# Mahindra & Mahindra Financial Services Ltd v. State of U.P. & Ors

- **Citation:** (2020) 1 ILRA 1497
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2019-12-16
- **Case number:** Misc. Bench No. 4529 of 2018
- **Bench:** Devendra Kumar Upadhyaya, Rajan Roy, Rajesh Singh Chauhan
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/mahindra-mahindra-financial-services-ltd-v-state-of-u-p-ors-45247
- **Pages:** 40

## Headnote

C.S.C.

A. Contract-Petitioner-financer extended
loan to opposite party-for purchase of a
transport
vehicle-agreement
to
hypothecate-vehicle as security to loan
advanced-loan defaulted-petitioner took
possession of the vehicle-tax not paid fro
the date of possession by petitionerfinancier becomes owner from date of
such possession-for payment of taxJointly and severely liable.

Place before appropriate Bench. (E-8)

List of cases cited: -

## Text

_Characters 0–39,795 of 131,379. This is a partial read: ask again with offset=39795 for what follows._

1498 INDIAN LAW REPORTS ALLAHABAD SERIES
of the appellant that the testimony is nottruthful
on the point of accident. In view of the consistent
testimony of P.W. 3 obviously, it cannot be said
that the deceased ever contributed towards the
accident. Further, it is a claim petition under
section 163-A of the Motor Vehicle Act wherein
the point of negligence need not be specifically
established to the ambit claimed by the insurance
company. Therefore, the finding in so far as on
issue no. 1 is concerned as recorded by the
tribunal is on the face just and consistent and the
same need no interference by this Court.

17. In so far as the entire quantam of
compensation is concerned, then the
tribunal
has
rightly
assessed
the
compensation and has under various heads
assessed the monthly income to Rs.3,000/-
which amount was reduced by 1/3 margin
while assessing the annual income, thus,
annual income was calculated to Rs.
24000/- and after adding 30% as future
prospect say Rs.7200/- in the annual
income, it was assessed to Rs. 31,200/-.

18. Thereafter, applying the multiplier of
15 the compensation amount was assessed to Rs.
4,14,000/- then Rs. 5,000/- was awarded for loss
of estate, Rs.5,000/- for loss of love and affection
and Rs. 5,000/- for funeral expenses and under
head of loss of company of the husband Rs.
5000/- was awarded, thus aggregating to Rs.
4,34,000/-. This amount along-with 7% interest
was awarded as over all compensation and under
circumstances in cannot be said to be either
unreasonable or excessive and the finding
recorded by the tribunal on all the issues are liable
to be confirmed. Consequently, the appeal being
without any force is liable to be dismissed and the
judgment and award dated 29.2.2016 passed in
M.A.C.P. No. 308 of 2014 is hereby confirmed.

19.

The
entire
amount
of
compensation shall be paid to the claimant
respondent in the proportion as directed by
the
tribunal.
At
this
stage,
money
deposited by the insurance company at the
time of presentation of this appeal i.e. Rs.
25,000/- shall be remitted to the trial court
if it has not been done so far and the
insurance company is directed to deposit
the remaining entire amount outstanding
with the tribunal concerned within a period
of 30 days from today by adjusting the
amount, if any, already deposited and paid.

20. However, the learned counsel for the
insurance
company
claimed
that
for
completing official formalities, some more
time is needed for ensuring the compliance for
which he prays for two and half months period
at least. The plea is sustained.

21. The amount of compensation
may be deposited in two and half months
from today.

22. Consequently, this appeal is dismissed.

23. Costs easy.
----------
(2020)1 ILR 1497

ORIGINAL JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 16.12.2019

BEFORE
THE HON'BLE DEVENDRA KUMAR
UPADHYAYA, J.
THE HON'BLE RAJAN ROY, J.
THE HON'BLE RAJESH SINGH CHAUHAN, J.

Misc. Bench No. 4529 of 2018

Mahindra & Mahindra Financial Services
Ltd. ...Petitioner
Versus
State of U.P. & Ors. ...Respondents

Counsel for the Petitioner:
Amol Kumar
1 All. Mahindra & Mahindra Financial Service Ltd. Vs. State of U.P. & Ors.
1499
Counsel for the Respondents:
C.S.C.

