1.      This Revision Petition No.2048 of 2016 challenges the order of Maharashtra State Consumer Disputes Redressal Commission, Circuit Bench at Nagpur (‘State Commission’) dated 25.01.2015. Vide this order, the State Commission dismissed FA No.139/2013 and affirmed the District Consumer Disputes Redressal Forum, Nagpur (‘the District Forum’) order dated 01.08.2013.

2.      As per the Report of the Registry, there is 14 days delay in filing of this Revision Petition. For the reasons stated in the IA/17232/2017, the delay is condoned.

3.      For Convenience, the parties in the matter are being referred to as mentioned in the Complaint before District Forum.

4.      Brief facts of the case, as per the complainant, are that on 20.12.2011, the complainant purchased a Mahindra Maxima vehicle from the non-applicant. The vehicle was purchased for Rs.3,63,947 and registered as MH-40 N-6615. He paid Rs.63,947 upfront, while the remaining Rs.3,00,000 was financed by the Opposite Party (OP). The loan was to be repaid through monthly instalments of Rs.8,950. He repaid the loan instalments regularly until April 2012. A payment of Rs.2,000 was made on 19.07.2012, along with a fine of Rs.411 as late payment. However, when the instalment was overdue by 1½ months, without issuing any written notice, OP seized the vehicle on 24.07.2012 by sending labourers to his house and taking the vehicle while the complainant's daughter was ill. At the time of seizure, the vehicle allegedly contained Rs.56,200 in cash, a music system worth Rs.10,500, and important documents. He lodged a complaint with Patansaongi Police Station on the same day. The next day, when he went to OP office, he was threatened and driven out. A legal notice was issued to OP on 30.07.2012. In response, OP demanded Rs.30,000, which included current and outstanding instalments, along with expenses to retrieve the vehicle. The complainant approached the Consumer Forum, seeking to return of the seized vehicle and Interest from 24.07.2012 for delay in return and compensation of Rs.2,00,000 for physical and mental agony.

5.      In reply, the OP confirmed that the complainant had purchased the vehicle from Unnati Motors for Rs.3,16,972 and obtained a loan of Rs. 3,00,000. He paid Rs.16,972 as down payment, and the loan was to be repaid by 20.12.2015 in EMIs of Rs.8,950. The OP denied seizing the vehicle without notice and stated that the complainant was irregular in making payments, often delayed by several months, and that the vehicle was seized after he was 3 months in arrears. His claim of Rs.56,200 being in the vehicle during seizure is false but acknowledged presence of music system. His police report filed on 28.06.2012, did not mention any cash. They had sent a notice on 31.07.2012 offering the complainant to take back the vehicle after paying the outstanding instalments and related expenses. However, he did not comply with this offer. They acted as per terms of the loan agreement and there is no deficiency in service. OP reiterated that if he paid the outstanding Rs.70,664 along with other dues, they were still willing to return the vehicle. The OP invoked arbitration clause in the agreement and sought the complaint be referred to arbitration.

6.      The District Forum in its Order dated 01.08.2013, partly allowed the complaint with the following order:

“ORDER

1.  The complaint of the Complainant is partly allowed.

2.  The opposite party finance company is ordered that they should recover the outstanding loan amount along with interest upto 20/7/2012 from Complainant and on receipt of said order within 30 days should handover the vehicle to Complainant and obtain acknowledgment from Complainant that it is received in good condition.

3. The opposite party finance company should submit accounts up to 20/7/2012 to the Complainant and should obtain acknowledgment from Complainant towards receipt.

4.  The opposite party finance company is also ordered that after 30 days from receipt of order they should recover balance outstanding amount from Complainant @ Rs.8950/- by extending the period of repayment as per revised schedule and should given an acknowledgment to Complainant towards its receipt.

5.  The opposite party finance company should pay to the Complainant an amount of Rs.10,000 towards mental agony and Rs.2,000) towards expenses of complaint within 30 days from receipt of copy of this order.

6. The Complainant is also ordered that henceforth he should pay the amount of installments to the opposite party regularly as per revised schedule.”

