Patna High Court
Mr. Ram Ayodhya Singh vs The State Of Bihar on 19 May, 2023
IN THE HIGH COURT OF JUDICATURE AT PATNA
Civil Writ Jurisdiction Case No.3456 of 2021
======================================================
Dhananjay Seth S/o - Sri Shankar Seth R/o- vill - Karanpura, P.S. Durgawati,
Distt.- Bhabhua. ... ... Petitioner
Versus
1. The Union of India through Secretary Department of Finance and
Commerce, New Delhi.
2. The Reserve Bank of India through General Manager South Gandhi Maidan Patna .
3. The State of Bihar through Chief Secretary, Govt. of Bihar, Patna.
4. That Motor Finance Ltd. At. - G.T. Marhia Parao Varanasi with its branch at,
Kashi Palace, Patna.
5. Recovery Agent Tata Motor finance Ltd G.T. Marhia Parao, Varanshi with
its branch at Kashi Palace, near Hari Niwas complex Patna- 1.
... ... Respondents
======================================================
with
Civil Writ Jurisdiction Case No. 16155 of 2021
======================================================
Mr. Ram Ayodhya Singh Son of Shiv Ratan Singh Resident of Village-
Bishunpur Pakari, P.O.- Pakri, P.S.- Beur, District- Patna.
... ... Petitioners
Versus
1. The State of Bihar through the Principal Secretary, Finance Department,
Govt. of Bihar, Patna.
2. M.D. and C.E.O., I.C.I.C.I. Bank, Regional Office- I.C.I.C.I. Bank Tower,
Near Chakali Circle, Old Padara Road, Vadodara, Gujarat. Corporate Office-
I.C.I.C.I. Bank Tower, Bandra Kurla Complex, Mumbai.
3. Zonal Manager, I.C.I.C.I. Bank, Zonal Office, Patna, Plot No. 6B, Sahdeo
Mahto Marg, Sri Krishna Puri, Patna.
4. Branch Manager, I.C.I.C.I. Banak, Anisabad, Patna.
... ... Respondents
======================================================
with
Civil Writ Jurisdiction Case No. 19461 of 2021
======================================================
Janam Jay Kumar Son of Muni Singh at Hathidah, P.O.- Hathidah, P.S.
Hathidah, District- Patna. ... ... Petitioner
Versus
1. Union of India though the Secretary, Department of Finance and Company
Act, New Delhi-1.
2. The Chief Manager, Reserve Bank of India at South Gandhi Maidan, Patna-
4.
3. Indusind Bank Limited 211 Saran Chambers (ii), 5, Parth Road Lucknow
226001 through its Chief Manager.
4. Branch Manager Indusind Bank Limited at Golu Suzuki, Auto Mobile near
Amardeep Cinema Anex-31, Harhar Mahav Chauk Begusarai 851101.
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
5. The State of Bihar through the District Magistrate, Purnea.
... ... Respondents
======================================================
with
Civil Writ Jurisdiction Case No. 7944 of 2022
======================================================
Geetanjali Wife of - Deomunni Prasad, at Kumhrar Chowk Par, Bahadurpur,
Police Station- Agamkuan, District - Patna.
... ... Petitioner
Versus
1. The State of Bihar
2. The Home Commissioner, Government of Bihar, Patna.
3. The Director General of Police, Bihar, Patna.
4. The Secretary, Department of Transport Government of Bihar Patna.
5. The Chief Manager, Reserve Bank of India, South Gandhi Maidan, Patna.
6. Superintendent of Police, Patna.
7. Branch Manager Sri Ram Finance Company Limited at Lav Kush Tower 3rd
floor Exhibition Road Police Station- Gandhi Maidan Patna.
8. Amit Kumar at Khabra Muzaffarpur, C/o Sri Ram Transport Finance
Company Limited Patna.
... ... Respondents
======================================================
with
Civil Writ Jurisdiction Case No. 8056 of 2022
======================================================
Shashi Kant Kumar Son of Jay Jay Ram Pandit, At Mohalla - Ward no. - 12
Near Kali Mandir Baghra Puraini Madhepura, P.S.- Puraini Bazar, District -
Madhepura. ... ... Petitioner
Versus
1. The State of Bihar Bihar.
2. The Home Commissioner, Government of Bihar, Patna.
3. The Director General of Police, Bihar, Patna.
4. The Secretary, Department of Transport Government of Bihar Patna.
5. The Chief Manager, Reserve Bank of India, South Gandhi Maidan, Patna.
6. Superintendent of Police, Madhepura.
7. M/S Tata Motor Finance Solutions Limited Registered Office 10th Floor 106
A and B maker chamber iii, Nariman, Mumbai 400021 through General
Manager.
8. Branch Manager Tata Motor Finance Solutions Limited at 1st Floor Manju
Complex Bhata Bazar Purnia 854301.
9. Kare Roy, Himanshu Roy and Sudhanshu Roy, Son of Subhash Roy, At
Tetri, Post and Police Station- Naugachiya, District - Bhagalpur.
... ... Respondent/s
======================================================
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
Appearance :
(In Civil Writ Jurisdiction Case No. 3456 of 2021)
For the Petitioner/s : Mr. Sanjay Kumar Pandey (Advocate),
Mr. Badri Narayan Singh, Advocate
Mr. Sanjay Kumar Pandey, Advocate
Mr. Manoj Kumar, Advocate
Mr. Sushan Kumar Keshari, Advocate
For the Respondent/s : Mr. Anuj Kumar (Adv.)
Mr. Manoj Kumar, AC to GP 24
Respondent No. 5 : Mr. Rajiv Kumar and Manoj Priydarshi, Advocate
(In Civil Writ Jurisdiction Case No. 16155 of 2021)
For the Petitioner/s : Mr. Anil Kumar Verma, Advocate
For the Respondent/s : Mr.Anil Kumar Singh (Gp26)
For the Respondent No. : Mr. Y.V. Giri, Sr. Advocate
Mr. Prabhakar Nath Rai, Advocate
(In Civil Writ Jurisdiction Case No. 19461 of 2021)
For the Petitioner/s : Mr. Badri Narayan Singh, Advocate
Mr. Sanjay Kumar Pandey, Advocate
Mr. Manoj Kumar, Advocate
Mr. Sushen Kumar Keshari, Advocate
For the Respondent/s : Mr.Dr. Krishna Nandan Singh (ASG)
(In Civil Writ Jurisdiction Case No. 7944 of 2022)
For the Petitioner/s : Mr. Badri Narayan Singh, Advocate
Mr. Sanjay Kumar Pandey, Advocate
Ms. Indira Kumari, Advocate
For the Respondent : Mr.Md. Nadim Seraj (Gp5)
(In Civil Writ Jurisdiction Case No. 8056 of 2022)
For the Petitioner/s : Mr. Badri Narayan Singh, Adv.
Mr. Sanjay Kumar Pandey, Adv.
Ms. Indira Kumari, Adv.
For the Respondent/s : Ms. Divya Verma AC to AAG-3
======================================================
CORAM: HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASAD
CAV JUDGMENT
Date : 19-05-2023
Heard learned counsel for the petitioners led by Mr. Y.V.
Giri, learned Senior Advocate, learned counsel for the contesting
respondents and Mr. Abhinav Srivastava, learned Amicus Curiae in
all these writ applications.
2. Let it be recorded at the outset that in this batch of six
writ applications, earlier five of them were tagged and heard on
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
different dates by the Hon'ble Division Bench as per the then
Roster. In the light of the change of Roster, these writ applications
were listed before this Court. Vide order dated 18.04.2023 passed
by the learned predecessor Court, CWJC No. 2808 of 2023
(Shivram Singh Vs. The State of Bihar and Others) has also been
tagged with the lead case being C.W.J.C. No. 3456 of 2020. In this
case no counter affidavit on behalf of the State Bank of India has
been filed, hence, this Court thinks it just and proper to de-tag
this case from the batch of cases in which the Bank and Finance
Companies have taken a stand by filing a counter affidavit. It is
once again placed on record that in C.W.J.C. No.3456 of 2021 and
C.W.J.C. No. 8056 of 2022 the same and one Finance Company is
the contesting respondent. Counter affidavit has been filed in
C.W.J.C. No. 3456 of 2021 and the same stand has been taken in
both the cases.
3. On the request of learned counsel for the parties, all
these writ applications have been taken up together and are being
disposed of by this common judgment.
Brief facts of the case
4. In all these writ applications, the petitioners are
aggrieved by the action of the contesting respondents, namely, Tata
Motor Finance Limited, IndusInd Bank Limited, Shri Ram Finance
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
Company, ICICI Bank and the State Bank of India. Their common
grievance is that their respective vehicles which they had
purchased with the financial assistance from these institutions have
been forcibly seized with the help of goons and musclemen of the
contesting respondents during odd hours.
