State Consumer Disputes Redressal Commission
Dr. H.R. Prem Sachdev, vs Citi Bank N.A., on 26 November, 2008
IN THE STATE COMMISSION : DELHI IN THE STATE COMMISSION : DELHI (Constituted under Section 9 clause (b) of the Consumer Protection Act, 1986 ) Date of Decision: 26-11-2008 Complaint No.C-72/2005 Dr. H.R. Prem Sachdev, - Complainant S/o Late Sh. Gela Ram Sachdev, In person. R/o 58/2, Ashok Nagar, New Delhi-110018. Also at CU-163-A, Vishaka Enclave, Pitampura, Delhi. Versus Citi Bank N.A., - Opposite Party. Jevam Bharti Building, Through 124, Connaught Circus, Mr. R.S. Suri, New Delhi-110001. Advocate. Through its Manager/Chief Manager. CORAM: Mr. Justice J.D.Kapoor President Ms Rumnita Mittal Member
1. Whether reporters of local newspapers be allowed to see the judgment?
2. To be referred to the Reporter or not?
JUSTICE J.D. KAPOOR, PRESIDENT (ORAL) For forcible seizure of the vehicle when complainant was on his way to hospital as his wife was ailing merely to recover few alleged unpaid instalments against car loan, the complainant has through this complaint sought the following directions :-
(a) Direct the OP to pay a sum of Rs. 20,20,000/-
to the complainant with interest @ 24% from the date of filing of the complaint till realization;
(b) Direct the OP to disclose the amount of outstanding dues as well as amount of alleged sale and to refund the excess payment;
(c) Award Rs. 21,000/- towards litigation expenses in favour of the complainant.
2. Case of the complainant, in brief, is that he has applied for grant of a car loan and an amount of Rs. 3,48,000/- was sanctioned by the OP vide agreement No. A4A 3976884817 for purchase of Santro Car bearing registration No. DL-3-FN-0008. Apart from the said loan, the complainant had also availed other car loans from the OP from time to time vide loan account No. AUD 3976703165 (Honda Cty), A4A 3976741279 (Santro) and A4K 3976824065 (Honda City) and he has paid off the loans for his other car gracefully and to the satisfaction of the OP.
3. The complainant was regularly making payment of instalments to the OP-Bank as and when it became due. The complainants wife who was getting her treatment from Shanti Nursing Home Ltd. for her diseases of Umbilical Hernia, following which she developed umbilical sepsis. Since the complainant was mentally and financially disturbed and could not keep a track on his bank account for the clearance of the monthly instalments of the said Santro Car, three instalments became due and outstanding upto February 2005, which the complainant could not deposit due to aforesaid reasons.
4. The complainant was going with his wife for her check up to Shanti Nursing Home Ltd. on 14-02-2005 in the evening hours as she had developed severe complications after the operations. The son of complainant namely Dr. Sanjay Sachdeva was driving the said car at that time, when at about 7.45 p.m. the representatives of the OP stopped the said Santro Car and in a high handed manner tried to take the Santro car at Ashok Nagar, New Delhi. The complainant showed them the medical papers and assured them that he would deposit the due instalments within 24 hours but the representatives of the OP-Bank were very abusive and used very insultive language and they lifted the said car, forecefully, illegally and unlawfully by snatching the keys of said car from the custody of the complainants son. They also got signature of the complainants son on a blank paper under duress. Various belongings of the complainant worth Rs. 20,000/-, including cash of Rs. 3,700/- and golden chain and one golden ring of complainants wife were also lying in the said car.
5. As against this the plea of the OP is that the complainant entered into a loan-cum-hypothecation agreement with the OP for purchase of a car on 08-09-2003 and sanctioned an amount of Rs. 3,48,000/-. Upon entering into the agreement the complainant agreed to all the terms and conditions stipulated in the agreement and the complainant agreed to repay the loan facility in equated monthly instalments of Rs. 7,406/- each over a tenure of 59 months with one cheque to be paid in advance.
6. That as per clause 4 of the agreement the borrower by way of providing security to the Bank against the loan amount hereby hypothecates the vehicle against which the vehicle is taken and therefore the vehicle is in the exclusive hypothecation of the OP and the complainant is not the owner of the vehicle till the loan amount and any dues under the said agreement is discharged.
7. That the complainant has been a regular defaulter and despite repeated requests and reminders by the OP the complainant failed to regularize his loan account. OP acting as per the terms of the agreement and procedure of law vide letters dated 05-12-2003 and 20-11-2003 requested the complainant to regularize his loan account but the complainant failed to pay any heed to the same. Thereafter, vide notice dated 06-01-2004 the OPs were constrained to recall the loan facility granted to the complainant.
