The Securitisation Act is meant for speedy recovery of dues by banks and financial institutions, but that does not mean the principles of natural justice can be bypassed, observed the Allahabad High Court.
In Ram Umrao v. Managing Director, IndusInd Bank Ltd , the petitioner’s truck was seized by the recovery agent on behalf of the bank for his alleged inability to pay his dues on the loan taken after hypothecation of the truck.
The Reserve Bank had, following the strictures passed by the Apex Court in ICICI’s case against the strong-arm tactics of uncouth recovery agents, laid down elaborate guidelines in April 2008, setting down norms for appointment and conduct of recovery agents. These include, proper training for recovery agents, prior intimation to the borrower about the impending act of the recovery agent and informing the jurisdictional police station by the recovery agent before snooping down on the borrower.
And, before setting in motion the process of seizure through recovery agent , the bank should serve a notice on the borrower as to why he has not paid the dues. The process of seizure by the recovery agent can be started, if at all, only after being convinced of the lack of insincerity on the part of the borrower on perusal of his reply.
The High Court found that these principles of natural justice were not complied with, and accordingly, ordered the return of the seized truck.
(The author is a New Delhi-based chartered accountant)
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