2015 (2) TMI 1046 - HC - Companies Law

Secured creditors prohibited from publishing borrower photos under SARFAESI Act; court emphasizes borrower dignity.

The court held that secured creditors are not authorized to publish photographs of defaulting borrowers/guarantors under the SARFAESI Act, 2002. It ... Power to publish the Photographs of default borrowers/guarantors in newspapers/magazines etc. under SARFAESI Act - Held that:- It is 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 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. - Decided in favour of appellants. Issues Involved1. Whether a secured creditor can publish the photograph(s) of defaulting borrower(s)/guarantor(s) in newspapers/magazines for the recovery of secured debt under the SARFAESI Act, 2002.Detailed AnalysisIssue 1: Publication of Photographs by Secured Creditors1) The primary question in these writ petitions is whether a secured creditor, who has initiated action under the SARFAESI Act, 2002, is entitled to publish the photograph(s) of defaulting borrower(s)/guarantor(s) in newspapers/magazines.2) The petitioners' advocates argued that such publication lacks legislative sanction and should be permanently restrained.3) The respondents' advocates cited decisions from the Madhya Pradesh and Madras High Courts, which held that the SARFAESI Act does not prohibit the publication of photographs of defaulting borrowers, making it permissible.4) They also referenced a letter from the Deputy General Manager of the RBI, which suggested that publishing photographs of defaulters is permitted, especially when other efforts to serve notices have failed.5) The respondents contended that such publication is not coercive under Section 15 of the Contract Act, 1872, as it falls within the first exception of Section 499 of the IPC, which pertains to defamation, arguing that it serves the public good.6) It was further argued that the publication of such information acts as a deterrent against potential defaulters and helps in disseminating information to other financial institutions, thus serving a public interest.7) The respondents also claimed that the fiduciary duty of banks to maintain secrecy is not absolute and can be overridden by a higher public duty, especially in cases involving public funds.8) The court examined the reasons given by the Madhya Pradesh and Madras High Courts. In Archana Chauhan, it was held that publication of photographs is not impermissible, arbitrary, or illegal. In K.J. Doraisamy, it was held that the right to privacy is not absolute and that the bank's duty to maintain secrecy is superseded by larger public interest.9) The court disagreed with these judgments, stating that the opinions were not supported by any provision of the SARFAESI Act or the rules framed thereunder. It held that the SARFAESI Act does not authorize the publication of photographs of defaulting borrowers.10) The court also noted that the RTI Act does not provide a basis for such publication, as the SARFAESI Act does not permit it.11) The court emphasized that a public authority can only act within the powers conferred by law, and the SARFAESI Act does not authorize the publication of photographs of defaulting borrowers.12) The court highlighted that the publication of photographs could cause irreparable damage to the reputation and dignity of borrowers, and such actions should not be taken without express legislative authorization.13) The court also noted that a writ of mandamus could be issued to restrain a public authority from performing an unauthorized act.14) The court concluded that the decisions in Archana Chauhan and K.J. Doraisamy are not persuasive precedents and that the SARFAESI Act does not permit the publication of photographs of defaulting borrowers.15) The court held that the RBI's letter, which advised caution in publishing photographs, does not have the force of law and cannot justify such actions.16) The court restrained the secured creditors from publishing photographs of defaulting borrowers, as it is not permissible under the SARFAESI Act or any other binding rule/notification/guideline.17) The court disposed of the writ petitions without costs, allowing the secured creditors to proceed against the defaulting borrowers strictly in accordance with the law for the recovery of secured debt.18) The court ordered that a photocopy of this order be retained with the records and that an urgent photostat certified copy of the judgment be furnished to the applicant if applied for.