RE: Legal Opinion on repossession of leased vehicles.
We refer to your letter dated 22 November 2006 on the above subject.
From your letter it appears that Company 1 (“COMPANY 1”) had extended lease finance of Tk. 30 lac to Company 2 (“COMPANY 2”) for acquiring one unit of vehicle on December 22, 2005. The vehicle was registered in the Name of COMPANY 1. As COMPANY 2 has failed to repay rentals on the due date (present outstanding 5 rentals), COMPANY 1 would like to repossess the vehicle with the assistance of police after lodging FIR.
In these circumstances you have requested us to give our legal opinion as to whether it will be in order for GSBP to foreclose the vehicle with the help of the Police or would COMPANY 1 need to go to the court for legal measure to seize the vehicle.
COMPANY 2 has failed to repay rentals on the due date; this means that COMPANY 2 has failed to perform a term of the Lease Agreement dated 4 December 2005 and as a result according to Clause 12.16 of the Lease Agreement has committed an Event of Default. Now according to Clause 12.16.02 COMPANY 1 has inter alia two options:
a) Proceed by appropriate court action to enforce performance by COMPANY 2 of the applicable term i.e. payment of rent and/or to recover damages for the breach thereof; And/Or
b) Terminate the Lease Agreement and/or declare the Lease Receivable due and payable forthwith and/or terminate COMPANY 2’s right to possession of the Vehicle without the necessity to give notice. COMPANY 1 or their servants or agents may thereupon repossess and take the Vehicle and for that purpose with the authority and as agents of COMPANY 2 enter upon any land or premises where the Vehicle is (or is suspected to be).
So COMPANY 1 has both options, either go to the court and enforce the terms of the agreement OR repossess the vehicles. In our opinion, repossession of the vehicle is the better option.
According to the undertaking given by COMPANY 2 dated 4 December 2005 and also under Clause 12.10 of the Lease Agreement, the ownership of the vehicle lies exclusively with COMPANY 1. And according to Clause 12.21, upon early termination of the Lease Agreement, COMPANY 2 shall at its own expense, forthwith deliver to COMPANY 1 the Vehicle, at the address of COMPANY 1 in good condition and working order.
So we suggest that, although it is not required under the terms of the Agreement, COMPANY 1 may first write a letter to COMPANY 2, demanding the repayment of all due rentals within 7 days from the receipt of the letter, failing which COMPANY 1 shall terminate the lease agreement in accordance with clause 12.16.02 of the lease agreement. In the letter it may also be mentioned that in the event the lease agreement is terminated for the default of COMPANY 2, then COMPANY 2, at its own cost shall return the possession of the Vehicle to COMPANY 1 failing which COMPANY 1 will lodge FIR with the police and repossess the vehicle with the help of the Police. Moreover COMPANY 1 shall proceed by appropriate court action to enforce performance by COMPANY 2 of the repayment of rent and/or to recover damages for the breach thereof.
If COMPANY 2 fails to act in accordance with the request of the letter, then COMPANY 1 may file an FIR with the Police and repossess the vehicle with the help of the Police.
If you have any further query, please do not hesitate to contact the undersigned.
All documents/papers referred to us are returned herewith.
For: “The Lawyers & Jurists”