Citi Bank N.A. vs State of Haryana and Another

M.L. Singhal, J.—This is a criminal miscellaneous petition filed u/s 482 of the Criminal Procedure Code, by Citi Bank N. A. through its Assistant Vice President, Shri Surinder Kumar, seeking the quashing of FIR No. 758, dated October 17, 1993, u/s 382 of the Indian Penal Code, lodged by Harmit Singh, respondent No. 2, at PS Central Faridabad (Haryana). For understanding the controversy, the recitation of the facts is necessary to be given.

The petitioner is a body corporate constituted under the law prevailing in the USA and having its registered office at 399, Park Avenue, New York-10043, USA, and, inter alia, a branch office at Jeevan Bharati Building, Connaught Place, New Delhi. The petitioner is operating, inter alia, a citimobile finance scheme under which it lends money to the beneficiary payable at an equated monthly instalment for the purchase of car. Harmit Singh approached and requested the petitioner for the grant of a loan for the purchase of a Maruti Standard car under the aforesaid scheme. Respondent No. 2 agreed to repay the loan in 36 equated monthly instalments with interest. He secured the loan against the said vehicle and agreed to adhere strictly to the repayment schedule. A sum of Rs. 1,31,000 was sanctioned as loan to respondent No. 2 by the petitioner. The loan agreement dated January 22, 1992, was executed to which respondent No. 2 is a signatory. The loan was subject to the terms and conditions as stipulated in the agreement and other documents which respondent No. 2 agreed to and accepted by way of his endorsement on the said documents. The respondent''s loan account was maintained by the petitioner which is B4-146-38493. In pursuance of receiving the loan from the petitioner, respondent No. 2 purchased a Maruti car which was registered as DL-2CC-1687. This car was hypothecated in favour of the petitioner-bank. Among others, an irrevocable power of attorney authorising and empowering the petitioner to deal with the vehicle or sell it off or otherwise parting with the same in any manner whatsoever as the bank deemed fit and proper was executed. This power of attorney is irrevocable since the consideration has been paid to respondent No. 2. This authority was to be used only in case of default and recall of loan amount. It was agreed between the parties that in the event of default in making payments of equated monthly instalments to the petitioner, the petitioner shall take possession of the vehicle. The relevant clause of the agreement is reproduced as under :

"The bank is entitled to take repossession of the hypothecated vehicle whether the entire loan amount has been recalled or not, whenever in the absolute discretion of the bank there is likelihood of due money not being paid and/or the vehicle is likely to be transferred to defeat the security and the due amounts of the bank."

The bank''s right to sell the vehicle will be exercisable only after seven days'' period commencing from the taking over of the possession of the vehicle. It is averred that Harmit Singh-respondent No. 2 failed to adhere to the financial discipline of repayment of the loan amount either towards principal or interest charges. Several cheques issued by respondent No. 2 for repayment of the loan were dishonoured/returned unpaid with the remarks "refer to drawer/insufficient funds". Respondent No. 2 was served with reminders to pay the amount which was due from him due to dishonouring of the cheques. Respondent No. 2 failed to abide by the terms of the contract though persistent requests were made to him. Respondent No. 2 failed to make the vehicle available for inspection to the officials of the petitioner-bank in consonance with the terms of the hypothecation. He made the last payment on August 25, 1993, for the month of May, 1993. As per the books of account, he was required to pay a sum of Rs. 87,145.22 towards principal, interest and other dues as on October 31, 1993, per the certified copy of the statement of account, annexure P-4. Notice was issued to him prior to the repossession of the car by the petitioner-bank. Respondent No. 2 did not reply to the notices and deliberately violated the equated monthly instalment schedule. After taking repossession of the car on September 18, 1993, forwarded communication to PS Central Faridabad, annexures P-6 and P-7. It is further averred that although the repossession of the car hypothecated with the petitioner-bank was eminently justified by the default clause incorporated in the loan agreement, respondent No. 2 chose to lodge FIR No. 758, dated October 17, 1993, at PS Central Faridabad, annexure P-9 u/s 382 of the Indian Penal Code. This FIR was lodged by respondent No. 2 maliciously with an ulterior motive for wreaking vengeance for having addressed communications to respondent No. 2 calling upon him to repay the instalments due and reminding him of the default committed by him. In this case mens rea is totally absent inasmuch as the right was given to the financier to seize the vehicle and it did not amount to taking possession of the vehicle dishonestly because such an act does not fall in the category of cases in which the person seizing gains possession wrongfully nor the hirer loses possession wrongfully so as to make such act of seizure an offence falling within the ambit of Section 379 of the Indian Penal Code. The hirer by his conduct became disentitled to the possession of the vehicle.

