Failure To Update Credit Ratings On Time Affects Borrowers' Fundamental Right To Dignity & Reputation: Kerala HC Dismisses Writ Appeal Filed By TransUnion CIBIL
The Kerala High Court observed that TransUnion CIBIL has the expertise to assign credit ratings to borrowers and if they do not update the credit rating to reflect the borrower’s actual creditworthiness, their inaction would affect borrower’s fundamental rights to dignity and reputation.
The Court said that a borrower's reputation is an integral aspect of his dignity and his right to privacy which is today recognised not only as a common law right but also a fundamental right under Article 21 of our Constitution.
The Court was hearing a Writ Appeal filed by the Appellant after he was aggrieved by the common judgment in the Writ Petitions.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. observed, “Under the statutory scheme of CICRA, it is the appellant who possesses the expertise to assign a credit rating to the borrower from a credit institution such as the writ petitioner. If the credit rating of the writ petitioner is not updated, to reflect his actual creditworthiness at any given point in time, the inaction of the appellant would affect the fundamental rights to dignity and reputation of the writ petitioner.”
Advocate C. Ajith Kumar appeared for the Appellant and Advocate C.S. Abdul Sammad appeared for the Respondent.
Brief Facts-
The Writ Petitioner who had taken loans from three credit institutions filed Writ Petitions after he was aggrieved by the appellant's inaction in rectifying his credit rating even after the loan account was settled by him. The Appellant argued that the delay was due to the non-receipt of comments from the credit institutions on the Petitioner's request. The Writ Court directed the appellant to consider the petitioner's request for rectification, after hearing from the credit institutions and the petitioner, and to decide within three months. The Appellant contended that the directive of the Court was unworkable, as they are not empowered by the Credit Information Companies (Regulation) Act, 2005 (CICRA) to adjudicate credit ratings, and can only make corrections certified by the credit institutions.
The Court noted that the Appellant was a credit information company whose activities are regulated by the provisions of the CICRA. According to the Court objects and reasons of CICRA indicate that institutions such as the appellant were found to be necessary to arrest the accretion of fresh non-performing assets [NPAs] in the banking sector through an efficient system of credit information on borrowers as a first step to credit risk management.
The Court observed, “As the credit institutions are required to mandatorily become members of credit information companies such as the appellant, and obtain credit ratings of its customers from such companies, the actions of the credit information companies have the propensity to affect the reputation of a borrower like the writ petitioner. This is equally so when the credit information company fails to act in a timely manner to obtain the credit rating of a borrower from a credit institution so as to update his credit rating.”
The Court relied on the decision in Prodair Air Products India Pvt. Ltd. v. State of Kerala - [2023 (3) KLT 234] and observed, “The culture of justification is now seen as a necessary and essential feature of administrative decision making. The administrative authority must demonstrate responsiveness, justification and demonstrated expertise. The last mentioned feature refers to the requirement of the decision maker establishing the reasonableness of his decision by demonstrating therein his experience and expertise.”
Accordingly, the Court dismissed the Petition.
