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Banks can't employ goons for recovery: SC
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January 08, 2007 12:15 IST

The Supreme Court has strongly deplored the practice of banks and financial institutions using 'goondas' and musclemen to recover loans from alleged defaulters.

Rejecting arguments by senior counsel Mukul Rohtagi appearing for the ICICI Bank that if force was not applied the defaulters would not repay, a Bench comprising Chief Justice-designate K G Balakrishnan and Justice D K Jain asserted that recovery of loans, if any, should be only through legal means.

"We are governed by a rule of law in the country. How can someone take possession by force. You cannot employ goondas," the Bench remarked while dealing with a plea by the bank challenging the registration of a criminal case against its officials for allegedly using criminal force against a loanee.

The Uttar Pradesh police had earlier registered criminal cases against the bank officials including its managing director following a complaint that the bank sent musclemen to recover a car from a loanee for non-payment of loan.

Following this, the bank moved the Allahabhad High Court which rejected its plea for quashing the criminal cases registered against its officials.

Rohtagi who mentioned the bank's plea before the Supreme Court contended that in the absence of force, loans could not be recovered from the defaulters.

He further claimed that the senior bank officials did not owe any vicarious responsibility for actions purportedly done by some lower rung personnel.

But, the bench rejected the arguments and maintained that loaned property or amount cannot be recovered by employing musclemen and goondas.

However, the Bench stayed the arrest of the senior bank officials on the plea of the defence counsel.

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