2020 (12) TMI 141 - HC - Indian Laws

Hypothecation - recovery of dues - repossession of the hypothecated vehicle from the borrower as borrower defaulted in paying the EMI - Section 19 of the Recovery of Debts and Bankruptcy Act, 1993 - HELD THAT - The petitioner Madhab Kumar Das has admitted that he purchased the vehicles on loan granted by the PNB, after entering into a hypothecation deed, as indicated above. There is also no denial at all as regards the purchase of four vehicles by the petitioner from the loan sanctioned by the same Bank and about the dues amounting to ₹ 78,79,978.34 to the Bank. It is also an admitted position that the PNB has already filed the O.A. No.328/2018 before the DRT, Guwahati, which is pending at the stage of final hearing. The petitioner/borrower has not at all denied any of the documents referred above about the execution of the hypothecation deed, dated 10.12.2014, as well as taking of loan for four vehicles from the PNB and also about the filing of the claim petition by the PNB before the DRT, rather he has contested the said case also. In view of the fact that the petitioner/borrower is a willful defaulter, whose loan account turns NPA, the PNB after giving proper notice etc., has taken the possession of the vehicle through its recovery agent. So far as the conduct of the Bank, while taking possession of the vehicle, same cannot be held to be illegal one, as in view of the hypothecation deed entered into between the borrower and the financer, the purchaser is merely a trustee/ bailee and the ownership remains with the Bank, till full recovery of the loan amount - In case vehicle is seized by financier, no criminal action can be taken against him as he is repossessing goods owned by him, for violation of conditions of higher purchase agreement/ defaulted in making payment, etc. The impugned order reveals that the learned trial Court being aware of the fact that the Bank has ground for resuming the possession of the vehicle, has not taken any cognizance against them under Sections 420/406/120B of the IPC but has taken cognizance only against the offence under Section 323/506 of the IPC. That being so, the Court has erred in passing the order dated 28.11.2018, to accommodate the petitioner/borrower to take the interim custody of the vehicle on certain payment and other conditions. Such an order was passed even after objection raised by the Bank, as huge amount of dues was pending as against the borrower. This is more particularly so as because the matter was sub-judice before the DRT, Guwahati, for recovery of outstanding dues and the possession of the vehicle. The petitioner/borrower who is a willful defaulter, after repeated assurance/promise cannot be given indulgence again and again to repay his loan and the Bank is at liberty to go for legal recourse which they have already adhered to, by filing application before the DRT. The prayer of the petitioner Madhab Kumar Das, made in the instant petition indicates that he is still willing to get back the vehicles without any payment of dues as indicated in the order dated 28.11.2018, which sufficiently indicates that he is not willing to pay the amount due to the Bank but simply want to posses the vehicles without any condition, which however cannot be allowed to prevail. Petition disposed off.

Summary

Issues:
1. Granting interim custody of a seized vehicle in a case involving loan default and repossession by a bank.
2. Legality of the conditions imposed by the trial court while granting interim custody.
3. Challenge to the trial court's order by the borrower and the bank.
4. Justifiability of the borrower's claim to possess the vehicles without paying outstanding dues.
5. Legal authority of the bank to repossess the vehicle and the borrower's challenge under criminal allegations.

Analysis:
1. The judgment involves the grant of interim custody of a seized vehicle in a case arising from loan default and repossession by a bank. The petitioner, who purchased vehicles through a loan from the bank, defaulted on payments, leading to the bank taking possession of the vehicles. The borrower subsequently filed a complaint against the bank alleging forceful seizure of a specific vehicle, leading to legal proceedings (para 2-3).

2. The legality of the conditions imposed by the trial court while granting interim custody is questioned. The trial court ordered the borrower to pay a security amount to take custody of the vehicle, make regular payments, and not transfer the vehicle, among other conditions. The borrower challenged these conditions through a revision petition (para 4-5).

3. Both the borrower and the bank challenged the trial court's order. The borrower sought release of the seized vehicle to pay EMIs, while the bank contested the order granting interim custody, arguing for the sale of the vehicles to recover outstanding dues. The bank highlighted the borrower's history of defaults and contested promises of repayment (para 6).

4. The borrower's claim to possess the vehicles without paying outstanding dues is scrutinized. The court found the borrower to be a willful defaulter, emphasizing the bank's ownership rights over the vehicles until full repayment. The court cited legal precedent to support the bank's repossession actions and dismissed the borrower's claims (para 9-11).

5. The legal authority of the bank to repossess the vehicle and the borrower's challenge under criminal allegations were addressed. The court ruled that the bank's actions were legal, as the borrower defaulted on payments and did not respond to notices. The court deemed the borrower's criminal allegations against the bank as unjustified, emphasizing the bank's right to repossess in case of default (para 10-12).

6. Ultimately, the court quashed the trial court's order granting interim custody to the borrower, citing the pending legal proceedings before the Debt Recovery Tribunal for the recovery of outstanding dues. The court upheld the bank's right to seek legal recourse for recovering the dues through the appropriate legal channels (para 15).