Cannot publish defaulters photo - Calcutta

Case reference:  By Bank - 

1)Madhya Pradesh and Madras High Courts, reported in AIR 2007 Madhya Pradesh 45 

2) Ku. Archana Chauhan v. State Bank of India, Jabalpur and [2007 136 Comp. Cas 568 (Mad)

3) Mr. K.J. Doraisamy v. the Assistant General Manager, State Bank of India, Erode Branch

4) (2004) 3 SCC 349 : Ashok Kumar Pandey v. State of West Bengal

5)  AIR 2007 SC 712 : Transcore v. Union of India

6) AIR 1987 Calcutta 29 : Shankarlal Agarwalla v. State Bank of India - Public vs private duty

7) AIR 1992 Kerala 351 : Kattabomman Transport Corporation Ltd. v. State Bank of Travancore  - Public vs private duty

Defined: 

1) Section 15 of the Contract Act, 1872 defining coercion

2) Public Good/Public Interest by Supreme court

Kolkata High Court (Appellete Side)

Ujjal Kumar Das & Anr vs State Bank Of India & Ors on 3 May, 2013

Author: Dipankar Datta

IN THE HIGH COURT AT CALCUTTA

CONSTITUTIONAL WRIT JURISDICTION

APPELLATE SIDE

Present : The Hon'ble Justice Dipankar Datta

W.P. 10315 (W) of 2013

Ujjal Kumar Das & Anr.

Versus

State Bank of India & Ors.

With

W.P. 9850 (W) of 2013

Messrs Allianz Convergence

Private Limited & Ors.

Versus

The General Manager,

State Bank of India & Anr.

For the petitioner in : Mr. Suddhasatva Banerjee, Advocate

W.P. 10315(W) of 2013 Mr. Deboki Nandan Maity, Advocate

For the petitioner in : Mr. M.S. Tiwari, Advocate

W.P. 9850(W) of 2013 Mr. Sailendra Tiwari, Advocate

Mr. Dharmendra Tiwari, Advocate

Mr. R.K. Pandey, Advocate

For the respondents in : Mr. Subrata Kumar Sinha, Advocate

W.P. 10315(W) of 2013 Mr. Sudip Pal Chowdhury, Advocate For the respondents in : Mr. O.N. Rai,

Advocate W.P. 9850(W) of 2013 Mr. P.K. Roy, Advocate Mr. D.K. Singh, Advocate Hearing

concluded on : April 9, 2013.

Judgment on : May 3, 2013.

1) Whether or not a secured creditor, which has initiated action for enforcement of its security interest in terms of the provisions of the Securitisation and Reconstruction of Financial Asset and Enforcement of Security Interest Act, 2002 (hereafter the SARFAESI Act), is entitled to publish the photograph(s) of the defaulting borrower(s)/guarantor(s) in  newspapers/magazines etc. is the common question that arises for an answer on these two writ petitions. In view thereof, these two writ petitions were heard one after the other and shall stand disposed of by this common judgment and order.

........

3) Secured creditor relied on the decisions of the Madhya Pradesh and Madras High Courts, reported in AIR 2007 Madhya Pradesh 45 : Ku. Archana Chauhan v. State Bank of India, Jabalpur and [2007 136 Comp. Cas 568 (Mad) : Mr. K.J. Doraisamy v. the Assistant General Manager, State Bank of India, Erode Branch, Archana Chauhan (supra) and K.J. Doraisamy (supra) 

.........

7) Additionally, he contended that the first ground on which the impugned act of threatening to publish photographs, names and addresses of the defaulting borrowers in the newspapers could be faulted is that it is coercive. Referring to Section 15 of the Contract Act, 1872 defining coercion, he contended that the act complained has to fall within any of the mischief mentioned therein. The expression "any act forbidden by the Indian Penal Code" (hereafter the IPC) would require consideration of the provisions thereof and the only forbidden act that could be relevant for the present case or could be complained of as having been committed by the secured creditor in the given fact situation is 'defamation'. One has therefore to look to Section 499 of the IPC. According to him, publication of photograph clearly falls within the first exception provided in Section 499 of the IPC and, therefore, it cannot be said to be a defamatory act. The petitioners having borrowed money from the secured creditor and they having defaulted in repayment thereof leading to classification of their loan account (cash credit) as non-performing asset, the publication, if made, would therefore be a true account of the situation. To bolster his contention that it is for the 'public good', Mr. Rai submitted that although the expression 'public good' has not been defined in the IPC, the Supreme Court defined the expression 'public interest' relying on the definition/meaning of the expression given in Stroud's Judicial Dictionary and Black's Law Dictionary while pronouncing its decision reported in (2004) 3 SCC 349 : Ashok Kumar Pandey v. State of West Bengal. Taking a cue therefrom, he proceeded to submit that publication of photographs, names and addresses of the defaulting borrower(s)/guarantor(s) in the newspapers by public sector banks is really a step satisfying public interest and can be termed as an act for 'public good' for good reasons. India had a fairly well developed commercial banking system in existence at the time of independence in
1947.

