Repossession of goods by the financial institution in case of default in repayment of loan does not amount to theft

Madras High Court: While setting aside the FIR registered against the officials of the Bank for an offence under Section 379 Penal Code, a bench of S. Vaidyanathan J ruled that no criminal action could be taken against the financier/ financial institution for repossessing the goods hypothecated with them in case of default in repayment of loan.

In the instant case, a loan agreement was signed between the petitioner and the 2nd respondent for a sum of Rs.9,00,000/- for purchase of a car. The petitioner seized the car on default in the repayment of loan and kept it in their custody. The 2nd respondent filed a case against the officials of the Bank for an offence under Section 379 IPC. After registering the case, the 1st respondent Police sent a communication to the bank, asking them to surrender the vehicle, as the same is required for investigation as well as for production before the Court. Aggrieved by the same, the petitioner filed the present petition under Section 482 of CrPC to quash the FIR pending on the file of the 1st respondent Police.

The Court referred K.A. Mathai  v. Kora Bibikutty, (1996) 7 SCC 212 where it was held that in case of default to make payment of installments financier had a right to resume possession even if the hire purchase agreement does not contain a clause of resumption of possession for the reason that such a condition is to be read in the Agreement. The Court also referred Anup Sarmah vs. Bhola Nath Sharma, (2013) 1 SCC 400 where it was held that in an Agreement of hire purchase, the purchaser remains merely a trustee/bailee on behalf of the financier / financial institution and ownership remains with the latter. Accordingly, the Court made it clear that in case vehicle is seized by the financier, no criminal action can be taken against him as he is repossessing the goods owned by him, and in such an eventuality, it cannot be held that the financier had committed an offence of theft and that too, with the requisite mens rea and requisite dishonest intention. [HDFC Bank Limited v. State, 2015 SCC Online Mad 10573, decided on 21.12.2015]

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