TransUnion CIBIL Must Update Credit Ratings On Time, Borrowers' Reputation Integral To Right To Dignity And Privacy Under Article 21: Kerala HC
The Kerala High Court has ruled that if a Credit Information Company such as TransUnion CIBIL Limited fails to update the credit ratings of its borrowers promptly, it would infringe upon their fundamental rights.
The Division Bench comprising Justice A.K.Jayasankaran Nambiar and Justice Syam Kumar V.M. held that borrowers reputation is protected under right to dignity and privacy guaranteed by Article 21 of the Constitution of India.
“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.”
The petitioner had availed loans from three credit institutions namely ICICI Bank, India Bulls Housing Finance Ltd and Kotak Mahindra Bank. The petitioner was aggrieved that TransUnion CIBIL Limited has not restored his credit rating despite settling the loan accounts. The writ petitions were disposed of by directing TransUnion CIBIL Limited to consider the rectification of the credit rating after hearing the petitioner and the credit institutions.
Aggrieved by this, the present writ appeals were filed by the Director of TransUnion CIBIL Limited which is a credit information company.
The TransUnion CIBIL Limited submitted before the Court that they were entitled to make corrections, deletions or additions to the credit information after such corrections/deletions or additions have been certified as correct by the credit institutions. It was also submitted that they are not empowered to adjudicate upon the credit rating as per the Credit Information Companies (Regulation) Act, 2005.
The Court noted that the writ petition was only disposed of with an order of expeditious rectification of the petitioner's credit rating after getting data from all the parties.
The Court noted that TransUnion CIBIL Limited, as a credit information company, is crucial for maintaining a comprehensive and reliable information system for borrowers to manage credit risk effectively. Interpreting the provisions of CICRA, the Court observed that TransUnion CIBIL Limited is expected to update the credit rating of a borrower based on the data received from the credit institutions.
The Court stated that the right to dignity and privacy are integral parts of borrowers' rights protected under Article 21 of the Constitution of India. This is because the reputation of borrowers, such as the petitioner in this case, can be adversely impacted if a credit information company does not promptly update their credit ratings.
“As the credit institutions are required to mandatorily become members of credit information companies such as the appellant(TransUnion CIBIL Limited), 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. 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 went on to state that credit information companies must operate with fairness, as their actions can impact the fundamental rights of borrowers.
Accordingly, writ appeals were dismissed.
Citation: 2024 LiveLaw (Ker) 529
Case Title: The Director v Sajeed V M & Connected Cases
Case Number: W.A.NO.445 OF 2024 & Connected Cases