..........

10) The prohibition contained in the general law of contract and the penal law, it was submitted, is thus inapplicable to the facts of the present case or such similar cases.

11) The next point, which according to Mr. Rai deserves consideration, is that the banks share a fiduciary relation with their customers and are, therefore, obliged to maintain secrecy of the customer's accounts. The duty to maintain secrecy as aforesaid which arises from the contract between the bank and its customer is, however, not absolute but is a qualified one subject to reasonable exceptions. One of such exceptions is a case where a duty higher than the private duty is involved. Referring to the decision reported in AIR 1987 Calcutta 29 : Shankarlal Agarwalla v. State Bank of India, it was submitted that this Court approved of such exception. Moreover, in its decision reported in AIR 1992 Kerala 351 : Kattabomman Transport Corporation Ltd. v. State Bank of Travancore, the Kerala High Court also observed that in cases where public fund is involved, the bank's public duty would prevail over its private duty to the customer.

12) Finally, it was submitted that information about loan defaulters would have the impact of alerting the citizens not only about those who are defaulting on repayments but also about the  fact that a willful defaulter would be similarly treated. It could thus lead to safeguarding economic and moral interests of the nation. The benefits accruing to the economic and moral fibre of the country far outweighs any damage to the fiduciary relationship of bankers and their customers.

13) The writ petition, Mr. Rai urged, should therefore be dismissed.

14) I have heard the parties and perused the decisions cited at the bar.

15) The reasons assigned by the learned Judges of the Madhya Pradesh and the Madras High Courts ought to be noticed at this stage, for, if I agree therewith, the writ petitions would merit dismissal in limine.

16) In Archana Chauhan (supra), the learned Judge observed as follows:

2. With respect to the photographs, in the opinion of this Court publication of photographs of the borrowers cannot be said to be impermissible mode. Action cannot be said to be arbitrary or illegal in any manner. It cannot be said to be defamatory publication made, hence I find no ground to quash the publication (P-3).

17) The learned Judge of the Madras High Court in K.J. Doraisamy (supra) examined the issue from the angle of the right to privacy that every individual is entitled to claim as well as information that one could seek under the Right to Information Act, 2005 (hereafter the RTI Act). The relevant passages from the decision read as follows:

'8. Sale of immovable secured assets. - (1) Where the secured asset is an immovable property, the authorised officer shall take or cause to be taken possession, by delivering a possession notice prepared as nearly as possible in Appendix IV to these rules, to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property. Appendix IV to the said Rules which contains the Form in which the Possession Notice is to be issued by the Bank, steers clear any doubt that one may have. Para 2 and 3 of the Format of Notice under Appendix IV reads as follows:

29. The above discussion makes it clear that from the point of view of the individual, his right to privacy is not absolute and from the point of view of the Bank, the duty to maintain secrecy is superceded by a larger public interest as well as by the Bank's own interest under certain circumstances.

30. Coming to the authority of law, by which the Bank may be allowed to publish the photograph of the defaulter, it is seen that Section 13(4) of the Sarfaesi Act authorizes the Bank to take possession of the secured asset and sell it. The procedure for such sale is prescribed under Rule 8 of the Security Interest (Enforcement) Rules, 2002. Sub-rule (1) of Rule 8 reads as under:

'8. Sale of immovable secured assets. - (1) Where the secured asset is an immovable property, the authorised officer shall take or cause to be taken possession, by delivering a possession notice prepared as nearly as possible in Appendix IV to these rules, to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property. Appendix IV to the said Rules which contains the Form in which the Possession Notice is to be issued by the Bank, steers clear any doubt that one may have. Para 2 and 3 of the Format of Notice under Appendix IV reads as follows:

The borrower having failed to repay the amount, notice is hereby given to the borrower and the public in general that the under signed has taken possession of the property described herein below in exercise of powers conferred on him/her under Section 13(4) of the said Ordinance read with rule 9 of the said Rules on this .... day ...of the year .....

The borrower in particular and the public in general is hereby cautioned not to deal with the property and any dealings with the property will be subject to the change of the ... (name of the Institution) for an amount Rs.... and interest thereon.' Thus the statutory rules themselves provide for a notice not merely to the defaulting borrower, but also to the public in general. Therefore, the threat held out by the Bank to publish the photograph of the borrower and the surety, is also authorized by the statutory rules.

