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2009 DIGILAW 601 (UTT)

Magma Fincorp Limited v. Vijay Kumar

2009-12-03

R.D.SHENOY, R.K.BATTA

body2009
ORDER Dr. P.D. Shenoy, Member: This is another case of forcible repossession of the vehicle by a non-banking finance company without following the rule of law. 2. This revision is filed against the concurrent judgments and orders of the Fora below. The facts of the case, in brief, are that the truck bearing registration No. HR-4 7 -8469 was purchased by the complainant Sri Vijay Kumar after 'availing financial assistance from the opposite parties. He has deposited the instalments towards repayment of the loan and the last instalment was deposited by him during May, 2007. On 2.7.2007 when the truck was being plied in the area of Balwara (Jaipur), some musclemen of the opposite parties forcibly took possession of the vehicle. Subsequently when the complainant visited the office of the opposite parties, they refused to return the vehicle on the ground that there were irregularities in repayment of the loan amount. Therefore, a complaint was filed before the District Forum stating that forcible repossession of the vehicle caused financial loss to the tune of Rs. 1,25,000. He has also claimed towards mental agony and other expenses. In total he claimed Rs. 2 lakh along with 12% interest to be paid to him apart from delivery of the vehicle in question. This case was contested by the opposite parties. It was pleaded that the complainant was informed before taking repossession of the vehicle oh 6.7.2007, which was as per terms and conditions of the agreement and the legal notice was also issued on the same day and the complainant was asked to pay outstanding amount within seven days. Therefore, .the vehicle was auctioned on 31.7.2007. The District Forum after hearing the parties allowed the complaint and directed the opposite parties as follows : "Respondents are directed to deliver the vehicle in question to the com-plainant within a period of 30 days from the receipt of the copy of this order and re-schedule the installments. Depreciation, on account of wear and tear after assessment by a Surveyor, be adjusted in the loan account. The respondents shall not be entitled to interest for the period, vehicle remained in their possession. Complainant after the demise of his father (who was the sole bread earner of the family) has been virtually rendered unemployed by the act of the respondents. The respondents shall not be entitled to interest for the period, vehicle remained in their possession. Complainant after the demise of his father (who was the sole bread earner of the family) has been virtually rendered unemployed by the act of the respondents. Thus, he is entitled to damage to the tune of Rs.10,000 and litigation expenses to the tune• of Rs. 2,000." 3. Aggrieved by the order of the District Forum, the opposite parties filed appeal before the State Commission with the delay of 112 days along with an application for condonation of delay. The application for condonation of delay was rejected by the State Commission quoting the judgment of the Hontile Apex Court in Bikram Doss v. Financial Commissioner & Ors., AIR 197'l(SC) 1221. The State Commission observed that musclemen of the opposite parties had forcibly taken the possession of the vehicle by taking law in their hands. Therefore, the appeal was dismissed in limine both on the ground of limitation as well as on merits. 4. Hence this revision. 5. Learned Counsel for the petitioner vehemently argued that repossession of the vehicle was taken as per terms and conditions of the agreement as the finance agreement. We hasten to point out in this connection that the agreement does not say that the petitioners can forcibly repossess the vehicle. 6. At this juncture, learned Counsel for the petitioner quoted the circular of the Reserve Bank of India dated 24th April, 2009 which clarifies the position regarding repossession of the vehicle financed by the NBFCs, which reads as follows : "Please refer to ONBS (PO) CC No. 80/03.10.042/2005-06 dated September 28, 2006, advising NBFCs to put in place a Fair Practices Code with the approval of their Boards, which, inter alia, covers recovery of loans. In this connection; it is further clarified that, with particular reference to queries raised regarding repossession of vehicles, NBFCs must have a built in re-possession clause in the con-tract/loan agreement with the borrower which must be legally enforceable. In this connection; it is further clarified that, with particular reference to queries raised regarding repossession of vehicles, NBFCs must have a built in re-possession clause in the con-tract/loan agreement with the borrower which must be legally enforceable. To ensure responsibility, the terms and conditions of the contracts agreement should also contain provisions regarding (a) notice period before taking possession; (b) circumstances under which the notice period can be waived; (c) the procedure for taking possession of the security; (d) a provision regarding final chance to be given to the borrower for repayment of loan before the sale/auction of the property; (e) the procedure for giving repossession to the borrower and (0 the procedure for sale! auction of the property. A copy of such terms and conditions must be made available to the borrowers in terms of ONBS PO/CC No. 107/ 03.10.042/ 2007-08 dated October 10, 2007 wherein it was stated that NBFCs may invariably furnish a copy of the loan agreement along with a copy each of all enclosures quoted in the loan agreement to all the borrowers at the time of sanction/disbursement of loans, which may form a key component of such con tracts/loan agreements. 