Forcible repossession by lenders is illegal; file police complaint

The National Commission observed that Singh had admittedly defaulted in payment, but there was no evidence to prove that the bank had served a notice prior to repossessing the vehicle

Sher Singh had obtained a loan of Rs 16.55 lakh from a bank for purchasing a heavy goods truck. Repayment had to be made in 47 equated monthly instalments (EMIs) of Rs 45,600 each.

 

According to Singh, the vehicle had some major defects due to which he incurred losses. Consequently, his EMI payment was delayed, and he requested an extension. The bank acceded to his request and accepted part payment on November 23, 2012.

 

Later, 8 to 10 musclemen intercepted the vehicle at Haidargarh in Barabanki District of Uttar Pradesh on November 25, 2012, and took forcible repossession. Singh approached the bank to try to reclaim his vehicle but did not succeed. He also filed a civil suit seeking an order directing the bank to return the truck to him. Meanwhile, the bank issued a notice on the same day it took forcible repossession of the vehicle and finally sold it in March 2013. Hence, the suit was dismissed by the civil judge as it had become infructuous upon the sale of the vehicle.

 

Singh filed a consumer complaint before the New Delhi District Forum against the bank. On May 19, 2015, the forum ruled in his favour and allowed the complaint. The bank challenged the order by filing an appeal before the Delhi State Commission, which modified it and directed the bank to pay Rs 5 lakh as compensation and Rs 50,000 as the cost of litigation.

 

Both Singh and the bank were unhappy with the order and challenged it before the National Consumer Disputes Redressal Commission. While Singh wanted the compensation to be enhanced, the bank sought to be exonerated of any liability.

 

Singh relied on the judgment of the Supreme Court in an earlier case where forcible repossession was held illegal. He claimed that he had suffered a loss of Rs 60,000 per month for which he should be adequately compensated.

 

On the other hand, the bank argued that Singh had not shown any evidence to prove that he had visited the bank either to clear the outstanding dues or for settlement after the vehicle was repossessed. 

 

The bank claimed that Singh had sent his driver for voluntary and peaceful surrender of the vehicle as the EMI could not be paid. Later, after a lapse of nearly nine months, as an afterthought, a police complaint was lodged alleging forcible repossession of the vehicle. So, the bank argued that it should be exonerated of all liability, as Singh had defaulted on repayment of the loan, and there was no deficiency on its part.

 

The National Commission observed that Singh had admittedly defaulted in payment, but there was no evidence to prove that any notice had been given by the bank prior to repossessing the vehicle. Also, Singh resides in Faridabad, while the vehicle was seized at Haidargarh, indicating that the vehicle was not voluntarily surrendered. It noted the Supreme Court’s observations that the practice of hiring recovery agents, who are musclemen, is to be deprecated and discouraged. 

 

Further, instead of resorting to strong-arm tactics, banks should take recourse to the procedure recognised by law.

 

By its order of November 4, 2024, delivered by Inder Jit Singh, the National Commission dismissed the revision and upheld the State Commission’s order directing the bank to pay Rs 5 lakh as compensation and Rs 50,000 towards costs.

 

The writer is a consumer activist