31. Lastly, with the advent of the Right to Information Act, 2005, the Bank has become obliged to disclose information to the public. Section 3 of the said Act entitles all citizens to a right to information. Section 4(2) of the said Act provides as follows:

'2. It shall be a constant endeavour of every public authority to take steps in accordance with the requirements of Clause (b) of Sub-section (1) to provide as much information suo moto to the public at regular intervals through various means of communications, including internet, so that the public have minimum resort to the use of this Act to obtain information.' Public Authority is defined under Section 2(h) of the Act to include 'any body owned, controlled or substantially financed'. Therefore, the respondent Bank is a Public Authority within the meaning of the Act and they owe a duty to disseminate information even suo moto.

Certain exemptions are listed out under Section 8 of the Right to Information Act, 2005, two of which are of significance and they read as follows:

'8. Exemption from disclosure of information:

1) Notwithstanding anything contained in this Act, there shall be no obligation to give any citizen -

1.    a)

 b) .....

c) ......

d) ......

e) 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;

f) .........

g) .....

h) ....

i) ....

j) Information which relates to personal information the disclosure of which has no relationship to any public activity or interest or which would cause unwarranted invasion of the privacy of the individual unless the Central Public Information Officer or State Public Information Officer or the appellate authority as the case may be, is satisfied that the larger public interest justifies the disclosure of such information.' Thus the aforesaid provision leaves no room for any doubt that the 'Right to Privacy' fades out in front of the 'Right to Information' and 'larger public interest'.

32.  If 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. Moreover, the petitioner is not entitled to seek the relief of a writ of mandamus for the flowing reasons also:

(a) It is a fundamental principle of the Law of Writs that a Writ of Mandamus can be issued only to compel the performance of a statutory or public duty. But the prayer made in the present writ petition is to prevent the Bank from the performance of its public duty.

(b) What is challenged in the present writ petition, is a notice under Section 13 of the Sarfaesi Act. The petitioner has a statutory remedy of appeal under Section 17 of the Act, without exhausting which, he is not entitled to invoke the writ jurisdiction of this Court.

Hence I find no violation of any right or legal provision in the threat held out by the respondent Bank to publish the photographs of the borrower and the surety for the non repayment of the loan. Consequently the writ petition fails and is dismissed. No costs. Consequently, connected miscellaneous petitions are also dismissed."

18) With the deepest of respect I have for the learned Judges who decided the writ petitions in Archana Chauhan (supra) and K. J. Doraisamy (supra), I have failed to persuade myself to agree with Their Lordships.

19) The learned Judge deciding Archana Chauhan (supra) was of the opinion that publication of photographs is not an impermissible mode. It is neither arbitrary or illegal nor defamatory.

20) In my humble view, the opinions recorded in the paragraph extracted supra are neither backed by any reason nor can be supported with reference to any provision of the SARFAESI Act or the rules framed thereunder. It is settled law that broadly, every judgment of a superior courts has three segments, viz. (i) the facts and the point at issue; (ii) the reasons for the decision; and (iii) the final order containing the decision. The principle on the basis whereof a legal issue is answered forms the ratio decidendi of a judgment. It is the ratio decidendi of a judgment and not the conclusion that operates as a precedent. The principle, on the basis of which His Lordship reached the opinions as recorded, is conspicuous by its absence. Opinions, without anything more, cannot be of much persuasive value and hence I am left with no other option but to decline to be ad idem with the same.

21) The learned Judge while deciding K. J. Doraisamy (supra) was of the view that right to privacy is not absolute and that intrusion into privacy may be made by legislative provisions. For tracing the legislative provision that intrudes into the right of privacy, the learned Judge referred to Rule 8 of the Security Interest (Enforcement) Rules, 2002 (hereafter the Rules) and the contents of Appendix IV, being the form in which the notice of possession is required to be given. The learned Judge appears to be right in his observation that Rule 8 read with Appendix IV provides for a notice not merely to the defaulting borrower but also to the public in general, but fell in error in observing that the threat of the bank to publish the photograph of the borrower is also authorized by the statutory rules. Reading the relevant statutory rules as they presently stand, I am of the considered view that publication of photograph of a borrower is neither allowed by express provision nor by necessary implication. The public may be notified in terms of the statutory rules by issuance of notices in newspapers/magazines etc. giving the details of the borrower, the loan account, the location of the secured asset, its measurement, the quantum of secured debt, etc. but there is no provision in the SARFAESI Act or the rules framed thereunder authorizing the secured creditor to publish photographs of the defaulting borrowers.

