1999 ALL MR (Cri) 597
IN THE HIGH COURT OF JUDICATURE AT BOMBAY (NAGPUR BENCH)

D.D. SINHA, J.

M/S. B.C.L. Financial Services Ltd. Vs. State Of Maharashtra & Ors.

Cri. Writ Petition No. 106 of 1998

14th January, 1999

Petitioner Counsel: Mr. N. S. BADHE, & Mr. V. K. KOLTE
Respondent Counsel: Mr. CHAWDA, Mr. R. L. KHAPRE

Motor Vehicles Act (1988), S.2(30) - Criminal P.C. (1973), S.457 - Vehicle purchased on hire-purchase agreement - Hirer not paying instalments of loan - Vehicles sold without disclosing nature of his ownership - Seizure of vehicle - Interim custody can be given to financer and not purchaser of vehicle.

The petitioner a finance company advanced loan to R-2 to purchase a Motor Vehicle. The vehicle was obtained by R.2 under Hire-purchase agreement executed by him in favour of petitioner. Some instalments were paid but payments were discontinued. R.2 got the vehicle registered in some other RTO and it was sold without disclosing the previous registration and the hire - purchase agreement. Subsequently, the vehicle was seized on complaint received by the petitioner. On application filed by the purchaser of the vehicle for custody of the vehicle the vehicle was released in his favour.

Held, that the petitioner the financer of the vehicle was entitled to interim custody of the vehicle and not the alleged bona fide purchaser. [Para 14]

The contract of hire-purchase simplicitor confers no title on the hirer, but a mere option to purchase on fulfilment of certain conditions; and the solemn agreements entered into by the parties, under which contracts and obligations are created cannot be brushed aside simply because Section 2(30) of the Act widenes the meaning of the word "owner" to include the person in possession of the vehicle, under hire-purchase agreement. In the instant case, the petitioner is the real owner, however, R-2 is the first valid registered owner of the vehicle. R.2 obtained loan from the petitioner-company, under the hire-purchase agreement and, therefore, was under statutory obligation to re-pay the loan and, therefore, would only remain registered owner till such time, when R-2 shall exercise option to purchase vehicle in question on fulfilment of required conditions under the hire purchase agreement. Thus, the petitioner is entitled to interim custody of the vehicle.

1995 (1) Crimes 803 (Orissa) and 1987 Mah LJ 340 not followed in view of AIR 1961 SC 440.

Cases Cited:
1993 Cri. L.J. 1069 [Para 7,8,13,17]
1993 Cri. L.J. 2484 [Para 7,8]
1987 Mah L.J. 340 [Para 8,17]
AIR 1961 SC 440 [Para 13]


JUDGMENT

JUDGMENT :- Heard Shri Badhe, learned counsel for the petitioner; Shri Khapre, learned counsel for Resp. No.3; and Shri Chawda, learned A.P.P. for Resp. No.1/State. The Respondent No.2 though served, none appeared for Respondent No.2.

2. This Criminal Writ Petition is directed against Common Order dated 23-03-1998, passed by the learned Ist Judicial magistrate, First Class, Court No.2, Nagpur, below Exhibit-1, in Misc. Criminal Cases Nos. 30/1998, 31/1998 and 32/1998, whereby the trial Court allowed the Criminal Application No. 32/1998, preferred by Moreshwar s/o Baliram Khanorkar, (i.e. present Resp. No.3); and released the vehicle, in question, on Supratnama, in his favour.

3. It will be appropriate for me to consider few facts, which have given rise to the controversy, in question.

The petitioner is the finance company and doing the business of finance. On 10-10-1997, the Respondent No.2 - Farukh Ahmed s/o. Iqbal Ahmed Khan approached the petitioner and requested the petitioner to advance finance for the purposes of buying the vehicle, in question. The petitioner advanced loan to the Respondent No.2, to the extent of Rs. 3,95,000/-, with a condition that the Respondent No.2 should deposit Rs. 70,000/- with the office of the petitioner. The Respondent No.2, had deposited the amount of Rs. 70,000/- and, therefore, the petitioner-company had issued a cheque dated 18-10-1997 of Rs. 4,68,000/-, drawn on the Federal Bank Ltd, in the name M/s. Jaika Motors Ltd., Nagpur, an authorised dealer of TATA SUMO Vehicle. The said cheque was handed over to Jaika Motors Ltd, by the petitioner, towards the consideration of TATA SUMO vehicle. The Respondent No.2, has duly signed the relevant documents in the office of the petitioner, required for compliance of loan. The vehicle, in question, was registered with Durg R.T.O. (M.P.) on 15-12-1997, vide registration No. MP-24 GC 0621. The Respondent No.2 supplied the xerox copy of the Registration Book of the vehicle, in question, issued by R.T.O., Durg to the petitioner. The vehicle was obtained by the Resp. No.2, under Hire Purchase agreement, executed by Resp. No.2 in favour of the petitioner. The Resp. No.2 was to re-pay the loan amount in 35 equal instalments. however, the Resp. No.2 had only deposited Rs. 46,743/- in the office of the petitioner, towards the loan instalments till December - 1997. Thereafter, the Resp. No.2 did not pay anything to the petitioner-company.

