India's apex consumer court has ruled it illegal to repossess a financed vehicle without serving a notice to the owner who has allegedly defaulted on loan repayment. It was also illegal not to serve notice to the loan taker at the time of the vehicle's subsequent sale, the National Consumer Disputes Redressal Commission announced in its recent ruling while hearing a complaint against Mahindra & Mahindra Financial Services Ltd. (MMFS). The company, which was accused of wrongfully dispossessing Naresh Singh, a resident of Indore in Madhya Pradesh, of a commercial vehicle despite his having repaid his vehicle loan was asked to pay compensation of INR 42,000.

In its strongly worded order, the commission also told the finance company to pay Singh INR 15,000 as the amount spent on obtaining permit and registration and INR 1,000 as cost of the litigation. According to Singh in his petition that MMFS gave him a loan of INR 0.35 million for purchasing a Mahindra Tourist vehicle on a hire-purchase basis. The loan amount was to be paid in 34 installments.

It was agreed that the first installment would be of INR 24,500 and the remaining installments would be of INR 12,250 each. According to the commercial vehicle operator he paid all the installments against the loan between June 1, 2004, and Sep. 2, 2005.

Despite that, the finance company repossessed the vehicle Oct. 23, 2005, without giving notice on the ground that INR 0.429 million was outstanding against the loan. He alleged that soon after the illegal repossession of his vehicle, it was sold without any notice to him for a sum of INR 0.25 million Singh filed a complaint claiming a sum of INR 82,000 as compensation and for other charges.

The finance company admitted that it financed INR 0.350 million for purchasing a vehicle by Singh but denied that he paid the installments regularly. Denying deficiency in service on its part, MMFS claimed that INR 85,650 was outstanding against Singh Oct. 23, 2005, and, therefore, the vehicle was possessed in a lawful manner and sold.

The district forum ruled in Singh's favor and concluded that the possession of the vehicle was taken by the finance company without informing him about any amount outstanding against him and, thereafter, the vehicle was unlawfully sold without notice. The national commission also slammed MMFS for delay of 71 days in filing the revision petition.