In a hire-purchase agreement, the hirer remains a trustee/bailee on behalf of the financier/financial institution, and ownership remains with the latter, thus repossession of the goods by the financier does not warrant criminal action.

Per Rajiv Sharma, Judge:

The present petition is instituted against the order dated 31.11.2012 rendered by the learned Judicial Magistrate, 1st Class, Court No.2, Sundernagar, Mandi in case P.C. No. 202-I/08.

2. Key facts necessary for adjudication of the petition are that respondent No.4 raised loan of Rs.3,60,000/- from ICICI Bank, Sundernagar, District Mandi in the year 2004. A margin money of Rs.70,000/- was deposited by him with the bank. Hire-purchase agreement was entered into between the parties vide Annexure P-9. Since respondent No.4 did not pay installments regularly, the vehicle in question, i.e. Mahindra Pick-up Jeep No.HP-31B-0264 was taken into possession. Respondent No.4 filed complaint against the petitioner and respondents No. 2 and 3, on the basis of which FIR No.66/2007, dated 12.2.2007 was registered. Thereafter, charges were framed against the petitioner by the learned Judicial Magistrate, 1st Class, Court No.2, Sundernagar, Mandi, on 31.11.2012 under Sections 392 read with Section 34 of the Indian Penal Code.

3. Mr. N.S. Chandel, learned Advocate, has vehemently argued that the possession of the vehicle was taken over on 10.6.2006 strictly as per hirepurchase agreement entered into between the parties. He has referred to Annexures P5 to P7 and P9 to this effect.

4. Relevant portion of vehicle loan-cum-hypothecation agreement, Annexure P-9 reads as under:-

ICICI bank shall be entitled to take possession of the collateral(s), irrespective of whether the loan has been recalled whenever in the opinion of ICICI bank there is an apprehension of any money not being paid or ICICI bank’s security being jeopardized.

5. The vehicle in question has been taken into possession strictly as per the clause of the loan-cum- hypothecation agreement entered into between the parties, more particularly, as per the clause quoted here-in-above. It is settled law by now that the recovery of the possession of goods by owner-financier, as per terms of the hire-purchase agreement, does not amount to a criminal offence. Respondent No.4 defaulted in making the installments, which led to taking over the possession of the vehicle by the bank. No offence was made out against the petitioner. If there was any dispute qua hire-purchase agreement, the same was to be resolved on the basis of terms incorporated in the hire-purchase agreement. Respondent No.4 could not become owner of the vehicle, till he had not paid entire loan amount. Initiation of criminal proceedings against the petitioner on the basis of registration of FIR No.66/2007 dated 12.2.2007 was gross misuse of process of law.

6 Their Lordships of Hon’ble Supreme Court in Charanjit Singh Chadha and others vs. Sudhir Mehra, (2001) 7 Supreme Court Cases 417 have held that the hire-purchase agreement is an executory contract of sale, conferring no right in rem on the hirer until the conditions for transfer of the property to him have been fulfilled. Their Lordships have further held that where hirer had defaulted in installment payments of motor vehicle and agreement specifically provided that the financiers were entitled to repossess the vehicle in case of default and their agents were authorized to enter any premises for the purpose and the financiers had actually recovered possession of the vehicle, no offence was made out against the persons, who had taken over the possession of the vehicle. Their Lordships have held as under:-

5. Hire-purchase agreements are executory contracts under which the goods are let on hire and the hirer has an option to purchase in accordance with the terms of the agreement. These types of agreements were originally entered into between the dealer and the customer and the dealer used to extend credit to the customer. But as hire-purchase scheme gained popularity and in size, the dealers who were not endowed with liberal amount of working capital found it difficult to extend the scheme to many customers. Then the financiers came into picture.