A person’s credit score and credit information report are a measure of his creditworthiness. A credit report is a detailed breakdown of an individual’s history prepared by the credit bureau. The credit reports are used by the lenders to determine the creditworthiness of the loan applicant. The shared credit information is intended to put an end to habitual defaulters.

However, for this given importance of credit scores, the accuracy of captured information will be the crucial element. We today often come across many cases wherein the Credit Information Company supply incorrect information of the borrower or client. In order to get a brief idea of remedy for such instances let us peruse the following provisions, which would suggest the appropriate recourse which a person can have at such instances.

At the outset it must be noted that section 19 of the Credit Information Companies (Regulation) Act, 2005 (the Act) mandates a credit information company or credit institution or specified user, as the case may be, in possession or control of credit information to ensure that the data relating to the credit information maintained by them is accurate and complete. Similarly, rule 25(1) of the Credit Information Companies Rules, 2006 mandates the credit information company to verify the data or information or credit information and ensure that the same is accurate, complete and updated by the respective credit institution or credit information company, as the case may be.

However, where such information recorded is incorrect, foremost, section 21(3) of the Act provides that 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 to such person and such person then either by making an appropriate correction, addition or otherwise, take appropriate steps to update the credit information within thirty days. Further, rule 10(b)(4), the Credit Information Companies Regulations, 2006 obliges every specified user, credit information company, and credit institution, to take prompt action in relation to updating of the credit information and to send the intimation and their response with proper co-ordination amongst them so as to ensure that the requisite action is taken in this behalf within the time limit i.e., 30 days. Pertinently, second proviso to section 21(3) states that such alteration can only be made after such correction, deletion or addition has been certified as correct by the concerned credit institution. In such a situation, a borrower or client has two recourses to choose from.

Firstly, section 23(1) of the Act provides that any credit information company or credit institution or specified user who wilfully and knowingly provides false credit information or omits to make a material statement to any other credit information company or credit institution or specified user or borrower or client, as the case may be, such person, shall be punishable with fine which may extend to one crore rupees. Furthermore, sub-section (5) provides that where a contravention or default has been committed by any of the prescribed persons, every person who, at the time the contravention or default was committed, was in charge of, and was responsible to the credit information company or credit institution or specified user for the conduct of its business, shall be deemed to be guilty of the contravention or default and shall be liable to be proceeded against and punished accordingly.

However, in terms of section 24, no court can take cognizance of an offence alleged to have been committed by a member of a credit information company under section 23, unless, a complaint in writing is made by an officer of the credit information company generally or specially authorised in writing in this behalf by the credit information company or if so, directed by the Reserve Bank so to do. A bare perusal of the provision also shows that intention is critical for attraction of any liability under section 23. Moreover, the remedy under section 23 is often suffocated for the reason that cognizance of the court is subject to the complaint in writing by the person designated for this purpose by the credit information company.

Secondly, and most relevant for any such borrower or client, section 18(1) of the Act provides that if any dispute arises amongst, credit information companies, credit institutions, borrowers and clients on matters relating to business of credit information and for which no remedy has been provided under this Act, such disputes shall be settled by conciliation or arbitration. Sub-section (2) further provides that where a dispute has been referred to arbitration under sub-section (1), the same shall be settled or decided, (a) by the arbitrator to be appointed by the Reserve Bank; (b) within three months of making a reference by the parties to the dispute, which is extendable to a maximum period of 6 months.

Furthermore, the remedy before any other court or authority (excluding the writ jurisdiction of the High Court or Supreme Court) is also barred by section 31 of the Act.

The phrase “on matters relating to business of credit information” has been under examination pertinently in three decisions namely, Srikanth Vairagare v. M/S. ICICI Bank Limited [Arbitration Application No. 94 of 2012] before the Andhra Pradesh High Court (“Srikant Vairagare”), Sunil Agarwal v. LIC Housing Finance Limited & Ors. [[2012] 173 CompCas476(Cal)] before the Calcutta High Court (“Sunil Agarwal”) and more recently, in P.V.R.S. Mani Kumar vs. Transunion CIBIL Ltd. [O.A. No. 360 of 2015] before the Madras High Court (“P.V.R.S. Mani Kumar”). A brief discussion of these decisions would project that generally such disputes are referrable to arbitration.

