Court backs vehicle owner, slams finance company

New Delhi, Jan 29 (IANS) In a warning to finance companies, India's apex consumer court has ruled it illegal to repossess a financed vehicle without serving a notice to the owner who has allegedly defaulted on loan repayment.

It was also illegal not to serve notice to the loan taker at the time of the vehicle's subsequent sale, the National Consumer Disputes Redressal Commission said in its recent ruling while hearing a complaint against Mahindra & Mahindra Financial Services Ltd (MMFS).

The company -- which was accused of wrongfully dispossessing Naresh Singh, a resident of Indore in Madhya Pradesh, of a commercial vehicle despite his having repaid his vehicle loan -- was asked to pay compensation of Rs.42,000. In its strongly worded order, the commission also told the finance company to pay Singh Rs.15,000 as the amount spent on obtaining permit and registration and Rs.1,000 as cost of the litigation.

Dismissing the finance company's appeal against a state consumer commission's judgment in favour of Singh, it said: "We find that both the district consumer forum as well as the state commission have given concurrent finding of fact that the vehicle in question was repossessed by the petitioner without serving notice of outstanding amount on the respondent (Singh) and it was also sold without giving any notice to the respondent."

"The counsel for the petitioner has failed to show any material irregularity or illegality in the impugned order which may call for interference by this commission in revisional jurisdiction. Therefore, the revision petition fails," said the apex consumer court's Presiding member Ajit Bharihoke and Member Suresh Chandra.

Singh had said in his petition that MMFS gave him a loan of Rs.3.5 lakh for purchasing a Mahindra Tourist vehicle on a hire-purchase basis. The loan amount was to be paid in 34 instalments. It was agreed that the first instalment would be of Rs.24,500 and the remaining instalments would be of Rs.12,250 each.

The commercial vehicle operator said he paid all the instalments against the loan between June 1, 2004, and Sep 2, 2005. Despite that, the finance company repossessed the vehicle Oct 23, 2005, without giving notice on the ground that Rs.4.29 lakh was outstanding against the loan.

He alleged that soon after the illegal repossession of his vehicle, it was sold without any notice to him for a sum of Rs.2.5 lakh. Singh filed a complaint claiming a sum of Rs.82,000 as compensation and for other charges.

The finance company admitted that it financed Rs.3.50 lakh for purchasing a vehicle by Singh but denied that he paid the instalments regularly.

Denying deficiency in service on its part, MMFS claimed that Rs.85,650 was outstanding against Singh Oct 23, 2005, and, therefore, the vehicle was possessed in a lawful manner and sold.

The district forum ruled in Singh's favour and concluded that the possession of the vehicle was taken by the finance company without informing him about any amount outstanding against him and, thereafter, the vehicle was unlawfully sold without notice.

The national commission also slammed MMFS for delay of 71 days in filing the revision petition.

"The petitioner has failed to disclose sufficient cause for delay in filing of revision petition. Therefore, we are not inclined to condone the delay on this count alone and revision petition fails," said Bharihoke.

(Rahul Chhabra can be contacted at rahul.c@ians.in)

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