Patna High Court says banks can't forcibly seize loan-default vehicles by engaging recovery agents

The Patna High Court has said that banks and non-banking finance companies cannot use recovery agents to forcefully seize the vehicles of customers who have defaulted on car loans. The high court said that a Rs 50,000 fine will be imposed on erring banks and similar lenders if they were found guilty.   

On May 19, Justice Rajiv Ranjan Prasad of the Patna High Court said the seizure of vehicles by recovery agents was illegal and a violation of the fundamental rights to life and livelihood. 

“The right to recovery of these banks and financial institutions if pitted against the constitutional right of life of a person/petitioner to live with dignity and not to be deprived of without following the established procedure of law, the constitutional rights of the person/petitioners shall prevail,” the order said. 

While referring to a Supreme Court judgment, the high court said that even the apex court has ruled that the engagement of gangsters, goons, or musclemen as recovery agents in the process of repossession is prohibited.  

While disposing of a bunch of writ petitions, Justice Prasad asked the police to register FIRs against such recovery agents and take legal action. 

The high court said that vehicle loans should be recovered following provisions of securitisation that empower banks and financial institutions to recover bad debts by acquiring physical possession of the mortgaged properties of defaulting borrowers with the aid of the district administration and getting them auctioned in order to enforce their security interest. 

 (With agency inputs)