Respondent No. 2 contested this petition urging that on September 18, 1993, the car was snatched illegally by 6-7 hooligans who overtook the car in their jeep and forcibly stopped him when he was travelling with his father in this car, They told him that they had the permission of the police to take possession of the car. They could not show any such permission to him. Out of them, four persons forcibly got into the car and drove it away. The terms of the loan agreement are onerous inasmuch as they tilt heavily towards the petitioner-bank. They are harsh towards the loanee in that the bank can recall the loan at any time. It was denied that the petitioner-bank made any demand for inspection of the car. It was denied that there was any condition in the agreement incorporating that the car was to be made available for inspection on regular basis even without any demand by the petitioner-bank. The vehicle was taken forcibly out of his possession and the petitioner-bank had no power to authorise any person to forcibly take the vehicle from his custody. The petitioner-bank presented the cheques to the bank almost after four months of the due dates for the payment of equated monthly instalments and sometimes the petitioner would present two post-dated cheques in one month when there would be no money available in the account of respondent No. 2 with the bank for payment. It is well known that the businessman''s money is always in circulation and respondent No. 2 could not anticipate such irregular presentation of the cheques by the bank, Presentation of these post-dated cheques at small intervals of three days or seven days was unjustified, He had paid more than Rs. 85,000 by August 1993, even as per the statement of account, annexure P-4, attached by the petitioner with this petition and was always ready and willing to pay the balance amount.

I have heard Mr. H.S. Mattewal, senior advocate, for the petitioner, Mr. R.S. Cheema, senior advocate, for respondent No. 2 and Mr. Raman Gaur, advocate, for the State of Haryana.

Section 382 of the Indian Penal Code reads as follows :

"382. Theft after preparation made for causing death, hurt or restraint in order to the committing of the theft--Whoever commits theft, having made preparation for causing death, or hurt, or restraint, or fear of death or of hurt, or of restraint, to any person, in order to the committing of such theft, or in order to the effecting of his escape after the committing of such theft, or in order to the retaining of property taken by such theft, shall be punished with rigorous imprisonment for a term which may extend to ten years, and shall also be liable to fine."

It is thus clear that mere taking away out of one''s possession will not constitute theft. It is only dishonestly taking away out of one''s possession that there will be an offence of theft. In this case to my mind the petitioner-bank felt that they were entitled to take repossession of the vehicle hypothecated with them in their discretion when there was likelihood of due money not being paid. In my opinion, the bank misconstrued Clause 9 of the loan agreement, The bank could take repossession of the vehicle hypothecated with them either if there was likelihood of due money not being paid, or the vehicle was likely to be transferred to defeat the security and the due amounts of the bank. In this case, the respondent had repaid Rs. 45,563.51 as principal plus Rs. 40,164.49 as interest as is clear from the loan account, annexure P-4. Assuming that a sum of Rs. 85,436.49 was still outstanding, almost the same amount had been paid. The total loan taken by the respondent No. 2 for the purchase of the car was Rs. 1,31,000. He had executed a "demand promissory note" for Rs. 1,31,000 with interest at 1,25 per cent. per annum above the Reserve Bank of India rate with a minimum of 16 per cent. He had thus bound himself to repay the loan through demand promissory note executed by him. Hypothecation of this car was another way of enforcing the recovery of loan against respondent No. 2. The vehicle could be repossessed by the petitioner if there was likelihood of the vehicle being transferred to defeat the security and the due amounts of the bank. To me, it seems that the petitioner took over the possession of the vehicle after respondent No. 2 had defaulted in the payment of the equated monthly instalments assuming that it was in their absolute discretion to take over possession of the vehicle when there was likelihood of the dues not being paid. It was held in Sardar Trilok Singh and Others Vs. Satya Deo Tripathi, that where the truck was sold under a hire-purchase agreement and the financier seized the truck on default in payment of instalments and the purchaser launched criminal prosecution, launching of criminal prosecution was an abuse of the process of the court since the dispute was essentially of a civil nature.

