Criminal action cannot be initiated against banks and financial institutions for taking possession of vehicles and other goods hypothecated with them in case of default in repayment of loan, the Madras High Court Bench here has held.
Justice S. Vaidyanathan passed the order while quashing a First Information Report registered by Kadupatti police near here against a private bank under Section 379 (theft) of Indian Penal Code for having taken possession of a car since the debtor did not repay the loan.
After registering the case, the police had also sent a communication to the bank directing it to surrender the vehicle on the ground it was required for investigation as well as production before the court concerned. Hence, the bank had rushed to the court with the quash application.
Accepting its plea, the judge pointed out that the Supreme Court had held in a catena of decisions that a financier had a right to resume possession of the goods even if the hire purchase agreement did not contain a specific clause for resumption of possession.
“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,” he added.