Interpreting the phrase, the Andhra Pradesh High Court in Srikanth Vairagare held that “section 18 of the Act is a mechanism for settlement of disputes relating to business of credit information. It does not relate to settlement of any dispute as between the borrower and the credit institution in relation to the credit information given by the credit institution to the CIC, including the correctness or otherwise of such information. This will be the legal position also in relation to any dispute as between a client as defined in Section 2(c) (which is an inclusive definition) of the Act and the credit institution. Section 18 of the Act would apply only when dispute arises on matters relating to business of credit information. A dispute between the borrower and credit institution, including any dispute as to the correctness or otherwise of the credit information given by the credit institution to the CIC, is not a dispute relating to the business of credit information. Section 18 of the Act can be invoked only as regards disputes relating to the business of credit information; that too, for which there is no remedy provided under the Act. Only such disputes could be carried for settlement by conciliation and arbitration in terms of the provisions of the A&C Act by invoking Section 18 of the Act”.

On the other hand, in Sunil Agarwal, the dispute pertained about the accuracy of the information showing the petitioner as guarantor for the loan LIC Housing Finance Ltd., granted to Sudip and collection, storage and use of the information by Credit Information Bureau (India) Ltd. The Petitioner preferred writ petition under Article 226 against the inaction of the Reserve Bank of India in referring the dispute to arbitration under section 18 of the Act. The Court noted that the remedy available is not disputed between the parties and thus, the RBI ought to have treated application as reference under section 18(1) and appoint arbitrator in terms of section 18(2).

More recently, in P.V.R.S. Mani Kumar, the Madras High Court, exhaustively examined whether there was a dispute on matter relating to business of credit information between the applicant and the CIC and whether CIC is party to the dispute. The dispute pertained to the fact that the Bank had denied credit to the applicant because it received a negative report from the Credit Information Company. The applicant wrote to CIC, requesting the credit information to be deleted from the information data, as the applicant had not defaulted any repayment. The applicant received no response from the CIC and the negative credit information about the applicant continued to remain in their website. In light of this, the applicant sought interim injunction against display of information and direction to invoke arbitration under section 18 of the Act.

The Hon’ble Court first referred to the Division Bench decision in DSL Enterprises Private Limited & Ors. v. The Chief General Manager, DBOD, Reserve Bank of India & Ors. of the Bombay High Court, which had distinct facts. Moreover, Section 2(c) (ii)(A) of the CICRA was not brought to the notice of the Division Bench. In so far as the decision in Srikanth Vairagare is concerned, the Court observed that the decision was rendered relying the judgment of the Division Bench of the Bombay High Court and hence, the same has no avail to the facts of the present case.

Finally referring to these facts and decisions, including Sunil Agarwal, the Hon’ble Madras High Court found no hesitation in holding that the applicant can invoke Section 18 of the Act for settlement of disputes by invoking the arbitration clause. For the interim period, the Court also injuncted CIC from continuing to publish the data furnished by it in its Credit Information Report.

In light of these provisions and authorities referred it is safe to conclude that the in such cases, the available remedy with a borrower or client is of arbitration vide issuing of a letter for reference to the RBI. Further, it is pertinent to note that if the arbitration is not made available to such parties, the petitioner would have no civil remedy as section 31 of the already bars remedy before any other court or authority and offences under section 23 requires wilful default and letter from the designated official of the CIC. The aggrieved party would only have to only repeatedly request the CIC to correct the information, which cannot be the intent of the legislature and is even otherwise arbitrary and impugnable.

(These suggestions are personal and not exhaustive. For more please reach out with specific queries on [email protected])