Factual Background 

In the matter of Dhananjay & Ors v UOI v Ors All of the petitioners shared the grievance that their vehicles, which they had bought with bank and financial institution assistance, had been forcibly taken away from them without following the law and by using goons and musclemen at odd times. The petitioners requested from the court that the contending respondents return the automobiles with all paperwork. Additionally, they demanded compensation for reputational damage.

Issue 

whether the respondents could in these circumstances successfully implement the provision of the Loan Agreement providing for the seizure of cars in the case of default.

whether the automobiles had been forcibly confiscated by the banks and financial institutions

Courts Verdict 

According to Justice Rajeev Ranjan Prasad of the Patna High Court’s Single Judge Bench, banks and other financial institutions cannot use thugs as recovery agents to forcibly seize vehicles from loan defaulters because doing so would be illegal.

The Reserve Bank of India (RBI) procedures and the relevant law were not followed when the vehicle was seized, according to a judgement issued on May 19 that expressed outrage over the banks’ and loan businesses’ actions and noted that doing so was blatantly illegal. The court determined that the banks and financing businesses disputing these concerns have a fundamental duty to refrain from breaking the law. They are not allowed to take any actions that are contrary to the core values and policies of India, which provide that no one may be denied a means of subsistence or the right to a dignified existence without first following the established legal process. When a petitioner’s constitutional right to “life”—the ability to live with dignity and not have that right violated—is compared to the right of these banks and financial organisations to be reimbursed, the petitioners’ constitutional rights will win out.

The court determined that the respondents could only exercise their rights within the confines of the constitution while seeking to use their private authority to reclaim the loan through the repossession of the automobile. The single-judgement makes it clear that the financier cannot enforce the loan agreement by breaking the law and violating regulatory laws like the Act of 2002 under the guise of a power granted to them under the loan agreement to reclaim the vehicle.

Because the activities of the banks and financial businesses were illegal, the petitioners who were forced to contest the current matter will be entitled to expenses. As a result, the court orders that each of the contesting respondents’ Financial Institutions be obligated to pay the corresponding writ petitioners a sum of 50,000 as litigation costs within 30 days of the date a copy of this judgement is produced.