BEFORE THE A.P.STATE CONSUMER DISPUTES REDRESSAL COMMISSION: AT HYDERABAD.
F.A.No. 326 OF 2013 AGAINST C.C.NO.165 OF 2011 DISTRICT CONSUMER FORUM RANGA REDDY
Between
Smt Pitta Sathyamma W/o M.Jayaraj
aged 55 yrs, Occ: Pensioner
R/o H.No.13, Sita Homes, Badangpet
R.R.District, Hyderabad-58
Appellant/complainant
A N D
1. The State Bank of India
PNB Dilsukhnagar Branch, GBR
Tower, D.No.242, Chaitanyapuri,
R.R.District, Hyderabad-60
rep. by its Chief Manager
2. The State Bank of India
Stressed Assets Recovery Branch(SARB)
2nd Floor, Latha Complex, Opp.Board of Intermediate
MJ Road, Nampally, D.No.5-A-196 to 207
Hyderabad-001
3. The Assistant General Manager RACP
State Bank of India, 3rd Floor, D.No.1-1-78
Zonal Office, Patny Centre
Secunderabad-003
Respondents/opposite parties
Counsel for the Appellants M/s Y.D.Badola
Counsel for the Respondent M/s G.Prabhakar Sarma
QUORUM: SRI R.LAKSHMINARASIMHA RAO, HON’BLE MEMBER
AND
SRI S.BUJANGA RAO, HON’BLE MEMBER
FRIDAY THE FOURTH DAY OF OCTOBER
TWO THOUSAND THIRTEEN
Oral Order (As per Sri R.Lakshminarasimha Rao, Hon’ble Member)
***
1. The unsuccessful complainant is the appellant. She filed complaint seeking relief of restraining the first respondent- bank-bank from repossessing Maruthi Car bearing registration number AP 29K 6186.
2. The facts of the case as seen from the complaint are that the appellant purchased Maruthi 800 car on 27.09.2005 from Mitra Agencies which is authorized dealer of Maruthi Suzuki on loan for a sum of `2,25,000/- arranged by M/s Agencies in favour of the appellant by the first respondent- bank. The loan amount was repayable in 60 monthly installments with each installment including principal and interest of `4,455/- As on 12.11.2005 the appellant paid the amount of `2,86,925/-. The first respondent- bank issued letter dated 17.10.2011 demanding the appellant to pay an amount of `1,09,227/-. The appellant submitted that the first respondent- bank-bank threatened her that it would repossess the vehicle in case the appellant does not pay the balance loan amount.
3. The first respondent- bank resisted the claim on the premise that the complaint is not maintainable and the appellant has no cause of action to file the complaint. The first respondent-bank submitted that it had sanctioned loan amount of `2,25,000/- as per the terms stipulated in the sanction letter. The complaint is not maintainable as the appellant has converted the District Forum into civil court. The first respondent- bank is legally taking steps to recover the outstanding loan amount by following due process of law. The appellant executed Term Loan Agreement in favour of the first respondent- bank her husband stood as guarantor for repayment of the loan amount.
4. The first respondent- bank submitted that the appellant hypothecated the car as security for repayment of the loan amount together with interest. The loan amount with interest is payable in installments @ `4,455/- commencing from November,2009. The loan amount together with interest is to be repaid together with interest @ 3.25% below the State Bank Advance Rate effective rate being 7% per annum with monthly rests subject to the variance in such rate of interest on account of change in rates of interest pursuant to the instructions that may be issued by Reserve Bank of India.
5. The first respondent- bank submitted that after availing the term loan amount, the appellant paid few monthly installments and committed default in repaying the monthly installments as agreed and violated the terms of loan agreement. The appellant failed to pay interest accrued to the loan account from time to time. The loan account of the appellant was classified as Non-Performing Asset and the same was transferred from the first respondent-bank to its Stressed Assets Recovery Branch on administrative reasons for taking necessary action for recovery of the outstanding loan amount together with interest.
6. The respondents submitted that the respondent no.2-bank had sent letter dated 17.10.2011 informing the appellant about the transfer of the loan account and requested her to pay the outstanding loan together with future interest and in default of payment of the amount, the second respondent would be constrained to take further steps for seizure and sale of the car in public auction. The second respondent-bank had not committed any illegality or irregularity in issuing the letter. Hence, prayed for dismissal of the complaint.
