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2007 DIGILAW 1591 (PNJ)

Punjab Kashmir Finance Ltd. v. State of Haryana

2007-09-01

A.N.JINDAL

body2007
JUDGMENT A.N. Jindal, J.:-The petitioner M/s Punjab Kashmir Finance Limited, Balbir Tower, G.T.Road, Jalandhar through Shri Nirmal Singh, Assistant Manager (T), Legal Department (hereinafter referred to as the petitioner) has invoked the provisions of Section 482 of the Code of Criminal Procedure(for short Cr.P.C.) for quashing an FIR No.805 dated 28.12.2005 under Section 392 of the Indian Penal Code (for short IPC), Police Station Sadar, Gurgaon. The case has been registered at the instance of respondent Tayyab Hussain son of Isab Khan resident of village Uttawad, Tehsil Hathin, District Faridabad (hereinafter referred to as the complainant), who entered into hire-purchase agreement on 12.10.2002, vide which he got financed a truck bearing Reg.No.HR38H-2131. The total sum of finance was Rs.7,42,460/-, which was to be repaid by the complainant in 34 monthly instalments commencing from 11.11.2002. On account of the default committed by the complainant in paying the instalments, the truck was repossessed by the petitioner on 10.2.2005. Even after the complainant made the payment of Rs.60,000/-, out of the defaulted amount and further gave an assurance that he will make the payment of the balance defaulted amount, the truck was not released. On showing inability by the complainant to give the instalments in time, arbitration proceedings also started. The complainant also filed a civil suit for restraining the petitioner from taking possession of the vehicle forcibly. The petitioner further submitted that since on account of default in payment of the instalments, the vehicle was taken away by the re-possessing agency on 28.12.2005, the complainant had lodged a complaint, on the basis of which an FIR was lodged by the police against the petitioner under Section 392 IPC. Thereafter, the vehicle was got released by the complainant from the Court on Superdari on 31.12.2005. Thereafter, the vehicle was got released by the complainant from the Court on Superdari on 31.12.2005. The petitioner has sought quashing of the said FIR on the grounds that the truck was taken for the reason that the complainant had failed to deposit the monthly instalments; the petitioner was entitled to get back the possession due to the default committed by the complainant; the FIR is a cryptic and vague; motive of the police is to harass the petitioner and his officials; the initiation of criminal proceedings is an abuse of the process of criminal law in order to evade the instalments of loan, to which he is liable under the hire-purchase agreement and that the FIR is not based on total true and complete facts and a case under Section 392 IPC is not made out. 2. Reply to the petition has been filed by the complainant (respondent No.2), wherein, he admitted that he had got financed one LP Truck-1613 bearing Reg.No.HR38H-2131 from the petitioner Finance Company on 12.10.2002 in the sum of Rs.6,77,710/- i.e. Rs.5,50,000/- as financed amount and Rs.1,27,710/- as interest, which was to be paid in 35 monthly instalments of Rs.20,000/- each; he has been paying the financed amount to the petitioner regularly and out of the total amount, he had already paid Rs.6,61,986/- and a sum of Rs.15,724/- remained balance; the petitioner has intentionally exaggerated the amount and started demanding Rs.2,09,849/- more from him, for which a notice dated 24.5.2005 was issued to him; when he went to the petitioner company to get cancelled the notice, he was not given any heed, rather he was threatened that his vehicle will be snatched; the officials of the petitioner company tried to forcibly snatch the truck from him on 10.8.2005 from his village Rupraka near Hathin, District Mewat; thereafter, he filed a civil suit; again on 28.12.2005 when the complainant along with his driver Ali Hasan was going towards Gurgaon, then the petitioner along with 3-4 more persons got down from the car and climbed up the truck and threatened them. They also drove away the truck for about one kilometer towards Shahzadpur and stopped near a farm-house, where the complainant and his driver were left. Consequently, the present case was got registered against the petitioner. 3. Arguments heard. Records perused. 4. They also drove away the truck for about one kilometer towards Shahzadpur and stopped near a farm-house, where the complainant and his driver were left. Consequently, the present case was got registered against the petitioner. 3. Arguments heard. Records perused. 