Verifying information or objections raised by the borrowers is the duty of Credit Agency: Kerala High Court

IN THE HIGH COURT OF KERALA AT ERNAKULAM THE HONOURABLE MR.JUSTICE N.NAGARESH WEDNESDAY THE 06TH DAY OF JANUARY 2021 16TH POUSHA 1942 WP(C).No.22108 OF 2020(K SUJITH PRASAD AGED 53 YEARS S O SIVARAMA PILLAI SARAS FLAT NO.208 KSHB CHINNAKADA P.O. KOLLAM TALUK KOLLAM DISTRICT 691 001 THE RESERVE BANK OF INDIA BRANCH OFFICE P.B NO 6507 NANDAVANAM PALAYAM THIRUVANANTHAPURAM KERALA 695 033 THE BRANCH MANAGER ICICI BANK LTD VAIDYA COMMERCIAL ARCADE RESIDENCY ROAD CHINNAKADA P.O. KOLLAM 691 001 THE DIRECTOR TRANS UNION CIBIL LIMITED ONE INDIA BULLS CENTER TOWER 2A 19TH FLOOR SENAPATI BAPAT MARG ELPHINSTONE ROADS MUMBAI 400 013 R3 BY ADV. SRI.C.AJITH KUMAR SRI. MILLU DANDAPANI FOR R1HAVING BEEN FINALLY HEARD ON 06.01.2021 THE COURT ON THE SAME DAY DELIVERED THE WP(C) No.22108 2020 2 JUDGMENT ~ ~ ~ ~ ~ ~ ~ Dated this the 6th day of January 2021 The petitioner who is a practising Lawyer seeks to direct the 2nd respondent Branch Manager ICICI Bank Limited to recall the petitioner s entries in the CIBIL report of the petitioner and to direct the 2nd respondent to delete the The petitioner states that he had availed a personal loan of ₹3 lakhs from the 2nd respondent. The loan was sanctioned on 16.12.2006. The petitioner repaid the entire loan. The 2nd respondent however issued a notice on 12.08.2016 demanding the petitioner to pay ₹42 895 . The petitioner remitted the said amount as demanded by the 2nd WP(C) No.22108 2020 3 respondent on 30.08.2016 The 2nd respondent sanctioned to the petitioner an amount of ₹37 337 on 16.07.2007. The petitioner repaid the said amount also. Yet the 2nd respondent demanded an additional amount of ₹11 000 as per Ext.P3. The petitioner remitted the said amount also as evidenced by Ext.P4 The petitioner wanted to avail a vehicle loan from another bank. The Manager was satisfied with the eligibility of the petitioner for availing loan. The Manager however did not sanction the loan pointing out that there are some adverse entries in the CIBIL report in respect of the petitioner The petitioner would state that the repayment of the loans availed by the petitioner from the 2nd respondent may not have been made with the desired promptitude. However the petitioner had remitted all the amounts demanded by the 2nd respondent which were alleged to be due in the loan accounts of the petitioner. However in spite of remittance of all the dues the 2nd respondent made adverse reports on the basis of which the 3rd respondent entered adverse entries in WP(C) No.22108 2020 4 their records. The action of the 2nd respondent in not communicating true state of affairs in respect of the petitioner s loan accounts has caused untold hardship to the petitioner. The 2nd respondent is therefore liable to be directed to delete adverse entries in the CIBIL report of the petitioner contended the learned counsel for the petitioner The 2nd respondent Bank did not enter appearance The 3rd respondent Company however filed a statement The 3rd respondent stated that it is a Credit Information Company certified by the Reserve Bank of India. When information data is submitted by a member Bank or financial institution the 3rd respondent enters the same in their records The 3rd respondent is only a repository of information. The 3rd respondent is not bound to ascertain the correctness or otherwise of the information submitted to them by financial 7. On receipt of notice of the writ petition the 3rd respondent sent Exts.R3(a) and R3(b) mails to the 2nd respondent requiring to confirm whether the information WP(C) No.22108 2020 5 provided by them in respect of the petitioner is correct or requires any correction. The 2nd respondent so far has not responded to the mails sent by the 3rd respondent. Unless the 2nd respondent reports any change in records maintained by them the 3rd respondent will not be in a position to make any I have heard the learned counsel for the petitioner and learned Standing Counsel appearing for the 1st respondent and the learned Standing Counsel appearing for the 3rd respondent It is the credit report of the 3rd respondent by which the petitioner is aggrieved. Financial Institutions try to mitigate the risk of lending to borrowers by making a credit analysis on individuals and institutions applying for new