https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=299843 https://www.taxtmi.com/caselaws?id=299843 Interpretation of contract terms - Breach of contract - Damages assessment - Petitioner entered into a hire purchase agreement - Whether the post dated cheques issued by the hirer at the time of execution of the agreement continue to remain as valid instruments supported by consideration once the agreement gets determined ipso facto? - HELD THAT:- It is undoubtedly true that the owner/financier is entitled to enforce payment of monthly instalments as undertaken by the hirer. The post dated cheques issued by the hirer towards equaled monthly hire can be presented for encashment every month. Those cheques represent payments towards discharge of the liability covered under the agreement between the parties. According to the petitioner 48 post dated cheques were handed over to the owner at the time when Annexure A8 agreement was executed. This assertion made by the petitioner has not been controverted by respondent No. 2/owner in the counter affidavit filed before this court. The details of these cheques are given in the agreement itself. Bach of these cheques had to be presented for encashment on an agreed date every month. The due date for payment of monthly hire charges as stipulated in Annexure A8 agreement was 5th of every month. Thus, every cheque issued by the petitioner albeit in advance can be said to be supported by consideration at least on the date when the hire charges would become due. But a reading of clause 9 extracted above, will clearly show that the agreement gets determined ipso facto if and when the hirer commits default in payment of any of the instalments of hire. Various other contingencies which would result in determination of the agreement are also enumerated in the agreement with which we are not concerned in this case. It is pertinent to note that in the second schedule of the agreement the total value of the vehicle and the amount financed, the rate of hire purchase charge in percentage etc. are mentioned. The second schedule also contains the details of 48 instalments, viz., the date on which the hire money becomes due and the amount payable as hire money every month etc. It is contended by learned counsel for the petitioner that applying the principles laid down in Sundaram Finance s case [ 1965 (11) TMI 123 - SUPREME COURT] , the hire purchase agreement in this case (Annexure A8) can be construed only as a loan agreement. If any amount is payable by the loanee towards the liability, the remedy available is only to sue for the balance. Thus the post-dated cheques cannot be said to have been supported by any consideration and therefore there is no legally enforceable debt or liability to attract the provisions of Section 138 of the Negotiable Instruments Act. He submits that the above dictum is apposite to the facts and circumstances of this case. Thus, I do not deem it necessary to consider the above contention. The Supreme Court had taken the view that the hire purchase agreement in Sundaram Finance Ltd. s case [ 1965 (11) TMI 123 - SUPREME COURT] was only a loan agreement in the context of exigibility of sales tax on vehicles for which finance was arranged in collaboration with dealers of those vehicles. In my view, the facts revealed in this case would make it clear that the cheque was presented for encashment after the vehicle was seized by the complainant. The seizure was in May 1999 and the cheque was presented for encashment in September 1999. Thus even going by the terms in Annexure A8 agreement, it stood determined ipso facto on default of the hirer to pay the instalments and also on seizure of the vehicle by the owner. The remedy available to the owner has been provided under clause 9. It is also on record that the complaint/owner has taken recourse to that remedy as provided under the above clause. A suit has been filed before the High Court of Madras. Under such circumstances, I have no hesitation to hold that Annexure A1 complaint filed against the petitioner is not sustainable. I am also inclined to agree with the contention that once the financier/owner under a hire purchase agreement exercised the option of seizure of the vehicle, the post dated cheques obtained from the hirer cannot be presented for encashment after the seizure. The owner has to take recourse to other legal remedies for recovery of the balance amount. If and when the vehicle is sold subsequently, the owner can recover the balance amount after adjusting the sale proceeds of the vehicle. Of course, in the post seizure scenario, it may be open to the parties to agree upon a new schedule of payment or restructuring of the hire transaction. Thus, I am satisfied that the criminal proceeding pending against the petitioner in Annexure A1 is liable to be quashed. Accordingly Annexure A1 is quashed. Case-Laws Indian Laws Fri, 02 Apr 2004 00:00:00 +0530