JUDGMENT : M.A.ABDUL HAKHIM, J. The appellant is the petitioner in M.A.(Arb.) No.272/2024 of the Additional District Court-VIII, Ernakulam, filed under Section 9 of the Arbitration and Conciliation Act, 1996, for repossessing a hypothecated vehicle through the Advocate Commissioner appointed by the Court. 2. In this Appeal, this Court is called upon to adjudicate the rival claims between the appellant/financier and the 2 nd respondent/purchaser in confiscation proceedings, over a Toyota Innova Car. The 1 st respondent/original registered owner of the vehicle contends that the financier is to recover the hire purchase money from the vehicle itself and not to proceed against him. 3. The facts are more or less admitted by the parties. The 1 st respondent was the registered owner of a Toyota Innova Car bearing Reg.No.KL 23 F 6111. The vehicle was hypothecated with the appellant for the loan availed by the 1 st respondent as per the Hire Purchase Agreement. The hypothecation in favour of the appellant was duly endorsed in the Registration Certificate of the vehicle. The vehicle was involved in an NDPS offence. The vehicle was seized by the Excise Department. The 1 st respondent filed Application before the Sessions Court claiming interim custody of the vehicle under Section 451 Cr.P.C. and the same was dismissed by the Sessions Court holding that in view of the Circular issued by the Government, the District Level Narcotic Drugs and Psychotropic Substances and Conveyance Disposal Committee (Drug Disposal Committee) constituted under Section 5 of the NDPS Act is the authority to dispose of the vehicle involved in NDPS offences. The 1 st respondent filed an Application for interim custody before the Drug Disposal Committee and this Court as per judgment dated 02.11.2022 in W.P.(Crl)No.881/2022 directed the Drug Disposal Committee of Kollam to dispose of the said Application within 30 days from the date of receipt of copy of the said judgment. A Communication dated 23.07.2022 was issued to the first respondent that the vehicle is in the custody of the Court; that the vehicle will be brought to the Disposal Committee only after getting permission from the Court and thereafter the Committee will take decision to dispose of the vehicle through auction. On 26.11.2022, the Drug Disposal Committee of Kollam decided to dispose of vehicles including the vehicle of the 1 st respondent in auction. On 26.11.2022, the Drug Disposal Committee of Kollam decided to dispose of vehicles including the vehicle of the 1 st respondent in auction. The 1 st respondent has filed W.P.(Crl.) No.186/2023 challenging the proceedings of the Drug Disposal Committee of Kollam dated 26.11.2022 and for other reliefs and the said writ petition is pending consideration before this Court on the ground that the order was passed in violation of the direction of this Court in W.P.(Crl.) No.881/2022. The vehicle was later sold in e- auction conducted by the Excise Department. The vehicle was purchased by one Bosekutty Abraham for an amount of Rs.5,38,729/-. From the said Bosekutty Abraham the 2 nd respondent herein purchased the vehicle. At present, the 2 nd respondent is the registered owner of the vehicle. Since the monthly hire installments payable to the appellant were defaulted by the 1 st respondent and an amount of Rs.4,76,788/- is due from him, the appellant decided to initiate arbitration proceedings against the 1 st respondent as provided in the Hire Purchase Agreement. The appellant filed M.A.(Arb.)No.272/2024 before the District Court, Ernakulam under Section 9 of the Arbitration and Conciliation Act, 1996 to repossess the vehicle through Court as an interim measure. As per the Interim Order in I.A.No.3/2024 in M.A.(Arb)No.272/2024, the Advocate Commissioner was appointed to take the vehicle into custody and hand over the same to the appellant. The Advocate Commissioner obtained possession of the vehicle from the 2 nd respondent and handed over the vehicle to the appellant. The 2 nd respondent filed I.A.No.6/2024 to get himself impleaded in M.A. (Arb) No. 272/2024 and I.A.No.5/2024 seeking to restrain alienation of the vehicle and restoration of the possession of the vehicle to the 2 nd respondent. I.A.No.6/2024 was allowed impleading the 2 nd additional respondent in M.A. (Arb) No. 272/2024. I.A.No.5/2024 was allowed ordering restoration of the vehicle back to the 2 nd respondent, holding that on confiscation, the vehicle will vest with the Government free from all encumbrances unless and until the said order of confiscation is set aside. Since I.A.No.5/2024 is allowed ordering restoration of the vehicle to the 2 nd respondent, M.A.(Arb)No.272/2024 was rejected by the District Court by a separate order. The present Appeal is filed challenging the order in M.A. (Arb.) No.272/2024, taking grounds against the order in I.A.No.5/2024. 4. I heard the learned counsel for the appellant Sri. Since I.A.No.5/2024 is allowed ordering restoration of the vehicle to the 2 nd respondent, M.A.