TaxTMI 
TaxTMI 
2020 (10) TMI 1347
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....red to as the 'District Forum'], whereby the District Forum allowed Complaint Case No. 105/2005 filed by the Respondent, Rajesh Kumar Tiwari [hereinafter referred to as the 'Complainant'], and directed the Financier to pay Rs. 2,23,335/- to the Complainant, along with interest at 10% per annum, Rs 10,000/- towards physical and mental injury and Rs 1000/- as litigation expenses. 2. On or about 2nd August 2002, the Complainant entered into a hire-purchase agreement with the Financier, then known as Magma Leasing Ltd. for hire-purchase of a Mahindra Marshal Economic Jeep bearing the Registration No. UP-42-T/1163, which is hereinafter referred to as the 'vehicle', the cost whereof was Rs.4,21,121/- of which the complainant made an initial payment of Rs.1,06,121/-. According to the Financier, an amount of Rs.1,04,000/- from out of the initial payment of Rs.1,06,121/- was paid by the complainant to the dealer directly. The balance amount of Rs.3,15,000/- was paid by the Financier. 3. The Complainant agreed to repay a sum of Rs.4,38,585/- whichwas inclusive of finance charges of Rs.83,650/- to the Financier in 35 monthly instalments of Rs.12,531/-, commencing from 1st August, 2002. ....
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....demand in respect thereof by the company, at its registered office the stipulated down payments/initial payment/instalments as mentioned in Schedule-III/other charges on the due dates, whether or not it has received delivery of the Hired Article. b) MAINTENANCE Maintain and keep the Hired Article in good and serviceable condition at his own cost. The company and/or its Bankers shall have all the rights to inspect and to call for the Hired Article to be produced at any time for any time for any reason whatsoever. The Hirer shall be responsible and liable for damage, if any, caused to the Hired Article and/or to any other third party. c) LOCATION Keep the Hired Article at the Hirer's said premises and shall permit the company and/or its agent at all times to enter upon any premises at which the Hired Article is kept/parked for the purpose of verification and also repossession the Hired Article under the provisions of clause 15 of this agreement and shall not under any circumstances change the location of the Hired Article, without express approval of the company. d) INSURANCE Insure and keep comprehensively insured the Hired Artic....
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....ompany is entitled to retake the possession of the Hired Article. The Hirer has, in order to facilitate taking possession of the vehicles, in the event of the Hirer committing breach of the agreement, executed necessary documents and has authorised the company to use the same as and when the occasion so arises. f) ALIENATION OF HIRED ARTICLE Ensure not to sell, assign, mortgage, pledge, hypothecate or otherwise deal with the Hired Article or any part thereof, to part with possession of the Hired Article without the express written permission of the company previously obtained and not to use the Hired Article for any purpose other than that declared in the application. g) ........ h) ....... i) .... j) ....... 04. ........... 05. LOSS AND DAMAGE In the event of the Hired Article, being from any cause whatsoever, wholly lost to the company during the said hiring, the measure of damages as admitted to be payable by the Hirer to the company shall be the aggregate of all arrears amounts. If any, and the total amount of the installment which would have been payable during the residue of the said hire purchas....
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....ircumstances stated in this agreement, the Hirer may request the company in writing to revive the agreement and apply for restoration of the same to it on payment of all sums which might have been arrived at as due thereon had the agreement not been determined or the Hired Article not repossessed by the company together with damages to be mutually agreed upon between the company and the Hirer, and the expenses which the company has incurred in repossessing the same and/or as a consequence of the agreement being determined and such request may be entertained by the company at its absolute discretion and upon such further or other terms as it thinks fit and proper in the circumstances. The company shall be under no compulsion to accept the request for revival of this agreement as stated supra. 13. ...... 14. ..... 15. DETERMINATION In case the Hirer shall during the continuance of this agreement do or suffer one or more of the following:- a) Fail to pay any of the hire installments or the interest or other amounts (for example; insurance premium, expenses incurred for collection of installments, additional taxes, additional, finance charge....