22) Reliance placed by the learned Judge on the RTI Act, for concluding that it was the public duty of the secured creditor in that case to disseminate information regarding the defaulting borrowers, appears to be misplaced. While not disagreeing with the learned Judge that information relating to the defaulting borrowers could be made available to the public by a secured creditor, if it were a public authority within the meaning of Section 2(h) of the RTI Act, His Lordship appears to have missed the woods for the tree. A secured creditor, being a public authority, can make public so much of the information that it is authorized in terms of the SARFAESI Act. If the SARFAESI Act does not permit it to publish the photograph of a defaulting borrower, a fortiorari, such photograph cannot be published by taking aid of the RTI Act.

23) Lastly, the observations made in paragraph 32 extracted supra appear to me to be based on a misconception of statutory powers that are exercisable by a public authority. While a natural person has the liberty of indulging in any act of his choice unless such act is forbidden by law, for a public authority it is the other way round. It has no power to act in a particular manner unless it is authorized by law. The observation that the secured creditors are entitled to invent novel methods to recover their dues, because the borrowers are finding newer and newer methods to defraud the secured creditors, can never be countenanced. Should the Court allow the secured creditors to subvert the rule of law? If the observation is allowed to represent the correct position of law, a secured creditor on being resisted to take possession of the secured asset in terms of Section 13(4) of the SARFAESI Act read with Rule 8 of the Rules need not take recourse to Section 14 thereof and would be encouraged to use musclemen to overpower the borrower and take possession.

24) Law is well settled that the State or its executive officers cannot interfere with the rights of its subjects unless they could point to some specific rule of law authorizing the act of interference. It is  also well settled principle of law that when a stature requires a thing to be done in a particular manner, it should be done in that manner alone or not at all. I proceed to hold on the said principle that a secured creditor is not free to take any action it wishes for enforcing its security interest; it is empowered and authorized to take such action that the statute permits it. There is absolute lack of legislative sanction in relation to publication of photographs of defaulting borrower(s)/guarantor(s).

The SARFAESI Act and the rules framed thereunder not having conferred any power on the secured creditors to publish their photographs, they cannot resort to such action on the ground that publication of photograph is not prohibited. For the secured creditors, the test is not as to whether publication is prohibited by the statute but whether such publication is permitted by it. Prohibition has to be inferred in the absence of express authorization. If the arguments advanced by the respective learned counsel for the secured creditors were accepted, the secured creditors would have the carte blanche to invent any method for recovery of their secured debt throwing asunder the provisions of the SARFAESI Act.

25) That apart, the problem could be looked at and answered from a different angle. There is little doubt that the SARFAESI Act confers wide powers on the secured creditors to enforce the security interest without judicial intervention up to the stage of taking measures under Section 13(4) thereof.

Classification of a loan account as non-performing asset, computation of the quantum of dues and taking over possession of the secured asset upon rejection of the response to the notice under Section 13(2) are the various steps that are required to be taken for enforcing the security interest.

In course thereof, the secured creditors may not ordinarily face interference by the courts, since the vires of the SARFAESI Act has been upheld. It is only at the stage of Section 17(1) thereof that there is scope for a judicial determination of the issues raised by a borrower/guarantor by the Debts Recovery Tribunal having jurisdiction. Till such time the Tribunal is approached and requested to consider a prayer for interim relief, it is a totally one-sided affair. The secured creditor unilaterally decides whether one is a defaulter or not and further as to whether the photograph of such defaulter ought to be published or not. By no stretch of reasoning can I conceive of the SARFAESI Act conferring on the secured creditor the unfettered power to act in such manner. If it were accepted that the secured creditor enjoys the unfettered power of publishing the photograph of a defaulting borrower/guarantor and does so even before the Tribunal under Section 17 of the SARFAESI Act could be approached, and quite some time thereafter the Tribunal under sub-section (3) of Section 17 holds that the secured creditor had acted contrary to the other provisions thereof while enforcing the security interest under sub-section (4) of Section 13 and ultimately directs restoration of possession, the damage that could be caused to the reputation and dignity of an honest borrower/guarantor by reason of publication of his photograph in the interregnum would be irretrievable. It may not be possible to compensate such damage by money, if a borrower/guarantor, who has been proceeded against contrary to law by the secured creditor and whose photograph is published, is unable to bear the ignominy and takes a drastic step. Since publication of photograph of a defaulting borrower/guarantor has the potential of exposing him to irreparable loss, injury and prejudice, publication of photograph cannot be resorted to in the absence of an express power or an agreed term in this behalf.

