M/S. MAGMA FINCORP LTD. versus RAJESH KUMAR TIWARI on 1 October 2020

[2020] 11 S.C.R. 59

M/S. MAGMA FINCORP LTD.

v.

RAJESH KUMAR TIWARI

(Civil Appeal No. 5622 of 2019)

OCTOBER 01, 2020

[D. Y. CHANDRACHUD AND INDIRA BANERJEE, JJ.]

Consumer Protection Act, 1986:

ss.2(1)(r) and 12 – Complaint alleging unfair trade practiceand deficiency in service – Against the appellant-financier, withwhom the complainant had entered into hire-purchase agreementfor purchase of a vehicle – Alleging that even though thecomplainant had paid 7 out of 35 instalments, the Financier tookpossession of the vehicle without notice and sold the vehicle refusingto concede to his request for opportunity to clear the outstandinginstalments – Fora below allowed the complaint directing thefinancier to refund the instalments paid by the complainant withinterest and to pay damages and litigation cost and also the amountwhich was paid to dealer of vehicle directly by the complainant –Appeal to Supreme Court – Held: Under a Hire-Purchase agreement,goods are let out on hire, with an option to purchase, in accordancewith the terms of the agreement – The financier continues to beowner of the goods until the option to purchase (upon payment ofagreed amounts) is exercised by the hirer – There is no legalimpediment to the financier taking repossession of the goods, upondefault in payment of instalments – The Consumer Protection Actdoes not override the contract Act – Requirement of notice to thehirer before repossession would depend on the terms and conditionsof the agreement – If stipulation of notice are violated, non-servicewould tantamount to deficiency in service and the consumer wouldbe entitled to compensatory damages – If non-service of noticecauses loss to the hirer, consumer/hirer is entitled to punitive damages– In the present case there is no evidence of any loss suffered byhirer due to non-receipt of notice – There is no deficiency in serviceand no case of unfair trade practice is made out – The direction offora below has given a defaulting hirer, benefit of free use of thevehicle.

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AAllowing the appeal, the Court

HELD: 1.1 Section (2)(1)(r) of Consumer Protection Act,1986 defines “unfair trade practice” to mean a trade practice, forthe purpose of promoting provision of any service, by adoptionof unfair method or unfair or deceptive practice, including any ofBthe practices enumerated in Sections 2(1)(r)(i) to (x), 2(r)(2),2(r)(3) and 2(r)(3A). The complaint in the present case does notmake out any case of unfair trade practice within the meaning ofSection 2(1)(r) of the Consumer Protection Act 1986. [Para 25][98-D-E]

C1.2 Under the terms and conditions of the hire purchaseagreement, the ownership of the vehicle was to stand transferredto the Complainant from the Financier, upon payment of all the 35instalments and other dues, if any. Until then, the ownership wasto be with the Financier. As all the 35 instalments had not beenpaid by the complainant to the Financier, the ownership of theDvehicle remained with the Financier. The hire purchase agreementclearly enabled the Financier to take possession of the vehicle,on default in payment of any of the instalments. There is no termin the Hire Purchase Agreement, that requires the Financier togive notice to the Complainant before terminating the HireEPurchase Agreement, upon breach of any term thereof, or beforetaking possession of the vehicle. On the other hand, clause 15 ofthe Hire Purchase Agreement expressly provides fordetermination of the Hire Purchase Agreement without notice tothe Complainant, upon default in hire instalments. [Paras 28-30][98-H; 99-A-D]F

1.3 The Complainant has only made a vague assertion thatthe action of the Financier in taking possession of the vehicle,admittedly for default in payment of instalments, and in notreleasing the vehicle to the Complainant, in spite of theComplainant’s assurance to the Financier to clear outstandingGinstalments and pay future instalments timely, amounts to an actof unfair trade practice and constitutes deficiency of service. Therepossession of a vehicle under hire, in accordance with the termsand conditions of a hire purchase agreement, upon default inpayment of hire instalments and refusal to release the same onHmere assurance of the Complainant to clear outstanding arrears of hire instalments, and pay future instalments in time, does notconstitute ‘deficiency’ in service. [Paras 26 and 31][98-E;99-D-E]

1.4 The object of a notice before taking possession of avehicle on hire under a Hire Purchase Agreement, is to enablethe hirer, to make a written request to the Financier to revive thehire purchase agreement in terms of Clause 12 of the saidagreement, upon payment of all outstanding dues together withdamages, as might be mutually agreed upon. A notice also drawsthe attention of the hirer to the alleged breaches of agreementon the part of the hirer, on the basis of which, the Financier claimsto be entitled to take possession. Such notice gives the hirer anopportunity to show that the hirer had not, in fact, committed anybreach of agreement. [Paras 34, 35][100-B-D]

2.1 A District Forum constituted under the ConsumerProtection Act derives its power to grant relief from Section 14of the said Act. If the District Forum is satisfied that the allegationscontained in the complaint about the services are proved, it maydirect the service provider to (i) return the charges paid by theComplainant [Section 14(1)(c)]; (ii) to pay such amount, as maybe awarded by the District Forum as compensation to theconsumer for any loss or injury suffered by the Complainant/Consumer, due to the negligence of the service provider [Section14(1)(d)]; (iii) to pay punitive damages in such circumstances asthe District Forum deems fit [Proviso to Section 14(1)(d)]; (iv) toremove the deficiencies in the service in question. [Section14(1)(a)]; (v) to discontinue the unfair trade practice [Section 14(1)(f)] [Para 38][100-G; 101-A-C]

2.2 Before a District Forum can grant relief to the consumerof a service, it has to be satisfied that the allegations in thecomplaint, and/or in other words, the allegations which constitutea valid complaint, that is allegations of unfair or restrictive tradepractice adopted by the service provider, or the allegations ofdeficiency in the service hired, or availed of or agreed to beavailed of by the Complainant from the service provider, or theallegations of the service provider charging a price in excess ofthe price fixed for the service, under any law, for the time being A

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Ain force or agreed between the parties or allegations of offeringspurious services or services hazardous to life or safety, areproved. [Para 39][101-D-E]

2.3 Section 13(2)(b) of the Consumer Protection Act, 1986casts an obligation on the District Forum to decide a complaintBon the basis of the evidence brought to its notice by theComplainant and the service provider. Irrespective of whetherthe service provider adduces evidence or not, the decision ofthe District Forum has to be based on evidence relied upon bythe Complainant. The onus of proof is on the Complainant makingthe allegation. Section 27 of the Consumer Protection Act castsCan obligation on the District Forum, the State Commission or theNational Commission to dismiss frivolous complaints with costsnot exceeding Rs.10,000/-. [Para 40][101-F-G]

2.4 The Complainant produced a delivery receipt in respectof the vehicle, some payment receipts, Insurance papers in respectDof the vehicle, an FIR unconnected with the Financier and/orcopies thereof and some documents relating to the filing of theComplaint and payment of Court Fees etc., none of which establishany deficiency of service or unfair trade practice on the part ofthe Financier. [Para 41][101-G-H; 102-A]

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2.5 The District Forum drew adverse inference against theFinancier for not producing the Hire Purchase Agreement andassumed that there was no provision in the Hire PurchaseAgreement for taking the vehicle back or selling it to a thirdparty. No adverse inference could have been drawn against theFFinancier for not producing the Hire Purchase Agreement beforethe District Forum, when there was no allegation in the complaint ofbreach by the Financier of the Hire Purchase Agreement, in takingpossession of the vehicle. The District Forum did not exercise itspower under Section 13(4)(ii) to call upon the Financier to producethe Hire Purchase Agreement. Even otherwise, the District ForumGdid not direct the Financier to produce the Hire Purchase Agreement.[Paras 42, 43][102-B-D]

2.6 The finding of the District Forum, of the vehicle havingbeen lifted “forcefully” or “snatched” is, contrary to theComplainant’s own case made out in the Complaint, and thereforeHperverse. It is well settled that a new case cannot be made out by way of evidence, when there are no pleadings to support the same.[Para 44][102-E-F]

3.1 The State Commission assumed that the error in theaddress of the complainant in the notice despatched by the Financierwas deliberate, in order to sell the vehicle without the knowledge ofthe Complainant. Such assumption was not based on any materialson record but patently conjectural. The State Commission observedthat the Complainant had been deprived of the opportunity to depositthe amount, due from him to the Financier, which again is contraryto the Complainant’s own pleadings in his complaint. The StateCommission further found that there was no mention of theamount due to be paid by the Complainant to the Financier, in theWritten Statement filed by the Financier before the District Forum.There was also no mention in that written statement of when thevehicle had been sold and the amount for which the vehicle hadbeen sold, whether such amount was more than or less than theamount due from the Complainant to the Financier. Observingthat the silence on the part of the Financier in not divulginganything about the sale rendered the sale ‘dubious’, the StateCommission concluded that the Financier had surreptitiously soldthe vehicle, without the knowledge of the Complainant, withoutnotice to the Complainant, and without disclosing the details ofthe sale. The aforesaid observation, of the sale being dubious,has been made, overlooking the terms and conditions of the hirepurchase agreement, and without considering the law governinghire purchase agreements. The Financier remains the owner of thevehicle taken by the complainant on hire, on condition of option topurchase, upon payment of all hire instalments. The hire instalmentsare charges for use of the vehicle as also for the exercise of optionto purchase the vehicle in future. The Financier being the owner ofthe vehicle, there was no obligation on the part of the Financier, todivulge details of the sale of that vehicle, and that too on its own,without being called upon to do so. [Paras 46-48][102-G-H;103-A-E]

3.2 The finding of the State Commission that the Financiersold the vehicle without the knowledge of the Complainant is contraryto the Complainant’s own case in his complaint before the DistrictForum. The Complainant has established that there was a discrepancy 63AB

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Aand/or error in the address of the Complainant in the notice forrepossession, from which all the three fora under the ConsumerProtection Act, 1986, have concluded that possession of the vehiclewas taken without notice. It was not the case of the Complainantthat the vehicle was sold without notice to or knowledge of thecomplainant. The error and/or discrepancy in the address is minorBand there are no materials on the basis of which the State Commissionconcluded that the error was deliberate. The finding of the StateCommission, of the error in the address being deliberate, isunsubstantiated. [Paras 49, 50 and 51][103-F-H; 104-A-C]

C3.3. By directing the Financier to pay to the Complainant, theentire amount paid by the Complainant to the Financier from theinception, as also the amount paid by the Complainant to the dealerdirectly, along with interest at the rate of 10% per annum, damagesof Rs.10,000/- and litigation costs, the fora constituted under theConsumer Protection Act, 1986, have given a defaulting hirer theDbenefit of free use of the vehicle of the value of Rs.4,21,121/- foralmost twelve months, plus damages, oblivious to the depreciationin the value of the vehicle by reason of wear and tear, due to use bythe hirer, as also an admitted accident for which the vehicle lay seizedwith the Police for some time. [Para 53][104-E-G]

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4.1 The Consumer Protection Act, 1986, which creates forafor expeditious adjudication and settlement of consumer disputes,is not in derogation of any law in existence, but in addition thereto,as provided in Section 3 thereof. The said Act protects consumersof services from being charged a price in excess of the price fixedFfor the service under any law or the price agreed between theparties and also redressal of deficiency in the services availed bythe Consumer and/or against restrictive or unfair trade practices,and/or spurious services. The Consumer Protection Act, 1986 doesnot override the Contract Act, 1872, and other enactments in force,applicable to the service availed by the consumer from the serviceGprovider. [Paras 55, 56][105-B-C]

4.2 The protection, to which the consumer of a service isentitled under the Consumer Protection Act, is against loss of money,by reason of being denied service, of a quality agreed upon expressly or by necessary implication, inter alia, in view of the applicable law,for which the consumer has paid, or has agreed to pay a consideration.The said Act also protects consumers from being overcharged forany service obtained and/or agreed to be obtained. The consumerof a service may also be entitled to damages for any loss sufferedby the consumer, by reason of denial or deficiency in service forwhich the consumer has paid or agreed to pay (if the parties haveagreed to deferred payment), charges and/or in other words, pricefor the service. In cases of breach of contract, liquidated damagesmay be imposed on the party in breach, if the agreement providesfor liquidated damages, that is a fixed amount by way of damages.Where the parties to an agreement have not agreed to liquidateddamages, the party in breach of agreement may be directed topay unliquidated damages which are compensatory. Suchcompensatory damages are not to punish the party in breach, butto compensate the party not in breach, for losses suffered as aresult of the breach. Where, however, the damages caused by thebreach are severe and extensive, the party in breach may be requiredto pay to the party not in breach, such damages as would restore theposition of the party not in breach, to the position before the breachoccurred. [Paras 57-59][105-D-H]