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....ompany. 15.1 In the event of the agreement of hiring being determined as aforesaid before its full term expires, the Hirer shall forthwith deliver to the company the Hired Article along with all certificate and policies of insurance and all other documents relating to the said Hired Article. However, refusal of the Hirer/its men or obstruction or delay in handing over to the company the physical possession of the Hired Article together with all specified relevant documents/certificates under these circumstances shall be deemed to be an unlawful detention and wrongful possession of the property by the Hirer and an offence within the purview of the provisions of the Indian Penal Code. 5. It is not in dispute that the Complainant defaulted in payment of instalments. Even though the Complainant was required to pay the first instalment within 1st August, 2002 and the subsequent instalments within the 1st of each succeeding month, the Complainant did not adhere to the schedule of repayments, which according to the Financier, was of essence to the hire-purchase agreement. Post dated cheques deposited by the Complainant were, according to the Financier, dishonoured. 6. In th....
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....Paying June Instalment When Applicant was about to Started Driving Vehicle Opposite party No.2 has Lifted Vehicle Without giving any prior Notice or Information on Dated 14.07.2003. Whereas Applicant has Paid Total of 1,19,335 (One Lakh Nineteen Thousand Three Hundred and Thirty Five Rupees) in the form of Installment. Provision-8 When Applicant Has Contacted to the office of Opposite party No.2 in relation to this They Said That your Instalments were Due to which vehicle was Lifted. When Applicant Said that He will Complete all the Due Instalment Soon And in Future he will pay all the Installment Timely. But Opposite party No.2 does not heard it And refused to give vehicle. Provision-9 That the Applicant/Complainant was Surprised with this behaviour of Opposite party No.2 and did correspondence with Administration And Government in relation to this. That Inspection was also conducted But There was no result of all this. Provision-10 That Applicant has done correspondence with Opposite party no.1 and tell the complete situation but Applicant vehicle was not given to Applicant again but it was sold to some other person. Applicant has done very much helter-....
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....and started plying the vehicle, the Financier took repossession of the vehicle. According to the Complainant he paid Rs.1,19,335/- towards instalments. It is not the case of the Complainant in his complaint, that the Financier took forcible possession of the vehicle through so called recovery agents, by threat or by use of muscle power. 12. The Complainant has alleged that, even though, the Complainant had deposited Rs.1,19,335/- towards instalments, the Financier took possession of the vehicle without notice. The Complainant has also alleged that the Financier refused to concede to the request of the Complainant to release the vehicle, even though the Complainant had sought the opportunity to clear the outstanding instalments, and pay future instalments within time. [Paragraphs (8) and (11) of the complaint]. 13. The vehicle was sold in November 2003. Till then, the Complainant did not even clear the instalments outstanding upto July 2003, that is, the outstanding instalments for the period during which the vehicle was in the possession of the Complainant, not to speak of any further instalments. 14. By an order dated 22nd August 2008, the District Forum allowed the Compl....
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.... That being the finding, which could not be controverted by the Learned Counsel for the petitioner even before us, we are not inclined to interfere with the impugned order. Accordingly, the revision petition fails and is dismissed in limine." 18. The short question raised by the Financier in this appeal is, whether the Financier is the real owner of the vehicle which is the subject of a hire purchase agreement, and if so, whether there can be any impediment to the Financier, taking repossession of the vehicle, when the hirer does not make payment of instalments in terms of the hire purchase agreement. 19. Another question which arises for determination in this appeal is, whether service of proper notice on the hirer is necessary for repossession of a vehicle which is the subject of a hire purchase agreement, and if so, what is the consequence of non service of proper notice. 20. Before dealing with the aforesaid questions involved, in this appeal, it may be pertinent to refer to the relevant provisions of the Consumer Protection Act, 1986, set out hereinafter for convenience. 21. The Consumer Protection Act, 1986 has been enacted to protect the interest....
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....r agreed to be hired or availed of by him suffer from deficiency in any respect; (iv) a trader or the service provider, as the case may be, has charged for the goods or for the services mentioned in the complaint, a price in excess of the price- (a) fixed by or under any law for the time being in force; (b) displayed on the goods or any package containing suchgoods; (c) displayed on the price list exhibited by him by or underany law for the time being in force; (d) agreed between the parties; (v) goods which will be hazardous to life and safety when usedare being offered for sale to the public,- (a) in contravention of any standards relating to safety of suchgoods as required to be complied with, by or under any law for the time being in force; (b) if the trader could have known with due diligence that thegoods so offered are unsafe to the public; (vi) services which are hazardous or likely to be hazardous to life and safety of the public when used, are being offered by the service provider which such person could have known with due diligence to be injurious to life and safety. with a view to....
