M/S Magma Fincorp Ltd. (Formerly … vs Rajesh Kumar Tiwari on 1 October, 2020


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Supreme Court of India

M/S Magma Fincorp Ltd. (Formerly … vs Rajesh Kumar Tiwari on 1 October, 2020

Author: Hon’Ble Dr. Chandrachud

Bench: Hon’Ble Dr. Chandrachud, Hon’Ble Ms. Banerjee

                                                                                              1


                                                                               REPORTABLE
                                       IN THE SUPREME COURT OF INDIA
                                        CIVIL APPELLATE JURISDICTION

                                         CIVIL APPEAL NO. 5622 OF 2019
                                    (ARISING OUT OF SLP (C) NO. 33720 OF 2018)


                         M/S Magma Fincorp Ltd.                                …..Appellant

                                                        versus


                         Rajesh Kumar Tiwari                                 …..Respondent




                                                  JUDGMENT

Indira Banerjee, J.

This appeal is against an order dated 2 nd August, 2018 passed

by the National Consumer Disputes Redressal Commission

[hereinafter referred to as the ‘National Commission’], dismissing

Revision Petition No.5 of 2018, filed by the Appellant [hereinafter

referred to as the Financier], under Section 21(b) of the Consumer

Protection Act, 1986, against an order dated 31 st August, 2017 passed

by the State Consumer Disputes Redressal Commission, Uttar
Signature Not Verified

Digitally signed by
ARJUN BISHT
Pradesh [herein after referred to as the ‘State Commission’],
Date: 2020.10.01
18:58:59 IST
Reason:

dismissing Appeal No. 1704 0f 2008 filed by the Financier, and
2
affirming the order dated 22nd August, 2008 passed by the District

Consumer Disputes Redressal Forum, Ambedkar Nagar, Uttar Pradesh

[hereinafter referred to as the ‘District Forum’], whereby the District

Forum allowed Complaint Case No. 105/2005 filed by the Respondent,

Rajesh Kumar Tiwari [hereinafter referred to as the ‘Complainant’],

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.

2. On or about 2nd August 2002, the Complainant entered into a

hire-purchase agreement with the Financier, then known as Magma

Leasing Ltd. for hire-purchase of a Mahindra Marshal Economic Jeep

bearing the Registration No. UP-42-T/1163, which is hereinafter

referred to as the ‘vehicle’, the cost whereof was Rs.4,21,121/- of

which the complainant made an initial payment of Rs.1,06,121/-.

According to the Financier, an amount of Rs.1,04,000/- from out of

the initial payment of Rs.1,06,121/- was paid by the complainant to

the dealer directly. The balance 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 in 35

monthly instalments of Rs.12,531/-, commencing from 1st August,

2002. The monthly instalments were to be paid till 1 st June, 2005.

The Complainant apparently deposited post dated cheques of
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Rs.12,531/-.

4. A part of the recital and some of the relevant terms and

conditions of the said hire purchase agreement between the Financier

and the Complainant, are set out hereinbelow for convenience:

“…..

WHEREAS the Hirer has agreed to deposit post dated
cheques with the company at its registered office at 24, Park
Street, Calcutta-700016 towards security for payment of
monthly/quarterly hire charge and undertakes to ensure
encashment of the same on the respective due dates.

WHEREAS the Hirer has agreed to hold the Hired Article in
Trust for the company subject to user right and not to deal
with the same in the manner specified in Clause 3(1) hereof
until the entire amounts due under this agreement are duly
paid to the company on the terms and conditions more
particularly set out hereunder.

……..

01. HIRED ARTICLE AND TENURE
The company shall provide funds for acquisition of the hired
articles set out in the Schedule. I hereto and the hirer shall
hold the same in trust for the company from the date of
commencement of this agreement regardless of the date of
physical delivery of the hired article for the period as stated
in Schedule-II hereof subject only to Hirer’s user rights upon
the terms and conditions, herein contained.

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

The Annexure hereto shall form an integral part of
this agreement.

02. The Hirer shall duly perform and observe all the
terms and condition contained in this agreement and the
covenants on his part to be performed and observed and
shall in the manner aforesaid, pay to the company,
monthly/quarterly sums by way of hire instalments as
mentioned in Schedule-II and Schedule-III of this agreement
and shall also pay to the company all other sums of money
4
which may become due and payable under this agreement,
upon execution thereof regardless 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
any demand in respect thereof by the company, at its
registered office the stipulated down payments/initial
payment/instalments as mentioned in Schedule-III/other
charges on the due dates, whether or not it has
received delivery of the Hired Article.

b) MAINTENANCE
Maintain and keep the Hired Article in good and
serviceable condition at his own cost. The company
and/or its Bankers shall have all the rights to inspect
and to call for the Hired Article to be produced at any
time for any time for any reason whatsoever. The Hirer
shall be responsible and liable for damage, if any,
caused to the Hired Article and/or to any other third
party.

c) LOCATION
Keep the Hired Article at the Hirer’s said premises and
shall permit the company and/or its agent at all times
to enter upon any premises at which the Hired Article is
kept/parked for the purpose of verification and also
repossession the Hired Article under the provisions of
clause 15 of this agreement and shall not under any
circumstances change the location of the Hired Article,
without express approval of the company.

d) INSURANCE
Insure and keep comprehensively insured the Hired
Article in the name of the company and/or its Banker
against loss or damage by fire, accident, flood,
earthquake, theft or any other cause and including
against third party claims with an insurance company
for the full cost of the Hired Article, such insurance
policy shall be lodged with the company and/or its
bankers duly assigned in their favour promptly and
regularly. And loss and/or liability arising to the
company for the Hirer’s omission or neglect to keep the
Hired Article so comprehensively insured shall be
entirely to the account of the Hire and the Hirer and
shall immediately make payment to the company in
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respect of all such losses suffered and/or liabilities
incurred by the company.

In the event, the company effects or renews the
insurance of the Hired Article, the Hirer will on demand,
reimburse to the company such sum or sums as shall
have been so spent by the company together with
interest at 3% per month calculated from the date of
insurance till date of actual payment.

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

e) REGISTRATION
Notwithstanding the fact that the company
continues to remain the owner of the Hired
Article until payment of the entire dues by the
Hirer, the company agrees to permit the Hirer to
have the Registration under the Motor Vehicles
Act
of the Hired Article in his/its own name with
endorsement of the company’s name as financier,
provided that the Hirer shall be deemed to have
transferred the registration in the name of the
company when the Hirer commits a breach of any
of the conditions of this agreement and the
company is entitled to retake the possession of
the Hired Article. The Hirer has, in order to
facilitate taking possession of the vehicles, in the
event of the Hirer committing breach of the
agreement, executed necessary documents and
has authorised the company to use the same as
and when the occasion so arises.

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f) ALIENATION OF HIRED ARTICLE
Ensure not to sell, assign, mortgage, pledge,
hypothecate or otherwise deal with the Hired Article or
any part thereof, to part with possession of the Hired
Article without the express written permission of the
company previously obtained and not to use the Hired
Article for any purpose other than that declared in the
application.

   g)    ……..
   h)    …….
   i)    ….
   j)    …….
04.      ………..
05.      LOSS AND DAMAGE

In the event of the Hired Article, being from any cause
whatsoever, wholly lost to the company during the said
hiring, the measure of damages as admitted to be payable
by the Hirer to the company shall be the aggregate of all
arrears amounts. If any, and the total amount of the
installment which would have been payable during the
residue of the said hire purchase form. For the purpose of
this clause, the Hired Article, if damaged and not forthwith
repaired and restored to its original condition, shall be
deemed to be wholly lost to the company. However, every
opportunity and reasonable time shall be given to the hirer
to restore the Hired Article to working condition subject to
the hirer continuing to pay the hire installments as per the
agreement.

06. RELEASE OF PROPERTY.

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

a. all installments due under this agreement.

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

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

07. …..

08. USE OF THE HIRED ARTICLE FOR UNLAWFUL
PURPOSE
The Hirer undertakes not to use Hired Article either by
itself/himself or through its/his servants or agents, for
any unlawful purpose prohibited as per the terms and
conditions of the insurance policy or do or permit to be
done any act or thing which might render the insurance
invalid, and in particular, not to use the Hired Articles in
any acts liable to contravention of any of the provisions
of the Acts of the Central and State Legislatures.