(Arb)No.272/2024 was rejected by the District Court by a separate order. The present Appeal is filed challenging the order in M.A. (Arb.) No.272/2024, taking grounds against the order in I.A.No.5/2024. 4. I heard the learned counsel for the appellant Sri. Shiju Varghese, the learned counsel for the 1 st respondent, Sri.B. Mohanlal and the learned counsel for the 2 nd respondent, Sri.John Joseph (Roy). 5. The learned counsel for the appellant contended that the District Court failed to appreciate the law on the point correctly. The appellant granted loan on the hypothecation of the vehicle by way of hire purchase. It is the appellant, who is the owner of the vehicle, and the 1 st respondent is only a hirer. The installment amounts paid by the 1 st respondent are only hire money. The 1 st respondent will become the owner of the vehicle only on purchase of the vehicle after payment of the last hire money as per the payment schedule. The hypothecation in favour of the appellant is clearly endorsed in the Registration Certificate of the vehicle to secure the loan granted by the appellant for the vehicle. Section 51(4) of the Motor Vehicles Act, 1988 specifically provides that no entry regarding the transfer of ownership of a motor vehicle which is held under hire purchase agreement shall be made except with the written consent of the person whose name has been specified in the Certificate of Registration with whom the registered owner has entered into hire purchase agreement. The learned counsel pointed out that Section 51(5) permits the financier to obtain the Certificate of Registration in his name after repossessing the vehicle. The District Court illegally relied on Section 67H of the Abkari Act, 1077, to hold that the vehicle is vested with the Government free from all encumbrances. When the interest of the financier is sufficiently protected by Sections 51(4) and 51(5) of the Motor Vehicles Act, 1988, which is a Central Act, the said provisions will prevail over Section 67H of the Abkari Act which is a State legislation. It is a settled law that when there is repugnancy between the Central Law and the State Law, it is the Central Law which would prevail. It is a settled law that when there is repugnancy between the Central Law and the State Law, it is the Central Law which would prevail. The hypothecation in favour of the appellant could not be termed as an encumbrance since as per the hire purchase system, the appellant is the owner of the vehicle. The learned counsel further contended that, at any rate, the Excise authorities should have issued notice to the appellant before confiscating the vehicle since the appellant is the legal owner of the vehicle. If the practice adopted by the respondents is permitted, it is very easy to defeat the valuable rights of the financier over the hypothecated vehicle at the instance of the registered owner colluding with the confiscation authorities. 6. The learned counsel for the first respondent contended that this appeal is to be considered along with W.P.(Crl.) No. 186/2023 filed by the first respondent arising from the prayer for interim custody of the vehicle. The Drug Disposal Committee decided to dispose of the vehicle, totally ignoring the judgment of this Court in W.P.(Crl.) No.881/2022, directing to consider the application for custody filed by the first respondent. The appellant is having hypothecation over the vehicle with respect to the loan granted by the appellant to the 1 st respondent. The appellant is to recover the loan amount from the vehicle itself. But without proceeding against the vehicle, the appellant has illegally initiated arbitration proceedings against the 1 st respondent. The appellant, being the legal owner of the vehicle in view of the Hire Purchase Agreement, ought to have taken steps to challenge the confiscation order by which the vehicle is vested with the Government. The security for the loan happened to be lost to the appellant on account of its conduct and the 1 st respondent could not be held responsible for the same. 7. The counsel for the 2 nd respondent contended that in view of Section 67H of the Abkari Act relied on by the District Court, the vehicle shall vest with the Government free from all encumbrances on confiscation of the vehicle. When the vehicle is vested with the Government, the Government is free to dispose of the said vehicle according to its decision. Neither the appellant/financier nor the first respondent/registered owner challenged the order of confiscation and the order of confiscation has become final. When the vehicle is vested with the Government, the Government is free to dispose of the said vehicle according to its decision. Neither the appellant/financier nor the first respondent/registered owner challenged the order of confiscation and the order of confiscation has become final. The 2 nd