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.... (oo) "spurious goods and services" mean such goods and services which are claimed to be genuine but they are actually not so. (r) "unfair trade practice" means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice including any of the following practices, namely: (1) the practice of making any statement, whether orally or in writing or by visible representation which,- (i) .... (ii) falsely represents that the services are of a particularstandard, quality or grade; (iii) ..... (iv) represents that the goods or services have sponsorship,approval, performance, characteristics, accessories, uses or benefits which such goods or services do not have; (v) ... (vi) makes a false or misleading representation concerning the need for, or the usefulness of, any goods or services; (vii) ..... (viii) makes to the public a representation in a form thatpurports to be- (i) a warranty or guarantee of a product or of any goods orservices; or (ii) a promise to replace, maintain or repa....
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....uld reasonably understand to be a bargain price having regard to the prices at which the product advertised or like products are ordinarily sold; (3) permits- (a) the offering of gifts, prizes or other items with the intention of not providing them as offered or creating impression that something is being given or offered free of charge when it is fully or partly covered by the amount charged in the transaction as a whole; (b) the conduct of any contest, lottery, game of chance or skill, for the purpose of promoting, directly or indirectly, the sale, use or supply of any product or any business interest; (3-A) withholding from the participants of any scheme offering gifts, prizes or other items free of charge, on its closure the information about final results of the scheme. Explanation.-For the purposes of this sub-clause, the participants of a scheme shall be deemed to have been informed of the final results of the scheme where such results are within a reasonable time published, prominently in the same newspapers in which the scheme was originally advertised; (4) permits the sale or supply of goods intended to be used, orare ....
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....a District Forum by- (a) the consumer to whom such goods are sold or delivered oragreed to be sold or delivered or such service provided or agreed to be provided; (b) any recognised consumer association whether the consumerto whom the goods sold or delivered or agreed to be sold or delivered or service provided or agreed to be provided is a member of such association or not; (c) one or more consumers, where there are numerousconsumers having the same interest, with the permission of the District Forum, on behalf of, or for the benefit of, all consumers so interested; or (d) the Central Government or the State Government, as thecase may be, either in its individual capacity or as a representative of interests of the consumers in general. (2) Every complaint filed under sub-section (1) shall beaccompanied with such amount of fee and payable in such manner as may be prescribed. (3) On receipt of a complaint made under sub-section (1), theDistrict Forum may, by order, allow the complaint to be proceeded with or rejected: Provided that a complaint shall not be rejected under this subsection unless an opportunity of being hea....
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....all be called in question in any court on the ground that the principles of natural justice have not been complied with. (3-A) Every complaint shall be heard as expeditiously as possibleand endeavour shall be made to decide the complaint within a period of three months from the date of receipt of notice by opposite party where the complaint does not require analysis or testing of commodities and within five months, if it requires analysis or testing of commodities: Provided that no adjournment shall be ordinarily granted by the District Forum unless sufficient cause is shown and the reasons for grant of adjournment have been recorded in writing by the Forum: Provided further that the District Forum shall make such orders as to the costs occasioned by the adjournment as may be provided in the regulations made under this Act: Provided also that in the event of a complaint being disposed of after the period so specified, the District Forum shall record in writing, the reasons for the same at the time of disposing of the said complaint. (3-B) ..... (4) For the purposes of this section, the District Forum shall havethe same powers as....
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....boratory from the goods in question; (b) to replace the goods with new goods of similar descriptionwhich shall be free from any defect; (c) to return to the complainant the price, or, as the case may be,the charges paid by the complainant; (d) to pay such amount as may be awarded by it ascompensation to the consumer for any loss or injury suffered by the consumer due to the negligence of the opposite party: Provided that the District Forum shall have the power to grant punitive damages in such circumstances as it deems fit; (e) to remove the defects in goods or deficiencies in the servicesin question; (f) to discontinue the unfair trade practice or the restrictive tradepractice or not to repeat them; (g) not to offer the hazardous goods for sale; (h) to withdraw the hazardous goods from being offered for sale; (ha) to cease manufacture of hazardous goods and to desist from offering services which are hazardous in nature; (hb) to pay such sum as may be determined by it, if it is of the opinion that loss or injury has been suffered by a large number of consumers who are not identifiable convenie....