(Extracted from True Translated Copy)

7.      Dissatisfied with the District forum order, the OP filed FA No. FA/13/139 and the State Commission vide order dated 25.01.2015 dismissed the said Appeal and Affirmed the Order of the District Forum dated 01.08.2013 with the following order:

6.  Feeling aggrieved by that order, the original OP has preferred this appeal. We have heard learned advocate Shri. M.R Johrapurkar appearing for the appellant and respondent in person and perused the material placed before us by both the parties in appeal.

7. The learned advocate of the appellant submitted in brief that the complainant\respondent was aware of the schedule of payment and it was not necessary to issue notice to him by the OP on his failure to pay the installments before seizure of the vehicle. According to him on failure of the complainant to make the payment of installments on time, the appellant has rightly seized the vehicle. He also submitted that the Forum had no jurisdiction to entertain the complaint in view of arbitration clause in the agreement and this fact was not considered by the Forum. According to him, on the date of taking of possession i.e. on 24/7/2012, it was found that the payments were made after a long time and thus the Forum erred in holding that only installments of one and half months were due from the complainant. He therefore submitted that impugned order cannot be sustained in law and it may be set aside. He relied on the observations made in the case of Sheokumar Singh Vs. Ashok Layland 2012 (I) CPJ 433 (NC) In that case, there was no evidence that the vehicle was forcibly repossessed by the respondent. The installments were also not deposited on time. There was breakdown and trouble in the engine and replacement of drivers cabin. It is held that no blame can be attributed to the respondents and deficiency in service is not proved.

8. The respondent, on the other hand, argued that the vehicle was forcibly seized from his possession by the OP that too without issuing notice and, therefore, the Forum has rightly partly allowed the complaint. He, therefore requested that the appeal may be dismissed.

9. The perusal of copy of the loan agreement particularly, clause Nos.11 & 12 shows that in case of default on the part of borrower/complainant in payment of installments, the lender/OP will be entitled to declare all sums due and on the basis of such declaration, if the borrower fails to make the payment in full within seven days thereof, the lender may at his sole discretion, terminate the agreement and demand from the borrower the vehicle and thus take its possession or issue notice to the borrower to pay the amount due with interest.

10. Thus, in any case, as per said agreement, it was necessary for the OP/appellant to declare the amount due and to give seven day's time to the complainant/respondent to repay the amount due before taking any further action particularly before the seizure of the vehicle. However, admittedly before seizure of the vehicle, no such declaration of the amount due and the demand notice giving seven days time was given by the OP/appellant to the complainant/ respondent. Therefore we find that the OP seized the vehicle in contravention of the aforesaid terms and conditions of the loan agreement and thus it has rendered deficient service to the complainant/respondent.

11. We also find that though the complainant did not make payment of some installments on time, but he subsequently made payments with interest and delay charges as stated above and the Forum has rightly considered the same. There was no huge amount due from the complainant. However, it was mandatory for the OP to give seven days time to the complainant by giving notice to pay the dues and then, to seize the vehicle on his failure to pay the same. Therefore, we hold that the Forum has rightly partly allowed the complaint giving appropriate directions as noted above to the OP and also to the complainant. The aforesaid decision relied on by the learned advocate of the OP/ appellant is not applicable to the facts and circumstances of this case since they are totally different from those of this case. Moreover, in view of the well settled law the Forum had jurisdiction to entertain and decide the complaint even though there is arbitration clause in the loan agreement.

12. We, therefore, hold that the impugned order is legal, correct and proper and needs no interference. Hence the appeal deserves to be dismissed.

ORDER

1. The appeal is dismissed.
2. No orders as to cost.
3. Copy of the order be furnished to both the parties free

          of cost.”

