Bajaj Auto Ltd. vs Tamilnadu Mercantile Bank Ltd. and The S.L.N. Auto Service Station

Anand By rareddy J.

Heard the counsel for the Appellant. The Appellant was the fourth Defendant in the suit filed by Respondent No. 1 herein.

The brief facts of the case are that the Plaintiff had received an application from the first Defendant for purchase of an auto-rickshaw under a scheme called, the ''Prime Minister Rojgar Yojana'' and the Plaintiff had sanctioned a term loan of Rs. 46.600/- for purchase of a new auto-rickshaw from the second Defendant. The second Defendant is authorised dealer of the fourth Defendant. A quotation was issued by the second Defendant in respect of the proposed purchase. The Plaintiff, in turn, as security for due repayment of the term loan, had obtained documents such as, a Promissory Note, a delivery letter, a hire-purchase agreement and a deed of hypothecation etc., in respect of the vehicle and the loan which was repayable in 60 monthly instalments of Rs. 780/- was released in favour of the purchaser. However, the loan amount covered under a demand draft for Rs. 49,909/- was issued favouring the second Defendant towards the cost of the vehicle, apart from road tax, insurance charges and cost of accessories. This was issued to the second Defendant under a covering letter and the second Defendant, promptly collected the proceeds of the demand draft but, it is the case of the Plaintiff that the second Defendant however failed and neglected to deliver the vehicle to the first Defendant. In that circumstance, the Plaintiff was constrained to call upon the second Defendant to deliver the vehicle by several letters. When the second Defendant did not comply, the Plaintiff relentlessly made a demand for refund of the amount.

Ultimately on 18.3.1998, the second Defendant is said to have addressed a letter to the Plaintiff enclosing a cheque for a sum of Rs. 49,908/-, which however, when presented to the banker of the second Defendant, was dishonoured, on the ground that there were insufficient funds. This having been brought to the attention of the second Defendant, the Plaintiff was directed to re-present the cheque which was dishonoured yet again. It is in that background that a legal notice was issued calling upon the second Defendant to pay the amount and incidentally, the fourth Defendant was also called upon to pay the amount jointly and severally along with the second Defendant. On failure of the Defendants to comply, a suit was filed seeking recovery of a sum of Rs. 68,451./- along with interest and such other costs.

The suit was practically not contested though Defendant No. 3 had entered appearance to set up certain defences which were not tenable, denying his liability. Defendant No. 4 had remained unrepresented. However, it was stated that there was a memo of appearance filed on behalf of Defendant No. 4 by a counsel and the suit having been decreed, the same was challenged in appeal by the fourth Defendant. The lower appellate court, however, has opined that the suit was of the year 2000 and the liability having been found to be joint and several, the fourth Defendant being the principal of the second Defendant was also, in the opinion of the lower appellate court, equally liable and having regard to the sheer efflux of time, the lower appellate court was of the opinion that there was no warrant for granting any opportunity to the fourth Defendant to contest the suit, while taking note of the fact that the fourth Defendant had never had a say in the proceedings and that the fourth Defendant''s claim that it was never represented by any counsel, it could not be said that the suit was not contested. It is that which is sought to be challenged in the present second appeal.

The substantial question of law framed at the time of admission of this appeal is, as to whether there was any privity of contract between the Appellant herein and the Plaintiff. The trial court has held that the liability was joint and several and in view of the second Defendant, having embroiled itself in a partnership dispute and according the Plaintiff, the second Defendant was no longer solvent and was not capable of being proceeded against for recovery of the amount, the Plaintiff having proceeded against the Appellant herein for recovery of the amount, the Appellant is highly aggrieved and hence this appeal.

The learned Counsel for the Appellant would contend that there is no relationship of principal and agent as between the second Defendant and this Appellant, as contended by the Plaintiff. The Appellant was the manufacturer of the vehicle in question and the normal business practice of the Appellant was that vehicles are sold at wholesale price to its dealers, such as the second Defendant and it is the dealer who marks up the price and sells at a retail price, keeping for himself the profit margin. In such a relationship, it cannot be said that the second Defendant was the agent of the Appellant and there was no such relationship of agency as between the Appellant and the Respondent. The counsel would submit that the appeal be allowed.

The learned Counsel for the Respondent - Plaintiff, on the other hand, would point out that though the sequence of events and the transaction would indicate that the Plaintiff -bank has proceeded as if the vehicle has been delivered, in view of the admission by the second Defendant that there was no delivery and that the Plaintiff was entitled for a refund would clinch the case in favour of the Plaintiff and the fact that there is no denial by the Appellant herein as to the second Defendant being its dealer, it follows that the Appellant would be liable as the principal of the second Defendant, where it is also not denied that the second Defendant was the authorised dealer of the Appellant.

Insofar as the contentions of the counsel for the Appellant is concerned, though the Appellant has not participated in the suit nor has been given an opportunity by the lower appellate court, from the pleadings as set out in the plaint, it cannot be readily discerned that there was a relationship of principal and agent as is evident between the Appellant and Defendant No. 2. It is merely an assertion on the part of the Plaintiff. From the sequence of events as narrated in the plaint, the transaction was clearly between the Plaintiff and Defendants 1 to 3. There was no privity of contract that is readily discernable between the Plaintiff and the present Appellant - Defendant No. 4. The admitted circumstance that the second Defendant had received money and was also ready and willing to refund-the same at a point of time would clearly disclose that the relationship stopped at that stage as between the Plaintiff and the second Defendant. It was not the case either of the Plaintiff or of the second Defendant that the money that was paid towards the purchase of the vehicle had been credited to the benefit of the Appellant herein. This would demonstrate that there was no privity of contract insofar as the present transaction was concerned, either between the second Defendant and the Appellant or the Plaintiff and the Appellant. The Appellant merely has been roped in only on the ground that the second Defendant had billed itself as an authorised dealer of the vehicles manufactured by the Appellant. This by itself did not create a relationship of principal and agent in order that the Plaintiff could fasten the liability on the Appellant. This is apparent even without having to call upon the parties to tender evidence in this regard. The trial court merely having held that the liability was joint and several as against Defendants 2 and 4 is, therefore, without basis. There was no plea or proof as regards the relationship of principal and agent. As already stated, the mere fact that the second Defendant was dealing in vehicles manufactured by the Appellant, did not also raise a presumption that the sale price, which was said to have been paid to the second Defendant was, in fact, payable to the Appellant and could be recovered from the Appellant on failure of delivery of the vehicle. In that view of the matter, the judgment and decree of the trial court would have to be modified insofar as it pertains to the Appellant.

Accordingly, the judgment and decree of the trial court as well as the lower appellate court would require to be modified to hold that the Plaintiff - Respondent is entitled to recover the amount, if any, due as claimed in the plaint from Defendants 2 and 3 jointly and severally and any liability found against Defendant No. 4 would stand absolved.

The appeal stands disposed of.