7. The appellant in support of her claim filed her affidavit and the documents A1 to A3. On behalf of the respondents, the City Case Officer of the respondent no.2 bank filed his affidavit and the documents, Exs.B1 to B5.
8. The District Forum dismissed the complaint on the premise that the appellant is a defaulter and in view of the provisions of the Term Loan Agreement the respondents are entitled to repossess the vehicle. The District Forum observed that the appellant cannot rely on the two decisions of the Hon’ble Supreme Court in view of ExB5, the statement of accounts and the decision of the Supreme Court in 2012 CPJ IV SC.
9. Aggrieved by the order of the District Forum, the complainant has filed appeal contending that the District Forum failed to consider the amount paid by the appellant to the respondents is more than the cost of the vehicle and that the finding of the District Forum that the petition, I.A.No. 165 of 2011 filed seeking permission to receive the insurance policy .It is contended that the District Forum failed to apply the ratio laid in ‘Suryapal Singh’s decision which is in favour of the appellant’s case and the District Forum failed to consider the decisions relied upon by the appellant.
10. The learned counsel for the both parties has filed written arguments.
11. The point for consideration is whether the order of the District Forum suffers from misappreciation of facts or law?
12. The appellant applied on 28.9.2005 for sanction of loan for purchased of Maruthi Car and the first respondent-bank sanctioned the term of loan of `2,25,000/- in terms of the Sanction Letter dated 28.09.2005. The appellant executed Term Loan Agreement on 28.09.2005 in favour of the respondent no.1-bank and the appellant’s husband stood as guarantor for repayment of the loan amount. The loan amount as provided by the Term Loan Agreement is repayable in 60 Equated Monthly Installments of `4,455/- each commencing from November,2009 till the entire loan amount is repaid, together with interest at 3.25% below the Stat Bank Advance Rate, the effective rate being 7% per annum with monthly rests. The interest as to the Stat Bank Advance Rate was made subject to change in rate of interest pursuant to instructions of the Reserve Bank of India from time to time.
13. Admittedly, after availing the loan amount, the appellant paid a few loan installments and thereafter she committed default in repaying the loan amount nor she did pay the interest accrued to the loan account. It is not denied that the first respondent-bank classified the appellant’s loan account as Non-Performing Asset and transferred the appellant’s loan account to the second respondent-bank. The second respondent-bank had sent letter dated 17.10.2011 to the appellant informing her about the transfer of her loan account from the first respondent-bank to it and called upon her to pay the outstanding loan amount together with future interest. The letter is made basis for filing the complaint by the appellant and it reads as under:
At your request the Bank through its PBB DILSHUKNAGAR Branch had sanctioned credit facilities of Rs.225000.00 to you on 10/7/2005 for the purchase of four wheeler car. In consideration thereof, you have executed security documents in favour of the Bank agreeing to abide by the terms and conditions mentioned therein. You have also hypothecated the vehicle purchased with the Banks finance in favour of the Bank and also authorized the Bank, its agents and nominees to enter any places at all times where the hypothecated article is kept to take possession thereof and/or sell by public auction or by private treaty on the occurrence of any circumstance in the opinion of the bank endangering the security.
2. As you have failed to adhere to the terms and conditions of the loan agreement and committed default in discharging the debt, the above loan account has been transferred to this Branch by the Bank on administrative reasons for taking necessary action for recovery of the Bank due from you.
3. You are hereby called upon to discharge the debt of rs.109227.94 due as on 17.10.2011 with further interest from 17.10.2011 + expenses there on within fifteen days from the date of this notice, failing which the Bank will be constrained to sell the vehicle by public auction and appropriate the net sale proceeds to your loan account. The bank shall take necessary steps for recovery of the shortfall if any after sale of the above hypothecated vehicle at your costs and consequences.
14. The learned counsel for the appellant has contended that the appellant paid an amount of `2,86,925/- towards loan amount with interest and subsequently she paid a sum of `30,000/- to clear the pending installments and requested the chief manager of to the second respondent-bank for one time settlement as she was ailing and her husband was suffering from stroke and chief manager of to the second respondent-bank had not agreed for the proposal for one time settlement of the loan account and thereby the appellant field the complaint before the District Forum for restraining the respondents from seizing the car except by due process of law and she based her claim on the two decisions of the Hon’ble Supreme Court, Viz., 1). in “ICICI Bank v. Prakash Kaur & Ors.”, III (2007) 2 SCC 711 and “Citicorp Maruti finance Ltd vs S.Vijayalaxmi“ decided on 14.11.2011.
