Managing Director, Orix Auto Finance (India) Ltd Vs. Shri Jagmander Singh &
Anr  Insc 68 (10 February 2006)
Pasayat & S.H. Kapadia
Out of S.L.P. (C) No.22535 of 2004) ARIJIT PASAYAT, J.
in this appeal is to the order passed by a learned Single Judge of the Punjab
and Haryana High Court dismissing the Civil Revision filed under Section 115 of
the Code of Civil Procedure, 1908 (in short the 'Code').
background facts in a nutshell are as follows:
a Hire Purchase Agreement executed between the appellant (hereinafter referred
to as the 'Financier') and the respondent no.1 (hereinafter referred to as
'Hirer') possession of truck No.HR-46-C-3689 was handed over to the hirer
subject to compliance of the terms and conditions of the agreement. As per the
terms and conditions stipulated in the agreement, the hirer was to repay the
total financed amount of Rs.9,24,000/- in 33 monthly instalments of Rs.28,000/-
the agreement the first instalment was payable on 25.10.2000 and the last
instalment was payable on 25.6.2003.
case of default in making payment of the monthly instalment the hirer was
liable to pay delay charges. Clause 10 of the agreement which is relevant for
this purpose of this appeal reads as follows:
"In case the Hirer shall during the continuance of this Agreement do or suffer
any of the following acts or things, viz. either:
fail to pay any
of the hiring (rent) instalments or any such monies which has fallen due within
the provisions of this agreement, within or at the stipulated time, whether
demanded or not;
insolvent, or compound with its creditors;
the Hirer, being
a Limited Company, shall pass a resolution for voluntary winding up or shall
have a petition for winding up presented against it or if a Receiver shall be
appointed of its undertaking;
pledge or sell
or hypothecate or charge or mortgage or let or assign or attempt to pledge or
sell or assign or part with possession of or otherwise alienate or transfer the
do or suffer any
act or thing whereby or in consequence of which the said vehicle may be
distrained or taken in execution under legal process or by legal process or by
any public authority;
fail to keep or
cause the vehicle comprehensively insured during the period of the Agreement;
indemnify the Owner, the Insurance premium paid by the Owner, resulting from
the Hirer's failure to keep the insurance effective at any point of time during
the currency of this Hire Agreement.
fail to pay to
the Government or any public authority any tax or surcharge or other levies due
in respect of the vehicle;
vehicle to another State and get it re-registered there;
break or fail to
perform or observe any of the conditions on its part herein contained.
on the occurrence of any such event, the right of the Hirer under this
Agreement shall forthwith stand determined ipso facto without any notice to the
Hirer and all the instalments previously paid by the Hirer shall be absolutely
forfeited by the Owner who shall thereupon be entitled to enter into any house
or place where the said vehicle may then be, remove and retake possession of
the same and to sue for all the instalments due and for damage for breach of
the Agreement and for all the costs of retaking possession of the said vehicle
and all costs occasioned by the Hirer's default." (Underlined for
emphasis) According to the financier there was default in making payment of the
monthly instalments and the hirer was requested to clear the amounts due by
several letters. In spite of several requests/demands the hirer did not pay the
amount due and as on 27.8.2002 he was in arrears of Rs.1,34,000/- on account of
monthly instalments due excluding other charges payable on account of delay in
the appellant repossessed the vehicle on 27.8.2002. According to the financier
in view of the violation of the terms by the hirer the agreement stood
by registered letter dated 27.8.2002 the financier called upon the hirer to pay
a sum of Rs.4,27,485/- which was the amount due. The notice stipulated that the
amount was to be paid within 10 days from the date of the receipt of the
letter. The hirer did not make any payment and on the other hand made a false
complaint to the Reserve Bank of India (in short 'RBI'), and filed a civil suit
in the Court of Civil Judge, Senior Division, Sonepat for declaration with
consequential reliefs and permanent injunction along with mandatory injunction.