4. It appears that, in February-1998, the vehicle was sold by Resp. No.2, to one Moreshawar Baliram Khanorkar, (Resp. No.3) after re-registering the vehicle, in question, at Shivani R.T.O.

5. The petitioner lodged a report on 25-02-1998 in the Sitabuldi Police Station, against the Resp. No.2; and accordingly the Resp. No.2 was arrested by the Police on 25-02-1998 itself; and the vehicle, in question, also was seized by them on 26-02-1998. However, the seized vehicle bears the registration No. MP22 B 6992 of Shivani R.T.O.; and the offence U/ss. r/w Section 34 under Crime No. 122/98 came to be registered against the Respondent No.2.

6. The said vehicle from the date of seizure was lying in the Sitabuldi Police Station. The petitioner moved an application being Criminal Misc. Application/Case No. 30/1998, U/s. 457 of the Criminal Procedure Code, 1973, for custody of the vehicle. Similarly, the Resp. No.2 and 3 also moved an application for the custody of the vehicle, being Criminal Misc. Application/Cases Nos. 31/1998 and 32/1998. Since the common question was involved in all these three applications regarding grant of custody of the vehicle, the trial court, by passing the common order, impugned herein, allowed the application of the Resp. No. 3, hence the present criminal Writ Petition.

7. The counsel for the applicant/petitioner contended that the Resp. No.2 obtained the finance from the petitioner-company, under Hire Purchase Scheme, for the purposes of purchasing the vehicle, in question. It is further contended that, under the Hire Purchase Scheme, though the vehicle is in possession of the hirer, the ownership of the vehicle is always remains with the financer i.e. petitioner-company. It is submitted that, under the Hire Purchase agreement, the hirer, i.e. the Resp. No.2, is under obligation to re-pay the entire loan amount, with interest as per the instalments agreed between the petitioner and respondent No.2. It is further submitted that, the Registration Certificate, issued by R.T.O. Durg clearly demonstrates that the petitioner had financed the Resp. No.2, for purchase of the vehicle, in question. The learned counsel contended that, though the Resp. No.2 was the registered owner, legal owner of the vehicle was the petitioner and, therefore, it is the petitioner, who was entitled to get the custody of the vehicle. In order to substantiate this contention, the learned counsel placed reliance on the Judgment of the Karnataka High Court, reported in 1993 Cri. L.J. 1069 (M/s. Shriram Transport Finance Co. Ltd. Vs. Shri R. Khaishiulla Khan and others) particularly, the observations made by the Karnataka High Court, in para 10 of its Judgment, which reads thus :

"10. - The solemn agreements entered into by the parties under which rights and obligations are created cannot be brushed aside simply because Section 2(30) of the Act widens the meaning of the word "owner" to include the person in possession of the vehicle under the Hire Purchase agreement..."

The learned counsel also places reliance on another ruling i.e. 1993 Cri. L.J. 2484 (Manoj Kumar Sharma Vs. Sadhan Roy and Anr.), particularly, in respect of the observations made in para No.4 of the above-referred judgment, which read thus. :

"4. In the instant case, the trial Magistrate has taken cognizance of a case under Ss. 406/420, IPC, against the opposite parties on the allegation that though the opposite party No.1. was yet to pay his dues to the petitioner he transferred the registration of the truck from his name to that of the opposite Party No.2 secretly and illegally by deleting the showing of the petitioner as financier and changing the registration number and they were trying to sell the truck to a third party. Such being the case, the principle enunciated by this Court in Gopiram's case (supra) would apply. At the moment it clearly appears that opposite party had the motive to deprive the petitioner from getting the money which was due by opposite Party No. 1 on account of the hire-purchase. Therefore, in my own view, also it would not be judicious to give custody of the truck to opposite party No.2, merely because she happens to be its registered owner. The petitioner is better entitled to get the custody during the proceeding of the case."