4.3 Apart from compensatory damages, an AdjudicatingAuthority may impose on the party in breach, punitive damages ornominal damages. Punitive damages are awarded where the party inbreach of agreement has behaved in a manner, which is reprehensibleand calls for punishment. Nominal damages are awarded where thereis no real harm done, by reason of the breach of the contract.[Para 60][106-A-B]

4.4. Section 14 of the Consumer Protection Act, 1986empowers the District Forum to award compensation to the partynot in breach by directing the party in breach to return the priceor the charges as may have been paid by the complainant [Section14(1)(c)]. The said Section also enables the District Forum toaward compensatory damages to the consumer for loss or injurysuffered by the consumer due to negligence of the party in breach[Section 14(1)(d)]. The Forum may direct removal of the deficiencyin service, if the deficiency can be removed and it can direct dis-continuation of unfair trade practices or restrictive practices and AB

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Adirect the same not to be repeated [Section 14(1)(e) and (f)]. Theproviso to Section 14(1)(d) of Consumer Protection Act, 1986empowers the District Forum to grant punitive damages in suchcircumstances as it deems fit. Punitive damages are not generallyawarded in cases of breach of contract unless the act is soreprehensible that it calls for punishment of the party in breach,Bby imposition of punitive and/or exemplary damages.Compensation which is compensatory, has to be assessed takinginto account relevant factors, such as the loss incurred by theclaimant, though some amount of guess work and/or estimationmay be permissible. In the instant case, the District Forum didCnot even undertake the exercise of assessment of the loss/damages, if any, suffered by the complainant by reason of non-service of notice before taking possession of the vehicle. [Paras61 and 62][106-B-F]

5.1 Goods are let out on hire under a Hire PurchaseDAgreement, with an option to purchase, in accordance with theterms and conditions of the Hire Purchase Agreement. The hirersimply pays for the use of the goods and for the option to purchasethem. Until the option to purchase is exercised by the hirer, uponpayment of all amounts agreed upon between the hirer and theFinancier, the financier continues to be owner of the goods beingEthe subject of hire purchase. Till such time the hirer remains atrustee and/or bailee of the goods covered by the Hire PurchaseAgreement. The Financier continues to remain the owner of avehicle, covered by a hire purchase agreement till all the hireinstalments are paid and the hirer exercises the option to purchase.FThus, when the Financier takes re-possession of a vehicle underhire, upon default by the hirer in payment of hire instalments, theFinancier takes re- possession of the Financier’s own vehicle. Whenthe agreement between the Financier and the hirer permits theFinancier to take possession of a vehicle financed by the Financier, there is no legal impediment to the Financier taking possessionGof the vehicle. When possession of the vehicle is taken, theFinancier cannot be said to have committed theft. [Paras 77-80][111-F-H; 112-A-C]5.2 Whether the transaction between a Financier and apurchaser/hirer is a hire purchase transaction, or a loanH

transaction, might be determined from the terms of theagreement, considered in the light of surrounding circumstances.However, even a loan transaction, secured by right of seizure ofa financed vehicle, confers licence to the Financier to seize thevehicle. [Para 81][112-C-D]

5.3 In the present case, the agreement executed by andbetween the Financier and the Complainant is a Hire PurchaseAgreement as will appear from the terms and conditions thereof.In any event, the fora under the Consumer Protection Act, havenot arrived at any specific finding to the contrary. There is nodiscussion of the nature of the agreement between the Financierand the Complainant. Be that as it may, the agreement clearlypermits the Financier to take possession of the vehicle, upondefault in payment of instalments. [Para 82][112-E]

5.4 The Financier being the owner of the vehicle which isthe subject of a Hire Purchase Agreement, there can be noimpediment to the Financier taking possession of the vehicle whenthe hirer does not make payment of instalments/hire charges interms of the Hire Purchase Agreement. However, suchrepossession cannot be taken by recourse to physical violence,assault and/or criminal intimidation. Nor can such possession betaken by engaging gangsters, goons and musclemen as so calledRecovery Agents. [Para 87][113-G-H; 114-A-B]

5.5 Whether the service of proper notice on the hirer wouldbe necessary for repossession of a vehicle, which is the subjectmatter of a Hire Purchase Agreement, would depend on the termsand conditions of the Hire Purchase Agreement, some of whichmay stand modified by the course of conduct of the parties. If thehire purchase agreement provides for notice on the hirer beforerepossession, such notice would be mandatory. Notice may alsobe necessary, if a requirement to give notice is implicit in theagreement from the course of conduct of the parties. If the hirercommits breaches of the conditions of a hire purchase agreementwhich expressly provides for immediate repossession of a vehiclewithout further notice to the hirer, in case of default in paymentof hire charges and/or hire instalments repossession would notbe vitiated for want of notice. [Paras 88, 89][114-C-G]

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A5.6. In a case where the requirement to serve notice beforerepossession is implicit in the hire purchase agreement, nonservice of proper notice would tantamount to deficiency of servicefor breach of the hire purchase agreement giving rise to a claimin damages. The Complainant consumer would be entitled tocompensatory damages, based on an assessment of the lossBcaused to the complainant by reason of the omission to give notice.Where there is no evidence of any loss to the hirer by reason ofomission to give notice, nominal damages may be awarded. Wherea Financier erroneously and/or wrongfully invokes the power torepossess without notice to the hirer, causing thereby extensiveCpecuniary loss to the hirer or loss of goodwill and repute, a forumconstituted under the Consumer Protection Act may awardpunitive damages. [Paras 90 and 91][114-G-H; 115-A-C]

5.7 In the instant case, there is no evidence of any losssuffered by the complainant by reason of non-receipt of notice.DAdmittedly, several instalments, remained unpaid. Afterrepossession the complainant contacted the Financier and wasinformed of the reasons for the repossession. He only made anoffer to pay outstanding instalments and gave an assurance topay future instalments in time. If the Financier was not agreeableto accept the offer, the Financier was within its rights under theEhire purchase agreement. This is not a case where payment hadbeen tendered by the hirer but not accepted by the Financier/lender. The Complainant had not tendered payment. [Para 92][115-C-E]

6. The Financier admittedly paid Rs.3,15,000/- for acquisitionFof the vehicle, out of which the Financier had been able to realizeRs.1,19,000/- inclusive of all charges. There was depreciation inthe value of the vehicle by reason of usage by the Complainant,for about a year. The District Forum did not even notionally assessthe depreciation in the value of the vehicle. The District ForumGwas not justified in directing the Financier to pay the ComplainantRs.2,23,335/- being the entire amount paid by the Complainantto the Financier from the inception as well as the payment ofRs.1,04,000/- made by the Complainant to the dealer along withdamage of Rs.10,000/- and litigation costs of Rs.1,000/- after the H

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Complainant had held and used the vehicle for almost a year.The Complainant, admittedly a defaulter, has in effect, beenallowed free use of the vehicle for about a year, plus damages, foran error in the notice of repossession, without considering theprejudice, if any, caused to the complainant by the error andconsequential non receipt of the notice, and without making anyassessment of the loss, if at all, to the Complainant by reason ofthe error/omission. [Paras 93, 94][115-E-H; 116-A]

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Charanjit Singh Chadha & Ors. v. Sudhir Mehra(2001) 7 SCC 417; K. L. Johar & Co. v. DeputyCommercial Tax Officer, Coimbator AIR 1965 SC 1082: [1965] SCR 112; Anup Sarmah v. Bhola Nath Sharmaand Others (2013) 1 SCC 400 : [2012] 11 SCR 360;Orix Auto Finance (India) Ltd. v. Jagmander Singh andAnother (2006) 2 SCC 598 : [2006] 2 SCR 169; K. A.Mathai alias Babu & Anr. v. Kora Bibbikutty & Anr.(1996) 7 SCC 212; Sundaram Finance Ltd. v. The State ofKerala & Anr. AIR 1966 SC 1178 : [1966] SCR 828 –relied on.

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ICICI Bank Ltd. v. Prakash Kaur & Ors. (2007) 2 SCC711 : [2007] 3 SCR 253; Citicorp Maruti Finance Ltd. v.S. Vijaylaxmi (2012) 1 SCC 1 : [2011] 14 SCR 1050 –distinguished.

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Jagdish Chandra Nijhawan v. S.K. Saraf (1999) 1 SCC119; Smt. Lalmuni Devi v. State of Bihar & Ors. (2001)2 SCC 17 – held inapplicable.

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Case Law Reference

(2001) 7 SCC 417[1965] SCR 112[2012] 11 SCR 360[2006] 2 SCR 169(1996) 7 SCC 212(1999) 1 SCC 119

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A(2001) 2 SCC 17held inapplicablePara 70[1966] SCR 828relied onPara 73[2007] 3 SCR 253distinguishedPara 83[2011] 14 SCR 1050distinguishedPara 85

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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5622of 2019.

From the Judgment and Order dated 02.08.2018 of the NationalConsumer Disputes Redressal Commission, New Delhi in RevisionPetition No. 05/2018.

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Rajiv Ranjan Dwivedi, Kunal Cheema, Ms. Aditi Parkhi, Advs.for the appearing parties.

The Judgment of the Court was delivered by INDIRA BANERJEE, J.

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1. This appeal is against an order dated 2[nd] August, 2018 passedby the National Consumer Disputes Redressal Commission [hereinafterreferred to as the ‘National Commission’], dismissing Revision PetitionNo.5 of 2018, filed by the Appellant [hereinafter referred to as theFinancier], under Section 21(b) of the Consumer Protection Act, 1986,against an order dated 31[st] August, 2017 passed by the State ConsumerDisputes Redressal Commission, Uttar Pradesh [herein after referredto as the ‘State Commission’], dismissing Appeal No. 1704 0f 2008 filedby the Financier, and affirming the order dated 22[nd] August, 2008 passedby the District Consumer Disputes Redressal Forum, Ambedkar Nagar,Uttar Pradesh [hereinafter referred to as the ‘District Forum’], wherebythe District Forum allowed Complaint Case No. 105/2005 filed by theRespondent, Rajesh Kumar Tiwari [hereinafter referred to as the‘Complainant’], and directed the Financier to pay Rs. 2,23,335/- to theComplainant, along with interest at 10% per annum, Rs 10,000/- towardsphysical and mental injury and Rs 1000/- as litigation expenses.

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2. On or about 2[nd] August 2002, the Complainant entered into ahire-purchase agreement with the Financier, then known as MagmaLeasing Ltd. for hire-purchase of a Mahindra Marshal Economic Jeepbearing the Registration No. UP-42-T/1163, which is hereinafter referredto as the ‘vehicle’, the cost whereof was Rs.4,21,121/- of which thecomplainant made an initial payment of Rs.1,06,121/-. According to the H

Financier, an amount of Rs.1,04,000/- from out of the initial payment ofRs.1,06,121/- was paid by the complainant to the dealer directly. Thebalance amount of Rs.3,15,000/- was paid by the Financier.

3. The Complainant agreed to repay a sum of Rs.4,38,585/-which was inclusive of finance charges of Rs.83,650/- to the Financier in35 monthly instalments of Rs.12,531/-, commencing from 1[st] August, 2002.The monthly instalments were to be paid till 1[st] June, 2005. TheComplainant apparently deposited post dated cheques of Rs.12,531/-.

4. A part of the recital and some of the relevant terms and conditionsof the said hire purchase agreement between the Financier and theComplainant, are set out hereinbelow for convenience:

“…..

WHEREAS the Hirer has agreed to deposit post datedcheques with the company at its registered office at 24, ParkStreet, Calcutta-700016 towards security for payment ofmonthly/quarterly hire charge and undertakes to ensureencashment of the same on the respective due dates.

WHEREAS the Hirer has agreed to hold the Hired Article inTrust for the company subject to user right and not to dealwith the same in the manner specified in Clause 3(1) hereofuntil the entire amounts due under this agreement are dulypaid to the company on the terms and conditions moreparticularly set out hereunder.

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01. HIRED ARTICLE AND TENURE

The company shall provide funds for acquisition of the hiredarticles set out in the Schedule. I hereto and the hirer shallhold the same in trust for the company from the date ofcommencement of this agreement regardless of the date ofphysical delivery of the hired article for the period as statedin Schedule-II hereof subject only to Hirer’s user rights uponthe terms and conditions, herein contained.