5. In CWJC No. 3456 of 2021, the allegations is that the
vehicle was forcibly seized in the month of February, 2020 but the
petitioner got the same released after payment of Rs.3,80,000/-. It
is stated that soon thereafter the unprecedented pandemic Covid-
19 came because of which the entire country went under a
lockdown as a result of which the vehicle could not be run during
the period 23.03.2020 to 03.06.2020 so no installment was paid for
this period. It is stated that this was the exempted period declared
by the Government of India but the Financer (respondent no. 4)
seized the truck near village Rahnam through two persons, namely,
L.H. Pandit and Kavindra Tiwary along with some goons who
were armed. The truck was taken away. It is stated that a sum of
Rs.40,000/- was lying in the upper box of the vehicle as the
vehicle was returning after sale of sand of Rs.50,000/-. The driver
reported the matter to the petitioner whereafter the petitioner
contacted L.H. Pandit and Kavindra Tiwary but they did not take
any care.
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
6. It is the case of the petitioner that he had invested
Rs.3,00,000/- as down payment against the price of the chasis plus
Rs.3,00,000/- in construction of truck body and had also paid a
sum of Rs.9,31,000/- as installment. The dues during the Covid
period against the petitioner was only Rs.2,15,500/- for which the
vehicle in which the petitioner had invested Rs.17,31,000/- was
seized with the use of arms.
7. Petitioners have relied upon a judgment of the Hon'ble
Supreme Court in the case of ICICI Bank Vs. Shanti Devi
Sharma & Ors arising out of SLP (Crl.) No. 4935 of 2006
reported in (2008) 7 SCC 532 in which the Hon'ble Supreme
Court has held such action of the Bank illegal. The petitioner has
also relied upon the judgment of this Court in case of Sujay
Kumar Vs. Uco Bank reported in 2020(1) PLJR 583 wherein this
Court has declared the seizure of this nature illegal and ordered the
financial institution to return the vehicle to the owner with liberty
to claim damage by the owner. This Court also held that the
Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (hereinafter referred to
as the 'SARFAESI Act, 2002' or 'Act of 2002'). and the Rules
framed thereunder are to be followed in the matter of seizure of the
vehicles.
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
8. In CWJC No. 16155 of 2021, the case of the petitioner
is that he had got a financial assistance of Rs.10,00,000/- from the
Bank. He was paying the Equal Monthly Installment (EMI) of the
said vehicle properly, it was lastly deposited on 29.06.2021. The
Bank had taken post-dated cheques from the petitioner to secure
the loan of Rs.10,00,000/- but even as the petitioner was
depositing EMI, the Bank got bounced the cheque without any
notice to the petitioner. It is his case that during pandemic period,
four installments of EMI became due. For this reason, it is stated
that the vehicle in question has been pulled down/seized while it
was on way. The respondent bank neither followed the procedure
prescribed under the SARFAESI Act, 2002 and rules framed
thereunder nor gave any notice to the petitioner seeking to re-
possess the vehicle. The petitioner tried to approach the authorities
of the bank but they did not hear the grievance of the petitioner.
9. In CWJC No. 19461 of 2021, the grievance of the
petitioner is that his truck bearing no. BR 53G-1698 was seized
forcibly and illegally by the goons of the respondent bank during
the pandemic period on 02.09.2021. The petitioner has paid the
installments during the period 21.11.2018 to 31.01.2021 which
comes to a sum of Rs.20,51,400/-, out of which the petitioner had
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
already paid Rs.20,11,200/-, thus, only a sum of Rs.40,200/- was
due in January, 2021.
10. It is stated that during the pandemic period, the
Government of India as well as the Reserve Bank of India had
given instruction not to take any coercive measure besides giving a
moratorium period of six months. It is stated that in this case, the
Bank issued a notice dated 20.09.2021 under Section 13(2) of the
SARFAESI Act, 2002 to declare the property as Non-Performing
Asset (NPA) but the notice reached five days after the posting. The
vehicle had already been re-possessed on 02.09.2021. The
petitioner, in response to the notice wrote to the Bank on
27.09.2021 vide Annexures '2', '2A' and '3' to the writ application
and informed that he was ready to pay the real dues. Request was
made to release the vehicle but it was not paid heed to.
11. In CWJC No. 7944 of 2022, the grievance of the
petitioner is that his Bus No. BR 01 PA-9979 was seized forcibly
and by the goons of the respondent finance company on
10.05.2022 at Khabra in the District of Muzaffarpur and the
vehicle was loaded with passengers. It is stated that the goons led
by one Amit Kumar of Khabra with Branch Manager of the
Finance Company took possession of the vehicle on the point of
pistol and power.
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
12. In CWJC No. 8056 of 2022, it is the case of the
petitioner that his truck bearing no. BR43 GA 5925 was seized
forcibly and illegally by the goons of the respondent finance
company on 07.02.2021 through a recovery agent. It is his case
that the finance company had given an assistance of
Rs.29,57,000/- against which the petitioner has paid about
Rs.25,00,000/- in different installments before seizure, still the
finance company seized the vehicle through goons on road which
has become the habit of the private financing institutions. Infact,
sensing the threat from the finance company, the petitioner had
earlier filed a writ petition in this Court on 18.01.2020 giving rise
to C.W.J.C. No. 1480 of 2022 in which he had expressed his
apprehension about the seizure of the vehicle by the financer but
during pendency of the writ application, the vehicle was seized as
a result whereupon the writ application was permitted to be
withdrawn with liberty to take recourse to such remedies which are
available in accordance with law and in case, the need so arises, he
may approach this Court by filing a proper petition.
13. In all these writ applications the petitioners have the
grievance against the manner in which their respective vehicles
were seized and possessed by the Finance Companies/contesting
respondents without taking recourse to the process of law.
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
14. The petitioners in all these writ applications are
seeking a direction to the contesting respondents to hand over their
respective vehicles with all papers. They are also seeking
compensation to the loss of reputation and other kinds of
compensation.
Stand of the contesting respondents
15. It is the stand of the contesting respondents that writ
petition as framed is not fit to be entertained in this Court as no
part of the cause of action has arisen within the territorial
jurisdiction of this Court. It is contended that the writ application
involves disputed question of facts, hence, cannot be entertained.
Further it is the submission of the contesting respondents that the
Banks and Finance Companies which are involved in the financing
business are not a State or instrumentality of the State within the
meaning of Article 12 of the Constitution of India, hence, no writ
may be issued. Lastly, it is submitted that the respondent Bank and
Finance Company has an option either to re-possess the
hypothecated vehicles in terms of the Loan Agreement and
without taking recourse to court or to follow the procedure
prescribed under the SARFAESI Act, 2002 and Rules framed
thereunder.
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
16. In CWJC No. 3456 of 2021, the respondent company
has taken a plea that the petitioner had surrendered the vehicle on
his own free will to the answering respondent and he had given his
consent to sell or dispose of the said vehicle at the best possible
price and as per instruction of the petitioner in the said case, the
vehicle in question was taken possession on 14.12.2020 and sold
on 31.12.2020 and the sale proceeded thereof amounting to Rs.
15,25,590/- has been adjusted in the loan amount of the petitioner.
17. Mr. Y.V. Giri, learned Senior Counsel for the ICICI
Bank Limited has led the argument which has been adopted by
learned counsel representing the contesting respondents in other
cases. Learned counsel submits that a writ petition would not lie
against the Finance Companies and the Banks involved in
financing business. It is his contention that the process of re-
possession of the vehicle was initiated as per the rights conferred
upon the answering respondents under the loan agreement and it
was not incumbent upon the answering respondent to follow the
procedures prescribed under SARFAESI Act, 2002 and the rules
framed thereunder.
18. Learned counsel has relied upon the judgments of
the Hon'ble Supreme Court in the Case of Magma Fincorp Ltd.
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
v. Rajesh Kumar Tiwari reported in (2020) 10 SCC 399 and in
the case of Maganlal Chhaganlal (P) Ltd. v. Municipal Corpn.
of Greater Bombay reported in (1974) 2 SCC 402.
