JUSTICE V.K.JAIN (ORAL)

            The complainant, who is petitioner in RP No. 1658 of 2014, purchased a truck and got the said truck financed from Indusind Bank, petitioner in RP No. 1452 of 2014 to the extent of Rs 10.2 lacs. The truck, according to the complainant, was worth Rs.12 lacs at the time it was purchased. There was default in payment of the loan taken by the complainant from the bank. The vehicle, according to the complainant was forcibly repossessed by the bank in March 2008. The vehicle was later sold by the bank for a price of Rs 4.55 lakhs on 20.11.2008. The complainant approached the concerned District Forum by way of a consumer complaint filed on 22.10.2009.

2.      The complaint was resisted by the bank which inter-alia stated in its written version that the complainant having defaulted in payment of the loan taken by him the bank officials approached him for demanding the outstanding amount. At that time the complainant expressed his inability to pay the outstanding amount and surrendered the vehicle to the bank on 19.06.2008 by way of a surrender letter duly signed by him. The vehicle was sold for Rs.4,55,000/- on 20.11.2008.

3.      The District Forum having dismissed the consumer complaint the complainant approached the concerned State Commission by way of an appeal. Vide impugned order dated 30.09.2013 the State Commission allowed the appeal and directed the bank to pay compensation quantified at Rs. 3 lacs to the complainant. Being aggrieved from the order passed by the State Commission both the parties are before this Commission. The bank is challenging the award of the compensation, whereas the complainant seeks enhancement.

4.      It is an admitted position that a loan of Rs 10.2 lakhs was taken by the complainant from the bank. The loan was repayable in installments. It is also an admitted position that the complainant had defaulted in timely payment of the installments, the last installment according to the bank, having been paid by him on 18.09.2007. Admittedly, no letter or notice was sent by the bank to the complainant informing him that he having defaulted in payment of the loan, the vehicle will be repossessed by the bank, in terms of the agreement executed by it with the complainant. The case of the bank is that the complainant had voluntarily surrendered the vehicle on 19.06.2008, by way of a surrender letter. I have carefully perused the alleged surrender letter dated 19.06.2008. This letter is a printed document in which blanks have been filled up, by writing agreement number, vehicle number, the date since which installments were due and the date of the alleged surrender. The case of the complainant is that the blank document had been obtained from him at the time of grant of the loan itself and there would be no reason for him to surrender the vehicle.

I am in agreement with the State Commission that the complainant was not likely to voluntarily surrender the vehicle to the bank. Even if the complainant was not in a position to service the loan, he would have himself looked for a buyer who would pay him the prevailing price of the truck, instead of leaving it to the bank to sell truck at whatever price it might get in the market. In the normal course of human conduct such a course of action was not likely to happen. In fact it is rather strange that the bank official was carrying the surrender letter with him at the time he approached the complainant for demand of the outstanding loan amount. The complainant, if he wanted to surrender the truck would have gone to the concerned branch of the bank and in the normal course the bank would have asked him to write it a surrender letter in his own hand and would also have got the said surrender letter witnessed from one or more persons. Therefore, I have no hesitation in confirming the findings of the State Commission that the alleged surrender never happened. The obvious inference would be that the vehicle was forcibly re-possessed by the bank when the complainant defaulted in servicing the loan taken by him. Another  important aspect in this regard is that the bank has not filed an affidavit of the bank official to whom the vehicle was allegedly surrendered. No such official was produced as a witness. If the vehicle was voluntarily surrendered by the complainant it would be surrendered to one or more bank officials. Therefore, the bank should have no difficulty in filing an affidavit of such an official to confirm the stand taken in the written version. Since no such affidavit was filed an adverse inference should necessarily be drawn against the bank that in fact the vehicle was never surrendered.

5.      The vehicle is alleged to have been sold by the bank on 20.11.2008. There is no evidence of the bank having conducted a public auction for the sale of the vehicle. There is no evidence of the bank having intimated the date of the proposed sale of the truck to the complainant. If the bank intended to be fair to the complainant the less expected from it was to intimate the complainant that since he had defaulted in payment of the loan, the vehicle would be surrendered at a particular place on a particular date. Had that been done, the complainant would have got an opportunity to participate in the process of sale of the vehicle or to find a suitable buyer who could bid for purchase of the truck. This clearly shows that the petitioner bank was acting in an absolutely opaque manner and no attempt was made to sell  the truck at a fair market price prevailing at that time. The vehicle in question was purchased in July 2006 for Rs. 12 lakhs. It was sold by the bank for Rs 4,55,000/-  after less than two and half years. This is a clear indicator that the vehicle was not sold at a fair market price since even after deduction of the depreciation the value of the truck was unlikely to fall to such a low level.

