Failure to Repay SBI Car Loan: DRT Orders Repayment with 11.25% Interest, Upholds Right to Sell Hypothecated Vehicle for Recovery [Read Order]

The Debts Recovery Tribunal (DRT)-II, Mumbai, with regards to the default of the car loan, ordered the repayment of the amount with interest of 11.25% to State Bank of India ( SBI ). The tribunal also upheld the right to sell the hypothecated vehicle for recovery.

SBI, applicant sought recovery of ₹10,74,796 as on 4 March 2014 together with future interest at 11.25% per annum with monthly rests from the date of filing of the application, i.e., 24 March 2014, and enforcement of the hypothecated security.

The borrower, Nityanand Pawaskar - respondent had approached the then State Bank of Bikaner and Jaipur (subsequently merged with SBI) in December 2011 seeking financial assistance for purchase of a vehicle.

The bank sanctioned a car loan of ₹10 lakh on 22 December 2011 at a floating interest rate of 11.5% per annum, repayable in 84 equated monthly instalments (EMIs) of ₹17,387 commencing January 2012.

The loan amount was disbursed through RTGS directly to the car dealer, and the vehicle - a Mahindra Scorpio EX 9-seater was hypothecated in favour of the bank as security.

To secure the facility, the borrower executed several loan and security documents, including the loan-cum-hypothecation agreement, accepted sanction letter, authority to deduct EMIs from savings account, authority to pay supplier, and other supporting financial documents. Post-dated cheques were also issued in favour of the bank.

However, after availing the loan, the borrower failed to adhere to the repayment schedule and defaulted on instalments. The loan account was classified as a Non-Performing Asset (NPA) on 1 January 2013 in accordance with RBI guidelines.

Despite service of summons, the defendant did not appear before the Tribunal and was set ex parte. The bank led evidence through affidavit and produced documentary records including the loan ledger extract, sanction documents, and proof of disbursement. The Tribunal noted that the evidence remained unchallenged and unrebutted.

After the scrutiny of the pleadings and documentary evidence, the Tribunal held that there was no reason to disbelieve the bank’s claim. It allowed the application with costs and directed the borrower to pay ₹10,74,796 along with future simple interest at 11.25% per annum from 24 March 2014 until realisation.

Presiding Officer Harish Kumar Kaushik's bench agreed that the hypothecated Mahindra Scorpio car had secured the adjudicated sum. In the instance that the borrower was unable to redeem the vehicle in line with the law, SBI was permitted to sell the hypothecated vehicle in order to recoup its obligations.

A Recovery Certificate was directed to be issued to facilitate enforcement proceedings before the Recovery Officer.

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