The Karnataka High Court has said that an investigation would be imperative into the huge proliferation of mobile loan apps and their modus operandi.
Justice M Nagaprasanna observed that the office-bearers of several of such mobile loan apps are said to be entities of China or individuals from China sitting as its directors.
The court said this while dismissing a petition filed by a Kerala-based company challenging the Enforcement Directorate (ED) notice directing the account of the company to be placed under debit freeze.
The petitioner is Inditrade Fincorp Limited which claims to be a Type-II non-deposit-taking Non-Banking Financial Company (NBFC) and also claims to have secured and unsecured micro-lending business with interest on the loans given and other incidental fees as its primary revenue.
The court said that it is in the public domain that several borrowers have died of suicide unable to bear the harassment of representatives of such loan apps. The bench said that the gullible borrowers are reportedly given a call and are lured into getting a small loan without any documentation, only required to download the loan app giving access to the contents of the smartphone.
“A small-time borrower desirous of getting money without any documentation would grab the opportunity and accept every condition and give access to his smartphone. It is then that trouble crops up when the representatives of such mobile loan apps/companies begin to haunt the borrower threatening leakage of contents in the smartphone while seeking such repayment. It is alleged in some cases that repayment is sought 16 to 20 times more than what a borrower has to pay as EMI,” Justice Nagaprasanna said.
The bench further said, “The investigation would be imperative, as any effort of any neighbouring nation to destabilize this country, either economically or otherwise, by any method which would touch upon the security of the nation and safety of its citizens, cannot be turned a blind eye to, and in certain cases, certainly in the case of the petitioner, investigation cannot be stalled on this specious plea of procedural aberration as alleged by the petitioner.”
Pursuant to a search conducted on Cashfree Payments India Private Limited and Razorpay Solutions India Private Limited, which are Payment Gateways utilized by the petitioner company for disbursal and collection of digital micro-loans, the ED had directed a debit freeze of the account.
The petitioner contended that merely because it has used the Payment Gateways to disburse loans it would not mean that it is also involved in any of the activity of those Payment Gateways.
The court, however, pointed out that 15 FIRs were registered by the Cyber Crime Police Station in Bengaluru against numerous entities in connection with their involvement in extortion and harassment of the public.