
Srei
Equipment Finance Ltd. V. Ramjan Ali & Ors.
Criminal Appeal No. 6 of 2021 (arising out of SLP
(Crl.) No.3893/2020)
Bench: Ashok Bhushan, R. Subhash Reddy &
M.R.Shah, JJ.
Facts:
Amarnath
Yadav purchased a JCB machine and entered into a finance agreement with Srei
Equipment Finance Limited [SEF], promising repayment in 46 instalments. The
vehicle was registered by Regional Transport Officer [RTO] to Amarnath. The
registration also mentioned the finance agreement with SEF, making an entry of
hypothecation as required by Section 51 of the Motor Vehicles Act, 1988[1]. Amarnath did not pay two
instalments, and SEF referred the dispute to an arbitrator. Amarnath failed to
appear before the arbitrator. The arbitrator gave an award in favour of the
SEF.
Amarnath
made an application with the RTO to cancel the entry of SEF as the person with
whom the vehicle was hypothecated. Without informing the SEF, RTO withdrew the
entry from the registration certificate and issued a fresh registration
certificate in the name of Amarnath. The RTO also issued a clearance
certificate favouring Amarnath, noticing that vehicle has been sold to Ramjan
Ali.
Based
on RTO records, Ramjan Ali got clearance certificate, he got the vehicle registered
in his name as the owner. The registration certificate noted the entry of
hypothecation in favour of Magma Fincorp Limited. Ramjan obtained the transfer
from the original owner and was using the vehicle.
One
day, the vehicle was taken possession by four persons, and Ramjan lodged an FIR
under Sections 364 and 392. The police seized the vehicle. Ramjan filed an
application before the Chief Judicial Magistrate for release of the vehicle. SEF
also appeared before Chief Judicial Magistrate and filed an objection claiming
to be the vehicle’s financer. The Chief Judicial Magistrate noticed a dispute of
ownership and did not release the vehicle favouring any of the parties.
Therefore, CJM rejected Ramjan’s application for release of the vehicle and SEF’s
objection filed.
Ramjan
applied Section 482 Cr.P.C. before the High Court challenging the order passed
by the CJM rejecting his application to release the vehicle. SEF was
subsequently impleaded 3 in the application under Section 482 Cr. P.C. The High Court allowed the application under
Section 482 Cr. P.C and directed the release of the vehicle in favour of Ramjan
Ali. SEF aggrieved by the said order appealed before the Supreme Court under
Article 136 of India’s Constitution.
Issue: Was
the decision of the High Court to allow the application under Section 482 Cr.
P.C and releasing the vehicle in favour of 2nd owner was sound in law or not?
Held: The
Supreme Court held that the RTO at the time of cancelling the vehicle’s
registration issued by it should note that entry of the appellant as a person
in whose favour the vehicle was hypothecated, had been fraudulently deleted.
In
consequence of the above, all subsequent registrations will be considered as
non-est (as if it does not exist). Although Ramjan might be a bonafide
purchaser, he was the beneficiary of a fraud.
The
Supreme Court also observed that the H.C. committed an error while directing
the vehicle’s release favouring Ramjan. The High Court order was held to be
unsustainable by the Supreme Court and was set aside. The court allowed the
appeal accordingly and had that vehicle be released in favour of SEF. The court
directed that CJM, Sitapur shall ensure that vehicle is received back from Ramajan
and released in favour of SEF on such terms and conditions as may be deemed fit
and proper, which exercise shall be completed within four weeks from the date
of judgement.
The
court also discussed Rule 61 of The Central Motor Vehicle Rules, 1989 deals
with termination of hire purchase agreement etc. and Section 55(5) dealing with
registration cancellation.
The
Supreme Court also observed that the H.C. ignored the application for release
of the vehicle was filed SEF and had also filed an objection to Ramjan’s
application of release. The application was filed objecting the release and
claiming ownership of the vehicle as the hypothecation entry was fraudulently
removed. This fraudulent removal facilitated the transfer in favour of Ramjan
was illegal and void.
[ See Provision Rule 61, which is relevant is as follows:- “61. Termination of hire-purchase agreements, etc.—(1) An application for making an entry of termination of agreement of hire purchase, lease or hypothecation referred to in sub-section (3) of section 51 shall be made in Form 35 duly signed by the registered owner of the vehicle and the financier, and shall be 14 accompanied by the certificate of registration and the appropriate fee as specified in rule 81.
(2) The application for the issue of a fresh certificate of registration under sub-section (5) of section 51 shall be made in Form 36 and shall be accompanied by a fee as specified in rule 81.
(3)
Where the registered owner has refused to deliver the certificate of
registration to the financier or has absconded then the registering authority
shall issue a notice to the registered owner of the vehicle in Form 37.
(5) If a
registering authority is satisfied that the registration of a motor 16 vehicle
has been obtained on the basis of documents which were, or by representation of
facts which was, false in any material particular, or the engine number or the
chassis number embossed thereon are different from such number entered in the
certificate of registration, the registering authority shall after giving the
owner an opportunity to make such representation as he may wish to make (by
sending to the owner a notice by registered post acknowledgement due at his
address entered in the certificate of registration), and for reasons to be
recorded in writing cancel the registration.]
[1] Where an application for registration of a motor vehicle
which is held under a hire-purchase, lease or hypothecation agreement
(hereafter in this section referred to as the said agreement) is made, the
registering authority shall make an entry in the certificate of registration
regarding the existence of the said agreement.purchase, lease or hypothecation
agreement (hereafter in this section referred to as the said agreement) is
made, the registering authority shall make an entry in the certificate of registration
regarding the existence of the said agreement.