09. COLLATERAL SECURITY
The monthly/quarterly payment of hire charges for the
Hired Article shall be secured by the delivery to the
company of a promissory note to be executed by the
Hirer for the value of Rs.438585/- (Rupees Four Lac
Thirty Eight Thousand Five Hundred Eighty Five only)

10. ………

11. ……

12. REVIVAL OF THE AGREEMENT
In the event of the company repossessing the
Hired Article under any of the circumstances
stated in this agreement, the Hirer may request
the company in writing to revive the agreement
and apply for restoration of the same to it on
payment of all sums which might have been
arrived at as due thereon had the agreement not
been determined or the Hired Article not
repossessed by the company together with
damages to be mutually agreed upon between
the company and the Hirer, and the expenses
which the company has incurred in repossessing
the same and/or as a consequence of the
agreement being determined and such request
may be entertained by the company at its
absolute discretion and upon such further or
other terms as it thinks fit and proper in the
circumstances. The company shall be under no
compulsion to accept the request for revival of
this agreement as stated supra.

13. ……

14. …..

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15. DETERMINATION
In case the Hirer shall during the continuance of this
agreement do or suffer one or more of the following:-

a) Fail to pay any of the hire installments or the
interest or other amounts (for example; insurance
premium, expenses incurred for collection of
installments, additional taxes, additional, finance
charges for late payment of installments etc.) having
fallen due hereunder within 7 (seven) days of the
amount falling due for payment whether
demanded or not;

b) …….

c) …….

d) pledge or mortgage or hypothecate or sell or
attempt to pledge or sell or part with possession of or
otherwise alienate or transfer the said Hired Article;

e)….

f) fail to keep the said Hired Article comprehensively
insured as agreed hereinbefore during the period of the
agreement.

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

h) remove the Hired Article to any other State i.e. all
such States other than the State in which the Hired
Article is registered under Motor Vehicles, Act without
prior written permission of the company;

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

j) ……

k) …..

l) …….

then on the occurrence of any of the above such
events, the rights of the Hirer under this
Agreement shall forthwith stand determined
“IPSO FACTO” without any notice to the Hirer and
all installments due and remaining unpaid, all
future instalments in terms of this agreement
and any other charges. Expenses realizable from
the Hirer shall become due and payable forthwith
by the Hire and the company and/or its bankers
and/or its agent shall thereupon be entitled to
enter into the premises of the Hirer at such place
the vehicle may be lying and remove and take
possession of the Hired Article situated in any
land or place or house wherever the same may
then be without being liable to any
proceedings/complaint by the Hirer or any other
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person claiming through/under him or otherwise,
and the company shall have the right to sue the
Hirer for all such sums receivable from the Hirer
as stated above and also for damages for breach
of this agreement without prejudice to the
company’s right to otherwise obtaining and
recovering possession of the Hired Article. This
shall also be without prejudice to the right of the
company to sell the hired articles after
repossession without the intervention of the
court as also to proceed against the Hirer for
recovering any deficiency after adjustment of the
sale proceeds of the hired articles as stated
above in respect of the outstanding dues to the
company.

15.1 In the event of the agreement of hiring being
determined as aforesaid before its full term expires, the
Hirer shall forthwith deliver to the company the Hired Article
along with all certificate and policies of insurance and all
other documents relating to the said Hired Article. However,
refusal of the Hirer/its men or obstruction or delay in
handing over to the company the physical possession of the
Hired Article together with all specified relevant
documents/certificates under these circumstances shall be
deemed to be an unlawful detention and wrongful
possession of the property by the Hirer and an offence
within the purview of the provisions of the Indian Penal
Code
.

5. It is not in dispute that the Complainant defaulted in payment

of instalments. Even though the Complainant was required to pay

the first instalment within 1st August, 2002 and the subsequent

instalments within the 1st of each succeeding month, the Complainant

did not adhere to the schedule of repayments, which according to the

Financier, was of essence to the hire-purchase agreement. Post

dated cheques deposited by the Complainant were, according to the

Financier, dishonoured.

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6. In the circumstances, the Financier took re-possession of the

vehicle on 14th July, 2003, allegedly upon notice to the Complainant,

and in accordance with the conditions of the hire-purchase

agreement. The factum of notice is, however, disputed by the

Complainant.

7. After taking re-possession of the vehicle, the Financier called

upon the Complainant to clear his outstanding dues amounting to

Rs.2,80,132.59 as on the date of the notice, failing which the vehicle

would be disposed of.

8. A pre sale legal notice dated 26.07.2003 was allegedly sent by

the Financier to the Complainant, calling upon him to clear his total

outstanding dues of Rs.2,80,132.59 within 7 days from the date of

receipt of the notice, which was, according to the Financier, duly

served on the Complainant. The Complainant did not make the

repayment demanded, or even part thereof. The vehicle was sold by

the Financier sometime in November, 2003.

9. On or about 15th July, 2005, that is, exactly two years after the

Financier took possession of the vehicle, the Complainant filed the

complaint under Section 12 of the Consumer Protection Act, 1986,

being Complaint No.105 of 2005 in the District Forum, admitting that

he had paid only 7 complete instalments. For the sake of

convenience, the relevant paragraphs of the complaint are extracted

hereinbelow:

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“Provision-3 That Applicant/Complainant has Submitted
1,04,000 as a margin money And 3,15,000 was Finance from
Opposite party. That to be Submitted in 35 Equal monthly
instalments.

Provision-4 That After Agreement with Opposite party
No.2 Applicant has Received Vehicle from Amit Auto Sales On
29.7.2002.

Provision-5 That Applicant Started Driving Vehicle After
Completing All the Formalities Related to Vehicle Documents
and Started Paying Instalment

Provision-6 That Applicant has Paid Complete 7
instalments And in 8th Month Applicant Has not
Completed his two instalments Due to ill health. After
Recovering in Next Month When He started Driving Vehicle
There was A suit Filed for Accident on Applicant Vehicle
That’s why Applicant vehicle was sealed. This Information
was Given to Opposite party no.2 Immediately And it was
Also said that After Releasing of vehicle he will be able to pay
Instalment Smoothly.

Provision-7 That After Arranging Somehow applicant was
able to release Vehicle And Driver. And After Paying June
Instalment When Applicant was about to Started Driving
Vehicle Opposite party No.2 has Lifted Vehicle Without giving
any prior Notice or Information on Dated 14.07.2003.
Whereas Applicant has Paid Total of 1,19,335 (One Lakh
Nineteen Thousand Three Hundred and Thirty Five Rupees) in
the form of Installment.

Provision-8 When Applicant Has Contacted to the office of
Opposite party No.2 in relation to this They Said That your
Instalments were Due to which vehicle was Lifted. When
Applicant Said that He will Complete all the Due Instalment
Soon And in Future he will pay all the Installment Timely. But
Opposite party No.2 does not heard it And refused to give
vehicle.

Provision-9 That the Applicant/Complainant was Surprised
with this behaviour of Opposite party No.2 and did
correspondence with Administration And Government in
relation to this. That Inspection was also conducted But
There was no result of all this.

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

Provision-11 That the Applicant is been Continuously being
upset and shocked by Opposite party no 1 and 2. Beside
Assuring that he will pay all the past due Installment soon
and will pay all other Installment timely, although vehicle
was not Released in the favour of Applicant by Opposite
party. That come under the Category of Business
Misconception. In Unfair Trade Practice Act. And Due to
Deficiency in Service. It is also Come Under Consumer
Protection Act And Sustainable before The Honourable Court.
….

Provision-13 That due to Opposite party acts Applicant Has
Suffered Irreparable loss and Complete Reimbursement
Responsibility is on Opposite party.


Provision-15. That Applicant is requesting for following….

(a) That Opposite party Shall make Available Applicant
vehicle to him immediately/ And it is requested to order that
Amount that is paid in the form of instalment should be
refunded.

(b) That From the Date of Lifting of vehicle till the date
of judgment or till the date of Handing over of vehicle. It is
Requested to order that 18,000 p.m. to be given as a loss
from Opposite party.

(c) That due to Acts of Opposite party to fulfil the
Social, financial, physical and mental loss It is requested to
order Rs.10,00,000 from Opposite party

(d) That It is Requested to order Rs.5000/- as suit
expenses and Such other Relief Which The Hon’ble court
Deems Fit.”

10. As admitted by the Complainant in Paragraph (4) of his

complaint, the Complainant had received possession of the vehicle

from the dealer on 29.7.2002. It is the case of the Complainant in his

complaint at Paragraph (7) that the Financier had “lifted the vehicle”

on 14.07.2003 without any prior notice or information. The vehicle

was taken away by the Financier on 14.7.2003, almost a year after

the Complainant received possession of the vehicle. Twelve
13
instalments were payable within 14.07.2003, 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 instalments

after the 7th, timely, due to his illness. Later, an accident case was

registered against the vehicle, which was detained by the Police.

