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CASE NO.: Appeal (crl.)  549 of 2008

PETITIONER: Bharath Metha

RESPONDENT: State by Inspector of Police Chennai

DATE OF JUDGMENT: 25/03/2008

BENCH: Dr. ARIJIT PASAYAT & P. SATHASIVAM

JUDGMENT: J U D G M E N T (Arising out of SLP (Crl.) No.1595 of 2005)

Dr. ARIJIT PASAYAT, J.

1.      Leave granted.

2.      Challenge in this appeal is to the order of a learned Single  Judge of the Madras High Court dismissing the petition filed by  the appellant.  The Criminal Revision was filed against order  dated 22.12.2003 made in CMP No. 7255 of 2003 by the Court of  Judicial Magistrate No. II, Ponneri, dismissing the petition filed  by the appellant under Sections 451 and 457 of the Code of  Criminal Procedure, 1973 (in short the \021Cr.P.C.\022).  The application  was filed for release of lorry bearing Registration No. TN-01-F- 9797 which was alleged to have been involved in a case  registered for offences punishable under various provisions of the  Tamil Nadu Prohibition Act.  The case of the appellant before the  High Court was that money was provided to the respondent No. 2  to purchase the said lorry under a hire purchase agreement. In  terms of the agreement, the hirer was required to pay 32 monthly  instalments of Rs.14,875/- between the period from 24.6.2000  and 24.1.2003.  Under the hire purchase laws, the hirer can  become the owner of the vehicle by exercising the option to  purchase after paying the entire amount due and till that time  the financier is the owner. The financier is also entitled to  possession of the vehicle since he is the owner. In the agreement,  appellant is described as the owner and the respondent no.2 as  the hirer.  The appellant tried to take possession of the vehicle as  an owner but the vehicle was not available at the premises and  on enquiry appellant came to know that the police had seized the  same on 6.9.2000 when the vehicle was operating with a fake  number plate for transporting prohibited spirit. The First  Information Report was lodged against respondent No.2 and  therefore the appellant prayed for release of the vehicle. The  prayer was resisted by the State on the ground that the vehicle  had already been directed to be returned to the respondent No.2  as he was the owner as per the Registration Certification.

3.      The High Court noted that the vehicle was involved in  commission of offences punishable under Sections 4(I)(A) and  4(1)(aaa) of the Act read with Rules 5 & 6 of Rectified Spirit  Rules.  High Court also noted that though an order had been  passed for releasing the vehicle in favour of respondent No. 2, he  had not taken custody of the same though the order was passed  on 23.1.2001.  The High Court also noted that since the  respondent No.2 was registered as owner of the vehicle and  appellant was only the financier, the vehicle could not be

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released as prayed for.  Accordingly, as noted above, the criminal  revision petition was dismissed.

4.      Learned counsel for the appellant submitted that in the  certificate of registration there is clearly an endorsement to the  effect that the vehicle was hired under the hire purchase  agreement. It was also clearly endorsed that the hirer had  entered into hire purchase agreement with Subham Credits  represented by the appellant.

5.      Learned counsel for the State clearly stated that though an  order was passed permitting to respondent No.2 that release of  the vehicle by executing bond of Rs.1,00,000/- with two sureties  of like sum and other condition that he shall not alienate or  encumber or alter  the vehicle  and shall produce the vehicle as  and  when required by the trial court, the said condition has not  been complied with.   

6.      It is to be noted that respondent No. 2 did not appear before  the High Court in the connected proceedings.   

7.      The nature of hire purchase agreement has been noted by  this Court in Charanjit Singh Chadha v. Sudhir Mehra (2001(7)  SCC 417). At page 421 it was noted as follows:

\0235. 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.

6. Though in India, Parliament has passed the  Hire Purchase Act, 1972, the same has not  been notified in the Official Gazette by the  Central Government so far. An initial  notification was issued and the same was  withdrawn later. The rules relating to hire- purchase agreements are delineated by the  decisions of higher courts. There are a series of  decisions of this Court explaining the nature of  the hire-purchase agreement and mostly these  decisions were rendered when the question

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arose whether there was a sale so as to attract  payment of tax under the Sales Tax Act.     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 contract. 8. In K.L. Johar & Co. v. CTO (AIR 1965 SC  1082) 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.       8.      The scope and ambit of Section 451 Cr.P.C. was highlighted  by this Court in Sunderbhai Ambalal Desai v. State of Gujarat  (2002(10) SCC 283).   

9.      Undisputedly, in the Registration Certificate the name of the  financier has been indicated and the factum that the vehicle was  subject to such an agreement was also noted.  In the agreement,  appellant is described as owner, but respondent no.2 as hirer.  It  is noticed that the respondent No.2 had applied for the release of  the vehicle and the High Court had directed the release of vehicle  on certain conditions. Undisputedly, those conditions have not  been fulfilled.  The vehicle is, therefore, lying with the seizing  authorities for nearly eight years now.  In view of the factual  position highlighted above, we direct release of the vehicle in  favour of the appellant subject to fulfillment of the conditions  which were stipulated for the respondent No.2.   

10.     The appeal is allowed to the aforesaid extent.