T.S. Abdul Saleem vs State of Kerala

M.R. Hariharan Nair

Both these cases touch upon C.C.No 1098\\99 pending before the Judicial First Class Magistrate''s Court-1, Muvattupuzha. In Crl.M.C.No.292\\2000, the challenge is with regard to the denial of interim custody of a Tata Benz vehicle, alleged theft of which is the subject matter of the said C.C.No. 1098\\99. The prayer in Crl.M.C.No.5420\\99 is to quash the proceedings in the aforesaid criminal case. The petitioners in Crl.M.C.No.5420\\99 are the accused in the said C.C.No. 1098\\99. They are the holders of Power-of-Attorney of M\\s. M.K. Credit Corporation which is a hire purchase company. The additional 2nd respondent, who was the hirer of the goods vehicle (Tata Benz - bearing registration No.KEF 3090) reported theft of the said vehicle and it was based thereon that C.C.No. 1098\\99 was filed.

The learned counsel for the petitioners submits that there is no question of any theft and that what was done was only repossession of the vehicle in exercise of the right of the hire, purchase company pursuant to the agreement admittedly executed by the 2nd respondent. It is contended that the initiation of criminal proceedings against the Power-of-Attorney holders of the owner of the vehicle works out a miscarriage of justice and that the continuance of the criminal proceedings is totally unjustified.

The 2nd petitioner in Crl.M.C.No.5420\\99 had moved the trial court for interim custody of the vehicle under Sec. 451 of the Code of Criminal Procedure. The request was turned down by the trial court stating that the continued custody of the vehicle with the police is necessary for the trial of the case.. As regards the interim custody, it was held that the registered owner of the vehicle is the complainant in the case and as such, he has a better claim. It was therefore held that the petition filed by the present petitioner in the trial court viz., Crl.M.P.No.5041\\99 was disallowed and the petition for interim custody filed by the complainant as Crl.M.P.No.4797\\99 was allowed. 4. The question for consideration is whether the charge and further proceedings in C.C.No.l098\\99 are liable to be quashed in exercise of the power of this Court under Sec. 482 of the Code of Criminal Procedure.

During hearing, the learned counsel for the petitioners relied on the decision in Divakaran Vs. Abdul Kalam and Another, where the question of interim custody of a vehicle, during trial, was considered. There also a contention was raised that the person in possession of the Registration Certificate is the better claimant. The contention was dispelled and it was held that mere possession of the registration certificate of the vehicle by the hirer is no ground to release the vehicle to him if it is found that the vehicle is under hire-purchase agreement and the financier has exercised his right to repossess the vehicle for non-payment of the hire instalments as stipulated in the hire purchase agreement. The general principle that normally the vehicle should be returned to the person in whose name the registration certificate stands, it was held, was not applicable in cases where a hire purchase agreement in respect of the vehicle exists and where the financier exercises his right to repossess the vehicle for default of payment of the hire purchase instalments. The direction of the trial court refusing custody to the hire purchase company was therefore set aside.

K. A. Mathai alias Babu v. Kora Bibbikutty, (1996) 7 SCC 212 relied on by the petitioners arose from re-possession of the vehicle by the financier (hire purchase company) after default was committed by the hirer and after possession thereof had passed on to a third person. Offence of theft was alleged against the original hirer and his driver for aiding the hire puchase company when it repossessed the vehiche. The Apex Court held that where repossession is in exercise of such right of the hire purchase company, no question of theft would arise because there is no mens rea or dishonest intention in the matter of such repossession. The hire purchase company was acquitted of the charge of theft.

Charanjit Singh Chadha and Others Vs. Sudhir Mehra, which is other decision relied on by the petitioners also dealt with a more or less similar case. There also, the offence of theft was alleged by the hirer. The High Court of Punjab and Haryana declined to quash the proceedings brought against the financier as accused and held that the allegations in the complaint were capable of making out offence punishable under Sec. 379 of the IPC and dismissed the Crl.M.C. The Apex Court held that hire purchases agreement are executory contracts under which the goods are let on hire with an option to purchase in accordance with the terms of the agreement. Under the agreement, the hirer is simply paying for the use of the goods with a right of option to purchase the vehicle. When the agreement specifically says that the owner has got a right to repossess the vehicle, there cannot be any basis for alleging that the company has committed criminal breach of trust, cheating or theft in the matter of repossession. There was no dishonest intention involved in the matter of such repossession and as such the essential element necessary to constitute the offence of theft etc., is wanting. Repossession of goods under the power given in the hire purchase agreement, it was held, will not amount to any criminal offence. The Apex Court therefore quashed the entire proceedings relating to the case of theft initiated by the hirer.