The Hirer shall not be entitled to make any claimwhatsoever on the company in respect of the Hired Articleand/or relating to its specification and/or its condition and/or in any other manner whatsoever.

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The Annexure hereto shall form an integral part of thisagreement.

02. The Hirer shall duly perform and observe all the termsand condition contained in this agreement and the covenantson his part to be performed and observed and shall in themanner aforesaid, pay to the company, monthly/quarterly sumsby way of hire instalments as mentioned in Schedule-II andSchedule-III of this agreement and shall also pay to thecompany all other sums of money which may become dueand payable under this agreement, upon execution thereofregardless of the date of delivery of the Hired Article.

03. HIRER’S WARRANTIES

The Hirer shall:

a) HIRE PAYMENTS

Punctually and promptly pay to the company without anydemand in respect thereof by the company, at its registeredoffice the stipulated down payments/initial payment/instalments as mentioned in Schedule-III/other charges onthe due dates, whether or not it has received delivery ofthe Hired Article.

b) MAINTENANCE

Maintain and keep the Hired Article in good and serviceablecondition at his own cost. The company and/or its Bankersshall have all the rights to inspect and to call for the HiredArticle to be produced at any time for any time for anyreason whatsoever. The Hirer shall be responsible and liablefor damage, if any, caused to the Hired Article and/or toany other third party.

c) LOCATION

Keep the Hired Article at the Hirer’s said premises andshall permit the company and/or its agent at all times toenter upon any premises at which the Hired Article is kept/parked for the purpose of verification and also repossessionthe Hired Article under the provisions of clause 15 of thisagreement and shall not under any circumstances change the location of the Hired Article, without express approvalof the company.

d) INSURANCE

Insure and keep comprehensively insured the Hired Articlein the name of the company and/or its Banker against lossor damage by fire, accident, flood, earthquake, theft orany other cause and including against third party claimswith an insurance company for the full cost of the HiredArticle, such insurance policy shall be lodged with thecompany and/or its bankers duly assigned in their favourpromptly and regularly. And loss and/or liability arising tothe company for the Hirer’s omission or neglect to keepthe Hired Article so comprehensively insured shall beentirely to the account of the Hire and the Hirer and shallimmediately make payment to the company in respect of allsuch losses suffered and/or liabilities incurred by thecompany.

In the event, the company effects or renews the insuranceof the Hired Article, the Hirer will on demand, reimburse tothe company such sum or sums as shall have been so spentby the company together with interest at 3% per monthcalculated from the date of insurance till date of actualpayment.

The Hirer confirms that he/it will get the benefit of theinsurance only if no amount is overdue by him to thecompany. If the contract of hiring is terminated either bythe company or by the Hirer as provided in this agreement,the Hirer’s interest in the insurance policy and his/its rightof claiming anything there under shall IPSO FACTO cometo an end. The Hirer further agrees that whenever he/it isnot entitled to the benefit of insurance under the clause,the same would go to the company and the company shallbe considered to be the insured in his/its place.However, the said insurance shall not absolve theHirer from his/its liabilities towards the company underthis agreement and in no case shall the Hirer be entitled toclaim any benefit from the company beyond any amount ofclaim received from the insurance company.

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e) REGISTRATION

Notwithstanding the fact that the company continues toremain the owner of the Hired Article until payment of theentire dues by the Hirer, the company agrees to permit theHirer to have the Registration under the Motor VehiclesAct of the Hired Article in his/its own name withendorsement of the company’s name as financier, providedthat the Hirer shall be deemed to have transferred theregistration in the name of the company when the Hirercommits a breach of any of the conditions of this agreementand the company is entitled to retake the possession of theHired Article. The Hirer has, in order to facilitate takingpossession of the vehicles, in the event of the Hirercommitting breach of the agreement, executed necessarydocuments and has authorised the company to use the sameas and when the occasion so arises.

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Df) ALIENATION OF HIRED ARTICLE

Ensure not to sell, assign, mortgage, pledge, hypothecateor otherwise deal with the Hired Article or any part thereof,to part with possession of the Hired Article without theexpress written permission of the company previouslyobtained and not to use the Hired Article for any purposeother than that declared in the application.

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g) ……..

h) …….

F

i) ….

j) ….....

04. ………..

05. LOSS AND DAMAGE

G

In the event of the Hired Article, being from any causewhatsoever, wholly lost to the company during the said hiring,the measure of damages as admitted to be payable by theHirer to the company shall be the aggregate of all arrearsamounts. If any, and the total amount of the installment whichwould have been payable during the residue of the said hire H

purchase form. For the purpose of this clause, the HiredArticle, if damaged and not forthwith repaired and restoredto its original condition, shall be deemed to be wholly lost tothe company. However, every opportunity and reasonable timeshall be given to the hirer to restore the Hired Article toworking condition subject to the hirer continuing to pay thehire installments as per the agreement.

06. RELEASE OF PROPERTY.

If the event sic of the hiring continues for the full periodreferred to in Schedule-III hereof and the following sums ofmoney been punctually paid:-

a. all installments due under this agreement.

b. other sums of money due hereunder then in such event thecompany shall release and relinquish all its rights and interestin the Hired Article. Until such payments, the company shallcontinue to have all rights and interest created by thesepresents over the hired Article together with any accession,improvements and additions made thereto by the hirer asclearly provided in clause 3(i) of this agreement and rights ofthe Hirer shall be subject to the beneficial rights of the companyand the Hirer shall be deemed to be holding the Hired Articlein trust for the company.

The company shall be at liberty to hypothecate the HiredArticle in favour of the Bankers until the Hirer shall pay theentire amount due hereunder.

07. …..

08. USE OF THE HIRED ARTICLE FOR UNLAWFULPURPOSE

The Hirer undertakes not to use Hired Article either byitself/himself or through its/his servants or agents, forany unlawful purpose prohibited as per the terms andconditions of the insurance policy or do or permit to bedone any act or thing which might render the insuranceinvalid, and in particular, not to use the Hired Articles inany acts liable to contravention of any of the provisionsof the Acts of the Central and State Legislatures.

AB

C

D

E

F

G

H

A

09. COLLATERAL SECURITY

The monthly/quarterly payment of hire charges for the HiredArticle shall be secured by the delivery to the company of apromissory note to be executed by the Hirer for the valueof Rs.438585/- (Rupees Four Lac Thirty Eight ThousandFive Hundred Eighty Five only)

B

10. ………

11. ……

12. REVIVAL OF THE AGREEMENT

C

In the event of the company repossessing the Hired Articleunder any of the circumstances stated in this agreement,the Hirer may request the company in writing to revivethe agreement and apply for restoration of the same to iton payment of all sums which might have been arrived atas due thereon had the agreement not been determined orthe Hired Article not repossessed by the company togetherwith damages to be mutually agreed upon between thecompany and the Hirer, and the expenses which thecompany has incurred in repossessing the same and/or asa consequence of the agreement being determined and suchrequest may be entertained by the company at its absolutediscretion and upon such further or other terms as it thinksfit and proper in the circumstances. The company shall beunder no compulsion to accept the request for revival ofthis agreement as stated supra.

D

E

F13. ……

14. …..

D

E

F13. ……

14. …..

15. DETERMINATION

In case the Hirer shall during the continuance of thisagreement do or suffer one or more of the following:- G

a) Fail to pay any of the hire installments or the interest orother amounts (for example; insurance premium, expensesincurred for collection of installments, additional taxes,additional, finance charges for late payment of installmentsetc.) having fallen due hereunder within 7 (seven) days of H

the amount falling due for payment whether demandedor not;

b) …….

c) …….

d) pledge or mortgage or hypothecate or sell or attempt topledge or sell or part with possession of or otherwisealienate or transfer the said Hired Article; e)….

f) fail to keep the said Hired Article comprehensivelyinsured as agreed hereinbefore during the period of theagreement.

g) fail to pay to the government or any public authorityand taxes or charges due in respect of the Hired Article.

h) remove the Hired Article to any other State i.e. all suchStates other than the State in which the Hired Article isregistered under Motor Vehicles, Act without prior writtenpermission of the company;

i) break or fail to perform or observe any conditions onhis/its part herein contained;

j) ……

k) …..

l) …….

then on the occurrence of any of the above such events, therights of the Hirer under this Agreement shall forthwithstand determined “IPSO FACTO” without any notice tothe Hirer and all installments due and remaining unpaid,all future instalments in terms of this agreement and anyother charges. Expenses realizable from the Hirer shallbecome due and payable forthwith by the Hire and thecompany and/or its bankers and/or its agent shallthereupon be entitled to enter into the premises of the Hirerat such place the vehicle may be lying and remove andtake possession of the Hired Article situated in any land orplace or house wherever the same may then be without

A

B

C

D

E

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G

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A

being liable to any proceedings/complaint by the Hirer orany other person claiming through/under him or otherwise,and the company shall have the right to sue the Hirer forall such sums receivable from the Hirer as stated aboveand also for damages for breach of this agreement withoutprejudice to the company’s right to otherwise obtaining andrecovering possession of the Hired Article. This shall alsobe without prejudice to the right of the company to sell thehired articles after repossession without the interventionof the court as also to proceed against the Hirer forrecovering any deficiency after adjustment of the saleproceeds of the hired articles as stated above in respect ofthe outstanding dues to the company.

B

C

15.1 In the event of the agreement of hiring being determinedas aforesaid before its full term expires, the Hirer shallforthwith deliver to the company the Hired Article along withDall certificate and policies of insurance and all otherdocuments relating to the said Hired Article. However, refusalof the Hirer/its men or obstruction or delay in handing overto the company the physical possession of the Hired Articletogether with all specified relevant documents/certificates underthese circumstances shall be deemed to be an unlawfulEdetention and wrongful possession of the property by the Hirerand an offence within the purview of the provisions of theIndian Penal Code.

D

5. It is not in dispute that the Complainant defaulted in payment ofinstalments. Even though the Complainant was required to pay the firstFinstalment within 1[st] August, 2002 and the subsequent instalments withinthe 1[st] of each succeeding month, the Complainant did not adhere to theschedule of repayments, which according to the Financier, was of essenceto the hire-purchase agreement. Post dated cheques deposited by theComplainant were, according to the Financier, dishonoured.

G

6. In the circumstances, the Financier took re-possession of thevehicle on 14[th] July, 2003, allegedly upon notice to the Complainant, andin accordance with the conditions of the hire-purchase agreement. Thefactum of notice is, however, disputed by the Complainant.

7. After taking re-possession of the vehicle, the Financier calledHupon the Complainant to clear his outstanding dues amounting to Rs.2,80,132.59 as on the date of the notice, failing which the vehiclewould be disposed of.

8. A pre sale legal notice dated 26.07.2003 was allegedly sent bythe Financier to the Complainant, calling upon him to clear his totaloutstanding dues of Rs.2,80,132.59 within 7 days from the date of receiptof the notice, which was, according to the Financier, duly served on theComplainant. The Complainant did not make the repayment demanded,or even part thereof. The vehicle was sold by the Financier sometime inNovember, 2003.

9. On or about 15[th] July, 2005, that is, exactly two years after theFinancier took possession of the vehicle, the Complainant filed thecomplaint under Section 12 of the Consumer Protection Act, 1986, beingComplaint No.105 of 2005 in the District Forum, admitting that he hadpaid only 7 complete instalments. For the sake of convenience, therelevant paragraphs of the complaint are extracted hereinbelow:

“Provision-3 That Applicant/Complainant has Submitted1,04,000 as a margin money And 3,15,000 was Finance fromOpposite party. That to be Submitted in 35 Equal monthlyinstalments.

Provision-4 That After Agreement with Opposite party No.2Applicant has Received Vehicle from Amit Auto Sales On29.7.2002.

Provision-5 That Applicant Started Driving Vehicle AfterCompleting All the Formalities Related to Vehicle Documentsand Started Paying Instalment Provision-6 That Applicant has Paid Complete 7 instalmentsAnd in 8[th] Month Applicant Has not Completed his twoinstalments Due to ill health. After Recovering in Next MonthWhen He started Driving Vehicle There was A suit Filed forAccident on Applicant Vehicle That’s why Applicant vehiclewas sealed. This Information was Given to Opposite partyno.2 Immediately And it was Also said that After Releasing ofvehicle he will be able to pay Instalment Smoothly.