respondent purchased the vehicle from Bosekutty Abraham who purchased the vehicle in auction conducted by the Government. When the Government sells a property, which absolutely belonged to it, the purchaser will get full ownership rights over the same. Section 51(4) of the Motor Vehicles Act is applicable only in the case of transfer of the vehicle and the same is not applicable in the case of confiscation of the vehicle by the authorities. If the claim of the financier is allowed to stand, any offender can defeat the confiscation proceedings, colluding with the financier by obtaining possession of the vehicle on the claim that the financier is having better claim over the vehicle. The District Court correctly ordered to restore possession of the vehicle to the 2 nd respondent as per the impugned order. Even though the said order was passed as early as on 22.11.2024, on account of the pendency of this appeal and interim order, the 2 nd respondent has not obtained possession of the vehicle even now. 8. I have considered the rival contentions. 9. It is clear from Annexure R1(a) order passed by the Sessions Court that the vehicle was taken into custody in Crime No.10/2021 of Karunagapally Excise Range Officer registered under Section 20(b)(ii)(B) of the NDPS Act against the 1 st respondent and another. The 1 st respondent is the first accused in the said crime. The vehicle was taken into custody by the officers of the Excise Department. The vehicle was disposed of as per Ext.R1(d) decision of the Drug Disposal Committee constituted under Section 5 of the NDPS Act. It is an admitted fact that one Bosekutty Abraham purchased the vehicle in auction from the Government and from whom the 2 nd respondent purchased the vehicle. Nobody has challenged the Order of confiscation confiscating the vehicle and it has become final. 10. It appears from the impugned order that the District Court was under the mistaken impression that the vehicle was seized in an Abkari Offence. Nobody has challenged the Order of confiscation confiscating the vehicle and it has become final. 10. It appears from the impugned order that the District Court was under the mistaken impression that the vehicle was seized in an Abkari Offence. The District Court considered Section 67H of the Abkari Act and the Kerala Abkari (Disposal of Confiscated Articles) Rules, 1996 to hold that the vehicle is free from encumbrance relying on Section 67H of the Abkari Act. Since the vehicle is involved in NDPS offence, the relevant provision is Section 60(3) of the NDPS Act and the NDPS (Seizure, Storage, Sampling and Disposal) Rules, 2022. 11. Section 60(3) of the NDPS Act is extracted hereunder for easy reference. “Section 60: Liability of illicit drugs, substances, plants, articles and conveyances to confiscation.-- (1)…….. (2)…….. (3) Any animal or conveyance used in carrying any narcotic drug or psychotropic substance or controlled substances or any article liable to confiscation under sub-section (1) or sub-section (2) shall be liable to confiscation, unless the owner of the animal or conveyance proves that it was so used without the knowledge or connivance of the owner himself, his agent, if any, and the person- in-charge of the animal or conveyance and that each of them had taken all reasonable precaution against such use.” 12. Rule 23(5)(e) of the NDPS (Seizure, Storage, Sampling and Disposal Rules, 2022 provides that the seized conveyances shall be sold by way of tender or auction as may be determined by the Drug Disposal Committee. 13. In Ganga Hire Purchase Pvt. Ltd. v. State of Punjab [ (1999) 5 SCC 670 ], the Hon’ble Supreme Court considered the question whether on account of the hire purchase agreement, the financier can be held to be the owner within the ambit of S.60(3) of the NDPS Act. The Hon’ble Supreme Court answered the question as follows. “2.Under Sub-s.(3) of S.60 of the NDPS Act, any animal or conveyance used in carrying any narcotic drug or psychotropic substance is liable to confiscation, unless the owner of the conveyance proves that it was so used without the knowledge or connivance of the owner himself, his agent, if any, and the person in charge of the animal or conveyance and that each of them had taken all reasonable precaution against such use. There is no dispute that the vehicle in question was found to be carrying certain narcotics. There is no dispute that the vehicle in question was found to be carrying certain narcotics. The bone of contention of the appellant is that in view of the hire purchase agreement, the appellant continues legally to be "the owner" of the vehicle so long as the entire hire purchase money has not been paid and therefore unless and until it is established that the vehicle was used for carrying of narcotics with the knowledge of the appellant, an order of confiscation could not have been passed. In support of this contention, reliance has been placed on a decision of a learned Single Judge of the Rajasthan High Court in the case of Punjab Kashmir Finance (P) Ltd. v. State (1993 CriLJ 498 (Raj)). The expression "owner" has not been defined in the NDPS Act. There is also no dispute that under the hire purchase agreement, the title to the vehicle is retained with the appellant until and unless the entire hire purchase money is paid back. But, if the contention of the appellant is accepted, then all the vehicles which have been purchased on hire purchase basis, cannot be confiscated notwithstanding the fact that the vehicles were found to be used for commission of offences under the NDPS Act in carrying narcotic and psychotropic substances. The very purpose for engrafting Sub-s.