15. The learned counsel submitted that the District Forum has overlooked the full bench decision and relied upon “Surya Paul Singh Vs Siddha Vinayaka Motor and Another “ reported in III (2012) CPJ, 4 (SC)
16. The learned counsel for the appellant further submitted that the District Forum has not considered the pleading of the complaint that the appellant paid the amount more than the cost of the car and she was paying the amount which shows her bonafides and he has contended that the respondents cannot say that there was no deficiency in service on their part as they failed to renew the insurance policy which amounts to deficiency in service on their part and the District Forum dismissed the petition I.A.No. 85 of 2012 though the insurance papers are necessary for the appellant to prove her case.
17. The learned counsel for the respondents has contended that in terms of the Term Loan Agreement , the respondents are authorized to repossess the vehicle and there is no illegality in the second respondent sending the letter dated 17.10.2011 to the appellant . He has submitted that the appellant approached for one time settlement of her loan account and considering her request the second respondent agreed for settling of the loan account for one time settlement for `95,000/- as against the outstanding loan amount of `1,10,380/-. The learned counsel submitted that the appellant agreed to pay the amount of `95,000/- towards one time settlement and thereafter without paying the amount she filed the complaint before the District Forum.
18. The learned counsel for the respondent further submitted that there is no averment in the complaint in regard to the insurance of the car and insurance papers and the appellant should not go beyond the pleadings and she should restrict her case to the pleading of the complaint. The learned counsel submitted that the Hon’ble Supreme Court in none of the decisions relied upon by the appellant prohibited the Banks from repossessing the hypothecated vehicles. He has submitted that the complaint is not maintainable.
19. Clause 11 of the Term Loan Agreement empowers the first respondent-bank to repossess the vehicle in case the appellant committed default in making payment of the loan installments. It reads as under:
“The Bank, its agents and nominees shall be entitled at all time to enter any place where the hypothecated article(s) is/are kept and on the occurrence of any circumstances in the opinion of the Bank endangering the security to take possession thereof and/or sell by public auction or by private treaty. Provided that the Bank shall be entitled at all times to apply any other money or moneys in its hand standing to the credit of or belonging to the Borrower in or towards payment of any amount for the time being payable to the Bank and to recover at anytime from the Borrower by suit or otherwise the balance remaining payable to the Bank. The Bank also reserves the right to note lien on other deposits of the Borrower as additional security for the loan.”
20. Thus, in terms of the Term Loan Agreement, the appellant acquiesced to the right of the respondent no.1-bank that in case there is default committed by her, the respondent can repossess the hypothecated vehicle. There is no dispute of the fact that the first respondent–bank transferred and authorized the respondent no.2-bank to realize the loan amount with accrued interest. The second respondent bank is the branch of the first respondent-bank. It cannot be termed as muscleman or unauthorized entity for the purpose of collection of the loan amount advanced by the respondent no.1-bank.
21. The respondent no.1-bank classified the appellant’s loan account as “Non-Performing Asset”. The appellant has not denied her loan account being classified as “Non-Performance Asset”. The first respondent-bank classified the appellant’s loan account as “Non-Performing Asset” and thereafter transferred the loan account to the second respondent bank. On receiving the notice from the second respondent-bank, the appellant approached its chief manager and requested him to accept for one time settlement of her loan account . Considering her request, the chief manager of the second respondent-bank accepted for one time settlement of the appellant’s loan account for `95,000/- as against the outstanding loan amount of `1,10,380/-. The appellant retracted from the commitment she made to the second respondent and proceeded to file the complaint against the respondents.
22. In reply to the contention of the learned counsel for the respondent that there is no averment in the pleading nor there is proof to show that there is deficiency in service on the part of the respondents, the learned counsel for the appellant submitted that the respondent being the owner of the vehicle until the ownership is transferred to the appellant, has the obligation to get renewed the insurance policy and its failure to take steps for renewal of the insurance policy amounts to deficiency in service on the part of the respondent and the District Forum dismissed the petition to receive the insurance policy obtained by the appellant.
