In a recent Judgment of Supreme Court, a Division Bench comprising Hon’ble Justice D. Y Chandrachud and Hon’ble Justice Indira Banerjee, considered the effect of Hire Purchase Agreement.
The Supreme Court held that the financer can take possession of goods without notice, if the agreement provides so.
As per the petition, the complainant entered into a hire purchase agreement with the appellant, which is financing the company to hire purchase of a jeep. The total cost of the jeep was Rs 4,21,121. The complainant paid the dealer a sum of 1,06,121 while the remaining amount of RS 3,15,000 was paid by the Financier (appellant).
The remaining amount was to be paid in instalments of 12,531 every month. As security, the complainant had deposited post-dated cheques. The complainant defaulted on the payment of the instalments. When the appellant deposited the cheques given by the complainant, the cheques were dishonoured.
The Financier repossessed the jeep on 14.07.2003. Financier informed the complainant that he should clear his dues; otherwise, his jeep will be auctioned off. As the complainant did not clear the dues, a presale notice was sent to him on 26.07.2003. Shortly after that in November 2003, the jeep was sold off by the Financier.
After two years, the complainant filed a complaint in the District Forum. Before the District Forum, the complainant stated that he was not able to pay the instalments because he fell ill and later, the car met with an accident and was impounded by the Police. By the time he was able to get the vehicle released, it was repossessed by the Financier.
He also stated that he had paid Rs 1,19,335 towards the instalment had requested time from the Financier, but still, his vehicle was repossessed. It was also stated the Financier gave no notice, and the vehicle was taken forcibly.
The District Forum passed an order in favour of the complainant, and the Financier was directed to pay him a sum of Rs.2,23,335. He was also awarded Rs. 10,000 as damages.
The appellant approached the State Commission and filed an appeal. The State Commission dismissed the appeal. The Financier then filed a Revisional Application before the National Commission, under Section 21(b) of 15 the Consumer Protection Act which was also dismissed.
Aggrieved by order of the National Commission, the appellant approached the Supreme Court.
The issue raised Before the Court.
The main issues Before the Supreme Court were if the Financier was the real owner in terms of the hire purchase agreement and if a proper service of notice is necessary for repossession of the vehicle.
The reasoning of the Court
The Court opined that in a hire purchase agreement, the ownership of the vehicle lies with the Financier till the time all the payments are not made. After the payments are made, the ownership of the vehicle is transferred to the who has made the payments. In the present case, the ownership rights were with the Financier as all the payments were not made.
The Court opined that as per the hire purchase agreement, the Financier could take possession of the vehicle if there was the default in repayment as it was mentioned in the clauses of the hire purchase agreement.
On the issue of notice, the Court sided with the Financier’s statement that the notice was issued, but due to some error in the address, it could not be delivered. The Court also observed that if the notice were required in the first place, it would depend on the terms of the hire purchase agreement.
The Court also stated that the order of the state commission and national commission was wrong in law as the Financier could not be directed to pay compensation as the Financier was well within his rights to take the possession of the vehicle because there was the default in the repayment.
The decision of the Court
The Court allowed the appeal of the appellant. However, the appellant was directed to pay a sum of Rs 15,000 to the complainant towards damages due to deficiency of service of notice.
Title: M/S Magma Fincorp Ltd. versus Rajesh Kumar Tiwari
Case No.: CIVIL APPEAL NO. 5622 OF 2019
Date of Order: 01.10.2020
Coram: Hon’ble Justice D. Y Chandrachud and Hon’ble Justice Indira Banerjee