Right of Lenders to Publish Photgraphs of Wilful Defaulters in Newspapers

Reserve Bank of India guidelines in this regard stipulates that a lending institution can consider publication of the photographs of those borrowers, including proprietors/ partners /directors / guarantors of borrower firms/ companies, who have been declared as wilful defaulters following the mechanism set out in the RBI instructions stipulated in its Master Circular on Wilful Defaulters DBR.CID.BC.No.22/20.16.003/2015-16 dated July 1, 2015. However such publications of the details of the Wilful Defaulters by the Banks have been quite often dragged to the corridors of the Courts and unfortunately there have been conflicting decisions given by various High Courts in this regard.

In the past, while the Bombay[1], Madras and Madhya Pradesh[2] HCs had allowed banks to publish the names and photographs of defaulters, the Calcutta[3] and Kerala[4] HCs held such moves as unconstitutional and impermissible in law. 

However a clarified picture was brought in this regard by the ApexCourt[5], when it upheld the decision of Bombay High Court in D.J.EximIndia P Ltd v SBI, in the Appeal filed by the Petitioners. A bench headed by justice Fakkir Mohamed Ibrahim Kalifulla upheld the Bombay High Courts Order allowing the Lender to publish names and photographs of directors and guarantors of defaulter firm in newspapers on the grounds that Rule 8 framed under the SARFAESI Act specifically authorised the banks to publish the names and addresses of wilful defaulters and there is also no legal bar that prohibits them from publishing such information. The Supreme Court had accepted the view that there is no legal bar either in the said rule or under any provisions of the Act which expressly prohibits the bank from publication of photographs and therefore, the action of the bank in publishing the photographs cannot be held to be ultravires. From the banks point of view, the duty to maintain secrecy is superseded by a larger public interest as well as by the banks own interest under certain circumstances, it held.

Recently the Division Bench of Hon’ble Madras High Court elaborately discussed this matter while deciding M.R.Motor Company vFederal Bank. The High Court concurred with the views expressed by the Bombay High Court, which was upheld by Supreme Court that the banks have the right to publish the name of the defaulters by giving their names and addresses which serves the two fold purpose of notifying the public that these persons are wilful defaulters and to caution the prospective buyers who may be offered the property which is mortgaged by these defaulters with the bank. The Court held that this being the primary objective for the publication of the notice, there would be no impediment in publication of photographs of wilful defaulters and particularly those defaulters who have committed various acts of misfeasance.

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[1] D.J.Exim India P Ltd v SBI [(2015)1CompLJ138(Bom)]

[2] M/S Prakash Granite Industries vs. The Punjab National Bank

[3] Ujjal Kumar Das and Another v. State Bank of India

[4] Venu. P.R Vs. SBI [[2013(3) KLT 691]]

[5] Special Leave to Appeal (C) No. 37726 of 2013 with T.P.(C) No. 691 of 2014, dated 14/7/2014, reported in CDJ 2014 SC 617