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Kerala High Court · body

2012 DIGILAW 125 (KER)

V. A. George, Chennai v. Abraham Augustine

2012-01-25

N.K.BALAKRISHNAN

body2012
Judgment 1. This petition is filed by the accused in C.C. No:178/2005 of Judicial First Class Magistrate Sultanbathery, to quash the proceedings in that case. The 1st petitioner is the President and Managing Director of a Finance Company of which petitioners 2 and 5 are the employees. An agreement was entered into between the 1st respondent (hereinafter referred to as respondent) and the Petitioner Company. `.4,80,000/-was advanced to the respondent for the purchase of a mini lorry, on 6.11.2000. The amount so advanced was to be repaid in 36 instalments of `.18,000/-. The mini lorry was taken delivery by the respondent. A few instalments were stated to have been paid by the respondent. As the respondent committed default in paying the instalments the mini lorry was repossessed by the petitioner Company on 6.5.2002. A complaint was filed by him before the learned Magistrate which was forwarded to the police for investigation. The police, after conducting investigation referred the case as false. Then the respondent filed a protest complaint. After conducting inquiry, the learned Magistrate took cognizance of the case against the petitioner for offences under sections 143, 148, 394, 427 and 506(ii) r/w 149 of I.P.C. 2. The Petitioners contend that as per the hire purchase agreement, the petitioner Company was authorized and empowered to repossess the vehicle on failure to pay the instalments. According to the petitioners due intimation was given to the respondents regarding the intended seizure of the vehicle. Immediately after the seizure also the police was informed and as such it cannot be said that it was a dishonest removal of the mini lorry. The petitioners also contend that they had not used force or threatened the respondent while taking possession of the vehicle. Therefore, the petitioners contend that the cognizance taken by the learned Magistrate is bad and is thus liable to be quashed. 3. The learned counsel for the petitioners has relied upon the decision of the Division Bench of the Delhi High Court in BHAGYA PRODUCTS V. COMMISSIONER OF POLICE 2003 (2) KLT 1054 where some guidelines were issued by that Court. 3. The learned counsel for the petitioners has relied upon the decision of the Division Bench of the Delhi High Court in BHAGYA PRODUCTS V. COMMISSIONER OF POLICE 2003 (2) KLT 1054 where some guidelines were issued by that Court. In the aforesaid decision it was held: "Conscious of the fact that parties are governed by a written contract and are bound by the terms of the contract which they have entered into with open eyes, and in view of the guidelines framed by the Reserve Bank of India which we find are not being honoured strictly by the finance companies, we issue the following guidelines to be strictly followed by all finance companies before it exercises its power to repossess a vehicle:- (i) Whenever a cheque is not honoured for payment, it would be immediately brought to the notice of the borrower by issuance of a notice under registered post, to be posted at the address provided by the borrower and proof of dispatch by registered post at the given address would be considered as sufficient proof of service of notice. (ii) 7 days time should be given reckoned from the date of service of the registered notice for clearance of the amount under the dishonoured cheque. (iii) In case of second dishonour of cheque similar notice be provided drawing the attention of the borrower to the term of agreement entitling the lender to recall the entire loan. This notice should again give 7 days time to the borrower to pay the outstanding amounts as on date. The 7 days time to be reckoned from the date of service of the notice. (iv) If the amount is not paid, it would be open to the finance company in exercise of its power under the finance agreement to recall the loan. If it exercises this power another notice be given to the borrower intimating that the loan has been recalled and the borrower should be called upon to tender the amount due within 7 days of receipt of notice. This notice again be sent by registered post at the address given by the borrower. (v) If no amount is paid within the stipulated period as per the notice, finance company would be authorized to repossess the vehicle but this power of repossession would not entitle the finance company to track the vehicle while plying on the road. This notice again be sent by registered post at the address given by the borrower. (v) If no amount is paid within the stipulated period as per the notice, finance company would be authorized to repossess the vehicle but this power of repossession would not entitle the finance company to track the vehicle while plying on the road. (vi) In case the borrower refuses to sign the papers when the car is repossessed, on repossession of the vehicle, immediate information be provided by the finance company to the local police intimating the time and place when the vehicle was repossessed. 4. The learned counsel for the petitioners would submit that the respondent was given notice of the default committed by him and though opportunity was given to the respondent to pay the instalment he did not pay the amount. It was also alleged by the petitioners that they had a reliable information that the respondent was attempting to transfer possession of the said vehicle. But it is not disputed that the endorsement was made in the R.C. Book regarding hypothecation of the vehicle. The fact that seizure was subsequently reported to the police, according to the respondent, was sufficient to comply with the directions issued in the decision in BHAGYA PRODUCTS's case and as such the petitioners cannot be held to have committed any offence as alleged in the complaint. 