7. This circular has been issued in continuation of the earlier circular dated 20th September, 2006 advising NBFCs to put in place a Fair Practices Code with the approval, of their Board pertaining to recovery of loans. Highlights of the circular are as follows : (a) The NBFCs must adopt fair practices;• (b) Repossession must be legal and forcible; (c) There should be transparency and there should be detailed procedure followed by giving the final chance to the borrower for the repayment of loan, etc. 8. It is crystal clear from the case under consideration that there was no transparency and repossession was taken with the help of musclemen, which is not legal. 9. This case is squarely covered by the judgment of this Commission in Maruti Finance. Ltd. v. Vijayalaxmi, III (2007) CPJ 161 (NC), wherein it is observed as follows : "A.I. When a vehicle is purchased by a person (consumer) by borrowing money from the money lender/financier/banker, the consumer is the owner of the vehicle and not the money lender/financier/banker, unless the ownership is transferred. 2. Ltd. v. Vijayalaxmi, III (2007) CPJ 161 (NC), wherein it is observed as follows : "A.I. When a vehicle is purchased by a person (consumer) by borrowing money from the money lender/financier/banker, the consumer is the owner of the vehicle and not the money lender/financier/banker, unless the ownership is transferred. 2. In a democratic country having well established independent judiciary and having various laws it is impermissible for the money lender/financier/banker to take possession of the vehicle for which loan is advanced, by use of force. 3. Legal or judicial process may be slow but it is no excuse for employing musclemen to repossess the vehicle for which loan is given. Such type of 'instant justice' cannot be permitted in a civilized society where there is effective rule of law. Otherwise, it would result in anarchy, that too when the borrower retorts and uses the force. B. 1. A hire-purchase agreement is a normal one under which owner hires goods to another party called the hirer and further agrees that the hirer shall have an option to purchase the chattel when he has paid a certain sum, or when the hire-rental payments have reached the hire-purchase price stipulated in the agreement. 2. As against this, when a person desires to purchase vehicle/goods and not having sufficient money on hand, borrows the amount needed from a money lender /financier/ banker and pays it over to the vender• of the vehicle, the transaction between the consumer and the money lender will unquestionably be a loan transaction. In such a case the vehicle purchased by the consumer is registered in the name of the consumer and remains at all material times so registered in his name. The consumer remains qua the world at large the owner and remains in possession of the vehicle. By an agreement the vehicle can be given as security for the loan advanced. In such a case, the right to seize the vehicle is merely a licence to ensure compliance with the terms of the so-called. hire purchase agreement (Re. AIR 1966 SC 1.178). C. It is to be stated that many financiers/banks are in race for giving loan for purchase of vehicles or various articles. . After giving loan and taking interest in advance, the polite behaviour changes because of the documents which are signed on the dotted lines by the borrower. hire purchase agreement (Re. AIR 1966 SC 1.178). C. It is to be stated that many financiers/banks are in race for giving loan for purchase of vehicles or various articles. . After giving loan and taking interest in advance, the polite behaviour changes because of the documents which are signed on the dotted lines by the borrower. On occasions, borrower suffers harassment, torture, or abuses at the hands of the musclemen of the money lender. Such a behaviour is required to be prohibited and the process of repossession is required to be streamlined so as to fit in cultural civilized society. Let the rule of law prevail and not that of jungle where might is right." 10. The Hon'ble Apex Court in lCICI Bank v. Prakash Kaur & Ors., III (2007) SLT 1, has deprecated the practice of forcible repossession of the vehicle and has laid down appropriate guidelines to the financiers. The ratio of this case is also squarely ?pplicable to the case under consideration. 11. Accordingly, this revision petition is dismissed. There shall be no order as to costs. R.P. dismissed.