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  • MR. PRIANK ADHYARU
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Smart Summary

National Consumer Disputes Redressal Commission — Revision Petition No. 1185 of 2013 (Order dated 05 Oct 2020)

Factual and Procedural Background

The complainant (respondent before this Commission) obtained finance from HDFC Bank (petitioner) for a vehicle in the amount of Rs. 5,05,000/-. The loan was repayable in instalments and the complainant defaulted. The vehicle was repossessed by the bank on 01.06.2009 and later sold on 10.06.2009 for Rs. 3,81,500/-. Aggrieved by the bank's actions, the complainant filed a consumer complaint before the concerned District Forum.

The District Forum issued an order (dated in the text as 18.05.2020) which included references to the complainant's prayers: (a) a claim for Rs.7,50,000/- as cost of the vehicle with 9% p.a. interest from the date of complaint until recovery, (b) Rs.10,000/- for mental harassment and costs, and (c) a direction concerning certain cheques. The petitioner bank filed an appeal before the State Commission. The State Commission passed an order dated 29.11.2012 which, among other things, directed payment by the respondent of Rs.3,02,340/- with 9% p.a. simple interest from the date of filing the complaint and awarded Rs.10,000/- with 9% p.a. simple interest; it further held that the respondent would not be entitled to recover any amount from the complainant towards the loan.

The petitioner bank sought revision before this Commission against the State Commission's order dated 29.11.2012. The present order (dated 05 Oct 2020) was delivered by Justice V.K. Jain, Presiding Member.

Legal Issues Presented

  1. Whether the petitioner bank was deficient in service for repossessing the vehicle — specifically, whether repossession occurred without notice or involved use of force.
  2. Whether dispatch and service of a notice prior to repossession had been proved and, if notice was not required by the agreement, whether evidence of notice or its absence affected the claim for damages or relief under consumer law.
  3. How the principles stated by the Hon'ble Supreme Court in M/s Megma Fincorp Ltd. v. Rajesh Kumar Tiwari (as quoted in the opinion) apply to the evidence and agreement in this case, including the conditions under which punitive or compensatory damages may be awarded for wrongful repossession.

Arguments of the Parties

Petitioner (HDFC Bank) — key contentions

  • The complainant had defaulted in repayment of the loan, and the bank lawfully repossessed the vehicle in terms of the agreement.
  • Although the agreement (clause 14.2) authorized repossession without notice, the bank in fact issued a notice dated 04.04.2009 informing the complainant to pay Rs.454,611.39 within 15 days and warning that the vehicle would be sold seven days after repossession; a copy of that notice appears at page 110 of the paper book.
  • The dispatch of the notice was supported by a bulk registry (showing the letter at Sl. No. 2263) and the post office stamp, demonstrating that the notice was duly sent to the complainant on 09.04.2009.
  • The bank's agents approached the vehicle and the vehicle was surrendered by the complainant's driver; the bank placed on record a surrender letter purportedly executed by the driver.

Respondent (Complainant) — key contentions

  • The complainant alleged that the vehicle was repossessed by the bank through the use of force while it was being driven by his driver.
  • The consumer complaint did not specifically aver that no notice was given before repossession (the opinion notes the absence of such specific averment).

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
M/s Megma Fincorp Ltd. vs. Rajesh Kumar Tiwari (Civil Appeal No. 5622 of 2019) — selected paragraphs quoted in the opinion (paras 81, 90, 91, 94) - Distinguishing hire-purchase and loan transactions and confirming that even a loan secured by seizure confers licence on financier to seize the vehicle (para 81).
- Where a hire-purchase agreement implicitly requires notice before repossession, failure to serve proper notice can amount to deficiency of service and entitle the hirer to compensatory or nominal damages depending on proof of loss (para 90).
- Consumer forums may award punitive damages only in exceptional circumstances where the financier's conduct is sufficiently reprehensible (para 91).
- A District Forum should not award the entire amount paid and extensive damages without assessing prejudice to the complainant, especially where the complainant has had use of the vehicle (para 94). 		The Court relied on the above principles to assess whether the bank's conduct amounted to deficiency of service: the Court recognized that notice can be inferred from conduct but noted the petitioner bank here produced evidence of an express notice dated 04.04.2009 and proof of its dispatch. Applying the precedent, the Court concluded that because dispatch of notice was proved and the complainant did not prove forcible repossession or loss, the bank could not be deemed deficient in service; therefore, the reliefs granted earlier could not be sustained.

