Prayagraj: Holding that finance companies cannot use goons to recover vehicles in loan default cases, the Allahabad high court has ruled that a financer’s contractual right to repossess a vehicle must be enforced through a legally recognised forum such as a civil court or an arbitrator, and not through recovery agents who seize vehicles by force.The court noted that the borrower’s vehicle was allegedly seized at gunpoint on a highway despite him having paid 31 of the 45 instalments due under the loan agreement. It observed that the allegation was never specifically denied by the finance company.Allowing a writ petition filed by Sadab Ahmad, a division bench of Justice JJ Munir and Justice Indrajeet Shukla directed the immediate release of the vehicle without any precondition. The court also imposed costs of Rs 10,000 on the finance company and directed it to restructure the loan without charging penal interest. The issue of any loan default, however, was left open for adjudication by a competent forum.“The right of the finance company engrafted into a hire-purchase agreement to seize the vehicle gives an enforceable right no doubt, but that enforcement has to be done through a process known to law. It cannot be done by force employing goons, styled as agents,” the bench observed.The court said permitting such action would amount to vesting a private party with coercive powers akin to those exercised by the state through courts, arbitrators or quasi-judicial authorities, backed by law enforcement agencies.According to the petition, Ahmad, a self-employed man, purchased a vehicle in Dec 2023 through finance provided by HDB Financial Services Ltd. The loan was repayable in 45 instalments of Rs 64,059 each.He alleged that on Aug 9, 2026, men acting on behalf of the finance company intercepted him in Chandauli, threatened him at gunpoint, took possession of the vehicle and compelled him to sign a repossession inventory. After complaining to the company, police and district administration, he approached the high court seeking release of the vehicle.The finance company argued that Ahmad’s loan account was linked to that of his brother, Shoaib Ahmad, who had allegedly defaulted and whose financed vehicle could not be traced. It also claimed that the petitioner had defaulted on repayments, that 30 post-dated cheques had bounced, and that the loan facility had been terminated.The company said it had authorised a repossession agency, Poonia Associates Private Limited, a day before the seizure and relied on the repossession clauses in the agreement as well as Supreme Court rulings in support of its stand.
