the petition filed by Kerala-based Inditrade Fincorp Limited, questioning a freeze order and show cause notice issued by the Enforcement Directorate (ED).
The petitioner was disbursing small loans to small borrowers, through Cashfree Payments or Razorpay or any other payment gateway, and had an agreement with Waterelephant Financial Services Pvt Ltd, which is said to have had several transactions, and whose directors are said to be Chinese.
“The challenge to both the freeze order dated September 2, 2022, and show cause notice dated October 14, 2022, deserves to be rejected and the defreezement order shall remain, subject to proceedings before the Adjudicating Authority. At this stage, I do not find any violation of procedure stipulated under Section 17 of the Prevention of Money Laundering Act,” said Justice M Nagaprasanna, in the order passed recently.
The court noted that investigation would be imperative, as any effort by a neighbouring nation to destabilise the country, either economically or otherwise, which would touch upon security and safety of its citizens, cannot be ignored. Investigation in the petitioner’s case cannot be stalled, the court added.
“It is in public domain that several borrowers have died by suicide, unable to bear the harassment of representatives of such loan apps.
The office-bearers of several of these companies, which control and operate such mobile loan apps, are said to be Chinese entities or individuals. Therefore, investigation becomes necessary into companies which operate such loan apps and have transactions between each other,” the court said.
MODUS OPERANDI
The court noted that there is a proliferation of mobile loan apps and their modus operandi is to call gullible borrowers and lure them to take a small loan without any documentation. The borrowers are only told that they should download the loan app and give access to the contents of the smartphone.
A small-time borrower who wants money without any documentation grabs the opportunity and accepts every condition, and gives access to the smartphone. Trouble crops up when the loan app representatives start threatening the borrower with leaking the contents of the phone, while seeking high amounts as repayment, at times 16-20 times the amount borrowed.