credit facilities or loan. The analysis is normally based on a review of Capacity Capital Conditions Character and Collaterals called “the Five Cs” of credit. Financial Institutions in India rely on credit scores given by Credit Information Companies formed under the Credit Information CompaniesAct 2005 WP(C) No.22108 2020 6 10. The 3rd respondent is a Credit Information Company functioning in accordance with the provisions of the Credit Information Companies Act 2005. The 3rd respondent gives credit scores in respect of the customers of Credit Institutions. A credit score is a numerical expression based on an analysis of the credit history of an individual. A credit score in effect represents the creditworthiness of an individual. Credit scores are used by Credit Institutions like banks and other financial entities to evaluate the potential risk passed by lending money to consumers and to mitigate loans due to bad debt. By the very nature of credit score it has positive or negative impact on the financial credibility of an It is taking into account the said fact that the Parliament has enacted Credit Information Companies Regulation) Act 2005 12. Section 21(3) of the Act 2005 reads as follows: “21. Alteration of credit information files and credit reports—(1) Any person who applies for grant or sanction of credit facility from any credit institution WP(C) No.22108 2020 7 may request to such institution to furnish him a copy of the credit information obtained by such institution from the credit information company. 2) Every credit institution shall on receipt of request under sub sectionfurnish to the person referred to in that sub section a copy of the credit information subject to payment of such charges as may be specified by regulations by the Reserve Bank in this regard. 3) If a credit information company or specified user or credit institution in possession or control of the credit information has not updated the information maintained by it a borrower or client may request all or any of them to update the information whether by making an appropriate correction or addition or otherwise and on such request the credit information company or the specified user or the credit institution as the case may be shall take appropriate steps to update the credit information within thirty days after being requested to do so: Provided that the credit information company and the specified user shall make the correction deletion or addition in the credit information only after such correction deletion or addition has been certified as correct by the concerned credit institution: Provided further that no such correction deletion or addition shall be made in the credit information if any dispute relating to such correction deletion or addition is pending before any arbitrator or tribunal or court and in cases where such dispute is pending the entries in the books of the concerned credit institution shall be taken into account for the purpose of credit information.” In view of the first proviso to Section 21(3) a Credit Information Company can make a correction deletion or WP(C) No.22108 2020 8 addition of the credit information after such correction deletion or addition has been certified as credit by the concerned credit institution. The 2nd proviso would indicate that the right over a credit information is solely that of the concerned bank or financial institution In view of the fact that credit score given by the credit information companies like the 3rd respondent can have serious adverse civil consequences on individuals the 3rd respondent is bound to ascertain the true state of affairs with its member Banks financial institutions whenever any anomaly is pointed out by individuals. Updation of credit information is a statutory right of a borrower or client of a Credit Institution in view of Section 21(3) of the Act 2005 14. The statement filed by the 3rd respondent would show that as soon as the 3rd respondent received information about the grievance of the petitioner the 3rd respondent promptly addressed the 2nd respondent to confirm on the complete account details of the accounts of the petitioner The 3rd respondent required the 2nd respondent Bank that in WP(C) No.22108 2020 9 case of any incorrect information the correct information shall be provided to the 3rd respondent. However the 2nd respondent has not responded to