After the Complainant got the vehicle released from the police and

started plying the vehicle, the Financier took repossession of the

vehicle. According to the Complainant he paid Rs.1,19,335/- towards

instalments. It is not the case of the Complainant in his complaint,

that the Financier took forcible possession of the vehicle through so

called recovery agents, by threat or by use of muscle power.

12. The Complainant has alleged that, even though, the

Complainant had deposited Rs.1,19,335/- towards instalments, the

Financier took possession of the vehicle without notice. The

Complainant has also alleged that the Financier refused to concede to

the request of the Complainant to release the vehicle, even though

the Complainant had sought the opportunity to clear the outstanding

instalments, and pay future instalments within time. [Paragraphs (8)

and (11) of the complaint].

13. The vehicle was sold in November 2003. Till then, the

Complainant did not even clear the instalments outstanding upto July
14
2003, that is, the outstanding instalments for the period during which

the vehicle was in the possession of the Complainant, not to speak of

any further instalments.

14. By an order dated 22nd August 2008, the

District Forum allowed the Complaint and directed the Financier to

pay Rs.2,23,335/- to the Complainant, along with simple interest at

10% per annum from the date of filing of the complaint till payment

as also Rs.10,000 towards damages for physical and mental agony

and Rs.1000/- as litigation expenses, within 45 days from the date of

the order.

15. Being aggrieved by the order of the District Forum allowing

the complaint, and directing the Financier to pay the Complainant the

entire amount paid by the Complainant to the Financier towards

instalments and other charges as well as the sum of Rs.1,04,000/-

paid by the Complainant directly to the dealer, along with interest at

10% per annum, damages of Rs.10,000/- and litigation costs of

Rs.1,000/-, the Financier filed an appeal before the State Commission.

The Financier contended that the vehicle had to be sold since the

complainant had not paid an outstanding amount of Rs.2,80,132/-.

16. By a judgment and order dated 31 st August, 2017, the State

Commission dismissed the appeal. The Financier filed a Revisional

Application before the National Commission, under Section 21(b) of
15
the Consumer Protection Act, which has been dismissed by the

judgment and order under appeal.

17. The Financier has contended that possession of the vehicle

had been taken by the Financier upon notice to the Complainant.

However, the fact finding fora under the Consumer Protection Act

1986 have concurrently found that the notice had not been sent to

the address as mentioned in the Hire Purchase Agreement, and

accordingly held that notice had not been served on the complainant.

The relevant portion of the order of the National Commission under

appeal is set out hereinbelow:

“The State Commission has affirmed the order passed by
the District Forum on the finding that the address of the
Respondent/complainant, as mentioned in the Hire Purchase
Agreement, is “Village Rammanpur, Post-Bangaon Dehwa,
Akbarpur, Ambedkar Nagar” whereas the notice for
repossessing the vehicle was sent to him at “Rampur
Bangadon, Akbarpur, Ambedkar Nagar, which is not the
correct address of the complainant and, therefore, the notice
for repossession was held to have not been served on the
complainant, as a result of which the petitioner did not been
served on the complainant, as a result of which the
petitioner did not have any right to repossess the vehicle
and put it to auction.

That being the finding, which could not be controverted
by the Learned Counsel for the petitioner even before us, we
are not inclined to interfere with the impugned order.

Accordingly, the revision petition fails and is dismissed in
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

subject of a hire purchase agreement, and if so, whether there can be
16
any impediment to the Financier, taking repossession of the vehicle,

when the hirer does not make payment of instalments in terms of the

hire purchase agreement.

19. Another question which arises for determination in this appeal

is, whether service of proper notice on the hirer is necessary for

repossession of a vehicle which is the subject of a hire purchase

agreement, and if so, what is the consequence of non service of

proper notice.

20. Before dealing with the aforesaid questions involved, in this

appeal, it may be pertinent to refer to the relevant provisions of the

Consumer Protection Act, 1986, set out hereinafter for convenience.

21. The Consumer Protection Act, 1986 has been enacted to

protect the interests of consumers, by making provisions for the

establishment of Consumer Councils and other fora for speedy

redressal of consumer disputes and for matters connected therewith.

The Consumer Protection Act, 1986 as per its Statement of Objects

and Reasons placed before Parliament, has been enacted to promote

and protect the rights of consumers such as:

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

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

17

(c) the right to be assured, wherever possible, access to
variety of goods at competitive prices;

(d) the right to be heard and to be assured that consumers’
interests will receive due consideration at appropriate
forums;

(e) the right to seek redressal against unfair trade practices
or unscrupulous exploitation of consumers; and

(f) right to consumer education.”

22. The fora constituted under the Consumer Protection Act, 1986

are quasi judicial bodies, required to observe the principles of Natural

Justice and to award relief of a specific nature and to award

wherever appropriate, compensation to consumers.

23. Some of the relevant provisions of the Consumer Protection

Act, 1986 as amended from time to time, are set out hereinbelow for

convenience:

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

(a) ….

(aa) ……

(b) “complainant” means—

(i) a consumer; or

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

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

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

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

(c) “complaint” means any allegation in writing made by a
complainant that—
18

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

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

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

(iv) a trader or the service provider, as the case may be, has
charged for the goods or for the services mentioned in
the 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 containing such
goods;

(c) displayed on the price list exhibited by him by or under
any law for the time being in force;

(d) agreed between the parties;

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

(a) in contravention of any standards relating to safety of such
goods as required to be complied with, by or under any law
for the time being in force;

(b) if the trader could have known with due diligence that the
goods so offered are unsafe to the public;

(vi) services which are hazardous or likely to be hazardous
to life and safety of the public when used, are being offered
by the service provider which such person could have known
with due diligence to be injurious to life and safety.
with a view to obtaining any relief provided by or under this Act;

(d) “consumer” means any person who,—

(i) buys any goods for a consideration which has been paid or
promised or partly paid and partly promised, or under any
system of deferred payment and includes any user of such
goods other than the person who buys such goods for
consideration paid or promised or partly paid or partly
promised, or under any system of deferred payment when
such use is made with the approval of such person, but does
not include a person who obtains such goods for resale or for
any commercial purpose; or

(ii) hires or avails of any services for a consideration which has
been paid or promised or partly paid and partly promised, or
under any system of deferred payment and includes any
19
beneficiary of such services other than the person who hires
or avails of the services for consideration paid or promised, or
partly paid and partly promised, or under any system of
deferred payment, when such services are availed of with the
approval of the first mentioned person but does not include a
person who avails of such services for any commercial
purpose;

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

(e) “consumer dispute” means a dispute where the person
against whom a complaint has been made, denies or disputes
the allegations contained in the complaint;

(g) “deficiency” means any fault, imperfection,
shortcoming or inadequacy in the quality, nature and
manner of performance which is required to be
maintained by or under any law for the time being in
force or has been undertaken to be performed by a
person in pursuance of a contract or otherwise in relation
to any service;

(o) “service” means service of any description which is made
available to potential users and includes, but not limited to, the
provision of facilities in connection with banking, financing,
insurance, transport, processing, supply of electrical or other
energy, board or lodging or both, housing construction,
entertainment, amusement or the purveying of news or other
information, but does not include the rendering of any service
free of charge or under a contract of personal service;

(oo) “spurious goods and services” mean such goods and
services which are claimed to be genuine but they are actually
not so.

(r) “unfair trade practice” means a trade practice which, for the
purpose of promoting the sale, use or supply of any goods or for
the provision of any service, adopts any unfair method or unfair
or deceptive practice including any of the following practices,
namely:

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

(i) ….

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

20

(iii) …..

(iv) represents that the goods or services have sponsorship,
approval, performance, characteristics, accessories, uses
or benefits which such goods or services do not have;

(v) …

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

(vii) …..

