The Bombay High Court has demanded for a clear demarcation between permissible borrower hand-holding and prohibited loan-waiver advertising. However, before criminal liability is fastened, the factual report should inform a clear distinction between permissible advertising and borrower assistance, and prohibited debt-management practices.
Briefly, Bajaj Finance approached the Bombay High Court against alleged misleading campaigns by entities offering “Debt Management Plans”, loan settlements, foreclosures and legal services. According to the petitioner, some advertisements promised borrowers that they could avoid repaying their loans altogether. Respondent Nos. 6 and 9, however, stated that they merely assisted customers in obtaining, restructuring or settling loans, without any direct assurance, and that the final decision remained with the bank.
The Division Bench comprising Justice Bharati Dangre and Justice Ashish S. Chavan found that the Union of India’s affidavit largely addressed illegal digital lending applications, rather than the misleading debt-management activities raised in the petition. While acknowledging the importance of tackling illegal loan apps, the Court said the affidavit did not address the issue before it.
The Court stressed the need to clearly distinguish permissible borrower assistance from prohibited activities and noted that the affidavit did not indicate any proposed regulatory framework to make that distinction.
The Court also observed that the enquiry should not be confined to few respondents, since the petitioner alleged that several other entities were making similar claims. It identified operators promising complete freedom from loan repayment as the intended focus of the proceedings, while leaving the permissible extent of advertising and borrower assistance for further examination.
