NCDRC holds Kotak Mahindra Bank liable for forcefully seizing Vehicle of Customer who could not pay EMI

The National Consumer Disputes Redressal Commission (NCDRC) in New Delhi, led by Dr. Inder Jit Singh, held Kotak Mahindra Bank Ltd. responsible for service deficiency after it repossessed a vehicle financed through a loan without issuing prior notice to the borrower or giving him a chance to settle his dues. The bank then sold the vehicle at an undervalued price.

Case Summary:

The Complainant took a loan of ₹16,55,000 from Kotak Mahindra Bank Ltd. to purchase a heavy goods vehicle, with repayment set over 47 months at ₹45,600 per month. After experiencing mechanical issues with the vehicle, the Complainant missed the September installment, which he later paid. He also requested extra time to pay the October and November installments, which the Bank allowed, and the payments were made. However, two days after paying, bank employees forcibly repossessed the vehicle in Haidargarh, U.P., and sold it soon afterward. The Complainant’s civil suit to recover the vehicle was dismissed since the sale had already taken place. He then filed a consumer complaint seeking compensation.

Legal Proceedings:

• District Consumer Commission: Ordered the Bank to pay ₹10 lakh in compensation and ₹50,000 in legal costs to the Complainant.
• State Consumer Commission: Reduced the compensation to ₹5 lakh.
• NCDRC: Both parties filed revision petitions—the Complainant for increased compensation and the Bank to dismiss the State Commission’s ruling.

NCDRC’s Findings:

The NCDRC noted that the vehicle was repossessed by force, which the Bank tried to justify as a “voluntary surrender.” However, the NCDRC found this argument invalid as the Bank had not issued a repossession notice or offered a chance to settle outstanding payments. Referencing the Supreme Court case Manager, ICICI Bank Ltd. v. Prakash Kaur, the NCDRC reaffirmed that banks cannot use force in repossession efforts. Similar rulings, such as Citicorp Maruti Finance Ltd. v. S. Vijaylaxmi and ICICI Bank v. Shanti Devi Sharma, have also established that forceful repossession by banks is a deficiency in service.

The NCDRC further observed that the Bank failed to provide any notice or documentation before repossession, which severely affected the Complainant’s livelihood, and the vehicle was sold quickly at just ₹12 lakh. Citing Ruby (Chandra) Dutta v. United India Insurance Co. Ltd., the NCDRC stated that revisional jurisdiction is only applicable when findings are legally flawed, which was not the case here. As a result, the NCDRC upheld the State Commission’s order and dismissed both revision petitions.