19. On going through the records, this Court finds that
by virtue of a direction issued by the Hon'ble Divison Bench of
this Court in course of hearing of this writ application on
15.11.2022, the State was directed to submit a report from the
local Superintendent of Police with regard to the factual aspect of
the alleged act of forceful seizure. Mr. Abhinav Srivastava, a
learned Advocate of this Court was appointed as an 'Amicus' to
assist this Court on the issue with regard to the competence,
legality and otherwise of the action of the contesting respondents
and what order the Court may pass so as to ensure establishment
of rule of law especially with regard to the borrower being
protected from recovery procedure in a patently illegal manner by
sheer might of people who otherwise do not have authority to do
so. In this regard this Court deems it just and proper to reproduce
the order dated 15.11.2022 as under:-
"Heard Mr. Badri Singh, learned counsel for the
petitioners in all the cases and different learned
counsels for the State. In CWJC No.19461 of
2021 Ms. Archana Shahi, learned counsel for the
respondents no. 3 and 4 (financial institutions)
appears and states that the copy of the brief has
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
not been served on her and further that she may be
given time to file a detailed response.
2. Basically the issue in a nutshell in all these
cases is whether the lending institutions, for the
purposes of recovery on the ground of default or
otherwise, can resort to extra judicial/legal mode
of forcibly taking possession of the hypothecated
vehicles. By an earlier order the Court had
directed the learned State Counsel to take a report
from the local police with regard to the factual
aspect of the matter in CWJC 3456 of 2021. A
report has been submitted by the Superintendent
of Police, Kaimur at Bhabua admitting that
without any due process of law or information to
the local police forcibly the vehicle was seized.
The Court being conscious of the prevailing
ground reality and taking into account the fact that
such things are happening on a regular basis and
in a very open and brazen manner and has now
almost attained a type of acceptance, in active
connivance with the State authorities, especially
the local police, the Court request Mr. Abhinav
Srivastava, learned counsel to assist the Court on
the issue with regard to the competence, legality
and otherwise of such action and what order the
Court may pass so as to ensure establishment of
the rule of law especially with regard to the
borrower being protected from recovery
procedures in a patently illegal manner by sheer
might of people who otherwise don't have
authority to do so and with the active connivance
of the State authorities, especially the local police.
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
Let learned counsel for the petitioner serve a copy
of the briefs on Mr. Abhinav Srivastava, learned
Amicus by day after tomorrow. Copy of CWJC
No. 19461 of 2021 be also served on Ms. Archana
Shahi by day after tomorrow.
3. In the meantime learned counsel for the
petitioners in the other cases will also file an
affidavit from where actually the vehicle has been
seized and learned State counsels shall also
submit a report by filing affidavit with regard to
the factual aspect of the alleged act.
4. As jointly prayed for, the matters be listed on
05.12.2022 for admission among the top 5 cases.
Learned State counsels would also file their
affidavit within two weeks. All the counsels for
the concerned respondents besides serving a copy
of the counter affidavit on learned counsel for the
petitioner shall also serve a copy on the learned
Amicus. In the meantime the vehicles, if already
not sold, shall not be sold without the leave of the
Court.
5. Let the name of Mr. Abhinav Srivastava,
learned Amicus be printed in the cause list in the
column of the petitioners. In all cases learned
State counsels would submit a report from the
local S.P. if the place of seizure is disclosed in the
writ petition.
6. In the meantime by day tomorrow learned
counsel for the petitioners shall file the original
hard copy of the writ petition which shall be
accepted by the registry."
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
20. Again vide order dated 20.12.2022 the Hon'ble
Court recorded that in few cases in which the concerned
Superintendent of Police of the District have found that there was
forceful seizure but at their level no action had been taken for the
reason that nobody came forward to lodge any complaint with the
Police and further that the matter is sub-judiced in the present
proceeding. The Hon'ble Division Bench did not approve the
stand of the District Police that nobody came forward to inform
may be a ground available to them. The District Police was
reminded of the law which require that whenever a cognizable
offence is brought to the notice of the authority concerned, the
natural consequences have to follow.
21. This Court has perused the counter affidavit filed on
behalf of the Superintendent of Police, Kaimur in C.W.J.C. No.
3456 of 2021. He has referred the reports submitted by the S.H.O.
of the concerned Police Station. He has stated that the vehicle in
question was seized by the Agent of Tata Finance. This counter
affidavit says that the vehicle was seized by a recovery agent of
Tata Finance,Varanasi on 14.12.2020 and has been sold to one
Heyat Ahmad on 31.12.2020 i.e. within 17 days.
22. In C.W.J.C. No. 16155 of 2021, the Senior
Superintendent of Police, Patna has submitted a report vide letter
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
no.1082 dated 13.05.2022 confirming that the vehicle (Scorpio)
was seized at the Bypass Toll Tax, Didarganj, Patna by one Amit
Raj who is said to be the owner of Amit Raj Consultancy Private
Limited which is the Channel Partner of ICICI Bank. The said
vehicle has also been auction sold.
Facts Emerging From the Records
23. From the materials available on the record and the
submissions made on behalf of the parties referred hereinabove,
the following facts would emerge :-
(i) In all these cases, for one reason or the another the
contesting respondents have a case that the petitioners had
committed default in the matter of payment of EMI against their
respective vehicle loan accounts;
(ii) The Banks and Finance Companies who are involved
in this case have entered into a hypothecation cum loan agreement
whereunder they have a right to repossess the vehicle in case of
default. Allegation in all these cases are that the vehicles have been
seized/possessed by use of force, in some cases it is alleged use of
pistol in the process of seizure.
(iii) These Banks and Finance Companies are governed
by the guidelines issued by the Reserve Bank of India in the matter
of appointment of Recovery Agents and the procedures which are
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
required to be followed in the matter of recovery of loans and re-
possession /sale of the hypothecated vehicles;
(iv) The contesting respondents in these cases have not
followed the provisions of the SARFAESI Act, 2002 and the
Rules framed thereunder in the matter of re-possession of movable
properties;
(v) A Master Circular DBOD.No.BP.BC.9/21.04.048/
2014-15 dated July 1, 2014 consolidating the
instructions/guidelines issued to the Banks till June 30, 2014
relating to statutory and other restrictions of loans and advances
has been issued on July 1, 2015. A copy of the same has been
brought on record with the 5th Supplementary Affidavit filed on
behalf of the respondent no. 2 to 4 in C.W.J.C. No. 16155 of 2021.
(vi) In these cases the guidelines of the Reserve Bank of
India as contained in its Master Circular in the matter of
appointment of Recovery Agent and re-possession of the vehicle
have not been followed.
24. In the aforementioned background of the facts
which are emerging from the records, Mr. Y. V. Giri, learned
Senior Advocate representing the contesting respondents in
C.W.J.C. No. 16155 of 2021 has gone to the extent of submitting
that the contesting respondents derive its power to seize the
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
vehicle without recourse to law under the loan agreement hence no
fault may be found in the action of the respondents in taking
possession of the vehicle and sale thereof.
Consideration
25. Mr. Y.V. Giri, learned Senior Counsel has given
much emphasis on his submission that the private respondents who
are the Banks and Financial Institutions cannot be subjected to a
writ under Article 226 of the Constitution of India. It is his
submission that these contesting respondents are neither a State
nor an instrumentality of the State or any other authority within the
meaning of Article 12 of the Constitution of India, therefore, the
petitioners cannot maintain a writ application against their action
in the matter of seizure of the vehicles in question.
26. This argument of learned Senior Counsel for the
contesting respondents, namely, ICICI Bank Limited in C.W.J.C.
No. 16155 of 2021 has been adopted by the learned counsel for the
contesting respondents in other writ applications also, therefore,
this Court deems it just and proper to answer this issue at the
threshold.
27. To this Court, it appears that after the decision of the
Hon'ble Constitution Bench of the Supreme Court of India in the
case of Kaushal Kishore Vs. State of Uttar Pradesh and Others
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
reported in (2023) 4 SCC 1, the submissions as framed above on
the question of issuance of a writ to a non-State actor is devoid of
merit.
28. Assuming the submission as it is and without going
into a question as to whether in these cases the contesting
respondents would come within the meaning of Article 12 of the
Constitution of India or not, this Court deems it expedient to have
a glance over the developments on this aspect by way of judicial
pronouncements.
29. The Hon'ble Supreme Court while considering the
question no. 2, framed in the case of Kaushal Kishore (Supra)
has dealt in detail as to how the law has developed so far and has
recognized that a fundamental right under Article 19 or 21 can be
claimed against anyone other than the State or its instrumentality.
The Hon'ble Apex Court has discussed the question as to whether
Part III of the Constitution has a "vertical" or "horizontal" effect.
It has been held that wherever constitutional rights regulate and
impact only the conduct of the government and government actors
in their dealings with private individuals they are said to have a
"vertical" effect. But wherever constitutional rights impact even
the relations between private individuals, they are said to have a
"horizontal" effect.
