Forceful Seizure Of Car, Ludhiana Commission Orders Cholamandalam Finance Company To Pay Compensation

Recently, the Ludhiana District Consumer Disputes Redressal Commission bench comprising of Sanjeev Batra (President), Jaswinder Singh (Member) and Monika Bhagat (Member) held Cholamandalam Investment and Finance Co. Ltd, a finance company based in Chennai, liable of using forceful recovery agents for repossession of complainant’s Maruti Swift Desire Car without giving any prior notice. The bench deprecated the practice of using forceful recovery agents for repossession of vehicles and emphasized the need for proper notice. Brief facts of the case: Raj Kumar (“Complainant”) purchased a Maruti Swift Desire Car in 2016, financed by M/s. Cholamandalam Investment and Finance Co. Ltd. (“Finance Company”). The vehicle was insured with M/s. IFFCO-Tokio General Insurance Company Ltd. (“Insurance Company”). He financed the vehicle for Rs. 5,80,000 through the Finance Company with an agreement to repay the loan in 60 monthly instalments of Rs. 13,496 each. The complainant had paid 34 instalments of the loan when the car was forcibly seized by unknown individuals while being driven by a driver. These individuals claimed to act on behalf of the finance company and took the car to a parking yard in Kurukshetra. Aggrieved, the complainant filed a consumer complaint in the Ludhiana District Consumer Disputes Redressal Commission (“District Commission”). The complainant argued that this act was illegal, arbitrary, and in violation of the agreement between the parties and consumer protection laws. The finance company argued that the complainant had defaulted on loan repayments, and they had followed the contractual procedure to repossess and sell the vehicle. They claimed that the complainant had concealed these facts and filed a false complaint. Observations by the Commission: The District Commission reviewed the loan agreement, specifically Clause 11, which outlined the procedure for repossession and termination. According to the agreement, the borrower's rights over the asset would stand determined if certain events of default occurred, and the borrower would be required to deliver the asset to the finance company. However, the District Commission found that the finance company failed to prove that proper notice of repossession had been served on the complainant, as required by the agreement. The District Commission noted that finance company had not provided evidence of authorization for the individuals who repossessed the vehicle. This lack of proof raised concerns about the legitimacy of the repossession and whether the individuals acted on behalf of the finance company. The District Commission observed that while the finance company claimed to have issued notices, including a final call letter and pre-sale notice, they did not provide any postal or courier receipts as evidence of proper service. Without such evidence, the presumption of deemed notice could not be drawn, and compliance with the terms and conditions of the agreement was questionable, it noted. The District Commission referred to previous judgments by the Hon’ble Supreme Court of India such as ICICI Bank Vs Prakash Kaur & Ors. 2007(2) SCC (711) that discouraged the use of forceful recovery agents for vehicle repossession and emphasized the importance of proper notice. Consequently, the District Commission concluded that the finance company’s actions in repossessing the vehicle did not comply with the proper legal procedures, and their actions amounted to a deficiency in service and an unfair trade practice under the Consumer Protection Act, 1986. The District Commission acknowledged that the complainant's vehicle had been sold to a third party, making restoration impossible. However, the auction money had been credited to the complainant's loan account. The District Commission considered the complainant's loss of livelihood and usage of the vehicle and awarded a composite compensation of Rs. 50,000 to the complainant. This compensation was to be paid by the finance company within 30 days of receiving a copy of the order. Failure to do so would result in interest being applied at a rate of 8% per annum on the awarded amount. Case: Raj Kumar vs M/s Cholamangalam Investment & Finance Co.Ltd Case No.: CC/20/40 Advocate for the Appellant: Gurcharan Singh adv Advocate for the Respondent: Sarabdeep S. adv Click Here To Read/Download Order

Forceful Seizure Of Car, Ludhiana Commission Orders Cholamandalam Finance Company To Pay Compensation

Smita Singh

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