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

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

(ii) a promise to replace, maintain or repair an article or
any part thereof or to repeat or continue a service until
it has achieved a specified result,
if such purported warranty or guarantee or promise is
materially misleading or if there is no reasonable prospect
that such warranty, guarantee or promise will be carried
out;

(ix) materially misleads the public concerning the price at
which a product or like products or goods or services, have
been or are, ordinarily sold or provided, and, for this
purpose, a representation as to price shall be deemed to
refer to the price at which the product or goods or services
has or have been sold by sellers or provided by suppliers
generally in the relevant market unless it is clearly
specified to be the price at which the product has been
sold or services have been provided by the person by
whom or on whose behalf the representation is made;

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

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

(a) expressed on an article offered or displayed for sale, or on
its wrapper or container; or

(b) expressed on anything attached to, inserted in, or
accompanying, an article offered or displayed for sale, or
on anything on which the article is mounted for display or
sale; or

(c) contained in or on anything that is sold, sent, delivered,
transmitted or in any other manner whatsoever made
available to a member of the public,
21
shall be deemed to be a statement made to the public by, and
only by, the person who had caused the statement to be so
expressed, made or contained;

(2) permits the publication of any advertisement whether in any
newspaper or otherwise, for the sale or supply at a bargain
price, of goods or services that are not intended to be offered for
sale or supply at the bargain price, or for a period that is, and in
quantities that are, reasonable, having regard to the nature of
the market in which the business is carried on, the nature and
size of business, and the nature of the advertisement.
Explanation.—For the purposes of clause (2), “bargaining
price” means—

(a) a price that is stated in any advertisement to be a bargain
price, by reference to an ordinary price or otherwise; or

(b) a price that a person who reads, hears or sees the
advertisement, would reasonably understand to be a
bargain price having regard to the prices at which the
product advertised or like products are ordinarily sold;
(3) permits—

(a) the offering of gifts, prizes or other items with the
intention of not providing them as offered or creating
impression that something is being given or offered free of
charge when it is fully or partly covered by the amount
charged in the transaction as a whole;

(b) the conduct of any contest, lottery, game of chance or
skill, for the purpose of promoting, directly or indirectly, the
sale, use or supply of any product or any business interest;
(3-A) withholding from the participants of any scheme offering
gifts, prizes or other items free of charge, on its closure the
information about final results of the scheme.
Explanation.—For the purposes of this sub-clause, the
participants of a scheme shall be deemed to have been
informed of the final results of the scheme where such results
are within a reasonable time published, prominently in the
same newspapers in which the scheme was originally
advertised;

(4) permits the sale or supply of goods intended to be used, or
are of a kind likely to be used, by consumers, knowing or having
reason to believe that the goods do not comply with the
standards prescribed by competent authority relating to
performance, composition, contents, design, constructions,
finishing or packaging as are necessary to prevent or reduce the
risk of injury to the person using the goods;
22
(5) permits the hoarding or destruction of goods, or refuses to
sell the goods or to make them available for sale or to provide
any service, if such hoarding or destruction or refusal raises or
tends to raise or is intended to raise, the cost of those or
other similar goods or services;

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

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

Section 11. Jurisdiction of the District Forum.- (1) Subject
to the other provisions of this Act, the District Forum shall have
jurisdiction to entertain complaints where the value of the goods
or services and the compensation, if any, claimed does not
exceed rupees twenty lakhs.

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

(a) the opposite party or each of the opposite parties, where
there are more than one, at the time of the institution of the
complaint, actually and voluntarily resides or carries on business
or has a branch office or personally works for gain; or

(b) any of the opposite parties, where there are more than one,
at the time of the institution of the complaint, actually and
voluntarily resides, or carries on business or has a branch office,
or personally works for gain, provided that in such case either
the permission of the District Forum is given, or the opposite
parties who do not reside, or carry on business or have a branch
office, or personally work for gain, as the case may be, acquiesce
in such institution; or

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

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

(a) the consumer to whom such goods are sold or delivered or
agreed to be sold or delivered or such service provided or
agreed to be provided;

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

23

(c) one or more consumers, where there are numerous
consumers having the same interest, with the permission of the
District Forum, on behalf of, or for the benefit of, all consumers
so interested; or

(d) the Central Government or the State Government, as the
case may be, either in its individual capacity or as a
representative of interests of the consumers in general.
(2) Every complaint filed under sub-section (1) shall be
accompanied with such amount of fee and payable in such
manner as may be prescribed.

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

Provided that a complaint shall not be rejected under this sub-
section unless an opportunity of being heard has been given to
the complainant:

Provided further that the admissibility of the complaint shall
ordinarily be decided within twenty-one days from the date on
which the complaint was received.

(4) Where a complaint is allowed to be proceeded with under
sub-section (3), the District Forum may proceed with the
complaint in the manner provided under this Act:
Provided that where a complaint has been admitted by the
District Forum, it shall not be transferred to any other court or
tribunal or any authority set up by or under any other law for the
time being in force.

Explanation.—For the purposes of this section, “recognised
consumer association” means any voluntary consumer
association registered under the Companies Act, 1956 (1 of
1956) 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 it under
Section 12 relates to goods in respect of which the procedure
specified in sub-section (1) cannot be followed, or if the
complaint relates to any services,—

(a) refer a copy of such complaint to the opposite party directing
him to give his version of the case within a period of thirty days
or such extended period not exceeding fifteen days as may be
granted by the District Forum;

(b) where the opposite party, on receipt of a copy of the
complaint, referred to him under clause (a) denies or disputes
24
the allegations contained in the complaint, or omits or fails to
take any action to represent his case within the time given by
the District Forum, the District Forum shall proceed to settle the
consumer dispute,—

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

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

(c) where the complainant fails to appear on the date of hearing
before the District Forum, the District Forum may either dismiss
the complaint for default or decide it on merits.
(3) No proceedings complying with the procedure laid down in
sub-sections (1) and (2) shall be called in question in any court
on the ground that the principles of natural justice have not
been complied with.

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

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

Provided further that the District Forum shall make such orders
as to the costs occasioned by the adjournment as may be
provided in the regulations made under this Act:
Provided also that in the event of a complaint being disposed of
after the period so specified, the District Forum shall record in
writing, the reasons for the same at the time of disposing of the
said complaint.

(3-B) …..

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

(i) the summoning and enforcing the attendance of any
defendant or witness and examining the witness on oath;
25

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

(iii) the reception of evidence on affidavits;

(iv) the requisitioning of the report of the concerned analysis or
test from the appropriate laboratory or from any other relevant
source;

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

(vi) any other matter which may be prescribed.
(5) Every proceeding before the District Forum shall be deemed
to be a judicial proceeding within the meaning of Sections 193
and 228 of the Indian Penal Code (45 of 1860), and the District
Forum shall be deemed to be a civil court for the purposes of
Section 195, and Chapter XXVI of the Code of 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, the
provisions of Rule 8 of Order I of the First Schedule to the Code
of Civil Procedure, 1908 (5 of 1908) shall apply subject to the
modification that every reference therein to a suit or decree
shall be construed as a reference to a complaint or the order of
the District Forum thereon.

(7) In the event of death of a complainant who is a consumer or
of the opposite party against whom the complaint has been
filed, the provisions of Order XXII of the First Schedule to the
Code of Civil Procedure, 1908 (5 of 1908) shall apply subject to
the modification that every reference therein to the plaintiff and
the defendant shall be construed as reference to a complainant
or the opposite party, as the case may be.

Section 14. Finding of the District Forum.-(1) If, after the
proceeding conducted under Section 13, the District Forum is
satisfied that the goods complained against suffer from any of
the defects specified in the complaint or that any of the
allegations contained in the complaint about the services are
proved, it shall issue an order to the opposite party directing him
to do one or more of the following things, namely:

(a) to remove the defect pointed out by the appropriate
laboratory from the goods in question;

(b) to replace the goods with new goods of similar description
which shall be free from any defect;

(c) to return to the complainant the price, or, as the case may be,
the charges paid by the complainant;

26

(d) to pay such amount as may be awarded by it as
compensation to the consumer for any loss or injury suffered by
the consumer due to the negligence of the opposite party:
Provided that the District Forum shall have the power to grant
punitive damages in such circumstances as it deems fit;

(e) to remove the defects in goods or deficiencies in the services
in question;

(f) to discontinue the unfair trade practice or the restrictive trade
practice or not to repeat them;

(g) not to offer the hazardous goods for sale;

(h) to withdraw the hazardous goods from being offered for sale;
(ha) to cease manufacture of hazardous goods and to desist
from offering services which are hazardous in nature;
(hb) to pay such sum as may be determined by it, if it is of the
opinion that loss or injury has been suffered by a large number
of consumers who are not identifiable conveniently:
Provided that the minimum amount of sum so payable shall not
be less than five per cent of the value of such defective goods
sold or services provided, as the case may be, to such
consumers:

Provided further that the amount so obtained shall be credited in
favour of such person and utilized in such manner as may be
prescribed;

(hc) to issue corrective advertisement to neutralize the effect of
misleading advertisement at the cost of the opposite party
responsible for issuing such misleading advertisement;

(i) to provide for adequate costs to parties.
(2) Every proceeding referred to in sub-section (1) shall be
conducted by the President of the District Forum and at least
one member thereof sitting together:

Provided that where a member, for any reason, is unable to
conduct a proceeding till it is completed, the President and the
other member shall continue the proceeding from the stage at
which it was last heard by the previous member.