A. Contract-Petitioner-financer extended
loan to opposite party-for purchase of a
transport
vehicle-agreement
to
hypothecate-vehicle as security to loan
advanced-loan defaulted-petitioner took
possession of the vehicle-tax not paid fro
the date of possession by petitionerfinancier becomes owner from date of
such possession-for payment of taxJointly and severely liable.

Place before appropriate Bench. (E-8)

List of cases cited: -

1. Daya Shanker Yadav Vs. St. of U.P. & anr.
reported in 2008(1) AWC 801

(Delivered by Hon'ble Rajan Roy, J.)

1. The following questions have been
referred for our consideration by a
Division Bench of this Court vide
reference order dated 24.05.2018 passed in
Writ Petition No. 4529(M/B) of 2018;
Mahindra & Mahindra Financial Services
Ltd. Vs. State of U.P. through Principal
Secretary, Transport & Others:-

"1. Whether in view of Sections
2(g), 2(h), 4, 9, 10, 12, 13, 14 and 20 of
the Act, 1997 read with Sections 39, 50
and 51 of the Act, 1988 and other relevant
provisions of the said enactments and the
Rules of 1998 and 1989, a Financier of a
motor vehicle/ transport vehicle in respect
of which a hire-purchase, lease or
hypothecation
agreement
has
been
entered, is liable to tax from the date of
taking possession of the said vehicle under
the said agreements, even if, its name is
not
entered
in
the
Certificate
of
Registration or not? If not, who is liable in
this regard?

2.
Whether
the
judgments
rendered in the case of Lakhimpur
Finvest Company Ltd. (supra), Manish
Mukhriya (supra) and Shri Prakash
(supra) and/or the judgments rendered in
the case of Amar Nath Chaubey (supra)
and
Shriram
Transport
Finance
Company Limited (supra), lay down the
law correctly on the issue framed as
Question No. 1 ?"

2. The Court had issued notice to
opposite party no. 4 but inspite of service
being sufficient as per Rules of the Court
no one has appeared before us to argue the
matter on his behalf.

3. We have heard Shri Amol Kumar,
learned counsel for the petitioner and Shri
Amitabh Kumar Rai, learned Additional
Chief Standing Counsel for the State.

Facts

4. Although, we are not required to
decide any factual issues involved in the
writ petition nevertheless a brief narration
of
relevant
facts
would
help
in
understanding
the
issues
before
us.
Petitioner is the Financier who had
extended a loan to opposite party no. 4 for
purchase of a transport vehicle. The terms
of loan were reduced in writing in form of
an agreement dated 26.06.2012. It is not in
dispute that the agreement involved
hypothecation of the vehicle, thereby
creating a charge in respect thereof in
favour of the Financier as security for loan
advanced. It is also not in dispute that said
agreement contained a condition entitling
the petitioner to take possession of the
hypothecated vehicle in the event of
default and also the right to sell it.
Opposite party no. 4 defaulted in payment
of loan amount. Accordingly, Petitioner-
1500 INDIAN LAW REPORTS ALLAHABAD SERIES
Financier took possession of the vehicle in
question on 09.12.2014. Opposite party
no. 4 informed the Registering Authority
on 09.12.2014 about possession of the
vehicle having been taken by Financier.
Opposite party no. 4-registered owner had
paid all taxes prior to the date of such
possession. Tax in respect of the vehicle
for the period 01.01.2015 to 31.12.2017
remained unpaid. Accordingly, a notice
dated 06.07.2016 was issued to opposite
party no. 4 i.e. registered owner, who,
being aggrieved, filed a writ petition
before this Court bearing No. 11147(M/B)
of 2019; Jamil Ahmad Vs. State of U.P.
challenging said notice on the ground that
possession of the vehicle having been
taken by the Financier he was not liable to
pay tax for the period subsequent to such
possession and it was the Finance
Company which was under an obligation
to pay the same. Writ Court, without
issuing notice to the petitioner-Financier,
who was a party therein, decided the
petition vide judgment dated 22.05.2017
observing therein that it is not disputed by
the learned counsel for the parties that
controversy involved in the said writ
petition is similar to the one decided in the
case of Daya Shanker Yadav Vs. State of
U.P. and Anr. reported in 2008(1) AWC
801 and is squarely covered by it and,
accordingly, it disposed of the petition of
opposite party no. 4 in terms of judgment
in Daya Shanker Yadav' case (supra) by
permitting the petitioner to submit a fresh
representation before the Taxation Officer
who was directed to take a decision
thereon in terms of Para 28(1) of the
judgment in Daya Shanker Yadav (supra).
Petitioner, who is the Financier, was not
heard in the said writ petition. Consequent
to the above, a notice dated 06.01.2018
was issued to the petitioner-Financier
under Rule 18(2) of the U.P. Motor
Vehicles Taxation Rules, 1998 holding
him liable to pay the tax due and it is this
notice which is under challenge in the writ
petition filed by the Financier out of which
the instant reference has arisen for our
consideration.

