HDFC Bank Limited v. Balwinder Singh, (2009)- Harassment In Lieu Of Loan Recovery

DATE: 16th March, 2009

JUDGES

• Justice B.N.P. Singh
• Dr. P.D. Shenoy

PARTIES

• HDFC Bank (APPELLANT)
• Balwinder Singh (RESPONDENT)

SUBJECT: In the present case, the National Consumer Dispute Redressal Commission was hearing a revision petition filed by HDFC Bank seeking relief against the judgement of District Forum which was further confirmed by State Commission.

AN OVERVIEW

1. The respondent in the present petition purchased a car with the financial aid from the appellant bank. On account of default in the payment of installments, it was alleged by the respondent that the bank had engaged musclemen to forcibly take over the possession of the vehicle and sold it to third party. Due to the actions taken by the appellant, the respondent was left with no choice than to file a complaint in the district forum.
2. The district forum in its judgement observed that the OPs shall not be entitled to any interest on the amount remaining unpaid after adjusting the sale price of Rs. 1,65,000. The forum further directed the bank to return the cheques received by them and to redraw the account of the complainant and ascertain the principal amount due from him on 20.7.2007 and adjust the amount of Rs. 1,65,000 towards the principal amount. Along with that, the district forum directed the bank to pay a compensation amount of Rs. 4lakhs for snatching the vehicle and causing mental agony and physical harassment.
3. Aggrieved by the order of the District Forum, the bank filed an appeal before the State Commission which confirmed with the orders of the district forum. The state commission observed that no notice was sent to the respondent stating the repossession of the vehicle on account of default in payment instalments. Also, the endorsement stating that the respondent was unable to pay the instalments was not signed by the respondent himself implying that the bank was indulged in tampering. Thus, the state commission was of the same view as that of the district forum.
4. The respondent was aggrieved by the decision of the State Commission also and thus filed the present appeal before the National Commission. In his appeal, the appellant urged that he is willing to pay Rs. 2.5 lakh directly to the respondent through a demand draft. It is only the compensation that he seeks to be relieved from.

IMPORTANT PROVISIONS

CONSUMER PROTECTION ACT

• Section 27- Penalties.-

(1) Where a trader or a person against whom a complaint is made or the complainant] fails or omits to comply with any order made by the District Forum, the State Commission or the National Commission, as the case may be, such trader or person or complainant shall be punishable with imprisonment for a term which shall not be less than one month but which may extend to three years, or with fine which shall not be less than two thousands rupees but which may extend to ten thousand rupees, or with both

(2) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), the District Forum or the State Commission or the National Commission, as the case may be, shall have the power of a Judicial Magistrate of the first class for the trial of offences under this Act, and on such conferment of powers, the District Forum or the State Commission or the National Commission, as the case may be, on whom the powers are so conferred, shall be deemed to be a Judicial Magistrate of the first class for the purpose of the Code of Criminal Procedure, 1973 (2 of 1974).

(3) All offences under this Act may be tried summarily by the District Forum or the State Commission or the National Commission, as the case may be.

ISSUES: The issue before the National Commission in the present case was whether the compensation awarded by the District Forum and State Commission shall be relieved or not?

ANALYSIS OF THE JUDGEMENT

• While looking into the facts of the case the court stated “we are stunned to observe that HDFC Bank which has a high standing in the corporate world had hired Goondas directly or through their recovery agents to recover money financed by it”.
• Quoting the judgement in Citicorp Maruti Finance Ltd. v. S. Vijayalaxmi - “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”, the commission stated that it is impermissible for the money lender/ financer/ banker to take possession of the vehicle for which loan is advanced, by use of force that too when we have various laws and an established independent judiciary present.
• Further the commission opined that legal or judicial process may be slow but it is no excuse for employing musclemen to repossess thevehicle 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.
• The commission also addressed the issue of repossession and stated that in cases where a person borrows money from bank in the form of loan for purchase of a vehicle, the consumer remains qua the world at large the owner and remains in possession of the vehicle. The right to seize the vehicle is merely a licence in order to make sure that the terms of the hire-purchase agreement are complied with.
• Thus the commission held that on instances where the borrower suffers harassment, torture, or abuses at the hands of the musclemen of the money lender, such 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.
• Therefore the commission held that the acts of the appellant were arbitrary and criminal in nature and thus, dismissed the appeal.

CONCLUSION

• Default in payment of loan instalments is always a possibility where there is a loan transaction and different procedures have been laid down to deal with the same, for example, penalties, added interest etc. In case a recovery agent is sent, the bank has to first send a notice to the defaulter which clearly was not done in the present circumstances. And the fact that the bank had sent musclemen in the name of recovery agents who performed physical assault on the respondent acted as a pimple grown on an ulcer for the bank.
• It is not at all acceptable that banks, in order to recover money, harass and torture people and cause mental agony. However, default in loan payment is not being advocated at all but, the defaulters do have human rights and physical assault is a violation of the same.
• Thus, the National Commission was correct in its judgement to let the law prevail and not a jungle.