Banks Cannot Publish Defaulters’ Photos to Force Repayment, Violates Right to Privacy and Dignity: Kerala High Court

In a significant ruling, the Kerala High Court, presided over by Justice Murali Purushothaman, declared that publicly displaying photographs of loan defaulters by financial institutions infringes on their fundamental right to privacy and dignity. The court made these observations while dismissing a writ petition filed by the Chempazhanthi Agricultural Improvement Co-operative Society Ltd. in Thiruvananthapuram. The judgment emphasizes the sanctity of constitutional rights over coercive recovery practices.

Background of the Case

The Chempazhanthi Agricultural Improvement Co-operative Society and its managing committee, represented by their President, Jayakumar, and Secretary, Lekshmi R. Nair, sought to challenge a directive issued by the Assistant Registrar of Co-operative Societies. The directive ordered the removal of a flex board outside the society’s office that displayed photographs, names, and loan details of over 1,750 defaulting borrowers.

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Facing a 59% overdue rate on loans totaling ₹12 crores against deposits of ₹28 crores, the society argued that the display was a last-resort measure to prompt repayments. The board, they claimed, had proven effective, with several borrowers settling their dues after its installation. However, the Assistant Registrar deemed the action unlawful, citing potential violations of the borrowers’ privacy and reputation.

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Legal Issues 

The petitioners, represented by Advocates P.N. Mohanan, C.P. Sabari, Amrutha Suresh, and Gilroy Rozario, contended:

1. The publication was a justified means of protecting the society’s financial stability and depositor interests.

2. Similar practices, such as public announcements under Rule 81 of the Kerala Co-operative Societies Rules, 1969, were permissible, validating the society’s actions.

3. The display had shown tangible results, contributing to loan recoveries.

Conversely, the respondent, represented by Government Pleader Resmi Thomas, argued that:

1. The display violated borrowers’ fundamental rights under Article 21 of the Constitution, which guarantees dignity and privacy.

2. The Kerala Co-operative Societies Act and Rules provide no legal basis for such public displays as a debt recovery method.

Court’s Observations

Justice Murali Purushothaman delivered a detailed judgment addressing key aspects of the case:

1. Violation of Article 21:  

   The court underscored that publishing photographs and personal details of defaulters without consent constitutes an unwarranted invasion of their right to privacy and reputation. Justice Purushothaman stated, “The publication or display of photographs of defaulting borrowers will infringe upon their dignity and reputation, and violate their fundamental right to life, as guaranteed under Article 21 of the Constitution of India.”

2. Lack of Legal Framework:  

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   The judgment highlighted that the Kerala Co-operative Societies Act and Rules offer comprehensive mechanisms for debt recovery, including arbitration and property attachment, but do not authorize public shaming as a valid recovery method. “The Act and the Rules do not provide for the display or publication of photographs and other details of defaulting borrowers as a mode of recovery,” the court observed.

3. Dignity Over Coercion:  

   The court firmly rejected the argument that coercive practices like public displays are permissible. It remarked that such methods, while potentially effective, cannot override constitutional protections. “Borrowers cannot be coerced to repay loans by threatening to damage their reputation and privacy,” the judgment noted.

4. Obsolete Practices:  

   Addressing the petitioners’ reliance on the “beat of tom-tom” analogy under Rule 81 of the 1969 Rules, Justice Purushothaman dismissed it as irrelevant in contemporary times. The judgment stated, “The practice of tom-tomming is an outdated and primitive method that is no longer suitable for the modern era.”

Judgment

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The High Court upheld the directive of the Assistant Registrar, dismissing the petition. It ruled that the society’s actions in publishing the photographs and details of defaulters were unlawful and infringed upon the constitutional rights of borrowers. The court reinforced the principle that recovery efforts must adhere to legal and ethical boundaries.

Key Takeaways

Public shaming of defaulters through photographs and personal details is unconstitutional.

Privacy and dignity are integral to the right to life under Article 21.

Recovery methods must align with the procedural safeguards outlined in statutory laws.

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