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.... appears to the State Commission that such District Forum has exercised a jurisdiction not vested in it by law, or has failed to exercise a jurisdiction so vested or has acted in exercise of its jurisdiction illegally or with material irregularity. Section 21. Jurisdiction of the National Commission.Subject to the other provisions of this Act, the National Commission shall have jurisdiction,- (a) ...... (b) to call for the records and pass appropriate orders in any consumer dispute which is pending before or has been decided by any State Commission where it appears to the National Commission that such State Commission has exercised a jurisdiction not vested in it by law, or has failed to exercise a jurisdiction so vested, or has acted in the exercise of its jurisdiction illegally or with material irregularity. Section 26. Dismissal of frivolous or vexatious complaints.-Where a complaint instituted before the District Forum, the State Commission or, as the case may be, the National Commission, is found to be frivolous or vexatious, it shall, for reasons to be recorded in writing, dismiss the complaint and make an order that the complainant shall pay to the....
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....ice" to mean a trade practice, for the purpose of promoting provision of any service, by adoption of unfair method or unfair or deceptive practice, including any of the practices enumerated in Sections 2(1)(r)(i) to (x), 2(r)(2), 2(r)(3) and 2(r)(3A). The complaint does not make out any case of unfair trade practice within the meaning of Section 2(1)(r) of the Consumer Protection Act 1986. 26. The Complainant has only made a vague assertion that the action of the Financier in taking possession of the vehicle, admittedly for default in payment of instalments, and in not releasing the vehicle to the Complainant, in spite of the Complainant's assurance to the Financier to clear outstanding instalments and pay future instalments timely, amounts to an act of unfair trade practice and constitutes deficiency of service. 27. As observed above, deficiency has been defined in Section 2(1)(g) set out herein above, as any fault, imperfection or shortcoming or inadequacy in the quality, nature or manner of performance which is required to be maintained by or under any law, for the time being in force, or undertaken to be performed by a person, in pursuance of a contract or otherwise, in r....
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....or otherwise, including Rs.1,04,000/- paid by the Complainant directly to the dealer, and also to pay damages of Rs.10,000 for physical and mental suffering, only because of an error in the address of the Complainant, in the notice sent by the Financier, and that too, without even considering how the Complainant was prejudiced by the error, when the vehicle had been taken away for non payment of hire instalments and sold after about four months. 34. The object of a notice before taking possession of a vehicle on hire under a Hire Purchase Agreement, is to enable the hirer, to make a written request to the Financier to revive the hire purchase agreement in terms of Clause 12 of the said agreement, upon payment of all outstanding dues together with damages, as might be mutually agreed upon. 35. A notice also draws the attention of the hirer to the alleged breaches of agreement on the part of the hirer, on the basis of which, the Financier claims to be entitled to take possession. Such notice gives the hirer an opportunity to show that the hirer had not, in fact, committed any breach of agreement. For example, the hirer might be able to show that the Financier had erroneously om....
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....rvice provider charging a price in excess of the price fixed for the service, under any law, for the time being in force or agreed between the parties or allegations of offering spurious services or services hazardous to life or safety, are proved. 40. Section 13(2)(b) of the Consumer Protection Act, 1986 casts an obligation on the District Forum to decide a complaint on the basis of the evidence brought to its notice by the Complainant and the service provider. Irrespective of whether the service provider adduces evidence or not, the decision of the District Forum has to be based on evidence relied upon by the Complainant. The onus of proof is on the Complainant making the allegation. Section 27 of the Consumer Protection Act casts an obligation on the District Forum, the State Commission or the National Commission to dismiss frivolous complaints with costs not exceeding Rs.10,000/-. 41. The evidence to which the Complainant drew the attention of the District Forum is apparent from its judgment and order. The Complainant produced a delivery receipt in respect of the vehicle, some payment receipts, Insurance papers in respect of the vehicle, an FIR unconnected with the Financ....
