GENERAL MANAGER, M/S. L & T FINANCE LTD. & ANR. vs RAMPADA MAITY

The complainant/respondent purchased a vehicle at the total cost of Rs.12,21,646/-, including loan of Rs.10,35,000/- taken from the petitioner company. The said loan taken from the petitioner was repayable in 47 monthly installments of Rs.29,713/- each. The complainant made payment of Rs.4,85,426/- to the petitioner towards repayment of the said loan. He however defaulted in further payment of the said loan, as a result of which, the vehicle was seized by the petitioner company on 12.06.2010, when it was transporting certain goods from Haldia to Kharagpur and the complainant was not present in the said vehicle. The case of the complainant is that the representative of the petitioner made his driver get down from the vehicle and sign an inventory list, whereafter the vehicle was possessed by them. This is also the case of the complainant that when he approached the concerned office of the petitioner company for release

of the vehicle, he was told that it would be released only if the entire outstanding amount was repaid by him. Alleging deficiency on the part of the petitioner in rendering services to him, the complainant approached the concerned District Forum seeking return of the vehicle along with compensation etc.

The complaint was resisted by the petitioner company primarily on the ground that since the complainant had committed default in repayment of the loan, it had over right to repossess the vehicle and accordingly it had instructed the repossession agents to take possession of the said vehicle. This is also the case of the opposite party that it had sent a letter dated 17.06.2010 to the complainant terminating the agreement and asking him to repay the entire loan amount within 7 days. It was further stated in the said letter that in the event of failure of the complainant to make payment of entire amount payable, the petitioner shall be constrained to sell the vehicle and adjust the sale proceeds towards satisfaction of its claim. Since the complainant did not respond to the aforesaid letter, the vehicle was sold on 17.08.2010 for a consideration of Rs.6,40,000/- and after adjusting the sale proceeds, there was an outstanding amount of Rs.1,43,796.66 in the loan account of the complainant.

The District Forum vide its order dated 03.08.2012 directed as under: "The OPs are directed to pay Rs.6,10,823/- to the complainant toward the value of the vehicle in question along with compensation Rs.1,25,000/- and litigation cost Rs.4,000/- within 45 days from the date of communication of this order. The OPs are allowed to adjust defaulted amount stood outstanding in the name of the complainant till 12.06.2010 without any interest over such defaulted amount. In case the OPs fails to comply with the order, the complainant is at liberty to execute the order in accordance with law in which case, the OPs will be liable to pay interest @ 8% p.a. over the total awarded amount from the date of this order till full and final settlement."

Being aggrieved from the order passed by the District Forum, the petitioner company approached the concerned State Commission by way of an appeal. Vide impugned order dated 28.07.2015, the State Commission dismissed the appeal filed by the petitioner. Being dissatisfied, the petitioner company is before us by way of this revision petition.

Admittedly, the agreement between the parties, Loan-cum-Hypothecation Agreement not a Hire Purchase Agreement. Therefore, the rights which are available to financer, under a Hire Purchase Agreement were not available to the petitioner company, though it is evident from a bare perusal of clause 13 of the said Loan-cum-Hypothecation Agreement that in the event of default, the petitioner could terminate the loan agreement and recover the arrears due upto the date of termination and future installments for the unexpired period, besides repossessing and selling the asset financed by it. The aforesaid rights did not become available to the financer before terminating the loan agreement. In the present case, there is evidence of the loan agreement having been terminated by the petitioner company at any time before the vehicle came to be seized. The case of the petitioner is that it had sent a letter dated 17.06.2010 to the complainant requiring him to make payment of the aforesaid amount aggregating to Rs.7,74,666/-. The fora below found that the aforesaid notice was not served upon the complainant, the same having been received by a person namely Biswajit Maity. It was also noticed that the A.D. card filed by the petitioner company did not bear any stamp or seal of the post office by which the said letter was allegedly delivered to the addressee. Moreover, this was not the case of the opposite party in the reply filed before the District Forum that the loan agreement was terminated by it vide the

aforesaid letter dated 17.06.2010. The case of the petitioner in the written statement filed before the District Forum was that the said agreement was terminated on 17.06.2010. If this so, the petitioner committed breach of the terms of the said loan agreement by repossessing the vehicle on 12.06.2010, five days before the alleged termination.

There is no evidence of any notice having been sent to the complainant, before repossessing the vehicle, that if he does not pay the outstanding amount, the vehicle would be repossessed by the petitioner.

Admittedly before selling the vehicle repossessed from the complainant, the petitioner company did not convey the date on which the said vehicle was proposed to be sold by it to the complainant. As a result, the complainant lost an opportunity to make a bid to purchase the vehicle repossessed from him. In our opinion, the petitioner company ought to have intimated the date of intended sale to the complainant so that he would be able to participate in the said sale process.

There is no evidence of any public notice having been given by the petitioner in a newspaper before selling the vehicle repossessed from the complainant. Therefore, it cannot be said that the vehicle was sold, following a fair and transparent process. This was yet another act of deficiency on the part of the petitioner in rendering service to the complainant.

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".

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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... 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, we are of the considered view that since there was a deficiency on the part of the petitioner company in rendering services to the complainant/respondent, the said company ought to pay suitable compensation to the complainant.

The next question which arises is what would be the fair compensation which the petitioner should pay to the complainant in the fact and circumstances of this case. Admittedly, the vehicle was used by the complainant for about two years before it came to be seized on 12.06.2010. The vehicle was purchased for a total cost of Rs.12,21,646/- and was sold for a consideration of Rs.6,40,000/-. The complainant had contributed less than Rs.2 Lakhs for purchasing the vehicle though he paid total sum of Rs.4,85,426/- to the petitioner. He also used the vehicle for about two

years, to earn his livelihood. The total cost to the complainant, considering the contribution and the repayment made by him, comes to about Rs.6,72,000/-. It transpired during the course of hearing, even after adjusting the sale price of the vehicle of Rs.6,40,000/- in the loan amount, the petitioner company was seeking to recover the balance amount of about Rs.1,43,000/- from him along with interest on that amount. Half of the compensation awarded by the District Forum has already been paid to the complainant. Considering all the facts and circumstances of the case, we permit the complainant to retain the amount already paid to him and also direct the petitioner company not to recover the balance amount of Rs.1,43,796.66 from the complainant, treating the aforesaid amounts as the compensation payable to the complainant. The revision petition stands disposed of with the aforesaid modification to the orders passed by the Fora below.