Forcibly recovering vehicles not an offence.
The decision comes as a major relief to banks and financial institutions. They will not face any criminal action for taking away a vehicle anytime before it is transferred in the buyer's name after he has made full payment.
A bench comprising Justice B. S. Chauhan and Justice FAI Kalifulla said it was a settled proposition of law that the financier retained the ownership during the subsistence of the hire- purchase agreement.
The purchaser remains the trustee/ bailee on behalf of the financier or the financial institution, it added.
" Thus, in case the vehicle is seized by the financier, no criminal action can be taken against him as he is repossessing the goods owned by him," the bench said.
The order came on a petition filed by Anup Sarmah, who had initiated criminal proceedings against Bhola Nath Sharma and others after they took possession of his Maruti Zen financed by them.
A judicial magistrate in Guwahati directed the financiers to return the vehicle to the buyer. They filed an appeal before the Gauhati High Court in June 2009, which quashed the criminal proceedings against them.
Sarmah then approached the Supreme Court. But it accepted the contention of the financiers that they remained the owner of the vehicle under the hire- purchase agreement and, therefore, the possession taken by them could not be held to be an offence.
The bench pointed out that the Supreme Court had, in a number of judgments in the past, quashed criminal proceedings against financiers in such cases.
In the Trilok Singh case in 1979, the SC had quashed the criminal case against the financier who had taken away a truck from a buyer after there was a default in the payment of loan.
In 1996, the apex court went a step further and held in the K. A. Mathai case that the financier had a right to resume possession " even if the hire- purchase agreement does not contain a clause of resumption of possession". In the Charanjit Singh Chadha case in 2001, the court held that recovery of the vehicle by the financier did not amount to commission of a criminal offence.
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