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2003 DIGILAW 555 (KER)

Sakthi Finance Ltd. v. Velayudhan

2003-08-27

G.SASIDHARAN

body2003
Judgment :- 1.O.S.492/2003 was filed in the Munsiff's Court-II, Kozhikode by the respondent for a declaration that he is not liable to pay any amount to the revision petitioners to discharge the loan availed on the security of vehicle KL/13/B-8487 and for a mandatory injunction to direct the revision petitioners to return the vehicle. I.A.2229/2003 was filed by the respondent for a temporary mandatory injunction to direct the revision petitioners to return the above vehicle. The above application for temporary mandatory injunction was dismissed by the learned Munsiff. Respondent filed C.M.A.83/2003 in the Court of the District Judge, Kozhikode and the learned I Additional District Judge disposed of the above appeal by setting aside the order of the learned Munsiff and granting interim mandatory injunction directing the petitioners to return the vehicle to the respondent. The petitioners, who are the defendants in the above suit, have filed this revision challenging the judgment in civil miscellaneous appeal by which interim mandatory injunction was granted. 2. According to the respondent, he availed himself a loan of Rs.4.12 lakh as per agreement dated 2.10.1999 from the petitioners for the purchase of a vehicle and he remitted an amount of Rs.5,50,000/- in 40 monthly instalments at the rate of Rs.13,750/-. The allegation in the plaint is that on 31.3.2003 respondent gave to the petitioners a cheque which was encashed by them on 30.4.2003. The respondent would allege that since nobody turned up for collecting the amount due in the month of April, 2003 he approached the third petitioner and expressed his readiness to settle the account and as instructed by the third petitioner, he again approached him on 15.5.2003. When the respondent again approached the third petitioner he was told that an amount of Rs.3,50,000/- was due from him in the loan transaction. Then the respondent demanded a copy of the statement of accounts in writing and the third petitioner directed the respondent to come and collect the copy of statement of accounts on 19.5.2003. On 17.5.2003 the second petitioner seized the vehicle from the Bus Stand, Kozhikode. The respondent alleges that the vehicle is covered by a pucca permit in Tellicherry-Kozhikode route and that motor vehicle tax and insurance premium had already been paid. On 17.5.2003 the second petitioner seized the vehicle from the Bus Stand, Kozhikode. The respondent alleges that the vehicle is covered by a pucca permit in Tellicherry-Kozhikode route and that motor vehicle tax and insurance premium had already been paid. The case of the respondent is that in case the vehicle is kept by the second petitioner respondent may not be able to conduct the bus service between Tellicherry and Kozhikode and in that event the route permit would be cancelled. It is stated that there are five employees attached to the bus and they had already lost the job. 3. Petitioners 2 and 3 filed a joint objection to the petition for temporary mandatory injunction and the contention raised is that one Sayed made a request to the first petitioner to grant hire purchase facility for hiring a vehicle Tata bus and accordingly an agreement was executed on 12.1.1996. It is also stated that the first petitioner purchased the vehicle from Sakthi Automobiles as per invoice dated 21.12.1995 and let the vehicle to the above said Sayed. The total hire amount payable by Sayed was Rs.6,98,400/-. As per the agreement, the hirer was liable to pay the hire amount by way of 47 monthly instalments commencing from 12.3.1996 and ending on 12.1.2000 and the vehicle was registered in the name of Sayed and endorsement was made in the registration certificate regarding the hire purchase agreement. Petitioners 2 and 3 would contend that the respondent also became the hirer of the vehicle when Sayed executed an assignment in favour of him with the permission of the first petitioner. It is contended that the respondent is a defaulter and he had only paid Rs.2,73,600/- towards 18 monthly instalments. According to the petitioners, if the respondent was ready to pay an amount of Rs.2,63,924.44 they were prepared to close the account and issue hire purchase termination letter and also to release the vehicle. Petitioners 2 and 3 also contended that repossession of the vehicle by the first petitioner Company was legal and in accordance with the hire purchase agreement and that the first petitioner is the real owner of the vehicle. 4. The learned Munsiff found that the documents would prima facie show that the transaction was only a hire purchase transaction. Petitioners 2 and 3 also contended that repossession of the vehicle by the first petitioner Company was legal and in accordance with the hire purchase agreement and that the first petitioner is the real owner of the vehicle. 