4. There is no dispute with regard to the fact that the complainant got financed a truck bearing Reg.No.HR38H-2131. The case of the petitioner is that he got it financed for Rs.7,42,760/-, whereas, the case of the complainant is that he got financed Rs.5,50,000/- plus interest Rs.1,27,710/- i.e, total Rs.6,77,710/-. However, this fact is not in controversy before me. There is also no dispute that respondent No.2 committed default in payment of the instalments. However, the parties are at variance with regard to the amount, which is due against respondent No.2. The only controversy before me is that whether the petitioner being the finance company could repossess or take the truck back from the custody of the complainant in the light of the hire-purchase agreement i.e, loan amount agreement, executed between the parties. 5. Before I lay my hands to decide whether the re-possession was legal, it will have to be determined, whether the document executed between the parties was a hire-purchase agreement or a loan amount agreement. Hire-purchase agreement is that under which, an owner gives the goods to a hirer, giving the hirer an option to purchase the goods. On the other hand, when a person borrows money and pays it to vendor, transaction between the customer and the vendor will be a loan transaction. In a hire-purchase agreement, the hirer is under no obligation to buy. Where the customer is himself the owner and with a view to finance his purchase, he enters into an agreement in the form of hire-purchase agreement, it will be a loan transaction. 6. The petitioner before me is not the dealer of the motor vehicles, but he is a finance company. The vehicle purchased is in the name of the complainant and the complainant is the real owner of the vehicle. Moreover, on cursory look of the averments made in the petition for quashing the FIR in question, it transpires that the petitioner company itself mentioned that it financed a loan of Rs.7,42,460/-, to be paid by the complainant in 34 monthly instalments. The complainant defaulted in making the payment of instalments, therefore, the truck was repossessed. Moreover, on cursory look of the averments made in the petition for quashing the FIR in question, it transpires that the petitioner company itself mentioned that it financed a loan of Rs.7,42,460/-, to be paid by the complainant in 34 monthly instalments. The complainant defaulted in making the payment of instalments, therefore, the truck was repossessed. Certainly, as per hire-purchase agreement on completion of the instalments, the liability of the complainant was to be discharged and he would have remained the owner of the vehicle. Moreover, when the agreement appears in substance to be a loan agreement, the same cannot be treated as hirepurchase agreement, merely for the reason of mentioning as such. Similar agreement was considered by the Supreme Court in Sundaram Finance Ltd. vs. The State of Kerala and another, AIR 1966 SC 1178, wherein, the majority view was that such an agreement would be a loan agreement. Shah. J. on behalf of the majority observed as under:- “It is also to be noted that the agreement does not contemplate exercise of an option on payment of a nominal sum of money as is to be found in other hire purchase agreements. Execution of the promissory note, the hire purchase agreement and the other documents, in our judgment, indicate that it was the intention of the parties not to transfer any interest in the vehicle by the customer to the appellants; it was intended to give security by hypothecating the vehicle in favour of the appellants and for ensuring repayment of the loan advanced that the customer submitted to the various onerous conditions of the hire purchase agreement............” In the light of these principles the true nature of the transaction of the appellants may now be stated. The appellants are carrying on the business of financiers; they are not dealing in motor vehicles. The motor vehicle purchased by the customer is registered in the name of the petitioner and remains at all material times so registered in his name. In the letter taken from the customer under which the latter agrees to keep the vehicle insured, it is expressly recited that the vehicle has been given as security for the loan advanced by the appellants. As a security for repayment of the loan the customer executes a promissory note for the amount paid by the appellants to the dealer of the vehicle. As a security for repayment of the loan the customer executes a promissory note for the amount paid by the appellants to the dealer of the vehicle. The so-called ‘sale-letter’ is a formal document which is not made effective by registering the vehicle in the name of the appellants and even the insurance of the vehicle has to be effected as if the customer is the owner. Their right to seize the vehicle is merely a license to ensure compliance with the terms of the hire purchase agreement. The customer remains qua the world at large the “owner” and remains in possession, and on condition of performing the covenants has a right to continue to remain in possession. The right of the appellants may be extinguished by payment of the amount due to them