Cannot Use Recovery Agents to Seize Vehicles Over Non-Payment Of EMIs: High Court

The Patna High Court came down heavily on banks and finance companies that use the service of recovery agents to forcibly seize vehicles of customers who are unable to pay the EMI on time for the loans that they have taken.

The court went on to impose a fine of Rs 50,000 on erring banks and finance companies.

In a judgment that was passed on May 19, Justice Rajiv Ranjan Prasad said that the seizure of vehicles by recovery agents was illegal and in violation of the fundamental rights to life and livelihood.

Disposing off a batch of petitions, Justice Prasad maintained that banks and finance companies could not use the service of recovery agents to seize the vehicle if the customer has defaulted on the payment of EMI. The court directed the police to register FIRs against such agents and take legal action.

Banks should recover loans only by following the securitisation provisions. This gives the banks and finance companies to recover bad debts by acquiring the physical possession of the mortgaged property of the defaulting customer, the court noted.

The verdict was passed while disposing off five petitions on the forceful seizure of vehicles of customers who had defaulted on their EMIs.