5. The vehicle in question is a public
service vehicle as per Section 2(o) of the
U.P. Motor Vehicles Taxation Act, 1997
read with Section 2(35) of the Motor
Vehicles Motor Vehicles Act, 1988,
therefore, it is a ''transport vehicle' within
the meaning of Section 2(n) of the Act,
1997.

Contention of rival parties

6. Contention of Shri Amol Kumar,
learned counsel for the petitioner was that
since transport vehicle in question was not
registered in name of the petitionercompany and it continued to be registered
in name of the borrower, therefore, he
alone was responsible, and not the
Company, for payment of any tax,
additional tax and/or penalty. Fact that the
vehicle had been possessed by the finance
company
on
09.12.2014
under
a
loan/hypothecation agreement was not
relevant in this regard in view of Section
9(2) of the Act, 1997 and also in view of
the fact that even as per definition of
''Owner' and ''Operator', it is the registered
owner who is the ''Owner'. It was also his
contention that mere taking of possession
by the Financier is not relevant unless
Certificate of Registration and other
documents are also surrendered by the
registered owner and vehicle is registered
in its name, as, otherwise, finance
company would not be able to either use
the vehicle or sell it. He took us through
various provisions of Section 2(g), 2(h), 4,
9, 10, 12, 13, 14, 20 and Section 37, 50
1 All. Mahindra & Mahindra Financial Service Ltd. Vs. State of U.P. & Ors.
1501
and 51 of the Act, 1988. He relied upon
various decisions rendered in the case of
Lakhimpur Finvest Company Ltd. Vs.
State of U.P. and Ors. reported in 2005
(2) AWC 1608 All., Amar Nath Chaubey
Vs. State of U.P. and Ors. rendered in
Writ Tax No. 521 of 2017, Manish
Mukhriya Vs. State of U.P. reported in
2015 (4) ALJ 248, Sri Prakash Vs. State
of U.P. and Ors. rendered in Writ Tax No.
41 of 2016, Radhika Prasad Vs. State of
U.P. and Ors. rendered in Writ Petition
No. 333 (M/B) of 2015, Sriram Transport
Finance Company Ltd. Vs. State of U.P.
and Ors. rendered in Writ Tax No. 217 of
2017, HDFC Bank Ltd. Vs. Reshma and
Ors. reported in 2013 (3) SCC 679,
Purnya Kala Devi Vs. State of Assam and
Anr. reported in 2014 (4) SCC 142,
Naveen Kumar Vs. Vijay Kumar and Ors.
reported in 2018 (3) SCC 1. His contention
was that it is the registered owner who was
liable to pay tax even for the period
subsequent to the date of taking possession
by the Financier till the vehicle was got
registered in the name of the Financier. It
was also his contention that for the period
prior to such possession also it was the
registered owner who was responsible to
pay tax.

7. On the other hand Shri Amitabh
Kumar Rai, learned Additional Chief
Standing Counsel appearing for the State
also took us through various provision of
the Act, 1997 as referred hereinabove,
especially Section 9(2), 9(3), 13 and 20.
He contended that Section 9(2) was not
attracted in the present case as it did not
involve transfer of vehicle. He relied upon
decision of the Supreme Court in the case
of Purnya Kala Devi (supra), wherein,
definition of ''Owner' contained in Section
2(30) of the Act, 1998, similar to the
definition in Section 2(h) of the Act, 1997,
was considered and it was held that person
in possession and control of the vehicle
under
an
agreement
of
lease,
hypothecation or hire-purchase would be
the owner. Based on it he contended that
finance company having taken possession
of the vehicle on 09.12.2014 was liable to
tax from date of such possession, it being
the owner, as, after such possession the
registered owner was neither in possession
nor in control of the vehicle and the fact
that he was the registered owner or had a
permit in his name, was irrelevant. In this
regard he also relied upon definition of
''Operator' in Section 2(g) of the Act, 1997
which according to him supported his
contention. He referred to provisions of
Section 13 of the Act, 1997 to contend that
after having taken possession of the
transport
vehicle,
petitioner-Financier
should have submitted a declaration in
Form-A as per Rule 7 of the Rules, 1998
and if it failed to do so it can not take any
advantage of its lapse. In this context he
also contended that if the petitionerFinancier claims that the vehicle is not in
use as such no tax is required to be paid,
then it had to take recourse to Section 12
of the Act, 1997.

