2020 Supreme(SC) 570

SUPREME COURT OF INDIA
D.Y. CHANDRACHUD, INDIRA BANERJEE, JJ.
M/S MAGMA FINCORP LTD. - APPELLANT
VERSUS
RAJESH KUMAR TIWARI - RESPONDENT
APPEAL NO. 5622 OF 2019 (ARISING OUT OF SLP (C) NO. 33720 OF 2018)
Decided on : 01-10-2020

IMPORTANT POINTS
(1) Repossession of a vehicle under hire, in accordance with terms and conditions of a hire purchase agreement, upon default in payment of hire instalments and refusal to release the same on mere assurance of Complainant to clear outstanding arrears of hire instalments and pay future instalments in time, does not constitute ‘deficiency’ in service.
(2) Consumer Protection Act, 1986 is not in derogation of any law in existence, but in addition thereto – Consumer Protection Act, 1986 does not override Contract Act, 1872, and other enactments in force, applicable to service availed by consumer from service provider.
(3) When agreement between Financier and hirer permits Financier to take possession of a vehicle financed by Financier, there is no legal impediment to Financier taking possession of vehicle – When possession of vehicle is taken, Financier cannot be said to have committed theft.
(4) Repossession of vehicle cannot be taken by recourse to physical violence, assault and/or criminal intimidation.
(5) Punitive damages are awarded where party in breach of agreement has behaved in a manner which is reprehensible and calls for punishment. Nominal damages are awarded where there is no real harm done, by reason of the breach of the contract.

Headnote:

(A) Consumer Protection Act, 1986 – Section 2(1)(d), 2(1)(g), 2(1)(o) – Financial services – Hire-Purchase Agreement – Default in payment of instalments – Repossession and sale of vehicle by Financier – Complainant was a consumer of services provided by Financier – Under terms and conditions of hire purchase agreement, ownership of vehicle was to stand transferred to Complainant from Financier, upon payment of all 35 instalments and other dues – Until then, ownership was to be with Financier – As all 35 instalments had not been paid by complainant to Financier, ownership of vehicle remained with Financier – Hire purchase agreement clearly enabled Financier to take possession of vehicle, on default in payment of any of instalments – There is no term in Hire-Purchase Agreement, that requires Financier to give notice to Complainant before terminating Hire Purchase Agreement, upon breach of any term thereof, or before taking possession of vehicle – Repossession of a vehicle under hire, in accordance with terms and conditions of a hire purchase agreement, upon default in payment of hire instalments and refusal to release the same on mere assurance of Complainant to clear outstanding arrears of hire instalments and pay future instalments in time, does not constitute ‘deficiency’ in service. (Paras 24, 28, 29 and 31)

(B) Consumer Protection Act, 1986 – Sections 13(4)(ii) and 15 – Financial services – Hire-Purchase Agreement – Default in payment of instalments – Repossession and sale of vehicle by Financier – There was error in address of Complainant in notice purported to be issued to Complainant before taking possession – As such, it may reasonably be assumed that obligation to give notice to Complainant was implicit in Hire Purchase Agreement – District Forum drew adverse inference against Financier for not producing Hire Purchase Agreement and assumed that there was no provision in Hire Purchase Agreement for taking vehicle back or selling it to a third party – It was not even case of Complainant in his complaint that Hire Purchase Agreement did not authorize Financier to take possession of vehicle upon default or to sell the same to a third party – No adverse inference could have been drawn against Financier for not producing Hire Purchase Agreement before District Forum, when there was no allegation in complaint of breach by Financier of Hire Purchase Agreement, in taking possession of vehicle – District Forum did not exercise its power under Section 13(4)(ii) to call upon Financier to produce Hire Purchase Agreement – Finding of District Forum, of vehicle having been lifted forcefully or snatched is contrary to Complainant’s own case made out in Complaint and perverse – A new case cannot be made out by way of evidence when there are no pleadings to support the same – State Commission assumed that error in address of complainant in notice despatched by Financier was deliberate, in order to sell vehicle without knowledge of Complainant – Such assumption was not based on any materials on record but patently conjectural – Financier remains owner of vehicle taken by complainant on hire, on condition of option to purchase, upon payment of all hire instalments – Hire instalments are charges for use of vehicle as also for exercise of option to purchase vehicle in future – Financier being owner of vehicle, there was no obligation on part of Financier, to divulge details of sale of that vehicle, and that too on its own, without being called upon to do so. (Paras 32, 42, 43, 44, 46, 48 and 51)

