
M/S
Magma Fincorp Ltd. v. Rajesh Kumar Tiwari
CIVILAPPEAL NO. 5622 OF 2019 (ARISING OUT OF SLP (C)
NO. 33720 OF 2018) decided on October 1, 2020
Bench:
Dr. Dhananjaya Y Chandrachud, Indira Banerjee, JJ.
Facts:
The
Complainant entered into a hire-purchase agreement with the Financier. The
Complainant agreed to repay a sum of Rs.4,38,585/- which was inclusive of
finance charges of Rs.83,650/- to the Financier in 35 monthly instalments of
Rs.12,531/-. The complainant paid monthly
instalment till certain time and then defaulted. In the circumstances, the
Financier took re-possession of the vehicle allegedly
upon notice to the Complainant, and in accordance with the conditions of the
hire-purchase agreement. The factum of notice is, however, disputed by the
Complainant.
After
taking re-possession of the vehicle, the Financier called upon the Complainant
to clear his outstanding dues amounting to Rs.2,80,132.59 as on the date of the
notice, failing which the vehicle would be disposed of. The Complainant did not make the repayment demanded,
or even part thereof. The vehicle was sold by the Financier.
It
is the case of the Complainant that the Financier had “lifted the vehicle”
without any prior notice or information.
The
Consumer District Forum allowed the Complaint and directed the Financier to pay
Rs.2,23,335/- to the Complainant, along with simple interest at 10% per annum
from the date of filing of the complaint till payment as also Rs.10,000 towards
damages for physical and mental agony and Rs.1000/- as litigation expenses,
within 45 days from the date of the order. Being
aggrieved by the order of the District Forum allowing the complaint, the Financier filed an appeal before the State
Commission. The State Commission dismissed the appeal and hence, the SLP.
(1) Whether the Financier is the real owner of the
vehicle which is the subject of a hire purchase agreement, and if so, whether
there can be any impediment to the Financier, taking repossession of the
vehicle, when the hirer does not make payment of instalments in terms of the
hire purchase agreement.
Held
The Supreme Court while
answering the said question summarized the principles regarding Hire Purchase
transaction:
- Goods are let out on hire under a
Hire Purchase Agreement, with an option to purchase, in accordance with
the terms and conditions of the Hire Purchase Agreement. The hirer simply
pays for the use of the goods and for the option to purchase them.
- Until the option to purchase is
exercised by the hirer, upon payment of all amounts agreed upon between
the hirer and the Financier, the financier continues to be owner of the
goods being the subject of hire purchase. Till such time the hirer remains
a trustee and/or bailee of the goods covered by the Hire Purchase
Agreement.
- The Financier continues to remain the
owner of a vehicle, covered by a hire purchase agreement till all the hire
instalments are paid and the hirer exercises the option to purchase. Thus,
when the Financier takes re-possession of a vehicle under hire, upon
default by the hirer in payment of hire instalments, the Financier takes
repossession of the Financier’s own vehicle.
- When the agreement between the
Financier and the hirer permits the Financier to take possession of a
vehicle financed by the Financier, there is no legal impediment to the
Financier taking possession of the vehicle. When possession of the vehicle
is taken, the Financier cannot be said to have committed theft.
- Whether the transaction between a
Financier and a purchaser/hirer is a hire purchase transaction, or a loan
transaction, might be determined from the terms of the agreement,
considered in the light of surrounding circumstances. However, even a loan
transaction, secured by right of seizure of a financed vehicle, confers
licence to the Financier to seize the vehicle.
Issue:
(2) Whether service of
proper notice on the hirer is necessary for repossession of a vehicle which is
the subject of a hire purchase agreement, and if so, what is the consequence of
non service of proper notice?
Held
The Supreme Court held that the
service of proper notice on the hirer would be necessary for repossession of a
vehicle, which is the subject matter of a Hire Purchase Agreement, would depend
on the terms and conditions of the Hire Purchase Agreement, some of which may
stand modified by the course of conduct of the parties. The court furthermore observed
that:
- If the hire purchase agreement
provides for notice on the hirer before repossession, such notice would be
mandatory. Notice may also be necessary, if a requirement to give notice
is implicit in the agreement from the course of conduct of the parties.
- If the hirer commits breaches of the
conditions of a hire purchase agreement which expressly provides for
immediate repossession of a vehicle without further notice to the hirer,
in case of default in payment of hire charges and/or hire instalments
repossession would not be vitiated for want of notice.
- In a case where the requirement to
serve notice before repossession is implicit in the hire purchase
agreement, non service of proper notice would tantamount to deficiency of
service for breach of the hire purchase agreement giving rise to a claim
in damages. The Complainant consumer would be entitled to compensatory
damages, based on an assessment of the loss caused to the complainant by
reason of the omission to give notice. Where there is no evidence of any
loss to the hirer by reason of omission to give notice, nominal damages
may be awarded.