5. The aforesaid submission is resisted by the learned counsel for the respondent. The learned counsel has relied upon the decision in THE MANAGING DIRECTOR, ORIX AUTO FINANCE (INDIA) LTD. V. SHRI JAGMANDER SINGH AND ANR. 2006 (1) SUPREME 708 where it was held: "If agreements permit the financier to take possession of the financed vehicles, there is no legal impediment on such possession being taken. Of course, the hirer can avail such statutory remedy as may be available. But mere fact that possession has been taken cannot be a ground to contend that the hirer is prejudiced. Stand of learned counsel for the respondent that convenience of the hirer cannot be overlooked and improper seizure cannot be made. There cannot be any generalization in such matters. It would depend upon the facts of each case. It would not be therefore proper for the High Courts to lay down any guideline which would in essence amount to variation of the agreed terms of the agreement. There cannot be any generalization in such matters. It would depend upon the facts of each case. It would not be therefore proper for the High Courts to lay down any guideline which would in essence amount to variation of the agreed terms of the agreement. If any such order has been passed effect of the same shall be considered by the concerned High Court in the light of this judgment and appropriate orders shall be passed." So relying upon these decisions the learned counsel for the petitioner submits that the proceedings taken by the learned Magistrate is to be quashed. 6. The learned senior counsel for the respondent/complainant has relied upon the subsequent decision of the apex Court in ICICI BANK LTD V. PRAKASH KAUR AND OTHERS (2007) 2 SUPREME COURT CASES 711. That was a case where, in terms of the agreement entered into between the writ petitioner therein and the Bank, the writ petitioner's truck was taken possession of by the Bank authorities by use of force. The writ petitioner was stated to have requested the Chief Manager of the Bank for release of the truck. That request was not heeded to. 7. In paragraph 16 it was held by the apex Court: "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 recognized 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." 8. In paragraph 28 also it was held: "In conclusion, we say that we are governed by the rule of law in the country. The recovery of loans or seizure of vehicles could be done only through legal means. The banks cannot employ goondas to take possession by force." 9. The aforesaid decision was quoted with approval by the apex Court in a later decision in CITI CORP.MARUTHI FINANCE LTD. The recovery of loans or seizure of vehicles could be done only through legal means. The banks cannot employ goondas to take possession by force." 9. The aforesaid decision was quoted with approval by the apex Court in a later decision in CITI CORP.MARUTHI FINANCE LTD. V. VIJAYALAXMI reported in 2011 (4) KLT SN 143 (C.NO.155) SC where it was held: "Even in case of mortgaged goods subject to Hire Purchase Agreements, the recovery process has 0to be in accordance with law and the recovery process referred to in the Agreements also contemplates such recovery to be effected in due process of law and not by use of force. Till such time as the ownership is not transferred to the purchaser, the hirer normally continues to be the owner of the goods, but that does not entitle him on the strength of the agreement to take back possession of the vehicle by use of force. The guidelines which had been laid down by the Reserve Bank of India as well as the Appellant Bank itself, in fact, support and make a virtue of such conduct. If any action is taken for recovery in violation of such guidelines or the principles as laid down by this Court, such an action cannot but be struck down". 10. Therefore, relying upon the aforesaid decisions the learned senior counsel appearing for the respondent would submit that if the respondent had committed default the petitioners should have resorted to the remedy through the Civil Court or by resorting to Arbitration, based on the Arbitration clause contained in the hypothecation agreement. There was no difficulty for the petitioners to move the District Court for getting interim relief as provided under section 9 of the Arbitration and Conciliation Act, 1996. But instead, the petitioners employed their own muscle men to seize the vehicle using force which, in the light of the decision of the apex Court cannot be approved. 11. It is also pointed out by the respondent that it is not mere removal of the truck but removal by force (robbery) causing hurt to the complainant and that was the reason why section 394 of IPC was incorporated. The truthfulness or otherwise of that allegation has to be gone into at the time of trial. It is also important to note that here the procedure for warrant case instituted on a complaint is to be followed. The truthfulness or otherwise of that allegation has to be gone into at the time of trial. It is also important to note that here the procedure for warrant case instituted on a complaint is to be followed. The petitioner will get opportunity to put forward all his contentions even at the time of recording of pre-charge evidence and they could also request for discharge after the pre-charge evidence is recorded. 12. It is fairly submitted by the learned senior counsel that so far as the 1st accused is concerned no knowledge can be imputed to him as he is the President/Managing Director, sitting at Chennai, who could not have any direct knowledge regarding the acts complained of and as such the proceedings as against A1 can be quashed. 13. In the light of what is stated above, this Criminal M.C. is disposed of as follows: Proceedings in C.C. No:178/2005 of Judicial First Class Magistrate, Sulthanbathery will stand quashed only as against the 1st petitioner (1st accused before that Court). The case as against other accused shall proceed in accordance with law. Other petitioners can raise all their contentions as are raised in this Criminal M. C. before the trial Court and they can also plead for an order of discharge. They are at liberty to apply to the learned Magistrate under section 205 of Cr.P.C. for exemption from personal attendance. If such a petition is filed the learned Magistrate will dispose of the same after hearing the learned counsel for the complainant also. This Criminal M.C. is disposed of accordingly.