New Delhi, Feb 26 (IANS) The Supreme Court Monday castigated commercial banks for deploying musclemen to recover loan arrears from defaulters or seizing their vehicles for non-payment of instalments.

Strictly directing them against resorting to this illegal practice, a bench of Justice A.R. Lakshmanan and Justice Altamas Kabir, however, quashed a criminal case registered by the Uttar Pradesh police against several top officials of the ICICI Bank for deploying goons to seize the truck of a widow, allegedly defaulting in payment of loan instalments.

The bench said, "We wish to make it clear that we do not appreciate the procedure adopted by the bank in removing the vehicle from the possession of the writ petitioner. The practice of hiring recovery agents who are musclemen is deprecated and needs to be discouraged."

The ICICI bank had appealed in the apex court against the Allahabad High Court judgement directing the police to register a First Information Report (FIR) against the bank officials for sending musclemen to seize the widow's truck for failure to repay one instalment.

The apex court directed the Reserve bank of India to appoint a special committee to suggest guidelines on employing agents to recover loans.

It said the agents so employed should have proper licence from the RBI so that they could be made accountable. The court also made it clear that the bank concerned cannot escape the charge of harassment by the agents and it would be vicariously responsible for the action of the agents.

It suggested to the RBI to educate the borrowers before loans were advanced so that they were aware of their responsibilities in terms of the agreement.