SC asks RBI to ensure banks, NBFCs seize financed vehicle lawfully
Highlighting RBI's directive that a financed vehicle can be seized only through "lawful means", the Supreme Court on Wednesday directed the federal bank to enforce its guidelines on non-banking financial companies and scheduled commercial banks to ensure that borrowers are not dispossessed of their hypothecated vehicles without due process of law.
The top court's direction came in a judgement in which it ordered Cholamandalam Investment and Finance Company Ltd to close the loan accounts of a truck owner, and refund Rs 4.5 lakh realised from the sale of his vehicle with six per cent annual interest.
It also asked the finance firm to pay Rs 10 lakh compensation for mental agony and loss of livelihood caused by the unauthorised repossession of his vehicle.
A bench of justices PS Narasimha and Alok Aradhe held that financial institutions cannot use force, stealth or arbitrary methods to recover loans, even when borrowers have defaulted on repayment.
Justice Narasimha, writing the ...
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