8.      In his arguments, the learned counsel for petitioner/OP reiterated the grounds of the revision petition and asserted that the respondent (complainant) did not pay the loan instalments in time and was an admitted defaulter when the vehicle was repossessed by the OP. The non-payment of instalments justified the repossession of the vehicle. The petitioner provided an affidavit regarding valuation and condition of the vehicle asserting that the vehicle’s condition was properly documented. The District Forum's order altered the terms and conditions of the payment schedule, which is not permissible under law. He maintained that changing the payment schedule would alter the relationship between the petitioner (finance company) and its customers, which is against the principles of law of contracts. The core of the petitioner’s argument was that the relationship between the respondent and the petitioner was based on the loan agreement, which included the payment schedule. Any modification of the terms of agreement or payment schedule by the District Forum is contrary to established legal principles, as it infringes upon the contractual terms agreed upon by both parties. He contended that the District Forum made a manifest error in passing the final order. Since the payment schedule is an essential part of the loan agreement, any alteration in it violates the liabilities and is therefore not justifiable. He also argued that there is an arbitration clause in the agreement and the Sole Arbitrator had already passed the award vide Order dated 15.03.2013. He relied upon the following judgments:

i. Magma Fincorp Ltd. vs. Rajesh Kumar Tiwari, (3030) 10 Supreme Court Cases 399;

ii. Balmukand Joshi vs. Suresh Rathi Securities Pvt. Ltd., 2023 SCC OnLine NCDRC 8;

iii. Kiran Singh And Ors. Vs. Chaman Paswan And Ors., (1954) 1 SCC 710;

iv. Mahindra & Mahindra Financial Services Ltd. vs. Sevakram Bhujangrav Zod & Anr., Arbitration Proceeding No.Mah/2013/1027 of 2013, decided on 15.03.2013;

v. Venkataraman Krishnamurthy And Anr. vs. Lodha Crown Buildmart Pvt. Ltd., (2024) 4 SCC 230;

v. Christi Sahitya Prasarak vs. Cholamandalam Investment & Finance Co. Ltd., 2022 SCC OnLine NCDRC 430.

9.      On the other hand, the respondent/complainant appeared in person, argued in favour of concurrent findings of the fora below.  He submitted that he filed the Consumer Complaint before the District Forum on 03.10.2012 which is much prior filing of the application by the petitioner/OP before the arbitrator on 29.12.2012.  He sought to dismiss the present Revision Petitioner with costs.

10.    I have examined the pleadings and associated documents placed on record, including the orders of learned District Forum and the State Commission and rendered thoughtful consideration to the arguments advanced by the learned Counsel for the petitioner and the respondent/complainant who appeared in person.

11.    The main issue to be determined is whether there was non-compliance of the terms of agreement between the parties? Whether the seizure of the vehicle by the OP is as per procedure prescribed? And if there any non-compliance, what is the liability of the parties?

12.    Admittedly, on 20.12.2011, the complainant purchased a Mahindra Maxima vehicle for Rs.3,63,947. He paid Rs.63,947 upfront and the remaining Rs.3,00,000 was financed by the OP. The loan was to be repaid through EMIs of Rs.8,950. The complainant asserted to have paid the loan instalments regularly until April 2012. A payment of Rs.2,000 was made on 19.07.2012, along with fine of Rs. 411 for late payment. However, when the instalment was overdue by 1½ months, without issuing any written notice, the OP seized the vehicle on 24.07.2012 by sending labourers to his house. He also alleged that at the time of the seizure, the vehicle contained Rs.56,200 cash, a music system worth Rs.10,500 and important documents. He lodged a complaint with Patansaongi Police Station on the same day. The next day, when he went to OP office, he was threatened and driven out. A legal notice was issued to the OP on 30.07.2012. In response, the OP demanded Rs.30,000, which included current and outstanding instalments, along with expenses to retrieve the vehicle.

13.    It is admitted position of the complainant that there was some default in payment of loan instalments due to OP. The Notice for default is stated to be dated 31.07.2012 granting 7 days’ time to pay the dues. The issue of the notice as claimed was refuted by the complainant. Even if such Notice was contemplated or issued, by then the lapse of the complainant to pay the EMI was for about 1½ months. It was argued by the learned counsel for the petitioner/ appellant before the learned State Commission that the complainant was aware of the schedule of payment and it was not necessary to issue notice to him by the OP on his failure to pay the installments before seizure of the vehicle. According to him on failure of the complainant to make the payment of installments on time, the appellant has rightly seized the vehicle. Accordingly, considering the loan agreement, terms of payment, payment schedule, payments made and the above facts, the learned District Forum and the State Commission considered that no notice was issued to the complainant before seizure of the vehicle and thus the seizure was without due compliance of the procedure. The judgment of the Hon’ble Supreme Court in the case of M/s. Magma Fincorp Ltd. Vs. Rajesh Kumar Tiwari, Civil Appeal No.5622 of 2019 decided on 1.10.2020 wherein it has held as under:

