2019 Supreme(All) 2246

IN THE HIGH COURT OF ALLAHABAD
DEVENDRA KUMAR UPADHYAYA, RAJAN ROY, RAJESH SINGH CHAUHAN, JJ.
Mahindra & Mahindra Financial Services Ltd. Thru. Shahid Ans – Appellant
Versus
State Of U.P. Thru. Prin. Secy. Transport & Others – Respondents
Misc. Bench No. 4529 of 2018
Decided on : 16-12-2019

Liability of Financier to pay tax from the date of taking possession of the vehicle under the agreements referred earlier, even if, its name is not entered in the Certificate of Registration.

Headnote:

Whether in view of Sections 2(g), 2(h), 4, 9, 10, 12, 13, 14 and 20 of the Act, 1997 read with Sections 39, 50 and 51 of the Act, 1988 and other relevant provisions of the said enactments and the Rules of 1998 and 1989, a Financier of a motor vehicle/ transport vehicle in respect of which a hire-purchase, lease or hypothecation agreement has been entered, is liable to tax from the date of taking possession of the said vehicle under the said agreements, even if, its name is not entered in the Certificate of Registration or not? If not, who is liable in this regard?

Fact of the Case:

Petitioner is the Financier who had extended a loan to opposite party no. 4 for purchase of a transport vehicle. The terms of loan were reduced in writing in form of an agreement dated 26.06.2012. It is not in dispute that the agreement involved hypothecation of the vehicle, thereby creating a charge in respect thereof in favour of the Financier as security for loan advanced. Opposite party no. 4 defaulted in payment of loan amount. Accordingly, Petitioner-Financier took possession of the vehicle in question on 09.12.2014. Opposite party no. 4 informed the Registering Authority on 09.12.2014 about possession of the vehicle having been taken by Financier. Opposite party no. 4 should have submitted a declaration in Form-A as per Rule 7 of the Rules, 1998 and if it failed to do so it can not take advantage of its lapse. Section 51(5) of the Act, 1988 read with Rule 61 of the Rules, 1989, can satisfy the Registering Authority that he has taken possession of the vehicle from the registered owner owing to his default under the said agreement and that the registered owner refuses to deliver the Certificate of Registration or has absconded, and such authority, may, after giving the registered owner an opportunity to make such representation as he may wish to make and notwithstanding that the Certificate of Registration is not produced before it, cancel the Certificate and issue a fresh Certificate of Registration in the name of the person with whom the registered owner had entered into such agreement, but, if the Financier does not take recourse to Section 51(5) then he can not take advantage of his lapse, especially in view of Section 2(g), 2(h), 9(3), 20(3) and Section 13 of the Act, 1997 read with Rule 7, 9(3) and 18 of the Rules, 1998 as discussed hereinabove.

Finding of the Court:

The Financier becomes its owner under Section 2(h) when he takes possession of the vehicle under an agreement of hire-purchase, lease or hypothecation, irrespective of the fact whether he is the registered owner or not as already discussed, and as thereafter he alone can use it, as such, he is liable to pay tax, additional tax and penalty which fall due for payment after such possession i.e. current tax and additional tax including arrears arising in respect thereof and penalty if any from the date of such possession.

Issues: Whether in view of Sections 2(g), 2(h), 4, 9, 10, 12, 13, 14 and 20 of the Act, 1997 read with Sections 39, 50 and 51 of the Act, 1988 and other relevant provisions of the said enactments and the Rules of 1998 and 1989, a Financier of a motor vehicle/ transport vehicle in respect of which a hire-purchase, lease or hypothecation agreement has been entered, is liable to tax from the date of taking possession of the said vehicle under the said agreements, even if, its name is not entered in the Certificate of Registration or not? If not, who is liable in this regard?

Ratio Decidendi: The Financier is thus liable to pay tax etc. as aforesaid. In this context, the Financier can very well say that the Certificate of Registration or token is not in his possession and the same being in possession of the borrower who has not delivered the same to the Financier, inspite of possession of the vehicle being taken by the latter, it is therefore not liable to pay tax even from the date it takes possession of the vehicle unless it is registered in its name and till then liability will continue with the registered owner, as was in fact argued by Shri Amol Kumar, especially when, it did not intend to use the vehicle and intended to get the benefit of Section 2 of Section 12 of the Act, 1997. However this argument is fallacious for the reason which follows. Apart from the reasons already given, this argument would not be available to the Financier for the simple reason that from the date of such possession of the vehicle it becomes the owner under Section 2(h) and if the vehicle is under a hire-purchase agreement its ‘Operator’ also under Section 2(g), may be, along with the registered owner or permit holder or holder of authorization certificate, as the case may be. The ownership or operatorship based on possession as is referred in Section 2(h) and Section 2(g) is not dependent on the name of such person in possession being entered in the Certificate of Registration as its registered owner etc., as already discussed, and as is also evident from the provisions themselves.

Final Decision: The Financier becomes its owner under Section 2(h) when he takes possession of the vehicle under an agreement of hire-purchase, lease or hypothecation, irrespective of the fact whether he is the registered owner or not as already discussed, and as thereafter he alone can use it, as such, he is liable to pay tax, additional tax and penalty which fall due for payment after such possession i.e. current tax and additional tax including arrears arising in respect thereof and penalty if any from the date of such possession.