In the said civil suit the hirer also filed application under Order XXXIX Rules
1 & 2 read with Section 151 of the Code praying for interim relief. On
receipt of the summons, written statement was filed by the appellant. The
matter was taken up 13.9.2002. A prayer was made for an adjournment of the date
as learned counsel for the appellant had met with an accident. The matter was
adjourned for arguments on the said application on 27.9.2002. But at the same
time learned Civil Judge directed the appellant to release the vehicle subject
to deposit of the balance of instalments along with interest amounting to
Rs.1,61,504/-. The said order was the subject- matter of challenge in Civil
Revision No.4680/2002. Initially the High Court had granted stay of the
operation of the order.
hirer filed an application for vacation of the order of stay.
impugned order the High Court dismissed the Civil Revision upholding the order
passed by the Trial Court.
to learned counsel for the appellant the order passed is clearly unsustainable.
The suit filed was not maintainable. While passing order for release, the trial
Court did not take note of the fact that according to the appellant the arrears
were much higher than the defaulted instalments. It was not considered by the
Trial Court as to how the appellant would recover its dues if the suit was
counsel for the respondent on the other hand submitted that the re-possession
as taken by the appellant was clearly contrary to law. Merely because the hirer
had signed the agreement which permitted re-possession that would not give
arbitrary power to the financier to take possession of the vehicle. It was
pointed out that in several cases different High Courts have deprecated the
practices of the financers taking possession of the financed vehicles.
order dated 16.11.2004 while issuing notice interim stay was granted subject to
the opposite party-respondent depositing Rs.2,50,000/- with the Registry of
this Court within four weeks without prejudice to the claims involved.
Admittedly the amount has been deposited.
as the question of re-possession is concerned, it is clearly permissible in
terms of Clause 10 of the Hire purchase agreement referred to above. What
ultimately is to be decided by the Trial Court in the suit is the amount to
which the appellant is entitled to. Learned counsel for the appellant has
submitted that without taking note of the defaulted amount which according to
him is in the neighbourhood of Rs.10 lakhs, the vehicle was directed to be
released on payment of the defaulted instalments. The said amount has also been
deposited. But at the same time it was imperative for the High Court to ensure
that in the event the suit is dismissed, and the hirer is liable to pay the
amount, how the same is secured.
not disputed that the vehicle if not used would lose its value. In the peculiar
circumstances of the case we direct that in case the respondent no.1-hirer pays
the appellant a sum of Rs.1,50,000/- in addition to the amount already
deposited within 10 days from today, the vehicle shall be released. The
respondents shall file an undertaking before the Trial Court that in the event
of non-success the vehicle shall be returned to the financier, unless the Trial
Court fixes some other terms.
made clear that we have not expressed any opinion on the merits of the case
which shall be decided in accordance with law.
we part with the case, it is relevant to take note of submission of learned
counsel for the Hirer that in several cases different High Courts have passed
orders regarding the right to re-possess where the High Courts have entertained
writ petitions including writ petitions styled as PIL on the question of right
of financiers to take possession of the vehicle in terms of the agreement. It
is stated that directions have been given to the RBI for framing guidelines in
this regard. If it is really so, the orders prima facie have no legal
foundation, as virtually while dealing with writ petitions subsisting contracts
are being re-written. It is still more surprising that petitions styled as PIL
are being entertained in this regard. Essentially these are matters of contract
and unless the party succeeds in showing that the contract is unconscionable or
opposed to public policy the scope of interference in writ petitions in such
contractual matters is practically non-existence. If agreements permit the
financier to take possession of the financed vehicles, there is no legal
impediment on such possession being taken. Of course, the hirer can avail such
statutory remedy as may be available. But mere fact that possession has been
taken cannot be a ground to contend that the hirer is prejudiced. Stand of
learned counsel for the respondent that convenience of the hirer cannot be
overlooked and improper seizure cannot be made. There cannot be any
generalization in such matters. It would depend upon facts of each case. It
would not be therefore proper for the High Courts to lay down any guideline
which would in essence amount to variation of the agreed terms of the
agreement. If any such order has been passed effect of the same shall be
considered by the concerned High Court in the light of this judgment and
appropriate orders shall be passed.
appeal is allowed to the aforesaid extent. No orders as to costs.