RE-POSSESSION OF VEHICLES UNDER HIRE PURCHASE AGREEMENTS

 

Supreme court once again says while deciding the matter of Suryapal Singh V Siddha Vinayak Motors & others SLP[Civil]No.5302/2012 decided on 21.02.2012

 

 “under the hire purchase agreement ,it is the financer who is the owner of the vehicle and the person who takes the loan retains the vehicle only as a bailee/trustee,therefore taking possession of the vehicle on the ground of non-payment of the instalments has always been upheld to be a legal right of the financer ”

In the above case, a petition was preferred against the order of National commission dt. 19.10.2011 wherein courts below had granted compensation to the petitioner.The facts of the case are as hereunder

 

The Petitioner availed of loan from Respondent No. 2 (OP No. 2 before the District Forum) for this purpose. According to the Complainant, he left his vehicle at the premises of Respondent No. 1 for servicing. The servicing was not carried out for one reason or the other and the Complainant finally found that Respondent No. 1 had somehow handed over his vehicle to Respondent No. 2 without any intimation to him. Alleging deficiency in service on the part of Respondent No. 1 in handing over his vehicle to Respondent No. 2 without his permission, the Complainant sought various reliefs before the District Forum. The complaint was opposed by both the OP's with OP No. 1 claiming that Opposite Party No. 2 repossessed the vehicle from the premises of Opposite Party No. 1 because the Complainant could not be located. Opposite Party No. 2 on the other hand, pleaded that it repossessed the vehicle because of the Complainant's repeated defaults in payment of monthly instalments of loan and interest. After considering the pleadings and evidence brought on record, the District Forum passed order for compensation ,interest and also return of re-possessed vehicle  making both the OP’s liable

An appeal was preferred by the  petitioner  for enhancement of compensation to the Madhya Pradesh state commission, Bhopal (in short, 'the State Commission')  which was dismissed ,a revision petition before national commission also confirm district forum order and dismissed the revision petition

 

Now the legal  question before us is as to

     

1.      Whether a financer becomes an owner of the vehicle in case of default in making loan instalments by the purchaser of the vehicle on hire purchase basis.

    2.      Whether  re-possession of vehicle by financer is an offence amounting to theft

    3.      Whether possession of vehicle by financer is an offence amounting to criminal breach of Trust Or Cheating

In M/s Damodar Valley Corporation vs. State of Bihar SC ,21 November, 1960

 

 “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.”

Further in   Charanjit Singh Chadha And Ors. Vs Sudhir Mehra On 31 August, 2001  Supreme Court Of India Noted

 

“. Though in India the Parliament has passed a Hire Purchase Act, 1972, the same has not been notified in the official gazette by the Central Govt. so far. An initial notification was issued and the same was withdrawn later. The rules relating to hire purchase agreements are delineated by the decisions of higher courts. There are series of decisions of this Court explaining the nature of the hire purchase agreement and mostly these decisions were rendered when the question arose whether there was a sale so as to attract payment of tax under the Sales Tax Act. .”

It is further observed “the owner re-possessing the vehicle delivered to the hirer under the hire purchase agreement will not amount to theft as the vital element of 'dishonest intention' is lacking. The element of 'dishonest intention'  is an essential element to constitute the offence of theft."Dishonestly"—is Whoever does anything with the intention of causing wrongful gain to one person or wrongful loss to another person, is said to do that thing "dishonestly".

 

In the matter of  Sardar Trilok Singh & Ors. vs. Satya Deo Tripathi AIR 1979SC 850 it was observed by the honourable court was of a clear view that it cannot be a case of criminal offence if vehicle is re-possessed by he financer. On the well-settled principles of law, the criminal proceeding ought to have been quashed by the High Court in exercise of its inherent power. The dispute among the paties can purely be of a civil nature even assuming the factsof re-possession are  substantially correct.

 

According to the law laid down in the case of  In K.A. Mathai & Anr. vs. Kora Dibbikutty & Anr.1996(7)SCC212 .The hire-purchase agreement in law is an executory contract of sale and confers no right in rem on hire until the conditions for transfer of the property to him have been fulfilled. Therefore, the re-possession of goods as per the term of the agreement may not amount to any criminal offence.In that particular case , the financier took possession of the bus from the complainant with the aid of the appellants. It cannot thus be said that the appellants, in any way, had committed the offence of theft and that too, when criminal or  dishonest intention could not be pin-ponted.

 

Similar views were expressed earlier in Instalment Supply (Pvt.) Ltd. & Anr. vs. Union of India & Ors. ; and reiterated in Sundaram Finance Ltd. vs. State of Kerala &OTHERS AIR1966SC1178,Smt Lalmuni Devi V Stse Of Bihar &Others 1(2001)SLT 26

14. It is also to be noticed that learned author R.M. Goode, in his book Hire Purchase Law & Practice (Second Edn.) has observed as follows at page 846:-

 

"It would seem that so long as the hirer is in possession of the goods they belong to him for the purpose of the Act [The Theft Act, 1968] even though his possession is unlawful, e.g. because the hire-purchase agreement has come to an end. If the owner has an enforceable right to possession then he will not be guilty of theft in seizing the goods”

The above discussion in the light of cited cases clearly spells out that financer’s act of re-possession of a vehicle is not an illegal act amounting to criminal proceedings against him .However the procedure is to be followed as stipulated in the agreement,.i.e. giving proper notice of the default to the borrower  before taking such steps giving him an opportunity to rectify the default.

 

Dr Prem Lata

MEMBER CONSUMER COURT

 

 

Previous

Next