Holding

The High Court's observations, being based on alleged facts and clarified not to influence proceedings, do not warrant expungement; the bank is not substantially aggrieved.

Summary

The respondents alleged that their son committed suicide after ICICI Bank's recovery agents forcibly repossessed his motorcycle, causing humiliation. A writ petition was filed seeking police action against the bank. The Delhi High Court ordered police reports, found them unsatisfactory, and directed an expeditious investigation, while observing that the bank's modus operandi was extra‑legal and that the humiliation caused the death. ICICI Bank applied under CrPC s.482 to have those observations expunged, but the High Court declined, merely clarifying that the observations would not affect any proceedings. The Supreme Court held that the observations were based on alleged facts, the investigation was ongoing, and the High Court’s clarification removed any prejudice, so expungement was unnecessary and the bank was not substantially aggrieved. The Court reiterated that loan recovery must be through legal means, citing SARFAESI Act, SIER and RBI guidelines, and directed the investigation to be completed within three months, ordering the bank to pay costs to the respondents.

Issues considered

Whether the High Court's observations, based on alleged facts, should be expunged to prevent prejudice to an ongoing criminal investigation.
Whether the observations constitute substantial prejudice to the bank warranting expungement under CrPC s.482.
Whether the bank's recovery methods violate the SARFAESI Act, SIER and RBI guidelines on fair practices.

Legislation cited

Subjects

suicideloan recoveryharassmentrecovery agentsSARFAESI ActRBI guidelinesexpungementcriminal investigationbankillegal repossession

Judgment

• . ..,,
(2008] 8 S.C.R. 973

ICICI BANK A
v.
SHANTI DEVI SHARMA ANO ORS.
(Criminal Appeal No. 900 Of 2008)
MAY 15, 2008
B
[TARUN CHATTERJEE AND DALVEER BHANDARI,
·~
JJ.]

Banks/Banking: Recovery of loans or seizure of vehicles
can only be done through legal means- Lenders/Banks not c
to resort to use of muscle power for recovery of Joans and per-
sistently bothering borrower at odd hours - Securitization and
Reconstruction of Financial Assets and Enforcement of Se-
curity Interest Act, 2002 - Security Jr;terest (Enforcement)
Rules, 2002- RBI Guidelines on Fair Practices Code for Lend-
D
ers dated 5.5.2003- Guideline (v)(c)- Guidelines on Engage-
ments of Recovery Agents dated 24.4.2008.
Prosecution case was that snn of respondent com-
mitted suicide as a result of harassment and humiliation
caused to him by the appellants bank's recovery agents. E
The respondent filed a writ petition seeking for directions
to the Commissioner of Police to take action against the
_... appellant-bank. High Court ordered the Police to file re-
ports as to the status of the investigation against the bank.
The High Court later reviewed the two status reports that F
were filed by the Police. It found them unsatisfactory and
accordingly, directed the Investigating Officer to conclude
the investigation into the matter as expeditiously as pos-
sible and take necessary action against those found guilty
of abetting the deceased to commit suicide. In addition,
G
the High Court stated the proximate cause of death of the
deceased that led him to commit suicide was on account
of humiliation caused by the Bank people from where loan
was taken by him; and the mod1.1s-operandi employed by
973 H
974 SUPREME COURT REPORTS [2008] 8 S.C.R.

A the banks for realization of their loan amount and for re-
covering the possession of the vehicle against which
loans are given was not legal.
The appellant bank filed applications for impleadment
as well as for clarification/deletion/modification under
8 s.482 Cr.P.C. According to the appellant bank, the obser-
vations made by the High Court were unjustified and un-
necessary for deciding the case.
In an order dated 11.8.2006, the High Court declined
c to expunge the impugned observations on the ground
that they were made consciously, however clarified th~
matter by stating that any observation made against ap-
pellant Bank would not influence or affect the proceed-
ings, if any, taken against the said bank or its employees,
Appellant-Bank filed the present appeal.
0
Disposing of the appeal, the Court
HELD: 1. Reference to the complaint shows that its
contents contain allegations and not facts. Moreown·, the
investigation· was ongoing. Thus, it should have been
E understood that the High Court was referring to alleged
facts. The High Court could have been more careful to r
note that the facts that it discussed were alleged. Recog-
nizing as much, the High court clarified that its observa- .._
tions were not to influence or affect the proceedings. This
F Court is reiterating the same. The observations would
have no bearing on the ongoing investigation. Given this
clarification, it cannot be said that the appellant bank has
been substantially aggrieved. Nor expunging the l\'!1-
pugned observations would have much of an effect. Un-
G der either scenario, having the observations expunged "'
or having them clarified, no one can rely on the observa-
tions. Nevertheless, it is appropriate to remind financial
institutions that they are bound by law. The recovery of
loans or seizure of vehicles can only be dona th:ough
H legal means. [Paras 8, 9 and 10] [979-A-E]
ICICI BANK v. SHANTI DEVI SHARMA 975
AND ORS.