8. That the complainant asked for some more time stating financial difficulty and the OP as a goodwill gesture and in anticipation that the complainant would pay his dues cooperated and granted more than sufficient time to the complainant to regularize his loan account but the complainant failed to regularize his loan account. The complainant thereafter expressed his desire to surrender the vehicle to the OP on account of his financial difficulty to repay his loan amount and the son of the complainant voluntarily surrendered the vehicle on 14-02-2005 to the OP and the said letter also bears signature of the person surrendering the vehicle. The complainant is therefore stopped from raising any dispute with respect to the same.
9. In identical cases we have taken a view in Citicorp. Maruti Finance Ltd. Vs. Smt. Vijaylaxmi, appeal No. 65/2004 dated 10-03-2005 and in Magma Leasing Ltd. Vs. Bharat Singh in appeal No. 954/2006 decided on 08-12-2006. that the seizure of the vehicle for the purpose of recovering dues by harassment, force, musclemen or recovery agents is illegal perse. Our view taken in Citicorp. Finance Ltd. case was upheld by the National Commission and subsequently Supreme Court in ICICI Vs. Prakash Kaur in SLP (Crl.) 15/2007.
Observations of National Commission in Revision Petition No. 737/2005 titled Citicorp Maruti Finance Ltd. Vs. S. Vijaylaxmi are relevant, pithy and are as under:-
When a vehicle is purchased by a person (consumer) by borrowing money from the money lender/financier/banker, the consumer is the owner of the vehicle and not the money/lender/financier/ banker, unless the ownership is transferred.
In a democratic country having well established independent Judiciary and having various laws it is impermissible for the money lender/financier/banker to take possession of the vehicle for which loan is advanced, by use of force.
Legal or judicial process may be slow but it is no excuse for employing musclemen to repossess the vehicle for which loan is given. Such type of instant justice cannot be permitted in a civilized society where there is effective rule of law. Otherwise, it would result in anarchy, that too, when the borrower retorts and uses the force.
A hire-purchase agreement is a normal one under which owner hires goods to another party called the hirer and further agrees that the hirer shall have an option to purchase the chattel when he has paid a certain sum, or when the hire-rental payments have reached the hire-purchase price stipulated in the agreement.
As against this, when a person desires to purchase vehicle/goods and not having sufficient money on hand, borrows the amount needed from a money lender/financier/banker and pays it over to the vender of the vehicle, the transaction between the consumer and the money lender will unquestionably be a loan transaction. In such a case the vehicle purchased by the consumer is registered in the name of the consumer and remains at all material times so registered in his name. The consumer remains qua the world at large the owner and remains in possession of the vehicle. BY an agreement the vehicle can be given as security for the loan advanced. IN such a case, the right to seize the vehicle is merely a licence to ensure compliance with the terms of the so called hire purchase agreement. (Re. AIR 1966 SC 1178).
It is to be stated that many financiers/banks are in race for giving loan for purchase of vehicles or various articles. After giving loan and taking interest in advance, the polite behaviour changes because of the documents which are signed on the dotted lines by the borrower. On occasions, borrower suffers harassment, torture, or abuses at the hands of the musclemen of the money lender. Such a behaviour is required to be prohibited and the process of repossession is required to be streamlined so as to fit in cultural civilized society. Let the rule of law prevail and not that of jungle where might is right.
In such cases even the police does not register the FIR or help the aggrieved consumer. In the present case, nothing has been done by the Police for years despite the complaint. IN any case, taking of pound of flesh is required to be discouraged.
In case when the vehicle was repossessed by use of force, and thereafter, sold without informing the complainant, in our view, it would be unjust to direct the consumer to pay the balance amount, as alleged by the financer to be outstanding. If such a relief is given to the money lender/financer, it would be unjust enrichment to the money lender and against equity. The question may arise for consideration only if the Complainant willingly surrenders the vehicle for sale and for recovery of the outstanding amount. Then, in such cases, consumer dispute would not arise.
Where the vehicle is forcefully seized and sold by the money lender/financer/banker it would be just and proper to award reasonable compensation to the Complainant. Reasonable compensation would depend upon facts of each case.
10. Merely because the right of re-possession of the vehicle was vested in the OP in case of default of payment does not mean that such right should be exercised by force or by employing musclemen or goons. Every legal right has to be enforced through legal method i.e. through intervention of Court.
11. Aforesaid circumstances amount to deficiency in service, as defined by section 2(1)(g) of the Consumer Protection Act 1986 which means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service.
