Taking serious note of the practice of employing 'muscle men, goons and recovery agents' by banks and financial institutions in recovering the dues from defaulting debtors, the Commission headed by Justice J D Kapoor cautioned them against adopting such recourses.

Banks can't employ goons for recovery: SC

Allowing the complaint of Vibhu Bhakru, an advocate practising at the Delhi High Court, the Commission said, "to create a scene at the residence of consumers for recovery of  the amount against loan or credit card and then use of abusive language and sending goons ...causes injury and damage not only to the health of the person but also to his reputation and creditworthiness in the society.

"No civilised society can brook such kind of methodology for recovery of any dues that are recoverable through civil legal remedy," said the Commission in its recent order, adding this practice has become rampant and needed to be curbed.

The Commission made it clear to banks and FIs that the if its directions in this regard were not followed, then the officers may be awarded jail term in accordance with the Consumer Protection Act.

Bhakru, who had availed the services of a credit card of the SCB, was asked to pay Rs 28,000 which was not due to be paid by him.  Later, when Bakhru refused to pay the amount raised by the Bank, some muscle men started abusing and harassing him which forced him to approach the Commission for redressal.

He, in the complaint, said that the Bank not only harassed him but also put his name in the defaulters' list which damaged his reputation and creditworthiness in the society.

The Bank, which later gave him a "no due certificate" without receiving any payment, submitted that the case be dismissed as nothing remained.

"The fact of having issued 'no due certificate' after filing of the complaint and having harassed the consumer for 15 long months does not take away the right of the consumer to seek compensation and impose punitive damages on such service providers," it said.

The Commission, dismissing the Bank's plea, asked it to pay to Bakhru damages of Rs 20,000, besides the penalty of Rs 10 lakh, which will be deposited in the Consumer Welfare Fund.

It also issued general directions to the all the banks and FIs, operating from Delhi, asking them not to employ "muscle men" as their recovery agents.