• ~ 2. The Securitization and Reconstruction of Finan- A
cial Assets and Enforcement of Security Interest Act, 2002
(SARFAESI) and the Security Interest (Enforcement)
Rules, 2002 (SIER) framed thereunder provide some of
the procedures by which security interests may be recov-
ered. In addition to SARFAESI and SIER, the Reserve B
Bank of India (RBI) has promulgated Guidelines on the
subject. The RBI Guidelines on Fair Practices Code for
Lenders dated 5.5.2003 provides at (v)(c) that: "In the
matter of recovery of loans, the lenders should not resort
to undue harassment viz. persistently bothering the bor- c
rowers at odd hours, use of muscle power for recovery
of loans, etc." A more comprehensive version of these
Guidelines was recently released on April 24, 2008. The
Guidelines expressly reference the 5.5.2003 Guidelines at
(i)(x) with regard to the methods by which recovery agents D
collect on security interests. In addition, the April 24, 2008
Guidelines further referred paragraph 6 of the "Code of
Bank's Commitment to Customers" pertaining to collec-
tion of dues. [Paras 11,12] [979-A-H; 980-A]
3. RBI has expressed its concern about the number E
of litigations filed against the banks in the recent past for
engaging recovery agents who have purportedly violated
the law. In the letter accompanying its April 24th, 2008
Guidelines on Engagement of Recovery Agents, RBI
stated: "In view of the rise in the number of disputes and F
litigations against banks for engaging recovery agents in
the recent past, it is felt that the adverse publicity would
result in serious reputational risk for the banking sector
as a whole." RBI has taken this issue seriously, as evi-
denced by the penalty that banks could face if they fail to G
comply with the Guidelines. [Para 13] [981-E-G]
4. It is appropriate to remind the banks and other fi-
nancial institutions that we live in a civilized country and
are governed by the rule of law. Looking to the gravity of
the above allegations, the matter should be investigated H
976 SUPREME COURT REPORTS [2008] 8 S.C.R.
II

A as expeditiously as possible and, in any event, it must be y '

concluded within a period of three months and, thereafter,
the concerned Deputy Commissioner of Police is directed
to submit the report of the investigation in the High Court.
In the facts and circumstances of this case the appellant i~
B directed to pay costs of this litigation to the respondents
which is quantified as Rs.25000/-. [Paras 14-16] [982-D-G]

CRIMINALAPPELLATE JURISDICTION: Criminal Appeal _. I-
No. 900 of 2008

c From the final Judgment and Orders dated 13.07 2006
and 11.08.2006 of the High Court of Delhi at New Delhi in WP
(Crl.) No. 57612006 and Crl M.A. No. 8093-94/2006 in WP (Crl)
No. 576 of 2006 respectively

U.U. Lalit, Manu Nair and Mark D'Souza (for M/s. Suresh
D A Shroff & Co.) for the Appellant.

8.8. Singh, D.S. Mahra anciAshok K. Mahajan for the Re-
spondents.
The Judgment of the Court was delivered by
E
DALVEER BHANDARI, J. 1. Leave granted.

2. This appeal is directed against the order dated 13th July,
2006 passed by the High Court of Delhi in Writ Petition (Crimi-
nal) No. 576 of 2006 and order dated 11th August, 2006 passed
F in Crl. M.A. Nos. 8093-94/2006 in W.P. (Crl.) No. 576 of 2006.
3. The question that arises in this case in narrow com-
pass: Should part of the impugned judgment be expunged so
that it may not adversely influence on an ongoing criminal in-
vestigation? The respondent filed a criminal writ petition num-
G ber 576 of 2006 with the Delhi High Court. Vide this writ peti-
tion, the respond~nts sought a writ of mandamus that would di- ,,.
rect the Commissioner of Police to take action against the ap-
pellant bank. Respondent no.1 alleged that her son committed y
suicide as a result of the manner in which the bank's recovery
H agents had repossessed her son's motorcycle. In the first infer-
ICICI BANK v. SHANTI DEVI SHARMA 977
AND ORS. [DALVEEP BHANDARI, J.]