8. With reference to Section 20 of the
Act, 1997 Shri Rai contended that Section
20 of the Act, 1997 provides for recovery
of tax/additional tax/ penalty as arrears of
land revenue. Section 20(3) of the Act,
1997 provides that the Taxation Officer
shall raise a demand in the form as may be
prescribed, from the ''Owner' or ''Operator',
as the case may be, for arrears of tax and
additional tax and penalty of each year,
which shall also include arrears of tax/
additional tax/ penalty, if any, of the
preceding years. Section 20(3) is the only
provision requiring the Taxation Officer to
raise a demand for payment of taxes and
1502 INDIAN LAW REPORTS ALLAHABAD SERIES
penalty. It is so, because the liability is
already fixed on the ''Owner' or ''Operator'
to make a declaration in the prescribed
form and to pay taxes according to the
declaration as per Section 13 of the Act,
1997 read with Rule 7 and 8 of the Rules,
1998. Rule 18 (1) of the Rules, 1998
envisages a situation when the ''Owner' or
the
''Operator'
has
not
made
any
declaration under Section 13 of the Act,
1997 and in such a situation the Taxation
Officer on receiving information shall
require the concerned person to file
declaration in Form ''A' (as provided under
rule 7) and may further serve upon the
person a special notice in Form ''E'. The
notice in Form ''E' requires filing of
declaration and also to pay the tax due
within 15 days from the date of service of
the notice, meaning thereby, that the
person not filing the declaration under
Section 13 of the Act, 1997 is given a
notice under rule 18(1) by the Taxation
Officer for filing a declaration and to pay
the taxes which are due, within 15 days.
The notice under rule 18(1) also does not
postulate determination of taxes by the
Taxation Officer, but, it requires payment
of taxes which are due as per the
declaration to be filed in pursuance to the
notice in Form ''E'.

9. Section 20(3) of the Act, 1997
read with rule 18(2) and (3) envisages a
situation when despite service of notice
under rule 18(1) or in case of default of
owner operator in payment of taxes despite
making declaration under Section 13, the
Taxation Officer is required to raise
demand in the prescribed Form E-1. Form
E-1 requires the Taxation Officer to raise a
specific demand with respect to tax/
additional tax and penalty and hence,
while issuing notice under Section 20(3)
and raising a demand in ''Form E-1', the
Taxation Officer has to determine the
liability to tax and penalty.

10. It was further submitted that in a
case where a declaration is filed under
Section 13, the Taxation Officer under
Section 20(3) is in a position to raise
demand for each year, otherwise, in a case
where no such declaration is filed, the
demand can be raised on receiving
information as provided under rule 18(1)
of the Rules, 1998. Section 20(3) of the
Act, 1997, thus, provides for raising of a
demand from the ''Owner' or ''Operator,
determining their liability, as the case may
be, which means that the Taxation Officer
while raising a demand has to fix the
liability of payment of tax under the
scheme of the Act, 1997 otherwise, the
definition of ''Operator' or ''Owner' in the
Act, 1997 as in the manner defined may
have no relevancy. It was submitted that
thus, while raising a demand under Section
20(3), Taxation Officer is required to fix
liability of the person liable to pay the tax
for the period it is due.

11. According to him Section 50 of the
Act, 1988 relates to transfer of ownership of
motor vehicle which does not get attracted in
the present case and the relevant provision
which is attracted is Section 51 relating to
motor vehicles under hypothecation/lease/hire
purchaseagreement.
In
this
regard
he
contended that Petitioner-finance company did
not take any steps in terms of Section 51(5), as
such, it is not open for it to say that unless the
Financier becomes the registered owner it is
not liable to pay taxes, specially as, being in
possession of the vehicle, a Financier is liable
to pay such tax and penalty, if any, for the
period vehicle is in its possession.