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
30. In Kaushal Kishore (supra), the Hon'ble Supreme
Court has shown that some of the Articles of Part III are in the form of a
Directive to the State while others are not. In paragraph '79' of the
judgment, their Lordships observed inter alia:-
"This is an indication that some of the rights conferred by
Part III are to be honored by and also enforceable against,
non-State actors."
31. Addressing the question as to how the Courts in
India have dealt with cases where there were complaints of
infringement by non-State actors, of fundamental rights, the
Hon'ble Supreme Court referred the judgments in the case of P.D.
Shamdasani Vs. Central Bank of India reported in (1951) SCC
1237, Vidya Varma Vs. Dr. Shiv Narain reported in AIR 1956
SC 108, Sukhdev Singh Vs. Bhagatram Sardar Singh
Raghuvanshi reported in (1975) 1 SCC 421, People's Union for
Democratic Rights Vs. Union of India reported in (1982) 3 SCC
235; S. Rangarajan Vs. P. Jagjivan Ram reported in
(1989)2SCC 574; Nilabati Behera Vs. State of Orissa reported
in (1993) 2SCC 746; Lucknow Development Authority Vs.
M.K. Gupta reported in (1994) 1 SCC 243; Bodhisattwa
Gautam Vs. Subhra Chakraborty reported in (1996) 1 SCC
490; M.C. Mehta Vs. Kamal Nath reported in (1997) 1 SCC 388,
Vellore Citizens' Welfare Forum Vs. Union of India reported in
(1996) 5 SCC 647, M.C. Mehta Vs. Kamal Nath reported in
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
(2000) 6 SCC 213; Consumer Education and Research Centre
& Ors. Vs. Union of India & Ors. reported in (1995) 3 SCC 42;
Vishaka Vs. State of Rajasthan reported in (1997) 6 SCC 241;
Githa Hariharan (Ms.) & Anr. Vs. Reserve Bank of India &
Anr. reported in (1999) 2 SCC 228; Indian Medical Association
Vs. Union of India reported in (2011) 7 SCC 179; Society for
Unaided Private Schools of Rajasthan Vs. Union of India
reported in 2012) 6 SCC 1; Jeeja Ghosh Vs. Union of India
reported in (2016) 7 SCC 761; Zee Telefilms Ltd. Vs. Union of
India reported in (2005) 4 SCC 649; Janet Jeyapaul Vs. S.R.M.
University reported in (2015) 16 SCC 530; Justice K.S.
Puttaswamy Vs. Union of India reported in (2017) 10 SCC 1.
32. At this stage, this Court finds that at least paragraphs
'81.15', 81.16', 82 and 83 from the judgment in Kaushal Kishore
(Supra) are required to be reproduced to end this discussion:-
"81.15. In Jeeja Ghosh v. Union of India [Jeeja
Ghosh v. Union of India98, the petitioner, a disabled
person suffering from cerebral palsy, was
unceremoniously ordered off a SpiceJet aircraft by
the flight crew on account of the disability. The
petition was filed for putting in place a system to
ensure such a violation of human dignity and
inequality is not meted out to similarly placed
persons. This Court observed as follows : (SCC p.
771, para 10)"
98 2016) 7 SCC 761 : (2016) 3 SCC (Civ) 551]
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
"10. It is submitted by the petitioner that the
Union of India (Respondent 1) has an obligation
to ensure that its citizens are not subject to such
arbitrary and humiliating discrimination. It is a
violation of their fundamental rights, including
the right to life, right to equality, right to move
freely throughout the territory of India, and right
to practise their profession. The State has an
obligation to ensure that these rights are
protected -- particularly for those who are
disabled."
(emphasis supplied)
This Court awarded compensation to the petitioner
against the private Airline on the ground that the
airline, though a private enterprise, ought not to have
violated her fundamental right.
81.16. In Zee Telefilms Ltd. v. Union of India [Zee
Telefilms Ltd. v. Union of India99, this Court held that
though BCCI does not fall within the purview of the
term "State", it discharges public duties and that
therefore even if a remedy under Article 32 is not
available, the aggrieved party can always seek a
remedy before the ordinary courts of law or by way
of a writ petition under Article 226. This Court
pointed out that the violator of a constitutional right
could not go scot-free merely because it is not
a State. The said logic was extended by this
Court to a "Deemed to be University"
in Janet Jeyapaul v. SRM University,100
99 (2005) 4 SCC 649] ,
100 (2015) 16 SCC 530 : 8 SCEC 68
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
on the ground that though it is a private university, it was
discharging "public functions", by imparting education.
82. All the above decisions show that on a case-to-
case basis, this Court applied horizontal effect,
considering the nature of the right violated and the
extent of obligation on the part of the violator. But to
enable the courts to have certain basic guidelines in
place, for dealing with such cases, this Court
developed a tool in K.S. Puttaswamy (Privacy-9 J.)20.
While affirming the right to privacy as a fundamental
right, this Court laid down the landscape as follows :
(SCC p. 539, paras 397-98)
"397. Once we have arrived at this understanding of
the nature of fundamental rights, we can dismantle a
core assumption of the Union's argument : that a
right must either be a common law right or a
fundamental right. The only material distinctions
between the two classes of right--of which the
nature and content may be the same--lie in the
incidence of the duty to respect the right and in the
forum in which a failure to do so can be redressed.
Common law rights are horizontal in their operation
when they are violated by one's fellow man, he can
be named and proceeded against in an ordinary
court of law. Constitutional and fundamental rights,
on the other hand, provide remedy against the
violation of a valued interest by the "State", as an
abstract entity, whether through legislation or
otherwise, as well as by identifiable public officials,
being individuals clothed with the powers of the
State. It is perfectly possible for an interest to
simultaneously be recognised as a common
20 K.S. Puttaswamy (Privacy-9 J.) v. Union of India, (2017) 10 SCC 1]
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
law right and a fundamental right. Where the
interference with a recognised interest is by the
State or any other like entity recognised by
Article 12, a claim for the violation of a
fundamental right would lie. Where the author
of an identical interference is a non-State actor,
an action at common law would lie in an
ordinary court.
398. Privacy has the nature of being [Ed. : The word
between two asterisks has been emphasised in
original.] both [Ed. : The word between two
asterisks has been emphasised in original.] a
common law right as well as a fundamental right. Its
content, in both forms, is identical. All that differs is
the incidence of burden and the forum for
enforcement for each form."
(emphasis supplied)
83. Thus, the answer to Question 2 is partly found in the
nine-Judge Bench decision in K.S. Puttaswamy (Privacy-9
J.)20 itself. We have seen from the line of judicial
pronouncements listed above that after A.K. Gopalan v.
State of Madras,101 lost its hold, this Court has expanded
the width of Article 21 in several areas such as health,
environment, transportation, education and prisoner's life,
etc. As Vivian Bose, J., put it in a poetic language in S.
Krishnan v. State of Madras102 (S. Krishnan case102 SCC p.
524, para 63)
"63. Brush aside for a moment the pettifogging of the law
and forget for the nonce all the learned disputations about
this and that, and "and" or "or";, or "may" and "must".
Look past the mere verbiage of the words and penetrate
deep into the heart and spirit of the Constitution."
(emphasis supplied)
20 K.S. Puttaswamy (Privacy-9 J.) v. Union of India, (2017) 10 SCC 1]
101 1950 SCC 228 :AIR 1950 SC 27
102 1951 SCC 499 : AIR 1951 SC 301]
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
The original thinking of this Court that these rights
can be enforced only against the State, changed
over a period of time. The transformation was
from "State" to "Authorities" to "instrumentalities
of State" to "agency of the Government" to
"impregnation with Governmental character" to
"enjoyment of monopoly status conferred by
State" to "deep and pervasive control"103 to the
"nature of the duties/functions performed"39 .
Therefore, we would answer Question 2 as
follows:
"A fundamental right under Articles 19/21 can be
enforced even against persons other than the State
or its instrumentalities."
33. In the light of the aforementioned discussion, lwhen
this Court considers the facts of these cases, it is noticed that these
petitioners are essentially complaining of violation of their
fundamental rights to earn their livelihood with dignity. They are
complaining of 'deprivation' in the hands of the contesting
respondents without following the law and by use of force which
cannot be permitted in a State governed by rule of law. Article 21
of the Constitution of India guarantees every person that he shall
not be deprived of his life and liberty except according to the
procedure established by law. The expressions "the State" is not
used in Article 21 as has been noticed by the Hon'ble Supreme
103 Ramana Dayaram Shetty v. International Airport Authority of India, (1979) 3 SCC 489
39 Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti Mahotsav Smarak Trust v.
