SHRIRAM TRANSPORT FINANCE CO.LTD.& Anr.
VANIJYA BHAWAN, DEVENDRA NAGAR,
RAIPUR.  CHHATTISGARH                                  ...........Petitioner(s)
                           Versus    
PANNALAL BAGHEL
S/O LATE LEKHRAM BHAGHEL, VILLAGE-KARELI POST-BHAINSA SAKRI , TEHSIL SIMGA
RAIPUR. CHHATTISGARH                               ...........Respondent(s)

BEFORE:    
     HON'BLE MR. JUSTICE V.K. JAIN, PRESIDING MEMBER

Dated : 01 Jul 2020

            The complainant who is petitioner in RP No.2112-2113 of 2013, purchased a second hand truck for Rs.11,67,500/- and got the same financed from the petitioner in RP No.1790 of 2013 to the extent of Rs.9 lacs.  The loan amount was repayable in 36 monthly instalments.  The complainant paid instalments up to May 2009 but thereafter, defaulted in payment of four instalments.  The vehicle was therefore, repossessed by the financer on 22.10.2009.  The case of the complainant is that no notice was given to him before repossessing the vehicle and the same was repossessed forcibly without following the due legal process.  The complainant therefore, approached the concerned District Forum by way of a Consumer Complaint seeking return of the truck or refund of Rs.7,61,832/- with interest and also sought compensation of Rs.2,00,000/- for financial loss and Rs.90,000/- towards mental agony.

2.      The complaint was resisted by the financer who inter-alia stated in its reply that the complainant having defaulted in repayment of the instalment, the vehicle was repossessed on 22.10.2009 with due intimation given to the concerned Police Station.  The vehicle was thereafter, sold when the complainant did not respond to the demand letter sent to him on 19.01.2011.

3.      The District Forum awarded compensation of Rs.7,61,822/- to the complainant along with interest towards the price of the truck and also awarded compensation of Rs.75,000/- towards financial loss and Rs.15,000/- for mental agony.

4.      Being aggrieved from the order passed by the District Forum, both the parties approached the concerned State Commission by way of separate appeals.

5.      Vide impugned order dated 31.01.2013, the State Commission directed the financer to pay a sum of Rs.1,21,827/- to the complainant.  The said amount was worked out after deducting the amount payable by the complainant to the financer from the IDV of the vehicle.  No compensation was awarded to the complainant.  Being aggrieved, both the parties are before this Commission by way of these cross Revision Petitions.

6.      It is not in dispute that the complainant had taken a loan for purchasing the vehicle.  It is also not in dispute that the complainant had defaulted in servicing the loan, he having not paid four instalments.  The financer would therefore, be entitled to repossess the vehicle.  But, the vehicle could not have been repossessed by the financer without following the due process of law.  There is no evidence to prove that the due process of law was followed before repossessing the vehicle.  The State Commission found that though a notice is alleged to have been sent by the financer to the complainant two days before repossessing of the vehicle, there was no evidence to prove service of the said notice.  The least expected from the financer was to send a demand letter to the complainant asking him to clear the outstandings and inform him that the vehicle would be repossessed if the outstanding amount was not paid.  That however, was not done and the vehicle was repossessed only financer by use of force instead of following the due process of law.  Therefore, it cannot be disputed that the financer had been deficient in rendering services to the complainant.

7.      In ICICI Bank Ltd. Vs. Prakash Kaur & Ors. (2007) 2 SCC 711, the petitioner purchased a truck getting it financed from ICICI Bank.  He having defaulted in payment of the instalments, the possession of the truck was taken by the Bank by use of force.  The truck having not been returned to him, a Writ Petition was filed by him, seeking registration of an FIR.  Disapproving the course of action adopted by the Bank, the Hon’ble Supreme Court directed the Bank to forthwith release the truck to the petitioner.  The Hon’ble Supreme Court was of the view that instead of taking resort to strong arm tactics, the bank should resort to procedure recognized by law to take possession of vehicle in cases where borrower itself defaulted in payment of instalments.  During the course of a separate judgment, Hon’ble Dr. Justice A.R. Laxmanan noted that the recovery/collection agents who are contractors hired by the banks, physically and mentally torture them and force them into paying the dues and the self-respect of a man and his stature in society is immaterial to such agents.  His Lordship also observed that many a times even notice is not given to the borrowers who purchased the vehicles on hire-purchase basis and the vehicle is seized in public places deliberately in order to cause embarrassment to the borrower.  In a subsequent decision CITICORPN. Maruti Finance Ltd. Vs. S. Vijalaxmi IV (2011) CPJ 67 (SC), a Three Judges-Bench of the Hon’ble Supreme Court reiterated as under:

“We reiterate the earlier view taken that even in case of mortgaged goods subject to Hire Purchase Agreements, the recovery process has to be in accordance with law and the recovery process referred to in the Agreements also contemplates such recovery to be effected in due process of law and not by use of force.  Till such time as the ownership is not transferred to the purchaser, the hirer normally continues to be the owner of the goods, but that does not entitle him on the strength of the agreement to take back possession of the vehicle by use of force”.