4. The learned Munsiff found that the documents would prima facie show that the transaction was only a hire purchase transaction. It was also found by the learned Munsiff that seizure of the vehicle was on default by the respondent in payment of the instalments and that the agreement provides for repossession of the vehicle in case of default in payment of instalments. On finding that repossession of the vehicle was not illegal and unauthorised, the prayer for granting temporary mandatory injunction was disallowed by the learned Munsiff. 5. The learned District Judge considered the question whether the transaction between the petitioners and the respondent was a hire purchase transaction or it was only a loan transaction by hypothecating the vehicle and also the properties of the respondent with a further warranty executed by the wife of the respondent. The learned District Judge found that the transaction between the petitioners and the respondent was only a loan transaction and that the right of the petitioners is to realise the balance amount, if any, due to them from the respondent. It was also found that in the case of a loan transaction even if there is a clause enabling the financier to seize the vehicle the creditor cannot forcibly repossess the hypothecated items. 6. In the judgment of the learned District Judge it is said that Ext.B1 is the application for hire purchase submitted by one Sayed in Kannur Branch of the first petitioner and that in that document in Page No.3 after writing the name and address of the dealer as Aravind Motors, Bangalore that was scored off. Ext.B1 is dated 9.10.1995. Ext.B2 is the proforma invoice dated 15.12.1995 issued to Sayed from Sakthi Automobiles. In Ext.B3 the amount advanced is shown as Rs.3,90,000/- and the rate of finance charge as 16.5%. The hire purchase agreement was produced before the appellate Court as Ext.B5 and in that the first petitioner is shown as the owner and K. Sayed is shown as the hirer. Admittedly there is a clause in Ext.B5 that the hirer shall pay to the owner one rupee in consideration of the option to purchase the vehicle. The hire purchase agreement was produced before the appellate Court as Ext.B5 and in that the first petitioner is shown as the owner and K. Sayed is shown as the hirer. Admittedly there is a clause in Ext.B5 that the hirer shall pay to the owner one rupee in consideration of the option to purchase the vehicle. The learned District Judge says that it was seen from Ext.B5 that option to purchase the vehicle was exercised even at the time of execution of Ext.B5 thereby meaning that the ownership of the vehicle was in fact with K. Sayed even on 12.1.1996. In a hire purchase agreement usually the option has to be exercised only after payment of the hire purchase amount and the hirer can purchase the vehicle only after that. The appellate Court says that since the option had been exercised even at the time when the agreement was executed, from that day Sayed continued to be the owner of the vehicle. 7. Ext.B10 is an application for re-finance submitted by the respondent in the Office of the first petitioner on 27.9.1999 in respect of the same vehicle. Ext.B11 is the document executed by the first petitioner and the respondent. It is stated that the wife of the respondent was the guarantor for the transaction. The document is described as a hire purchase agreement (used vehicle). The first petitioner is mentioned in the document as the financier and not as the owner. When the vehicle was sold by Sayed to the respondent Ext.B11 document was executed and in that the first petitioner is not mentioned as the owner of the vehicle. The above fact is pointed out by the appellate Court for saying that at the time of executing Ext.B11 giving financial assistance to the respondent for purchasing the vehicle from Sayed the transaction was only a loan transaction. 8. The submission made by the learned counsel appearing for the petitioners is that even at the time when permission was given to the respondent to purchase the vehicle from Sayed and Ext.B11 agreement was executed the transaction was a hire-purchase transaction and the first petitioner continues to be the owner of the vehicle who can re-possess the same in the event of the respondent committing default in payment of instalments agreed to be paid. 9. 9. S.51(1) of the Motor Vehicles Act provides that when an application for registration of a motor vehicle which is held under a hire-purchase, lease or hypothecation agreement is made, the registering authority shall make an entry in the certificate of registration regarding the existence of the agreement. The learned counsel appearing for the petitioners referring to the above clause of S.51 and also sub-s.(5) of the section argues that in default of payment of instalments the person with whom the registered owner has entered into an agreement of hire purchase can take possession of the vehicle and can apply to the authorities for issuing certificate of registration in the name of such person. It is true that sub-s.