High Court found Delays by TransUnion CIBIL Ltd. in updating borrowers' credit ratings constitute a breach of their fundamental rights Under Article 21 of the Constitution.
The Division Bench of Kerala High Court, consisting of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M., emphasized that the failure of Credit Information Companies (CICs) to promptly rectify credit ratings undermines the fairness and accuracy required by the Credit Information Companies (Regulation) Act, 2005 (CICRA). The court's decision mandates that CICs must act with due diligence to ensure that credit information reflects the true financial status of borrowers, thereby safeguarding their reputational interests and constitutional rights.
In a recent ruling, the Kerala High Court has underscored the importance of timely updates to credit ratings by Credit Information Companies (CICs) such as TransUnion CIBIL Limited. The court has determined that delays in updating credit ratings can infringe upon the fundamental rights of borrowers, specifically their right to dignity and privacy as protected under Article 21 of the Constitution of India.
This landmark judgment reinforces the regulatory expectations set out in CICRA and highlights the broader implications of administrative efficiency in the financial sector. It sets a precedent for ensuring that CICs uphold the principles of fairness and accuracy in credit reporting, thereby reinforcing the protection of borrowers' fundamental rights.
The Appellant, the 3rd respondent in W.P.(C).Nos.42469 of 2023, 863 of 2024, and 2623 of 2024 challenge the common judgment dated 23.02.2024 issued by a learned Single Judge. The judgment was in response to writ petitions filed by an individual who, despite settling loans with credit institutions, faced inaction from the appellant regarding rectification of his credit rating.
The writ petitioner had sought rectification of his credit rating from the appellant, a credit information company, after honouring his loan commitments. The appellant's defence was that the delay in updating the credit rating was due to non-receipt of comments from the credit institutions concerned.
The Single Judge directed the Appellant to expeditiously consider the writ petitioner's request for credit rating rectification, requiring consultation with the relevant credit institutions and a decision within three months of receiving the judgment copy.
The Appellant argued that the Single Judge’s directions are unworkable, citing that the Credit Information Companies (Regulation) Act, 2005 (CICRA) only allows them to make amendments to credit information after certification by the credit institutions. They contend that the order imposes responsibilities beyond their statutory powers.
The High Court found the appellant’s contention perplexing, noting that the Single Judge's order merely directs the appellant to process the rectification request in consultation with relevant institutions, not to adjudicate on the credit rating independently. The statutory framework of the CICRA mandates credit information companies to update credit reports based on information from member institutions, emphasizing the necessity for such companies to act fairly and within reasonable time.
The Court highlighted the importance of timely rectification of credit information to protect a borrower's reputation and fundamental rights, including dignity and privacy under Article 21 of the Constitution. The appellant's inaction could adversely affect these rights, necessitating adherence to the Single Judge’s directions.
The High Court Bench observed, "The CICRA mandates credit information companies to update credit reports based on information from member institutions, emphasizing the necessity for such companies to act fairly and within reasonable time."
The Court concluded that the appellant must comply with the Single Judge’s directions to ensure timely rectification of the credit rating. The Court dismissed the writ appeals, affirming the necessity for the appellant to follow the learned Single Judge’s directives without awarding costs.
This judgment underscores the duty of credit information companies to act promptly and fairly in updating credit ratings to prevent adverse effects on individuals' reputations and rights. It reinforces the need for administrative authorities to justify their actions, particularly when fundamental rights are at stake.
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