under the terms of the hire purchase agreement even before the dates fixed for payment. The agreement undoubtedly contains several onerous covenants, but they are all intended to secure to the appellants recovery of the amount advanced. We are accordingly of the view that the intention of the appellants in obtaining the hire-purchase and the allied agreements was to secure the return of loans advanced to their customers, and no real sale of the vehicle was intended by the customer to the appellants. The transactions were merely financing transactions.” A similar position arose before this High Court in Tarun Bhargava vs. State of Haryana, 2002(3) RCR(Crl.) 312, wherein, while determining the higher-purchase agreement as loan agreement, the court held the validity of the FIR registered against the financier under Sections 392/323/506/120-B IPC by making following observations:- “I may now summarise my conclusions as follows:- A) A hire-purchase agreement may in substance be a loan transaction and the label of such an agreement is not conclusive. It is open to the Court to determine whether a particular agreement is a loan transaction or a hire-purchase agreement. The parameters to be applied are laid down, interalia, in the judgment of the Supreme Court in Sundaram Finance Ltd.’s case (supra). In the present case, the agreement though termed as hire-purchase agreement, is held to be a loan agreement for the reasons already mentioned. B) In a loan agreement for financing goods on hypothecated basis, the creditor cannot forcibly repossess the hypothecated item, though he can enforce the security through the Court. In the present case, the agreement though termed as hire-purchase agreement, is held to be a loan agreement for the reasons already mentioned. B) In a loan agreement for financing goods on hypothecated basis, the creditor cannot forcibly repossess the hypothecated item, though he can enforce the security through the Court. C) If a specific clause is inserted in an agreement authorising repossession of a vehicle or any other goods by the hypothecatee, such a clause maybe unconscionable, unless otherwise shown by the hypothecatee and such a clause inserted in the present case is held to be void. In the present agreement, clause 4 and clause 7 permitting forfeiture of instalments already paid will be deemed to be void. D) Forcible repossession without intervention of the Court may involve commission of an offence and what offence has been committed will depend on facts of an individual case. The judgments of the Supreme Court in hire purchase cases holding that in a hire purchase agreement, the owner cannot be guilty of theft of his own property, will not be applicable to cases where the transaction is, in substance, a loan transaction, as in a loan transaction, the ownership will be of the borrower and the principle applicable to a hire purchase agreement will not apply.” Once again, recently, similar question came for discussion before the Apex Court in case, Manager, ICICI Bank Ltd. vs. Prakash Kaur and others, [2007 Law Herald (SC) 986] : 2007(2) RCR(Crl.) 76, wherein, the Apex Court deprecated the practice of taking the possession of the vehicles by the muscle men of the finance companies and observed as under:- “Before we part with this matter, we wish to make it clear that we do not appreciate the procedure adopted by the Bank in removing the vehicle from the possession of the writ petitioner. The practice of hiring recovery agents, who are musclemen, is deprecated and needs to be discouraged. The Bank should resort to procedure recognised by law to take possession of vehicles in cases where the borrower may have committed default in payment of the instalments instead of taking resort to strong arm tactics.” 7. While applying the aforesaid parameters to the facts of the instant case, on the perusal of the documents, it comes out that it was the loan transaction, in connection with which the documents were executed. While applying the aforesaid parameters to the facts of the instant case, on the perusal of the documents, it comes out that it was the loan transaction, in connection with which the documents were executed. Mere fact that the words ‘hire-purchase agreement’ were used, is hardly sufficient to turn the same as such, so as to give right to the petitioner to take forcible possession of the vehicle in question. That apart, the parties are at litigation. The petitioner has filed arbitration proceedings. 8. On the other hand, the complainant (respondent No.2) has also filed a suit for injunction restraining the petitioner company from snatching the truck in question from him, but instead the petitioner company had recourse to the remedy which is unknown to the law. Therefore, the argument that the FIR in question cannot be sustained is without any merit. Consequently, finding no merit in the petition, the same is dismissed. ——————