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....l. The State Commission observed that the Complainant had been deprived of the opportunity to deposit the amount, due from him to the Financier, which again is contrary to the Complainant's own pleadings in his complaint. 47. The State Commission further found that there was no mention of the amount due to be paid by the Complainant to the Financier, in the Written Statement filed by the Financier before the District Forum. There was also no mention in that written statement of when the vehicle had been sold and the amount for which the vehicle had been sold, whether such amount was more than or less than the amount due from the Complainant to the Financier. Observing that the silence on the part of the Financier in not divulging anything about the sale rendered the sale 'dubious', the State Commission concluded that the Financier had surreptitiously sold the vehicle, without the knowledge of the Complainant, without notice to the Complainant, and without disclosing the details of the sale. 48. The aforesaid observation, of the sale being dubious, has been made, overlooking the terms and conditions of the hire purchase agreement, and without considering the law governing hire....
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....corded in the Hire Purchase Agreement. The question which arises is, whether repossession of the vehicle without proper notice, for admitted default in payment of hire instalments, warranted the order passed by the District Forum, which has been affirmed by the State Commission and the National Commission. 53. By directing the Financier to pay to the Complainant, the entire amount paid by the Complainant to the Financier from the inception, as also the amount paid by the Complainant to the dealer directly, along with interest at the rate of 10% per annum, damages of Rs.10,000/- and litigation costs, the fora constituted under the Consumer Protection Act, 1986, have given a defaulting hirer the benefit of free use of the vehicle of the value of Rs.4,21,121/- for almost twelve months, plus damages, oblivious to the depreciation in the value of the vehicle by reason of wear and tear, due to use by the hirer, as also an admitted accident for which the vehicle lay seized with the Police for some time. 54. The Consumer Protection Act, 1986 creates fora for quick adjudication of consumer disputes. The Act protects consumers from defective goods, deficient services, unfair or restric....
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....mages caused by the breach are severe and extensive, the party in breach may be required to pay to the party not in breach, such damages as would restore the position of the party not in breach, to the position before the breach occurred. 60. Apart from compensatory damages, an Adjudicating Authority may impose on the party in breach, punitive damages or nominal damages. Punitive damages are awarded where the party in breach of agreement has behaved in a manner, which is reprehensible and calls for punishment. Nominal damages are awarded where there is no real harm done, by reason of the breach of the contract. 61. Section 14 of the Consumer Protection Act, 1986 empowers the District Forum to award compensation to the party not in breach by directing the party in breach to return the price or the charges as may have been paid by the complainant [Section 14(1)(c)]. The said Section also enables the District Forum to award compensatory damages to the consumer for loss or injury suffered by the consumer due to negligence of the party in breach [Section 14(1)(d)]. The Forum may direct removal of the deficiency in service, if the deficiency can be removed and it can direct dis-con....
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....e privilege of being allowed to discharge the purchase price of goods by instalments. 7. In Damodar Valley Corpn. v. State of Bihar AIR 1961 SC 440 this Court took the view that a mere contract of hiring, without more, is a species of the contract of bailment, which does not create a title in the bailee, but the law of hire purchase has undergone considerable development during the last half a century or more and has introduced a number of variations, thus leading to categories and it becomes a question of some nicety as to which category a particular contract between the parties comes under. Ordinarily, a contract of hire purchase confers no title on the hirer, but a mere option to purchase on fulfilment of certain conditions. But a contract of hire purchase may also provide for the agreement to purchase the thing hired by deferred payments subject to the condition that title to the thing shall not pass until all the instalments have been paid. There may be other variations of a contract of hire purchase depending upon the terms agreed between the parties. When rights in third parties have been created by acts of parties or by operation of law, the question may arise as t....
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.... the hirer was prejudiced. As regards the respondent's objection to improper seizure, this Court held that there could not be any generalization. Whether the seizure was improper, would depend on the facts of each case. However, it would not be appropriate for the Court to lay down any guideline which would in essence, amount to variation of the agreed terms of the agreement. 69. K. A. Mathai alias Babu & Anr. v. Kora Bibbikutty & Anr. (1996) 7 SCC 212, cited on behalf of the Financier, this Court held that where the Financier's Hire Purchase Agreement contained a clause of resumption, upon failure to make payment of instalments, it could not be said that the Financier had committed the offence of theft by taking possession of the vehicle covered by the Hire Purchase Agreement. 70. The Financier has also cited the Judgments Jagdish Chandra Nijhawan v. S.K. Saraf (1999) 1 SCC 119, and Smt. Lalmuni Devi v. State of Bihar & Ors. (2001) 2 SCC 17. 71. In Jagdish Chandra Nijhawan (supra), this Court held that where a Chairman, provided with rent fee furnished flat by the company of which the company was not the lessee, remained in wrongful possession of the flat after his Chairm....