Provision-7 That After Arranging Somehow applicant wasable to release Vehicle And Driver. And After Paying JuneInstalment When Applicant was about to Started Driving A

B

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D

E

F

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A

Vehicle Opposite party No.2 has Lifted Vehicle Without givingany prior Notice or Information on Dated 14.07.2003.Whereas Applicant has Paid Total of 1,19,335 (One LakhNineteen Thousand Three Hundred and Thirty Five Rupees)in the form of Installment.

Provision-8 When Applicant Has Contacted to the office ofOpposite party No.2 in relation to this They Said That yourInstalments were Due to which vehicle was Lifted. WhenApplicant Said that He will Complete all the Due InstalmentSoon And in Future he will pay all the Installment Timely. ButOpposite party No.2 does not heard it And refused to givevehicle.

B

C

Provision-9 That the Applicant/Complainant was Surprisedwith this behaviour of Opposite party No.2 and didcorrespondence with Administration And Government inrelation to this. That Inspection was also conducted But Therewas no result of all this.

D

Provision-10 That Applicant has done correspondence withOpposite party no.1 and tell the complete situation butApplicant vehicle was not given to Applicant again but it wassold to some other person. Applicant has done very muchhelter-skelter in relation to this But no result of all these.

E

Statutes

Provision-11 That the Applicant is been Continuously beingupset and shocked by Opposite party no 1 and 2. BesideAssuring that he will pay all the past due Installment soonand will pay all other Installment timely, although vehicle wasnot Released in the favour of Applicant by Opposite party.That come under the Category of Business Misconception. InUnfair Trade Practice Act. And Due to Deficiency in Service.It is also Come Under Consumer Protection Act AndSustainable before The Honourable Court.

F

G….

Provision-13 That due to Opposite party acts Applicant HasSuffered Irreparable loss and Complete ReimbursementResponsibility is on Opposite party.

…

H

Provision-15. That Applicant is requesting for following….(a) That Opposite party Shall make Available Applicant vehicleto him immediately/ And it is requested to order that Amountthat is paid in the form of instalment should be refunded.

(b) That From the Date of Lifting of vehicle till the date ofjudgment or till the date of Handing over of vehicle. It isRequested to order that 18,000 p.m. to be given as a lossfrom Opposite party.

(c) That due to Acts of Opposite party to fulfil the Social,financial, physical and mental loss It is requested to orderRs.10,00,000 from Opposite party (d) That It is Requested to order Rs.5000/- as suit expenses andSuch other Relief Which The Hon’ble court Deems Fit.”

10. As admitted by the Complainant in Paragraph (4) of hiscomplaint, the Complainant had received possession of the vehicle fromthe dealer on 29.7.2002. It is the case of the Complainant in his complaintat Paragraph (7) that the Financier had “lifted the vehicle” on 14.07.2003without any prior notice or information. The vehicle was taken away bythe Financier on 14.7.2003, almost a year after the Complainant receivedpossession of the vehicle. Twelve instalments were payable within14.07.2003, but the Complainant had, on his own admission in Paragraph(6) of the complaint, paid only 7 complete instalments.

11. According to the Complainant, he could not pay instalmentsafter the 7[th], timely, due to his illness. Later, an accident case wasregistered against the vehicle, which was detained by the Police. Afterthe Complainant got the vehicle released from the police and startedplying the vehicle, the Financier took repossession of the vehicle. Accordingto the Complainant he paid Rs.1,19,335/- towards instalments. It is notthe case of the Complainant in his complaint, that the Financier tookforcible possession of the vehicle through so called recovery agents, bythreat or by use of muscle power.

12. The Complainant has alleged that, even though, the Complainanthad deposited Rs.1,19,335/- towards instalments, the Financier tookpossession of the vehicle without notice. The Complainant has also allegedthat the Financier refused to concede to the request of the Complainantto release the vehicle, even though the Complainant had sought the A

B

C

DE

F

G

H

Aopportunity to clear the outstanding instalments, and pay futureinstalments within time. [Paragraphs (8) and (11) of the complaint].

13. The vehicle was sold in November 2003. Till then, theComplainant did not even clear the instalments outstanding upto July2003, that is, the outstanding instalments for the period during which theBvehicle was in the possession of the Complainant, not to speak of anyfurther instalments.

14. By an order dated 22[nd] August 2008, the District Forum allowedthe Complaint and directed the Financier to pay Rs.2,23,335/- to theComplainant, along with simple interest at 10% per annum from the dateCof filing of the complaint till payment as also Rs.10,000 towards damagesfor physical and mental agony and Rs.1000/- as litigation expenses, within45 days from the date of the order.

15. Being aggrieved by the order of the District Forum allowingthe complaint, and directing the Financier to pay the Complainant theDentire amount paid by the Complainant to the Financier towards instalmentsand other charges as well as the sum of Rs.1,04,000/- paid by theComplainant directly to the dealer, along with interest at 10% per annum,damages of Rs.10,000/- and litigation costs of Rs.1,000/-, the Financierfiled an appeal before the State Commission. The Financier contendedthat the vehicle had to be sold since the complainant had not paid anEoutstanding amount of Rs.2,80,132/-.

16. By a judgment and order dated 31[st] August, 2017, the StateCommission dismissed the appeal. The Financier filed a RevisionalApplication before the National Commission, under Section 21(b) of theConsumer Protection Act, which has been dismissed by the judgmentFand order under appeal.

17. The Financier has contended that possession of the vehiclehad been taken by the Financier upon notice to the Complainant. However,the fact finding fora under the Consumer Protection Act 1986 haveconcurrently found that the notice had not been sent to the address asGmentioned in the Hire Purchase Agreement, and accordingly held thatnotice had not been served on the complainant. The relevant portion ofthe order of the National Commission under appeal is set out hereinbelow:

“The State Commission has affirmed the order passedby the District Forum on the finding that the address of theHRespondent/complainant, as mentioned in the Hire Purchase Agreement,is “Village Rammanpur, Post-Bangaon Dehwa,Akbarpur, Ambedkar Nagar” whereas the notice forrepossessing the vehicle was sent to him at “RampurBangadon, Akbarpur, Ambedkar Nagar, which is not thecorrect address of the complainant and, therefore, the noticefor repossession was held to have not been served on thecomplainant, as a result of which the petitioner did not beenserved on the complainant, as a result of which the petitionerdid not have any right to repossess the vehicle and put it toauction.

That being the finding, which could not be controvertedby the Learned Counsel for the petitioner even before us, weare not inclined to interfere with the impugned order.

Accordingly, the revision petition fails and is dismissedin limine.”

18. The short question raised by the Financier in this appeal is,whether the Financier is the real owner of the vehicle which is the subjectof a hire purchase agreement, and if so, whether there can be anyimpediment to the Financier, taking repossession of the vehicle, whenthe hirer does not make payment of instalments in terms of the hirepurchase agreement.

19. Another question which arises for determination in this appealis, whether service of proper notice on the hirer is necessary forrepossession of a vehicle which is the subject of a hire purchaseagreement, and if so, what is the consequence of non service of propernotice.

20. Before dealing with the aforesaid questions involved, in thisappeal, it may be pertinent to refer to the relevant provisions of theConsumer Protection Act, 1986, set out hereinafter for convenience.

21. The Consumer Protection Act, 1986 has been enacted to protectthe interests of consumers, by making provisions for the establishmentof Consumer Councils and other fora for speedy redressal of consumerdisputes and for matters connected therewith. The Consumer ProtectionAct, 1986 as per its Statement of Objects and Reasons placed beforeParliament, has been enacted to promote and protect the rights ofconsumers such as:

A

B

C

D

E

F

G

H

A“(a) the right to be protected against marketing of goodswhich are hazardous to life and property;

(b) the right to be informed about the quality, quantity,potency, purity, standard and price of goods to protectthe consumer against unfair trade practices;B

(c) the right to be assured, wherever possible, access tovariety of goods at competitive prices; (d)the right to be heard and to be assured that consumers’interests will receive due consideration at appropriateforums; C

(e) the right to seek redressal against unfair trade practicesor unscrupulous exploitation of consumers; and (f)right to consumer education.”

22. The fora constituted under the Consumer Protection Act, 1986Dare quasi judicial bodies, required to observe the principles of NaturalJustice and to award relief of a specific nature and to award whereverappropriate, compensation to consumers.

23. Some of the relevant provisions of the Consumer ProtectionAct, 1986 as amended from time to time, are set out hereinbelow forEconvenience:

“2. Definitions.- (1) In this Act, unless the context otherwiserequires,—

(a) ….

F(aa) …...

(b) “complainant” means—

(i) a consumer; or

(ii) any voluntary consumer association registered under theCompanies Act, 1956 (1 of 1956), or under any otherGlaw for the time being in force; or

(iii) the Central Government or any State Government, whoor which makes a complaint;

(iv) one or more consumers, where there are numerousHconsumers having the same interest;

(v) in case of death of a consumer, his legal heir orrepresentative;

(c) “complaint” means any allegation in writing made by acomplainant that—

(i) an unfair trade practice or a restrictive trade practicehas been adopted by any trader or service provider;

(ii) the goods bought by him or agreed to be bought by himsuffer from one or more defects;

(iii) the services hired or availed of or agreed to be hired oravailed of by him suffer from deficiency in any respect;

(iv) a trader or the service provider, as the case may be, hascharged for the goods or for the services mentioned inthe complaint, a price in excess of the price—

(a) fixed by or under any law for the time being in force; (b) displayed on the goods or any package containingsuch goods;

(c) displayed on the price list exhibited by him by orunder any law for the time being in force; (d) agreed between the parties;

(v) goods which will be hazardous to life and safety whenused are being offered for sale to the public,—

(a) in contravention of any standards relating to safetyof such goods as required to be complied with, by orunder any law for the time being in force; (b) if the trader could have known with due diligencethat the goods so offered are unsafe to the public;

(vi) services which are hazardous or likely to be hazardous tolife and safety of the public when used, are being offered bythe service provider which such person could have knownwith due diligence to be injurious to life and safety.

with a view to obtaining any relief provided by or under thisAct; (d) “consumer” means any person who,—

A

B

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F

G

H

SUPREME COURT REPORTS

A

A(i) buys any goods for a consideration which has been paidor promised or partly paid and partly promised, or underany system of deferred payment and includes any user ofsuch goods other than the person who buys such goodsfor consideration paid or promised or partly paid or partlypromised, or under any system of deferred payment whenBsuch use is made with the approval of such person, butdoes not include a person who obtains such goods forresale or for any commercial purpose; or

(ii) hires or avails of any services for a consideration whichhas been paid or promised or partly paid and partlypromised, or under any system of deferred payment andincludes any beneficiary of such services other than theperson who hires or avails of the services for considerationpaid or promised, or partly paid and partly promised, orunder any system of deferred payment, when such servicesare availed of with the approval of the first mentionedperson but does not include a person who avails of suchservices for any commercial purpose; C

D

Explanation.—For the purposes of this clause, “commercialpurpose” does not include use by a person of goods boughtand used by him and services availed by him exclusively forthe purposes of earning his livelihood by means of self-employment; E

(e) “consumer dispute” means a dispute where the personagainst whom a complaint has been made, denies or disputesthe allegations contained in the complaint; F

(g) “deficiency” means any fault, imperfection, shortcomingor inadequacy in the quality, nature and manner ofperformance which is required to be maintained by or underany law for the time being in force or has been undertaken toGbe performed by a person in pursuance of a contract orotherwise in relation to any service; (o) “service” means service of any description which is madeavailable to potential users and includes, but not limited to,the provision of facilities in connection with banking,financing, insurance, transport, processing, supply of H

electrical or other energy, board or lodging or both, housingconstruction, entertainment, amusement or the purveying ofnews or other information, but does not include the renderingof any service free of charge or under a contract of personalservice; A

(oo) “spurious goods and services” mean such goods andservices which are claimed to be genuine but they are actuallynot so.

B

(r) “unfair trade practice” means a trade practice which, forthe purpose of promoting the sale, use or supply of any goodsor for the provision of any service, adopts any unfair methodor unfair or deceptive practice including any of the followingpractices, namely:

C

(1) the practice of making any statement, whether orallyor in writing or by visible representation which,—

D

(i) ….

(ii) falsely represents that the services are of a particularstandard, quality or grade;

(iii) …..

(iv) represents that the goods or services have sponsorship,Eapproval, performance, characteristics, accessories,uses or benefits which such goods or services do nothave;

(v) ...