“87. The question raised by the financier in this appeal, that is, whether the financier is the real owner of the vehicle, which is the subject of a hire-purchase agreement, has to be answered in the affirmative in view of the law enunciated by this Court in Charanjit Singh Chadha v. Sudhir Mehra, (2001) 7 SCC 417 : 2001 SCC (Cri) 1557 , K.L. Johar & Co., K.L. Johar & Co. v. CTO, AIR 1965 SC 1082 and Anup Sarmah v. Bhola Nath Sharma, (2013) 1 SCC 400 : (2013) 1 SCC (Civ) 513 : (2013) 1 SCC (Cri) 51. The financier being the owner of the vehicle which is the subject of a hire-purchase agreement, there can be no impediment to the financier taking possession of the vehicle when the hirer does not make payment of instalments/hire charges in terms of the hire-purchase agreement. However, such repossession cannot be taken by recourse to physical violence, assault and/or criminal intimidation. Nor can such possession be taken by engaging gangsters, goons and musclemen as so called recovery agents.”

…

“90.    In a case where the requirement to serve notice before repossession is implicit in the hire purchase agreement, non-service of proper notice could tantamount to deficiency of service for breach of the hire purchase agreement giving rise to a claim in damages. The complainant consumer would be entitled to compensatory damages, based on the assessment of the loss caused to the complainant by reason of the omission to give notice.  Where there is no evidence of any loss to the hirer by reason of omission to give notice, nominal damages may be awarded.”

14.    In the recent judgment of the Hon’ble High Court of Judicature at Patna in the case of Dhananjay vs. The Union of India & Ors. Vs. The State of Bihar & Ors., Civil Writ Jurisdiction Case No.3456 of 2021 and other connected matters, decided on 19.05.2023 wherein it has been observed and directed as under:

64. Having discussed the entire facts and circumstances of the case and the laws on the subject, this Court would make it clear that so far as the allegations against the Banks and Financial Institutions that they had forcibly seized/ repossessed the vehicles is concerned, this Court, instead of dwelling much upon that issue in the present proceeding, leaves it open for the Investigating Agency to look into the complaints of the petitioners and investigate them independently and in accordance with law. This Court has mainly concentrated on the plea of the Banks and Financial Institutions that they can seize and repossess the vehicle without taking recourse to law and legal procedures as envisaged under the Act of 2002 and the Rules framed thereunder. Thus, even as the allegations of forceful seizure and possession has been taken note of, the same would not come in the way of an independent investigation. This Court has found that at least in one case (C.W.J.C. No. 16155 of 2021) a first information report being Sadar P.S. Case No. 22 of 2023 dated 08.01.2023 has been lodged by the petitioner’s husband. In case other petitioners have also lodged any complaint with the respective police station, the same will be registered and duly investigated. It is still open to the petitioners to lodge their respective complaint with the jurisdictional police station within whose jurisdiction the vehicle in question has been seized and repossessed allegedly by use of force.

65. Since this Court has come to a conclusion that the covenants in the loan agreement of these cases are at best creating a ‘security interest’ in the ‘secured asset’ i.e. the vehicle in favour of the Banks and Financial Institutions, as the case may be, this Court directs that the Banks/Financial Institutions who are contesting respondents in these cases shall henceforth exercise their power to seize and repossess the vehicle only in accordance with the provisions of the Act of 2002, and the Rules framed thereunder and the RBI guidelines. Their right to seize or repossess is not in question, it is the manner in which it is being exercised is illegal, hence, they cannot continue with the same.

