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Anil Kumar Rastogi v. State Of U.P. & Others - WRIT - C No. 9302 of 2006  RD-AH 4024 (21 February 2006)
Hire Purchase Agreement
Writ against a private party A.F.R.
COURT NO. 34
CIVIL MISC. WRIT PETITION NO. 9302 OF 2006
Anil Kumar Rastogi ------------- Petitioner
State of U.P. & Ors. ------------- Respondents
Hon'ble Dr. B.S. Chauhan, J.
Hon'ble Dilip Gupta, J.
(By Hon'ble Dr. B.S. Chauhan, J.)
This writ petition has been filed for quashing the impugned notices dated 24.1.2006 and 25.1.2006, issued by the respondent no. 2, for recovery of amount and for auction of the vehicle owned by the petitioner and further to direct the respondents to release the said vehicle in favour of the petitioner forthwith and pay the damages caused by illegal seizure.
The facts and circumstances giving rise to this case are that petitioner approached the respondent no. 2 for financing the vehicle on hire purchase agreement, and for that purpose a loan of Rs.5,00,000.00 (Rupees five lacs only) was sanctioned by the respondent no. 2 and hire purchase agreement was entered into between the parties, wherein a monthly instalment of Rs.16,253.00 (Rupees sixteen thousand two hundred fifty three only) was to be paid by the petitioner for 35 months as per the schedule of repayment for the purchase of the vehicle bearing No. U.P. 86-9981. Out of said 36 instalments, petitioner paid 22 instalments; the total amount of Rs.3,56,456 (Rupees three lakh fifty six thousand four hundred fifty six only). However, as the subsequent instalments could not be paid, the respondent no. 2 recovered the possession of the vehicle. It is alleged that at the time of the seizure of the vehicle, it was carrying the goods owing to the 3rd party which had also been taken in possession by the said respondent no. 2. Thus, this writ petition has been filed for issuing direction for criminal prosecution of the respondent nos. 2 and 3 under Section 392 IPC, and for further direction to release the vehicle and not to charge the interest at exorbitant rate.
Shri B.P. Tiwari, learned counsel for the petitioner has submitted that the agreement for hire purchase is arbitrary and unreasonable and provides a very high rate of interest and the seizure of the vehicle is in contravention of the Banking Regulation Act, 1949. The notices impugned provide for recovery of interest at the rate of 62.02% per day which is too exorbitant. Hence, the Court must issue the directions providing for penal action against the said respondents.
The learned Standing Counsel appearing for respondent no. 1 has raised the preliminary objection regarding the maintainability of the writ petition against the ICICI Bank Ltd., contending that the said Bank is not a nationalised Bank. Merely impleading the State as a respondent would not make the petition maintainable. More so, the respondent no. 3 has been impleaded without giving its name and even the copy of the higher purchase agreement has not been filed. Petitioner has not given the correct facts. The impugned notices provide that in case the petitioner fails to make the re-payment of the outstanding dues, there shall be recovery of penalty at the rate of Rs.60.12 per day and it is not the rate of interest with which the respondents want to make the recovery. More so, it is settled legal proposition that under the higher purchase agreement the financial institution remains the owner, and therefore the petition is not maintainable and also lacks merit and is liable to be dismissed.
We have considered the rival submissions made by the learned counsel for the parties and perused the record.
As the issue of seizure of the vehicle is concerned, it is no more res integra. The Hon'ble Apex Court has considered the case time and again.
In Trilok Singh & Ors. Vs. Satya Deo Tripathi, AIR 1979 SC 850, the Hon'ble Supreme Court examined the similar case wherein the truck had been taken in possession by the financier in terms of hire purchase agreement, as there was a default in making the payment of instalments. A criminal case had been lodged against the financier under Sections 395, 468, 465, 471, 12-B/34, I.P.C. This Court refused to exercise its power under Section 482, Cr.P.C. and did not quash the criminal proceedings on the ground that the financier had committed an offence. However, reversing the said judgment, the Apex Court held that proceedings initiated were clearly an abuse of process of the Court. The dispute involved was purely of civil nature, even if the allegations made by the complainant were substantially correct. Under the hire purchase agreement, the financier had made the payment of huge money and he was in fact the owner of the vehicle. The terms and conditions incorporated in the agreement gave rise in case of dispute only to civil rights and in such a case, the Civil Court must decide as what was the meaning of those terms and conditions.
In K.A. Mathai alias Babu & Anr. Vs. Kora Bibbikutty & Anr., 1996 (7) SCC 212, the Hon'ble Apex Court had taken a similar view holding that in case of default to make payment of instalments, financier had a right to resume possession even if the hire purchase agreement does not contain a clause of resumption of possession, for the reason that such a condition is to be read in the agreement. In such an eventuality, it cannot be held that the financier had committed an offence of theft and that too, with the requisite mens rea and requisite dishonest intention. The assertions of rights and obligations accruing to the parties under the hire purchase agreement wipes out any dishonest pretence in that regard from which it cannot be inferred that financier had resumed the possession of the vehicle with a guilty intention.
