2007(3) CPR 191 (NC)
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION,
NEW DELHI
M.B. Shah, President; Rajyalakshmi Rao, and K.S. Gupta, Members
Citicorp Maruti Finance Ltd.—Petitioner
versus
S. Vijayalaxmi—Respondent
Revision Petition No. 737 of 2005
Decided on 27-7-2007

V. IMPORTANT POINT
A financier is not invested with the right to re-possess the vehicle, for which loan has been given by it, by use of force under any law, precedent or code of conduct. The Consumer Fora can direct refund of market value of the vehicle with interest as ‘reasonable compensation’. But when reasonable, compensation is awarded, further award of punitive damage is not necessary in the facts of the case.

Headnote:(i) Consumer Protection Act, 1986—Sections 21(b) and 14(1)(d) proviso read with Section 2(1)(g)—Deficiency in service—Hire purchase agreement of a financed vehicle—Financier abusing the process of law through such agreement—District Forum directing refund of market value of used/hired vehicle with 9% p.a. interest—In appeal, State Commission also granted punitive compensation for abuse of process of law—Revision against—Whether punitive compensation is according to law necessary? (No)—Result—Punitive compensation set aside but litigation costs awarded but no right to demand outstanding dues, if any.

       Held: In a case when the vehicle was repossessed by use of force, and thereafter, sold without informing the complainant, in our view, it would be unjust to direct the consumer to pay the balance amount, as alleged by the financier to be outstanding. If such a relief is given to the money lender/financier, it would be unjust enrichment to the money lender and against equity. That question may arise for consideration only if the complainant willingly surrenders the vehicle for sale and for recovery of the outstanding amount. Then, in such cases, consumer dispute would not arise. (Para 53)

       Held further: In view of the aforesaid discussion, in our view, where the vehicle is forcefully seized and sold by the money lender/financier/banker it would be just and proper to award reasonable compensation to the complainant. ‘Reasonable compensation’ would depend upon facts of each case.

       In the present case, as per the settlement letter dated 10th May, 2003, the complainant was required to pay only Rs. 60,000. The vehicle was sold for a sum of Rs.70,000 as stated by the petitioner. As against this, the complainant stated that it was sold for Rs.1,00,000. (Paras 54 and 55)

       Held thereafter: Considering the fact that the District Forum had already directed payment of Rs. 1,50,000 with interest at the rate of 9% p.a. from the date of filing of the complaint and Rs. 5,000 as compensation, in our view, it is not necessary to impose punitive damages. Hence, the order passed by the State Commission directing the petitioner to pay Rs. 50,000 as punitive damages to the complainant, is set aside. However, we make it clear that petitioner shall not be entitled to recover any amount from the complainant on the basis that some amount remains unpaid in their books of accounts. If any ante-dated cheques are remaining with the petitioner, the same shall be treated as null and void and no action on that basis shall be taken by the petitioner against the complainant. (Para 58)

       Held consequently: In the result, the Revision Petition stands disposed of accordingly. The petitioner shall pay Rs.10,000 as costs to the complainant. (Para 59)

       (ii) Hire Purchase Act, 1972 (Repealed)—Section 2(c)—Definition of Hire Purchase Agreement—When self-financed—When financed by Bank—Difference—Whether a financier is invested with the right to repossess the vehicle, for which loan has been given by it, by use of force? (No)—Case Law discussed—Whether financed hire purchase agreement containing self financed agreement clauses is valid or void? (void)—Whether Recovery of debts Due to Banks and Financial Institutions Act, 1993 or Section 29 of State Finance Corporation Act, 1951 or Section 69 of TPA, 1882 or Section 51(5) of Motor Vehicles Act, 1988 provide that hirer can take possession by force? (No)—Whether such a clause in hire purchase agreement is unconscionable and unfair? (Yes)—AIR 1995 AP 134 held not good law—(2006) 2 SCC 598 and (2007) 2 SCC 711 relied upon, 100(2002) DLT 581 approved. AIR 2003 P&H 98 followed.

       Held: A-1—When a vehicle is purchased by a person (consumer) by borrowing money from the money lender/financier/banker, the consumer is the owner of the vehicle and not the money lender/financier/banker, unless the ownership is transferred.

       2. In a democratic country having well established independent judiciary and having various laws it is impermissible for the money lender/financier/banker to take possession of the vehicle for which loan is advanced, by use of force.

        3. Legal or judicial process may be slow but it is no excuse for employing musclemen to repossess the vehicle for which loan is given. Such type of ‘instant justice’ cannot be permitted in a civilized society where there is effective rule of law. Otherwise, it would result in anarchy, that too, when the borrower retorts and uses the force.

       B-1—A hire-purchase agreement is a normal one under which owner hires goods to another party called the hirer and further agrees that the hirer shall have an option to purchase the chattel when he has paid a certain sum, or when the hire-rental payments have reached the hire-purchase price stipulated in the agreement.

       2. As against this, when a person desires to purchase vehicle/goods and not having sufficient money on hand, borrows the amount needed from a money lender/financier/banker and pays it over to the vender of the vehicle, the transaction between the consumer and the money lender will unquestionably be a loan transaction. In such a case the vehicle purchased by the consumer is registered in the name of the consumer and remains at all material times so registered in his name. The consumer remains qua the world at large the owner and remains in possession of the vehicle. By an agreement the vehicle can be given as security for the loan advanced. In such a case, the right to seize the vehicle is merely a licence to ensure compliance with the terms of the so called hire-purchase agreement. (Re. AIR 1966 SC 1178), Sundaram Finance Ltd. v. State of Kerala and Others,

        C—(i)It is to be stated that many financiers/banks are in race for giving loan for purchase of vehicles or various articles. After giving loan and taking interest in advance, the polite behaviour changes because of the documents which are signed on the dotted lines by the borrower. On occasions, borrower suffers harassment, torture, or abuses at the hands of the musclemen of the money lender. Such a behaviour is required to be prohibited and the process of repossession is required to be streamlined so as to fit in cultural civilized society. Let the rule of law prevail and not that of jungle where might is right.

       (ii)In such cases, even the Police does not register the FIR or help the aggrieved consumer. In the present case, nothing has been done by the Police for years despite the complaint. In any case, taking of pound of flesh is required to be discouraged. (Paras 1A, B and C).

       Result: Revision petition disposed of.