66. The Superintendent of Police of all the districts in the State of Bihar are directed to ensure that within their jurisdiction no recovery agent of the Bank and Financial Institution may take the law into their hands, intercept the vehicles on way and takes possession of the vehicle in default without an order of the competent court of law. Any seizure/repossession of the vehicle in default may be given effect to only in accordance with the law and the procedure established by law;

67. In all such cases where the vehicles have not been sold, the petitioner(s) and the Bank/Financial Institution through it’s authorized representative shall sit together and reconcile the account to determine the amount due in the loan account, however, the Bank/Financial Institution shall not charge any interest for the period during which the vehicle remained in seizure and they will treat the Covid-19 period in accordance with lockdown notification. Such reconciliation be made within a period of four weeks from today whereupon the petitioner(s) shall pay 30% of the outstanding amount and get release of the vehicle after giving an undertaking that he will pay the rest of the 70% of the outstanding amount with applicable interest from the date of handing over the possession of the vehicle till the date of payment in suitable installments as may be decided by the Banks/Financial Institutions. In the meantime, the petitioner(s) shall continue to pay the current EMI, failing which it will be open to the Bank/Financial Institution to proceed against the petitioner(s) in accordance with the provisions of the Act of 2002 and the Rules framed thereunder to re-possess the vehicle.

68.      In the cases where the vehicle has been sold to a third party and the Bank/Financial Institution is not in a position to restore the vehicle, they would be liable to pay the petitioner(s) to the extent of the value of the vehicle(s) as per their insurance value on the date of their seizure. The said amount shall be adjusted against the outstanding vehicle loan and thereafter if any surplus comes out the same will be made available to the petitioner. It will be open for the petitioners, if so advised to challenge the accounts furnished by the Banks/Financial Institutions and claim any compensation etc. for the loss arising out of seizure of their respective vehicles before appropriate court/forum.

69. Since the action of the Banks/Finance Companies are found illegal, the petitioners who have been made to contest this case shall be entitled for cost of litigation. Accordingly, this Court directs that each of the contesting respondents i.e. Banks/Financial Institutions would be liable to pay a sum of Rs. 50,000/- (fifty thousand) as cost of litigation to the respective writ petitioners within a period of 30 days from the date of receipt/production of a copy of this judgment.

70. These writ applications are disposed of accordingly.”

15.    It is settled in law that if due process of law has not been followed as per the agreement, then the seizure is illegal. At the same time, it is undisputed that on 20.12.2011, the complainant purchased a Mahindra Maxima vehicle for Rs.3,63,947 and registered as MH-40 N-6615. He paid Rs.63,947 upfront and the remaining Rs.3,00,000 was financed by the OP as per loan agreement dated 22.12.2011. The loan was to be repaid through monthly instalments of Rs.8,950. He repaid the loan instalments until April 2012. Thereafter, there was some default in payment of loan dues and the OP repossessed the vehicle and dispute arose. It is also a matter of record that the assessed value of the vehicle as on 04.10.2017 was Rs.85,000 and the OP admitted having sold away the said vehicle. Therefore, having sold away the vehicle, the order for receiving payment and handing over of the said vehicle is infeasible to be executed. Admittedly, the complainant had paid Rs.63,947 upfront and obtained loan of Rs.3,00,000 from OP. As per Para 26 of the District Forum order dated 01.08.2013, the complainant paid Rs.41,990 towards instalments from 20.01.2012 to 20.05.2012, before the vehicle was repossessed on 24.07.2012. In any case, about 13 years have elapsed since the purchase of the vehicle. Considering the non-compliance of the procedure in seizure as well as disposing of of the vehicle in dispute during the course litigation, rendering the order orders of both the fora unenforceable, the complainant needs to be compensated.

16.    The order of the learned District Forum and the State Commission are accordingly modified as below:

ORDER

1. The Opposite Party shall pay the Complainant Rs.63,947 paid by him as upfront cost to purchase the vehicle, along with simple interest @9% per annum from 20.12.2011 till the date of complete payment, within one month from the date of this order. In the event of delay beyond one month, the interest applicable for such extended period shall be @ 12% per annum.

2. The Opposite Party shall pay a lumpsum compensation of Rs.1,00,000 to the Complainant for the deficiency in service and loss sustained by the complainant in the transaction, within one month from the date of this order. In the event of delay beyond one month, the interest applicable for such extended period shall be @ 12% per annum.

3. The Opposite Party shall pay the Complainant Rs.25,000 as cost of litigation.

17.    The Revision Petition No.2048 of 2016 is disposed of with above orders. 

18.    All pending Applications, if any, also stand disposed of accordingly.