The limitation period for recovery under a hire purchase agreement begins after the sale of the repossessed vehicle, not at the time of default.

J U D G M E N T

This appeal under Section 96 CPC has been filed by the plaintiff against the judgment and decree dated 31/07/2003 in O.S.No.1/2002 on the file of the Subordinate Judges' court, Ernakulam. The respondents herein are the defendants in the suit. The parties in this appeal will be referred to as described in the plaint.

2. The plaintiff is engaged in the business of providing finance for the purchase of machinery, motor vehicles and consumer durables under hire purchase or leasing arrangements. The first defendant on 15/03/1996 entered into a hire purchase agreement with the plaintiff for the purchase of an ambassador car. The second and third defendants are the guarantors in the agreement. As per the terms and conditions of the hire purchase agreement, the first defendant agreed to repay the amount of ₹3,39,875/- which included the insurance premia and hire purchase charges at the rate of 17.5% per annum, which amount was agreed to be paid in 36 monthly installments starting from 15/04/1996. The first twenty-four monthly installments of ₹9,650/- each was agreed to be paid on or before the 15^th day of the first 24 months; the next 11 monthly installments at the rate of ₹9,050/- each on or before the 15^th day of the subsequent 11 months and the last monthly installment of ₹8,725/- on or before 15/03/1999. The first defendant also agreed to pay additional finance charges/interest at the rate of 36% per annum on the amount in the event of default being made on the payment of any monthly installment. As per clause 9 of the agreement, the plaintiff inter alia had the right to take possession of the vehicle, sell it, appropriate the sale proceeds towards monthly installments and other amounts due under the hire purchase agreement and to realise the balance amount outstanding from the first defendant. The first defendant paid a sum of ₹85,550/- covering only the first eight monthly installments leaving unpaid the remaining 28 monthly installments due from 15/12/1996 onwards. Despite repeated demands, the amounts were not cleared. The last payment was made by the defendant on 19/02/1997. Hence, the plaintiff proceeded in terms of clause 9 of the hire purchase agreement and on 18/02/1998 repossessed the vehicle. Even thereafter the first defendant neglected to pay the amounts due to the plaintiff. A notice was sent on 02/03/1998 demanding payment of the outstanding amounts. As the defendants failed in paying the amounts due to the plaintiff, the plaintiff on 05/02/2000 sold the vehicle for a sum of ₹1 lakh and adjusted the sale proceeds towards the total amount of ₹4,68,285,77/- due as on 05/02/2000 on account of defaulted 28 monthly instalments with additional finance charges/interest. The remaining amount including the additional finance charges up to 05/02/2000 is ₹3,68,285.77/-. The first defendant is bound to pay the said amount with interest and costs to the plaintiff.

3. The first defendant is ex parte. Defendants 2 and 3 filed written statement contending that the suit was barred by limitation. The plaintiff was to pay the monthly instalments by the 15^th day of every calendar month starting from 15/04/1996. The suit filed beyond 3 years of the date on which each instalment of hire charges was due is barred by limitation. Under clause 9 of the hire purchase agreement, in the event of the hirer defaulting the payment of instalments, the agreement would stand terminated/determined forthwith and so the cause of action for realization of the amounts due under the contract arose on the date of default of payment of the instalment. Even according to the plaintiff, the default occurred on 15/12/1996. Therefore, the cause of action arose on and after 15/12/1996.

Invoking the provisions contained in clause 9 of the hire agreement, the plaintiff took possess