SATBIR SINGH vs H D F C BANK LTD & ORS

M. Shreesha, Member

[1] Challenge in this First Appeal under Section 19 of the Consumer Protection Act, 1986 (for short the "Act") by the Complainant, is to order dated 21.11.2012, passed by the State Consumer Disputes Redressal Commission, Haryana, Panchkula (for short the ''State Commission'') in Complaint Case No. 54 of 2011. By its impugned order, the State Commission dismissed the Complaint on the ground that under the Hire Purchase Agreement, it is the financer, who is the owner of the vehicle and therefore, taking possession of the vehicle on the ground of non-payment of instalment is the legal right of the financer.

[2] Succinctly put, the brief facts which are material to the case are: that the Complainant is an Agriculturist and purchased a Canter Eicher for an amount of Rs. 5,24,300/-, taking a loan of Rs. 2,40,320/-, from the Opposite Parties. The Complainant had paid an amount of Rs. 2,83,680/- to the Opposite Parties for purchase of the said Eicher Canter. The Opposite Parties had taken 20 blank cheques of Central Co-operative Bank, Kaithal and informed the Complainant that they would deposit the cheques only in the event of the Complainant failing to pay the EMIs of Rs. 12,016/- per month.

[3] The Complainant pleaded that he had purchased the Canter for the purpose of earning his livelihood. After receiving the first instalment of Rs. 12,016/-, the first Opposite Party, returned the cheque No. 0164871 to the Complainant on 19.1.2006 and endorsed receipt on the reverse of the cheque.

[4] It was pleaded by the Complainant that on 2.12.2006, the first Opposite Party forcibly took possession of the said Vehicle from the Complainant''s son. The Complainant averred that he had paid all the due instalments on time and that he had paid Rs. 1,39,630/- for 11 months though the total instalments amounted to Rs. 1,32,176/- only.

[5] The Complainant lodged a police Complaint on 26.3.2007 stating that the agents of the Respondent Bank forcibly and illegally seized his vehicle. The Complainant produced his preliminary evidence before the Judicial Magistrate, First Class, Kaithal who summoned the Recovery Agent of the HDFC Bank vide order dated 26.7.2007. The Complainant averred that his case is still pending with JMIC, Kaithal.

[6] The Complainant filed a Complaint before the District Forum, Kaithal on 13.12.2006, which was dismissed on the ground of jurisdiction. Thereafter, the Complainant preferred Appeal No. 1444 of 2007 before the State Commission against the Order dated 1.5.2007. By this order, the State Commission set aside the order of the District Forum and allowed the Complaint filed by the Complainant vide order dated 20.09.2010. Against the order of the State Commission dated 20.09.2010, the first Opposite Party filed a Revision Petition No. 625 of 2011 before this Commission and this Commission remanded the Complaint back to the District Forum for deciding the matter afresh in accordance with law. After remand of the case by this Commission, the District Forum, Kaithal once again dismissed the Complaint vide its order dated 10.10.2011 on the ground of jurisdiction. Against the Order dated 10.10.2011, the Complainant preferred an Appeal No. 1541 of 2011 and this Commission vide its order dated 18.11.2011, gave liberty to the Complainant to file a fresh Complaint on the same cause of action in the State Commission.

[7] The Complainant pleaded that the act of the Opposite Parties in forcibly and illegally seizing the vehicle on 2.12.2006 inspite of payment of instalments, amounts to deficiency of service and therefore, sought direction to the Opposite Parties as follows: "To handover the Eicher Canter 1059 bearing registration no. HR-64-1732 or to make the payment of the Vehicle in question i.e.

Rs. 5,24,000/- alongwith interest @ 18% from 2.12.2006 till the date of payment;

To hand over the blank cheques, blank performa, blank stamp papers as well as some blank papers taken at the time of granting the loan to the complainant;

To handover the details of the account of the complainant;

To pay compensation to the tune of Rs. 15 lacs

(Rs. Fifteen lacs) on account of harassment, humiliation and loss of reputation and further be paid Rs. 50,000/- as legal expenses and misc. expenses to the complaint".