(5) of S.51 says that on cancelling the certificate of registration issued to the owner the authority can issue a fresh certificate of registration in the name of the person with whom the registered owner has entered into an agreement of hire-purchase. It is also said in the sub-section that if the registering authority is satisfied that the person with whom the registered owner has entered into agreement has taken possession of the vehicle owing to the default of the registered owner under the provisions of the hire-purchase agreement and that the registered owner refuses to deliver the certificate of registration or has absconded the registering authority can issue a fresh certificate of registration as provided in sub-s.(5) of S.51 only after giving the registered owner an opportunity to make such representation as he may wish to make. A reading of sub-s.(5) of S.51 would indicate that taking possession of the vehicle by the person with whom the registered owner has entered into a hire purchase agreement must be owing to the default of the registered owner under the provisions of the agreement. 10. Here, the suit is filed for declaration that the respondent is not liable to pay any amount more to the petitioners to discharge the loan availed on the security of the vehicle and for giving mandatory injunction to the revision petitioners to return the vehicle. S.51 is applicable when there is a hire purchase agreement. The case of the respondent is that there was no hire purchase agreement but there was only a loan transaction between him and the petitioners. S.51 is applicable when there is a hire purchase agreement. The case of the respondent is that there was no hire purchase agreement but there was only a loan transaction between him and the petitioners. Once it is found that the transaction is a loan transaction the above provisions are not applicable and it cannot be said that the petitioners can take forcible possession of the vehicle even if the vehicle was hypothecated at the time of giving the loan. 11. The learned counsel appearing for the petitioners relied on the decision in Hameed v. Jayabharat Credit & Investment Ltd. (1986 KLT 997) in support of the argument that when there is a hire purchase agreement the owner of the vehicle will be the financier. In the above decision it was found that the agreement between the parties could not be characterised as an agreement where the customer was the owner of the goods and he with a view to get financial assistance entered into an agreement with the financier. In the above decision the court said that as the person who had purchased the vehicle had no case that he had paid up the entire amount due to the financier in order to entitle him to exercise the option to purchase he could not thwart the rightful claim of the financier. The above observations were made by a learned judge of this Court in respect of the transaction in the case which came up for consideration before that learned judge on the assumption that the transaction was a hire purchase agreement. The said decision is not applicable to the facts of the present case. The prayer in the suit for declaration that the respondent is not liable to pay any amount in the loan transaction can be allowed or not is a question which can be decided only at the financial disposal of the case. The learned counsel appearing for the respondent would submit that if interim mandatory injunction is not granted the respondent will lose Rs.3,000/- per day since he will not be in a position to ply the bus in the route. He would also submit that if the bus service is not conducted in the route he would lose the permit. The learned counsel appearing for the respondent would submit that if interim mandatory injunction is not granted the respondent will lose Rs.3,000/- per day since he will not be in a position to ply the bus in the route. He would also submit that if the bus service is not conducted in the route he would lose the permit. It is stated that the respondent is a person who is having other buses and there is no case that he is a person who is not having the financial ability to pay the amount. It appears that he refuses to pay the amount because he has a case that no amount is due from him to the petitioners. That is why he has filed the suit for declaration that he is not liable to pay any amount to the petitioners in the loan transaction. Pointing out the above facts the submission made by the learned counsel appearing for the respondent is that in the above circumstances in case interim mandatory injunction is not granted irreparable injury will be caused to the respondent and in that view of the matter the balance of convenience is also in his favour. 