In Jagdish Chandra Nijhawan Vs. S.K. Saraf, (1999) 1 SCC 119, the Hon'ble Supreme Court dealt with a case wherein the company had provided an accommodation to its employee and after termination of his services, he did not vacate the said accommodation and a criminal case was lodged against him under Sections 406, 408, 409, I.P.C. also taking the assistance of Section 630 of the Companies Act, 1956. The Hon'ble Apex Court held that as the accused had been granted a rent free accommodation as a part of the conditions of employment, the agreement provided for civil rights and in such a matter, complaint was held to be not maintainable.
In Charanjit Singh Chadha & Ors. Vs. Sudhir Mehra, (2001) 7 SCC 417, again the Hon'ble Apex Court held that recovery of possession of the vehicle by financier-owner as per terms of the hire purchase agreement, does not amount to a criminal offence. Such an agreement is an executory contract of sale conferring no right in rem on the hirer until the transfer of the property to him has been fulfilled and in case the default is committed by the hirer and possession of the vehicle is resumed by the financier, it does not constitute any offence for the reason that such a case/dispute is required to be resolved on the basis of terms incorporated in the agreement. The Apex Court elaborately dealt with the nature of the hire purchase agreement observing that in a case of mere contract of hiring, it is a contract of bailment which does not create a title in the bailee. However, there may be variations in the terms and conditions of the agreement as created between the parties and the rights of the parties have to be determined on the basis of the said agreement. The Hon'ble Court further held that in such a contract, element of bailment and element of sale are involved in the sense that it contemplates an eventual sale. The element of sale fortifies when the auction is exercised by the intending purchaser after fructifies the terms of the agreement. When all the terms of the agreement are satisfied and option is exercised and sale takes place of the goods which till then had been hired. While deciding the said case, the Hon'ble Apex Court placed reliance upon its earlier judgments in M/s. Damodar Valley Corporation Vs. The State of Bihar, AIR 1961 SC 440; Instalment Supply (Private) Ltd. & Anr. Vs. Union of India & Ors., AIR 1962 SC 53; K.L. Johar & Co. Vs. The Deputy Commercial Tax Officer, Coimbtore III, AIR 1965 SC 1082; and Sundaram Finance Ltd. Vs. The State of Kerala & Anr., AIR 1966 SC 1178.
In Smt Lalmuni Devi Vs. State of Bihar & Ors., (2001) 2 SCC 17, the Hon'ble Supreme Court held that peculiar facts of a case may give rise to a civil claim and also amount to an offence. Merely because a civil claim is maintainable, it does not mean that the criminal complaint cannot be maintained, therefore, held that no law of universal application can be laid down. It would depend upon the facts and circumstances of each case depending upon the terms and conditions agreed by the parties.
In view of the above, the law can be summarised that in an agreement of higher purchase, the purchaser remains merely a trustee/bailee on behalf of the financier/financial institution and ownership remains with the latter. Thus, in case the vehicle is seized by the financier, no criminal action can be taken against him as he is re-possessing the goods owned by him.
So far as the issue of maintainability of the writ petition is concerned, the Hon'ble Apex Court in Federal Bank Ltd. Vs. Sagar Thomas & Ors, AIR 2003 SC 4325 considered the issue of maintainability of a writ petition against the Private Bank, and while deciding the issue placed reliance upon a large number of its earlier judgments, particularly, in All India Bank Employees' Assn. Vs. National Industrial Tribunal, AIR 1962 SC 171; Sukhdev Singh Vs. Bhagatram Sardar Singh Raghuvanshi, AIR 1975 SC 1331; Ramana Dayaram Shetty Vs. International Airport Authority of India, AIR 1979 SC 1628; Ajay Hasia Vs. Khalid Mujib Sehravardi, AIR 1981 SC 487; Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti Mahotsav Smarak Trust Vs. V.R. Rudani, (1989) 2 SCC 691; and Pradeep Kumar Biswas Vs. Indian Institute of Chemical Biology, (2002) 5 SCC 111. The Court held as under:-
"From the decisions referred to above, the position that emerges is that a writ petition under Article 226 of the Constitution of India may be maintainable against (i) the State (Government); (ii) an authority; (iii) a statutory body; (iv) an instrumentality or agency of the State; (v) a company which is financed and owned by the State; (vi) a private body run substantially on State funding; (vii) a private body discharging public duty or positive obligation of public nature; and (viii) a person or a body under liability to discharge any function under any statute, to compel it to perform such a statutory function."
After considering the provisions of the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949, and the Industries (Development and Regulation) Act, 1951, the Court observed as under:-
"In view of the provisions indicated above under the Companies Act and the industries (Development and Regulation) Act, it is submitted that the nature and control over the companies is more or less of the same degree and nature as the control exercised over the banking companies under the Banking Regulation Act. There is control and supervision over the functioning, working and the conduct of business of the companies. ...........................they remain regulatory in nature in the interest of the industry, the company, the shareholders and in the general interest since production of goods of importance is most essential for proper economic growth and stability of the country.