Section 15. Appeal.- Any person aggrieved by an order made
by the District Forum may prefer an appeal against such order to
the State Commission within a period of thirty days from the
date of the order, in such form and manner as may be
prescribed:

27

Provided that the State Commission may entertain an appeal
after the expiry of the said period of thirty days if it is satisfied
that there was sufficient cause for not filing it within that period:
Provided further that no appeal by a person, who is required to
pay any amount in terms of an order of the District Forum, shall
be entertained by the State Commission unless the appellant
has deposited in the prescribed manner fifty per cent of that
amount or twenty-five thousand rupees, whichever is less.
Section 17. Jurisdiction of the State Commission.- (1)
Subject to the other provisions of this Act, the State Commission
shall have jurisdiction,—

(a) to entertain—

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

(ii) appeals against the orders of any District Forum within the
State; and

(b) to call for the records and pass appropriate orders in any
consumer dispute which is pending before or has been decided
by any District Forum within the State where it appears to the
State Commission that such District Forum has exercised a
jurisdiction not vested in it by law, or has failed to exercise a
jurisdiction so vested or has acted in exercise of its jurisdiction
illegally or with material irregularity.

Section 21. Jurisdiction of the National Commission.-
Subject to the other provisions of this Act, the National
Commission shall have jurisdiction,—

(a) ……

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

Section 26. Dismissal of frivolous or vexatious
complaints.-Where a complaint instituted before the District
Forum, the State Commission or, as the case may be, the
National Commission, is found to be frivolous or vexatious, it
shall, for reasons to be recorded in writing, dismiss the complaint
and make an order that the complainant shall pay to the
28
opposite 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 of
Criminal Procedure, 1973 (2 of 1974), an appeal under Section
27
, both on facts and on law, shall lie from—

(a) the order made by the District Forum to the State
Commission;

(b) the order made by the State Commission to the National
Commission; and

(c) the order made by the National Commission to the Supreme
Court.

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

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

Provided that the State Commission or the National Commission
or the Supreme Court, as the case may be, may entertain an
appeal after the expiry of the said period of thirty days, if, it is
satisfied that the appellant had sufficient cause for not
preferring the appeal within the period of thirty days.

24. Section 11 of the Consumer Protection Act confers jurisdiction

on the District Forum, having territorial jurisdiction, to entertain a

complaint, subject to the pecuniary limit of the value of the goods or

services and/or the compensation claimed. In this case the territorial

or the pecuniary jurisdiction of the District Forum, to entertain the

complaint, is not in dispute. There can also be no dispute that the

Complainant was a consumer of services provided by the Financier.

The question is whether the complaint filed by the Complainant is a

‘complaint’ within the meaning of Section 11, read with Section 2(1)
29

(c) of the Consumer Protection Act, 1986. In other words, do the

ingredients of a complaint as provided in Sections 2(1)(c) (ii), (iv), (v)

and (vi) of the Consumer Protection Act exist in this case? Is there

any deficiency in the services availed by the Complainant from the

Financier, within the meaning of Section 2(1)(g) of the Consumer

Protection Act 1986? Has the Financier, as service provider adopted

any unfair trade practice within the meaning of Section 2(1)(r) of the

said Act?

25. Section (2)(1)(r) defines “unfair trade practice” to mean a

trade practice, for the purpose of promoting provision of any service,

by adoption of unfair method or unfair or deceptive practice,

including any of 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 trade practice within the meaning of Section 2(1)(r) of

the Consumer Protection Act 1986.

26. The Complainant has only made a vague assertion that the

action of the Financier in taking possession of the vehicle, admittedly

for default in payment of instalments, and in not releasing the vehicle

to the Complainant, in spite of the Complainant’s assurance to the

Financier to clear outstanding instalments and pay future instalments

timely, amounts to an act of unfair trade practice and constitutes

deficiency of service.

30

27. As observed above, deficiency has been defined in Section

2(1)(g) set out herein above, as any fault, imperfection or

shortcoming or inadequacy in the quality, nature or manner of

performance which is required to be maintained by or under any law,

for the time being in force, or undertaken to be performed by a

person, in pursuance of a contract 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 Complainant from the Financier, upon payment of all the 35

instalments and other dues, if any. Until then, the ownership was to

be with the Financier. As all 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 to

the Paper Book, clearly enabled the Financier to take possession of

the vehicle, on default in payment of any of the instalments. There is

no term in the Hire Purchase Agreement, that requires the Financier

to give notice to the Complainant before terminating the Hire

Purchase Agreement, upon breach of any term thereof, or before

taking possession of the vehicle.

31

30. On the other hand, clause 15 of the Hire Purchase Agreement

expressly provides for determination of the Hire Purchase Agreement

without notice to the Complainant, upon default in hire instalments.

Clause 15 enables the Financier and/or its agent to enter the

premises of the Complainant, where the vehicle under hire may be

lying, and to take possession of the same.

31. The repossession of a vehicle under hire, in accordance with

the terms and conditions of a hire purchase agreement, upon default

in payment of hire instalments and refusal to release the same on

mere assurance of the Complainant to clear outstanding arrears of

hire instalments, and pay future instalments in time, does not

constitute ‘deficiency’ in service.

32. The Financier has claimed to have issued notice to the

Complainant before taking possession of the vehicle and also a pre

sale notice. Unfortunately there was an error in the address of the

Complainant in the notice purported to be issued to the Complainant

before taking possession. It may thus, reasonably be assumed that

an obligation to give notice to the Complainant was implicit in the

Hire Purchase Agreement. The Financier also construed the Hire

Purchase Agreement to contain an implicit requirement to give notice

to a hirer before taking possession of the vehicle covered by the Hire

Purchase Agreement.

32

33. The question which follows is, whether the Financier could

have been directed to return the entire amount paid by the

Complainant, by way of instalments or otherwise, including

Rs.1,04,000/- paid by the Complainant directly to the dealer, and also

to pay damages of Rs.10,000 for physical and mental suffering, only

because of an error in the address of the Complainant, in the notice

sent by the Financier, and that too, without even considering how the

Complainant was prejudiced by the error, when the vehicle had been

taken away for non payment of hire instalments and sold after about

four months.

34. The object of a notice before taking possession of a vehicle on

hire under a Hire Purchase Agreement, is to enable the hirer, to make

a written request to the Financier to revive the hire purchase

agreement in terms of Clause 12 of the said agreement, upon

payment of all outstanding dues together with damages, as might be

mutually agreed upon.

35. A notice also draws the attention of the hirer to the alleged

breaches of agreement on the part of the hirer, on the basis of which,

the Financier claims to be entitled to take possession. Such notice

gives the hirer an opportunity to show that the hirer had not, in fact,

committed any breach of agreement. For example, the hirer might

be able to show that the Financier had erroneously omitted to give

credit to the hirer for payments made, or had not presented a cheque
33
in its possession for payment, even though there were sufficient

funds in the concerned bank account of the hirer, to honour the

cheque.

36. Many self employed hirers, operate vehicles taken on hire, to

earn a livelihood. Such vehicles are often run over long distances. A

notice ensures that the hirer is not taken by surprise and has time to

stop operating the vehicle, so that third persons using the vehicle on

payment of 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

Complainant had approached the Financier after possession of the

vehicle was taken, to be told that the Financier had taken possession

of the vehicle, as the Complainant had defaulted in payment of

instalments. The Financier had not agreed to release the vehicle, on

the assurance of the Complainant to clear outstanding instalments

and to pay future instalments in time.

38. A District Forum constituted under the Consumer Protection

Act, 1963, derives its power to grant relief from Section 14 of the said

Act. If the District Forum is satisfied that the allegations contained in

the complaint about the services are proved, it may direct the service

provider to

(i) return the charges paid by the Complainant [Section 14(1)
34

(c)];

(ii) to pay such amount, as may be awarded by the District
Forum as compensation to the consumer for any loss or
injury suffered by the Complainant/Consumer, due to
the negligence of the service provider [Section 14(1)(d)];

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

(iv) to remove the deficiencies in the service in question.