12. In the context of Section 9(3) he
contended that the expression ''jointly and
1 All. Mahindra & Mahindra Financial Service Ltd. Vs. State of U.P. & Ors.
1503
severally' for the purpose of fixing liability
of taxes and penalty used in Section 9(3)
of the Act, 1997 connotes that the owner
and operator are liable for payment of tax
to the extent of their liability, however, the
State Government is authorized to recover
the liability of taxes from either of them.
However, the Taxation Officer while
raising a demand for payment of taxes and
penalty under Section 20(3) has to
determine the liability of each separately.
Section
20(3)
of
the
Act,
1997
categorically provides that the Taxation
Officer shall raise a demand in the form as
may be prescribed from the owner or
operator, as the case may be, meaning
thereby that the Taxation Officer has to
determine the liability of each separately
and raise a demand accordingly, however,
recovery by the State Government can be
made from either of them. Section 13 and
20 of the Act, 1997 read with rule 7, 8 and
18 of the Rules, 1998 also postulate raising
a
demand
separately
from
the
owner/operator. In the present case, it is
not disputed that by virtue of definition of
the term ''operator' and ''owner' in the Act,
1997 it is the petitioner-company which is
solely liable for payment of tax from the
date of taking possession of the vehicle.
He submitted that none of the decisions
relied upon by learned counsel for the
petitioner
supported
the
petitionerFinancier's case. Section 9(2) of the Act,
1997 is not attracted in a case where the
vehicle after possession by the Financier is
not transferred. It is attracted only when
the vehicle is transferred by the registered
owner or by the Finance Company after
possession. In Amar Nath Chaubey's case
(supra) Section 9(3) of the Act, 1997 was
not taken into consideration. In Kamil
Hussain's case (supra) Section 51(5) of
the Act, 1988 as well as Section 9(3) of the
Act, 1997 were not taken into consideration.
He relied upon the decisions rendered in the
case of Purnya Kala Devi (supra), Manish
Mukhriya
(supra),
Lakhimpur
Finvest
Company Ltd. Vs. State of U.P. and Ors.;
2011 (29) LCD 2601, Lakhimpur Finvest
Company Ltd. (supra), Shriram Transport
Finance Company Ltd. (supra), Khenyei Vs.
New India Assurance Company Ltd. and
Ors.; 2015 (9) SCC 273 and J. Jeyasingh Vs.
Deputy Commercial Tax Officer; 1993 Legal
Eagle 837.

Discussion on Question No. 1

13. U.P. Motor Vehicles Taxation
Act, 1997 (hereinafter referred to as ''the
Act, 1997') is a Taxing Statute which as
per its long title provides for imposition of
tax and additional tax in the State of Uttar
Pradesh on motor vehicles engaged in
transport of passengers and goods for hire.
Motor vehicles to which it applies, are
regulated by an enactment of Parliament
known as the Motor Vehicles Act, 1988
(hereinafter referred to as ''the Act, 1988').
Rules known as Central Motor Vehicles
Rules, 1989 (hereinafter referred to as ''the
Rules, 1989) have been made by the
Central Government, under the Act, 1988.
U.P.
Motor
Vehicles
Rules,
1998
(hereinafter referred to as ''the Rules,
1998) have also been made by the State
Government under the Act, 1988.

14. Before referring to provisions of the
Act, 1997 it would be fruitful to refer to
relevant provisions of the Act, 1988 especially
those relating to registration of motor vehicles
as contained in Chapter-IV and some of the
definitions contained in Chapter-I.

The Act, 1988 and Rules, 1989

15. Section 39 of the Act, 1988
prohibits use and driving of any motor
1504 INDIAN LAW REPORTS ALLAHABAD SERIES
vehicle in any public place or any other
place unless the vehicle is registered in
accordance with Chapter- IV of the Act,
1988. Section 40 obligates every owner of
a motor vehicle to get it registered in terms
thereof.