(3) of S.60 of the NDPS Act is to have it as a deterrent measure to check the offences under the Act in question which have been found to be dangerous to the entire society. In the absence of any definition of "owner" in the NDPS Act, it would be reasonable for us to construe that the expression "owner" must be held to mean the "registered owner" of the vehicle in whose name the vehicle stands registered under the provisions of the Motor Vehicles Act. 3 In view of the aforesaid interpretation of the expression "owner" in Sub-s.(3) of S.60 of the NDPS Act, the appellant cannot be permitted to urge that the order for confiscation is bad as he had no knowledge of the fact that the vehicle was used for carrying any narcotic substances. 3 In view of the aforesaid interpretation of the expression "owner" in Sub-s.(3) of S.60 of the NDPS Act, the appellant cannot be permitted to urge that the order for confiscation is bad as he had no knowledge of the fact that the vehicle was used for carrying any narcotic substances. The High Court, therefore, in our opinion, was justified in rejecting the contention of the appellant that the truck in question having been taken on a hire purchase agreement, for the purpose of Sub-s.(3) of S.60, the appellant shall be treated to be the owner. 14. In view of the said decision, it could be held that the appellant could not be treated as the owner of the vehicle in the confiscation proceedings. Of course, the appellant can challenge the order of confiscation if its civil rights are affected. The appellant has not chosen to challenge the order of confiscation. If the appellant challenges the order of confiscation, it can succeed only if it is proved that the use of the vehicle was without the knowledge or connivance of the registered owner, his agent, if any, and the person-in-charge of the vehicle and that each of them had taken all reasonable precautions against such use. The knowledge or connivance of the financier of the vehicle is not relevant or material in confiscation proceedings under S.60(3) of the NDPS Act. 15. The next question to be considered is whether the hypothecation in favour of the appellant will prevail over the confiscation of the vehicle made by the authorities. Section 67H of the Abkari Act and Section 60 of the Kerala Forest Act provide that when an order for confiscation of any property is passed and it has become final, the property shall vest in the Government free from all encumbrances. In Ashokan v. State of Kerala [ 2004 (3) KLT 104 ], while considering the confiscation under the Forest Act, this Court held that the property confiscated by the competent authority absolutely vests with the Government. In the Judgment dated 06.03.2015 in W.P(C) No.13489/2014 arising from Abkari Act, this Court held that the sale effected in public auction would be without any encumbrance and the charge created under Section 8(a) of the Kerala Motor Transport Workers Welfare Fund Act 1985 would be of no consequence. In the Judgment dated 06.03.2015 in W.P(C) No.13489/2014 arising from Abkari Act, this Court held that the sale effected in public auction would be without any encumbrance and the charge created under Section 8(a) of the Kerala Motor Transport Workers Welfare Fund Act 1985 would be of no consequence. In the judgment of this Court dated 01.03.2013 in W.P(C) No.2642/2012 also, the same view is taken by a learned Single Judge of this Court. It is true that in the case of Abkari Act and Forest Act there is a clear provision that on confiscation the property shall vest free from all encumbrances. There is no similar provision in the NDPS Act. Confiscation is made by way of penalty when a property is involved in an offence. In offences under the NDPS Act, Abkari Act, Forest Act, etc., confiscation is made for preventing further crime using that property. Even if there is no provision in the NDPS Act, on confiscation, the property shall absolutely vest in the Government, free from all encumbrances. The confiscation itself is sufficient to hold that the confiscated property shall vest with the Government without any encumbrance. On confiscation, the confiscated property becomes the absolute property of the Government and it is for the Government to decide as to how the property is to be disposed. The hypothecation of the vehicle in favour of the financier will get extinguished on confiscation of the vehicle. On sale of the vehicle by the Government, the purchaser becomes the absolute owner of the vehicle and he is not bound by the hypothecation created over it before confiscation. It is the absolute right of the purchaser of the confiscated vehicle from the Government to remove the previous hypothecation endorsement from the Registration Certificate. 