BEFORE A.P STATE CONSUMER DISPUTES REDRESSAL COMMISSION AT HYDERABAD
F.A.No.89 OF 2011 AGAINST C.C.NO.553 OF 2010 DISTRICT FORUM-III HYDERABAD
Between:
HDFC Bank Limited, rep. by its Manager
4th Floor, Lala Landmark, 5-4-94 to 97
Ranigunj, M.G.Road, Secunderabad
Appellant/opposite party
A N D
Mr.Syded Khaleeq UR Rehaman
s/o Syed Habeeb UR.Rehaman
Aged 32 years, Occ:Business
H.No.19-4-281/9/406/8, Sanjya
Gandhi Nagar, Nawabsab Kunta
Hyderabad
Respondent/complainant
Counsel for the Appellant Sri J.Lokesh Reddy
Counsel for the Respondent Sri Md.Muneeruddin
QUORUM: SRI R.LAKSHMINARASIMHA RAO, HON’BLE MEMBER
AND
SRI THOTA ASHOK KUMAR, HON’BLE MEMBER
WEDNESDAY THE FIFTH DAY OF SEPTEMBER
TWO THOUSAND TWELVE
Oral Order (As per Sri R.Lakshminarasimha Rao, Hon’ble Member)
***
The opposite party in the complaint is the appellant. The respondent filed complaint seeking the cost of the vehicle with interest and compensation to the extent of Rs.50,000/- and costs.
The respondent purchased two wheeler Hero Honda Splendor bearing registration number AP 12 F-6452 for consideration by raising loan a sum of Rs.39,100/- from the appellant-bank and contributing the balance amount of Rs.10,000/- from his earnings. The appellant-bank issued loan repayment schedule of EMI @ Rs.1396/- for 36 months commencing from 5.11.2006 and ending on 5.10.2009.
The version of the respondent is that the appellant-bank had not furnished him the copy of loan agreement and he paid an amount of Rs.37,692/- for the period from 5.11.2006 to 5.06.2009 and for the period the amount payable is Rs.44,672/-. The recovery agents of the appellant-bank forcibly seized the vehicle parked at his house without issuing prior notice and they misbehaved with his wife. The respondent got issued notice dated 5.08.2009 requesting the appellant-bank to accept four installments amount and release the vehicle and the appellant-bank refused to receive the notice. The appellant-bank sold the vehicle without issuing pre-sale notice to the respondent. The respondent sought for refund of the amount of Rs.30,649/-.
The claim was contested by the appellant-bank on the premise that the respondent is not a consumer as defined in Section 2(10(b) and 2(1)(d) of the C.P.Act. The respondent had not purchased any goods nor availed service of the appellant-bank. The cost of the vehicle is Rs.47,700/- and the margin money paid by the respondent is Rs.8,600/-. The complaint is not maintainable as the respondent is using the vehicle for commercial purpose. The respondent availed loan of Rs.39,100/- vide loan account bearing number 10643152 and agreed to repay the amount in 36 EMI @ Rs.1396/-.On the date of repossession of the vehicle , i.e., on 25.06.2009 the respondent was due an amount of Rs.20,409/- inclusive of the EMIs and other charges.
The respondent has not come forward to pay the outstanding due and the appellant-bank sold the vehicle on 23.07.2009 for an amount of Rs.27,500/-and after adjusting the sale proceeds to the loan account, the respondent was due an amount of Rs.2,530/- as on 23.07.2009. As per clause 8 of the Agreement, the appellant-bank has right to repossess the vehicle and sell it in case of default on the part of the respondent.
The respondent in support of his case, filed his affidavit and the documents,ExA1 to A24 as also he filed his wife’s affidavit and on behalf of the appellant-bank its deputy manager(legal) filed his affidavit and the documents,ExB1 to B4.
The District Forum allowed the complaint on the premise that the appellant-bank forcibly seized the vehicle and sold it without issuing notice before repossession and sale of the vehicle.
The opposite party-bank has filed appeal contending that the respondent had been negligent in making payment of the loan installments from October,2008 til June 2009 and violated the terms of the loan agreement and that the account of the respondent has become NPA as the due amount was not paid after a period of 90 days. It is contended that the appellant-bank issued notice on 18.06.2009 informing the respondent that he is due an amount of Rs.30,907.28 which he was required to pay within a period of seven days and on his failure to pay the amount, the vehicle would be taken possession . As the respondent did not pay the amount, the appellant-bank had taken possession of the vehicle on 25.06.2009. It contended that the respondent had not paid even 29 monthly installments and he used the vehicle for a period of 35 months and the appellant-bank has power to repossess and sell the vehicle.
The points for consideration are :
i) Whether the repossession of the vehicle by the appellant-bank is justified?
ii) Whether the respondent is entitled to any amount from the appellant?
iii) To what relief?
POINT NO.1: The respondent purchasing the Hero Honda Motor Cycle bearing registration number AP 12 F-6452 for consideration of Rs.47,700/- by raising loan a sum of Rs.39,100/- from the appellant-bank and contributing the balance amount of Rs.8,600/- from his earnings is though disputed by the respondent, the cost of the vehicle and the margin money contributed by the respondent are evident from loan sanction letter and statement of account. It is not disputed that the loan amount is repayable in EMIs @ Rs.1396/- over a period of 36 months commencing from 5.11.2006 and ending on 5.10.2009.