16. An application for registration of
a vehicle is required to be moved under
Section 41 by or on behalf of the owner of
a motor vehicle. As per Rule 47 of the
Rules, 1989 an application for registration
of a motor vehicle is to be made in Form20 to the Registering Authority and it
should be accompanied by the documents
mentioned in the said Rule including a
Sale Certificate in Form-21. At Serial No.
1 of Form-20 full name of the person to be
registered as registered owner is required
to be mentioned. At the bottom there is a
''Note' wherein it is to be mentioned as to
whether the motor vehicle is subject to
hire-purchase agreement/lease agreement
or hypothecation, with details of the
Financier with whom such agreement is
entered. After these details the Financier
has to put his signature.

17. Form-21 i.e. the Sale Certificate
also contains a stipulation as to whether
the vehicle is held under an agreement of
hire-purchase/lease/ hypothecation, if so,
the person with whom such agreement has
been entered.

18. On completion of formalities in
terms of Section 41 of the Act, 1988 read
with Rule 48 of the Rules, 1989, the
Registering Authority is required to issue
to the owner of the motor vehicle a
Certificate of Registration in Form-23
which contains name of the registered
owner and at the bottom there is a ''Note'
with regard to the motor vehicle being
subject
to
hirepurchase/lease/hypothecation
agreement
and the Financier with whom such
agreement has been entered, if it is so.
Below
these
details,
the
specimen
signature of the Financier has to be
affixed. This is in keeping with the
requirement of Section 51(1) and (2).
Similar provision exists in Section 43(3)
for temporary certificate of registration.

19. Thus, the name of the Financier
is not entered in the Certificate of
Registration as the registered owner. It is
the
name
of
the
hirer,
lessee
or
hypothecator which is mentioned as
registered owner where the vehicle is
subject to such agreement.

20. Section 50 deals with action to be
taken by the transferor and transferee
consequent to transfer of ownership of a
motor vehicle for recording transfer of
ownership
in
the
Certificate
of
Registration by the registering authority.
This is required when the motor vehicle
changes hands due to sale, or inheritance
or purchase in public action conducted by
the Government. It lays down penal
consequences for non reporting of such
transfer. The Rules corresponding to
Section 50 are Rules 55, 56 and 57 of the
Rules, 1989.

21. Section 50 is as under:-

"50. Transfer of ownership.--
(1) Where the ownership of any motor
vehicle registered under this Chapter is
transferred,--

(a) the transferor shall,--

(i) in the case of a vehicle
registered within the same State, within
fourteen days of the transfer, report the
fact of transfer, in such form with such
documents and in such manner, as may be
1 All. Mahindra & Mahindra Financial Service Ltd. Vs. State of U.P. & Ors.
1505
prescribed by the Central Government to
the registering authority within whose
jurisdiction the transfer is to be effected
and shall simultaneously send a copy of
the said report to the transferee; and

(ii) in the case of a vehicle
registered outside the State, within fortyfive days of the transfer, forward to the
registering authority referred to in subclause (i)--

(A) the no objection certificate
obtained under section 48; or

(B) in a case where no such
certificate has been obtained,--

(I) the receipt obtained under
sub-section (2) of section 48; or

(II) the postal acknowledgment
received by the transferee if he has sent an
application in this behalf by registered
post
acknowledgment
due
to
the
registering authority referred to in section
48,

together with a declaration that
he has not received any communication
from such authority refusing to grant such
certificate or requiring him to comply with
any direction subject to which such
certificate may be granted;

(b) the transferee shall, within
thirty days of the transfer, report the
transfer to the registering authority within
whose jurisdiction he has the residence or
place of business where the vehicle is
normally kept, as the case may be, and
shall forward the certificate of registration
to that registering authority together with
the prescribed fee and a copy of the report
received by him from the transferor in
order that particulars of the transfer of
ownership
may
be
entered
in
the
certificate of registration.

(2) Where--

(a) the person in whose name a
motor vehicle stands registered dies, or

(b) a motor vehicle has been
purchased or acquired at a public auction
conducted
by,
or
on
behalf
of,
Government,

the person succeeding to the
possession of the vehicle or, as the case
may be, who has purchased or acquired
the
motor
vehicle,
shall
make
an
application for the purpose of transferring
the ownership of the vehicle in his name,
to the registering authority in whose
jurisdiction he has the residence or place
of business where the vehicle is normally
kept, as the case may be, in such manner,
accompanied with such fee, and within
such period as may be prescribed by the
Central Government.

