KOCHI: A division bench of the Kerala High Court has held that banks and financial institutions functioning in other countries cannot resort to coercive action by engaging recovery agents to recover a defaulted loan amount from a borrower in the country. The bench comprising Justice K Vinod Chandran and Justice V G Arun made the observation while disposing of a writ petition filed by a Kollam native who worked as a nurse in Saudi Arabia. According to the petitioner, recovery agents engaged by Al-Rajhi Bank of Saudi Arabia are intimidating her to pay the defaulted amount.
The court noted if the borrower has failed to repay the loan, which amounts to a criminal offence according to the law of the country where the bank operates, the bank should initiate criminal action through the diplomatic channel. “Any attempt to recover loans from an Indian citizen can only be in accordance with the Indian laws, lest it would amount to a challenge to the administration of justice in our country and would violate the Constitutional guarantee of equal protection of law to every citizen of the country. It is always open for the foreign bank or financial institution to initiate legal action for recovery, which can even be in pursuance of a judgment which the bank has obtained from the foreign country,” the court observed.
The court noted that coercive methods adopted by banks in India to recover pending loan amount from defaulters utilising the services of recovery agents have time and again invited criticism from various courts including the Supreme Court.
According to the petitioner, Al-Rajhi Bank and other foreign banks have authorised Mumbai-based Bilkish Associates Pvt Ltd to act on their behalf. The agreement entered into between Bilkish Associates and KGM Associates revealed that the latter was engaged for debt collection services in Kerala.
The petitioner said two persons from the recovery agency had threatened that she would be arrested and taken to Saudi Arabia if she failed to repay the loan immediately. The state police chief informed the court strict instructions were given to all district police chiefs to ensure that no unauthorised loan collection agents were functioning in the state.