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.... stipulated hire and the price for exercising the option. This class of hire-purchase agreements must be distinguished from transactions in which the customer is the owner of the goods and with a view to finance his purchase he enters into an arrangement which is in the form of a hire-purchase agreement with the financier, but in substance evidences a loan transaction, subsequent to a hiring agreement, under which the lender is given the license to seize the goods. 75. In the aforesaid case, the majority of the judges were of the view that the intention of the appellants in obtaining the hirepurchase and allied agreements was to secure the return of the loans advanced to their customers and no real sale of the vehicle was intended by the customer to the appellants. The transactions were merely financial transactions. The judgment of this Court in Sundaram Finance Ltd. (supra) was rendered in the context of the liability of a hirer to pay sales tax on the goods acquired under the Hire Purchase Agreement. 76. In Sundaram Finance Ltd. (supra), Subba Rao, J delivered a dissenting judgment holding:- "6. The object of the hire-purchase system was to help to finance the cus....
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.... the option to purchase. Thus, when the Financier takes re-possession of a vehicle under hire, upon default by the hirer in payment of hire instalments, the Financier takes repossession of the Financier's own vehicle. 80. When the agreement between the Financier and the hirer permits the Financier to take possession of a vehicle financed by the Financier, there is no legal impediment to the Financier taking possession of the vehicle. When possession of the vehicle is taken, the Financier cannot be said to have committed theft. 81. Whether the transaction between a Financier and a purchaser/hirer is a hire purchase transaction, or a loan transaction, might be determined from the terms of the agreement, considered in the light of surrounding circumstances. However, even a loan transaction, secured by right of seizure of a financed vehicle, confers licence to the Financier to seize the vehicle. 82. In this case, the agreement executed by and between the Financier and the Complainant is a Hire Purchase Agreement as will appear from the terms and conditions thereof. In any event, the fora under the Consumer Protection Act, have not arrived at any specific finding to the contrar....
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....ken for recovery in violation of such guidelines or the principles as laid down by this Court, such an action cannot be struck down." 86. This Court held that the Financier continues to be the owner of the goods. There is an obvious typographical error in paragraph (27) of the judgment where hirer has been erroneously been typed in place of lender/financier. 87. The question raised by the Financier in this appeal, that is, whether the Financier is the real owner of the vehicle, which is the subject of a Hire Purchase Agreement, has to be answered in the affirmative in view of the law enunciated by this Court in Haranjit Singh Chadha (supra), K.L. Johar & Co. (supra) and Anup Sarmah (supra). The Financier being the owner of the vehicle which is the subject of a Hire Purchase Agreement, there can be no impediment to the Financier taking possession of the vehicle when the hirer does not make payment of instalments/hire charges in terms of the Hire Purchase Agreement. However, such repossession cannot be taken by recourse to physical violence, assault and/or criminal intimidation. Nor can such possession be taken by engaging gangsters, goons and musclemen as so called Recovery Ag....
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....es, where the action of the Financier is so reprehensible that punishment is warranted. To cite an example, where a Financier erroneously and/or wrongfully invokes the power to repossess without notice to the hirer, causing thereby extensive pecuniary loss to the hirer or loss of goodwill and repute, a forum constituted under the Consumer Protection Act may award punitive damages. 92. In the instant case, there is no evidence of any loss suffered by the complainant by reason of non-receipt of notice. Admittedly, several instalments, remained unpaid. After repossession the complainant contacted the Financier and was informed of the reasons for the repossession. He only made an offer to pay outstanding instalments and gave an assurance to pay future instalments in time. If the Financier was not agreeable to accept the offer, the Financier was within its rights under the hire purchase agreement. This is not a case where payment had been tendered by the hirer but not accepted by the Financier/lender. The Complainant had not tendered payment. 93. The Financier admittedly paid Rs.3,15,000/- for acquisition of the vehicle, out of which the Financier had been able to realize Rs.1,19,....