In Sardar Trilok Singh and Others Vs. Satya Deo Tripathi, the dispute between the parties related to the purchase of truck from Harbans Singh accused No. 5, on March 29, 1973. Agreement was entered into between the respondent and his then partner on the one hand and the Sardar Finance Corporation on the other which firm was represented by appellant No. 1 as its partner in accordance with which about half the money was advanced by the said firm which enabled the respondents to acquire the truck. According to the complainant''s case, the amount advanced by the said firm was by way of loan while according to the case of the appellant it was on the basis of a hire-purchase agreement entered into between the parties in support of which formal agreement was also executed. The complainant''s case further was that he had paid back two monthly instalments the total of which was Rs. 3,566 and the third instalment was payable on July 31, 1973, but before that, all the accused in a high-handed manner during his absence came to his house and under the threat of arms took away the truck and thus they were said to have committed various offences including the offence of dacoity. It was held that the dispute raised by the respondent was purely of a civil nature even assuming the facts stated by him to be substantially correct. Money must have been advanced to him and his partner by the financier on the basis of some terms settled between the parties. In my opinion, the facts of the case Sardar Trilok Singh and Others Vs. Satya Deo Tripathi, are pari materia with the facts of the case in hand. Here also, for the purchase of car, the bank advanced a loan to the respondent No. 2. Respondent No. 2 hypothecated the car with the bank to ensure repayment. To ensure repayment, respondent No. 2 executed a demand promissory note in favour of the bank. The bank could enforce the hypothecation agreement for the recovery of the said amount if there was likelihood of the loan amount being not repaid by assuming possession of the car. If the bank assumed possession of the car, that was in the exercise of bona fide belief that there was likelihood of the loan not being repaid or the vehicle was likely to be transferred to defeat the security. It was held in Shriram Transport Finance Co. Ltd. Vs. Khaishiulla Khan, that in an act of seizure, it becomes abundantly clear that mens rea is totally absent in the person seizing the vehicle and as by mutual agreement, the right has been given to the financier to seize the vehicle. It does not amount to taking possession of the vehicle because such an act does not fall in the category of cases in which the person seizing gains possession wrongfully nor the hirer loses possession wrongfully so as to make such act of seizure an offence falling u/s 379 of the Indian Penal Code.

It has been brought to my notice that the car was made over to Harmit Singh, respondent No. 2, on spurdari by the magistrate. It shall remain absolutely with respondent No. 2 and he is discharged of the terms and conditions incorporated in spurdaginama executed by him before the Magistrate. The petitioner-bank could seize this car from the possession of respondent No. 2 if respondent No. 2 had made tangible attempt for the sale of this vehicle and thus tried to dissipate the hypothecation of this vehicle in favour of the petitioner.

For the reasons given above, this criminal miscellaneous petition succeeds and is accepted. FIR No. 758, dated October 17, 1993, u/s 382 of the Indian Penal Code registered at PS Central, Faridabad, is quashed. If advised, respondent No. 2 may file civil suit for damages against the one who was not representative of the bank who took away possession of the car in question from him unlawfully.