A company registered under the Companies Act for the purposes of carrying on any trade or business is a private enterprise to earn livelihood and to make profits out of such activities. Banking is also a kind of profession and a commercial activity, the primary motive behind it can well be said to earn returns and profits. Since time immemorial, such activities have been carried on by individuals generally. It is a private affair of the company though the case of nationalized banks stands on a different footing. ............................................ The banking companies have not been set up for the purposes of building the economy of the State; on the other hand such private companies have been voluntarily established for their own purposes and interest but their activities are kept under check so that their activities may not go wayward and harm the economy in general. ............................. There also, the main consideration is that the company itself may not sink because of its own mismanagement or the interest of the shareholders or people generally may not be jeopardized for that reason. .....................there is no other interest of the State, to control the affairs and management of the private companies. ........................................ yet the business activity is carried on by such companies or corporations which only remains a private activity of the entrepreneurs/companies. Such private companies would normally not be amenable to the writ jurisdiction under Article 226 of the Constitution. ..................................
There are a number of such companies carrying on the profession of baking. There is nothing which can be said to be close to the governmental functions. It is an old profession in one form or the other carried on by individuals or by a group of them. Losses incurred in the business are theirs as well as the profits. Any business or commercial activity, may be banking, manufacturing units or related to any other kind of business generating resources, employment, production and resulting in circulation of money are no doubt, such which do have impact on the economy of the country in general. But such activities cannot be classified as one falling in the category of discharging duties or functions of a public nature."
The Court further held as under:-
"For the discussion held above, in our view, a private company carrying on banking business as a scheduled bank, cannot be termed as an institution or a company carrying on any statutory or public duty. A private body or a person may be amenable to writ jurisdiction only where it may become necessary to compel such body or association to enforce any statutory obligations or such obligations of public nature casting positive obligation upon it. We do not find such conditions are fulfilled in respect of a private company carrying on a commercial activity of banking. Merely regulatory provisions to ensure such activity carried on by private bodies work within a discipline, do not confer any such status upon the company nor put any such obligation upon it which may be enforced through issue of a writ under Article 226 of the Constitution."
A similar criterion has been laid down while considering the issue of maintainability of the writ petition, in G. Bassi Reddy Vs. ICRI & Anr., (2003) 4 SCC 225 and Neeraj Awasthi & Ors. Vs. State of U.P., (2006) 1 SCC 667.
In view of the above, as the respondent Bank is not amenable to writ jurisdiction, we are of the considered opinion that the writ petition as such is not maintainable.
Recently, while deciding Civil Appeal No. 1070 of 2006, The Managing Director, Orix Auto Finance (India) Ltd. Vs. Shri Jagmander Singh & Anr., on 10th February, 2006, the Hon'ble Supreme Court has reconsidered the issue and held that it is not permissible for the Court to change the terms and conditions incorporated in the hire purchase agreement and nor it is permissible to examine the mode by which the recovery is being made. More so, while entertaining such a petition the Court must bear in mind the interest of both the parties and should not lose sight of the fact that in case the petition ultimately fails and the hirer is liable to pay then how the same can be secured. While considering the scope of consideration of such a matter under Public Interest Litigation, the Court has also made observation as under:-
"Before we part with the case, it is relevant to take note of submission of learned counsel for the Hirer that in several cases different High Courts have passed orders regarding the right to re-possess where the High Courts have entertained writ petitions including writ petitions styled as PIL on the question of right of financiers to take possession of the vehicle in terms of the agreement. It is stated that directions have been given to the RBI for framing guidelines in this regard. If it is really so, the orders prima facie have no legal foundation, as virtually while dealing with writ petitions subsisting contracts are being re-written. It is still more surprising that petitions styled as PIL are being entertained in this regard. Essentially these are matters of contract and unless the party succeeds in showing that the contract is unconscionable or opposed to public policy the scope of interference in writ petitions in such contractual matters is practically non-existence. 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 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."
In view of the above, the law can be summarised that as the agreement is reached between the parties, interference by the Court in such a matter would amount to changing the terms and conditions of the contract. However, in exceptional circumstances, where the Court comes to the conclusion that the contract itself is unconscionable or opposed to public policy, there may be some scope of interference.
In the instant case, the copy of the agreement has not been filed. Thus, we are not in a position to ascertain as to whether the agreement to which the petitioner is a party is either arbitrary or contains any term which can be said to be unconscionable. No document has been placed on record to substantiate the pleadings as mandatorily required in law. The instant case is squarely covered by the above referred to judgments delivered by the Hon'ble Apex Court which are binding on us by virtue of the provisions of Article 141 of the Constitution of India. No exception can be made out in the facts and circumstances of the case. Petition has been filed without any sense of responsibility without giving any name of the collecting agent or filing the copy of the agreement between the financier and the collecting agent. The petition suffers from want of proper pleadings.
We do not see any force in the submission made by the learned counsel for the petitioner that the respondent no. 2 could not give contract to any person for collecting its money, for the simple reason that the State Government itself is adopting the same procedure for collection of various kind of its outstanding dues including the collection of indirect taxes, royalty etc., by giving contract to the private individuals by auction or inviting tenders. In such a matter we do not see any scope of interference on any ground whatsoever.
Petition is dismissed. However, it will be open to the petitioner to approach the appropriate forum against the respondent no. 2, if he is so advised.
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