In a groundbreaking move to curb rampant misuse of loan recovery powers by private financial institutions, the Allahabad High Court has taken suo motu cognizance of alleged “loan harassment through goons” by a private bank and issued Dasti Summons to its officials to ensure their presence before the Court.
A Division Bench comprising Justice Saumitra Dayal Singh and Justice Indrajeet Shukla, while hearing Writ-C No. 33209 of 2025 (Mohd. Ovais v. State of U.P. & Ors.), passed the order after hearing Senior Advocate S.F.A. Naqvi, assisted by Advocate Syed Rafat Ali, appearing for the petitioner.
The petitioner, a micro-enterprise owner, had approached the Court alleging continuous harassment and intimidation by recovery agents of a private finance company (Respondent No. 5), despite timely payment of all EMIs and the loan account not being classified as NPA (Non-Performing Asset). The petitioner also highlighted that the loan carried a group general insurance policy intended to cover the dues in the event of the death of a partner, yet the bank allegedly ignored it and resorted to coercive recovery tactics.
Citing the Supreme Court’s landmark ruling in Manager ICICI Bank Ltd. v. Prakash Kaur & Ors. (AIR 2007 SC 1349), Senior Advocate Naqvi contended that no financial institution has the right to resort to muscle power or extrajudicial recovery methods, as such actions are in gross violation of Article 21 of the Constitution and RBI’s Fair Practices Code for Lenders.
Taking serious note of the allegations, the Bench observed that it was necessary to verify whether “the rule of law that binds and governs the society is being observed” by the respondent bank. Accordingly, the Court directed that Respondent No. 5 be served through Dasti Summons by October 10, 2025, with compliance to be reported by October 13, 2025. The matter is next listed for October 15, 2025, with the Bench noting that if the bank fails to appear, the stay application may be considered on the next date.
