How to deal with seizure of vehicle under hypothecation
27-May-2023 (In Civil Law)
In India, the process for dealing with the seizure of a vehicle under hypothecation is governed by the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. Here are the steps you can take to deal with the seizure of a vehicle under hypothecation in India:
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Receive a notice: The lender or financial institution that provided the loan will first issue a notice to the borrower before seizing the vehicle. The notice will provide information on the outstanding amount on the loan and the timeline for repaying the amount.
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Respond to the notice: It is important to respond to the notice within the stipulated timeframe and negotiate a repayment plan with the lender. If the borrower fails to respond or repay the outstanding amount, the lender can proceed with the seizure of the vehicle.
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Receive a possession notice: The lender will issue a possession notice under the SARFAESI Act, 2002, stating that they will take possession of the vehicle. This notice will specify the date, time, and place where the vehicle will be seized.
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File an objection: If the borrower has any objection to the possession notice, they can file an objection with the Debt Recovery Tribunal (DRT) within 45 days of receiving the notice.
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Obtain a release order: Once the outstanding amount is repaid, the borrower can obtain a release order from the lender, which will allow them to take possession of the vehicle again.
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Collect the vehicle: After obtaining the release order, the borrower can collect the vehicle from the place where it was seized.
It is important to follow the legal process and communicate effectively with the lender to resolve the issue of the seizure of the vehicle under hypothecation in India.
Is sarfaesi act applicable to vehicle loan?
Who is the owner of a hypothecated vehicle?
What is the law for seizing vehicles in India?
Can a bank seize a vehicle?
"Even in case of mortgaged goods subject to hire-purchase agreements, the recovery process has to be in accordance with law and the recovery process referred to in the agreements also contemplates such recovery to be effected in due process of law and not by use of force," said a bench of Justices Altamas Kabir, Cyriac Joseph and S S Nijjar.
Writing the judgment for the bench, Justice Kabir agreed that till the time the loans were paid in its entirety and ownership had not been transferred to the purchaser, the financier normally continued to be the owner of the vehicle.
"But that does not entitle him (the financier) on the strength of the agreement to take back possession of the vehicle by use of force. The guidelines which had been laid down by Reserve Bank of India as well as the appellant bank (Citicorp Maruti Finance Ltd) itself, in fact, support and make a virtue of such conduct," the bench said.
If any financier of a vehicle resorts to force to take back possession in violation of such guidelines or principles as laid down by the Supreme Court, "such an action cannot but be struck down", the bench said in its judgment.
- Receive a Notice: When your vehicle is seized under hypothecation, you will receive a notice from the lender or financial institution. This notice will typically detail the reason for the seizure and the outstanding dues.
- Contact the Lender: It's essential to communicate with the lender as soon as possible. Discuss the situation and try to understand the reason for the seizure. You may be able to negotiate a resolution, such as paying off the outstanding amount or restructuring the loan.
- Check for Validity: Ensure that the seizure is lawful and based on valid reasons. If there are discrepancies or you believe the seizure is unjust, consult with a legal expert for guidance.
- Payment of Dues: If the seizure is due to unpaid dues, consider paying the outstanding amount to release your vehicle. Be sure to obtain a proper receipt for the payment.
- Legal Assistance: If negotiations fail and you believe your rights are being violated, seek legal assistance. An attorney can help you understand your rights and take appropriate legal action.
- Review RBI Guidelines: Familiarize yourself with the Reserve Bank of India (RBI) guidelines regarding vehicle seizure by financial institutions. These guidelines outline the procedures and rules that lenders must follow.
- Documentation: Maintain records of all communications, notices, and payments related to the seizure. This documentation can be valuable if you need to prove your case legally.
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