The Supreme Court has categorically upheld the financiers’ right to re-possess a vehicle in case of default.
Also, in case the vehicle is seized by the financier, no criminal action can be taken against the financier as he is the legal owner, the apex court said in a recent ruling.
The ruling in the Anup Sharma vs Bhola Nath Sharma & other case, will strengthen the hands of asset-financing non-banking financing companies, say industry observers.
“The law can be summarised that in an agreement of hire purchase, the purchaser remains merely a trustee/bailee in behalf of the financier/financial institution and ownership remains with the latter.
Thus, in case the vehicle is seized by the financier, no criminal action can be taken against him as he is re-possessing the goods owned by him,” the two-judge bench of B. S. Chauhan and Fakir Mohammad said in an order dated October 30.
Reacting to this ruling, Raman Aggarwal, Director, Finance Industry Development Council (FIDC), said it has cleared the confusion around “re-possession.”
It would go a long way in improving the recovery scenario for asset financing NBFCs,
Aggarwal said earlier there was negativity around repossession in the light of mis-interpretation of various judgments.
The court orders never questioned the right of financiers’ to re-possess, but they wanted the malpractices (in repossession) to be checked, he said.
In September 2009, FIDC, a self-regulatory organisation for asset financing NBFCs in India, had come out with a handbook on ‘Repossession,’ which contained all the do’s and don’ts of repossession.