Law of Hypothecation
Valerian Menezes
(Querist) 15 December 2010
This query is : Resolved
Under the law of hypothecation a moveable, like a vehicle, is pledged for due consideration received by the borrower. The hypotheca, in case of a vehicle, is registered with an appropriate authority. As a matter of fact the possession and title rests with the borrower. But the creditor gets the lien on the vehicle. In case of default of the loan the creditor, as per specific agreement, can seize the vehicle demanding the records of the vehichle. However, as a general rule, as I learn, the creditor cannot sell the vehicle without obtaining decree from a competent court. But my question is, if the hypothecation bond executed by the borrower specifies that the vehicle can be sold by the creditor "either by public auction with or without notifying the borrower or through a private negotiation to a third party or bidder" can the creditor do so within the provisions of the law of hypothecation? Can he do it without obtaining court order?
s.subramanian
(Expert) 16 December 2010
even for seizure he has to obtain orders from the court. any direct seizure without such an order will be illegal. similarly for auction also court order is necessary.
Raj Kumar Makkad
(Expert) 16 December 2010
No. Such creditor cannot take benefit of the wrong clause inserted in the agreement of hypothecation. No agreement can be executed against the public policy.
malipeddi jaggarao
(Expert) 16 December 2010
But in case of vehicle, the creditor obtains blank transfer forms at the time of financing. He can easily get the registration transferred in his name. In such case it is transfer of ownership and the creditor gets every right to dispose-off the vehicle.