F

(vi) makes a false or misleading representation concerningthe need for, or the usefulness of, any goods or services;

(vii) …..

(viii) makes to the public a representation in a form thatpurports to be—

G

(i) a warranty or guarantee of a product or of any goods orservices; or

(ii) a promise to replace, maintain or repair an article or anypart thereof or to repeat or continue a service until ithas achieved a specified result, H

88SUPREME COURT REPORTS

A

if such purported warranty or guarantee or promise ismaterially misleading or if there is no reasonableprospect that such warranty, guarantee or promise willbe carried out;

(ix) materially misleads the public concerning the price atBwhich a product or like products or goods or services,have been or are, ordinarily sold or provided, and, forthis purpose, a representation as to price shall be deemedto refer to the price at which the product or goods orservices has or have been sold by sellers or providedby suppliers generally in the relevant market unless it isCclearly specified to be the price at which the producthas been sold or services have been provided by theperson by whom or on whose behalf the representationis made;

(x) gives false or misleading facts disparaging the goods,Dservices or trade of another person.

Explanation.—For the purposes of clause (1), a statement thatis—

(a) expressed on an article offered or displayed for sale,Eor on its wrapper or container; or (b)expressed on anything attached to, inserted in, oraccompanying, an article offered or displayed for sale,or on anything on which the article is mounted fordisplay or sale; or F

(c) contained in or on anything that is sold, sent, delivered,transmitted or in any other manner whatsoever madeavailable to a member of the public, shall be deemed to be a statement made to the publicby, and only by, the person who had caused the statementGto be so expressed, made or contained;

(2) permits the publication of any advertisement whether inany newspaper or otherwise, for the sale or supply at abargain price, of goods or services that are not intended tobe offered for sale or supply at the bargain price, or for aHperiod that is, and in quantities that are, reasonable, having regard to the nature of the market in which the business iscarried on, the nature and size of business, and the nature ofthe advertisement.

Explanation.—For the purposes of clause (2), “bargainingprice” means—

(a) a price that is stated in any advertisement to be abargain price, by reference to an ordinary price orotherwise; or (b) a price that a person who reads, hears or sees theadvertisement, would reasonably understand to be abargain price having regard to the prices at which theproduct advertised or like products are ordinarily sold;

(3) permits—

(a) the offering of gifts, prizes or other items with theintention of not providing them as offered or creatingimpression that something is being given or offeredfree of charge when it is fully or partly covered bythe amount charged in the transaction as a whole; (b)the conduct of any contest, lottery, game of chanceor skill, for the purpose of promoting, directly orindirectly, the sale, use or supply of any product orany business interest; (3-A) withholding from the participants of any scheme offeringgifts, prizes or other items free of charge, on its closure theinformation about final results of the scheme.

Explanation.—For the purposes of this sub-clause, theparticipants of a scheme shall be deemed to have beeninformed of the final results of the scheme where suchresults are within a reasonable time published, prominentlyin the same newspapers in which the scheme was originallyadvertised;

(4) permits the sale or supply of goods intended to be used,or are of a kind likely to be used, by consumers, knowing orhaving reason to believe that the goods do not comply withthe standards prescribed by competent authority relating to A

B

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A

performance, composition, contents, design, constructions,finishing or packaging as are necessary to prevent or reducethe risk of injury to the person using the goods;

(5) permits the hoarding or destruction of goods, or refusesto sell the goods or to make them available for sale or toBprovide any service, if such hoarding or destruction or refusalraises or tends to raise or is intended to raise, the cost ofthose or other similar goods or services;

(6) manufacture of spurious goods or offering such goodsfor sale or adopting deceptive practices in the provision ofservices.

C

Section 3. Act not in derogation of any other law.-The provisionsof this Act shall be in addition to and not in derogation of theprovisions of any other law for the time being in force.

Section 11. Jurisdiction of the District Forum.- (1) Subjectto the other provisions of this Act, the District Forum shallhave jurisdiction to entertain complaints where the value ofthe goods or services and the compensation, if any, claimeddoes not exceed rupees twenty lakhs.

D

(2) A complaint shall be instituted in a District Forum withinthe local limits of whose jurisdiction,—

E

(a) the opposite party or each of the opposite parties, wherethere are more than one, at the time of the institution of thecomplaint, actually and voluntarily resides or carries onbusiness or has a branch office or personally works for gain;For (b) any of the opposite parties, where there are more thanone, at the time of the institution of the complaint, actuallyand voluntarily resides, or carries on business or has a branchoffice, or personally works for gain, provided that in suchcase either the permission of the District Forum is given, orthe opposite parties who do not reside, or carry on businessor have a branch office, or personally work for gain, as thecase may be, acquiesce in such institution; or G

(c) the cause of action, wholly or in part, arises.

H

Section 12. Manner in which complaint shall be made.- (1)A complaint in relation to any goods sold or delivered oragreed to be sold or delivered or any service provided oragreed to be provided may be filed with a District Forum by—

(a) the consumer to whom such goods are sold or delivered oragreed to be sold or delivered or such service provided oragreed to be provided; (b) any recognised consumer association whether the consumerto whom the goods sold or delivered or agreed to be sold ordelivered or service provided or agreed to be provided is amember of such association or not;

(c) one or more consumers, where there are numerousconsumers having the same interest, with the permission ofthe District Forum, on behalf of, or for the benefit of, allconsumers so interested; or (d) the Central Government or the State Government, as thecase may be, either in its individual capacity or as arepresentative of interests of the consumers in general.

(2) Every complaint filed under sub-section (1) shall beaccompanied with such amount of fee and payable in suchmanner as may be prescribed.

(3) On receipt of a complaint made under sub-section (1), theDistrict Forum may, by order, allow the complaint to beproceeded with or rejected:

Provided that a complaint shall not be rejected under thissub- section unless an opportunity of being heard has beengiven to the complainant:

Provided further that the admissibility of the complaint shallordinarily be decided within twenty-one days from the dateon which the complaint was received.

(4) Where a complaint is allowed to be proceeded with undersub-section (3), the District Forum may proceed with thecomplaint in the manner provided under this Act:

Provided that where a complaint has been admitted by theDistrict Forum, it shall not be transferred to any other court A

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or tribunal or any authority set up by or under any other lawfor the time being in force.

Explanation.—For the purposes of this section, “recognisedconsumer association” means any voluntary consumerassociation registered under the Companies Act, 1956 (1 of1956) or any other law for the time being in force.

Section 13. Procedure on admission of complaint.-(1) …

(2) The District Forum shall, if the complaint admitted by itunder Section 12 relates to goods in respect of which theprocedure specified in sub-section (1) cannot be followed, orif the complaint relates to any services,—

(a) refer a copy of such complaint to the opposite partydirecting him to give his version of the case within a period ofthirty days or such extended period not exceeding fifteen daysas may be granted by the District Forum; (b) where the opposite party, on receipt of a copy of thecomplaint, referred to him under clause (a) denies or disputesthe allegations contained in the complaint, or omits or failsto take any action to represent his case within the time givenby the District Forum, the District Forum shall proceed tosettle the consumer dispute,—

(i) on the basis of evidence brought to its notice by thecomplainant and the opposite party, where the opposite partydenies or disputes the allegations contained in the complaint,or

(ii) ex parte on the basis of evidence brought to its notice bythe complainant where the opposite party omits or fails totake any action to represent his case within the time given bythe Forum;

(c) where the complainant fails to appear on the date ofhearing before the District Forum, the District Forum mayeither dismiss the complaint for default or decide it on merits.

(3) No proceedings complying with the procedure laid downin sub-sections (1) and (2) shall be called in question in anycourt on the ground that the principles of natural justice havenot been complied with.

(3-A) Every complaint shall be heard as expeditiously aspossible and endeavour shall be made to decide the complaintwithin a period of three months from the date of receipt ofnotice by opposite party where the complaint does not requireanalysis or testing of commodities and within five months, if itrequires analysis or testing of commodities:

Provided that no adjournment shall be ordinarily granted bythe District Forum unless sufficient cause is shown and thereasons for grant of adjournment have been recorded inwriting by the Forum:

Provided further that the District Forum shall make suchorders as to the costs occasioned by the adjournment as maybe provided in the regulations made under this Act:

Provided also that in the event of a complaint being disposedof after the period so specified, the District Forum shall recordin writing, the reasons for the same at the time of disposingof the said complaint.

(3-B) …..

(4) For the purposes of this section, the District Forum shallhave the same powers as are vested in a civil court under theCode of Civil Procedure, 1908 (5 of 1908), while trying a suitin respect of the following matters, namely:—

(i) the summoning and enforcing the attendance of anydefendant or witness and examining the witness on oath;

(ii) the discovery and production of any document or othermaterial object producible as evidence;

(iii) the reception of evidence on affidavits;

(iv) the requisitioning of the report of the concerned analysisor test from the appropriate laboratory or from any otherrelevant source;

(v) issuing of any commission for the examination of anywitness; and

(vi) any other matter which may be prescribed.

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(5) Every proceeding before the District Forum shall bedeemed to be a judicial proceeding within the meaning ofSections 193 and 228 of the Indian Penal Code (45 of 1860),and the District Forum shall be deemed to be a civil court forthe purposes of Section 195, and Chapter XXVI of the Codeof Criminal Procedure, 1973 (2 of 1974).

(6) Where the complainant is a consumer referred to in sub-clause (iv) of clause (b) of sub-section (1) of Section 2, theprovisions of Rule 8 of Order I of the First Schedule to theCode of Civil Procedure, 1908 (5 of 1908) shall apply subjectto the modification that every reference therein to a suit ordecree shall be construed as a reference to a complaint or theorder of the District Forum thereon.

(7) In the event of death of a complainant who is a consumeror of the opposite party against whom the complaint has beenfiled, the provisions of Order XXII of the First Schedule tothe Code of Civil Procedure, 1908 (5 of 1908) shall applysubject to the modification that every reference therein to theplaintiff and the defendant shall be construed as referenceto a complainant or the opposite party, as the case may be.

Section 14. Finding of the District Forum.-(1) If, after theproceeding conducted under Section 13, the District Forumis satisfied that the goods complained against suffer fromany of the defects specified in the complaint or that any of theallegations contained in the complaint about the services areproved, it shall issue an order to the opposite party directinghim to do one or more of the following things, namely:

(a) to remove the defect pointed out by the appropriatelaboratory from the goods in question; (b) to replace the goods with new goods of similar descriptionwhich shall be free from any defect;

(c) to return to the complainant the price, or, as the case maybe, the charges paid by the complainant; (d) to pay such amount as may be awarded by it ascompensation to the consumer for any loss or injury sufferedby the consumer due to the negligence of the opposite party:

Provided that the District Forum shall have the power to grantpunitive damages in such circumstances as it deems fit; (e) to remove the defects in goods or deficiencies in the servicesin question; (f) to discontinue the unfair trade practice or the restrictivetrade practice or not to repeat them; (g) not to offer the hazardous goods for sale; (h) to withdraw the hazardous goods from being offered forsale; (ha) to cease manufacture of hazardous goods and to desistfrom offering services which are hazardous in nature; (hb) to pay such sum as may be determined by it, if it is of theopinion that loss or injury has been suffered by a largenumber of consumers who are not identifiable conveniently:

Provided that the minimum amount of sum so payable shallnot be less than five per cent of the value of such defectivegoods sold or services provided, as the case may be, to suchconsumers:

Provided further that the amount so obtained shall be creditedin favour of such person and utilized in such manner as maybe prescribed; (hc) to issue corrective advertisement to neutralize the effectof misleading advertisement at the cost of the opposite partyresponsible for issuing such misleading advertisement;

(i) to provide for adequate costs to parties.

(2) Every proceeding referred to in sub-section (1) shall beconducted by the President of the District Forum and at leastone member thereof sitting together:

Provided that where a member, for any reason, is unable toconduct a proceeding till it is completed, the President andthe other member shall continue the proceeding from the stageat which it was last heard by the previous member.

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to the State Commission within a period of thirty days fromthe date of the order, in such form and manner as may beprescribed:

Provided that the State Commission may entertain an appealafter the expiry of the said period of thirty days if it issatisfied that there was sufficient cause for not filing it withinthat period:

Provided further that no appeal by a person, who is requiredto pay any amount in terms of an order of the District Forum,shall be entertained by the State Commission unless theappellant has deposited in the prescribed manner fifty percent of that amount or twenty-five thousand rupees, whicheveris less.