Court's Reasoning and Analysis

The Court proceeded by examining the documentary and testimonial record as follows:

  1. Admitted facts: The complainant defaulted on loan payments and the agreement (clause 14.2) expressly authorised the bank to repossess the hypothecated vehicle, even without notice and without court intervention.
  2. Notice evidence: Although the agreement permitted repossession without notice, the bank asserted that it had issued a notice dated 04.04.2009. The bank placed the notice on record (page 110 of the paper book) and produced a bulk registry showing the letter sent by registered post on 09.04.2009, indexed at Sl. No. 2263 and bearing the post office stamp. The Court accepted that the letter was duly sent prior to the repossession on 01.06.2009, noting that the consumer complaint did not specifically aver that no notice had been given.
  3. Allegation of force in repossession: The complainant alleged that force had been used while the vehicle was being driven by his driver. The bank produced a surrender letter purportedly signed by the driver. The Court observed that the complainant did not produce the driver as a witness nor file the driver's affidavit to substantiate the force allegation. Given the presence of the surrender letter and the absence of counter-evidence from the complainant, the Court drew the inference that the driver had peacefully surrendered the vehicle.
  4. Application of Supreme Court precedent: The Court referred to M/s Megma Fincorp Ltd. (supra) for guidance, noting (a) that notice requirements depend on the terms of the agreement and surrounding circumstances, (b) that failure to give notice can amount to deficiency of service if it causes loss, and (c) that punitive damages are limited to exceptional cases. The Court observed that while notice could sometimes be inferred from conduct, in this case the petitioner affirmatively produced evidence of notice dispatch and the complainant did not contest that fact in the complaint.
  5. Conclusion from facts and authority: Because the bank had proved dispatch of the 04.04.2009 notice and because the complainant failed to prove forcible repossession or to produce supporting testimony from the driver, the bank's conduct was not found to be deficient in rendering services to the complainant.

Holding and Implications

Core Ruling: The impugned order is set aside and the consumer complaint is dismissed.

Direct consequences and immediate implications for the parties (as stated in the opinion):

  • The impugned order (the order under challenge) could not be sustained and was set aside by this Commission.
  • The consumer complaint was dismissed by this Commission with no order as to costs.
  • Any amount deposited by the petitioner pursuant to an interim order of this Commission was to be released to the petitioner along with any interest accrued on that amount.
  • The Court held that, on the evidence before it, the petitioner bank could not be said to have been deficient in rendering services; the complainant failed to prove forcible repossession and failed to rebut the bank's proof of dispatch of notice dated 04.04.2009.

The opinion does not record broader policy pronouncements or a statement that it has laid down new legal precedent beyond applying the cited Supreme Court authority to the facts of this case.

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    HDFC BANK LIMITED v. NILESH MANGALDAS SHAH

    NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION

    NEW DELHI

    REVISION PETITION NO. 1185 OF 2013

    (Against the Order dated 29/11/2012 in Appeal No. 773/2010 of the State Commission Gujarat)

    1. HDFC BANK LIMITED

    RETAIL ASSET DIVISION, 8TH FLOOR,KASHI PLAZA,

    OPP DAYALJI GARDEN , MAJURGATE

    SURAT

    GUJARAT ...........Petitioner(s) Versus

    1. NILESH MANGALDAS SHAH

    THROUGH LEGAL HEIRS, NITABEN NILESHBHAI

    SHAH, R/O 49 LALKINAGAR, NR VISHAL NAGAR,

    ADAJAN ROAD,

    SURAT

    GUJARAT

    2. KUNAL NILESHBHAI SHAH,

    R/O 49 LALKINAGAR, NR VISHAL NAGAR, ADAJAN

    ROAD,

    SURAT

    GUJARAT

    3. RICHA NILESHBHAI SHAH,

    R/O 49 LALKINAGAR, NR VISHAL NAGAR, ADAJAN

    ROAD,

    SURAT

    GUJARAT ...........Respondent(s)

    BEFORE:

    HON'BLE MR. JUSTICE V.K. JAIN,PRESIDING MEMBER For the Petitioner : MR. VARSHAL M. PANCHOLI For the Respondent : MR. PRIANK ADHYARU Dated : 05 Oct 2020

    ORDER

    JUSTICE V.K.JAIN (ORAL)

    1. The complainant/respondent got a vehicle financed from the petitioner bank to the extent of Rs. 5,05,000/-. The loan taken by the complainant/respondent was re-payable in instalments. The complainant having defaulted in payment of the instalments the vehicle was re-possessed by the petitioner bank on 01.06.2009. The vehicle was later sold on 10.06.2009 for Rs. 381500/-. Being aggrieved from the act of the petitioner the complainant approached the concerned District Forum by way of a consumer complaint.