26) The learned Judge's further observation in K.J. Doraisamy (supra) that a writ of mandamus can be issued only to compel the performance of a statutory or public duty and not to prohibit performance of a public duty does not appear to me to be legally sound, in the given circumstances.

It is not the public duty of a secured creditor to publish photograph of a defaulting borrower and, therefore, a writ of mandamus may well issue restraining it from indulging in an act which is manifestly unauthorized.

27) For the reasons aforesaid, I hold that the decisions in Archana Chauhan (supra) and K. J. Doraisamy (supra) are not persuasive precedents.

28) Since legislative sanction is absent, it would be an academic exercise to examine the other issue as to whether publication of photograph, even if it were authorized by the statute, would offend Article 21 of the Constitution or not. I allow the issue to rest here.

29) Adverting to the letter issued by the Reserve Bank of India, it appears that the decisions in Archana Chauhan (supra) and K. J. Doraisamy (supra) were duly noticed. It is considered necessary to reproduce the letter of the Deputy General Manager of the Reserve Bank of India in its entirety.

The same reads as follows:

Wilful Defaulters - Publication of Photographs Please refer to your letter No.
CPP/KKK/120 dated June 06, 207 on the captioned subject.
2. In this connection, we advise that on a reference made to IBA, we have been
advised by IBA vide their letter dated June 09, 2007 (copy enclosed) that publishing of photographs of defaulter borrowers had been challenged in two High Courts (Madras and Madhya Pradesh) in the recent past and in both cases the courts had upheld the action of banks. Banks resort to newspaper advertisement (giving known address, photographs etc.) only when their efforts to serve notices under the Act fail and communications sent to known postal addresses are returned undelivered.
3. Further, they have opined that banks exercise utmost care while dealing with this sensitive issue. While publishing photos of borrowers along with notices issued under SARFAESI Act of wilful defaulters/fraudsters etc. could be justified, it may not be desirable to consider publishing photographs of defaulter borrowers merely for the reason that dues are outstanding and as a matter of routine.
4. It may be added that the SARFAESI Act, 2002 does not mention about publication of photographs of defaulters. The Possession Notice provides for description of the immovable property more as a caution to the public at large not to deal with the property and any such dealings with the property will be subject to the charge of the  Secured Creditor.
5. We, therefore, concur with the views of IBA in the matter that publishing of
photographs of defaulters should not be resorted to as a matter of routine and utmost care is to be exercised while dealing with this sensitive issue.

You are requested to take necessary action in this regard.

30) The RBI was conscious, despite the decisions in Archana Chauhan (supra) and K. J. Doraisamy (supra), that the SARFAESI Act does not permit publication of photograph of a defaulting borrower.

The letter at best can be regarded as an advice rather than expressing any direction or order, having the force of law. In fact, what the letter observes is to deal with the sensitive issue with utmost care.

The same thus cannot also come to the rescue of Mr. Sinha.

31) Turning to the contentions raised by Mr. Rai, I record my appreciation for his valiant effort to defend the indefensible. The purpose(s) which the secured creditor(s) could achieve by publication of photograph(s) are no doubt laudable but as submitted by him, resort to legal means would only be permissible to cut down the losses suffered by the public sector banks and other financial institutions because of the newer and newer methods adopted by the borrower(s)/guarantor(s) to deceive. As of now, publication of photograph(s) of defaulting borrower(s)/guarantor(s) by the secured creditor has to be viewed as taking recourse not to legal but to extra-legal means.

32) The decisions cited by Mr. Rai lay down principles of law, which are not in doubt. But the principles do not apply here because of want of legal authority of the secured creditors to act in the manner they have threatened to act.

33) For the reasons aforesaid, the petitioners' challenge restricted to the threat of publication of their photographs is upheld. Publication of photographs in newspapers, magazines etc. Neither being permissible in terms of the SARFAESI Act or the rules framed thereunder nor under any other rule/notification/guideline having binding effect, I further hold that the threat to publish photographs borders on extra-legal means to recover the dues. The secured creditors are, accordingly, restrained by a prohibitory order from taking such recourse.

34) Insofar as the other reliefs claimed in the writ petitions are concerned, I am inclined to keep my hands off. Should there be failure on the part of the defaulting borrowers/guarantors to repay the loan advanced by the secured creditors, the latter shall be free to proceed against the former strictly in accordance with law for recovery of the secured debt.

35) The writ petitions stand disposed of, without costs.

36) Photocopy of this order, duly counter-signed by the Assistant Court Officer, shall be retained with the records of W.P. 9850(W) of 2013. Urgent photostat certified copy of this judgment and order, if applied for, may be furnished to the applicant at an early date.

(DIPANKAR DATTA, J.)