The learned counsel contended that the trial Court while passing the impugned order did not take into consideration the contentions, raised and law cited by the petitioner hence the learned counsel contended that the impugned order is incorrect and not sustainable.

8. Shri. Khapre, learned counsel for the Resp. No. 3 submitted that the trial Court has rightly granted the custody of the vehicle, in question, in favour of the Resp. No.3. It is further contended that, the Resp. No.3 is a bonafide purchaser of the vehicle, in question and purchased the same from present Resp. No.2. The Resp. No.3 has verified the documents, i.e. Registration Certificate of the vehicle issued by R.T.O., Shivani, which does not bear any endorsement to show that the vehicle was financed by the petitioner. It is the case of the Resp. No.3 that, Resp. No.3, being bonafide purchaser, not aware of the fact that Resp. No.2 had purchased the vehicle, out of loan, advanced by the petitioner-company, under the hire-purchase agreement, was entitled to get the custody of the vehicle, in question. In order to substantiate this contention, the reliance is placed on the judgment, reported in 1995(1) (Crimes), Pg. 803 (Basanti Pradhan Vs. State of Orissa), where it has been held :

"........Basanti Pradhan having purchased the vehicle on hire-purchase agreement, the claim of the financer (opposite party no.3) cannot be preferred to that of Basanti Pradhan because as held in the case of Prabhat Kumar Das's case (supra) "the magistrate is required to confine himself only to find out as to who is entitled to possession of the property but not the title or ownership thereof.""

Similarly, reliance is also placed on the reported judgment of this Court, reported in 1987 Mah. L.J. 340 (Haribhau Dhondiba Chavan Vs. Balkrishna Bhikoba Ballal and another), particularly, the observations made in para 6 of the judgment, which read as under :

".... held that, normally, the registered owner is the proper person for the interim custody of the vehicle."

9. Shri Khapre, learned counsel contended that the respondent No.3 purchased the vehicle from Resp. No.2 for the consideration of Rs. 3,90,000/- in the month of February-1998, after obtaining the finance from Mahindra & Mahindra finance Services, Nagpur, to the extent of Rs. 2,50,000/-. The Resp. No. 3 was not at all aware regarding the loan obtained by Resp. No.2 from the petitioner-company. The Registration Certificate issued by R.T.O. Shivani in respect of the vehicle, in question, does not show anything in respect of hypothecation/finance being advanced by the petitioner-company to Resp. No.2. It is further submitted that, Resp. No.3, under the bonafide belief, that the Resp. No.2 is the owner of the vehicle, purchased the same. The learned counsel, therefore, contended that the impugned order is just and proper and same is also sustainable in law.

10. Shri Chawda, learned A.P.P. for the State/Resp. No.1, contended that, normally, in such circumstances and under Section 457 of the Code of Criminal procedure, the interim custody of the vehicle is given to the registered owner of the vehicle, as contemplated U/s. 2(30) of the Motor Vehicles Act, 1988, therefore, the impugned order is just and proper.

11. In order to appreciate the controversy in question, particularly, in regard to the provisions of Section 457 of the Code of Criminal Procedure, it will be appropriate to consider certain factual aspects of the matter. In the instant case, the petitioner being a finance company and at the relevant time, was engaged in doing the business of finance, for the purposes of purchase of old and new vehicles. The recitals in the application being Misc. Criminal Case No. 30/1998, preferred by the petitioner before the court below would show that, on 10-10-1997, the Respondent No.2 Farooque Iqbal had approached the petitioner with proposal for purchasing TATA SUMO (vehicle in question). The petitioner, accordingly at the instance of Resp. No.2, advanced financial assistance to him to the tune of Rs. 3,95,000/-, for the purpose of purchase of the vehicle. The Resp. No.2 had executed hire purchase agreement, in presence of two guarantors, viz. - Abdul Shaikh Abdul Kadar and Faizal Kazi. The said vehicle came to be registered at R.T.O., Durg in the name of Resp. No.2 - Farooque Ahmed, with the hire-purchase endorsement of BCL Financial Services Ltd., Vide Registration No. MP 24 GC 0621, dt. 15-10-1997. The Respondent No.2 had taken the delivery of the vehicle on 17-10-1997. The Chasis No. of the vehicle is 385013 JSQ 939784 and Engine No. is 483 DL JSQ 800019. Resp. No.2, therefore, is first Registered owner of the said vehicle. It is further stated by the petitioner in the said application that, till December 1997, the Respondent had paid the amount of Rs. 46,743/- to the petitioner, and nothing has been paid thereafter by the Resp. No.2. The petitioner after getting the information that the vehicle, in question, came to be re-registered at R.T.O., Shivani, and sold the same to other person, the report was lodged on 25-02-1998, and during the course of investigation, the vehicle, in question, came to be seized on 26-02-1998, having Registration No. MP 22 B 6992, with the same Chasis and Engine numbers, as stated above. It is further stated in the said application that, since the vehicle was purchased by resp. No.2, under hire-purchase agreement with the petitioner-company and Resp. No.2 is the First registered owner of the said vehicle and, therefore, the petitioner is entitled to have the custody of the vehicle, in question.