[Section 14(1)(a)];

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

(f)]

39. Before a District Forum can grant relief to the consumer of a

service, it has to be satisfied that the allegations in the complaint,

and/or in other words, the allegations which constitute a valid

complaint, that is allegations of unfair or restrictive trade practice

adopted by the service provider, or the allegations of deficiency in

the service hired, or availed of 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 of the price fixed for the

service, under any law, for the time being in force or agreed between

the parties or allegations of offering spurious services or services

hazardous to life or safety, are proved.

40. Section 13(2)(b) of the Consumer Protection Act, 1986 casts

an obligation on the District Forum to decide a complaint on the basis

of the evidence brought to its notice by the Complainant and the

service provider. Irrespective of whether the service provider
35
adduces evidence or not, the decision of the District Forum has to be

based on evidence relied upon by the Complainant. The onus of proof

is on the Complainant making the allegation. Section 27 of the

Consumer Protection Act casts an obligation on the District Forum,

the State Commission or the National Commission to dismiss frivolous

complaints with costs not exceeding Rs.10,000/-.

41. The evidence to which the Complainant drew the attention of

the District Forum is apparent from its judgment and order. The

Complainant produced a delivery receipt in respect of the vehicle,

some payment receipts, Insurance papers in respect of the vehicle,

an FIR unconnected with the Financier and/or copies thereof and

some documents relating to the filing of the Complaint and payment

of Court Fees etc., none of which establish any deficiency of service

or unfair trade practice on the part of the Financier.

42. The District Forum drew adverse inference against the

Financier for not producing the Hire Purchase Agreement and

assumed that there was no provision in the Hire Purchase Agreement

for taking the vehicle back or selling it to a third party. Significantly it

was not even the case of the Complainant in his complaint, that the

Hire Purchase Agreement, which the complainant had signed, did not

authorize the Financier to take possession of the vehicle upon default,

or to sell the same to a third party.

36

43. No adverse inference could have been drawn against the

Financier for not producing the Hire Purchase Agreement before the

District Forum, when there was no allegation in the complaint of

breach by the Financier of the Hire Purchase Agreement, in taking

possession of the vehicle. The District Forum did not exercise its

power under Section 13(4)(ii) to call upon the Financier to produce

the Hire Purchase Agreement. Even otherwise, the District Forum did

not direct the Financier to produce the Hire Purchase Agreement.

44. In the Complaint, a copy of which is annexed to the Paper

Book, there is not a whisper of application of any force in taking

possession of the vehicle. The finding of the District Forum, of the

vehicle having been lifted “forcefully” or “snatched” is, with the

greatest of respect, contrary to the Complainant’s own case made

out in the Complaint, and therefore perverse. 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.

45. The District Forum concluded that “snatching” the vehicle,

without notice, was in breach of the Hire Purchase Agreement and

was ‘deficiency’ in service. The State Commission dismissed the

Appeal of the Financier on the ground of delay and also on merits, on

the ground of non service of notice at the correct address of the

Complainant.

37

46. The State Commission assumed that the error in the address

of the complainant in the notice despatched by the Financier was

deliberate, in order to sell the vehicle without the knowledge of the

Complainant. Such assumption was not based on any materials on

record but patently conjectural. The State Commission observed that

the Complainant had been deprived of the opportunity to deposit the

amount, due from him to the Financier, which again is contrary to the

Complainant’s own pleadings in his complaint.

47. The State Commission further found that there was no

mention of the amount due to be paid by the Complainant to the

Financier, in the Written Statement filed by the Financier before the

District Forum. There was also no mention in that written statement

of when the vehicle had been sold and the amount for which the

vehicle had been sold, whether such amount was more than or less

than the amount due from the Complainant to the Financier.

Observing that the silence on the part of the Financier in not

divulging anything about the sale rendered the sale ‘dubious’, the

State Commission concluded that the Financier had surreptitiously

sold the vehicle, without the knowledge of the Complainant, without

notice to the Complainant, and without disclosing the details of the

sale.

48. The aforesaid observation, of the sale being dubious, has been

made, overlooking the terms and conditions of the hire purchase
38
agreement, and without considering the law governing hire purchase

agreements. The Financier remains the owner of the vehicle taken by

the complainant on hire, on condition of option to purchase, upon

payment of all hire instalments. The hire instalments are charges for

use of the vehicle as also for the exercise of option to purchase the

vehicle in future. The Financier being the owner of the vehicle, there

was no obligation on the part of the Financier, to divulge details of

the sale of that vehicle, and that too on its own, without being called

upon to do so.

49. The finding of the State Commission that the Financier sold

the vehicle without the knowledge of the Complainant is contrary to

the Complainant’s own case in his complaint before the District

Forum. The Complainant has in his complaint alleged that:-

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

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

(iii) The Complainant entered into correspondence with the
Financier and explained his situation, but the vehicle was
not returned.

50. The Complainant has established that there was a discrepancy

and/or error in the address of the Complainant in the notice for

repossession, from which all the three fora under the Consumer

Protection Act, 1986, that is the District Forum, the State Commission
39
and the National Commission have concluded that possession of the

vehicle was taken without notice. It was not the case of the

Complainant that the vehicle was sold without notice to or knowledge

of the complainant.

51. The error and/or discrepancy in the address is minor and there

are no materials on the basis of which the State Commission

concluded that the error was deliberate. The finding of the State

Commission, of the error in the address being deliberate, is

unsubstantiated.

52. Be that as it may, we proceed on the basis of the concurrent

factual findings of the District Forum, the State Commission and the

National Commission, that the Financier took possession of the

vehicle without notice. Since the Financier deemed it necessary to

issue notice to the complainant, and accordingly dispatched a notice,

the notice should have been sent to the correct address of the

Complainant, as recorded in the Hire Purchase Agreement. The

question which arises is, whether repossession of the vehicle without

proper notice, for admitted default in payment of hire instalments,

warranted the order passed by the District Forum, which has been

affirmed by the State Commission and the National Commission.

53. By directing the Financier to pay to the Complainant, the

entire amount paid by the Complainant to the Financier from the
40
inception, as also the amount paid by the Complainant to the dealer

directly, along with interest at the rate of 10% per annum, damages

of Rs.10,000/- and litigation costs, the fora constituted under the

Consumer Protection Act, 1986, have given a defaulting hirer the

benefit of free use of the vehicle of the value of Rs.4,21,121/- for

almost twelve months, plus damages, oblivious to the depreciation in

the value of the vehicle by reason of wear and tear, due to use by the

hirer, as also an admitted accident for which the vehicle lay seized

with the Police for some time.

54. The Consumer Protection Act, 1986 creates fora for quick

adjudication of consumer disputes. The Act protects consumers from

defective goods, deficient services, unfair or restrictive trade

practices, or spurious goods or services. The Act also protects

consumers of goods and services from being charged a price, in

excess of the price fixed by or under any law in force, the price

agreed between the parties, or the price declared by the service

provider or the supplier of the goods inter alia by display, and/or

representation.

55. The Consumer Protection Act, 1986, which creates fora for

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 consumers of

services from being charged a price in excess of the price fixed for
41
the service under any law or the price agreed between the parties

and also redressal of deficiency in the services availed by the

Consumer and/or against restrictive or unfair trade practices, and/or

spurious services.

56. The Consumer Protection Act, 1986 does not override the

Contract Act, 1872, and other enactments in force, applicable to the

service availed by the consumer from the service provider.

57. The protection, to which the consumer of a service is entitled

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 for any

service obtained and/or agreed to be obtained.

58. The consumer of a service may also be entitled to damages

for any loss suffered by the consumer, by reason of denial or

deficiency in service for which the consumer has paid or agreed to

pay (if the parties have agreed to deferred payment), charges and/or

in other words, price for the service. In cases of breach of contract,

liquidated damages may be imposed on the party in breach, if the

agreement provides for liquidated damages, that is a fixed amount

by way of damages. Where the parties to an agreement have not
42
agreed to liquidated damages, the party in breach of agreement may

be directed to pay unliquidated damages which are compensatory.

Such compensatory damages are not to punish the party in breach,

but to compensate the party not in breach, for losses suffered as a

result of the breach.

59. Where, however, the damages caused by the breach are

severe and extensive, the party in breach may be required to pay to

the party not in breach, such damages as would restore the position

of the party not in breach, to the position before the breach occurred.