    2. The complaint was resisted by the petitioner bank which inter alia stated in its reply that

    1

    the complainant having defaulted in re-payment of the loan the vehicle was re-possessed after notice to him as per the terms and conditions of the agreement executed between the parties and that the driver of the complainant had surrendered the vehicle when required by the agent of the petitioner bank.

    3. The District Forum vide its order dated 18.05.2020 directed as under:-

    (2) The complainant has prayed for that the respondent should pay to the complainant an amount of Rs.7,50,000/- (Rupees seven lakhs fifty thousand only) towards the cost of the vehicle in question having No. GJ- 22-A-9929. The said amount be paid by the respondent in the present case to the complainant with 9% p.a. simple rate of interest from the date of the complaint till the recovery of the said amount.

    (3) The respondent in the present should pay to the complainant an amount of Rs.10,000/- (Rupees ten thousand only) towards mental harassment and the cost of the complaint.

    (4) A say order is passed against the respondents that the cheques that have been given by the complainant in the present case to the respondent the said cheques are not presented by the respondent in the present case into the bank by filling up the date and amount on the said cheques and does not use the same."

    4. Being aggrieved from the order passed by the District Forum the petitioner bank approached the concerned State Commission by way of an appeal. Vide its order dated 29.11.2012 the State Commission directed as under:-

    "(2) As stated vide Para No.2 of the order of the Learned Forum, the complainant becomes entitled to get an amount of Rs.3,02,340/- (Rupees three lakhs two thousand three hundred forty only) from the respondent and this amount is to be paid by the respondent to the complainant with 9% p.a. simple rate of interest from the date of filing the complaint till the recovery of the said amount.

    (3) As far as the question of the compensation is concerned, an order is passed that the respondent should pay to the complainant an amount of Rs.10,000/- (Rupees ten

    thousand only) with 9% p.a. simple rate of interest from the date of filing the complaint till the date of its recovery.

    2

    (4) Further it is also held that the respondent will not be entitled to recovery any amount from the complainant towards the above loan.

    (5) Except this, the Para No.3,4,6,7 and 8 of the order remain unchanged."

    5. It is not in dispute that there was a default on the part of the complainant in re-payment of the loan which he had taken from the petitioner bank. It is also not in dispute that as per clause

    14.2 of the agreement in case of the default in payment of the loan the vehicle could be re- possessed by the petitioner bank through its officers, agents etc. without any notice and without assigning any reason, without intervention of any court. The said clause of the agreement reads as under:-

    "14.2 any of the 'Event of Default' pursuant to the terms of clause 11 arise whether demand for repayment is actually made or not then and in such case and at any time thereafter the bank through its officers agents or nominees shall have the right (without prejudice to the right the clause 7) to take anyone or more than one of the following actions without the specific intervention of a court or any court order:-

    without any notice assigning any reason and at the risk and expense of the borrower and if necessary as attorney for and in the name of borrower take charge and/or possession of seize, recover, appoint receiver of and remove the hypothecated vehicle.The bank will be within its rights to use tow - van to carry away the vehicle and/or

    1.

    enter into or upon any place or premises where the hypothecated vehicle may be kept or stored and inspect, value of insure the same at the cost and expenses of the borrower, and/or

    2.

    sell, buy auction or any private contract or tender (illegible) realization or otherwise dispose of or (illegible) vehicle in the manner the bank may think."

    3.

    6. The case of the petitioner bank is that though it was not required to give any notice to the complainant before re-possessing the vehicle such notice was actually given on 04.04.2009. There is a reference of notice in the written version to the consumer complaint though the specific date of the notice is not disclosed. A copy of the said notice is available on page 110 of the paper book. Vide this notice, the complainant was informed that the bank would recover possession of the vehicle if complainant failed to pay an amount of Rs.454,611.39 within 15 days of the notice. He was also informed that the vehicle will be sold and disposed of seven days after taking of the possession. The petitioner had also placed on record the copy of the bulk registry whereby several documents including the above-referred notice dated 04.04.2009 were sent to the addresses by registered post on 09.04.2009. The notice sent to the complainant is referred at Sl. No. 2263 in the afore-said bulk register and the name and address

    3

    of the complainant as well as the date of letter find mention in the register. The register also bears the stamp of the concerned post office. In the consumer complaint there is no specific averment that the vehicle was re-possessed without any notice to the complainant. Therefore, I have no hesitation in holding that the letter dated 04.04.2009 was duly sent to the complainant before the vehicle was re-possessed on 09.06.2009.