12. The recitals in the Criminal Misc. Application/Case No. 31/1998, preferred by the Resp. No.2 - Farooq, U/s. 457 of the Criminal Procedure Code, clearly show that he has entered into a hire-purchase agreement with the petitioner-company for the purchase of TATA SUMO JEEP and obtained finance from the petitioner-company, to the tune of Rs. 3,95,000/-. It is further stated in the said application that, the vehicle is purchased from Jaika Automobiles, Nagpur and was registered in the R.T.O. Durg. the Registration number allotted to the said vehicle was MP-24 GC 0621. It is nowhere stated in the said application by the Resp. No.2, that, he has sold the vehicle, in question, to Resp. No.3. After going through the above-referred applications, preferred by the petitioner as well as Resp. No.2, it is, prima facie, clear that the Resp. No.2 executed hire-purchase agreement with the petitioner-company for the purchase of vehicle i.e. TATA SUMO. The petitioner-company advanced loan of Rs. 3,95,000/- to the Resp. No.2 for that purpose. The vehicle was purchased from Jaika Motors Ltd., Nagpur and the vehicle came to be registered with the R.T.O., Durg, who has allotted the Registration No. MP 24 GC 0621, to the said vehicle. The said vehicle bears Chasis No. 385013 JSQ 939784 and Engine No. 483 DL 41 JSQ 800019. The resp. No.2 is the first registered owner of the vehicle. The vehicle which came to be seized by the Sitabuldi Police officials, in pursuance of the report lodged by the petitioner, possesses the above referred Chasis and engine numbers. On the back drop of the above-referred circumstances, I will have to find out as to whether the claim of the petitioner for getting the vehicle released in his favour on Suparatnama is just and proper.

13. The law laid down by the Apex Court, in the case of M/s. Damodar Valley Corporation Vs. State of Bihar, reported in A.I.R. 1961 SC 440, in my opinion is applicable in the instant case. In para 8 of the above referred judgment, it has been observed by the Apex Court :

" 8. ......It is well settled 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 centuary or more and has introduced a number of variations, thus leading the categories and it becomes a question of some neicety as to which category a particular contract between the parties come under. Ordinarily a contract of hire-purchase confers no title on the hirer, but a mere option to purchase on fulfilment of certain conditions."

On the basis of the above referred ratio laid down by the Apex Court, the Division Bench of Karnataka High Court in M/s. Shriram Transport Fiance Co. Ltd., Vs. Shri R. Khaishiulla Khan and others., (Judgment reported in 1993 Cri. L.J., page 1069), has held thus :

"The solemn agreement entered into by the parties under which rights and obligations are created cannot be brushed aside simply because Section 2(30) of the Act widens the meaning of the word "owner" to include the person in possession of the vehicle under the Hire-purchase agreement. If the hirer in possession of the vehicle has agreed that the financier or the owner would be at liberty to seize the vehicle whenever defaults are committed by him it becomes the obligation of the hirer to honour his commitment and pay the instalments as stipulated without committing any defaults. Having come in actual possession of the vehicle in pursuance of such agreement and the financier reposes confidence in him and entrusts the vehicle to his possession to run it and make earnings and the hirer taking advantage of the position in which he is placed by virtue of the agreement makes out a case of financier committing theft when he seizes the vehicle under the hire-purchase agreement in fact commits betrayal of the trust reposed in him by the financier or the real owner. It has become the modus operandi of the hirers, as we come across such instances frequently, to commit defaults either wilfully or otherwise, scuttle the rights of the financiers to seize the vehicle under the agreement by filing complaints of theft, take possession of the vehicle through court relying on registration certificates and drive the financiers or absolute owners to Civil Courts to recover the money advanced to the hirers. Such a course of open breach of solemn agreements cannot be encouraged by Courts but the Courts on the contrary, should give effect to such agreements voluntarily entered into. In our view, therefore, the learned Magistrate in the case giving rise to Criminal petition No. 110/92 was wrong in entrusting custody of the vehicle to the hirer-respondent."