Section 17. Jurisdiction of the State Commission.- (1) Subjectto the other provisions of this Act, the State Commission shallhave jurisdiction,—

(a) to entertain—

(i) complaints where the value of the goods or services andcompensation, if any, claimed exceeds rupees twenty lakhsbut does not exceed rupees one crore; and

(ii) appeals against the orders of any District Forum withinthe State; and (b) to call for the records and pass appropriate orders in anyconsumer dispute which is pending before or has beendecided by any District Forum within the State where it appearsto the State Commission that such District Forum has exercised a jurisdiction not vested in it by law, or has failed to exercisea jurisdiction so vested or has acted in exercise of itsjurisdiction illegally or with material irregularity.

Section 21. Jurisdiction of the National Commission.- Subjectto the other provisions of this Act, the National Commissionshall have jurisdiction,—

(a) …...

(b) to call for the records and pass appropriate orders in anyconsumer dispute which is pending before or has been decided by any State Commission where it appears to theNational Commission that such State Commission has exerciseda jurisdiction not vested in it by law, or has failed to exercisea jurisdiction so vested, or has acted in the exercise of itsjurisdiction illegally or with material irregularity.

Section 26. Dismissal of frivolous or vexatious complaints.-Where a complaint instituted before the District Forum, theState Commission or, as the case may be, the NationalCommission, is found to be frivolous or vexatious, it shall,for reasons to be recorded in writing, dismiss the complaintand make an order that the complainant shall pay to theopposite party such cost, not exceeding ten thousand rupees,as may be specified in the order.

Section 27A. Appeal against order passed under Section 27.-(1) Notwithstanding anything contained in the Code ofCriminal Procedure, 1973 (2 of 1974), an appeal underSection 27, both on facts and on law, shall lie from—

(a) the order made by the District Forum to the StateCommission; (b) the order made by the State Commission to the NationalCommission; and

(c) the order made by the National Commission to the SupremeCourt.

(2) Except as aforesaid, no appeal shall lie to any court fromany order of a District Forum or a State Commission or theNational Commission.

(3) Every appeal under this section shall be preferred withina period of thirty days from the date of an order of a DistrictForum or a State Commission or, as the case may be, theNational Commission:

Provided that the State Commission or the NationalCommission or the Supreme Court, as the case may be, mayentertain an appeal after the expiry of the said period ofthirty days, if, it is satisfied that the appellant had sufficientcause for not preferring the appeal within the period of thirtydays.

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A24. Section 11 of the Consumer Protection Act confers jurisdictionon the District Forum, having territorial jurisdiction, to entertain acomplaint, subject to the pecuniary limit of the value of the goods orservices and/or the compensation claimed. In this case the territorial orthe pecuniary jurisdiction of the District Forum, to entertain the complaint,is not in dispute. There can also be no dispute that the Complainant wasBa consumer of services provided by the Financier. The question is whetherthe complaint filed by the Complainant is a ‘complaint’ within the meaningof Section 11, read with Section 2(1) (c) of the Consumer ProtectionAct, 1986. In other words, do the ingredients of a complaint as providedin Sections 2(1)(c) (ii), (iv), (v) and (vi) of the Consumer Protection ActCexist in this case? Is there any deficiency in the services availed by theComplainant from the Financier, within the meaning of Section 2(1)(g)of the Consumer Protection Act 1986? Has the Financier, as serviceprovider adopted any unfair trade practice within the meaning of Section2(1)(r) of the said Act?

D25. Section (2)(1)(r) defines “unfair trade practice” to mean atrade practice, for the purpose of promoting provision of any service, byadoption of unfair method or unfair or deceptive practice, including anyof the practices enumerated in Sections 2(1)(r)(i) to (x), 2(r)(2), 2(r)(3)and 2(r)(3A). The complaint does not make out any case of unfair tradepractice within the meaning of Section 2(1)(r) of the Consumer ProtectionEAct 1986.

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26. The Complainant has only made a vague assertion that theaction of the Financier in taking possession of the vehicle, admittedly fordefault in payment of instalments, and in not releasing the vehicle to theComplainant, in spite of the Complainant’s assurance to the Financier toFclear outstanding instalments and pay future instalments timely, amountsto an act of unfair trade practice and constitutes deficiency of service.

27. As observed above, deficiency has been defined in Section2(1)(g) set out herein above, as any fault, imperfection or shortcomingor inadequacy in the quality, nature or manner of performance which isGrequired to be maintained by or under any law, for the time being inforce, or undertaken to be performed by a person, in pursuance of acontract or otherwise, in relation to any service.

28. Under the terms and conditions of the hire purchase agreement,the ownership of the vehicle was to stand transferred to the ComplainantHfrom the Financier, upon payment of all the 35 instalments and other dues, if any. Until then, the ownership was to be with the Financier. Asall the 35 instalments had not been paid by the complainant to the Financier,the ownership of the vehicle remained with the Financier.

29. The hire purchase agreement, a copy of which is annexed tothe Paper Book, clearly enabled the Financier to take possession of thevehicle, on default in payment of any of the instalments. There is noterm in the Hire Purchase Agreement, that requires the Financier togive notice to the Complainant before terminating the Hire PurchaseAgreement, upon breach of any term thereof, or before taking possessionof the vehicle.

30. On the other hand, clause 15 of the Hire Purchase Agreementexpressly provides for determination of the Hire Purchase Agreementwithout notice to the Complainant, upon default in hire instalments. Clause15 enables the Financier and/or its agent to enter the premises of theComplainant, where the vehicle under hire may be lying, and to takepossession of the same.

31. The repossession of a vehicle under hire, in accordance withthe terms and conditions of a hire purchase agreement, upon default inpayment of hire instalments and refusal to release the same on mereassurance of the Complainant to clear outstanding arrears of hireinstalments, and pay future instalments in time, does not constitute‘deficiency’ in service.

32. The Financier has claimed to have issued notice to theComplainant before taking possession of the vehicle and also a pre salenotice. Unfortunately there was an error in the address of theComplainant in the notice purported to be issued to the Complainantbefore taking possession. It may thus, reasonably be assumed that anobligation to give notice to the Complainant was implicit in the HirePurchase Agreement. The Financier also construed the Hire PurchaseAgreement to contain an implicit requirement to give notice to a hirerbefore taking possession of the vehicle covered by the Hire PurchaseAgreement.

33. The question which follows is, whether the Financier couldhave been directed to return the entire amount paid by the Complainant,by way of instalments or otherwise, including Rs.1,04,000/- paid by theComplainant directly to the dealer, and also to pay damages of Rs.10,000for physical and mental suffering, only because of an error in the address A

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Aof the Complainant, in the notice sent by the Financier, and that too,without even considering how the Complainant was prejudiced by theerror, when the vehicle had been taken away for non payment of hireinstalments and sold after about four months.

34. The object of a notice before taking possession of a vehicle onBhire under a Hire Purchase Agreement, is to enable the hirer, to make awritten request to the Financier to revive the hire purchase agreement interms of Clause 12 of the said agreement, upon payment of all outstandingdues together with damages, as might be mutually agreed upon.

35. A notice also draws the attention of the hirer to the allegedCbreaches of agreement on the part of the hirer, on the basis of which, theFinancier claims to be entitled to take possession. Such notice gives thehirer an opportunity to show that the hirer had not, in fact, committedany breach of agreement. For example, the hirer might be able to showthat the Financier had erroneously omitted to give credit to the hirer forpayments made, or had not presented a cheque in its possession forDpayment, even though there were sufficient funds in the concernedbank account of the hirer, to honour the cheque.

36. Many self employed hirers, operate vehicles taken on hire, toearn a livelihood. Such vehicles are often run over long distances. Anotice ensures that the hirer is not taken by surprise and has time to stopEoperating the vehicle, so that third persons using the vehicle on paymentof charges are not put to sudden inconvenience by reason of re-possession of the vehicle.

37. On the face of the averments in the Complaint, the Complainanthad approached the Financier after possession of the vehicle was taken,Fto be told that the Financier had taken possession of the vehicle, as theComplainant had defaulted in payment of instalments. The Financierhad not agreed to release the vehicle, on the assurance of the Complainantto clear outstanding instalments and to pay future instalments in time.

38. A District Forum constituted under the Consumer ProtectionGAct, 1963, derives its power to grant relief from Section 14 of the saidAct. If the District Forum is satisfied that the allegations contained inthe complaint about the services are proved, it may direct the serviceprovider to [INDIRA BANERJEE, J.]

(i) return the charges paid by the Complainant [Section 14(1)A(c)];

(ii) to pay such amount, as may be awarded by the DistrictForum as compensation to the consumer for any loss orinjury suffered by the Complainant/Consumer, due to thenegligence of the service provider [Section 14(1)(d)]; B

(iii) to pay punitive damages in such circumstances as theDistrict Forum deems fit [Proviso to Section 14(1)(d)];

(iv) to remove the deficiencies in the service in question. [Section14(1)(a)]; C

(v) to discontinue the unfair trade practice [Section 14(1)(f)]

39. Before a District Forum can grant relief to the consumer of aservice, it has to be satisfied that the allegations in the complaint, and/orin other words, the allegations which constitute a valid complaint, that isallegations of unfair or restrictive trade practice adopted by the serviceprovider, or the allegations of deficiency in the service hired, or availedof or agreed to be availed of by the Complainant from the service provider,or the allegations of the service provider charging a price in excess ofthe price fixed for the service, under any law, for the time being in forceor agreed between the parties or allegations of offering spurious servicesor services hazardous to life or safety, are proved.

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40. Section 13(2)(b) of the Consumer Protection Act, 1986 castsan obligation on the District Forum to decide a complaint on the basis ofthe evidence brought to its notice by the Complainant and the serviceprovider. Irrespective of whether the service provider adduces evidenceor not, the decision of the District Forum has to be based on evidencerelied upon by the Complainant. The onus of proof is on the Complainantmaking the allegation. Section 27 of the Consumer Protection Act castsan obligation on the District Forum, the State Commission or the NationalCommission to dismiss frivolous complaints with costs not exceedingRs.10,000/-.

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41. The evidence to which the Complainant drew the attention ofthe District Forum is apparent from its judgment and order. TheComplainant produced a delivery receipt in respect of the vehicle, somepayment receipts, Insurance papers in respect of the vehicle, an FIR

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Aunconnected with the Financier and/or copies thereof and some documentsrelating to the filing of the Complaint and payment of Court Fees etc.,none of which establish any deficiency of service or unfair trade practiceon the part of the Financier.

42. The District Forum drew adverse inference against the FinancierBfor not producing the Hire Purchase Agreement and assumed that therewas no provision in the Hire Purchase Agreement for taking the vehicleback or selling it to a third party. Significantly it was not even the case ofthe Complainant in his complaint, that the Hire Purchase Agreement,which the complainant had signed, did not authorize the Financier totake possession of the vehicle upon default, or to sell the same to a thirdCparty.

43. No adverse inference could have been drawn against theFinancier for not producing the Hire Purchase Agreement before theDistrict Forum, when there was no allegation in the complaint of breachby the Financier of the Hire Purchase Agreement, in taking possessionDof the vehicle. The District Forum did not exercise its power underSection 13(4)(ii) to call upon the Financier to produce the Hire PurchaseAgreement. Even otherwise, the District Forum did not direct the Financierto produce the Hire Purchase Agreement.

44. In the Complaint, a copy of which is annexed to the PaperEBook, there is not a whisper of application of any force in taking possessionof the vehicle. The finding of the District Forum, of the vehicle havingbeen lifted “forcefully” or “snatched” is, with the greatest of respect,contrary to the Complainant’s own case made out in the Complaint, andtherefore perverse. It is well settled that a new case cannot be made outFby way of evidence, when there are no pleadings to support the same.

45. The District Forum concluded that “snatching” the vehicle,without notice, was in breach of the Hire Purchase Agreement andwas ‘deficiency’ in service. The State Commission dismissed the Appealof the Financier on the ground of delay and also on merits, on the groundGof non service of notice at the correct address of the Complainant.

46. The State Commission assumed that the error in the addressof the complainant in the notice despatched by the Financier wasdeliberate, in order to sell the vehicle without the knowledge of theComplainant. Such assumption was not based on any materials on recordbut patently conjectural. The State Commission observed that theH

Complainant had been deprived of the opportunity to deposit the amount,due from him to the Financier, which again is contrary to theComplainant’s own pleadings in his complaint.