[8] The Opposite Parties filed their reply stating that the District Forum has no jurisdiction to entertain this complaint and that the Complainant is not a consumer because the vehicle in question has been purchased for commercial purpose and that as per the agreement entered into between the Complainant and the Opposite Parties, all disputes arising out of or relating to the agreement including any collateral documents, shall be subject to the exclusive jurisdiction of a competent court in the city where the lending office of the Bank is situated and no lending office is situated at Kaithal, therefore, the District Forum, Kaithal has no jurisdiction. It was further pleaded that as the amount prayed for is more than Rs. 20 lakhs, the District Forum has no pecuniary jurisdiction. The State Commission observed as follows: "It is an admitted case between the parties that the vehicle in question was purchased by the Complainant on 9.12.2005. It is also not disputed that a down payment of Rs. 2,83,680/- was paid by the complainant at the time of purchase of the vehicle and a loan of Rs. 2,40,320/- was taken by the complainant from the OPs. Such a controversy had arisen before the Hon''ble Supreme Court in case Suryapal Singh vs. Siddha Vinayak Motors & Another, CPJ (June) 2012 page 8 SC wherein it was held that:

"Under the Hire Purchase Agreement, it is the financer who is the owner of the vehicle and the person who takes loan retains vehicle only as bailee/trustee, therefore, taking possession of the vehicle on the ground of non-payment of instalment has always been upheld to be a legal right of the financer".

The instant case is fully covered by Suryapal Singh case .

As a sequel to our aforesaid discussions, we are of the considered view that there is no merit in the complaint. Hence, finding no merit in the complaint it is dismissed".

[9] Aggrieved by the said Order, the Complainant preferred this Appeal.

[10] The short question arising for consideration is whether on the facts found by the State Commission, extracted above, the Finance Company was justified in repossessing the vehicle by use of force, without due notice before sale?

[11] The aspect of ''Hypothecation'' under consideration in this case is covered by a Catena of decisions of the Hon''ble Apex Court. In Citicorp Maruti Finance Ltd. vs. S. Vijayalaxmi, 2012 1 SCC 1, a three Judge Bench of the Hon''ble Supreme Court has reiterated that even in case of the mortgaged goods, 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 by due process of law and not by use of force.

[12] It is, therefore, trite that even though the hire-purchase agreement or Loan-Cum-Hypothecation agreement may give a right to the banker/money lender/financial institution to take possession of the vehicle, but they have no power to resume the vehicle by use of force. They are obliged to follow the statutory remedy as may be available under the law.

[13] At the outset, we observe from the record that the Agreement executed between the Appellant/Complainant and the Respondent Bank is a ''Vehicle Loan Agreement'' and the said vehicle is hypothecated to the Bank and the terms of hypothecation are clearly listed in Clause 9 of the said Vehicle Loan Agreement. In the light of the fact that the Agreement herein is a loan Agreement, involving hypothecation of the vehicle, we are of the considered view that the State Commission has erred in dismissing the complaint primarily based on the presumption that the Agreement in the present case between the Appellant and the Respondent is a ''Hire Purchase Agreement'', without considering the issue of whether the Repossession and Sale of the vehicle was in accordance with law.

[14] Vide order dated 22.9.2014, the name of the fifth Respondent, Komal Sharma Area Manager, HDFC Bank C/o Magma Leasing & Finance, 1st Floor, L.G. Showroom, Kunjpura Road, Karnal has been deleted.

[15] This Commission vide its Order dated 15.1.2015 directed the Respondents to furnish the following information by way of respective affidavits: "Having heard the Appellant, who appears in person, learned counsel for HDFC Bank Ltd. and ''Shrashi'', now named as Magma Fincorp Ltd., we direct the said Respondents to furnish the following information by way of their respective affidavits:

A breakup of the amount due from the Appellant towards the principal and interest on the instalment due as on 01.12.2006.

Which agency had seized the vehicle in question?

Whether any notice by registered AD Post was served on the Appellant before repossessing the vehicle and putting it to sale".

[16] In compliance of this order, the Appellant and the Respondents herein filed their respective Statements of Account. The Statement of Account filed by the Appellant/Complainant reads as follows: As per the Complainant, Satbir Singh A/c . No. 2035

S.No. Date Amount(in ?)Mode Page No. 1. 19.1.2006 12016 Cheq. No. 35 0164871 Cash given/chq. Returned 2. 21.2.2006 12016 Cheq. No. 36 0164872 Cash given/chq. Returned 3. Not available 12016 Cheq. No. 37 0164882 4. 19.7.2006 12016 Cheq. No. 38 0164883 Cash given/chq. Returned 5. 30.3.2006 5000 cash 39 6. 30.4.2006 5970 cash 40 7. 15.5.2006 10550 cash 41 8. 29.6.2006 8000 cash 42 9. 22.8.2006 16000 cash 44 10. 15.9.2006 12016 Cheq. No. 45 0164884 Cash given/chq. Returned 11. 30.10.2006 9000 cash 46 12. 1.12.2006 10000 cash 47 _______ Total Rs. 1,24,600/- _______