14. The law laid down by the Apex Court and followed by the above referred Division Bench of the Karnataka High Court, in no uncertain terms conveys that the contract of hire-purchase simplicitor confers no title on the hirer, but a mere option to purchase on fulfilment of certain conditions; and the solemn agreements entered into by the parties, under which contracts and obligations are created cannot be brushed aside simply because Section 2(30) of the Act widens the meaning of the word "owner" to include the person in possession of the vehicle, under hire-purchase agreement. In the instant case, the petitioner is the real owner, however, Resp. No. 2, is the first valid registered owner of the vehicle. The resp. No.2 obtained loan from the petitioner-company, under the hire-purchase agreement and, therefore, was under statutory obligation to re-pay the loan and, therefore, would only remain registered owner till such time, when Resp. No.2 shall exercise option to purchase vehicle, in question on fulfilment of required conditions under the hire purchase agreement.

15. The trial Court while passing the impugned order did not consider any of these legal aspects as well as factual material placed before it. The trial court has also not given reasons as to how the conclusion is reached by the trial Court, for the purposes of allowing the Misc. Criminal Application No. 32 of 1998, moved by respondent No.3.

16. Similarly, the Gauhati High Court in its judgment reported in Manoj Kumar Sharma Vs. Sadhan Roy, 1993 Cr. L.J. 2484, particularly in para 4 observed :

"Therefore, in my own view, also it would not be judicious to give custody of the truck to opposite party No.2 merely because she happens to be its registered owner. The petitioner is better entitled to get the custody during the proceedings of the case."

The ratio laid down by the judgment of the Gauhati High Court is also, in my opinion, applicable to the case in hand. Hence, the contention raised by the learned counsel for Respondent No.3 is liable to be rejected and the petitioner, in my opinion, is better entitled to have the custody of the vehicle during the pendency of the case.

17. In view of the above referred judgment of the Apex Court and the Division Bench's Judgment of the Karnataka High Court and the judgment of the Gauhati High Court, I respectfully disagree with the view taken by the Orissa High Court tin Basanti Pradhan Vs. State of Orissa, reported in 1995(1) Crimes page 803, as well as the view taken by this Court in Haribhau Dhondiba Chavan Vs. Balkrishna Bhikoba Ballal reported in 1987 Mh. L.J. 340, as relied by the counsel for Respondent No.3.

18. Since for the purposes of controversy, in question, reliance is placed by this Court on the above referred Apex Court's judgment, it is not necessary for me to refer the matter to the larger bench.

19. It is, however, true that Respondent No.3 in the given set of circumstances might have been put to financial loss due to act of Respondent No.2. It is open for Respondent No.3 to take appropriate steps against Respondent No.2, if any.

20. It is also difficult to appreciate contentions raised by respondent no.3, in respect of bonafide purchase of the vehicle, by Respondent No.3 from Respondent No.2. Be that as it may, in the instant case, for the reasons stated hereinabove, the impugned order is not just and proper and the petitioner, in my opinion, is entitled for the interim custody of the seized vehicle i.e. TATA SUMO till the final disposal of the case.

21. In the circumstances, the Criminal Writ Petition is allowed and the impugned order dated 23-3-1998, passed by the learned First judicial Magistrate, First Class, Nagpur, is hereby quashed and set aside. The petitioner is entitled to have the interim custody of the seized vehicle, i.e. TATA SUMO, till the final disposal of the case. The petitioner is directed to execute a bond of suparatnama of Rs. 5 lakhs and is further directed to produce the vehicle as and when ordered by the Court below and is also directed not to dispose of the said vehicle in any manner whatsoever.

22. At this stage, Shri Khapre, learned counsel for respondent no.3 submitted that the effect and operation of this order may be suspended for a period of two months, in order to enable Respondent No.3, to approach the Apex Court. In the circumstances, the order of this Court is stayed/suspended for a period of two months from today i.e. up to 13th March, 1999, and will cease to operate from 13th March 1999, unless appropriate orders are obtained from the Apex Court.

23. No order as to costs.

Petition allowed.