47. The State Commission further found that there was no mentionof the amount due to be paid by the Complainant to the Financier, in theWritten Statement filed by the Financier before the District Forum. Therewas also no mention in that written statement of when the vehicle hadbeen sold and the amount for which the vehicle had been sold, whethersuch amount was more than or less than the amount due from theComplainant to the Financier. Observing that the silence on the part ofthe Financier in not divulging anything about the sale rendered the sale‘dubious’, the State Commission concluded that the Financier hadsurreptitiously sold the vehicle, without the knowledge of the Complainant,without notice to the Complainant, and without disclosing the details ofthe sale.

48. The aforesaid observation, of the sale being dubious, has beenmade, overlooking the terms and conditions of the hire purchaseagreement, and without considering the law governing hire purchaseagreements. The Financier remains the owner of the vehicle taken bythe complainant on hire, on condition of option to purchase, upon paymentof all hire instalments. The hire instalments are charges for use of thevehicle as also for the exercise of option to purchase the vehicle infuture. The Financier being the owner of the vehicle, there was noobligation on the part of the Financier, to divulge details of the sale ofthat vehicle, and that too on its own, without being called upon to do so.

49. The finding of the State Commission that the Financier soldthe vehicle without the knowledge of the Complainant is contrary to theComplainant’s own case in his complaint before the District Forum. TheComplainant has in his complaint alleged that:-

(i) The Complainant contacted the office of the Financier, to betold that the vehicle had been lifted, as instalments were due.

(ii) The Financier refused to return the vehicle on the assuranceof the Complainant to clear all the outstanding instalmentsand to pay instalments timely in future.

(iii) The Complainant entered into correspondence with theFinancier and explained his situation, but the vehicle was notreturned.

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A50. The Complainant has established that there was a discrepancyand/or error in the address of the Complainant in the notice forrepossession, from which all the three fora under the Consumer ProtectionAct, 1986, that is the District Forum, the State Commission and theNational Commission have concluded that possession of the vehicle wastaken without notice. It was not the case of the Complainant that theBvehicle was sold without notice to or knowledge of the complainant.

51. The error and/or discrepancy in the address is minor and thereare no materials on the basis of which the State Commission concludedthat the error was deliberate. The finding of the State Commission, ofthe error in the address being deliberate, is unsubstantiated.

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52. Be that as it may, we proceed on the basis of the concurrentfactual findings of the District Forum, the State Commission and theNational Commission, that the Financier took possession of the vehiclewithout notice. Since the Financier deemed it necessary to issue noticeto the complainant, and accordingly dispatched a notice, the notice shouldDhave been sent to the correct address of the Complainant, as recorded inthe Hire Purchase Agreement. The question which arises is, whetherrepossession of the vehicle without proper notice, for admitted default inpayment of hire instalments, warranted the order passed by the DistrictForum, which has been affirmed by the State Commission and the NationalECommission.

53. By directing the Financier to pay to the Complainant, the entireamount paid by the Complainant to the Financier from the inception, asalso the amount paid by the Complainant to the dealer directly, alongwith interest at the rate of 10% per annum, damages of Rs.10,000/-and litigation costs, the fora constituted under the Consumer ProtectionAct, 1986, have given a defaulting hirer the benefit of free use of thevehicle of the value of Rs.4,21,121/- for almost twelve months, plusdamages, oblivious to the depreciation in the value of the vehicle byreason of wear and tear, due to use by the hirer, as also an admittedaccident for which the vehicle lay seized with the Police for some time.

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54. The Consumer Protection Act, 1986 creates fora for quickadjudication of consumer disputes. The Act protects consumers fromdefective goods, deficient services, unfair or restrictive trade practices,or spurious goods or services. The Act also protects consumers of goodsand services from being charged a price, in excess of the price fixed by H

or under any law in force, the price agreed between the parties, or theprice declared by the service provider or the supplier of the goods interalia by display, and/or representation.

55. The Consumer Protection Act, 1986, which creates fora forexpeditious adjudication and settlement of consumer disputes, is not inderogation of any law in existence, but in addition thereto, as provided inSection 3 thereof. The said Act protects consumers of services frombeing charged a price in excess of the price fixed for the service underany law or the price agreed between the parties and also redressal ofdeficiency in the services availed by the Consumer and/or againstrestrictive or unfair trade practices, and/or spurious services.

56. The Consumer Protection Act, 1986 does not override theContract Act, 1872, and other enactments in force, applicable to the serviceavailed by the consumer from the service provider.

57. The protection, to which the consumer of a service is entitledunder the Consumer Protection Act, is against loss of money, by reasonof being denied service, of a quality agreed upon expressly or bynecessary implication, inter alia, in view of the applicable law, for whichthe consumer has paid, or has agreed to pay a consideration. The saidAct also protects consumers from being overcharged for any serviceobtained and/or agreed to be obtained.

58. The consumer of a service may also be entitled to damagesfor any loss suffered by the consumer, by reason of denial or deficiencyin service for which the consumer has paid or agreed to pay (if theparties have agreed to deferred payment), charges and/or in other words,price for the service. In cases of breach of contract, liquidated damagesmay be imposed on the party in breach, if the agreement provides forliquidated damages, that is a fixed amount by way of damages. Wherethe parties to an agreement have not agreed to liquidated damages, theparty in breach of agreement may be directed to pay unliquidated damageswhich are compensatory. Such compensatory damages are not to punishthe party in breach, but to compensate the party not in breach, for lossessuffered as a result of the breach.

59. Where, however, the damages caused by the breach are severeand extensive, the party in breach may be required to pay to the partynot in breach, such damages as would restore the position of the partynot in breach, to the position before the breach occurred.

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60. Apart from compensatory damages, an Adjudicating Authoritymay impose on the party in breach, punitive damages or nominal damages.Punitive damages are awarded where the party in breach of agreementhas behaved in a manner, which is reprehensible and calls for punishment.Nominal damages are awarded where there is no real harm done, byreason of the breach of the contract.

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61. Section 14 of the Consumer Protection Act, 1986 empowersthe District Forum to award compensation to the party not in breach bydirecting the party in breach to return the price or the charges as mayhave been paid by the complainant [Section 14(1)(c)]. The said Sectionalso enables the District Forum to award compensatory damages to theCconsumer for loss or injury suffered by the consumer due to negligenceof the party in breach [Section 14(1)(d)]. The Forum may direct removalof the deficiency in service, if the deficiency can be removed and it candirect dis-continuation of unfair trade practices or restrictive practicesand direct the same not to be repeated [Section 14(1)(e) and (f)].

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62. The proviso to Section 14(1)(d) of Consumer Protection Act,1986 empowers the District Forum to grant punitive damages in suchcircumstances as it deems fit. Punitive damages are not generallyawarded in cases of breach of contract unless the act is so reprehensiblethat it calls for punishment of the party in breach, by imposition of punitiveEand/or exemplary damages. Compensation which is compensatory, hasto be assessed taking into account relevant factors, such as the lossincurred by the claimant, though some amount of guess work and/orestimation may be permissible. In the instant case, the District Forumdid not even undertake the exercise of assessment of the loss/damages,if any, suffered by the complainant by reason of non-service of noticeFbefore taking possession of the vehicle.

63. The District Forum, as also the State Commission and theNational Commission, did not consider the law relating to hire purchasesas enunciated by this Court in a plethora of judgments.

G64. In Charanjit Singh Chadha & Ors. v. Sudhir Mehra[1], reliedupon by the Financier, this Court held:

“5. Hire-purchase agreements are executory contracts underwhich the goods are let on hire and the hirer has an option topurchase in accordance with the terms of the agreement. These

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types of agreements were originally entered into between thedealer and the customer and the dealer used to extend creditto the customer. But as hire- purchase scheme gained inpopularity and in size, the dealers who were not endowedwith liberal amount of working capital found it difficult toextend the scheme to many customers. Then the financierscame into the picture. The finance company would buy thegoods from the dealer and let them to the customer underhire-purchase agreement. The dealer would deliver the goodsto the customer who would then drop out of the transactionleaving the finance company to collect instalments directlyfrom the customer. Under hire-purchase agreement, the hireris simply paying for the use of the goods and for the option topurchase them. The finance charge, representing the differencebetween the cash price and the hire-purchase price, is notinterest but represents a sum which the hirer has to pay forthe privilege of being allowed to discharge the purchase priceof goods by instalments.

7. In Damodar Valley Corpn. v. State of Bihar AIR 1961 SC440 this Court took the view that a mere contract of hiring,without more, is a species of the contract of bailment, whichdoes not create a title in the bailee, but the law of hire purchasehas undergone considerable development during the last halfa century or more and has introduced a number of variations,thus leading to categories and it becomes a question of somenicety as to which category a particular contract between theparties comes under. Ordinarily, a contract of hire purchaseconfers no title on the hirer, but a mere option to purchase onfulfilment of certain conditions. But a contract of hire purchasemay also provide for the agreement to purchase the thing hiredby deferred payments subject to the condition that title to thething shall not pass until all the instalments have been paid.There may be other variations of a contract of hire purchasedepending upon the terms agreed between the parties. Whenrights in third parties have been created by acts of parties orby operation of law, the question may arise as to what exactlywere the rights and obligations of the parties to the originalcontract.

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A65. In Charanjit Singh Chadha (supra), this Court held that aHire Purchase Agreement is an executory contract of sale, conferringno right in rem on the hirer, until the conditions for transfer of the propertyto him have been fulfilled. The Financier continues to be the owner ofthe goods under a hire purchase agreement. The hirer simply pays foruse of the goods and for the option to purchase them. The finance charge,Brepresenting the difference between the price and the hire purchaseprice represents the sum which the hirer has to pay for the privilege ofbeing allowed to pay the purchase price in instalments. Where the hirerhad defaulted in payment of instalments and the agreement specificallyprovided that the Financier was entitled to repossess the vehicle in caseCof default, no case was made out against the Financier.

66. In K. L. Johar & Co. v. Deputy Commercial Tax Officer,Coimbatore[2]this Court took the view that a hire-purchase agreementhas two elements: (1) element of bailment; and (2) element of sale, in thesense that it contemplates an eventual sale. The element of sale fructifiesDwhen the option is exercised by the intending purchaser after fulfillingthe terms of the agreement. When all the terms of the agreement aresatisfied, and the option is exercised, a sale takes place of the goods,which till then, had been hired.

67. In Anup Sarmah v. Bhola Nath Sharma and Others[3]citedEon behalf of the Financier, this Court held that, in an agreement of hire-purchase, the purchaser remains merely a trustee/bailee on behalf ofthe financier/financial institution and ownership remains with the latter.Thus, in case the vehicle is seized by the Financier, no criminal actioncan be taken against the Financier, as the Financier is only repossessingthe goods owned by the Financier.F

68. In Orix Auto Finance (India) Ltd. v. Jagmander Singhand Another[4], relied upon by the Financier, this Court held that if theagreement permits the Financier to take possession of the financedvehicles, there is no legal impediment to such possession being taken.Of course, the hirer could avail of such statutory remedy as might beGavailable. But the mere fact that possession was taken could not be aground to contend that the hirer was prejudiced. As regards therespondent’s objection to improper seizure, this Court held that therecould not be anygeneralization. Whether the seizure was improper, would 2 AIR 1965 SC 10823 (2013) 1 SCC 400H4 (2006) 2 SCC 598

depend on the facts of each case. However, it would not be appropriatefor the Court to lay down any guideline which would in essence, amountto variation of the agreed terms of the agreement.

69. In K. A. Mathai alias Babu & Anr. v. Kora Bibbikutty &Anr.[5], cited on behalf of the Financier, this Court held that where theFinancier’s Hire Purchase Agreement contained a clause of resumption,upon failure to make payment of instalments, it could not be said that theFinancier had committed the offence of theft by taking possession of thevehicle covered by the Hire Purchase Agreement.

70. The Financier has also cited the Judgments Jagdish ChandraNijhawan v. S.K. Saraf[6], and Smt. Lalmuni Devi v. State of Bihar &Ors.[7]

71. In Jagdish Chandra Nijhawan (supra), this Court held thatwhere a Chairman, provided with rent fee furnished flat by the companyof which the company was not the lessee, remained in wrongfulpossession of the flat after his Chairmanship stood terminated, the disputewas of a civil nature. The High Court had thus, erred in law in quashingthe order of discharge made by the Court of Judicial Magistrate in aCriminal Revision application. The judgment has no relevance to theissues involved in this case.

