This case was originated out of CC/25/2019 which was heard by the then President of Jalpaiguri, D.C.D.R.C. who is now the President of Siliguri Circuit Bench of W.B. S.C.D.R.C. As a matter of natural justice, he is not to hear the same matter in his new capacity over the same issue. As a result, a request letter was sent from this office vide this office no.62/SCB/1E-15/2023 dated 13/2/2023 for constitution of Single Bench. Hon’ble President, W.B.S.C.D.R.C. vide its no. 320 (25)/2J-14/08 (Vol – 1) dated 27/2/2023 accorded approval/permission to form the Single Bench with the undersigned as Presiding Member.

The Case in brief is as follows: -

1. Ashim Sarkar, the respondent/complainant purchased one ALTO 800 SD Maruti car having chassis no. MA 3EUA61500 A79565, Engin No. F8DN, 5839507 becoming registration no. WB- 72- R 2895 on taking loan from Appellant/ OP, Mahindra and Mahindra Financial Services (hereinafter will be referred as M&MFS) on hypothecation basis and not on “HIRE – PURCHASE” Agreement.

2. The respondent/complainant continued to pay the EMI regularly from 10.07.2017 to 10/10/2018 (about 16 months) on regular basis. At the time of repossession of the car under reference by the REPO Agent engaged by  M&MFS being Appellant/OP in total claim was Rs.109060/- (Rupees one lakh nine thousand sixty) only out of which total payment cleared by the Respondent/Complainant was Rs. 87,220/- (Rupees eighty-seven thousand two hundred twenty) only. So, the total outstanding was Rs.21,840/- (EMI – 5460 x 4 = Rs.21,840/- (Rupees twenty-one thousand eight hundred forty) only. In other words, at the time of incident the Respondent/Complainant default for 4 instalments (5460 x 4) = Rs.21,840/- (Rupees twenty-one thousand eight hundred forty) only.

3. The Respondent/Complainant became defaulter from Nov., 2018 and a sum Rs. 21,840/- (Rupees twenty-one thousand eight hundred forty) only become outstanding dues to the Appellant/ OP (M&MFS) at the time of the repossession of the said car. The Respondent/Complainant have approached to the Appellant/ OP praying for time on humanitarian ground so that time could be extended for repayment of outstanding dues.

4. The Appellant/ OP allowed time up to 11/03/2019 with the understanding that the Respondent/Complainant will clear at least some of the outstanding dues meanwhile though there was no written correspondences. The Respondent/Complainant received on 09/3/2019 (a lawyer’s letter bearing Memo. No. DN/FEB/2019/JRC 3116 dated27/2/2019) on behalf of the Appellant/OP which inter alia says to clear up the dues of Rs.21480/- (Rupees twenty-one thousand eight hundred forty) only within 7 (seven) days from the receipt of this letter and to continue payment of future instalments failing which his client (M&MFS) being the Appellant/OP will initiate the legal proceedings. 

5. But, unfortunately, on 10/03/2019 just one day after the receipt of the letter under reference the car was taken up/snatched away by one Sudipmoy Nandi, REPO agent engaged by the Appellant/OP (M&MFS) from Rubel Das, Driver on behalf of the Respondent/Complainant to realize the outstanding dues of Rs, 21,800/- (Rupees twenty-one thousand eight hundred) only without waiting for the completion of 7(seven) days as per terms and conditions of the said letter dated 27/2/2019(i.e. up to 16/3/2019). In other words, the financier (M&MFC) took the harsh, bitter and final decision to re-possess the said car while plying on the road by his REPO agent without waiting up to 16/3/2019. Thus, the Appellant/OP (MMFC) transgressed his own commitment and terms & conditions by violating the time period of 7 (seven) days of the said letter dated 27/2/2019. This shows that the Appellant was in too much hurry and guided by pre-occupied notion/decision without waiting for 7 (seven) days.
6. Thus, the principles of natural justice have been violated in two ways.

1. The Appellant/OP itself violated the its own commitment and terms & conditions  as per content of the letter under reference dated 27/2/2019. It took the severe and stern action of repossession of the said car on the very second day i.e., 10/3/2019 without waiting the completion of 7 days (up to 16/3/2019). Thus, the Appellant/O.P. acted in pre-occupied decision.

2. The right of self-defence on the part of respondent/complainant was not allowed. The principles   of “AUDI ALTERAN TARTEN” i.e., the rule of fair hearing of the Other Side was not complied with. It means that no one should be punished unheard/unrepresented. Thus, the principles of natural justice of “to be heard” has been violated.

7. The said car which was snatched away by the REPO agent of Appellant/OP was not returned to the Respondent/Complainant.  Thus, the main source of earning/livelihood was stopped. The Appellant/OP, thus, deprived the Complainant/ Respondent of his means of livelihood/earning, his bread & butter. This harsh step of repossession of the car under their finance could have been resorted to the final & extreme step when all other steps/possibilities of loan recovery fail, not as first, primary and only step.

8. The Appellant/OP did not allow the Respondent/Complainant to hear anything in his defence. Thus, due process law has not been followed by the Appellant/OP by snatching away of the car through forceful means by REPO Agent which is against the guidelines of RBI.