12. In Sundaram Finance Ltd. v. The State of Kerala & Ann (AIR 1966 SC 1178) the Supreme Court held that a hire-purchase agreement is normally one under which an owner hires goods to another party called the hirer and further agrees that the hirer shall have an option to purchase the chattel when he was paid a certain sum, or when the hire-rental payments have reached the hire-purchase price stipulated in the agreement. There are transactions under which goods are purchased by the financier from the dealer, and the financier obtains a hire-purchase agreement from the customer under which the latter becomes the owner of the goods on payment of all the instalments of the stipulated hire and exercising his option to purchase the goods on payment of a nominal price. There are transactions under which goods are purchased by the financier from the dealer, and the financier obtains a hire-purchase agreement from the customer under which the latter becomes the owner of the goods on payment of all the instalments of the stipulated hire and exercising his option to purchase the goods on payment of a nominal price. There are other forms of transactions under which goods are purchased by the customer, who in consideration of executing a hire purchase agreement and allied document remains in possession of the goods, subject to liability to pay the amount paid by the financier on his behalf to the owner or dealer, and the financier obtains a hire-purchase agreement which gives him a licence to seize the goods in the event of failure of the customer to abide by the conditions of the hire-purchase agreement. The Supreme Court went on to observe that the true effect of a transaction has to be determined from the terms of the agreement considered in the light of the surrounding circumstances. The owner under the hire-purchase agreement enters into a transaction of hiring of goods on the terms and conditions set out in the agreement and the option to purchase exercisable by the customer on payment of all the instalments of hire arises when the instalments are paid and not before. In such a hire-purchase agreement there is no agreement to buy goods; the hirer being under no legal obligation to buy, has an option either to return the goods or to become its owner by payment in full of the stipulated hire and the price for exercising the option. That type of hire-purchase agreement has to be distinguished from transaction in which the customer is the owner of the goods and with a view to finance his purchase he enters into an agreement which is in the form of a hire-purchase agreement with the financier, but in substance evidences a loan transaction, subject to a hiring agreement under which the lender is given a licence to seize the goods. 13. The learned counsel appearing for the respondent cited the decision in State of Kerala v. Sundara Rama & Co. (1985 KLT 869) in which this Court considered the question whether the financier who advances money in respect of a vehicle will become the owner of the vehicle. 13. The learned counsel appearing for the respondent cited the decision in State of Kerala v. Sundara Rama & Co. (1985 KLT 869) in which this Court considered the question whether the financier who advances money in respect of a vehicle will become the owner of the vehicle. In that case the vehicle was involved in the commission of an offence under the Abkari Act and the vehicle was confiscated. The question arose whether confiscation of the vehicle without giving notice to the financier was proper. In dealing with that question a learned judge of this Court said that the agreement in that case even though described as a hire-purchase agreement indicated only a loan transaction on the security of the vehicle. There was a provision in the agreement authorising the financier to seize the vehicle on default of payment of instalments and the financier was mentioned as the owner. In spite of the above fact, the court said that as per the terms of the agreement under which the transaction was made it was possible to hold that the ownership of the vehicle was transferred to the customer and the financier was not owner of the vehicle. 14. In Ganga Hire Purchase Pvt. Ltd. v. State of Punjab & Ors. (AIR 2000 SC 449) it was held that the expression "owner" in the case of vehicle purchased on hire-purchase agreement means the person in whose name the vehicle stands registered under the provisions of the Motor Vehicles Act. In that case the vehicle was used for carrying narcotic drugs and it was confiscated. There was a hire-purchase agreement in respect of the vehicle and the financier challenged the order of confiscation of the vehicle. The contention that the financier continued to be the owner of the vehicle so long as the entire hire-purchase money had not been paid was taken up in that case. It was in that context that the Supreme Court said that the expression "owner" must be held to be the registered owner of the vehicle in whose name the vehicle stands transferred under the provisions of the Motor Vehicles Act. 15. The learned counsel appearing for the respondent would submit that the provisions of Usurious Loans Act, 