mation report (F.l.R.) dated 29.11.2005, the respondent alleged A
that on 161h October, 2005 at about 1.00 p.m., two recovery
agents (referred to as "goons") forcibly entered her son's bed-
room and started harassing and humiliating him for the loan
payments that were overdue on his two wheeler and on his per-
sonal loan. B
4. According to respondent no. 1, they repossessed the
vehicle taken in the presence of his friends who ridiculed him
for having lost the motorcycle. It is further mentioned in the FIR
that the deceased had used his motorcycle to get vegetables
for his small restaurant. It is also alleged that the deceased had C
to carry the vegetables on his back in the 8.bsence of his motor-
cycle. Upon finding the deceased carrying vegetables on his
back, members of the neighbo;hood allegedly made snide com-
ments. The deceased finally broke down before his wife and
allegedly stated that he had never faced such a humiliation and D
disgrace ;n his entire life. On that very day, while h;s wife was
washing clothes, the deceased went inside the small inner room
and hung himself to death. We reiterate that this version of the
events is found in the F1R and is thus an allegation at this time.
5. To ascertain the veracity of these assertions, the High E
Court ordered the Police tc file reports as to the status of the
investigation against the bank. The High Court later reviewed
the two status reports that we;e filed by the Police. It found
them unsatisfacrory and accordingly, the High Court directed
the Investigating Officer to: F
"conclude the investigation into the matter as expeditiously
as possible and take necessary action against those who
may be found guilty of abetting the deceased to commit
suicide."
G
In addition, the High Court stated that:
"Para 1: " ... the vehicle for which the loan was taken was
repossessed by the musclemen employed by ICICI Bank.
Para 3: " ... the proximate cause of death of the deceased H
978 SUPREME COURT REPORTS [2008] 8 S.C.R.

A that led him to commit suicide was on account of
humiliation caused by the Bank people from where loan
was taken by him."

Para 4: "The modus-operandi employed by the banks
like ICICI for realization of their loan amount and for
B recovering the possession of the vehicle against which
loans are given is extra legal and by no stretch of
imagination they can be permitted to employ musclemen
and goons for recovery of their dues even from a defaulting
party."
c 6. The appellant bank claimed that it was aggrieved by
the observations made by the High Court in paragraphs 1, 3 &
4 of the impugned order. The bank asked the High Court to
clarify or delete paras 1, 3 and 4. It did so by way of an applica-
D tion for impleadment as well as an application for clarification/
deletion/modification under section 482 (saving of inherent
power of High Court) of the Criminal Code of Procedure, 1973.
According to the appellant bank, the observations made by the
High Court were unjustified and unnecessary for deciding the
case.
E
7. In an order dated 11.8.2006, the High Court declined to
expunge the impugned observations because it had made them
" ... consciously and there are no reasons to expunge the same."
Nevertheless, the High Court clarified the matter by stating as
F under:
"However, it is clarified that any observation made against
ICICI Bank in the order passed by this Court on 13.07.2006
shall not influence or affect the proceedings, if any, taken
against the said bank or its employees."
G
8. Given that the investigation had not been completed,
the High Court could have prefaced its observations by stating
that the facts were alleged. It did, however, note that" ... perusal
of the complaint would reveal that the proximate cause of death
H ... was on account of humiliation caused by the Bank people ...
ICICI BANK v. SHANTI DEVI SHARMA 979
. ' AND ORS. [DALVEER BHANDARI, J.)

." Reference to the "complaint" implies that its contents contain A
allegations, not facts. Moreover, the investigation was ongoing.
Thus, it should have be.en understood that the High Court was
referring to alleged facts. That said, the court could have been
more careful to note that the facts that it discussed were al-
leged. Recognizing as much, the court clarified that its obser- B
vations were not to influence or affect the proceedings.
9. We reiterate the same. They will have no bearing on the
ongoing investigation. Given this clarification, we do not feel
that the appellant bank has been substantially aggrieved. Nor
do we believe that expunging the impugned observations would C
have much of an effect. Under either scenario, having the ob-
servations expunged or having them clarified, no one can rely
on the observations.
10. As mentioned, the investigation is ongoing. Neither D
the High Court's order nor the observations made herein are to
influence the investigation, save the time period in which it must
be completed. Nevertheless, it is appropriate to remind finan-
cial institutions that they are bound by law. The recovery of loans
or seizure of vehicles can only be done through legal means.
E
11. The Securitization and Reconstruction of Financial As-
sets and Enforcement of Security Interest Act, 2002
("SARFAESI") and the Security Interest (Enforcement) Rules,
2002 ("SIER") framed thereunder provide some of the proce-
dures by which security interests may be recovered. In addition F
to SARFAESI and SIER, the Reserve Bank of India ("RBI") has
promulgated Guidelines on the subject. The RBI Guidelines on
Fair Practices Code for Lenders dated 5.5.2003 provides at
(v)(c) that: "In the matter of recovery of loans, the lenders should
not resort to undue harassment viz. persistently bothering the G
borrowers at odd hours, use of muscle power for recovery of
loans, etc."
12. A more comprehensive version of these Guidelines
was recently released on April 24, 2008. The Guidelines ex-
pressly reference the 5.5.2003 Guidelines at (i)(x) with regard H
980 SUPREME COURT REPORTS [2008] 8 S.C.R.
r •
A to the methods by which recovery agents collect on security in-
terests. In addition, the April 24, 2008 Guidelines further referred
paragraph 6 of the "Code of Bank's Commitment to Custom-
ers" (BCSBI Code) pertaining to collection of dues. The BCSBI
Code at para 6 inter alia provides:
B "All the members of the staff or any person authorized to
represent our bank in collection or/and security
repossession would follow the guidelines set out below:
1. You would be contacted ordinarily at the place of
c your choice and in the absenca of any specified place
at the place of your residence and if unavailable at
your residence, at the place of business/occupation.
2. Identity and authority to represent would be made
known to you at the first instance.
D
3. Your privacy would be respected.
4. Interaction with you would be in a civil manner.
5. Normally our representatives will contact you between
0700 hours and 1900 hrs, unless the special
E circumstances of your business or occupation require
otherwise.
6. Your requests to avoid calls at a particular time or at .._
a particular place would be honored as far as
F possible.
7. Time and number of calls and contents of conversation
would be documented.
8. All assistance would be given to resolve disputes or
differences regarding dues in a mutually acceptable
G
and in an orderly manner.
9. During visits to your place for due\') collection, decency
and decorum would be maintained.
10. Inappropriate occasions such as bereavement in the
H
ICICI BANK v. SHANTI DEVI SHARMA 981
AND ORS. [DALVEER BHANDARI, J.]