60. Apart from compensatory damages, an Adjudicating Authority

may impose on the party in breach, punitive damages or nominal

damages. Punitive damages are awarded where the party in breach

of agreement has behaved in a manner, which is reprehensible and

calls for punishment. Nominal damages are awarded where there is

no real harm done, by reason of the breach of the contract.

61. Section 14 of the Consumer Protection Act, 1986 empowers

the District Forum to award compensation to the party not in breach

by directing the party in breach to return the price or the charges as

may have been paid by the complainant [Section 14(1)(c)]. The said

Section also enables the District Forum to award compensatory

damages to the consumer for loss or injury suffered by the consumer

due to negligence of the party in breach [Section 14(1)(d)]. The
43
Forum may direct removal of the deficiency in service, if the

deficiency can be removed and it can direct dis-continuation of unfair

trade practices or restrictive practices and direct the same not to be

repeated [Section 14(1)(e) and (f)].

62. The proviso to Section 14(1)(d) of Consumer Protection Act,

1986 empowers the District Forum to grant punitive damages in

such circumstances as it deems fit. Punitive damages are not

generally awarded in cases of breach of contract unless the act is so

reprehensible that it calls for punishment of the party in breach, by

imposition of punitive and/or exemplary damages. Compensation

which is compensatory, has to be assessed taking into account

relevant factors, such as the loss incurred by the claimant, though

some amount of guess work and/or estimation may be permissible.

In the instant case, the District Forum did not 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.

63. The District Forum, as also the State Commission and the

National Commission, did not consider the law relating to hire

purchases as enunciated by this Court in a plethora of judgments.
44

64. In Charanjit Singh Chadha & Ors. v. Sudhir Mehra1, relied

upon by the Financier, this Court held:

“5. Hire-purchase agreements are executory contracts
under which the goods are let on hire and the hirer has an
option to purchase in accordance with the terms of the
agreement. These types of agreements were originally
entered into between the dealer and the customer and the
dealer used to extend credit to the customer. But as hire-
purchase scheme gained in popularity and in size, the
dealers who were not endowed with liberal amount of
working capital found it difficult to extend the scheme to
many customers. Then the financiers came into the picture.
The finance company would buy the goods from the dealer
and let them to the customer under hire-purchase
agreement. The dealer would deliver the goods to the
customer who would then drop out of the transaction
leaving the finance company to collect instalments directly
from the customer. Under hire-purchase agreement, the
hirer is simply paying for the use of the goods and for the
option to purchase them. The finance charge, representing
the difference between the cash price and the hire-purchase
price, is not interest but represents a sum which the hirer
has to pay for the privilege of being allowed to discharge the
purchase price of goods by instalments.

7. In Damodar Valley Corpn. v. State of Bihar AIR 1961 SC
440 this Court took the view that a mere contract of hiring,
without more, is a species of the contract of bailment, which
does not create a title in the bailee, but the law of hire
purchase has undergone considerable development during
the last half a century or more and has introduced a number
of variations, thus leading to categories and it becomes a
question of some nicety as to which category a particular
contract between the parties comes under. Ordinarily, a
contract of hire purchase confers no title on the hirer, but a
mere option to purchase on fulfilment of certain conditions.

But a contract of hire purchase may also provide for the
agreement to purchase the thing hired by deferred
payments subject to the condition that title to the thing shall
not pass until all the instalments have been paid. There may
be other variations of a contract of hire purchase depending
upon the terms agreed between the parties. When rights in
third parties have been created by acts of parties or by
operation of law, the question may arise as to what exactly
were the rights and obligations of the parties to the original

1 (2001) 7 SCC 417
45
contract.

65. In Charanjit Singh Chadha (supra), this Court held that a

Hire Purchase Agreement is an executory contract of sale, conferring

no right in rem on the hirer, until the conditions for transfer of the

property to him have been fulfilled. The Financier continues to be

the owner of the goods under a hire purchase agreement. The hirer

simply pays for use of the goods and for the option to purchase

them. The finance charge, representing the difference between the

price and the hire purchase price represents the sum which the hirer

has to pay for the privilege of being allowed to pay the purchase

price in instalments. Where the hirer had defaulted in payment of

instalments and the agreement specifically provided that the

Financier was entitled to repossess the vehicle in case of default, no

case was made out against the Financier.

66. In K.L. Johar & Co. v. Deputy Commercial Tax Officer,

Coimbatore2 this Court took the view that a hire-purchase

agreement has two elements: (1) element of bailment; and (2)

element of sale, in the sense that it contemplates an eventual sale.

The element of sale fructifies when the option is exercised by the

intending purchaser after fulfilling the terms of the agreement. When

all the terms of the agreement are satisfied, and the option is

exercised, a sale takes place of the goods, which till then, had been

hired.

2. AIR 1965 SC 1082
46

67. In Anup Sarmah v. Bhola Nath Sharma and Others 3 cited

on behalf of the Financier, this Court held that, in an agreement of

hire-purchase, the purchaser remains merely a trustee/bailee on

behalf of the financier/financial institution and ownership remains

with the latter. Thus, in case the vehicle is seized by the Financier, no

criminal action can be taken against the Financier, as the Financier is

only repossessing the goods owned by the Financier.

68. In Orix Auto Finance (India) Ltd. v. Jagmander Singh

and Another4, relied upon by the Financier, this Court held that if

the agreement permits the Financier to take possession of the

financed vehicles, there is no legal impediment to such possession

being taken. Of course, the hirer could avail of such statutory

remedy as might be available. But the mere fact that possession

was taken could not be a ground to contend that the hirer was

prejudiced. As regards the respondent’s objection to improper

seizure, this Court held that there could not be any generalization.

Whether the seizure was improper, would depend on the facts of

each case. However, it would not be appropriate for the Court to lay

down any guideline which would in essence, amount to variation of

the agreed terms of the agreement.

3 (2013) 1 SCC 400
4 (2006) 2 SCC 598
47

69. In K. A. Mathai alias Babu & Anr. v. Kora Bibbikutty &

Anr.5, cited on behalf of the Financier, this Court held that where the

Financier’s Hire Purchase Agreement contained a clause of

resumption, upon failure to make payment of instalments, it could not

be said that the Financier had committed the offence of theft by

taking possession of the vehicle covered by the Hire Purchase

Agreement.

70. The Financier has also cited the Judgments Jagdish Chandra

Nijhawan v. S.K. Saraf6, and Smt. Lalmuni Devi v. State of

Bihar & Ors.7

71. In Jagdish Chandra Nijhawan (supra), this Court held that

where a Chairman, provided with rent fee furnished flat by the

company of which the company was not the lessee, remained in

wrongful possession of the flat after his Chairmanship stood

terminated, the dispute was of a civil nature. The High Court had

thus, erred in law in quashing the order of discharge made by the

Court of Judicial Magistrate in a Criminal

Revision application. The judgment has no relevance to the issues

involved in this case.

5 (1996) 7 SCC 212
6 (1999) 1 SCC 119
7 (2001) 2 SCC 17
48

72. In Lalmuni Devi (supra), the issue before this Court was,

whether facts which could give rise to a civil claim, could also amount

to offence. This Court held that merely because a civil claim was

maintainable did not mean that the criminal complaint would not be

maintained. The Judgment was rendered in the context of the

allegation that the respondent Nos. 2 and 10 had fraudulently got the

father of the complainant to execute a gift deed. The judgment is of

no relevance to this 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

might be determined from the terms of the agreement, considered in

the light of surrounding circumstances. An owner of goods, who

purports absolutely to convey or acknowledges to have conveyed

goods, and specifically purports to hire them under a Hire Purchase

Agreement, is not estopped from proving that the real bargain was a

loan on the security of the goods. If there is a bona fide and

completed sale of goods, evidenced by documents, anterior to and

independent of a subsequent and distinct hiring to the vendor, the

transaction may not be regarded as a loan transaction, even though

the reason for which it was entered into, was to raise money. If the

real transaction is a loan transaction, secured by a right of seizure of

the goods, the property passes under the documents embodying the

transaction, but subject to the terms of the hiring agreement, which

8 AIR 1966 SC 1178
49
become part of the buyer’s title, and confer a licence to seize.

74. A hire-purchase is, however a more complex transaction

where the owner enters into a transaction of hiring out goods on the

terms and conditions set out in the agreement, and the option to

purchase, exercisable by the customer on payment of all the

instalments of hire, arises when the instalments are paid and not

before. In such a hire-purchase agreement there is no agreement to

buy goods; the hirer being under no obligation to buy, has an option

either to return the goods or to become its owner by payment in full

of the stipulated hire and the price for exercising the option. This

class of hire-purchase agreements must be distinguished from

transactions in which the customer is the owner of the goods and

with a view to finance his purchase he enters into an arrangement

which is in the form of a hire-purchase agreement with the financier,

but in substance evidences a loan transaction, subsequent to a hiring

agreement, under which the lender is given the license to seize the

goods.