23. The appellant has taken responsibility to insure the car comprehensively and protect the car by taking all precautions so as to see its value is not diminished. Clause 12 of the Term Loan Agreement does not only cast obligation on the appellant to get the car insured it would also relieve the first respondent-bank from the responsibility of taking steps for getting the insurance cover for the car. Clause 12 reads as under:
Wherever, a vehicle has been purchased out of the aforesaid loan, the borrower shall keep the vehicle comprehensively insured in his/her name with an Insurance Company approved by the Bank for the market value or to the extent of at least 10% over the loan amount outstanding, whichever is higher and the Bank’s interest as the hypthecatee should be noted in the certificate of insurance and the insurance policy. The Borrower shall produce to the Bank from time to time relevant policy or policies for its inspection and also proper evidence to the satisfaction of the Bank and the Borrower hereby undertakes punctually to pay the premia due for such insurance and to produce the receipts for the premia paid to the Bank for its inspection from time to time and if the Borrower should fail to keep insured the said vehicle or to produce such policy or policies and receipts to the Bank on demand, the Bank shall be at liberty but not bound to effect such insurance and pay such premia at the expense of the Borrower and all expenses to be incurred by the Bank in this connection will be made by debit to the Borrower’s loan account and will form part of the Borrower’s indebtedness to the Bank and secured fully by the hypothecation hereby created. The Borrower agrees that any sum received under any such insurance shall be applied in or towards liquidation of the amount due to the Bank on account of the said loan interest and other charges as aforesaid and in the events of there being a surplus the same shall be refunded to the Borrower.
24. Thus, the appellant cannot take shelter under the order of dismissal of the application, I.A.No. 85 of 2012 which would hardly bring any change in circumstances where the appellant became defaulter and proceeded for one time settlement and thereafter questioned the notice dated 17.10.2011 issued by the respondent no.2-bank on the premise that it implies attempt for forcible possession of the vehicle. The appellant has not pleaded any deficiency in service nor did she prove that the respondents had committed any act that fell below the prescribed standard.
25. The vehicle which was declared an NPA. The circular issued by the RBI in regard of classifying an asset as non-performance asset which reads as under:
“Master Circular of RBI-Prudential norms on Income Recognition , Asset Classification & Provisions pertaining to Advances:
2.Definitions:
2.1 Non-performing Asset:
2.1.1. An asset, including a leased asset, becomes non performing when it ceases to generate income for the bank.
2.1.2. A Non-performing asset is a loan or an advance where
i)------------------
ii)-----------------
iii)-----------------
iv)--------------
v)---------------
vi) the amount of liquidity facility remains outstanding for more than 90 days in respect of a securitization transaction undertaken in terms of guidelines on securitization date 1.02.2006.
2.1.3. Banks should classify an account as NPA only if the interest charged during any quarter is not serviced fully within 90 days from the end of the quarter.
26. It is mentioned in the circular that “an asset, including a leased asset, become non-performing when it ceases to generate income for the bank”. A NPA is defined as “ a credit facility in respect of which the interest and/or installment of principal has remained ‘past due’ for a specified period of time”. The specified period is reduced from four quarters in the year 1993 to two quarters in 1995 onwards. A non-performing asset is a loan or an advance where interest and/or installment of principal remain overdue for a period of more than 90 days in respect of a term loan and in respect of other accounts any amount to be received remains overdue for a period of more than 90 days.
27. The RBI directed the banks to classify the categories of NPAs based on the period for which the asset has remained non-performing and reliability of the dues as a)Sub-standard Assets, b) Doubtful Assets and c)Loss Assets. A sub-standard asset is one which is classified as NPA for a period not exceeding two years. A Doubtful Asset is one, which remained NPA for period exceeding two years and Loss Asset is one where the loss has been identified by the bank or internal or external auditors or the RBI inspection but the amount has not been written off wholly.
28. Clause 4.2.4. of the guidelines mandate that upgradation of loan account classified as NPAs be treated as standard account in case the borrower pays the arrears of interest and principal. The respondent-Bank is required to follow the prudential norms and can classify the account of the respondent as NPA subject to satisfaction of clause 2.1.3 which requires 90 days overdue norm.