(3) If the transferor or the
transferee fails to report to the registering
authority the fact of transfer within the
period specified in clause (a) or clause (b)
of sub-section (1), as the case may be, or if
the person who is required to make an
application
under
sub-section
(2)
(hereafter in this section referred to as the
other
person)
fails
to
make
such
application within the period prescribed,
the registering authority may, having
regard to the circumstances of the case,
require the transferor or the transferee, or
the other person, as the case may be, to
pay, in lieu of any action that may be taken
against him under section 177 such
amount not exceeding one hundred rupees
as may be prescribed under sub-section
(5):

Provided
that
action
under
section 177 shall be taken against the
transferor or the transferee or the other
person, as the case may be, where he fails
to pay the said amount.

(4) Where a person has paid the
amount under sub-section (3), no action
shall be taken against him under section
177.
1506 INDIAN LAW REPORTS ALLAHABAD SERIES

(5) For the purposes of subsection (3), a State Government may
prescribe different amounts having regard
to the period of delay on the part of the
transferor or the transferee in reporting
the fact of transfer of ownership of the
motor vehicle or of the other person in
making the application under sub-section
(2).

(6) On receipt of a report under
sub-section (1), or an application under
sub-section (2), the registering authority
may cause the transfer of ownership to be
entered in the certificate of registration.

(7)
A
registering
authority
making any such entry shall communicate
the transfer of ownership to the transferor
and to the original registering authority, if
it is not the original registering authority."

22. Rule 55 of the Rules, 1989 which
is relevant, is as under:-

"55. Transfer of ownership.- (1)
Where the ownership of a motor vehicle is
transferred, the transferor shall report the
fact of transfer in Form 29 to the
registering authorities concerned in whose
jurisdiction
the
transferor
and
the
transferee reside or have their places of
business.

(2) An application for the
transfer of ownership of a motor vehicle
under sub-clause (z) of clause (a) of subsection (1) of section 50 shall be made by
the transferee in Form 30, and shall be
accompanied by--

(i) the certificate of registration;

(ii) the certificate of insurance;
and

(iii) the appropriate fee as
specified in rule 81.

(3) An application for transfer of
ownership of a motor vehicle under
subclause (ii) of clause (a) of sub-section
(1) of section 50 shall be made by the
transferee in Fonn 30 and shall, in
addition to the documents and fee referred
to in sub-rule (2), be accompanied by one
of the following documents, namely:--

(a) a no objection certificate
granted by the registering authority under
subsection (3) of section 48; or

(b) an order of the registering
authority refusing to grant the no
objection certificate under subsection (3)
of section 48; or (c) where the no
objection certificate or the order, as the
case may be, has not been received, a
declaration by the transferor that he has
not received any such communication
together with--

(i) the receipt obtained from the
registering authority under subsection (2)
of section 48; or

(ii) the postal acknowledgement
received from the registering authority
where the application for no objection
certificate has been sent by post."

23. Transfer of ownership under
Section 50(a)(i) and (ii) read with Rule 55
also covers a transfer of ownership of a
vehicle by the borrower with consent of
the Financier to a third person free from
encumbrances as is evident from Form 29
and 30.

24. Transfer of ownership of a motor
vehicle is not dependent upon compliance
of Section 50. It is complete when
ingredients of transfer as prescribed in law
are satisfied. In case of Sale such
transaction is regulated by the Sale of
Goods Act. Non compliance of Section 50
merely makes the transferor or transferee,
as the case may be, liable to penal action
under the Act, 1988 but it does not avoid
liability to tax etc. nor does it make the
transfer invalid or void. Section 50 (Old
1 All. Mahindra & Mahindra Financial Service Ltd. Vs. State of U.P. & Ors.
1507
Section 31 of the Act, 1939) is attracted
only as a consequence of such transfer of
ownership of motor vehicle.

25. A separate and special provision
has been made regarding motor vehicles
subject
to
hire-purchase,
lease
or
hypothecation agreement and transactions
based thereon, in Section 51. Rules
corresponding to it are Rule 60 and 61 of
the Rules, 1989.

26. Section 51 is as under:-

"51.
Special
provisions
regarding motor vehicle subject to hirepurchase agreement, etc.-- (1) Where an
application for registration of a motor
vehicle which is held under a hirepurchase,
lease
or
hypothecation
agreement (hereafter in this section
referred to as the said agreement) is made,
the registering authority shall make an
entry in the certificate of registration
regarding the existence of the said
agreement.

