Can Bank Recovery Agents Seize Your Vehicle?

Prakash Kaur took a loan from the ICICI Bank Allahabad branch to buy a truck, registration number UP-78-AN-1951. It appears she defaulted on her instalments. On July 13, 2006, the truck was taken from her possession by use of force. She alleged it was taken by M/s. Kartik Associates, Banaras Automobiles, Kodopur, Ram Nagar, Varanasi, acting as the bank's agents.

She asked the Chief Manager (Loans), ICICI Bank, Sardar Patel Marg, Civil Lines, Allahabad, to release the truck. On July 25, 2006, she also wrote to the agents asking for details of the instructions given to them to seize it. The truck did not come back. Her legal notice to M/s. Kartik Associates was returned unserved because it was refused.

She then wrote to the police on September 3/4, 2006. She said the bank and its officials had systematically conspired to cheat her by advancing the truck loan. She asked for an FIR under Section 120-B IPC and a long list of other IPC sections. The police took no steps. In her writ petition she also asked for cancellation of the bank's licence.

The Allahabad High Court, in Crl.M.P. No. 11210/2006, found that her application of September 3, 2006 showed the alleged commission of a cognizable offence. It directed the SSP, Allahabad, to ensure registration of a case on Annexure VII and investigation by a competent police officer.

In the Supreme Court, senior advocate Harish Salve, with senior advocate Mukul Rohatagi, argued for the bank. He said the dispute was entirely civil, about instalments and accounting, with no element of criminal intent. ICICI Bank also offered a compromise. It would forgo the interest payable on the outstanding dues, which amounted to Rs. 1,62,917. If Prakash Kaur paid an initial Rs. 50,000, the truck would be returned, and the balance principal found payable after final accounting could be paid in suitable instalments. Prakash Kaur said the principal was highly inflated and that she had defaulted on only one instalment.

The fight was not simply about whether a truck was taken. ICICI Bank said the quarrel was civil: instalments payable, payments actually made, and reconciliation of accounts. Prakash Kaur said there was criminal conspiracy and police inaction. The High Court acted on her application and directed an FIR.

Justice Lakshmanan's additional opinion described the regulatory backdrop. He wrote that the Banking Regulations Act does not, in any way, provide the details of the conduct of the bank business. He also wrote that the RBI guidelines issued on 21.11.2005 are dealt with elaborately but "still remains only on paper and is not being followed." The final order did not turn on construing a single section. It dealt with the civil money dispute and the manner in which the truck was taken.

The main order, delivered by Justice Altamas Kabir, accepted the bank's suggestion and allowed the appeal. It set aside the High Court's order. It added that if any FIR had already been registered in terms of that order, the FIR would stand quashed along with the investigation commenced on it. Justice Lakshmanan respectfully concurred with the conclusion and added his own paragraphs. Before parting with the matter, the main order said: "we do not appreciate the procedure adopted by the Bank in removing the vehicle from the possession of the writ petitioner." It then continued:

The next sentence of the order added that the Bank should resort to procedure recognized by law to take possession of vehicles where the borrower may have committed default in payment of the instalments instead of taking resort to strong arm tactics. Justice Lakshmanan's additional opinion put it in his own words: "The Banks cannot employ goondas to take possession by force."

• Money side settled by accounting. ICICI Bank had to release truck UP-78-AN-1951 on a deposit of Rs. 50,000 and forgo the interest. Prakash Kaur was to sit with the bank officials and her agent to reconcile the accounts, with credit for any payments she had not been given. She would then pay the balance principal in six equal monthly instalments.
• Later repossession only by law. If she defaulted on the subsequent instalments, the bank could re-possess the vehicle only "in accordance with law". Muscleman recovery stayed deprecated.

• Records the judgment mentions. The record shows the loan agreement with the bank, the date of seizure (July 13, 2006), the truck's registration number and the name of the agency said to have taken it. Justice Lakshmanan also noted that a harassed borrower who approaches the court or police station often has no recording to prove the abuse, which makes evidence hard to give.
• Steps she took before going to court. Prakash Kaur first wrote to the bank's Chief Manager (Loans) asking for the truck's release. She then wrote to the agents on July 25, 2006, asking for the instructions given to them, and sent a legal notice, which was refused. After that she wrote to the police on September 3/4, 2006.
• The forum she used. When the police took no steps, she moved the Allahabad High Court, which directed the SSP to register and investigate. The bank then argued in the Supreme Court that the dispute was civil and offered a compromise. The Supreme Court accepted that suggestion and set the High Court's order aside.
• Accounts. The Court ordered the bank to sit with her and her agent, reconcile the accounts and credit any payments she had not been given credit for. Only then was the balance principal to be paid in six equal monthly instalments.
• Other forums mentioned. Justice Lakshmanan noted that the RBI guidelines of 21.11.2005 cover redressal of grievances. He also noted that some aggrieved persons took recourse through the Ombudsman, though he said not many are aware of this forum.