29. Thus, in terms of the circular issued by the RBI, an asset to become or to be treated as an NPA, the interest remains unpaid for a period of 90 days. In order to brand the account as an NPA, the interest has to be remaining unpaid for ninety days. The appellant failed to pay a sum of 1 `1,11,544/- As such the vehicle can be regarded as NPA. We are not concerned whether the vehicle can be treated as NPA or otherwise as it would be a necessary parameter for the respodnents-bank to invoke provisions of securitization act which is not the domain of the complaint as it is filed under the provisions of the CP Act.
30. The learned counsel for the appellant would contend that the bank has no power to repossess the vehicle in terms of the loan agreement except by adopting the due course of law. The learned counsel for the appellant has contended that in view of the decision in Manager, ICICI Bank Ltd., Vs Prakash Kaur and Others” AIR 2007 SC 1349 recovery of the loan amount is to be made through legal means and not by hiring recovery agent, muscle men etc.
31. The Hon’ble Supreme Court had considered the power of the hirer and owner under the hire purchase agreement in “ICICI Bank v. Prakash Kaur & Ors.”, III (2007) 2 SCC 711 and “Citicorp Maruti finance Ltd vs S.Vijayalaxmi “decided on 14.11.2011. which read as under:
113. Prior to the decision in Prakash Kaur, the Apex Court in “Orix Auto Finance (India) Ltd. v. Jagmander Singh & Anr”., II (2007) CPJ 45 (SC)=II (2006) SLT 166=II (2006) BC 108 (SC)=(2006) 2 SCC 598, held as under :
“Essentially these are matters of contract and unless the party succeeds in showing that the contract is unconscionable or opposed to public policy the scope of interference in writ petitions in such contractual matters is practically non-existent. If agreements permit the financier to take possession of the financed vehicles, there is no legal impediment on such possession being taken. Of course, the hirer can avail such statutory remedy as may be available.”
In Prakash Kaur’s case (supra), the supreme court observed as under:
“Before we part with this matter, we wish to make it clear that we do not appreciate the procedure adopted by the Bank in removing the vehicle from the possession of the writ petitioner. The practice of hiring recovery agents, who are musclemen, is deprecated and needs to be discouraged. The Bank should resort to procedure recognized by law to take possession of vehicles in cases where the borrower may have committed default in payment of the installments instead of taking resort to strong-arm tactics.”
“A man’s self-respect, stature in society are all immaterial to the agent who is only primed at recovery. This is the modernized version of Shylock’s pound of flesh. No explanation is given regarding the interest charge and the bank takes cover under the guise of the holder of the card or loan having signed the agreement whose fine print is never read or explained to the owner.”
The Supreme Court has made certain suggestions to the finance institutes in regard to the steps taken at the time of repossession of the vehicle. The Apex Court held that
“Suggestions :
* Most of the non-banking financial institutions adopt the arbitration route for the purpose of getting a Commissioner of the Court appointed for seizing the vehicles.
* The most important aspect would be a broad guideline for fixing the targets, whether they be for lending or for recovery. This would result in a proper balance between the extreme differences of working conditions between the multinational commercial banks and nationalized and non-nationalized banks who are doing the very same credit business with dignity.”
.................................
“Additional inputs :
Considering the difficulties of the customers as well as banks, the concept to be developed is to create distinct and separate department for recovery. This should be manned by persons who will not resort to violence or force when they are in the process of recovery of the dues.”
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“In conclusion, we say that we are governed by the rule of law in the country. The recovery of loans or seizure of vehicles could be done only through legal means. The banks cannot employ goondas to take possession by force.” (emphasis supplied)
32. The Hon’ble Supreme Court though not passed a final order held in “Surya Paul Singh Vs Siddha Vinayaka Motor and Another “ reported in III (2012) CPJ, 4 (SC) that granting compensation in the matter of sale of reposed vehicle by the financier is not sustainable in law.
33. In Surya Paul Sing’s decision, several other decisions were referred to in holding that the power conferred on the financier in terms of agreement can be exercised without resorting to initiate proceedings before court of law.
34. In view of the decision in Surya Paul Sing’s case and in the light of the power conferred on the respondent bank by the default clause of the hypothecation agreement, the appellant cannot contend that the respondents have no power to repossess the vehicle. The District Forum has not committed any irregularity nor the findings returned suffer from any infirmity so as to make us interfere with the order passed by it.
35. In the result the appeal is dismissed confirming the order of the District Forum. There shall be no separate order as to costs.
MEMBER
MEMBER
Dt.04.10.2013
కె.ఎం.కె.*
