Car Dealership Held Vicariously Liable for Manager's Fraud; Must Register Vehicle or Refund Customer: Chhattisgarh State Consumer Commission - 2025-08-23

Dealership Must Register Car or Refund ₹8.97 Lakh to Customer Defrauded by Manager, Rules State Consumer Commission

Raipur, Chhattisgarh – The Chhattisgarh State Consumer Disputes Redressal Commission has ruled that a car dealership is vicariously liable for the fraudulent actions of its manager, upholding the principle that a company cannot evade its responsibility to a customer who has made full payment to its authorized representative.

A bench comprising Justice Gautam Chourdiya (President) and Mr. Pramod Kumar Verma (Member) modified a District Commission order, directing Krishna Auto Riders (Pvt) Ltd to either properly register a Hyundai i20 car for customer Narendra Gaharwariya within two months or refund the full purchase price of ₹8,97,000 with interest. The Commission affirmed that the relationship between the customer and the dealership was that of a "consumer" and "service provider," making the dealership directly accountable for the deficiency in service.

Background of the Case: A New Car with a Fake Identity

The dispute began when Narendra Gaharwariya purchased a Hyundai i20 from Krishna Auto Riders in Ambikapur. He made a total payment of ₹8,97,000 to the dealership's manager, Dipesh Kumar Sinha, between October 31 and November 1, 2021, and took delivery of the car on November 2, 2021.

Sometime later, the dealership provided him with a number plate (CG-30 C 9871). However, Mr. Gaharwariya was shocked to discover through an online search that the registration number belonged to a motorcycle owned by someone else. Despite repeated requests, the dealership failed to provide the correct registration documents. This forced him to park his new, unregistered car at home, unable to use it.

The Ambikapur District Consumer Commission had initially found the dealership guilty of deficiency in service and ordered them to register the vehicle or refund the amount. The dealership challenged this order before the State Commission.

Arguments Presented

Dealership's Position (Appellants - Krishna Auto Riders): The dealership's primary defense was that they were victims of fraud committed by their former manager, Dipesh Sinha. They argued: * The payment made by the customer was never deposited into the company's account and was embezzled by the manager. * A criminal case for fraud and embezzlement (under IPC Sections 420, 409, etc.) is already pending against Mr. Sinha. * The customer allegedly colluded with the manager to obtain the vehicle without making a valid payment to the company. * Therefore, the dealership claimed it had no liability towards the customer for registration, as no valid transaction had occurred from their perspective.

Customer's Position (Respondent - Narendra Gaharwariya): The customer contended that he had dealt with the dealership's official representative (the manager) at their place of business and had paid the full amount in good faith. His counsel argued: * The customer fulfilled his obligation by paying the agreed-upon price to the person in charge at the showroom. * The dealership provided the vehicle, a delivery receipt, and subsequently a (fake) number plate, all actions reinforcing the validity of the sale. * Internal fraud or embezzlement by an employee is an issue between the employer and the employee and does not absolve the company of its contractual duty to the consumer.

Commission's Decisive Finding: The Principle of Vicarious Liability

The State Commission meticulously examined the evidence, including payment receipts and witness affidavits, which confirmed that the customer had paid the full amount to the dealership's manager on its premises.

In its judgment, the Commission made a crucial observation on vicarious liability:

"The appellants... are the directors of Krishna Auto Riders Private Limited, Ambikapur, and respondent no. 2 [Dipesh Kumar Sinha] was the manager of the institution appointed by them. If the amount for the vehicle sold by respondent no. 2 has been embezzled instead of being given to the appellants... then the appellants... are responsible for it and are free to take appropriate action against him and recover the amount."

The bench concluded that since the manager was an employee acting within the apparent scope of his authority, the dealership, as the employer, was liable for his actions. The failure to register the vehicle after accepting full payment constituted a clear "deficiency in service."

Final Order and Implications

The State Commission modified the District Commission's order with clear, time-bound instructions:

• Register the Vehicle: Krishna Auto Riders must get the vehicle properly registered in Mr. Gaharwariya's name and provide him with all official documents within two months .
• Alternative - Full Refund: If they fail to do so, they must refund the entire purchase price of ₹8,97,000 .
• Compensation: The dealership must also pay ₹10,000 for financial and mental distress and ₹5,000 for litigation costs.
• Interest on Default: If the refund is not paid within the stipulated time, it will attract 6% annual simple interest from the date the complaint was filed (June 20, 2023).

This judgment reinforces a vital consumer protection principle: businesses are responsible for the conduct of their employees. Customers who transact in good faith at a business establishment cannot be penalized for internal fraud or mismanagement within the company.