By News Desk 
In today’s world, buying a house, car, bike, or even a mobile phone on loan has become commonplace. Whether it’s a government or private bank, financial institutions have made the loan process easier than ever—even for those with a low CIBIL score. However, while taking a loan may be simple, repaying it consistently is where many borrowers struggle.
A recent Supreme Court ruling has brought this issue into sharp focus, emphasizing that failure to repay a loan can result in losing ownership of the asset. This decision serves as a warning for those who take loans lightly and miss their EMI payments.
Loan Default Can Lead to Loss of Ownership
The Supreme Court has made it clear: if a borrower fails to pay back a loan, especially vehicle EMIs, the financer retains ownership of the asset until the loan is completely repaid. In such cases, the financer is legally allowed to reclaim the asset—be it a car or any other financed item—without facing criminal charges.
Financer Has Legal Rights Over the Vehicle
Many people purchase vehicles on EMI by paying a small down payment. But few realize that the financer technically remains the legal owner of the vehicle until the loan is fully paid. This point was highlighted in a recent case where the Supreme Court ruled that the financer can reclaim the vehicle if the borrower fails to make timely EMI payments.
Repossessing a Vehicle Is Not a Crime
The Supreme Court clarified that repossessing a vehicle due to non-payment is not a criminal act. If EMIs are consistently missed, the financer is within their rights to take the vehicle back, and the borrower cannot file a criminal complaint in such a scenario.
Case Example: Rajesh Tiwari vs Finance Company
In 2003, a resident of Ambedkar Nagar, Rajesh Tiwari, bought a Mahindra Marshal vehicle through finance. He made a down payment of ₹1 lakh, and his monthly EMI was set at ₹12,531. Tiwari paid only 7 EMIs and then defaulted. After five months of non-payment, the finance company seized the vehicle.
Consumer Court Favored the Borrower
Tiwari filed a complaint with the consumer court, claiming the financer took the vehicle without prior notice. The court ruled in his favor and ordered the financer to pay ₹2.23 lakh in compensation, stating that the company did not give him adequate opportunity to clear the dues.
Supreme Court Overturned the Decision
The finance company challenged this decision in the Supreme Court. After reviewing the case, the apex court sided with the financer, stating that Tiwari had defaulted and admitted to paying only 7 EMIs. The court observed that the vehicle was given on a 12-month financing plan and ruled that repossession was justified.
However, the Supreme Court did impose a nominal penalty of ₹15,000 on the financer for reclaiming the vehicle without issuing a proper notice.
What Borrowers Must Learn
- Taking a loan is a responsibility. Failing to pay EMIs on time can have serious consequences.
- Financers have the legal right to reclaim financed assets in case of default.
- Courts may support financers if due payments are not made—especially when borrowers fail to fulfill agreed terms.
Conclusion
The Supreme Court’s judgment serves as a strong reminder that loans should not be taken lightly. While financial institutions are making credit more accessible, they also have the right to protect their assets. If you are planning to buy a vehicle or any other asset on EMI, ensure that you understand the terms and commit to timely repayments. Otherwise, you may end up losing ownership and facing legal complications.