The Patna High Court ruled that banks and non-banking financing businesses may not utilize recovery agents to forcibly confiscate the cars of borrowers who had fallen behind on their auto loans. According to the high court, guilty banks and other lenders would be subject to a Rs 50,000 punishment. [1]
The seizure of automobiles by recovery agents was illegal and a breach of the fundamental rights to life and a means of support, according to Justice Rajiv Ranjan Prasad of the Patna High Court on May 19.
According to the single bench, banks and financial businesses “cannot act in conflict with the fundamental principles and policy of India, which means that no person may be deprived of his or her means of subsistence and the right to live in dignity without adhering to the established course of law.” [2]
The high court stated, citing a Supreme Court decision that even the highest court has declared that using gangsters, goons, or musclemen as recovery agents during the repossession procedure is forbidden.
Justice Prasad instructed the police to file FIRs and pursue legal action against such recovery agents while deciding several writ petitions. [3]
The high court ruled that vehicle loans must be recovered in accordance with securitization provisions, which allow banks and financial institutions to recoup bad debts by physically obtaining defaulting borrowers’ mortgaged properties with the assistance of the district administration and auctioning them to enforce their security interest. [4]
Written by- Himanshu Mishra, a student at St. Mother Teresa Law Degree College, Lucknow, 2nd Semester, an intern under Legal Vidhiya.
References:
[ LAW TREND, https://lawtrend.in/banks-cannot-forcibly-take-possession-of-loan-default-vehicles-by-engaging-musclemen-patna-hc/ (last visited on 28th MAY 2023);
BAR AND BENCH, https://www.barandbench.com/news/litigation/financial-institutions-cant-forcibly-seize-vehicles-loan-defaulters-recovery-agents-goons-patna-high-court (last visited on 28th MAY 2023);
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