V.R. Rudani, (1989) 2 SCC 691
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
Court in the case of Kaushal Kishore (supra). To put it in the
words of the Hon'ble Supreme Court, this Court would reproduce
the relevant lines from paragraph '86' of the judgment as under:-
" Article 21 does not say "the State shall
not deprive a person of his life and liberty",
but says that "no person shall be deprived
of his life or personal liberty".
34. The livelihood and all those aspects of life which
come to make a man's life meaningful, complete and worth living
are included within the meaning of the words "The Right to Life".
35. In these cases, it is alleged that the contesting
respondents have forcibly seized the vehicles while they are on
way. Admittedly the petitioners are the owners of the vehicle, they
have borrowed loan. In one of the cases, the bus passengers were
compelled to de-board the bus on way and then the vehicle was
repossessed. While doing so, admittedly, the contesting
respondents have not taken recourse to the provisions of the
SARFAESI Act, 2002 and the Rules framed thereunder. The
deprivation, in the present case, is not only by way of violation of
the established procedure of law but is also against the human
dignity.
36. To this Court, there is no iota of doubt that the action
of the contesting respondents is in contravention of the
fundamental policy of the Indian Law and it is in conflict with the
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
most basic notions of justice. This Court, therefore, rejects the
contention of Mr. Giri, learned Senior Counsel that no writ
application may be entertained against the contesting respondents.
Loan Agreements-Enforcement Mechanism
37. This leads to an another question as to whether the
provision regarding seizure of a vehicle in case of default, under
the loan agreement in these cases, may be enforced in the manner
it has been sought to be done. In the case of Kaushal Kishore
(Supra) the Hon'ble Supreme Court has, while discussing the
"horizontal" effect noticed the judgment of the Constitutional
Court of South Africa in the Governing Body of the Juma Musjid
Primary School & Others vs. Essay N.O. and Others reported
in 2011 SCC Online JACC 13 = (2011) 8 VCLR 61 wherein it
was held that the eviction order obtained by the owner of a private
land on which a public school was located, could not be enforced
as it would impact the students' right to basic education and the
best interests of the child under the South African Constitution
(Sections 28 and 29). The Court held that a private landowner and
non-State actor has a Constitutional obligation not to impair the
right to basic education under Section 29 of the Constitution.
38. In the background of the aforesaid issue, this Court
has to essentially consider as to whether the provisions of the loan
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
agreement in these cases may be enforced by adopting a procedure
which has no sanction of law and such procedure if permitted to be
followed would be violating the provisions of the SARFAESI Act,
2002 and the Rules framed thereunder. Corollary to this is as to
whether the contesting respondents have any Constitutional
obligation not to act in violation of law or in other words not to act
in conflict with the fundamental principles and policy of India in
the matter of seizure of movable or immovable properties by a
finance company which are contained in a legislative enactment
such as SARFAESI Act, 2002 and the rules framed thereunder.
39. To this Court, it appears that the contesting
respondents while seeking their private power to recover the loan
by repossessing the vehicle can exercise their rights only within
the constitutional limitations. A law such as SARFAESI Act, 2002
is a complete code unto itself and even the RBI guidelines have
given much emphasis that where Banks have incorporated a
repossessions clause in the contract with the borrower and rely on
such repossession clause for enforcing their rights, they should
ensure that the repossessions clause is legally valid, comply with
the provisions of the Indian Contract Act in letters and spirit and
ensure that such repossession clause is clearly brought to the
notice of the borrower at the time of execution of the contract.
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
40. According to the RBI guidelines, the terms and
conditions of the contract should be strictly in terms of pre-
recovery policy and should contain provisions regarding (a) notice
period before taking possession; (b) circumstances in which the
notice period can be waived (c) the procedure for taking
possession of the security (d) a provision regarding final chance to
be given to the borrower for repayment of loan before the
sale/auction of the property and (e) the procedure for giving
repossession of the policy and (f) the procedure for sale/auction of
the property. In all these circumstances, the contesting respondents
are unable to demonstrate from the records that the loan agreement
contains the procedures to be followed.
41. Mr. Giri has relied upon one of the clauses of the
hypothecation deed which reads as under:-
"2(iii) (i) to enter into and upon the premise of the
borrower and/or in other persons who then has
possession of the assets; (ii) to seize, recover, collect,
withdraw, receive the Assets and/or any income, profits
and benefits thereof without interruption or hindrance
by the borrower and/or by any person(s), (iii) to remove
and/or sell by public auction or by private contract,
dispatch or consign for realization or otherwise dispose
of or deal with all or any part of the Assets and enforce,
realize, settle, compromise and deal with any rights or
claims relating thereof without being bound to exercise
any of these powers or be liable for any losses in the
exercise or in the exercise thereof (iv) be and discharged
and well and sufficiently safe and keep harmless and
indemnified of, from and against all former and other
estates, titles, claims, dues, charges and incumbrances
whatsoever, or to direct the borrower and/or other
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
concerned person to sell, assign or otherwise liquidate,
any or all of the assets, (v) to claim the profits of any
such sale or liquidation, (vi) to retain all amounts and/or
other receipt so receivable by the Bank in respect of the
assets and use them, in whole or part, towards
repayment/payment of all amount in respect of the
facilities, (vii) to direct the borrower and so far other
concerned person in writing to deliver the assets to the
Bank on a date and time indicated by the Bank, in which
even the borrower shall add its own expense (a)
delivery/forthwith cause the same to be delivered to the
Bank; (b) providw/cause to be provided such guards and
maintenance services as shall be necessary to protect the
same.
Notwithstanding any pending suit or other proceeding,
the borrower undertakes to give immediate possession
of the Assets and all records/documents in relation
thereto to the nominee or authorized persons of the
Bank, on demand, and to transfer and to deliver to the
Bank all relevant bills, contracts, securities and
documents and the policy hereby course to accept the
Bank account and hence realization as sufficient proof
of amount realised and relative expenses and to pay all
due any shortfall thereby shown, provided every bank
shall under any way be liable or responsible for any
loss, damage or depreciation that the relevant assets may
suffer or sustain on any kind whatsoever as well the
same are in possession of the Bank or by reason of
exercise or non-exercise of rights or remedies available
to the Bank."
42. Mr. Giri, learned Senior Counsel has not placed any
other clause laying down the procedure as envisaged by RBI. At
this stage, it would be interesting to take note of the seizure
procedure available in the agreement in C.W.J.C. No. 7944 of
2022 as under:-
"In the event of failure of the Borrower in complying
with the demand, the Borrower shall be bound to
surrender the asset to the Lender at the cost of the
Borrower at such location, as the Lender may
designate, in the same condition in which it was when
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
the loan was granted, ordinary wear and tear excepted,
failing which, the Lender shall be entitled to seize the
Asset wherever it is, without any further notice, The
Borrower shall not prevent or obstruct the Lender from
taking possession of the Asset. For this purpose, the
Lender's authorised representative, employees and
agents will have unrestricted right of entry and shall be
entitled to enter upon the premises, or garage, or
godown, where the Asset shall be lying or kept, and to
possess the Asset. In the event of the Borrower not
cooperating, the Lender, if necessary, has the right to
break open any such place where the Asset is believed
to be kept and to seize the Asset. The Lender will be
well within his rights to use towvan or any carrier to
carry away the Asset. The Borrower shall be liable to
pay any towing charges and any other expenses
incurred by the Lender in connection with the seizure
of the Asset and for its sale etc."
43. The Indusind Bank Limited (respondent no. 3 in
C.W.J.C. No. 19461 of 2021) seems to have drafted its agreement
regarding enforcement of security interest keeping in view the Act
of 2002; the relevant clause of the Loan agreement in the said case
reads as under:-
"ENFORCEMENT OF SECURITY INTEREST
In the event of any default in the payment of
installments, violation of the terms and conditions of the
Agreement, the Lender may take all or any of the legal
action herein referred and/ or before all the forums and
also invoke its remedies available under the
Securitisation and reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (SARFAESI
Act) applicable in respect of the recovery of non-
performing asset. The Lender is entitled to recover and
dispose the Secured asset as per the said Act. The lender
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
is further entitled to recover the balance dues if any after
disposal of the secured asset.
