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January 2012

Supreme Court : Lending firms must follow norms before ‘re-possession’.

By Raman Jokhakar, Tarunkumar Singhal
Chartered Accountants
Reading Time 1 mins
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The Supreme Court last week cautioned hire purchase firms not to take goods forcibly but follow the norms set by the Reserve Bank of India. In the judgment, Citicorp Maruti Finance Ltd. v. S. Vijayalaxmi, it emphasised that “in case of mortgaged goods subject to hire purchase agreements, the recovery process has to be in accordance with law.” The Court noted that the recovery process referred to in the agreements also contemplated such recovery to be effected in due process of law and not by use of force. “Till such time as the ownership is not transferred to the purchaser, the hirer normally continues to be the owner of the goods, but that does not entitle him on the strength of the agreement to take back possession of the vehicle by use of force. The guidelines which had been laid down by the Reserve Bank of India support and make a virtue of such conduct. If any action is taken for recovery in violation of such guidelines or the principles as laid down by this Court, such an action cannot but be struck down.”
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