Borrowers increasingly taking law into own hands cannot be tolerated: Bombay High Court

The Bombay High Court recently flagged concern that there seemed to be a rise in instances where borrowers were taking the law into their own hands [Cholamandalam Investment Finance Company v. State of Maharashtra]..A division bench of Justices BP Colabawalla and Somasekhar Sundaresan said that such actions cannot be tolerated. The Court made the observation while dealing with a case where three borrowers allegedly tried to bypass court orders by pressurising a Non-Banking Finance Company (NBFC) against parting with certain property despite a court order for the property's handover.“After giving a solemn undertaking to this Court, the borrowers have sought to put extra-judicial pressure on the authorised officer of the Petitioner-NBFC. This cannot be tolerated even for a minute. We are increasingly finding that borrowers are taking the law into their own hands”, the Court remarked..The Court went on to issue a show cause notice to the borrowers, asking them be present in Court on the next date of hearing to explain why contempt of court action should not be initiated against them. .By way of background, on March 13, the Court had asked the borrowers to hand over possession of certain property (a secured asset) to Cholamandalam Investment & Finance Company (an NBFC) so that the said property could be auctioned. In response, the borrowers made a statement that they will handover possession of the secured asset to the NBFC..However, on March 21, the auction purchaser approached the High Court on apprehensions that even though possession had been handed over to the NBFC, the purchasers would not get a successful possession of the secured asset.The Court's attention was drawn to a letter addressed to the NBFC by the borrowers stating that the secured asset had been handed over on a condition that the NBFC would not part with its possession to anyone else..The authorized officer of the NBFC assured the Court on March 22 that they had not agreed to the condition put by the borrowers since there was no such restriction imposed by the Court in its March 13 order.The Court was also told that when the property's possession was handed over to the NBFC, there were about 30-40 persons present as well as a Member of Parliament (MP) and a Member of the Legislative Assembly (MLA). In such circumstances, the authorised officer was forced to accept the borrowers' letter which contained the condition. The NBFC, however, clarified that it has not acceded to the condition but had merely acknowledged the receipt of the letter. .The division bench observed that even though physical possession of the property had earlier also been handed over to the NBFC, the borrowers had later trespassed onto the asset by breaking open the locks. An FIR was also registered against them.“It is keeping these facts in mind that the March 13, 2024, order was passed, where an undertaking was recorded on behalf of the borrowers that they will voluntarily hand over physical possession of the secured asset. Despite this order, the borrowers now seek to insert certain conditions on the NBFC and over-reach the orders passed by this Court”, the Court observed..It proceeded to direct the borrowers and their lawyers to remain present in Court to explain why contempt should not be initiated against the borrowers for trying to over-reach court orders.“If they shall not remain present on the next date, we shall not hesitate to issue bailable/non-bailable warrants in their name, to secure their presence”, the Court warned, before posting the matter for further hearing on March 28..Advocates Charles D’souza and Alok Mishra appeared for the NBFC.Additional government pleader Dhriti Kapadia appeared for State of Maharashtra.Advocates Ziyad Madon, Nilesh Gala,.M Shah and Manish Gala appeared for the auction purchaser..[Read order].Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.