1918 have to be made applicable to the money transaction in the present case. 15. The learned counsel appearing for the respondent would submit that the provisions of Usurious Loans Act, 1918 have to be made applicable to the money transaction in the present case. Pointing out the decision in State Bank of Travancore v. C.T. George & Ann (1975 KLT 416) it was submitted by the counsel that the provisions of Usurious Loans Act were made applicable in the above case in loan transaction with bank. The question whether the provisions of the Usurious Loans Act are applicable to the transaction between the petitioners and the respondent need not be considered at this stage. It is open to the respondent to raise that contention in the suit at the time when a decision has to be taken as to whether any amount is due from the respondent to the petitioners in the transaction in question. 16. In respect of the bus the original agreement was with K.Sayed and the petitioners, Ext.B5 is the agreement and the provision in that agreement is that the hirer shall pay to the owner one rupee in exercising the option to purchase the vehicle. In that agreement first petitioner was shown as the owner and K. Sayed was shown as the hirer. The fact that the option to purchase the vehicle was exercised even at the time of execution of Ext.B5 agreement, as pointed out by the appellate Court, would indicate that the transaction was not a hire-purchase transaction because only after the payment of hire-purchase amount in the ordinary course a hirer can have the right to exercise the option to purchase the vehicle. Ext.B11 is the document executed by the respondent and the petitioners in respect of the transaction between them at the time when the respondent purchased the vehicle from Sayed. In that agreement the first petitioner was mentioned as the financier and not as the owner of the vehicle whereas in Ext.B5 hire-purchase agreement the first petitioner was mentioned as the owner. The transaction between the respondent and the petitioners is having characteristics different from those of the transaction between Sayed and the petitioners. Ext.B11 is a fresh transaction and as pointed out by the appellate Court, it is prima facie seen that it is a loan transaction. 17. The transaction between the respondent and the petitioners is having characteristics different from those of the transaction between Sayed and the petitioners. Ext.B11 is a fresh transaction and as pointed out by the appellate Court, it is prima facie seen that it is a loan transaction. 17. In the judgment of the appellate Court it is said that the decision reported in Charanjit Singh Chadha v. Sudhir Mehra (2001 (7) SCC 417) and some other decisions of the Supreme Court were cited before the learned District Judge. Reliance was placed on those decisions by the learned counsel appearing for the petitioners. As correctly pointed out by the learned District Judge, those decisions are in respect of the cases in which there was hire-purchase transaction. The question which was considered was whether there was commission of an offence of theft when the financier takes forcible possession of the vehicle. Since there were provisions in the agreements that in case of default of payment of instalments by the hirer the financier could take possession of the vehicle it was decided in those cases that when the financier took possession of the vehicle there was no commission of the offence of theft. The rights and liabilities under the hire-purchase agreement were not the questions which came up for consideration of the court in those cases. There is nothing to show that the appellate Court went wrong in coming to the prima facie conclusion that the transaction between the petitioners and the respondent was a loan transaction. 18. As pointed out earlier, if the vehicle is not given back to the respondent, he would be put to irreparable loss and injury. If the vehicle is kept by the petitioners, the respondent will not be in a position to conduct bus service as a result of which he will lose his permit. If the bus service is not conducted, he will have to suffer financial loss. There is no case that the respondent is not having the financial capacity to pay the amount claimed by the petitioners. In the above circumstances, as pointed out by the appellate Court, the balance of convenience is also in favour of the respondent. I do not find any reason to interfere with the direction given by the appellate Court by way of interim mandatory injunction that the petitioners have to return the vehicle to the respondent. In the above circumstances, as pointed out by the appellate Court, the balance of convenience is also in favour of the respondent. I do not find any reason to interfere with the direction given by the appellate Court by way of interim mandatory injunction that the petitioners have to return the vehicle to the respondent. There is no merit in this revision and it is hence dismissed.