Banks can’t exploit debtors: HC

Jaipur: A division bench of Rajasthan High Court has made disparaging remarks against the tendency of the banks for insisting on recovering intere st on the loans advanced and thereby putting the borrowers into messy litigation. The court also showed its annoyance on the fact that the banks impose unreasonable terms and conditions of mortgage of land in lieu of the debts advanced to poor people as loans. The court deprecated the tendency of the Banks in not following the RBI guidelines for the recovery of interests and insisting on litigating in one or the other forum and also not trying to settle the disputes amicably through lok adalats. These observations came in a matter related to agricultural loan advanced by the Bank of Rajasthan Limited. The Bench comprising of Justice Gyan Sudha Misra and Justice C R Jat observed, “Even though small amount of loan is advanced to the villagers by way of agricultural loan, the bank authorities imposes unreasonable conditions before the debtors to mortgage large areas of land and property as in our experience, we have noticed that even for a small amount of loan of Rs. 1 or 2 lakhs, 35 or 40 bighas of land is mortgaged to the bank and that results into cancerous litigation.” The court further instructed the higher authorities of the bank to avoid the tendency of putting the lands of the poor farmers for auctions in lieu of recovery of small amounts of loan dues. The Bench held, “It is expected of the higher authorities of the bank not to permit this nature of exploitation of the debtors although it is liable to recover its dues which it advances to the debtor.” The matter came before the division bench on an appeal filed against the order of single judge which directed the appellant petitioner Deepak Sharma to make a representation to the bank authorities for relaxation or waiver of the interest amount. The facts of the case remained that the Bank of Rajasthan ltd. has advanced a loan of sum of Rs. 70,000 by way of agriculture loan for the purchase of tractor to the appellant’s father and maternal aunt in March 1983 at the rate of 12.5% interest. The predecessors of the appellant failed to repay the said loan amount and after their death he got the land by way of will when he came to know the attachment proceedings for a sum of Rs. 1,12,991. The bank had obtained a decree for the said sum through SDO, and proceeded for attachment in the year 2004. Appearing on behalf of petitioner senior advocate G.G.Sharma submitted that the poor farmers are forced to mortgage their property and even after obtaining more than what was landed by the banks they insists on recovering inconceivable amounts in the name of debt dues or interest rates and keeps on insisting till the land is put to auction and thereby earns huge profits and renders poor farmers homeless. In the present matter the petitioner paid Rs. 3 lakh by an interim order of the division bench as against the said decretal amount of Rs. 1,12,991. The bench observed, “The appellant had paid more than double the decretal amount and if the bank had adopted an equitable approach following even the Reserve Bank of India guidelines in regard to the agricultural loan, the controversy would have been set at rest. But the bank insisted on claiming s sum of Rs. 8 lakh completely oblivious of the fact that the decretal amount ordered by the SDO was only a sum of Rs. 1,12,991. Nevertheless they cannot be expected to function like the proverbial character called Shylock and forget all the cannons of justice while insisting on the amount towards interest.” Deprecating the approach of the Bank the court said, “ The conduct of the respondent-bank in the matter is deprecated for when we are endeavouring hard upon reconciliation, and Lok Adalats, public institutions like the banks are also expected to be aware of the Reserve Bank of India Guidelines in regard to recovery of agricultural loans as they are certainly not expected to give a go-bye to all these developments and claim interest like the legendary Shylock in a matter of this nature.” Justice Misra, who delivered the Judgement on behalf of the bench has recently been promoted as Chief Justice of Jharkhand High court.

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