In Hari Dutta Sharma v. State of UP [2026: INSC: 1040], the Supreme Court held that a financier’s right to repossess a hypothecated vehicle cannot be exercised through force, deceit, or in violation of the loan agreement terms. Instead, the recovery of loans and seizure of vehicles must be carried out through proper legal means.
In this case, the Supreme Court directed the Reserve Bank of India (RBI) to ensure genuine compliance by non-banking financial companies (NBFCs) and scheduled commercial banks with its loan recovery guidelines, master circulars, and clarifications. The Court observed that these safeguards had largely existed only on paper rather than in actual practice.