16. If the stand of the appellant that a hypothecated vehicle cannot be confiscated considering the fact that the hire purchaser is the owner of the vehicle and the registered owner is only a hirer of the vehicle, it is very easy to defeat the confiscation proceedings. Government initiates confiscation proceedings of the vehicles involved in offences relating to Abkari Act, NDPS Act, Forest Act etc., to enforce the penal provisions. If such claim of financiers is permitted, it is very easy to defeat the penal provisions by the offenders by colluding with the financiers. 17. Government initiates confiscation proceedings of the vehicles involved in offences relating to Abkari Act, NDPS Act, Forest Act etc., to enforce the penal provisions. If such claim of financiers is permitted, it is very easy to defeat the penal provisions by the offenders by colluding with the financiers. 17. The learned counsel for the appellant relies on Section 51(4) of the Motor Vehicles Act and argued that the transfer of ownership of any motor vehicle which is held under any Hire Purchase Agreement shall not be made without the consent of the financier in favour of whom the Hire Purchase Agreement is executed. Section 51(5) deals with obtaining fresh certificate of registration in the name of the financier after re-possessing the vehicle in case the registered owner refuses to deliver Certificate of Registration. Section 51(4) deals only with transfer of ownership of a vehicle having hypothecation. When a vehicle is confiscated by the authorities it would not amount to transfer of ownership of the vehicle. It is vesting of ownership with the Government. Hence Section 51(4) dealing with transfer is not applicable. There is no repugnancy between Section 51(4) of the Motor Vehicles Act and Section 60(3) of the NDPS Act. 18. The learned counsel for the appellant cited the decision of this Court in to substantiate the point that the registering authority can terminate entry regarding hypothecation only after communication to the financier. This case is clearly distinguishable as the said case involves transfer of ownership of the vehicle and does not involve confiscation. The learned counsel cited the decision of the Hon’ble Supreme Court in SREI Equipment Finance Ltd. v. Ramjan Ali & Ors. [ (2022) 9 SCC 547 ] and argued that in the said case when the entry regarding hypothecation is deleted by the original owner without notice to the financier, the Hon’ble Supreme Court directed to release the vehicle to the financier holding that the High Court committed error in directing release of the vehicle in favour of the first respondent in whose name the vehicle was registered by the RTO after deleting the entry of hypothecation. This decision is also clearly distinguishable as the hypothecation entry was fraudulently removed by the registered owner for transferring the vehicle in favour of another. 19. This decision is also clearly distinguishable as the hypothecation entry was fraudulently removed by the registered owner for transferring the vehicle in favour of another. 19. The prayer of the counsel for the 1 st respondent that this Appeal has to be heard along with W.P.(Crl.) No.186/2023 is unsustainable on account of the fact that W.P.(Crl). No.186/2023 relates to the release of the vehicle. There is no interim order in the said writ petition. When the vehicle is confiscated, the prayer for custody of the vehicle has become infructuous. That apart, even though the 1 st respondent was a party before the District Court in the impugned proceedings, the first respondent did not advance any contention before the District Court. The 1 st respondent has not challenged the confiscation order also. Hence, there is no merit in the contentions advanced by the 1 st respondent. 20. Even though the learned District Court relied on the wrong provisions to allow the claim of the 2 nd respondent under the mistaken impression that the vehicle was seized in an Abkari offence, the legal principles with respect to confiscation of vehicle are the same as far as the present adjudication is concerned. The appellant has no right to retain possession of the vehicle, which it obtained through the interim order in M.A.(Arb.) No.272/2024. The appellant is liable to restore possession of the vehicle back to the 2 nd respondent as ordered in the impugned order. 21. The above appeal is dismissed without costs.