The Statement of A/c. of the Bank

S.No. Date Amount(in Rs. ) Mode Page No. 1. 23.1.2006 12016 cash 33 (SOA) 2. 22.2.2006 12015 cash -do- 3. 30.3.2006 5000 cash -do- 4. 4.4.2006 5970 cash -do- 5. 15.5.2006 10550 cash -do- 6. 30.6.2006 8000 cash -do- 7. 23.8.2006 16000 cash -do- 8. 31.10.2006 9000 cash -do- 9. 30.11.2006 3016 cash -do- 10. 1.12.2006 10000 cash -do- _________ Total Rs. 91,567/- _________

[17] It is apparent from the Statement of Account filed by the Complainant that a total amount of Rs. 1,24,600/- has been paid to the Bank and the concerned Bank officials present before us submitted that an additional amount of Rs. 3,016/- should also be reflected in the Complainant''s account. Therefore, it is a total of Rs. 1,27,616/-. It is also apparent on the face of record that three EMIs of Rs. 12,016/- dated 19.7.2006, 15.9.2006 and an undated instalment pertaining to Cheque Nos. 0164883, 0164884 and 0164882 respectively are not reflected in the Statement of Account furnished by the Bank. The Complainant has established his payment of these three EMIs by furnishing the relevant cheque nos. and also the photo-copies of the relevant cheques alongwith the respective endorsements. There are no cogent reasons given by the Bank as to why these amounts have not been reflected in their Books of Accounts.

[18] The Appellant/Complainant was present in person and submitted that he has paid an amount of Rs. 2,83,000/- to the dealer and had taken loan for an amount of Rs. 2,40,320/- for which, EMI of Rs. 12,016/- was fixed. We also observe from the record that the first Respondent, i.e. the Bank has entered into an Agreement with Shrachi Securities Limited ("SSL") which was assigned the job of sourcing the prospective customers, obtaining all necessary and supporting documents as well as recovery of EMIs, debts and enforcement of Securities of the said Company.

[19] The learned counsel for the Respondent Bank submitted that as per the terms of the Loan Agreement, it was agreed that the vehicle shall be hypothecated in favour of the Respondent Bank and in case he is a defaulter, the Respondent Bank is authorised to take possession of the vehicle (without any notice and/or intervention of the Court as per clause 17(2)(i) of the Loan Agreement) and sell the same to recover the dues (clause 17(2)(iii) of the Loan Agreement) by auction or by private contract or tender. As the Appellant had defaulted in the payment of the instalments, SIFL issued a notice on 12.8.2006 that an amount of Rs. 42,577/- was due and if the Appellant failed to pay the same, the Bank may initiate legal action and repossess the vehicle as per the terms of the Loan Agreement. Another notice on 2.11.2006 was sent by SIFL demanding a sum of Rs. 58,975/-. As the Appellant did not come forward to clear the total outstanding loan amount, it is submitted by the counsel for the Respondent Bank that SIFL repossessed the Vehicle on 2.12.2006. As on 31.5.2007, the total outstanding dues as per the Respondent Bank was Rs. 4,70,252/- and therefore, the vehicle was sold to the highest bidder on receipt of Rs. 3,91,500/-. The learned counsel for the Respondent Bank submitted that as per the Agreement with SIFL, a sum of Rs. 47,000/- i.e. 10% of the Finance Amount of Rs. 4,70,000/- was paid and therefore, the Bank was in receipt of Rs. 4,38,500/- (Rs. 3,91,500 from the sale + Rs. 47,000/- from SIFL). It is the case of the Respondent Bank that they incurred a loss of Rs. 31,752/- which included repossession, parking and valuation charges. It is also the case of the Respondent that the Appellant/Complainant filed a Criminal Complaint against the second and third Respondents which he subsequently settled on receiving a payment of Rs. 1,25,000/-, which is evidenced in the settlement order dated 11.7.2012.

[20] In the Statement of Account filed before this Commission, it is observed that the payment of Rs. 10,000/- was received by the Bank on 1.12.2006 by way of cash and it is pertinent to note that the said vehicle was admittedly seized on 2.12.2006. Repossession intimation was given to the police on 2.12.2006. As an amount of Rs. 10,000/- was received and accepted one day prior to the seizure, we are of the considered view that the act of the Respondent Bank in instructing SIFL to seize the vehicle on the very next day amounts to unfair trade practice. The seizure letter issued one day subsequent to the acceptance of the cash, loses its significance.

[21] We observe from the record that there is no notice issued prior to the sale of the vehicle even in the affidavit filed by the Legal Manager of the HDFC Bank. No reference has been made to any notice sent to the Appellant herein prior to sale of the vehicle which is against the principles of natural justice, admittedly when three EMIs of Rs. 12,016/- each, paid by the Complainant, have not been reflected in the Statement of Account of the Bank. To reiterate, the Bank has also accepted Rs. 10,000/- on 1.12.2006 which is just one day prior to the seizure of the vehicle thereby nullifying its own notice.

