Failure to exercise right of repossession by lending bank does not justify non-payment of loan.

The Appellant, a taxi driver, obtained a term loan of Rs. 4,80,000/- from the Respondent bank in September 2015 to purchase a Honda Amaze for commercial use

Although the Appellant paid approximately Rs. 4,29,000/-, he defaulted on subsequent installments, leading to a restructuring of the loan in March 2019

Following a continued default post-February 2020, the Respondent filed a recovery suit

The Trial Court (District Judge, Commercial Court, Tis Hazari) rejected the Appellant’s defense that he had signed blank documents and decreed the suit for Rs. 3,73,629/- with 10.05% interest

The Appellant challenged this decree before the Delhi High Court

1. Whether the failure of the Respondent Bank to exercise its contractual right to repossess the hypothecated vehicle constitutes a valid ground to justify the non-payment of loan installments by the borrower?

2. Whether the financial distress and lack of vehicle utility caused by the COVID-19 pandemic warrant a modification of the interest rate awarded by the Trial Court?

Section 96 of the Code of Civil Procedure, 1908, regarding the powers of the Appellate Court to review and modify decrees

The bank’s right to repossess is an optional remedy and does not discharge the borrower's primary obligation to repay the debt

Discretionary equitable jurisdiction to modify interest rates in light of extraordinary circumstances, such as the COVID-19 pandemic

The Court found no merit in the Appellant’s contention that the Bank’s failure to repossess the vehicle exonerated him from repayment, holding that such an omission does not constitute a valid legal defense for default

The Court concurred with the Trial Court’s findings that the loan disbursement was established and the Appellant’s pleas regarding blank documents were contradictory

However, the Court took judicial notice of the Appellant’s status as a taxi driver suffering from "financial distress" during the COVID-19 period, which prevented the commercial use of the vehicle

While the decree for the principal amount was upheld, the Court reasoned that the interest rate required a downward adjustment to meet the ends of justice given the specific economic hardship caused by the pandemic

The Court modified the interest rate from 10.05% per annum to 7% per annum simple interest, calculated from the date of the suit's filing until realization

The appeal was disposed of with these modifications