Coax, cajole, coerce and then just snatch the car — the foolproof formula that financial institutions have been using while dealing with loan defaulters. But now, a Calcutta High Court ruling threatens to slam the brakes on the banking method of employing muscle to reclaim machine.
The high court has severely ticked off HSBC for hiring goons to get back a Tata Safari from a client who defaulted on a single month’s payment. The court has directed HSBC to return the bank-financed car to Amal Bose, a resident of south Calcutta.
“In a civilised society, a financial institution — particularly a bank — cannot take possession of a vehicle using force,” the court order said, asking HSBC to be prompt about returning the car.
Making it clear that it was not passing any verdict on the validity of the hire-purchase agreement between Bose and his bank, the court added that HSBC could adopt legal measures to recover its dues or claim the car for non-payment of dues.
The bank, till Monday evening, refused to comment on the court order. Contacted through the weekend and Monday, its representatives in Mumbai said they would not react to the court’s observations without seeing a copy of the order.
But a message from HSBC-India manager (public affairs) Malani Thadani said the bank would abide by the laws of the land. “HSBC follows legal procedures to conduct its business and... will comply with the required laws and orders.”
Bose, who took Rs 7.29 lakh from the bank after depositing 20 per cent of the car’s cost with the bank as security money, allegedly failed to pay the equal monthly instalment for May 2003. But even that, his lawyer contended, was the fault of another bank entrusted with paying the sum.
A week into June, Bose and his family were travelling towards their Keyatala Road home in the car. On Southern Avenue, some unidentified men stopped the car, herded them out of it and drove off, his lawyer told the court. An FIR was lodged with the Lake police station but the case did not move forward.
The court remarked that the bank had never initiated any proceedings before any court of law to take back the car. “The procedure adopted by the bank has established a dangerous trend, leading to a serious law-and-order problem,” the court observed. “The bank should have adopted a civilised mode and manner for taking possession of the vehicle, which was with the petitioner under the hire-purchase agreement.”
Making it clear that no financial institution should take possession of any hypothecated vehicle by force, the court asked Calcutta Police to retrieve the car from the bank’s possession and hand it back to Bose.
The HSBC lawyers argued that it was Bose who had violated the terms of the agreement and the bank had no other option to realise the amount.