75. In the aforesaid case, the majority of the judges were of the

view that the intention of the appellants in obtaining the hire-

purchase and allied agreements was to secure the return of the loans

advanced to their customers and no real sale of the vehicle was

intended by the customer to the appellants. The transactions were

merely financial transactions. The judgment of this Court in
50
Sundaram Finance Ltd. (supra) was rendered in the context of

the liability of a hirer to pay sales tax on the goods acquired under

the Hire Purchase Agreement.

76. In Sundaram Finance Ltd. (supra), Subba Rao, J delivered a

dissenting judgment holding:-

“6. The object of the hire-purchase system was to help to
finance the customer in order that he might purchase the
property. Though that was the object, the transaction took
the form of hire-purchase agreement. The main feature of
the agreement, apart from small variations, was that the
dealer or the financier continued to be the owner till the
terms of the agreement were fully complied with by the
customer and the option to purchase the same was
exercised by him. If the terms were not complied with, the
dealer or the financier, as the case may be, could terminate
the agreement and take back the goods. In such a
transaction, the common intention of the dealer, the
financier and the customer was that the transaction should
take the form of a hire-purchase agreement which would
become a sale on the compliance of the terms of that
agreement. No doubt the financing operation could have
taken the form of a mortgage or pledge, but the parties, for
their mutual benefit and convenience, entered into a hire-
purchase transaction.

7. In the absence of any fraud or undue influence, the
question resolves itself into a simple question of intention. The
transactions were in accordance with the mercantile usage.
Both the financier and the customers with open eyes entered
into the transactions of hire-purchase. Their intention was
51
expressed in clear terms. They could have executed
hypothecation bonds, but they did not, and instead entered
into hire-purchase transactions. There was no reason to
camouflage the real nature of the transactions. None was
suggested. They were, therefore, bound by the terms of the
agreements.”

77. The law which emerges from the judgments of the Court

referred to above, is that 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.

78. 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.

79. 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.
52

80. 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.

81. 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.

82. In this 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. Be that as

it may, the agreement clearly permits the Financier to take

possession of the vehicle, upon default in payment of instalments.

83. In ICICI Bank Ltd. v. Prakash Kaur & Ors. 9 cited on behalf

of the complainant, this Court deprecated the practice of hiring

9 (2007) 2 SCC 711
53
Recovery Agents, who were musclemen to take possession of

vehicles in cases, where the borrower might have committed default

in payment of instalments. This Court held:-

“16. Before we part with this matter, we wish to make it
clear that we do not appreciate the procedure adopted by
the Bank in removing the vehicle from the possession of the
writ petitioner. The practice of hiring recovery agents, who
are musclemen, is deprecated and needs to be discouraged.
The Bank should resort to procedure recognized by law to
take possession of vehicles in cases where the borrower may
have committed default in payment of the instalments
instead of taking resort to strong-arm tactics.”

84. The Judgment was rendered in the facts and circumstances of

the case where it was alleged that possession of a truck had been

taken, by engaging goons and musclemen as Recovery Agents. The

disputes were settled before this Court in view of the submission of

Counsel that the truck could be returned upon payment of a sum of

Rs.50,000/-

85. In Citicorp Maruti Finance Ltd. v. S. Vijaylaxmi 10 cited by

the complainant, this Court held that the fora under the Consumer

Protection Act, 1986 were right in holding that the vehicles had been

illegally and wrongfully recovered by use of force from the loanees.

The judgment was rendered in the facts and circumstance of the case

and this Court deprecated the use of force. In this case, there was no

allegation in the complaint of use of force. Significantly, in Citicorp

10 (2012) 1 SCC 1
54
Maruti Finance Ltd. (supra), Kabir, J. held:-

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

86. This Court held that the Financier continues to be the owner of

the goods. There is an obvious typographical error in paragraph (27)

of the judgment where hirer has been erroneously been typed in

place of 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 the

subject of a Hire Purchase Agreement, has to be answered in the

affirmative in view of the law enunciated by this Court in Haranjit

Singh Chadha (supra), K.L. Johar & Co. (supra) and Anup

Sarmah (supra). The Financier being the owner of the vehicle which

is the subject of a Hire Purchase Agreement, there can be no

impediment to the Financier taking possession of the vehicle when

the hirer does not make payment of instalments/hire charges in terms

of the Hire Purchase Agreement. However, such repossession cannot

be taken by recourse to physical violence, assault and/or criminal
55
intimidation. Nor can such possession be taken by engaging

gangsters, goons and musclemen as so called Recovery Agents.

88. Whether the service of proper notice on the hirer would be

necessary for repossession of a vehicle, which is the subject matter of

a Hire Purchase Agreement, would depend on the terms and

conditions of the Hire Purchase Agreement, some of which may stand

modified by the course of conduct of the parties. If the hire purchase

agreement provides for notice on the hirer before repossession, such

notice would be mandatory. Notice may also be necessary, if a

requirement to give notice is implicit in the agreement from the

course of conduct of the parties.

89. If the hirer commits breaches of the conditions of a hire

purchase agreement which expressly provides for immediate

repossession of a vehicle without further notice to the hirer, in case of

default in payment of hire charges and/or hire instalments

repossession would not be vitiated for want of notice. In this case,

however a duty to give notice to the Complainant before

repossession, was implicit in the Hire Purchase Agreement. The Hire

Purchase Agreement was a stereotype agreement in a standard form,

prepared by the Financier. The same kind of agreements, containing,

identical terms, except for minor modifications are executed by all

hirers of vehicles, equipment, machinery and other goods, who enter

into hire purchase agreements with the Financier. The Financier who
56
set down the terms and conditions of the hire purchase, construed

the hire purchase agreement to contain an implied term for service

of notice and accordingly despatched a notice, but did not address it

to the correct address of the Complainant as given in the hire

purchase agreement.

90. In a case where the requirement to serve notice before

repossession is implicit in the hire purchase agreement, non service

of proper notice would tantamount to deficiency of service for breach

of the hire purchase agreement giving rise to a claim in damages.

The Complainant consumer would be entitled to compensatory

damages, based on 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 the hirer by reason of omission to give

notice, nominal damages may be awarded.

91. A forum constituted under the Consumer Protection Act has,

as observed above, the power to award punitive damages. Punitive

damages should, however, be granted only in exceptional

circumstances, where the action of the Financier is so reprehensible

that punishment is warranted. To cite an example, where a Financier

erroneously and/or wrongfully invokes the power to repossess without

notice to the hirer, causing thereby extensive pecuniary loss to the

hirer or loss of goodwill and repute, a forum constituted under the

Consumer Protection Act may award punitive damages.
57

92. 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 repossession the

complainant contacted the Financier and was informed of the reasons

for the repossession. 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.

93. The Financier admittedly paid Rs.3,15,000/- for acquisition of

the vehicle, out of which the Financier had been able to realize

Rs.1,19,000/- inclusive of all charges. There was depreciation in the

value of the vehicle by reason of usage by the Complainant, for about

a year. The District Forum did not even notionally assess the

depreciation in the value of the vehicle.

94. The District Forum was not justified in directing the Financier

to pay the Complainant Rs.2,23,335/- being the entire amount paid

by the Complainant to the Financier from the inception as well as the

payment of Rs.1,04,000/- made by the Complainant to the dealer

along with damage of Rs.10,000/- and litigation costs of Rs.1,000/-

after the Complainant had held and used the vehicle for almost a
58
year. The Complainant, admittedly a defaulter, has in effect, been

allowed free use of the vehicle for about a year, plus damages, for an

error in the notice of repossession, without considering the prejudice,

if any, caused to the complainant by the error and consequential non

receipt of the notice, and without making any assessment of the loss,

if at all, to the Complainant by reason of the error/omission.

95. For the reasons discussed above, 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.

96. The appeal is accordingly allowed. The Financier shall,

however, pay a composite sum of Rs.15,000/- to the Complainant

towards damages for ‘deficiency’ in service and costs for omission to

give the Complainant a proper notice before taking repossession of

the vehicle.

..….……………………………J.
[D.Y. CHANDRACHUD]

..….……………………………J.
[INDIRA BANERJEE]

NEW DELHI
OCTOBER 01, 2020



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