12. We have also taken a view that whenever any bank or financer decides to take the possession of the vehicle forcibly the contract stands terminated and the liabilities of the borrower stand discharged in full and final and the margin money has to be returned as the goods i.e. vehicle against which loan was raised is no more in possession of the borrower and therefore he is not in a position to enjoy its fruit. Even if we assume that the vehicle was surrendered by the complainant still the facts remains that the market value of the vehicle at the time of seizure should be assessed by 5% depreciated value per year and not to be auctioned or sold on throw away price and in that event also the consumer is entitled for refund of the margin money contributed by him.
13. As regards the contention of the OP that the complainant voluntarily surrendered the vehicle vide letter dated 14-02-2005 and the said letter bears the signature of the person surrendering the vehicle, use of power as well as arm twisting tactics cannot be ruled in obtaining such documents.
14. Some of our conclusions in such like cases are as under:-
(i) Hire-Purchase agreement or loan agreement or even hypothecation contract are contracts of civil nature and any right to any of the parties to the contract arising from breach of the term of the contract has to be enforced through legal process i.e. with the intervention of the Court and not through use of force, coercion. Such a methodology of enforcing ones right hits at the foundation of rule of law and civilized society. No society governed by rule of law can allow an individual to take law in his hands.
(ii) Use of force through musclemen and goons for seizing the goods or recovering the dues by publically humiliating, including physically beating and causing injuries in the public or at residence or at official or public place is serious violation of human rights as every human being has a right to be treated in the dignity and respect. That is why every civilized society is governed by rule of law.
(iii) Merely a person has, in terms of contract or by virtue of any law or Hire-Purchase Act or a Hypothecatee right to seize or repossess the goods like vehicles does not mean that he can arrogate the powers of the Court and be a Judge and pass the decree and execute the same. He has to enforce his right through civil, legal process and not through any other method and such an act amounts to deficiency in service.
(iv) Whenever the financer chooses to take possession of the vehicle and sell it, it has to refund the contribution and payment made by the person concerned after adjusting the unpaid instalment in the sale proceeds that too till the date of seizure of the vehicle and not beyond that as no person can be deprived of the amount contributed towards the purchase price of the vehicle and financer or Bank cannot be allowed encashment of post dated cheques as the vehicle or for that purpose any goods against which loan was advanced had been seized and the consumer inspite of being owner of the vehicle is no more in possession of the goods for which he had raised the loan nor is he in a position to enjoy the fruits. With seizure and sale of the vehicle or goods the contract stands terminated and the loan amount stands recovered.
(v) In such a situation financer recovers the dues accruing from the unpaid instalments and the principal by seizing and selling the vehicle. Hence all the post dated cheques have to be returned. In case it intends to return the vehicle, it can do so on payment of unpaid instalments due by that date.
(vi) Further the sale price of such a vehicle cannot be fixed by the financer at its whims or caprice. Experience shows that one or two year old vehicles are sold off at throwaway or at half or little more value to the known people or friends or by way of an auction. That is why we have taken the view that cost i.e. sale price of the vehicle shall be assessed and adjusted by way of depreciated value @ 5% per year in case of passenger vehicle and @10% in case of commercial vehicle.
(vii) Further whenever financer or Bank chooses to repossess the vehicle by employing musclemen or goons as recovery agents and without being equipped with the order from the Civil Court such financer has to compensate the consumer on account of mental agony, harassment, humiliation, emotional suffering and injury suffered by the consumer and insult he and his family members suffer.
15. Foregoing reasons persuade us to hold the OP guilty for grossest kind of deficiency in service and unfair trade practice for breach of terms of contract of hire-purchase/loan agreement by seizing the vehicle illegally and selling it at throwaway price and recovering the dues in respect of goods i.e. vehicle which had ceased to be in his possession and rendered the contract extinct and encashment of subsequent post-dated cheques being impermissible as with the possession and sale of vehicle the entire liability not only stood discharged but also entitled the consumer to claim the margin money contributed by him towards the price of the vehicle or goods.
16. Complaint is allowed in terms of following orders:-
(i) OP shall refund the amount contributed by the complainant and balance amount after assessing the sale price of the vehicle by way of depreciated value @ 10% p.a.
(ii) OP shall further return all the post-dated cheques from the date of seizure and if any of them has been encashed shall refund the amount thereof.
(iii) OP shall pay lump sum compensation of 50,000/- which shall include cost of litigation towards mental agony, trauma, emotional sufferings, physical discomfort and great injustice done to him on account of forcible repossession of the vehicle.
(iv) OP shall pay Rs. 10,000/- towards cost of litigation.
17. Payment shall be made within one month from the date of receipt of this order.
18. Complaint is allowed and disposed of in foresaid terms.
19. A copy of the order as per the statutory requirements be forwarded to the parties free of charge and thereafter the file be consigned to Record Room.
20. Announced on the 26th November, 2008.
(Justice J.D. Kapoor) President (Rumnita Mittal) Member jj