Exts.R3(a) and R3(b communications made by the 3rd respondent 15. Since the failure of the 2nd respondent to act on Exts.R3(a) and R3(b) has grave consequences on the financial credibility and creditworthiness of the petitioner and since updation of credit information is a statutory right conferred on the petitioner under Section 21(3) of the Credit Information Companies Act 2005 this Court finds that relief should be granted to the petitioner in this writ In such circumstances the 2nd respondent directed to respond to Ext.R3(a) mail dated 01.11.2020 and Ext.R3(b) mail dated 08.12.2020 of the 3rd respondent seeking confirmation on the complete account details in respect of the petitioner within a period of two weeks. The 3rd respondent on receipt of such information should make changes in the credit report in respect of the petitioner if found warranted on WP(C) No.22108 2020 10 the basis of information provided by the 2nd respondent without further delay Writ petition is disposed of as above N. NAGARESH JUDGE WP(C) No.22108 2020 11 PETITIONER S EXHIBITS THE TRUE COPY OF THE DEMAND NOTICE ISSUED BY THE 2ND RESPONDENT DATED 12.8.2016 VIDE REF NO PL 1608 0604932 THE TRUE COPY OF THE REMITTANCE SLIP DATED 30.8.2016 FOR AN AMOUNT OF RS.42 895 THE TRUE COPY OF THE DEMAND NOTICE ISSUED BY THE 2ND RESPONDENT DATED 11.8.2016 VIDES REF.NO.PL 1608 THE TRUE COPY OF THE REMITTANCE SLIP DATED 30.8.2016 FOR AN AMOUNT OF RS.11 000 TRUE COPY OF THE PASS BOOK ISSUED BY THE ORIENTAL BACK OF COMMERCE TO THE PETITIONER VIDES ACCOUNT NO RESPONDENTS EXHIBITS TRUE COPY OT THE E MAIL DATED 02 11 2020 SENT BY 3RD RESPONDENT TO THE OFFICIALS CONCERNED OF THE 2ND TRUE COPY OF THE E MAIL DATED 08 12 2020 SENT BY 3RD RESPONDENT TO THE OFFICIALS CONCERNED OF THE 2ND

Summary: Updating CIBIL score is a borrower’s statutory right and therefore, credit rating agencies are legally bound to consider objections against the rating given to a debtor. The Kerala High Court presided J. N. Nagaresh laid down this ratio in the case of Sujith Prasad Vs. Reserve Bank of India &amp; Ors., [W.P. (C) No. 22108 of 2020]. The brief facts of the case are that a lawyer filed a writ petition in the court aggrieved with the adverse CIBIL reports given by the ICICI Bank Ltd. The Petitioner contended that the CIBIL reports were not updated that the loan amounts taken by him were cleared off. The Credit information company, Trans Union CIBIL Ltd., submitted that information given by banks. Since it acts only as a mere repository of information, it is not bound to ascertain the correctness of the information given to it by the banks. The Court in this case noted that Credit agencies are formed and regulated under the Credit Information Companies (Regulation) Act, 2005. Under the Act, Section 21(3) mandates that credit information company must update the information by making appropriate addition or deletion on a request made by the borrower. Further, observing that the credit ratings have civil consequences, that impacts the financial credibility of a borrower, hence the company must consider objection. Hence, the Court was of the opinion that, “In view of the fact that credit score given by the credit information companies like the 3rd respondent can have serious adverse civil consequences on individuals, the 3rd respondent is bound to ascertain the true state of affairs with its member-Banks/financial institutions, whenever any anomaly is pointed out by individuals. Updation of credit information is a statutory right of a borrower or client of a Credit Institution, in view of Section 21(3) of the Act, 2005.” The Court in this case stated that it was the duty of the Credit agency to verify information or objections raised by the borrowers and hence was of the opinion that “A credit score is a numerical expression based on an analysis of the credit history of an individual. A credit score in effect represents the creditworthiness of an individual. Credit scores are used by Credit Institutions like banks and other financial entities to evaluate the potential risk passed by lending money to consumers and to mitigate loans due to bad debt. By the very nature of credit score, it has positive or negative impact on the financial credibility of an individual.” The respondent i.e. ICICI Bank was directed to update the CIBIL score and update the agency within a period of two weeks.