Chennai, April 10 (IANS) The Madras High Court has ruled that borrowers cannot invoke arbitration proceedings to address disputes related to the non-updating of their credit history by companies like TransUnion CIBIL Limited without first utilising the alternative remedies prescribed under the Credit Information Companies (Regulation) Act, 2005.
A division bench of Justices Anita Sumanth and C. Kumarappan delivered the verdict while allowing an original side appeal filed by the Reserve Bank of India (RBI).
The RBI, represented by its counsel Chevanan Mohan, had challenged a single judge’s ruling that permitted arbitration proceedings without requiring the borrower to exhaust statutory remedies.
Disagreeing with the earlier ruling, the division bench emphasised that Section 18 of the Act provides for dispute resolution through arbitration and conciliation only if no other remedy is available under the law.
Since the Act outlines a specific mechanism for correcting and updating credit information, arbitration cannot be the first recourse.
The bench elaborated that Section 21 of the Act offers a detailed process for borrowers to request changes to their credit information. Borrowers can demand modifications, corrections, additions, or deletions to their credit reports, and the institutions involved are legally bound to process such requests within 30 days of receiving them. If corrections are not made, the borrower must be informed of the reasons.
Justice Sumanth, who authored the verdict, stated that any individual applying for a loan or credit facility is entitled to request a copy of the credit report obtained by the lending institution from a credit information company. These institutions are required to provide such reports upon payment of charges specified by the RBI.
If a borrower finds discrepancies in the credit report, they can request that the relevant credit institution and the credit information company update their records. The law mandates that these corrections be verified and completed within the stipulated time frame. The statutory framework thus provides a robust and effective dispute resolution mechanism.
The court also noted the RBI’s submission that TransUnion CIBIL facilitates online dispute resolution through a straightforward application process on its website. However, the borrower in the case under consideration had not availed of this remedy and had instead directly invoked arbitration under Section 18.
The RBI counsel argued that the single judge had erred in entertaining the arbitration application and issuing an injunction against TransUnion CIBIL without the borrower first attempting to resolve the matter through the statutory process.
Agreeing with this stance, the Division Bench set aside the single judge’s order and granted the borrower the liberty to initiate an online application to rectify his credit report. The court clarified that, since TransUnion CIBIL had categorised the borrower as “high risk” based on information from multiple banks indicating defaults on credit card and gold loan repayments, he could still seek rectification if he possessed valid documentation to challenge that classification.
In conclusion, the Bench reiterated that while arbitration is an available remedy under the Act, it can only be invoked after all other statutory dispute resolution avenues have been fully pursued.
–IANS
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