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CASE NO.: Appeal (civil)  1070 of 2006

PETITIONER: The Managing Director, Orix Auto Finance (India) Ltd

RESPONDENT: Shri Jagmander Singh & Anr

DATE OF JUDGMENT: 10/02/2006

BENCH: ARIJIT PASAYAT & S.H. KAPADIA

JUDGMENT: J U D G M E N T (Arising Out of S.L.P. (C) No.22535 of 2004)

ARIJIT PASAYAT, J.   

Leave granted.

Challenge 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’).   

The background facts in a nutshell are as follows:

Under 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/- each.   As per the agreement the first instalment was payable on  25.10.2000 and the last instalment was payable on 25.6.2003.   In 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:

"10. In case the Hirer shall during the  continuance of this Agreement do or suffer any  of the following acts or things, viz. either:

a.      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;

b.      die, become insolvent, or compound with  its creditors;

c.      the Hirer, being a Limited Company, shall  pass a resolution for voluntary winding up or  shall have a petition for winding up presented

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against it or if a Receiver shall be appointed of  its undertaking;

d.      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 vehicle;

e.      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;

f.      fail to keep or cause the vehicle  comprehensively insured during the period of  the Agreement;

g.      fail to 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.

h.      fail to pay to the Government or any  public authority any tax or surcharge or other  levies due in respect of the vehicle;

i.      remove the vehicle to another State and  get it re-registered there;

j.      break or fail to perform or observe any of  the conditions on its part herein contained.

Then, 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 making payment.  Accordingly, 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 terminated.  Therefore, 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

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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.   The hirer filed an application for vacation of the order of stay.   By the impugned order the High Court dismissed the Civil  Revision upholding the order passed by the Trial Court.

According 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 ultimately dismissed.

Learned 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.  

By 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.

So far 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.   It is 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.  It is made clear that we have not expressed any opinion on the

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merits of the case which shall be decided in accordance with  law.  

Before 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.  

The appeal is allowed to the aforesaid extent. No orders  as to costs.