Banks Ought To Give Notice, Opportunity To Pay Dues Before Recovering Customer's Vehicle: NCDRC Holds Kotak Mahindra Bank Liable

Brief Facts:

The Complainant financed his heavy goods vehicle with a loan amount of Rs. 16,55,000/- issued by Kotak Mahindra Bank Ltd. (“Bank”). The loan was to be repaid within 47 months via instalments of Rs. 45,600/- per month. After the purchase, the Complainant failed to pay the September instalment due to losses arising through mechanical defects in the vehicle. However, he later paid it. During October and November, the Complainant again failed to pay the full instalments. He requested more time from the Bank to pay the full amount. The request was approved and the Complainant managed to pay the full amount for October and November.

Two days after paying the instalments, the Complainant's vehicle was forcibly possessed by the Bank's employees in Haidargarh, U.P. Subsequently, the Bank also issued a notice for the vehicle's sale and sold it within a few months. The Complainant filed a civil suit in an attempt to recover his vehicle. However, the suit was dismissed as infructuous since the Bank had already sold the vehicle.

Feeling aggrieved, the Complainant filed a consumer complaint in the District Consumer Disputes Redressal Commission-VI, New Delhi (“District Commission”). The District Commission allowed the complaint and directed the Bank to pay Rs. 10 Lakh as compensation and Rs. 50,000/- as legal costs to the Complainant. Dissatisfied by the order of the District Commission, the Bank filed an appeal before the State Consumer Disputes Redressal Commission, Delhi (“State Commission”). The State Commission modified the District Commission's order by reducing the compensation amount to Rs. 5 Lakh.

Subsequently, the Complainant filed a revision petition before the National Consumer Disputes Redressal Commission, New Delhi (“NCDRC”) for enhancement of compensation. The Bank also filed a revision petition before the NCDRC for setting aside the State Commission's order in totality. Both revision petitions were heard together.

Observations by the NCDRC:

The NCDRC observed that the Complainant's vehicle was forcibly taken away by some musclemen in Haidargarh. The Bank argued that the Complainant voluntarily surrendered his vehicle. However, the NCDRC found this contention untenable as the Bank failed to issue a repossession notice or grant an opportunity to the Complainant to settle his dues.

Reliance was placed on Manager, ICICI Bank Ltd. v. Prakash Kaur [2007 (1) JCC (SC) 681], wherein it was held that the recovery process of a vehicle must be legally performed, and the banks cannot use force for repossession. The NCDRC also cited similar cases such as Citicorp Maruti Finance Ltd. v. S. Vijaylaxmi [2012 (1) JCC (SC) 613] and ICICI Bank v. Shanti Devi Sharma [2008 (3) JCC (SC) 1572], wherein it was held that forceful repossession of vehicles by banks constitutes a deficiency in service.

The NCDRC further observed that the Bank failed to provide any documentation against the Complainant to prove that he was notified before the repossession or that steps were taken to enable him to settle payments. The NCDRC found that the State Commission's order was valid as the Bank was deficient in its service, due to which the Complainant's livelihood was impacted, and the vehicle was hastily sold at just Rs. 12 Lakh.

The NCDRC also cited Ruby (Chandra) Dutta v. United India Insurance Co. Ltd. [(2011) 11 SCC 269], wherein it was held that interference under revisional jurisdiction is warranted only when findings are legally perverse or violate procedural jurisdiction. As per the NCDRC, both the District Commission and the State Commission provided well-reasoned orders with no procedural errors. Therefore, the revision petitions were dismissed.

Case Title: Sher Singh vs Kotak Mahindra Bank Ltd.

Case No.: Revision Petition No. 895 of 2019

Advocate for the Complainant: Mr Vikas Jain, Mr Manjeet Saini and Mr Kamal Mahajan

Advocate for the Bank: Mr P.K. Seth

Date of Pronouncement: 04.11.2024

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