According to the learned counsel for the 2nd respondent, the position in the instant case is different in so far as repossession is allegedly made after the expiry of three years from the date of the last instalment contemplated in the agreement and according to the counsel, the right to repossess is lost by limitation. Yet another contention is that the 2nd respondent has paid up the full amount due to the hire purchase company, though he does not have receipts to evidence payment of all the 36 instalments. During heraring, he could, however, produce for perusal receipts to show that 20 instalments and part of 21st instalment was paid by 12-12-1994. As regards the evidence for payment of the balance, he would state that it was paid to an agent, the details of which would be divulged during trial.

During hearing the 2nd respondent relied on the decision in Sukra Shoe Fabric v. UCO Bank (1992 (1) KLT SN 20 at page 17). That was a case of default made by a borrower and the creditior bank locked up and sealed a factory building. It was held that the right given to a creditor under a hypothecation agreement can be exercised only by approaching the court of law and not by taking the law into its own hands.

The aforesaid case has absolutely no application to the facts of the present case in so far as the observation was not made with reference to any hire purchase agreement. What was considered was the right of a bank to seize the goods stored in a factory building under hypothecation agreement executed between the parties. In the present case the creditior is the owner of the vehicle whereas in the cited case the Bank had a lien and that makes all the difference.

The learned counsel for the 2nd respondent then relied on the decision in Sundaram Finance Ltd. Vs. State of Kerala and Another, . Though that was a case where liablility to sales tax was the question involved, reference is made-to various forms of hire purchase agreements. The case related to a system where the customer purchased a vehicle from the dealer directly and got it registered in his own name. Thereafter he entered into a hire purchase agreement with the financier. The customer executed a promissory note and a hire purchase agreement for the money advanced by the financier who would pay the dealer, a sister company. The question considered was whether the transaction between the customer and financier amounted to a sale. In that context the following observations were made:

The Court has to determine whether the transaction in question is a genuine sale by the original owner of the chattel to the person who is finding the money and a genuine re-letting by the latter to the original owner on hire-purchase terms, or whether the transaction, though taking that form is nothing more than a loan of money on the security of the goods."

The transaction,of hire puchase involved in that case was absolutely dissimilar to the facts of the present case. The context in which the above observation was made and the question considered were also different. Hence the above observation cannot be applied to the facts of the present case. The dealer and financier involved in that case were closely connected companies and for their own reasons they split up the business between them. In effect and in substance, the dealer, without receiving the whole money, put the customers in ownership and possession of the cars and the sale to financier and hire purchase agreement with the customer were later transactions.

In the present case, the position is different. Annexure-A2 appended to Crl.M.C.No.5420\\99 is a bipartite agreement between M\\s M.K. Credit Corporation, represented by the present petitoners and the 2nd respondent, who is the hirer. It is useful to quote clauses 5 to 8 from the agreement:

The hirer may, at any time, terminate the hiring by returning the vehicle\\s the owner (in the same order and condition in which it\\they was\\were delivered to the HirerVs, fair wear and tear excepted). The determination of the hiring as aforesaid shall not affect or prejudice the claim of the Owners for arrears of hire payments due upto the date of such return of the vehicle\\s or for damages for breach of this Agreement or the Owners'' right to enforce such claim by action or otherwise,

If default be made in payment of any inatalment of the hire amount due under this Agreement, the Hirer\\s shall pay to the Owners Additional Finance Charges at the rate of 36 per cent per annum of the amount from time to time in arrears, until payment thereof or determination of this agreement under the terms herein, but this Clause shall not in any way prejudice the Owners'' right under this agreement to repossess or retake possession of the vehicle\\s or to determine the hiring under this Agreement or otherwise.

During the subsistence of the contract, on demand the hirer hereby agrees to pay to the owners and the owners agree to refund to the hirer any increase\\decrease in the finance charges proportionate to the period of agreement, arising out of the increase\\decrease in Bank charges, as the case may be, without in any way affecting the contract value mentioned in the Second Schedule to this Agreement.

Upon the Hirer\\s paying the entire amounts due under Second Schedule herein and other amounts, if any, due under this Agreement, vehicle shall become the sole and abosolute property of the

(emphasis supplied)

It is evident from the above that on default being made in the payment of any instalment, the last of which was due on 12-3-1996 the hirer would be liable to pay to the owners Additional Finance charges at the rate of 36% per annum on the arrears until payment thereof is made; but the said right on the part of the financier is without prejudice to the rights of the petitioner to repossess or retake the vehicle and to determine the hiring agrement. It is also clear from Clause 8 that only upon payment of the entire amount due under the schedule for payment, the hirer would acquire ownership of the vehicle.