8.    Relying upon the aforesaid decisions, this Commission vide its order dated 13.03.2015 in R.P. No.3054 of 2014 (Manager, Shri Ram Transport Finance Co. Ltd. vs. R. Suresh & Ors.) inter-alia held as under:-

“8.      In our view, when a transporter finance company such as the petitioner before us, finances a vehicle and there is a default on the part of the borrower in servicing the loan taken by him, it must necessarily issue a notice to him expressing its intention to repossess the vehicle in exercise of the power conferred upon it under the loan agreement before the vehicle is actually repossessed by it.  The purpose behind insisting upon such a notice being given to the borrower is to give him an opportunity to approach the financer and either bring the payment if already made by him to the knowledge of the financer or to convince the finance that it was on account of reasons beyond his control that he could not service the loan and, therefore, the default committed by him may be condoned.  It is quite possible that the financer may get convinced from the circumstances so explained by the borrower and may not insist upon repossessing the vehicle, his primary objective being to recovery of loan given to the borrower and not to repossess the vehicle financed by it.  If a vehicle is repossessed, without giving such a notice to the borrower, not only it has the potential to disrupt the business or profession in which the borrower is engaged using the vehicle, it may also result in his image and reputation in the society being lowered on account of the abrupt, sudden and forcible seizure of the vehicle by the financer.  If a notice expressing intention to repossess the vehicle on the default of the borrower is given to him, he gets ample opportunity to prevent the proposed seizure by approaching the financer and either paying the amount which he was unable to pay along with appropriate interest and/or penalty on that amount or to dispose of the vehicle at his own level and repay the loan taken by him.  Therefore, in all fairness, the financer must give a reasonable notice to the borrower before repossessing the vehicle financed by it and in no case the vehicle should be possessed by use of force.
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11. … In our opinion, the seizure of the vehicle in such circumstances constitutes deficiency in service causing tremendous mental torture and stress to the borrower who all of a sudden finds himself without the vehicle which he had purchased albeit with the financial assistance taken from the lender.  The borrower in such circumstances does not get an opportunity to arrange the requisite finances to repay the amount which he defaulted in paying to the lender before the vehicle comes to be repossessed by the lender.  The mental torture and agony would be greater when the vehicle is repossessed in his absence.”

For the reasons stated hereinabove, the complainant/petitioner is entitled to appropriate compensation from the respondent for the aforesaid deficiency in the service.

9.      The vehicle was sold by the financer for a sum of Rs.3,16,500/- though the IDV of the vehicle as calculated by the State Commission after deducting the depreciation for two years, was more than Rs.7.5 lacs.  This clearly shows that the vehicle was sold away at a throw away price. There is no evidence to show that the vehicle was sold by way of a public auction after giving due public notice in newspapers etc.  Had the financer duly publicized the proposed sale of the vehicle, it would have given an opportunity to the complainant to participate in the auction or to ensure that potential buyers were present at the time of auction and it was possible to sell the vehicle at its prevailing market price.  That having not been done, this was yet another act of deficiency on the part of the financer in rendering services to the complainant.

10.    The State Commission has taken a very fair and reasonable view while assessing the net amount payable by the petitioner to the complainant.  The State Commission deducted depreciation of two years from the IDV of the vehicle and thereafter, it deducted the amount payable by the complainant to the financer from the said IDV.  The remaining amount payable by the financer in this manner came to Rs.1,21,827/- which the State Commission has awarded to the complainant.

11.    However, the State Commission, in my opinion, was not justified in not awarding any compensation to the complainant for the deficiency in rendering services to the complainant.  The complainant had claimed a compensation amounting to Rs.2 lacs and his counsel submits that the amount claimed by him being fair and reasonable, should be awarded meaning thereby that it should be fixed at Rs.2 lacs as against the amount awarded by the District Forum.  Considering all the facts and circumstances of the case, including the nature of deficiency, the financer, in my opinion, should pay an all-inclusive compensation quantified at Rs.2 lacs to the complainant.

12.    For the reasons stated hereinabove, the Revision Petitions are disposed of with the following directions:
          (i) The financer M/s Shriram Transport Finance Co. Ltd. shall refund a sum of Rs.1,21,827/- to the complainant in terms of the order of the State Commission.
          (ii)      The financer M/s Shriram Transport Finance Co. Ltd. shall also pay a sum of Rs.2 lacs as compensation to the complainant.
          (iii)     The payment in terms of this order shall be made within three months failing which it shall carry interest @ 9% per annum from the date of this order.
          The Revision Petitions stand disposed of.