Shiva Texyarn Limited vs Smt. Lalitha Krishnan, N. Krishnaswami and G. Subramaniam

M. Jeyapaul, J.—The suit is filed for recovery of Rs. 3,05,832/= together with interest at the rate of 24% per annum from the date of plaint

till the date of realisation and in default of payment of the said amount, sale of the plaint schedule mentioned property for applying the proceeds

towards payment of the principal, interest and costs.

The plaintiff M/s. Shiva Texyarn Limited extended Hire Purchase facility to the first defendant for the purchase of a Tempo Traveller. The first

defendant executed a Hire Purchase agreement in favour of the plaintiff on 1.1.1991 with regard to the purchase of Tempo Traveller. The plaintiff

purchased the Tempo Traveller from M/s. Vijay Sales Corporation, Madras and the bill was raised in the name of the plaintiff and the first

defendant as hirer. As per the Hire Purchase agreement, the first defendant is liable to pay a sum of Rs. 3,86,860/= in 36 monthly instalments. The

second and third defendant also joined in the execution of the Hire Purchase agreement as guarantors guaranteeing the due performance of the

terms and conditions of the Hire Purchase agreement executed by the first defendant. Their liability is joint and co-extensive with that of the hirer.

The third defendant, by his letter dated 1.1.1991, deposited the title deeds of the property belonging to him with an intent to create an equitable

mortgage to secure the amounts payable by the first defendant to the plaintiff. The plaintiff is the owner of the vehicle as per the terms and

conditions of the Hire Purchase agreement. If the hire amounts are not paid regularly, the plaintiff is entitled to additional finance charges at the rate

of 24% per annum. The first defendant totally paid a sum of Rs. 22,000/= towards dues that too irregularly and belatedly. The plaintiff has given

credit to the insurance policy amount of Rs. 1,08,750/= paid by Oriental Insurance Company Limited. Hence, the suit for recovery of the amount

as prayed for.

In the written statement, the first defendant would contend that the actual amount financed is only Rs. 2,63,000/=. The vehicle taken on hire by

the first defendant unfortunately met with an accident that took place on 2.6.1991. The vehicle was completely damaged. The insurance amount

claimed was meant for effecting repairs to run the vehicle, but, clandestinely, the plaintiff appropriated the insurance amount behind the back of the

defendant. Therefore, the vehicle could not be repaired and re-run. The claim of the plaintiff is excessive, arbitrary and whimsical.

The third defendant adopted the written statement of the second defendant. The second would contend that the vehicle met with an accident

within two months from the date of Hire Purchase agreement. The vehicle was not at all in use thereafter. As the plaintiff got away with the

insurance amount of Rs. 1,08,750/-, the first defendant could not effect repairs. Inspite of repeated request, the plaintiff did not part with the

insurance amount. The liability of the second defendant is not co-extensive as claimed in the plaint. Therefore, the second defendant would submit

that the suit is liable to be dismissed.

Based on the aforesaid pleadings of the parties, the following issues were framed:

i) Whether the plaintiff is entitled to the suit claim of Rs. 3,05,832.

ii) Whether the defendants are liable for the suit claim.

iii) Whether the liability of the second defendant is joint and co-extensive with that of the first defendant.

iv) To what relief is the plaintiff entitled?

Issues 1 to 3:- On the side of the plaintiff, the Manager Legal of the plaintiff Company was examined as PW1 and as many as nine documents

were marked and on the side of the defendants, the second defendant was examined as DW1.

No document was marked on the side of the defendants.

Learned Counsel for the plaintiff contends that the plaintiff, being the owner of the vehicle, is entitled to receive the insurance policy amount and

give credit to the loan account of the first defendant as per the Hire Purchase Agreement. The first defendant is only a bailee. He is bound to keep

the vehicle in good condition in terms of the agreement. No evidence was let in on the side of the defendants to establish that there was no

negligence on their part in the accident where the vehicle was extensively damaged. The plaintiff is entitled to claim the suit amount as prayed for,

he would contend.

On the other hand, learned Counsel for the defendants would submit that the vehicle met with an accident within fifteen days from the date of

issuance of permit to ply the vehicle on road. Though the plaintiff was employed as an agent to collect the insurance amount as per the terms of the

Hire Purchase agreement, the plaintiff should have parted with the amount to repair the vehicle so as to enable the first defendant to run the vehicle

again. As the vehicle could not be repaired on account of the default on the part of the plaintiff, the defendants are not liable to pay the suit amount.

There is no dispute to the fact that the first defendant entered into a Hire Purchase agreement, Ex.P3 with the plaintiff agreeing to pay a sum of

Rs. 3,86,860/= being the hire charges for the vehicle taken by ''che hirer. Defendants 2 and 3 have guaranteed the due payments of the said

amount by the first defendant. As per the terms of the Hire Purchase agreement, the ownership of the vehicle vests with the plaintiff till the Hire

Purchase agreement is cancelled after paying the entire dues under the Hire Purchase agreement. The defendant, being the hirer, has agreed to

keep the vehicle entrusted to him in good and substantial working order and repair the vehicle. He has also agreed to take responsibility for all

risks, damage by fire, etc.