The respondent paid an amount of Rs.38,262/-as seen from the statement of account and the amount paid by him is equivalent to 28 EMIS of Rs.1396/- each. 8 installments remained unpaid of which the amount covered under four cheques forms part and the four cheques were dishonoured. The respondent claimed no notice of bouncing of the four cheques while the appellant-bank had made default committed by the respondent not only as shield to defend its action of repossession of the vehicle as also made basis for sale of the vehicle.
The learned counsel for the respondent contends that the vehicle which was declared an NPA became good asset. He draws support from the notice issued by him on behalf of the respondent requesting the appellant-bank to permit to pay four installments. He contends that the appellant had not put the respondent on notice of the bouncing of four cheques issued in discharge of part of loan amount. In this regard, he has taken us through the circular issued by the RBI 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.
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. Admittedly, there is no communication from the appellant-bank about the dishonour of four cheques issued by the respondent. In order to brand the account as an NPA, the interest has to be remaining unpaid for ninety days. As such the vehicle cannot 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 appellant bank to invoke provisions of securitization act which is not the domain of the complaint as it is filed under the provisions of the CPAct.
The terms and conditions of the loan agreement are relied upon by the learned counsel for the appellant-bank in support of his contention that the appellant is entitled to repossess the vehicle on default committed by the respondent in making payment of the loan installments. Before adverting to the terms of the loan agreement it is essential to determine whether the appellant –bank issued notice before it proceeded to repossess the vehicle.
The learned counsel for the respondent has placed reliance on the decision of the Hon’ble High Court in “M/s Sravan Dall Mill P.Ltd vs Central Bank of India “ in W.P.No.18089 of 2006 decided on 11.09.2009.
In that case, the notice issued under Section 13(2) of SARFASI Act was questioned on the premise that no measures contemplated under Section 13(4) of the Act were taken. The operation of the account of the Company was not satisfactory and not in accordance with the terms of sanction and the Company requested for time for liquidating the outstanding debt.The classification of the account as NPA was challenged on the premise that the directions and guidelines issued by the RBI were not followed. The High Court extracted circular of the RBI which dealt with the NPA.
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 prinicipal 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.
The RBI directed the banks to classify the categories of NPAs based on the period for which the asset has remained non-performing and realisability 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 Dobutful 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.
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 learned counsel for the respondent has contended that the appellant-bank should follow the prudential norms and can classify the account of the respondent as NPA subject to satisfaction of clause 2.1.3 which requires 90days overdue norm.
Section 13.2 of the SARFASI Act reads as under:
“Where any borrower, who is under a liability to a secured creditor-----subsection (4).
The necessity to issue notice would arise when the bank has classified the account as NPA. The appellant bank has contended that it has issued notice. However, it remains a fact that the period of 60 days granted by Section 13.2 of the SARFASI Act is not completed by the time the appellant put the vehicle for sale.
The District Forum observed that the appellant bank had not issued notice before repossessing the vehicle as also it failed to issue any pre-sale notice. The learned counsel for the appellant-bank would contend that the bank had issued notice on 26.06.2009 and 27.07.2009. Except a postal receipt, the appellant had not produced any copy of notice said to have been issued prior to the date of repossession of the vehicle. As such the repossession of the vehicle cannot be held justifiable.
The learned counsel for the appellant would contend that the bank has power to repossess the vehicle in terms of the loan agreement. The fact remains that the appellant has not issued notice before repossessing the vehicle and before selling the vehicle. On both occasions the appellant-bank failed to issue notice to the respondent. The District Forum has rightly held that the appellant deprived the respondent an opportunity to participate in auction. It is also pertinent to note that the respondent got issued notice expressing his readiness to pay four installments and requesting the appellant bank to accept the amount and release the vehicle.
The learned counsel for the respondent has placed reliance on various decisions of the State Commissions, National Commission and the Hon’ble Supreme Court in support of his contention that the seizure and sale of hypothecated vehicle without notice is against law. He has relied upon the following decisions:
1.---2.—3.------4.----.5----.6----.7---.8-----.
The vehicle was three years old by the time the loan agreement was terminated. The respondent paid an amount of Rs38,262/-. There has been dispute as to the date of repossession of the vehicle. The appellant contends that it has repossessed the vehicle on 25.06.2009 whereas the respondent submits that the vehicle was seized on 16.06.2009. The outstanding balance as on 18.06.2009 as could be seen from the notice is Rs.20,407/- on 18.06.2009 and the amount mentioned due in the same notice as on 25.06.2009 is Rs.30,908/-. The amount due cannot be Rs.30,908/- within a span of one week.
The appellant-bank sold the vehicle for an amount of Rs.27,500/-. The learned counsel for the respondent challenged the sale of the vehicle for an unreasonable consideration. The vehicle was three years old by the time it was sold. The cost of the vehicle is Rs.49,100/- according to the respondent and it is Rs.47,700/ as per the version of the appellant-bank. The cost of the vehicle can be adjusted by depreciation value @5% per year , the vehicle has to be sold for an amount of Rs.------ Rs.47,700-7,155= Rs.40,545/-. The respondent was due as on the date of termination of the agreement is Rs.30,908/-. If the amount due is deducted from the value of the vehicle, the respondent would be entitled to Rs.40,545/-- Rs.30,908/- = Rs.9,637/-. We are inclined to make it to Rs.10,000/-. Thus the amount of Rs.30,000/- awarded by the District Forum is liable to be reduced to Rs.10,000/- and the rest of the order is upheld.
In the result, the appeal is allowed modifying the order of the District Forum and reducing the amount to be refunded from Rs.30,000/- to Rs.10,000/- and confirming the rest of the order. No costs.
MEMBER
MEMBER
Dt.05.09.2012
KMK*
