Banks using force to recover loan
–Supreme Court verdicts on the issue
"The RBI
has issued circulars for this very problem since 2003.”
Reference Case ;M/S Magma Fincorp Ltd.
vs. Rajesh Kumar Tiwari
Case No Civil Appeal No. 5622 Of 2019
Supreme
court has already delivered number of judgment on this issue . In the recent
order in case of M/S Magma Fincorp Ltd. Versus Rajesh Kumar Tiwari civil appeal no. 5622 of
2019 delivered on 1st october 2020
held that
1)“
Financier Continues
To Be Owner Of Goods
Which Are Subject Of Hire Purchase Agreement Until Hirer Pays All Installments:
Financier is not at fault by taking possession of
the vehicle when the hirer does not make payment of instalments/hire charges in
terms of the Hire Purchase Agreement.”said the Apex court
2) 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 muscle men as so called Recovery
Agents", the court added.
Supreme
court said while deciding the matter of Suryapal
Singh V Siddha Vinayak Motors & others SLP[Civil]No.5302/2012 decided on
21.02.2012
3) “under
the hire purchase agreement ,it is the financer who is the owner of the vehicle
and the person who takes the loan retains the vehicle only as a
bailee/trustee,therefore taking possession of the vehicle on the ground of
non-payment of the instalments has always been upheld to be a legal right of
the financer ”
Summarized the
principles regarding Hire Purchase transactions
1.
Under a Hire Purchase
Agreement Goods are let out on hire, with an option to purchase, in accordance
with the terms and conditions of the Hire Purchase Agreement. The hirer simply
pays for the use of the goods and for the option to purchase them.
2
Until the option to
purchase is exercised by the hirer, upon payment of all amounts agreed upon
between the hirer and the Financier, the financier continues to be owner of the
goods
3
When the agreement
between the Financier and the hirer permits the Financier to take possession of
a vehicle financed by the Financier and possession of the vehicle is taken, the
Financier cannot be said to have committed theft.
4
Whether the
transaction between a Financier and a purchaser/hirer is a hire purchase
transaction, or a loan transaction, might be determined from the terms of the
agreement, considered in the light of surrounding circumstances. However, even
a loan transaction, secured by right of seizure of a financed vehicle, it
confers licence to the Financier to seize the vehicle.
5. Regarding Notice ;Re-possessing vehicle without Notice
·
If the hire purchase agreement
provides for notice on the hirer before repossession, such notice would be
mandatory. Notice may also be necessary, if a requirement to give notice is
implicit in the agreement from the course of conduct of the parties.Non service
of proper notice would tantamount to deficiency of service for breach of the
hire purchase agreement giving rise to a claim in damages.
·
If the hirer commits
breaches of the conditions of a hire purchase agreement which expressly
provides for immediate repossession of a vehicle without further notice to the
hirer, in case of default in payment of hire charges and/or hire instalments
repossession would not be vitiated for want of notice.
·
Where there is no
evidence of any loss to the hirer by reason of omission to give notice, nominal
damages may be awarded.
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