Forcible Repossession Deemed Deficiency in Service: Consumer Fora Rule Against Bank.


04 November 2024 Civil Revision >> Civil & Consumer Law   |   Consumer Complaints >> Civil & Consumer Law   |   Consumer Protection Act >> Consumer Rights  

The National Consumer Disputes Redressal Commission (NCDRC) recently dismissed two Revision Petitions (RP) challenging an order passed by the State Consumer Disputes Redressal Commission, Delhi (State Commission). The core issue revolved around the alleged forceful repossession of a commercial vehicle by a financing bank (OP) and the subsequent compensation awarded to the complainant.

The case originated from a loan agreement between the complainant and the bank for the purchase of an Ashok Leyland heavy goods vehicle. The complainant faced initial issues with the vehicle leading to payment delays, which were later regularized. However, on November 25, 2012, while the vehicle was in Uttar Pradesh, employees of the bank, accompanied by unknown individuals, allegedly forcibly stopped and repossessed the vehicle. The bank proceeded to sell the truck in March of the following year.


 

 

Aggrieved by this action, the complainant initially filed a civil suit seeking the return of the vehicle, which was dismissed as infructuous due to the sale. Subsequently, a Consumer Complaint (CC) was filed before the District Consumer Disputes Redressal Commission Forum VI, New Delhi (District Commission). The District Commission ruled in favor of the complainant, finding the bank guilty of deficiency in service due to the forceful repossession.

The bank then appealed to the State Commission, which upheld the finding of deficiency in service but modified the compensation amount, reducing it to Rs. 5.00 lakhs along with Rs. 50,000/- as litigation costs. This prompted both parties to file Revision Petitions before the NCDRC: the complainant (RP No. 895 of 2019) seeking enhanced compensation, and the bank (RP No. 1461 of 2019) seeking to set aside the State Commission's order.

Complainant's Arguments for Enhanced Compensation:

The complainant argued that the State Commission failed to adequately consider the financial losses incurred due to being deprived of the vehicle's use and the additional expenses incurred to make the repossessed vehicle commercially viable again after its return (as per the District Forum's initial order, which was partially overturned). They emphasized that the illegal repossession was against the law, citing the Supreme Court's observations against the practice of using musclemen for recovery in cases like ICICI Bank Ltd. Vs. Prakash Kaur (2007).

Bank's Arguments for Setting Aside the Order:

The bank contended that the Fora below had summarily considered the matter, ignoring material evidence and Supreme Court judgments related to loan defaults and repossession. They argued that the complainant had failed to prove any financial loss and had not offered to settle the outstanding dues after the repossession. The bank also pointed to a dismissed civil suit where the Civil Judge had prima facie observed that the repossession and sale did not appear arbitrary, given the loan agreement and notice sent. Furthermore, the bank argued that since the complainant used the vehicle for commercial purposes, they did not fall under the definition of a 'consumer' under the Consumer Protection Act.

NCDRC's Observations and Decision:

The NCDRC, after hearing both parties and reviewing the records, upheld the concurrent findings of the District Commission and the State Commission regarding the bank's deficiency in service. The Commission noted the 

consistent finding that the vehicle was forcibly possessed by the bank, which contravenes the legal principles laid down by the Hon’ble Supreme Court against the use of force in recovery proceedings.

The NCDRC specifically highlighted the District Forum's observation, supported by Supreme Court precedents such as Manager, ICICI Bank ltd. Vs. Prakash Kaur (2007), Citicorp. Maruti Finance Ltd. Vs. S.Vijayalaxmi (2012), and ICICI Bank Vs. Shanti Devi Sharma & Ors. (2008), that even in cases of loan default, financial institutions must resort to due legal process rather than using force for repossession.

Regarding the quantum of compensation, the NCDRC agreed with the State Commission's reasoning for reducing the initial amount awarded by the District Forum, noting that it exceeded the compensation sought by the complainant. Finding no illegality, material irregularity, or jurisdictional error in the State Commission's order, the NCDRC reiterated the limited scope of its revisional jurisdiction, which is not meant for re-appreciating evidence when concurrent findings exist.

Citing a series of Supreme Court judgments including Ruby (Chandra) Dutta vs. United India Insurance Co. Ltd. (2011) and Sunil Kumar Maity vs. State Bank of India and Ors. (2022), the NCDRC emphasized that its revisional power is to be exercised only when the State Commission has acted beyond its jurisdiction, failed to exercise vested jurisdiction, or acted illegally or with material irregularity.

Ultimately, the NCDRC found no grounds to interfere with the State Commission's order and consequently dismissed both Revision Petitions. This decision underscores the importance of adhering to due legal process in recovery matters and reinforces the consumer protection framework against high-handed actions by financial institutions.


Consumer Protection Act, 1986