The hirer also, as per the terms of the agreement, has agreed to keep the vehicle insured during the period of hire against any loss or damage

by accident or fire or other perils under a comprehensive policy. It is to be noted that the hirer has irrevocably appointed the owner, the plaintiff

herein, as his agent for the purpose of receiving all moneys payable under the policy of insurance and giving discharge thereof. The agreement

would further read that in case the hirer, during the continuance of the Hire Purchase agreement, fail to pay any of the hire purchase instalments

within the stipulated time, whether demanded or not, the rights of the hirer under the agreement stand determined ipso facto without any notice to

the hirer. The hirer, as per the agreement, has held the vehicle merely as a bailee of the owner. He has also agreed under the Hire Purchase

agreement to pay the additional finance charges at the rate of 24% per annum in case of any default in payment of instalments by the first

defendant.

The fact remains that the vehicle hired to the first defendant by the plaintiff had met with a major accident. PW1 has categorically admitted that

except the engine part, all other portions of the vehicle got extensively damaged in the major mishap. It is found that the plaintiff was appointed as

agent of the first defendant for the purpose of receiving moneys payable under the insurance policy and giving discharge thereof. Therefore, there is

nothing wrong in receiving the insurance policy amount from the Insurance Company by the plaintiff.

The next question that arises for consideration is whether the plaintiff is liable to pay the said amount received from the Insurance Company in

the aftermath of the major accident which caused extensive damage to the vehicle to the first defendant for the purpose of repairing the vehicle.

Here is a case where the Hire Purchase agreement had been entered into on 1.1.1991 and the first instalment had become due on 1.2.1991. As

per the version of DW1, the accident had taken place on 2.6.1991. In the five months, only two instalments had been paid by the first defendant to

the plaintiff. The vehicle also met with an accident in the meantime. Admittedly, extensive damage has been caused to the vehicle. In the above

facts and circumstances, the plaintiff has an option either to adjust the insurance amount received from the Insurance Company to give credit to the

loan account of the first defendant or hand over the said amount to the first defendant for the purpose of repairing the vehicle. The first defendant

cannot dictate terms to the plaintiff as regards the proceeds of the insurance claim made by the plaintiff in the aftermath of the major accident

damaging the vehicle. No insurer would think in terms of handing over the insurance claim amount to the hirer when the hirer had made already

default of payment of instalments and the vehicle also had been extensively-damaged. The agreement also does not contemplate entrustment of the

insurance claim amount to the first defendant by the plaintiff on receipt of the same from the Insurance Company. The Hire Purchase agreement

clothes the plaintiff with every right to receive the amount from the Insurance Company and give discharge thereof. As a matter of right, the first

defendant cannot ask for the insurance claim amount for the purpose of repairing the vehicle. Further, it is found that the defendants have not

produced any document to show that a request was made to the plaintiff Company to handover the insurance amount for repairing the vehicle.

The Hire Purchase agreement would read that the hirer holds the vehicle merely as a bailee of the owner of the vehicle. As per Section 151 of

the Contract Act, the bailee is bound to take as much care of the goods bailed as a man of ordinary prudence. Further, in terms of Section 152 of

the Contract Act, the bailee is not responsible for the loss, destruction or deterioration of the thing bailed, if he has taken the amount of care of the

goods as a man of ordinary prudence.

The defendants have not let in evidence to show that the hirer took all care as a man of ordinary prudence to avoid the accident which caused

much damage to the vehicle. Further, it is found that as per the terms of the Hire Purchase agreement, the hirer has undertaken to repair the vehicle

and keep it in good condition. Therefore, the defendants cannot take a valid stand that they are not liable to pay any amount to the plaintiff as the

plaintiff had appropriated the insurance claim amount without returning the same to the first defendant for repairing the vehicle.

The third defendant has deposited the original sale deed, Ex.P6 under the letter evidencing deposit of title deeds, Ex.P5. The statement of

accounts would show that the suit amount is due from the first defendant. The plaintiff is entitled to. additional finance charges at the rate of 24% as

per the agreement between the parties as it has been established that the defendants failed to pay the instalments regularly in terms of the Hire

Purchase agreement.

In case the suit amount is not paid by the defendants to the plaintiff, the plaintiff is entitled to proceed against the property mortgaged by

depositing of title deeds by the third defendant. The liability of defendants 2 and 3 who have guaranteed due payments of the instalments by the

first defendant to the plaintiff is joint and co-extensive with that of the first defendant as per law. The second and third defendant cannot shirk their

responsibility by saying that effort should be taken by the plaintiff at the first instance to recover the amount from the principal and thereafter from

the guarantors.

In view of the above, it is held that the defendants are liable to pay the suit claim. The second and third defendants jointly and severally liable to

pay the suit amount. The plaintiff is entitled to recover the same from all the defendants.

Issue No. 4:- The plaintiff is entitled to claim the suit amount with interest at 9% per annum from the date of plaint till the date of decree and at

6% from the date of decree till the date of realisation. The plaintiff is also entitled to proceed against the property mortgaged by the third defendant

by deposit of title deeds in default of payment of the suit amount by the defendants.

The suit is decreed in the aforesaid terms with costs.