CIBIL score disputes cannot be raised through arbitration without first exhausting alternative remedy: Madras HC

The Madras High Court has held that loan applicants cannot resort to arbitration proceedings regarding the non-updation of their credit history, by companies such as TransUnion CIBIL Limited, without first exhausting an alternative remedy provided under the Credit Information Companies (Regulation) Act of 2005.

The Madras High Court has held that loan applicants cannot resort to arbitration proceedings regarding the non-updation of their credit history, by companies such as TransUnion CIBIL Limited, without first exhausting an alternative remedy provided under the Credit Information Companies (Regulation) Act of 2005.

A Division Bench of Justices Anita Sumanth and C. Kumarappan held so while allowing an original side appeal preferred by the Reserve Bank of India (RBI), represented by its counsel Chevanan Mohan, against a single judge’s order that the arbitration clause could be invoked even without exhausting the alternative remedy.

Disagreeing with the single judge, the Bench said, Section 18 of the Act provides for settlement of disputes between credit information companies, credit institutions, borrowers, and clients through arbitration and conciliation proceedings only if there was no other remedy provided to them under the Act.

In so far as disputes related to alteration of credit information files and credit reports was concerned, Section 21 of the Act enumerates the manner in which borrowers could get those reports updated, modified, altered, or amended by insisting upon making corrections, additions, deletions, and so on, the Bench said.

Authoring the verdict for the Bench, Justice Sumanth said, any person who applies for grant or sanction of credit facility, from any credit institution such as banks, could request the institution to furnish him/her a copy of the credit information obtained by such institution from the credit information company concerned.

Every credit institution was obligated to furnish a copy of the credit information report on payment of necessary charges, as specified by the RBI. If there were any discrepancies in the report, the applicant could request the credit information company, as well as the credit institutions concerned, to update their records.

The credit institutions, as well as the credit information company, after verification, should carry out the required corrections within 30 days of receipt of such a request. Further, the law makes it clear that the applicant must be informed of the reasons if such corrections could not be carried out within 30 days.