9. The Appellant/OP could have awaited 7 days i.e., up to 16/03/2019 and thereafter, they could have taken the repossession/snatching away of the said car after completing all the legal steps as they deem fit and proper. Moreover, there is no conclusive proof that the Appellant/O.P. issued Notices to the Respondent/O.P. from the date of possession (10/3/2019) and date of Auction, for repayment of outstanding dues.

10. The cause of action was in West Bengal (Dist. Jalpaiguri where the Respondent/Complainant lives) since the Respondent/Complainant resides in Jalpaiguri and availed loan from the M&MFC, which is situated also in West Bengal and repossession of the car was also taken place in West Bengal.  So, there is no illegality, material irregularity or jurisdictional error in this matter. Hence the Ld. DCDRC, Jalpaiguri and subsequently of Siliguri Circuit Bench of WBSCDRC has the full jurisdiction to hear the instant case.

Decisions with Reasons

During the arguments, the Ld. Advocate on behalf of the Appellant/OP submitted few judgements of Hon’ble Supreme Court which are discussed below:-

 In Chiranjit Singh Chaddah and Others Vs. Suthir Mehra (2001) SCC 417, Hon’ble Supreme Court gave the right to the financier for repossession of the vehicle but this is applicable only in HIRE PURCHASE Agreement.

The M.D., ORIX Auto Finance (India) Ltd. Vs. Jagminder Singh and Others (2006), 2 SCC  598, the Hon’ble Apex Court held that in case of HIRE PURCHASE Agreement, it gave the power to hirer to take repossession of the car. 

Anup  Sarma Vs. Bholanath Sharma and Others (2013) 1 SCC 408, the Hon’ble Supreme Court held that the purchaser remains  mere trustee/bailee on  behalf of the financial institution and ownership remains with the owner.

In Bharathi Knitting Co. Vs DHL World Wide Express Courier Division of the Air Freight Ltd., 1996 (4SCC704) Hon’ble Supreme Court held that the Respondent should be bound by the terms and conditions of the contract. In case of default, the financier should have the right to repossess and sell the vehicle. Thus, in respect of “HIRE PURCHASE” Agreement, the financier has the right to take repossession of the car, but that too, as a final and last resort when dialogue fails. Here also the borrower who became defaulter, should  be given reasonable time for repayment, by not taking the car from his possession as it is only the source of income for his livelihood as well as to clear up his outstanding dues.

In K. A. Mathai alias Babu Vs. Kora Baby Kutti & five Ors. the Hon’ble Apex Court held that   it could not be said that financier has committed any offence by taking possession of the vehicle under “HIRE PURCHASE” Agreement if the hirer fails to pay instalments.

In City Corp. Maruti Finance Ltd. Vs. Vijay Laxmi – 10(2012) 1 SCC, Justice A. Kabir of Hon’ble Supreme Court held that till 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 the possession of the vehicle by use of force. The guidelines which had been laid down by RBI as well as Appellant/Bank itself, in fact, support and make a virtue of such conduct. If any action is taken for recovery in violation of such guidelines of RBI as well as the Appellant/Bank or against the principles as laid down by the Court, such an action can be struck down.   

Ld. Advocate on behalf of the Respondent/Complainant argued that his client was not given sufficient chance/time for repayment and the car was snatched away from the road on plying condition without giving any chance/time to hear the cause of such outstanding dues and this violated the principles of “AUDI ALTERAN TARTEN” (i.e., right to be heard).

It is true that in “HIRE PURCHASE” Agreement, the financier is the real owner. This has been upheld in different judgements of the Hon’ble Supreme Court in Haranjit Singh Chadda, K L Jahar & Co., Anup Sharma, etc. 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. However, such repossession cannot be taken by recourse physical violence, assault and criminal intimidation. Nor can such possession be taken by engaging gangsters, goons, musclemen as so-called recovery agent. Moreover, serving notice upon the hirers before taking possession of the vehicle is mandatory. Here the Appellant committed mistakes by engaging REPO Agents and by not serving upon hirer any prior notice before such repossession.  

Let us be specific regarding the terms and conditions of the Agreement signed by both the parties.

Pt. 3 (a) of the terms and conditions of the Agreement signed by Appellant/OP and Respondent/Complainant deals with hypothecation and allows inspection of the said car/ not repossession. In the instant case, the car was purchased being financed by M&MFC being the Appellant/OP on hypothecation scheme and not on “HIRE PURCHASE” scheme. Therefore, rulings/orders of the Hon’ble Apex Court which are passed in respect of “HIRE PURCHASE” scheme may not be applicable in respect of vehicle loan extended on hypothecation basis.