The Borrower and Co-borrower expressly recognize and
accept that the Lender shall be absolutely entitled and
have full power and authority to sell assign or transfer in
any manner, in whole or in part and in such manner and
on such terms as the Lender may decide, to any third
party of the Lender's choice without reference to or
without written intimation to the Borrower and Co-
borrower. This includes reserving the right to the Lender
to retain its power hereunder to proceed against the
Borrower and Co-Borrower on behalf of the purchaser,
assignee or transferee, for any or all outstanding dues of
the borrower. Any such action and any such sale,
assignment or transfer shall bind the Borrower and Co-
borrower to accept such third party as creditor
exclusively or as a joint creditor with the Lender, or as
creditor exclusively with the right to the Lender to
continue to exercise all powers hereunder on behalf of
such third party and to pay over such outstanding
amounts and dues to such third party and/ or to the
Lender as the Lender may direct. The Borrower and Co-
borrower acknowledge and undertake to pay to third
parties the difference between the total loan amount and
the amount received the Lender in the event of transfer
of the portfolio to a third party. The third party shall have
authority of the Lender to collect the due amounts."
44. On a bare perusal of the aforementioned clause
which confers right upon the financier to repossess the vehicle in
case of default, it would appear that while in some cases no
procedure has been provided, at least in the case of Indusind Bank
Ltd., they admit the applicability of the SARFAESI Act 2002, they
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
have intcorporated it in their agreement but have not followed the
law.
45. In the counter affidavit filed on behalf of ICICI Bank
Limited it is stated that the Bank appointed M/s Amit Raj
Consultancy Services Private Limited to take possession of the
hypothecated vehicle but there is no statement that this was
informed to the petitioner. As per the RBI guidelines contained in
the Master Circular (Annexure '18' to the 5 th Supplementary
Counter affidavit of the ICICI Bank), the Bank should inform the
petitioner the details of recovery agency firm/companies while
forwarding default cases to the recovery agency. There is no
statement at all that this guideline was followed by the Bank. It is
further stated in the counter affidavit that before taking possession
of the hypothecated vehicle the answering respondents sent an
information to the Police Station but it is not stated as to under
which procedure the information was given to the Police Station.
The copy of the letter showing intimation to the Police Station
(Annexure 8 to the counter affidavit) has been brought on record.
A perusal of Annexure '8' would show that it is addressed to the
S.H.O., Didarganj, Patna, signed on 20.07.2021 and on the same
day the vehicle has been shown to have been possessed. This
procedure is neither laid down in the RBI guidelines or in the loan
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
agreement or under the SARFAESI Act 2002 and the Rules framed
thereunder. Admittedly, these actions have been taken by the Bank
during the Covid-19 period. It further appears that within eight
days from the date of re-possession of the vehicle, the ICICI Bank
claims to have issued a pre-sale notice to the petitioner on
28.07.2021, they obtained valuation of the vehicle on 29.08.2021
wherein the valuation of the vehicle was assessed at Rs.
6,50,000/- and thereafter the Bank auctioned the vehicle which
was informed to the Regional Transport Officer, Chajjubagh, Patna
vide letter dated 18.08.2021.
46. Therefore, by their own admission the Bank did not
even allow the petitioner to know as to what is the valuation and
basis thereof. The manner in which auction sale was notified or
brought to the notice of the public at large to fetch maximum
amount has not at all been disclosed in the counter affidavit. The
statement of the petitioner that he had deposited the last
installment on 29.06.2021 but thereafter no notice was given to
him has not all been denied.
47. This Court would at this stage take note of the RBI
Guidelines in the matter of taking possession of the property
mortgaged/hypothecated to banks. The relevant paragraph (xii) is
reproduced hereunder:-
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
"(xii) In a recent case which came up before the
Honourable Supreme Court, the Honourable Court
observed that we are governed by rule of law in the
country and the recovery of loans or seizure of
vehicles could be done only through legal means. In
this connection it may be mentioned that the
Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002
(SARFAESI Act) and the Security Interest
(Enforcement) Rules, 2002 framed thereunder have
laid down well defined procedures not only for
enforcing security interest but also for auctioning the
movable and immovable property after enforcing the
security interest. It is, therefore, desirable that banks
rely only on legal remedies available under the
relevant statutes while enforcing security interest
without intervention of the Courts."
48. As back as in the year 2007 while dealing with the
case of ICICI Bank Ltd. vs. Prakah Kaur and others reported
in (2007) 2 SCC 711 wherein it was the case of the respondents
that the Bank had recovered possession of the vehicle forcibly, the
Hon'ble Supreme Court observed as under:-
"16. Before we part with this matter, we wish to make
it clear that we do not appreciate the procedure adopted
by the Bank in removing the vehicle from the
possession of the writ petitioner. The practice of hiring
recovery agents, who are musclemen, is deprecated
and needs to be discouraged. The Bank should resort to
procedure recognised by law to take possession of
vehicles in cases where the borrower may have
committed default in payment of the instalments
instead of taking resort to strong-arm tactics."
49. The Hon'ble Supreme Court in the aforesaid case
while directing the the appellant Bank to hand over the vehicles to
the respondents recorded that in case of default in payment of
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
subsequent installments, the Bank will be entitled to repossess the
vehicle in accordance with law. Thus, what is important to note is
that it was the contention of ICICI Bank that in case of default of
payment of the installments and in terms of the agreement, the
truck was taken in possession of the Bank authorities, the Hon'ble
Supreme Court did not approve the same and while directing the
Bank to release the truck and reconcile the account, etc., it was
made clear that in case of default in payment of subsequent
installments, the Bank will be entitled to repossess the vehicle in
accordance with law.
50. Again only after an year in the case Shanti Devi
Sharma (supra) which was a case against the ICICI Bank, the
Hon'ble Supreme Court noticed the facts of the case wherein the
motorcycle of the husband of the respondent was repossessed by
the Bank through it's recovery agent by use of force whereafter he
was carrying the vegetables on his back and the members of the
neighbourhood allegedly made snide comments. This led to the
husband of the respondent committing suicide as he could not face
such a humiliation and discourage in his life. The Hon'ble
Supreme Court observed in paragraph 12 as under:-
"12. The Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002
(SARFAESI) and the Security Interest (Enforcement)
Rules, 2002 (SIER) framed thereunder provide some of
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
the procedures by which security interests may be
recovered. In addition to SARFAESI and SIER, Reserve
Bank of India (RBI) has promulgated guidelines on the
subject. The RBI Guidelines on Fair Practices Code for
Lenders dated 5-5-2003 provide at (v)(c) that: "in the
matter of recovery of loans, the lenders should not resort
to undue harassment viz. persistently bothering the
borrowers at odd hours, use of muscle power for
recovery of loans, etc."
51. The Hon'ble Supreme Court noticed that the RBI
has expressed it's concern about the number of litigations filed
against the banks in the recent past for engaging recovery agents
who have purportedly violated the law. In the guideline of April,
2008 on the engagement of recovery agents, RBI stated:
"In view of the rise in the number of disputes and
litigations against banks for engaging recovery agents in
the recent past, it is felt that the adverse publicity would
result in serious reputational risk for the banking sector
as a whole."
52. The Hon'ble Supreme Court noted that the RBI has
taken this issue seriously, as evidenced by the penalty that banks
could face if they fail to comply with the guidelines. In the said
case the Hon'ble Supreme Court refused to expunge the remarks
made by the Hon'ble Delhi High Court while disposing of the Writ
Petition (Criminal) No. 576 of 2006. The respondents in the said
case had prayed for a direction to the Commissioner of Police to
take action against the appellant Bank and the Hon'ble Delhi High
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
Court directed accordingly for taking action against those who
may be found guilty of abetting the deceased to commit suicide. In
paragraph '17' of the judgment in the case of Shanti Devi
Sharma (supra) the Hon'ble Supreme Court observed as under:-
"17. We deem it appropriate to remind the banks and
other financial institutions that we live in a civilised
country and are governed by the rule of law."
53. The Apex Court directed the Deputy Commissioner
of Police to expedite the investigation and submit a report to the
Delhi High Court and also awarded cost of litigation at Rs.
25,000/- against the Bank.
54. Mr. Y. V. Giri, learned Senior Counsel has relied
upon a judgment of the Hon'ble Apex Court in the case of
Magma Fincorp Ltd. v. Rajesh Kumar Tiwari reported in
(2020) 10 SCC 399. It is his submission that in the said case the
Hon'ble Supreme Court held that a financier is the real owner of
the vehicle which is the subject of a hire-purchase agreement,
therefore, there would be no impediment to the financier taking
possession of the vehicle when the hirer does not make payment of
installments/hire charges in terms of the hire-purchase agreement.