During hearing, the learned counsel for the petitioners also made available for perusal an extract of the Registration Certificate particulars relating to the vehicle in question issued by the R.T.A., Muvattupuzha, which shows that the v6hicle is still outstanding under the aforesaid hire purchase agreement and that the details in that regard are endorsed in the Registration Certificate.relating to the vehicle.

The agreement that subsists between the parties clearly shows that until the last payment due under the schedule to Annexure-A2 agreement is paid up, the ownership of the vehicle would continue to be with the petitioners and that the petitioners also have the right to repossess the vehicle without prejudice to other rights at any time, provided, default in payment is committed. It is obviously in exercise of the said right that the vehicle was repossessed by the petitioners. The observation in Sundaram Finance case cannot hence be applied to the facts of the present case.

The decision in Charanjit Singh Chadha and Others Vs. Sudhir Mehra, took into consideration the earlier decision in Sundaram Finance Ltd. Vs. State of Kerala and Another, as well and it is with reference to the said decision also that it was clearly laid down that in a case where the agrement provides that the hirer would not become the owner of the property until he pays the entire instalments, the financier would be entitled to repossess the vehicle in case of default and in such a case no offence of theft can be successfully alleged against the financer. In these circumstances, I am of the view that there cannot be any doubt that the allegation of their raised by the 2nd respondent against the petitioners cannot legally stand.

An ingenious argument was advanced by the learned counsel for the 2nd respondent based on Sec. 27 of the Limitation Act which reads as follows:

Extinguishment of right to property. - At the determination of the period hereby limited to any person for instituting a suit for possession of any property, his right to, such property shall be extinguished."

The contention is that on the expiry of three yerars from the date of last instalment fixed under Annexure-A2, the right of the hirer to the property would stand extinguished. The contention has to fail because Sec. 27 has to be read along with Sees. 25 and 26 of the Limitation Act which are the other Sections appearing in part IV of the Limitation Act and the reference therein is with respect to the acquisition of easement by prescription which obviously relates to immovable property. Sec. 27, therefore, cannot have any application to movable property like the vehicle involved in the present case and it is more so when the agrement specifically provides that the financier can repossess the vehicle at any time until title has passed to the hirer which contingency would arise only when the entire payment due to the'' financier is made.

That Section 27 of the Limitation Act cannot affect the right of the financier is also clear from Sec. 51(5) of the Motor Vehicles Act which reads as follows:

Special provisions regarding motor vehicle subject to hire-purchase agreement, etc.

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(5) where the person whose name has been specified in the certificate of registration as the person with whom the registered owner > has entered into the said agreement, satisfies the registering authority that he has taken possession of the vehicle from the registered owner owing to the default of the regitered owner under the provisions of the said agreement and that the registered owner refuses to deliver the certificate of registration or has absconded, such authority may, after giving the registered owner an opportunity to make such representation as he may wish to make (by sending to him a notice by registered post acknowledgment due at his address entered in the certificate of registration) and notwithstanding that the certificate of registration is not produced before it, cancel the certificate and issue a fresh certificate of registration in the name of the person with whom the registered owner had entered into the said agreemet:

Provided that a fresh certificate of registration shall not be issued in respect of a motor vehicle, unless such person pays the prescribed fee:

Provided further that a fresh certificate of registration issued in respect of a motor vehicle, other than a transport vehicle, shall be valid only for the remaining period for which the certificate cancelled under this sub-section would have been in force.

According to this section, if the hirer fails to handover the certificate of registration, the financier, after repossession, can even get a fresh certificate of registration after cancellation of the old one. Hence the mere fact that the existing registration certificate stands in the name of the 2nd respondent, though with the endorsement with regard to the hire purchase, does not in any way confer on him any special right to claim interim possession of the vehicle.

In these circumtances, I am convicted that the charge laid in C.C.No. 1098/99 of the Judicial First Class Magistrate''s Court-I, Muvattupuzha, with regard to theft of 1983 Model Tata Benz goods vehicle bearing registration No.KEF 3090 is not legally sustainable. The continuance of the proceedings in the said case will result in total wastage of time for all concerned including loss of precious time of the court. Crl.M.C.No.5420\\99 is hence allowed and the procedings in the aforesaid case(C.C.No.1098\\99) are quashed. The court will take steps to get the vehicle surrendered as undertaken in the bond executed pursuant to the impugned order in Crl.M.C.No. 292/2000 and give possesssion of the same to the petitioners, who are actually entitled to retain its possession under the hire puchase agreement that subsists between the parties. Crl.M.C.No.2902\\2000 is also allowed. The order pased in Crl. M.PNos.4797\\99 and 5041\\99 on 5-11-1999 will stand quashed.

The Criminal Miscellaneous Cases are allowed as above.