In a significant ruling, the Patna High Court has declared that banks and financial institutions are prohibited from forcibly repossessing vehicles owned by loan defaulters through the use of recovery agents or hired goons. The court's decision came during the hearing of multiple pleas wherein petitioners voiced grievances about the illegal seizure of their vehicles without due process, often involving the intervention of musclemen at odd hours.
Justice Rajeev Ranjan Prasad, delivering the judgment on May 19, expressed deep concern over the actions of banks and finance companies, emphasizing that seizing or repossessing vehicles without adhering to the guidelines outlined by the Reserve Bank of India (RBI) and without following legal procedures is entirely unlawful.
Highlighting the constitutional obligation of these institutions to act in accordance with the law, the court underscored that the fundamental principles and policies of India safeguard individuals' right to livelihood and dignity. Consequently, the rights of loan defaulters to a dignified life, which cannot be compromised without due process, supersede the recovery rights of banks and financial institutions.
The petitioners sought a directive from the court to compel the contesting respondents to return their vehicles along with all relevant documents. Additionally, they sought compensation for the damage caused to their reputations.
The central issue before the court was to determine whether the respondents could legitimately exercise the clause in the loan agreement that permits the seizure of vehicles in cases of default.
The court held that while exercising their right to recover loans through vehicle repossession, the respondents must operate within constitutional boundaries. It unequivocally stated that the lenders cannot take the law into their own hands and violate legislative mandates and regulatory laws, such as the Act of 2002.
Regarding the alleged forcible seizure or repossession of vehicles by banks and financial institutions, the court entrusted the investigation to the appropriate agency, instructing them to conduct an independent and lawful inquiry into the petitioners' complaints.
As a consequence of the illegal actions of the banks and finance companies, the court ruled that the petitioners should be awarded costs. It directed each contesting respondent, i.e., the banks and financial institutions, to pay ₹50,000 as litigation costs to the respective writ petitioners within 30 days from the receipt or production of a copy of the judgment, thereby concluding the plea.
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TAGS: Patna High Court vehicle seizure loan defaulters recovery agents goons violation of law judgment RBI guidelines constitutional obligation fundamental rights due process plea compensation loan agreement constitutional limitations investigating agency illegal actions litigation costs.
