The Calcutta High Court ruled that repossessing a loan-funded vehicle after repeated EMI defaults is not theft and quashed the criminal case against a bank agent. The court held that taking back a car after default is lawful.
Kolkata: The Calcutta High Court ruled that taking back a loan-funded vehicle after repeated EMI defaults does not amount to theft, and has quashed a criminal proceeding filed against a bank’s representative.
Justice Dr. Ajoy Kumar Mukherjee delivered the judgment while allowing CRR 1255 of 2024 along with CRAN 4 of 2025, where petitioner Prantik Chakraborty sought quashing of G.R. Case No. 369 of 2024 arising out of Kakdwip Police Station Case No. 33 of 2024.
The petitioner said that in March 2023, the opposite party approached him for a loan to purchase a vehicle.
Acting on behalf of IndusInd Bank Ltd., a loan of Rs.27,98,943 was sanctioned. With interest, the borrower had to repay Rs.36,13,435 under a loan-cum-hypothecation agreement dated 21 March 2023.
As per the agreement, the borrower agreed to pay 58 EMIs Rs.62,310 for the first EMI and Rs.61,766 for the remaining 57 EMIs starting from 21 May 2023. But the borrower defaulted in paying EMIs. A notice was served on 11 December 2023, but despite service, the borrower did not clear the dues.
Following the agreed terms, and acting under Clause 8 of the agreement, the bank repossessed the vehicle on 27 January 2024 and informed the borrower about the repossession.
The petitioner argued that the complaint lodged by the borrower was a counterblast and contained only “vague and omnibus allegations”.
He submitted that the FIR did not make out the ingredients of theft and that under a hypothecation agreement, “unless and until the borrower pay the full amount, the lender deemed to be the owner of the vehicle”.
Therefore, taking possession of the vehicle in terms of the agreement “does not make out any offence at all”, especially since the opposite party “deliberately failed to pay the installment amount”.
He said that any further continuation of the criminal proceeding would be “a mere abuse of process of the court”.
The State produced the case diary and submitted that witnesses told police that the borrower had defaulted on five EMIs, after which IndusInd Bank agents took the vehicle. The State left the matter to the discretion of the court.
Justice Mukherjee observed that the borrower had entered into a loan-cum-hypothecation agreement and agreed to repay the EMIs. The court reiterated the settled legal position that unless the entire payment under such an agreement is completed, the borrower cannot claim ownership over the vehicle.
The judge referred to Clause 12(ii) of the agreement, which clearly states that the lender has the right “to take possession of the vehicle and to make a public auction in case of default in payment”.
The court examined the central question: whether a financer repossessing a vehicle from a hirer who defaults on EMIs can be accused of theft when the hire-purchase agreement expressly allows repossession.
In the landmark case Charanjit Singh Chadha & Ors. vs. Sudhir Mehra (2001) 7 SCC 417, the Supreme Court held that when the hirer has defaulted, and the agreement gives the financer the right to take back the vehicle, the borrower “cannot have any grievance” and cannot allege that the financer has committed theft.
The High Court noted that the Supreme Court had said that when the agreement specifically recognises the financer’s right to repossess, criminal action cannot be initiated for exercising that right.
Justice Mukherjee applied this principle and said that in hire-purchase agreements, the purchaser is only a “trustee/bailee” and the financer remains the real owner until all conditions are fulfilled.
Therefore, when the financer repossesses the vehicle due to non-payment, “no criminal action can be taken against him as he is repossessing the vehicle owned by him”.
Since the Supreme Court’s law directly covered the present case, the High Court held that the criminal proceedings were liable to be quashed.
The court accordingly quashed G.R. Case No. 369 of 2024 arising out of Kakdwip Police Station Case No. 33 of 2024, which was pending before the Additional Chief Judicial Magistrate, Kakdwip, South 24 Parganas.
The court also allowed both connected applications CRR 1255 of 2024 and CRAN 4 of 2025. The court directed that urgent certified copies of the order be issued on completion of formalities.
Case Title: Prantik Chakraborty vs. The State of West Bengal & Anr.
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