Loan default and recovery

Warning lending institutions and banks against forcibly taking away of vehicles under hire-purchase agreements when there is a default in payment of loans, the Supreme Court has asked the financiers to follow the norms set by RBI before re-possession.

In the case of Citicorp Maruti Finance Ltd vs S Vijayalaxmi, the court said that till the time the loans were paid fully and the ownership had not been transferred to the purchaser, the lending companies normally continued to be the owner of the vehicle.

?But that does not entitle him (the financier) on the strength of the agreement to take back possession of the vehicle by use of force. The guidelines which had been laid down by RBI support and make a virtue of such conduct. If any action is taken for recovery in violation of such guidelines or the principles as laid down by this court, such an action cannot but be struck down,? the apex court cautioned.

Besides, it said that ?even in case of mortgaged goods subject to hire-purchase agreements, the recovery process has to be in accordance with law and the recovery process referred to in the agreements also contemplates such recovery to be effected in due process of law and not by use of force.?

In this case, one S Vijayalaxmi had failed to honour a loan payment to Citicorp Maruti Finance Ltd, which took away the Maruti Omni van with prior information to the police. It later sold off the vehicle. Vijayalaxmi approached the district forum and complained of deficient service.

The National Consumer Disputes Redressal Commission in 2007 had upheld the state commission?s order that increased the punitive damage on Citicorp Maruti Finance from R5,000 to R50,000.

Difference between tax & fees

In an important ruling that will address the vulnerability of millions of workers engaged in the unorganised construction industry, the Supreme Court has upheld the constitutional validity of the 2% levy on the cost of all construction provided under the the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996.

Stating that the special cess cannot be termed as tax, but a fee, to create a corpus fund for providing welfare measures to the unorganised industry, it said: ?the levy of cess on the cost of construction incurred by the employers on the building and other construction works is for ensuring sufficient funds for the welfare boards to undertake social security schemes and welfare measures for building other construction workers.?

The apex court further said that the sole aim of the 1996 Act ?is the welfare of building and construction workers, directly relatable to their constitutionally recognised right to live with basic human dignity, enshrined in Article 21 of the Constitution of India.?

Perils of promotion

The Supreme Court has held that an employee would cease to be a workman when placed in the executive cadre and would not be entitled to any benefit accruing from a settlement arrived between the management and a trade union of which he is a member prior to promotion.

Dismissing petitions filed by the Air India Cabin Crew Association and the executive cadre of in-flight pursers and air hostesses challenging the decision by which their service conditions were altered, it upheld the decision of Air India to give equal promotional avenues to both after their promotion to executive cadre despite an agreement in 1997 to treat in-flight pursers as a separate cadre.

To bring about parity in the service conditions of both flight pursers and air hostesses, the apex court said that Air India was always entitled to alter its policies and ?it is, in fact, the prerogative of the management to place an employee in a position where he would be able to contribute the most to the company.?

indu.bhan@expressindia.com