[22] The Complainant had clearly pleaded in para 12 of his Complaint that on 2.12.2006, 5-6 musclemen of the first Opposite Party took possession of the vehicle forcibly from the Complainant''s son without any reason or basis. Admittedly the Complainant also lodged a criminal complaint against the Respondents. In compliance with the question from this Commission with respect to the Agency which had seized the said vehicle, the Respondent Bank submitted that it was SIFL which had seized the vehicle on their instructions.

[23] The practice of repossessing the Hypothecated goods or vehicles forcibly through recovery agents has been deprecated in a catena of decisions by the Hon''ble Supreme Court and by this Commission. Time and again, it has been emphasized that in a democratic country, like ours, which is governed by rule of law if repossession of a hypothecated vehicle by the muscle men of the Bank or financial institutions or its agents is encouraged, it will create lawlessness. Resumption of possession by use of force is against the public policy and the Bankers/Financial institutions cannot be allowed to take law in their own hands and repossess the vehicle by use of muscle power on the ground that the loanee had defaulted in payment of a few instalments on time.

[24] In ICICI Bank Ltd. Vs. Prakash Kaur & Ors., 2007 2 SCC 711, deprecating the practice of hiring of recovery agents for taking possession of the vehicle by use of force, the Hon''ble Supreme Court had observed as follows:- "Before we part with this matter, we wish to make it clear that we do not appreciate the procedure adopted by the Bank in removing the vehicle from the possession of the writ petitioner. The practice of hiring recovery agents, who are musclemen, is deprecated and needs to be discouraged. The Bank should resort to procedure recognised by law to take possession of vehicles in cases where the borrower may have committed default in payment of the instalments instead of taking resort to strong-arm tactics."

[25] In the concurring judgment, Dr. AR. Lakshmanan, J, while providing additional inputs, which could be used for formulating robust guidelines for collection of dues and repossession of the Hypothecated properties, went on to observe that "we are governed by the rule of law in the country. The recovery of loans or seizure of vehicles could be done only through legal means. The Banks cannot employ goondas to take possession by force".

[26] Tested on the touchstone of the afore-noted legal principles, we are of the opinion that on facts in hand the Bank had repossessed the vehicle from the Complainant wrongfully and illegally by use of force.

[27] The reading of the judgment of this Commission as well as the Hon''ble Supreme Court on which reliance was placed by the learned counsel for the parties shows, that the settled law is that the possession of the vehicle though hypothecated cannot be taken by use of force.

[28] Moreover, there is no evidence on record to establish that prior intimation regarding the mode, date and time of auction of the vehicle in question was given to the Complainant prior to sale. We are constrained to observe that these kinds of closed door "auctions" justifiably give rise to allegations of sale of seized vehicles at a throwaway price, to the detriment of the borrowers.

[29] Now we address ourselves to the quantum of compensation to be awarded to the Appellant herein. From the Statement of Account of the Bank dated 1.12.2014, Annexure R1-C pages 33 & 34 of the Vol. I filed before us, it is shown that as on 1.12.2006 after acceptance of Rs. 10,000/- the amount due was Rs. 45,521/- but in this due amount admittedly three instalments of Rs. 12,016/- had not been reflected. Therefore, an amount of Rs. 36,048/- had to be deducted from this amount and the total due by the Appellant/Complainant as on date of the seizure was Rs. 9,473/-. As the vehicle was seized within the very first year of its purchase, we are of the view that the Complainant is entitled to Rs. 1,18,143/-(Rs. 1,27,616 - Rs. 9,473). Hence, the Respondent Bank is liable to refund an amount of Rs. 1,18,143/- with interest at 9% p.a. from 2.12.2006, i.e. the date of seizure of the vehicle together with compensation of Rs. 25,000/- for mental agony caused to the Appellant/Complainant herein due to wrongful seizure and sale and also for using recovery agents in the process of this illegal seizure. We also award costs of Rs. 10,000/- towards litigation expenses.

[30] We are of the considered view that it was only on the directions of the HDFC Bank that SIFL has repossessed the vehicle and no liability can be fastened on the recovery agent and therefore, case against Respondents nos. 2 and 3 is dismissed without costs.

[31] In the result, this Appeal is allowed and the order of the State Commission is set aside and we direct the Respondent Bank to refund Rs. 1,18,143/- with interest @9% p.a. form 2.12.2006, together with compensation of Rs. 25,000/- and costs of Rs. 10,000/-. We direct the HDFC Bank to comply with this direction within four weeks from the date of receipt of this order, failing which the amount would carry an interest @12% per annum.