    7. The case of the complainant is that the vehicle was re-possessed by the petitioner bank by use of force while was it being driven by his driver. The case of the petitioner bank that the vehicle was surrendered by the driver when approached by the agent of the petitioner bank. The petitioner bank has placed on record the surrender letter purporting to be executed by the driver of the complainant. Though the case of the complainant is that the vehicle, was re- possessed by use of force, no affidavit of the driver was filed to prove that the vehicle was re- possessed by use of force. The driver was not produced as a witness before the District Forum. Since the surrender letter purporting to be executed by the driver of the complainant was filed before the District Forum it was necessary for the complainant to counter the stand of the petitioner in this regard by examining the driver as a witness or at least by filing his affidavit. No such course having been adopted by the complainant the obvious inference would be that the driver had peacefully surrendered the vehicle to the petitioner.

    8. The issue involved in this petition recently came up before the Hon'ble Supreme Court in

    CIVIL APPEAL NO. 5622 OF 2019 M/s Megma Fincorp Ltd. Vs. Rajesh Kumar Tiwari

    and the following view was taken:-

    "81. Whether the transaction between a Financier and a purchaser/hirer is a hire purchase transaction, or a loan transaction,might be determined from the terms of the agreement, considered in the light of surrounding circumstances. However, even a loan transaction, secured by right of seizure of a financed vehicle, confers licence to the Financier to seize the vehicle.

    90. In a case where the requirement to serve notice before repossession is implicit in the hire purchase agreement, non service of proper notice would tantamount to deficiency of service for breach of the hire purchase agreement giving rise to a claim in damages. The Complainant consumer would be entitled to compensatory damages, based on an assessment of the loss caused to the complainant by reason of the omission to give notice. Where there is no evidence of any loss to the hirer by reason of omission to give notice, nominal damages may be awarded.

    91. A forum constituted under the Consumer Protection Act has,as observed above, the power to award punitive damages. Punitive damages should, however, be granted only in exceptional circumstances, where the action of the Financier is so reprehensible that punishment is warranted. To cite an example, where a Financier

    erroneously and/or wrongfully invokes the power to repossess without notice to

    4

    the hirer, causing thereby extensive pecuniary loss to the hirer or loss of goodwill and repute, a forum constituted under the Consumer Protection Act may award punitive damages.

    94. The District Forum was not justified in directing the Financier to pay the Complainant Rs.2,23,335/- being the entire amount paid by the Complainant to the Financier from the inception as well as the payment of Rs.1,04,000/- made by the Complainant to the dealer along with damage of Rs.10,000/- and litigation costs of Rs.1,000/- after the Complainant had held and used the vehicle for almost a year. The Complainant, admittedly a defaulter, has in effect, been allowed free use of the vehicle for about a year, plus damages, for an error in the notice of repossession, without considering the prejudice,if any, caused to the complainant by the error and consequential non receipt of the notice, and without making any assessment of the loss, if at all, to the Complainant by reason of the error/omission."

    9. In the present case, the evidence placed on record shows not only the issue of notice dated 04.04.2009 to the complainant before re-possessing the vehicle on 01.06.2009 the complainant has also failed to prove that the vehicle was re-possessed by use of force. The agreement between the parties authorized the petitioner to re-possess the vehicle without giving any notice to the borrower. Though, in view of the decision of the Hon'ble Supreme Court in M/s Megma Fincorp Ltd. (supra) a notice could be inferred from the conduct of the parties, the petitioner itself having claimed that a notice dated 04.04.2009 was given to the complainant before re-possessing the vehicle, the dispatch of such a notice has been duly proved and this is not the case of the complainant anywhere in the consumer complaint that no notice before re-possessing the vehicle was given to him. Therefore, the petitioner bank cannot be said to be deficient in rendering services to the complainant.

    10. For the reasons stated hereinabove the impugned order cannot be sustained and the same is accordingly set aside. The consumer complaint is consequently dismissed with no order as to costs. The amount, if any, deposited by the petitioner, pursuant to the interim order of this Commission shall be released to the petitioner along-with the interest which may have accrued on that amount.

    ......................J

    V.K. JAIN

    PRESIDING MEMBER

    5

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    Comments

    HDFC BANK LIMITED v. NILESH MANGALDAS SHAH
    (Oct 5, 2020)