First of all, let it be recorded that in none of these cases it is the
contention of the Bank/Finance Company that there was a hire
purchase agreement or that they are the owner of the vehicles. To
this Court, it appears that Mr. Giri has referred only one part of the
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
judgment rendered by the Hon'ble Apex Court in the case of
Magma Fincorp Ltd. (supra). In paragraph '87' of the judgment
their Lordships of the Hon'ble Supreme Court held as under:-
"87. The question raised by the financier in this
appeal, that is, whether the financier is the real owner
of the vehicle, which is the subject of a hire-purchase
agreement, has to be answered in the affirmative in
view of the law enunciated by this Court in
Charanjit Singh Chadha2, K.L. Johar & Co.,4 and
Anup Sarmah5. The financier being the owner of the
vehicle which is the subject of a hire-purchase
agreement, there can be no impediment to the
financier taking possession of the vehicle when the
hirer does not make payment of instalments/hire
charges in terms of the hire-purchase agreement.
However, such repossession cannot be taken by
recourse to physical violence, assault and/or criminal
intimidation. Nor can such possession be taken by
engaging gangsters, goons and musclemen as so-
called recovery agents."
(underline is mine)
55. It is crystal clear from the aforementioned judgment
that the Hon'ble Supreme Court's judgment bans taking over
possession by recourse to physical violence, assault and/or
criminal intimidation. It completely bans taking such possession
by engaging gangsters, goons and musclemen as so called
2 Charanjit Singh Chadha v. Sudhir Mehra, (2001) 7 SCC 417 : 2001 SCC (Cri) 1557
4 K.L. Johar & Co. v. CTO, AIR 1965 SC 1082
5 Anup Sarmah v. Bhola Nath Sharma, (2013) 1 SCC 400 : (2013) 1 SCC (Civ) 513 :
(2013) 1 SCC (Cri) 518
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
recovery agents. From paragraph '11' of the judgment in the case
of Magma Fincorp Ltd. (supra) it would be crystal clear that
Magma Fincorp Ltd. (supra) was not a case of forceful
possession of the vehicle through so called recovery agents.
56. This Court is of the considered opinion that a
recovery agent cannot intercept a bus or a truck or a scorpio
vehicle on way and direct the passengers to come down and leave
the vehicle, unless they obtain appropriate order in accordance
with law and such orders are required to be executed only in
accordance with law.
57. This Court had occasion to consider an identical
question in the case of Sujay Kumar (supra) paragraph '17' and
'18' of the judgment read as under:-
"17.The question which really arises for
onsideration in the present writ application is,
firstly, as to whether under the hypothecation
agreement which confers a right and power upon
the respondent-Bank, in case of default on the part
of the borrower to seize and take possession of the
vehicles without any notice to the borrower from
any place and without recourse to any suit may be
interpreted so as to mean that the respondent-Bank
has a license to forcefully take possession of the
vehicles at any place without giving notice to the
borrower or the guarantor and without recourse to
any suit or proceeding and permission from a
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
competent of law. The right and entitlement to
seize the vehicle may be one thing, here the
manner in which that right and entitlement has
been exercised by the respondent- ank has been
questioned.
18. The second question which arises for
consideration is as to whether after coming into
force of the SARFAESI Act, 2002 the respondent-
Bank would be justified in ignoring the provisions
of the SARFAESI Act, 2002 which has got a legal
sanctity and the purpose behind that enactment
was to regulate Securitization and Reconstruction
of Financial Assets and Enforcement of Security
Interest. If the legislatures of this country decided
to enact a regulatory law for enforcement of
security interest, is it open for the respondent-Bank
to take a plea that in terms of its own policy the
Bank can appoint a recovery agent and may take
possession of the hypothecated/movable in which
a security interest has been created by virtue of a
hypothecation agreement in a manner which is in
teeth of the statutory provision."
58. This Court dealt in detail the preamble of the Act of
2002 as under:-
"19. Let us see first the scheme of the SARFAESI Act,
2002. The preamble of the Act of 2002 reads as under:-
An Act to regulate securitization and reconstruction of
financial assets and enforcement of security interest and
for matters connected therewith or incidental thereto.
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
The dictionary Section 2 defines financial assistance,
financial asset, hypothecation, property, secured asset,
secured creditor and security interest as under: -
"2.(k) "financial assistance" means any loan or advance
granted or any debentures or bonds subscribed or any
guarantees given or letters of credit established or any
other credit facility extended by any bank or financial
institution [including finds provided for the purpose of
acquisition of any tangible asset on hire or financial
lease or conditional sale or under any other contract or
obtaining assignment or licence of any intangible asset
or purchase of debt securities];
2(l). "financial asset" means debt or receivables and
includes-
(i) a claim to any debt or receivables or part thereof,
whether secured or unsecured; or (ii) any debt or
receivables secured by, mortgage of, or charge on,
immovable property; or
(iii) a mortgage, charge, hypothecation or pledge of
movable property; or (iv) any right or interest in the
security, whether full or part underlying such debt or
receivables; or
(v) any beneficial interest in property, whether movable
or immovable, or in such debt, receivables, whether
such interest is existing, future, accruing, conditional or
contingent; or
[va] any beneficial right, title or interest, in any tangible
asset given on hire or financial lease or conditional sale
or under any other contract which secures the obligation
to pay any unpaid portion of the purchase price of such
asset or an obligation incurred or credit otherwise
provided to enable the borrower to acquire such tangible
asset; or] [any right, title or interest on any intangible
asset or licence or assignment of such intangible asset,
which secures the obligation to pay any unpaid portion
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
of the purchase price of such intangible asset or an
obligation incurred or credit otherwise extended to
enable the borrower to acquire such intangible asset or
obtain licence of the intangible asset; or;]
(vi) any financial assistance;
2(n). "Hypothecation" means a charge in or upon any
movable property, existing or future, created by a
borrower in favour of a secured creditor without
delivery of possession of the movable property to such
creditor, as a security for financial assistance and
includes floating charge and crystallisation of such
charge into fixed charge on movable property;
2(t). "property" means--
(i) immovable property;
(ii) movable property;
(iii) any debt or any right to receive payment of money,
whether secured or unsecured;
(iv) receivables, whether existing or future;
(v) intangible assets, being know-how, patent,
copyright, trade mark, licence, franchise or any other
business or commercial right of similar nature;
2(zc). "secured asset" means the property on which
security interest is created;
2(zd) "secured creditor" means--
(i) any bank or financial institution or any consortium or
group of banks or financial institutions holding any right,
title or interest upon any tangible asset or intangible
asset as specified in clause (1);
(ii) debenture trustee appointed by any bank or financial
institution; or
(iii) an asset reconstruction company whether acting as
such on managing a trust set up by such asset
reconstruction company for the secularization or
reconstruction, as the case may be; or
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
(iv) debenture trustee registered with the Board
appointed by any company for secured debt securities; or
(v) any other trustee holding securities on behalf of a
bank or financial institution,
in whose favour security interest is created by any
borrower for due repayment of any financial assistance.;]
2(zf). "security interest" means right, title or interest of
any kind, other than those specified in section 31, upon
property created in favour of any secured creditor and
includes ---
(i) any mortgage, charge, hypothecation, assignment or
any right, title or interest of any kind, on tangible asset,
retained by the secured creditor as an owner of the
property, given on hire or financial lease or conditional
sale or under any other contract which secures the
obligation to pay any unpaid portion of the purchase
price of the asset or an obligation incurred or credit
provided to enable the borrower to acquire the tangible
asset; or
(ii) such right, title or interest in any intangible asset or
assignment or licence of such intangible asset which
secures the obligation to pay any unpaid portion of the
purchase price of the intangible asset or the obligation
incurred or any credit provided to enable the borrower to
acquire the intangible asset or licence of intangible
asset.]"
20. Under the scheme of the SARFAESI Act, 2002,
a demand notice under Section 13(2) has to be
issued to the borrower calling upon him to discharge
in full his liabilities to the secured creditor within 60
days from the date of the notice, failing which the
secured creditor shall be entitled to exercise all or
any of the rights under sub- section (4). If the
borrower submits an objection within the aforesaid
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
period of 60 days, the same is to be considered by
the secured creditor and the objections are to be
disposed off by communicating the decision to the
borrower within 15 days of the receipt of such
representation or objection. The reasons for non-
cceptance of the representation is to be provided.
Under sub-section (4) of Section 13, in case the
borrower fails to discharge his liability within the
prescribed period the secured creditor may take
recourse to one or more of the measures provided
under sub-section (4) to recover his secured creditor.
It includes taking over the possession of secured
assets of the borrower including the right to transfer
by way of lease, assignment or sale for realizing the
secured asset.
21. We are concerned here with the power to be
exercised under Section 13(4)(a) of the SARFAESI
Act, 2002. The Security Interest (Enforcement
Rules, 2002) lays down the procedures to be
followed. For purpose of taking possession of
movable property in possession of the borrower, the
Authorized Officer shall take possession of such
movable property in presence of two witnesses after
a Panchnama drawn and signed by the witnesses as
merely as possible in Appendix I to the Rules.
