PRAYAGRAJ: The Allahabad High Court has issued a stern message to finance companies engaging in strong-arm tactics and forcible vehicle seizures over unpaid loan instalments. The court made it clear that no finance company can use goons or recovery agents to tow away or seize a person's vehicle due to a default in loan repayments. While a company may possess the right to repossess a vehicle, it must follow the due process established by law and approach legal forums such as civil courts or arbitrators for the same.
Allegations of vehicle seizure at gunpoint
The case stems from a petition filed by Sadab Ahmed, who purchased a Tata commercial cargo vehicle in December 2023 financed by HDB Financial Services. The financing agreement required the loan to be repaid in 45 instalments of Rs 64,059 each. According to the petition, on August 9, 2026, individuals working on behalf of the finance company intercepted Sadab in Chandauli. It was alleged that they threatened him at gunpoint, forcefully snatched the vehicle, and subsequently made him sign lists of seized properties.
Vehicle can only be repossessed through legal procedure
Sadab lodged complaints regarding the incident with the finance company, local police, and the district magistrate before approaching the Allahabad High Court for the release of his vehicle. The petition was heard by a division bench comprising Justice JJ Munir and Justice Indrajit Shukla. The court noted that while a finance company might hold the right to repossess moveable property like a vehicle under a hypothecation agreement, this right must be executed strictly through the due process of law. The company cannot seize vehicles backed by the muscle of recovery agents or goons.
Private companies cannot be granted state coercive power
The High Court observed that interpreting repossession clauses in agreements to permit forcible extraction would effectively vest a private entity with the coercive power of the state. The bench emphasized that stopping a borrower midway and forcibly snatching a vehicle is legally untenable. The court also took note of the fact that Sadab had already paid 31 out of the 45 instalments, yet his vehicle was seized on a highway at gunpoint, an allegation that was never denied before the court.
Court orders vehicle return and imposes penalty
The High Court directed the finance company to immediately restore Sadab's vehicle without imposing any preconditions. Furthermore, the bench ordered the company to restructure his remaining loan without charging any penal interest. The court also imposed a cost of Rs 10,000 on the finance company for its high-handed actions.