72. In Lalmuni Devi (supra), the issue before this Court was,whether facts which could give rise to a civil claim, could also amount tooffence. This Court held that merely because a civil claim wasmaintainable did not mean that the criminal complaint would not bemaintained. The Judgment was rendered in the context of the allegationthat the respondent Nos. 2 and 10 had fraudulently got the father of thecomplainant to execute a gift deed. The judgment is of no relevance tothis case.

73. In Sundaram Finance Ltd. v. The State of Kerala & Anr.[8]the majority of the Judges held that, the true effect of a transaction mightbe determined from the terms of the agreement, considered in the lightof surrounding circumstances. An owner of goods, who purportsabsolutely to convey or acknowledges to have conveyed goods, and 5 (1996) 7 SCC 212

6 (1999) 1 SCC 119

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Aspecifically purports to hire them under a Hire Purchase Agreement, isnot estopped from proving that the real bargain was a loan on the securityof the goods. If there is a bona fide and completed sale of goods, evidencedby documents, anterior to and independent of a subsequent and distincthiring to the vendor, the transaction may not be regarded as a loantransaction, even though the reason for which it was entered into, wasBto raise money. If the real transaction is a loan transaction, secured by aright of seizure of the goods, the property passes under the documentsembodying the transaction, but subject to the terms of the hiringagreement, which become part of the buyer’s title, and confer a licenceto seize.

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74. A hire-purchase is, however a more complex transaction wherethe owner enters into a transaction of hiring out goods on the terms andconditions set out in the agreement, and the option to purchase, exercisableby the customer on payment of all the instalments of hire, arises whenthe instalments are paid and not before. In such a hire-purchaseDagreement there is no agreement to buy goods; the hirer being under noobligation to buy, has an option either to return the goods or to becomeits owner by payment in full of the stipulated hire and the price forexercising the option. This class of hire-purchase agreements must bedistinguished from transactions in which the customer is the owner ofthe goods and with a view to finance his purchase he enters into anEarrangement which is in the form of a hire-purchase agreement with thefinancier, but in substance evidences a loan transaction, subsequent to ahiring agreement, under which the lender is given the license to seize thegoods.

75. In the aforesaid case, the majority of the judges were of theFview that the intention of the appellants in obtaining the hire- purchaseand allied agreements was to secure the return of the loans advanced totheir customers and no real sale of the vehicle was intended by thecustomer to the appellants. The transactions were merely financialtransactions. The judgment of this Court in Sundaram Finance Ltd.G(supra) was rendered in the context of the liability of a hirer to pay salestax on the goods acquired under the Hire Purchase Agreement.76. In Sundaram Finance Ltd. (supra), Subba Rao, J delivereda dissenting judgment holding:- “6. The object of the hire-purchase system was to help toHfinance the customer in order that he might purchase the property. Though that was the object, the transaction tookthe form of hire-purchase agreement. The main feature of theagreement, apart from small variations, was that the dealeror the financier continued to be the owner till the terms of theagreement were fully complied with by the customer and theoption to purchase the same was exercised by him. If theterms were not complied with, the dealer or the financier, asthe case may be, could terminate the agreement and take backthe goods. In such a transaction, the common intention of thedealer, the financier and the customer was that the transactionshould take the form of a hire-purchase agreement whichwould become a sale on the compliance of the terms of thatagreement. No doubt the financing operation could have takenthe form of a mortgage or pledge, but the parties, for theirmutual benefit and convenience, entered into a hire- purchasetransaction.

7. In the absence of any fraud or undue influence, thequestion resolves itself into a simple question of intention.The transactions were in accordance with the mercantileusage. Both the financier and the customers with open eyesentered into the transactions of hire-purchase. Their intentionwas expressed in clear terms. They could have executedhypothecation bonds, but they did not, and instead enteredinto hire-purchase transactions. There was no reason tocamouflage the real nature of the transactions. None wassuggested. They were, therefore, bound by the terms of theagreements.”

77. The law which emerges from the judgments of the Court referredto above, is that goods are let out on hire under a Hire PurchaseAgreement, with an option to purchase, in accordance with the termsand conditions of the Hire Purchase Agreement. The hirer simply paysfor the use of the goods and for the option to purchase them.

78. Until the option to purchase is exercised by the hirer, uponpayment of all amounts agreed upon between the hirer and the Financier,the financier continues to be owner of the goods being the subject ofhire purchase. Till such time the hirer remains a trustee and/or bailee ofthe goods covered by the Hire Purchase Agreement.

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A79. The Financier continues to remain the owner of a vehicle,covered by a hire purchase agreement till all the hire instalments arepaid and the hirer exercises the option to purchase. Thus, when theFinancier takes re-possession of a vehicle under hire, upon default bythe hirer in payment of hire instalments, the Financier takes re- possessionof the Financier’s own vehicle.B

80. When the agreement between the Financier and the hirer permitsthe Financier to take possession of a vehicle financed by the Financier,there is no legal impediment to the Financier taking possession of thevehicle. When possession of the vehicle is taken, the Financier cannotbe said to have committed theft.C

81. Whether the transaction between a Financier and a purchaser/hirer is a hire purchase transaction, or a loan transaction, might bedetermined from the terms of the agreement, considered in the light ofsurrounding circumstances. However, even a loan transaction, securedby right of seizure of a financed vehicle, confers licence to the FinancierDto seize the vehicle.

82. In this case, the agreement executed by and between theFinancier and the Complainant is a Hire Purchase Agreement as willappear from the terms and conditions thereof. In any event, the foraunder the Consumer Protection Act, have not arrived at any specificEfinding to the contrary. There is no discussion of the nature of theagreement between the Financier and the Complainant. Be that as itmay, the agreement clearly permits the Financier to take possession ofthe vehicle, upon default in payment of instalments.

83. In ICICI Bank Ltd. v. Prakash Kaur & Ors.[9]cited onFbehalf of the complainant, this Court deprecated the practice of hiringRecovery Agents, who were musclemen to take possession of vehiclesin cases, where the borrower might have committed default in paymentof instalments. This Court held:- “16. Before we part with this matter, we wish to make it clearGthat we do not appreciate the procedure adopted by the Bankin removing the vehicle from the possession of the writpetitioner. The practice of hiring recovery agents, who aremusclemen, is deprecated and needs to be discouraged. TheBank should resort to procedure recognized by law to take H9 (2007) 2 SCC 711

possession of vehicles in cases where the borrower may havecommitted default in payment of the instalments instead oftaking resort to strong-arm tactics.”

84. The Judgment was rendered in the facts and circumstances ofthe case where it was alleged that possession of a truck had been taken,by engaging goons and musclemen as Recovery Agents. The disputeswere settled before this Court in view of the submission of Counsel thatthe truck could be returned upon payment of a sum of Rs.50,000/-

85. In Citicorp Maruti Finance Ltd. v. S. Vijaylaxmi[10]cited bythe complainant, this Court held that the fora under the ConsumerProtection Act, 1986 were right in holding that the vehicles had beenillegally and wrongfully recovered by use of force from the loanees. Thejudgment was rendered in the facts and circumstance of the case andthis Court deprecated the use of force. In this case, there was noallegation in the complaint of use of force. Significantly, in Citicorp MarutiFinance Ltd. (supra), Kabir, J. held:-

“27. Till such time as the ownership is not transferred to thepurchaser, the hirer normally continues to be the owner ofthe goods, but that does not entitle him on the strength of theagreement to take back the possession of the vehicle by useof force. The guidelines which had been laid down by ReserveBank of India as well as the appellant Bank itself, it fact,support and make a virtue of such conduct. If any action istaken for recovery in violation of such guidelines or theprinciples as laid down by this Court, such an action cannotbe struck down.”

86. This Court held that the Financier continues to be the ownerof the goods. There is an obvious typographical error in paragraph (27)of the judgment where hirer has been erroneously been typed in placeof lender/financier.

87. The question raised by the Financier in this appeal, that is,whether the Financier is the real owner of the vehicle, which is thesubject of a Hire Purchase Agreement, has to be answered in theaffirmative in view of the law enunciated by this Court in HaranjitSingh Chadha (supra), K.L. Johar & Co. (supra) and Anup Sarmah(supra). The Financier being the owner of the vehicle which is the subject A

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Aof a Hire Purchase Agreement, there can be no impediment to theFinancier taking possession of the vehicle when the hirer does not makepayment of instalments/hire charges in terms of the Hire PurchaseAgreement. However, such repossession cannot be taken by recourseto physical violence, assault and/or criminal intimidation. Nor can suchpossession be taken by engaging gangsters, goons and musclemen as soBcalled Recovery Agents.

88. Whether the service of proper notice on the hirer would benecessary for repossession of a vehicle, which is the subject matter of aHire Purchase Agreement, would depend on the terms and conditionsof the Hire Purchase Agreement, some of which may stand modified byCthe course of conduct of the parties. If the hire purchase agreementprovides for notice on the hirer before repossession, such notice wouldbe mandatory. Notice may also be necessary, if a requirement to givenotice is implicit in the agreement from the course of conduct of theparties.D

89. If the hirer commits breaches of the conditions of a hire purchaseagreement which expressly provides for immediate repossession of avehicle without further notice to the hirer, in case of default in paymentof hire charges and/or hire instalments repossession would not be vitiatedfor want of notice. In this case, however a duty to give notice to theEComplainant before repossession, was implicit in the Hire PurchaseAgreement. The Hire Purchase Agreement was a stereotype agreementin a standard form, prepared by the Financier. The same kind ofagreements, containing, identical terms, except for minor modificationsare executed by all hirers of vehicles, equipment, machinery and othergoods, who enter into hire purchase agreements with the Financier. TheFFinancier who set down the terms and conditions of the hire purchase,construed the hire purchase agreement to contain an implied term forservice of notice and accordingly despatched a notice, but did not addressit to the correct address of the Complainant as given in the hire purchaseagreement.G

90. In a case where the requirement to serve notice beforerepossession is implicit in the hire purchase agreement, non service ofproper notice would tantamount to deficiency of service for breach ofthe hire purchase agreement giving rise to a claim in damages. TheComplainant consumer would be entitled to compensatory damages, basedHon an assessment of the loss caused to the complainant by reason of the omission to give notice. Where there is no evidence of any loss to thehirer by reason of omission to give notice, nominal damages may beawarded.

91. A forum constituted under the Consumer Protection Act has,as observed above, the power to award punitive damages. Punitivedamages should, however, be granted only in exceptional circumstances,where the action of the Financier is so reprehensible that punishment iswarranted. To cite an example, where a Financier erroneously and/orwrongfully invokes the power to repossess without notice to the hirer,causing thereby extensive pecuniary loss to the hirer or loss of goodwilland repute, a forum constituted under the Consumer Protection Act mayaward punitive damages.

92. In the instant case, there is no evidence of any loss sufferedby the complainant by reason of non-receipt of notice. Admittedly, severalinstalments, remained unpaid. After repossession the complainantcontacted the Financier and was informed of the reasons for therepossession. He only made an offer to pay outstanding instalments andgave an assurance to pay future instalments in time. If the Financier wasnot agreeable to accept the offer, the Financier was within its rightsunder the hire purchase agreement. This is not a case where paymenthad been tendered by the hirer but not accepted by the Financier/lender.The Complainant had not tendered payment.

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

94. The District Forum was not justified in directing the Financierto pay the Complainant Rs.2,23,335/- being the entire amount paid by theComplainant to the Financier from the inception as well as the paymentof Rs.1,04,000/- made by the Complainant to the dealer along withdamage of Rs.10,000/- and litigation costs of Rs.1,000/- after theComplainant had held and used the vehicle for almost a year. TheComplainant, admittedly a defaulter, has in effect, been allowed freeuse of the vehicle for about a year, plus damages, for an error in thenotice of repossession, without considering the prejudice, if any, caused A

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Ato the complainant by the error and consequential non receipt of thenotice, and without making any assessment of the loss, if at all, to theComplainant by reason of the error/omission.

95. For the reasons discussed above, the impugned orders of theNational Commission, the State Commission and the District Forum,Bunder the Consumer Protection Act, 1986 cannot be sustained and thesame are set aside.

96. The appeal is accordingly allowed. The Financier shall, however,pay a composite sum of Rs.15,000/- to the Complainant towards damagesfor ‘deficiency’ in service and costs for omission to give the ComplainantCa proper notice before taking repossession of the vehicle.

Kalpana K. Tripathy

Appeal allowed.

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