10 June 2024


Supreme Court

Magma Fincorp Ltd. vs. Rajesh Kumar Tiwari




Financier remains owner of goods which are subject of Hire Purchase Agreement until hirer pays all instalments

Present appeal is against an order passed by the National Commission, dismissing Revision Petition, filed by the Appellant [the Financier], under Section 21(b) of the Consumer Protection Act, 1986, against an order passed by the State Commission, dismissing Appeal filed by the Financier, and affirming the order passed by the District Forum, whereby the District Forum allowed Complaint Case filed by the Respondent, and directed the Financier to pay Rs. 2,23,335 to the Complainant, along with interest at 10% per annum, Rs 10,000 towards physical and mental injury and Rs 1000 as litigation expenses.

Goods are let out on hire under a Hire Purchase Agreement, with an option to purchase, in accordance with the terms and conditions of the Hire Purchase Agreement. The hirer simply pays for the use of the goods and for the option to purchase them. Until the option to purchase is exercised by the hirer, upon payment of all amounts agreed upon between the hirer and the Financier, the financier continues to be owner of the goods being the subject of hire purchase. Till such time the hirer remains a trustee and/or bailee of the goods covered by the Hire Purchase Agreement.

The Financier continues to remain the owner of a vehicle, covered by a hire purchase agreement till all the hire instalments are paid and the hirer exercises the option to purchase. Thus, when the Financier takes re-possession of a vehicle under hire, upon default by the hirer in payment of hire instalments, the Financier takes re-possession of the Financier’s own vehicle. When the agreement between the Financier and the hirer permits the Financier to take possession of a vehicle financed by the Financier, there is no legal impediment to the Financier taking possession of the vehicle. When possession of the vehicle is taken, the Financier cannot be said to have committed theft.

Whether the transaction between a Financier and a purchaser/hirer is a hire purchase transaction, or a loan transaction, might be determined from the terms of the agreement, considered in the light of surrounding circumstances. However, even a loan transaction, secured by right of seizure of a financed vehicle, confers licence to the Financier to seize the vehicle.

In present case, the agreement executed by and between the Financier and the Complainant is a Hire Purchase Agreement as will appear from the terms and conditions thereof. In any event, the fora under the Consumer Protection Act, have not arrived at any specific finding to the contrary. There is no discussion of the nature of the agreement between the Financier and the Complainant. The agreement clearly permits the Financier to take possession of the vehicle, upon default in payment of instalments.

In the instant case, there is no evidence of any loss suffered by the complainant by reason of non-receipt of notice. Admittedly, several instalments, remained unpaid. After re-possession, the complainant contacted the Financier and was informed of the reasons for the re-possession. He only made an offer to pay outstanding instalments and gave an assurance to pay future instalments in time. If the Financier was not agreeable to accept the offer, the Financier was within its rights under the hire purchase agreement. This is not a case where payment had been tendered by the hirer but not accepted by the Financier/lender. The Complainant had not tendered payment.

The impugned orders of the National Commission, the State Commission and the District Forum, under the Consumer Protection Act, 1986 cannot be sustained and the same are set aside. The appeal is accordingly allowed.

Tags : Compensation Direction Legality

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