Forcible repossession of vehicle is illegal

A financier cannot take forcible action to repossess a vehicle. It has to adopt a juridical remedy and cannot take the law in its hands

It is common to find finance companies refusing to sanction a loan unless the borrower gives his signatures on blank papers. This enables financiers to misuse these pre-signed documents.

K Subrahmanyan wanted to purchase a lorry. He approached Shriram Transport Finance. He was compelled to sign on blank papers before the loan was approved. The company then sanctioned a loan of Rs 2,20,000. A loan-cum-hypothecation agreement was executed that provided for paying an EMI (equated monthly instalment) of Rs8,500 for three years.

Subramanyan paid his EMIs on time. There was just one instance of delay, for which he paid Rs 11,500 in December 2009. The following month, he paid the usual amount of Rs 8,500 on January 4, 2010. Despite this, the financier forcibly repossessed the vehicle on January 13, 2010. Subramanyan approached the financier the following day. He was shocked to find that the blank papers on which he had signed were misused to make it appear that he had voluntarily surrendered the vehicle.

Subramanyan complained before the District Consumer Forum. The financier contested the case, contending that the complaint was not maintainable as Subramanyan could not be termed a consumer in view of the loan cum hypothecation agreement. The lender also accused him of being a defaulter.

The Forum ruled that the financier had committed grave deficiency in service, and ordered it to refund Rs1,26,000, together with 12 per cent interest from the date of complaint. In addition, Rs30,000 was awarded as compensation and Rs4,000 towards litigation costs. On receiving the entire amount, Subramanyan would have to return the vehicle's original registration certificate and execute the necessary documents for its transfer.

Shriram Transport Finance appealed against this order. By its order of August 31, 2011, the Kerala State Commission reduced the amount to Rs76,000 without interest, but upheld the compensation and costs.

Shriram Transport Finance questioned this order in a revision petition. The National Commission observed that the records revealed that Subramanyan had never defaulted in paying EMIs. The Commission found discrepancies in the statements made by the financier and found it incredible to believe that the vehicle had been surrendered on December 31, 2009, but the EMI subsequently paid on January 4, 2010. The National Commission concluded that the financier was attempting to cover up for forceful repossession of the vehicle.

By its order of January 4, 2019, delivered by the Bench of Anup Thakur and C Viswanath, the National Commission held that forcible vehicle repossession constituted a deficiency in service for which a consumer complaint would be maintainable. It dismissed the financier's revision petition and upheld the State Commission’s order.

The author is a consumer activist