Pt. 6 of the terms and conditions of the Agreement deals with event of default: In case of non – payment/ delayed payment or if the Loan becomes overdue the Appellant/OP (M&MFC) could have resorted to criminal prosecution against the defaulter (Respondent/Complainant) but cannot take away plying vehicle from the road by employing REPO Agenet. In ICICI Bank Vs. Prakash Kant & Nine Ors. (2007) 2 SCC 711, the Hon’ble Apex Court highly deprecated the practice of snatching of the plying vehicle by engaging 9 (nine) REPO Agents who are the musclemen even if the borrower might have committed defaulter in payment of the instalment. The Hon’ble Apex Court observed that this practice (of taking away the car from the road by the REPO Agents) needs to be deprecated and discouraged.  It is crystal clear that the Appellant/OP (M&MFC) had transgressed the spirit of the order of the Hon’ble Apex Court by snatching away of the plying car from the road by employing REPO Agents/musclemen which are against the guidelines of the RBI. In M&MFS (Appellant) Vs. Nizamuddin (Respondent) Civil Appeal No. 8043 of 2022 dated 04/11/2022, J J M R Shah & M M Sundaresh observed that as the hypothecated vehicle was detained/seized and thereafter sold which was found to be illegal, the Respondent/Complainant shall be entitled to compensation/loss suffered because of not plying of the vehicle seized and sold illegally.

Pt. 13 of the terms and conditions of the Agreement  deals with arbitration & conciliation clause wherein all disputes, claims, etc. shall be settled by arbitrator/conciliator as per Arbitration & Conciliation Act, 1996. The order of the said arbitrator/conciliator will be final on all parties. But, in the instant case, the Appellant/OP (M&MFC) violated the terms and conditions of the Agreement by not referring the case to the Arbitrator/Conciliator though it was the signatory of the said Agreement.                                     

 Considering all the pros and cons of the case, but the Appellant/OP committed a series of mistakes/wrongs which made him liable/answerable under CP Act, 1986.

If the Appellant/OP waited up to 16/03/2023, the Respondent/Complainant could have cleared up some of the outstanding dues if not the total dues thus the Appellant/op acted against the principle of natural justice by not providing / allowing 7 (Seven days) as envisaged in its letter dated 27/02/2019 under reference.

Not only that, the Appellant/OP also violated its own terms and conditions of the Agreement by not referring the case to the Arbitrator/Conciliator, not resorting to criminal prosecution/civil procedure as applicable.

Even during the holding auction, the Respondent/Complainant was not given any chance to participate though he has the first priority to take part in such auction. It is also doubtful whether the said auction was made after wide publicity through printing and electronic media, etc. Here also the Respondent/Complainant was deprived of his natural right since the Respondent/Complainant was neither informed nor participated in the auction.

We should not forget that even if repossession is permissible under the terms and conditions of the Agreement, repossession of the car should be the extreme step and last resort where of the other means/ steps fails. Since, repossession means deprivation of the source of income on the part of Respondent & thus loss of the source of livelihood and debarring him (the Respondent/Complainant, Loanee) of his source of income to make repayment of the dues though he has cleared as many as 16 (sixteen) installments amounting Rs. 87,220/- (Rupees eighty-seven thousand two hundred twenty) only. He is not the habitual defaulter as he cleared 16 (sixteen) instalments consecutively and then became defaulter due to some medical problems of his family. Ld. Lower Forum acted legally with no materiel irregularity and with no jurisdictional error. It is also doubtful whether sufficient publicity was made before auction of the said car and it is not proved conclusively that the Respondent/Complainant was served prior notice to participate in the said Auction.

Thus, the appellant’s action by the prepossession of the vehicle by REPO Agents without waiting for 7 (seven) days as per the terms and conditions of its own letter dated 27/02/2019 (received by the respondent/complainant) on 09/03/2020 is against the principles of natural justice, and deficiency in service and negligence. Moreover, taking repossession of the car without complying with the terms & conditions of the Agreement (Hypothecation) is the glaring example of unfair trade practices.

Even if the said Case was financed under “Hire purchase Agreement”. The financier should have severed notice to the Respondent/Complainant to clear the payment of outstanding dues, even then the financier could not take repossession/ snatching of the said car plying on the road by forceful means/by employing REPO Agent. Here, it is questionable whether the snatching of the car from the road in plying conditions comes under the term “Legal Action” as per the letter dated 27/2/2019 of the Ld. Advocate on behalf of the Appellant/OP (M&MFC).

Hon’ble Apex Court in ICICI Bank Vs. Santi Devi Sharma observed that repossession of the vehicle (by the financier) on ground of default is unjustifiable and unreasonable since it is a coercive measure.

                                                                               Hence, it is ordered

That the case of the Appellant/OP fails to justify the case after contest but without cost.

That Respondent/Complainant should get Rs.30,000/- (Rupees thirty thousand) only as compensation for mental agony, unfair trade practices, negligence, deficiency in service, etc. and Rs.5,000/- (Rupees five thousand) only as litigation cost.

The Appellant/OP should pay the above-mentioned 2 (two) amounts to the Respondent/Complainant within one month from the receipt of this letter failing which 10% interest per annum on the said amount will be charged till the date of its realization.

Thus, the Order of the Ld. DCDRC, Jalpaiguri stands modified to the above extent.

Let the Copies of this Order be served to both the Parties free of cost by hand/speed post-delivery.

Let the Copy of this Order be sent to the Ld. DCDRC, Jalpaiguri immediately.

Statutory deposit, if any, may be released after observing all formalities and procedures.

Thus, the Case is hereby dropped.