Under sub-rule (2) of rule 4 after taking possession
the Authorized Officer shall make or cause to be
made an inventory to the property in Appendix II
and deliver a copy of such inventory to the borrower
or any person entitled to receive the same on behalf
of the borrower. All notices are to be served upon
the borrower through electronic mode of service, in
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
addition to the modes specified under Rule 3. Rule 3
provides for service of notice by registered post with
acknowledgment due or by speed post or by courier
or by any other means of transmission of documents
like Fax message or electronic mail service. Under
Rule 5 the valuation of movable secured assets is to
be made and thereafter if considered necessary the
Authorized Officers would fix in consultation with
the secured creditor the reserve price of the assets to
be sold in realization of the dues of the secured
creditor. Under Rule 6 the Authorized Officer may
sell the movable secured assets in one or more lots
by adopting any of the methods mentioned under
Clause (a), (b), (c) and (d). Clause (b) and (c) talks
of inviting tender from the public; or holding public
auction including through e-auction mode. Proviso
to sub-rule (2) of Rule 6 says that if the sale of such
secured asset is being effected by either inviting
tenders from the public or by holding public auction,
the secured creditor shall cause a public notice in
the Form given in Appendix- II-A to be published in
two leading newspapers, including one in vernacular
language having wide circulation in the locality."
59. In the light of the aforesaid discussions, this Court is
of the considered opinion that the loan agreement which are
available on the record are at best creating a security interest in the
vehicles which would be covered within the meaning of the words
"Secured Asset" under the Act of 2002. The covenants of the loan
agreement providing for re-possessing the vehicle do not provide
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
for a procedure in accordance with the provisions of the Act of
2002 and the Rules framed thereunder. In the garb of a power
acquired by the financier under the loan agreement to re-possess
the vehicle, they cannot be allowed to take the law into their hands
and enforce the loan agreement by violating the legislative mandate
and the regulatory law such as as the Act of 2002.
Constitutional Obligation- not to act in violation of Law
60. The Banks and the Finance Companies who are
contesting these matters are under a constitutional obligation not
to act in violation of law. They cannot act in conflict with the
fundamental principles and policy of India which means that no
person may be deprived of his livelihood and the right to live with
dignity without following the established procedure of law. The
right to recovery of these Banks and Financial Institutions if pitted
against the constitutional right of 'life' of a person/petitioner to
live with dignity and not to be deprived of without following the
established procedure of law, the constitutional rights of the
person/petitioners shall prevail. In this connection, this Court is
tempted to reiterate that these are the rights conferred by Part III
of the Constitution of India to 'a person' which are to be honoured
by and also enforceable against, non-State actors. The private
rights of the contesting respondents must be exercised within the
constitutional limitations and in accordance with law.
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
61. In result, this Court finds that the action of the
contesting respondents in seizure/re-possess the vehicle without
following the RBI guidelines and the law as also the judicial
pronouncements on the subject is wholly illegal. It is in violation
of law and deprive the petitioners of their fundamental rights of
livelihood and the right to live with dignity which are included in
Article 21 of the Constitution of India.
62. This Court, at this stage, must express its anguish on
the conduct of the respondents who are acting in violation of law,
the judgments of the Hon'ble Apex Court as well as in complete
disobedience and disregard to the judgment of this Court. Despite
the clear mandate of the Hon'ble Supreme Court that they cannot
re-possess the vehicle forcibly through recovery agents, several
repeated allegations are coming that these Banks and Financial
institutions are indulged in repeatedly doing the same.
63. Mr. Abhinav Srivastava, learned 'Amicus Curiae'
has ably assisted this Court. Learned 'Amicus Curiae' has strongly
submitted that the manner in which these contesting respondents
are repeatedly acting in violation of law and taking the law into
their hands, some stringent measures are required to be taken
against them and they are liable to be proceeded against by
instituting a contempt proceeding for showing their willful
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
disobedience and dis-regard to the judgment of this Court in the
case of Sujay Kumar (supra).
Observations and Directions
64. Having discussed the entire facts and circumstances
of the case and the laws on the subject, this Court would make it
clear that so far as the allegations against the Banks and Financial
Institutions that they had forcibly seized/repossessed the vehicles
is concerned, this Court, instead of dwelling much upon that issue
in the present proceeding, leaves it open for the Investigating
Agency to look into the complaints of the petitioners and
investigate them independently and in accordance with law. This
Court has mainly concentrated on the plea of the Banks and
Financial Institutions that they can seize and repossess the
vehicle without taking recourse to law and legal procedures as
envisaged under the Act of 2002 and the Rules framed thereunder.
Thus, even as the allegations of forceful seizure and possession
has been taken note of, the same would not come in the way of an
independent investigation. This Court has found that at least in one
case (C.W.J.C. No. 16155 of 2021) a first information report being
Sadar P.S. Case No. 22 of 2023 dated 08.01.2023 has been lodged
by the petitioner's husband. In case other petitioners have also
lodged any complaint with the respective police station, the same
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
will be registered and duly investigated. It is still open to the
petitioners to lodge their respective complaint with the
jurisdictional police station within whose jurisdiction the vehicle
in question has been seized and repossessed allegedly by use of
force.
65. Since this Court has come to a conclusion that the
covenants in the loan agreement of these cases are at best creating
a 'security interest' in the 'secured asset' i.e. the vehicle in favour
of the Banks and Financial Institutions, as the case may be, this
Court directs that the Banks/Financial Institutions who are
contesting respondents in these cases shall henceforth, exercise
their power to seize and repossess the vehicle only in accordance
with the provisions of the Act of 2002, and the Rules framed
thereunder and the RBI guidelines. Their right to seize or re-
possess is not in question, it is the manner in which it is being
exercised is illegal, hence, they cannot continue with the same.
66. The Superintendent of Police of all the districts in
the State of Bihar are directed to ensure that within their
jurisdiction no recovery agent of the Bank and Financial
Institution may take the law into their hands, intercept the vehicles
on way and takes possession of the vehicle in default without an
order of the competent court of law. Any seizure/repossession of
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
the vehicle in default may be given effect to only in accordance
with the law and the procedure established by law;
67. In all such cases where the vehicles have not been
sold, the petitioner(s) and the Bank/Financial Institution through
it's authorized representative shall sit together and reconcile the
account to determine the amount due in the loan account, however,
the Bank/Financial Institution shall not charge any interest for the
period during which the vehicle remained in seizure and they will
treat the Covid-19 period in accordance with lockdown
notification. Such reconciliation be made within a period of four
weeks from today whereupon the petitioner(s) shall pay 30% of
the outstanding amount and get release of the vehicle after giving
an undertaking that he will pay the rest of the 70% of the
outstanding amount with applicable interest from the date of
handing over the possession of the vehicle till the date of payment
in suitable installments as may be decided by the Banks/Financial
Institutions. In the meantime, the petitioner(s) shall continue to
pay the current EMI, failing which it will be open to the
Bank/Financial Institution to proceed against the petitioner(s) in
accordance with the provisions of the Act of 2002 and the Rules
framed thereunder to re-possess the vehicle.
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
68. In the cases where the vehicle has been sold to a
third party and the Bank/Financial Institution is not in a position
to restore the vehicle, they would be liable to pay the petitioner(s)
to the extent of the value of the vehicle(s) as per their insurance
value on the date of their seizure. The said amount shall be
adjusted against the outstanding vehicle loan and thereafter if any
surplus comes out the same will be made available to the
petitioner. It will be open for the petitioners, if so advised to
challenge the accounts furnished by the Banks/Financial
Institutions and claim any compensation etc. for the loss arising
out of seizure of their respective vehicles before appropriate
court/forum.
69. Since the action of the Banks/Finance Companies
are found illegal, the petitioners who have been made to contest
this case shall be entitled for cost of litigation. Accordingly, this
Court directs that each of the contesting respondents i.e.
Banks/Financial Institutions would be liable to pay a sum of Rs.
50,000/- (fifty thousand) as cost of litigation to the respective writ
petitioners within a period of 30 days from the date of
receipt/production of a copy of this judgment.
70. These writ applications are disposed of accordingly.
Patna High Court CWJC No.3456 of 2021 dt.19-05-2023
71. Let a copy of this judgment be communicated to the
Director General of Police, Bihar to issue necessary instructions to
all the Senior Superintendent of Police/Superintendent of Police in
the State of Bihar to act in terms of the directions contained in this
judgment.
(Rajeev Ranjan Prasad, J)
avin/-lekhi
AFR/NAFR AFR
CAV DATE 12.05.2023
Uploading Date 19.05.2023
Transmission Date