family or such other calamitous occasions would be
•' avoided for making calls/visits to collect dues
A

As noted above, this Code as well as others has been
incorporated into the April 24, 2008 Guidelines:

"(ix) A reference is invited to (a) Circular DBOD. B
Leg.No.BC.104/ 09.07.007 /2002-03 dated May 5, 2003
regarding Guidelines on Fair Practices Code for Lenders
(b) Circular DBOD.No.BP. 40/ 21.04.158/ 2006-07 dated
November 3, 2006 regarding outsourcing of financial
services and (c) Master Circular DBOD.FSD.BC':17/ c
24.01.011/2007-08 dated July 2, 2007 on Credit Card
Operations. Further, a referer.ce is also invited to paragraph
6 of the 'Code of Bank's Commitment to Customers' (BCSBI
Code) pertaining to collection of dues. Banks are advised
to strictly adhere to the guidelines I code mentioned above
D
during the loan recovery process."
[emphasis supplied].
13. RBI has expressed its concern about the number of
litigations filed against the banks in the recent past for eng<:ig-
ing recovery agents who have purportedly violated the law. In E
the letter accompanying its April 241h, 2008 Guidelines on En-
gagement of Recovery Agents, RBI stated:. "In view of the rise
in the number of disputes and litigations against banks for en-
gaging recovery agents in the recent past, it is felt that the ad-
verse publicity would result in serious reputational risk for the F
banking sector as a whole." RBI has taken this issue seriously,
as evidenced by the penalty that banks could face if they fail to
comply with the Guidelines. The releva.nt po.rtion of the Guide-
lines formulated by RBI is set out as under:
G
"3. Banks, as principals, are responsible for the actions of
~ their agents. Hence, they should ensure that their agents
engaged for recovery of their dues should strictly adhere to
the above guidelines and instructions, including the BCSBI
Code, while engaged in the process of recovery of dues.
H
982 SUPREME COURT REPORTS [2008] 8 S.C.R.

A 4. Complaints received by Reserve Bank regarding
violation of the above guidelines and adoption of abusive
practices followed by banks· recovery agents would be
viewed seriously. Reserve Bank may consider imposing
a ban on a bank from engaging recovery agents in a
B particular area, either jurisdictional or functional, for a
limited period. In case of persistent breach of above
guidelines, Reserve Bank may consider extending the
period of ban or the area of ban. Similar supervisory
action could be attracted when the High Courts or the
c Supreme Court pass strictures or impose penalties
against any bank or its Directors/ Officers/ agents with
regard to policy, practice and procedure related to the
recovery process.
5. It is expected that banks would, in the normal course
D ensure that their employees or agents also adhere to the
above guidelines during the loan recovery process."
14. We deem it appropriate to remind the banks and other
financial institutions that we live in a civilized country and are
governed by the rule of law.
E
15. Looking to the gravity of the above allegations, we
expect that the matter will be investigated as expeditiously as
possible and, in any event, it must be concluded within a period
of three months and, thereafter, the concerned Deputy Com-
F missioner of Police is directed to submit the report of the inves-
tigation in the High Court.
16. In the facts and circumstances of this case we direct the
appellant to pay costs of this litigation to the respondents which
is quantified as Rs.25000/-. The costs be paid within three weeks.
G We direct that the matter be listed before the High Court after the
report of the Deputy Commissioner of Police is filed
17. This appeal is accordingly disposed of.
D.G Appeal disposed of
H