Application by Banks for sale of Vehicle in Recovery Suit shall be disposed of within 60 days

Ronita Biswas | National Law University, Orissa | 14th February 2020

M/s ICICI Bank Ltd.v. Priya Baveja [CM APPL. 980/2020 (exemption )]

Facts

The Petitioner challenged the order of the Trial Court in view of the fact that the application under Order XXXIX Rule 6 CPC, which was filed by M/s. ICICI Bank Ltd. (hereinafter ‘Bank’) had not decided by the Trial Court, despite the suit itself having been decreed.

The background was that the Bank had filed a suit for recovery of Rs. 6, 04, 552.73/- against the Respondent/Defendant (hereinafter, Defendant) in which initially an application for appointment of Receiver was filed. The Defendant had initially availed of a vehicle loan of Rs. 8, 94, 000/- in respect of a car i.e., Honda City SV/MT Diesel, registered in Uttar Pradesh, which was disbursed to the Defendant under the loan cum hypothecation scheme of the Bank. The Defendant had agreed to repay the loan amount, along with interest @10.5%, in 60 equal instalments of Rs.19, 216/- each. The entire amount had been disbursed to the Defendant. 

According to the Petitioner, the Defendant had paid an amount of Rs. 5, 38, 832/- (28 EMIS) and defaulted for an amount of Rs. 1, 14, 512/- (06 EMIS) towards late payment and cheque bouncing charges totalling to Rs.1,27,906/- besides future instalments of Rs.4,99,616/-.

The Trial Court appointed one of the Bank officials as the Receiver and directed the seizure of the vehicle. However, the Court clearly stated in the order that taking of possession of the vehicle was subject to the condition that the vehicle shall not be sold/disposed of/parted with without the permission of the Court. Since then, the vehicle has been lying in the control of the Bank.  Immediately after taking possession of the vehicle, the Bank moved an application under Order XXXIX Rule 6 CPC. The application continued to remain pending even though the suit itself was decreed on 21.08.2019. The grievance of the Bank is that despite the application under Order XXXIX Rule 6 CPC having been filed, even in the final decree, permission had not been given to the Bank for selling the vehicle. 

The Petitioner then approached the HC.  

Appellant’s contention

The counsel for the Bank had submitted that the Bank had incurred parking charges for keeping the vehicle. Besides, the suit itself having been decreed, there was no purpose being served by not selling the vehicle. The Appellant relied on the order passed in M/s ICICI Bank Ltd. v. Naveen Kalkal [CM(M) 1821/2019, decided on 23rd December, 2019] and M/s. ICICI Bank Limited  v.  Nidhi Sharma [CM (M) 1814/2019, decided on 23rd December, 2019].

Respondent’s contention

The Respondent did not contest the matter and remained ex-parte.

Held

The Court opined that application under Order XXXIX Rule 6 CPC ought to have been decided by the Trial Court at the time of the final order in the suit itself. To keep the application pending, while the suit itself has been decreed, is completely irrational. The car has a limited life value which deteriorated with each passing day. The Bank ought to be permitted to sell the car to recover whatever amount it can to satisfy the decree. The Court relied on the case of  ICICI Bank Ltd. v. Kamal Kumar Garewal [FAO 49/2015, decided on 29th May, 2015], which reinstated the principle. Ideally, when the Trial Court is satisfied that the case for appointment of a Receiver has been made out and the Bank has taken control of the car for repayment, when the Bank approaches the Trial Court for permission to sell the vehicle, the same should be considered expeditiously.

The Court held that suits wherein the applications under Order XXXIX Rule 6 CPC, for permission to sell the vehicles, were simply being adjourned from time to time, it shall be  deemed appropriate to direct that applications for sale of the vehicle to be, disposed of within 60 days, except in case of any unusual or exceptional circumstances. Such orders for sale of the vehicle deserve to be passed especially in those cases where the Defendant(s) remain ex-parte and does not contest the proceedings. No useful purpose would be served by leaving the vehicle to deteriorate and letting the Bank incur further charges to store and preserve the vehicle.  

The Court permitted the Bank to sell the vehicle through a proper public auction with notice to the Defendant.