6.      The issue involved in this petition recently came up for consideration in RP No. 1790 of 2013 SHRIRAM TRANSPORT FINANCE CO. LTD. & ORS. Vs. PANNALAL BAGHEL Order dated 01.07.2020 and the following view was taken:-

“7.      In ICICI Bank Ltd. Vs. Prakash Kaur & Ors. (2007) 2 SCC 711, the petitioner purchased a truck getting it financed from ICICI Bank.  He having defaulted in payment of the instalments, the possession of the truck was taken by the Bank by use of force.  The truck having not been returned to him, a Writ Petition was filed by him, seeking registration of an FIR.  Disapproving the course of action adopted by the Bank, the Hon’ble Supreme Court directed the Bank to forthwith release the truck to the petitioner.  The Hon’ble Supreme Court was of the view that instead of taking resort to strong arm tactics, the bank should resort to procedure recognized by law to take possession of vehicle in cases where borrower itself defaulted in payment of instalments.  During the course of a separate judgment, Hon’ble Dr. Justice A.R. Laxmanan noted that the recovery/collection agents who are contractors hired by the banks, physically and mentally torture them and force them into paying the dues and the self-respect of a man and his stature in society is immaterial to such agents.  His Lordship also observed that many a times even notice is not given to the borrowers who purchased the vehicles on hire-purchase basis and the vehicle is seized in public places deliberately in order to cause embarrassment to the borrower.  In a subsequent decision CITICORPN. Maruti Finance Ltd. Vs. S. Vijalaxmi IV (2011) CPJ 67 (SC), a Three Judges-Bench of the Hon’ble Supreme Court reiterated as under:

“We reiterate the earlier view taken that even in case of mortgaged goods subject to Hire Purchase Agreements, the recovery process has to be in accordance with law and the recovery process referred to in the Agreements also contemplates such recovery to be effected in due process of law and not by use of force.  Till such time as the ownership is not transferred to the purchaser, the hirer normally continues to be the owner of the goods, but that does not entitle him on the strength of the agreement to take back possession of the vehicle by use of force”.

8.    Relying upon the aforesaid decisions, this Commission vide its order dated 13.03.2015 in R.P. No.3054 of 2014 (Manager, Shri Ram Transport Finance Co. Ltd. vs. R. Suresh & Ors.) inter-alia held as under:-

“8.      In our view, when a transporter finance company such as the petitioner before us, finances a vehicle and there is a default on the part of the borrower in servicing the loan taken by him, it must necessarily issue a notice to him expressing its intention to repossess the vehicle in exercise of the power conferred upon it under the loan agreement before the vehicle is actually repossessed by it.  The purpose behind insisting upon such a notice being given to the borrower is to give him an opportunity to approach the financer and either bring the payment if already made by him to the knowledge of the financer or to convince the finance that it was on account of reasons beyond his control that he could not service the loan and, therefore, the default committed by him may be condoned.  It is quite possible that the financer may get convinced from the circumstances so explained by the borrower and may not insist upon repossessing the vehicle, his primary objective being to recovery of loan given to the borrower and not to repossess the vehicle financed by it.  If a vehicle is repossessed, without giving such a notice to the borrower, not only it has the potential to disrupt the business or profession in which the borrower is engaged using the vehicle, it may also result in his image and reputation in the society being lowered on account of the abrupt, sudden and forcible seizure of the vehicle by the financer.  If a notice expressing intention to repossess the vehicle on the default of the borrower is given to him, he gets ample opportunity to prevent the proposed seizure by approaching the financer and either paying the amount which he was unable to pay alongwith appropriate interest and/or penalty on that amount or to dispose of the vehicle at his own level and repay the loan taken by him.  Therefore, in all fairness, the financer must give a

reasonable notice to the borrower before repossessing the vehicle financed by it and in no case the vehicle should be possessed by use of force.

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11. … In our opinion, the seizure of the vehicle in such circumstances constitutes deficiency in service causing tremendous mental torture and stress to the borrower who all of a sudden finds himself without the vehicle which he had purchased albit with the financial assistance taken from the lender.  The borrower in such circumstances does not get an opportunity to arrange the requisite finances to repay the amount which he defaulted in paying to the lender before the vehicle comes to be repossessed by the lender.  The mental torture and agony would be greater when the vehicle is repossessed in his absence.”

For the reasons stated hereinabove, the complainant/petitioner is entitled to appropriate compensation from the respondent for the aforesaid deficiency in the service.”

 7.      For the reasons stated hereinabove, I find no merit in the revision

petition filed by the bank and the same is hereby dismissed.

8.      As far as the complainant is concerned, in my opinion, the compensation awarded by the State Commission was fair and reasonable in the facts and circumstances of the case including that he approached the District Forum by way of a consumer complaint after about one and half years of the re-possession of the vehicle. Therefore, the compensation awarded by the State Commission does not call for any enhancement.  The revision petition filed by the complainant is also, therefore, dismissed with no order as to cost. Both the revision petitions stand dismissed accordingly.