Dhananjay Seth v/s The Union of India Civil Writ Jurisdiction Case No.3456 of 2021
The Hon’ble Patna High Court in a recent judgement has declared the forceful seizure of vehicles by recovery agents as unconstitutional and illegal. The Hon’ble Court has directed the banks and financial institutions to comply with the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and the guidelines issued by the Reserve Bank of India (RBI) while seizing or repossessing vehicles.
This judgement came in response to two civil writ petitions filed against various government and financial institutions. The petitioners alleged that their vehicles were seized by recovery agents without following due process of law and in violation of their fundamental rights. The court, after examining the facts of the cases, found that the recovery agents had seized the vehicles without any order from the competent court of law and in active connivance with the state authorities, especially the local police.
The Hon’ble Court also noted that such incidents were happening on a regular basis and had almost attained a type of acceptance. The court then directed the banks and financial institutions to exercise their power to seize and repossess the vehicle only in accordance with the provisions of the SARFAESI Act, the rules framed thereunder, and the RBI guidelines.
The Hon’ble Court, however clarified that the right to seize or repossess the vehicle was not in question, but the manner in which it was being exercised was illegal. It was also directed by the court to the Superintendent of Police of all the districts in the state of Bihar to ensure that within their jurisdiction, no recovery agent of the bank and financial institution may take the law into their hands, intercept the vehicles on the way, and take possession of the vehicle in default without an order of the competent court of law.
The Hon’ble High Court relied on the judgement of the Hon’ble Supreme Court in the case of ICICI Bank v/s Shanti Devi Sharma & Ors (2008) 7 SCC 532, wherein the Hon’ble Supreme Court had held such actions of the bank illegal. The Supreme Court then also referred to its own judgement in the case of Sujay Kumar v/s Uco Bank 2020 (1) PLJR 583, wherein the court had declared the seizure of this nature illegal and ordered the financial institution to return the vehicle to the owner with liberty to claim damage by the owner.
Author of this article:
Adv. Ravish Bhatt,
Partner, R&D Law Chambers,
Dual Qualified Lawyer Solicitor | International Tax Affiliate
Connect with Mr. Bhatt on Linkedin: https://www.linkedin.com/in/adit-ravishbhatt/
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