(C) Consumer Protection Act, 1986 – Sections 3 and 14 – Adjudication and settlement of consumer disputes – Consumer Protection Act, 1986 is not in derogation of any law in existence, but in addition thereto – Consumer Protection Act, 1986 does not override Contract Act, 1872, and other enactments in force, applicable to service availed by consumer from service provider – Consumer of a service may also be entitled to damages for any loss suffered by the consumer, by reason of denial or deficiency in service for which consumer has paid or agreed to pay – In cases of breach of contract, liquidated damages may be imposed on party in breach, if agreement provides for liquidated damages, that is a fixed amount by way of damages – Where parties to an agreement have not agreed to liquidated damages, party in breach of agreement may be directed to pay unliquidated damages which are compensatory – Such compensatory damages are not to punish party in breach, but to compensate party not in breach, for losses suffered as a result of breach – Punitive damages are not generally awarded in cases of breach of contract unless act is so reprehensible that it calls for punishment of party in breach, by imposition of punitive and/or exemplary damages – Compensation which is compensatory, has to be assessed taking into account relevant factors, such as loss incurred by claimant, though some amount of guess work and/or estimation may be permissible. (Paras 55, 56, 58 and 62)

(D) Consumer Protection Act, 1986 – Section 23 – Financial services – Hire-Purchase Agreement – Default in payment of instalments – Repossession and sale of vehicle by Financier – Goods are let out on hire under a Hire-Purchase Agreement, with an option to purchase, in accordance with terms and conditions of Hire Purchase Agreement – Hirer simply pays for use of the goods and for option to purchase them – Until option to purchase is exercised by hirer, upon payment of all amounts agreed upon between hirer and Financier, financier continues to be owner of goods being subject of hire purchase – Till such time hirer remains a trustee and/or bailee of goods covered by Hire Purchase Agreement – Financier continues to remain owner of a vehicle, covered by a hire purchase agreement till all hire instalments are paid and hirer exercises option to purchase – When Financier takes re-possession of a vehicle under hire, upon default by hirer in payment of hire instalments, Financier takes repossession of Financier’s own vehicle – When agreement between Financier and hirer permits Financier to take possession of a vehicle financed by Financier, there is no legal impediment to Financier taking possession of vehicle – When possession of vehicle is taken, Financier cannot be said to have committed theft – Even a loan transaction, secured by right of seizure of a financed vehicle, confers licence to Financier to seize vehicle – However, such repossession cannot be taken by recourse to physical violence, assault and/or criminal intimidation – Nor can such possession be taken by engaging gangsters, goons and musclemen as so-called Recovery Agents – There is no evidence of any loss suffered by complainant by reason of non-receipt of notice – Impugned orders of National Commission, State Commission and District Forum, under Consumer Protection Act, 1986 cannot be sustained and same are set aside – However, Financier shall pay composite sum of Rs.15,000/- to Complainant towards damages for deficiency in service and costs for omission to give Complainant a proper notice before taking repossession of vehicle. (Paras 77, 78, 79, 80, 81, 87, 92, 94, 95 and 96)

(E) Hire-Purchase Agreement – Default in payment of instalments – Repossession of vehicle by Financier – Whether service of proper notice on hirer would be necessary for repossession of a vehicle which is subject matter of a Hire Purchase Agreement, would depend on terms and conditions of Hire Purchase Agreement, some of which may stand modified by course of conduct of parties – If hire purchase agreement provides for notice on hirer before repossession, such notice would be mandatory – Notice may also be necessary, if a requirement to give notice is implicit in agreement from course of conduct of parties – If hirer commits breaches of conditions of a hire purchase agreement which expressly provides for immediate repossession of a vehicle without further notice to 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 requirement to serve notice before repossession is implicit in hire purchase agreement, non-service of proper notice would tantamount to deficiency of service for breach of hire purchase agreement giving rise to a claim in damages – Complainant consumer would be entitled to compensatory damages, based on an assessment of loss caused to complainant by reason of omission to give notice – Where there is no evidence of any loss to hirer by reason of omission to give notice, nominal damages may be awarded. (Paras 88, 89 and 90)

Facts of the case:

Present appeal is against an order dated 2nd August, 2018 passed by the National Consumer Disputes Redressal Commission dismissing Revision Petition No.5 of 2018, filed by the Appellant [Financier], under Section 21(b) of the Consumer Protection Act, 1986, against an order dated 31st August, 2017 passed by the State Consumer Disputes Redressal Commission, Uttar Pradesh dismissing Appeal No. 1704 0f 2008 filed by the Financier, and affirming the order dated 22nd August, 2008 passed by District Consumer Disputes Redressal Forum, Ambedkar Nagar, Uttar Pradesh whereby the District Forum allowed Complaint Case No. 105/2005 filed by the Respondent [Complainant], and directed Financier to pay Rs. 2,23,335/- to the Complainant, along with interest at 10% per annum, Rs 10,000/- towards physical and mental injury and Rs 1000/- as litigation expenses. Short question raised by the Financier in this appeal is, whether Financier is the real owner of the vehicle which is 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 hire purchase agreement. Another question which arises for determination in this appeal is, 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.

Findings of Court:

The Financier admittedly paid Rs.3,15,000/- for acquisition of vehicle, out of which the Financier had been able to realize Rs.1,19,000/- inclusive of all charges. There was depreciation in value of the vehicle by reason of usage by the Complainant, for about a year. The District Forum did not even notionally assess the depreciation in the value of the vehicle.

Result : Appeal allowed.