(2) Where the ownership of any
motor vehicle registered under this Chapter is
transferred and the transferee enters into the
said agreement with any person, the last
registering authority shall, on receipt of an
application in such form as the Central
Government may prescribe from the parties to
the said agreement, make an entry as to the
existence of the said agreement in the
certificate of registration and an intimation in
this regard shall be sent to the original
registering authority if the last registering
authority is not the original registering
authority.

(3) Any entry made under subsection (1) or sub-section (2), may be
cancelled by the last registering authority
on proof of the termination of the said
agreement by the parties concerned on an
application being made in such form as
the Central Government may prescribe
and an intimation in this behalf shall be
sent to the original registering authority if
the last registering authority is not the
original registering authority.

(4) No entry regarding the
transfer of ownership of any motor vehicle
which is held under the said agreement
shall be made in the certificate of
registration
except
with
the
written
consent of 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.

(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 registered 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 has entered into
the said agreement:

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
1508 INDIAN LAW REPORTS ALLAHABAD SERIES
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.

(6) The registered owner shall,
before
applying
to
the
appropriate
authority, for the renewal of a permit
under section 81 or for the issue of
duplicate certificate of registration under
sub-section (14) of section 41, or for the
assignment of a new registration mark
under section 47, or removal of the vehicle
to another State, or at the time of
conversion of the vehicle from one class to
another, or for issue of no objection
certificate under section 48, or for change
of residence or place of business under
section 49, or for the alteration of the
vehicle under section 52, make an
application to the person with whom the
registered owner has entered into the said
agreement, (such person being hereafter in
this section referred to as the financier)
for the issue of a no objection certificate
(hereafter in this section referred to as the
certificate).

Explanation.--For the purposes
of this sub-section and sub-sections (8)
and
(9),
"appropriate
authority"
in
relation to any permit, means the authority
which is authorised by this Act to renew
such permit and, in relation to registration
means the authority which is authorised by
this Act to issue duplicate certificate of
registration
or
to
assign
a
new
registration mark.

(7) Within seven days of the
receipt of an application under sub-section
(6) the financier may issue, or refuse, for
reasons which shall be recorded in writing
and communicated to the applicant, to
issue, the certificate applied for, and
where the financier fails to issue the
certificate and also fails to communicate
the reasons for refusal to issue the
certificate to the applicant within the said
period of seven days, the certificate
applied for shall be deemed to have been
issued by the financier.

(8) The registered owner shall,
while
applying
to
the
appropriate
authority for the renewal of any permit
under section 81, or for the issue of a
duplicate certificate of registration under
sub-section (14) of section 41, or while
applying
for assignment
of a new
registration mark under section 47, submit
with such application the certificate, if
any, obtained under sub-section (7) or,
where no such certificate has been
obtained, the communication received
from the financier under that sub-section,
or, as the case may be, a declaration that
he has not received any communication
from the financier within the period of
seven days specified in that sub-section.

(9) On receipt of an application
for the renewal of any permit or for the
issue
of
duplicate
certificate
of
registration or for assignment of a new
registration mark in respect of a vehicle
which is held under the said agreement,
the appropriate authority may, subject to
the other provisions of this Act,--

(a) in a case where the financier
has refused to issue the certificate applied
for,
after
giving
the
applicant
an
opportunity of being heard, either--

(i) renew or refuse to renew the
permit, or

(ii) issue or refuse to issue the
duplicate certificate of registration, or

(iii) assign or refuse to assign a
new registration mark;

(b) in any other case,--

(i) renew the permit, or

(ii) issue duplicate certificate of
registration, or
1 All. Mahindra & Mahindra Financial Service Ltd. Vs. State of U.P. & Ors.
1509

(iii) assign a new registration
mark.

(10) A registering authority
making an entry in the certificate of
registration regarding--

(a)
hire-purchase,
lease
or
hypothecation agreement of a motor
vehicle, or

(b) the cancellation under subsection (3) of an entry, or

(c)
recording
transfer
of
ownership of motor vehicle, or

(d) any alteration in a motor
vehicle, or

(e) suspension or cancellation of
registration of a motor vehicle, or

(f) change of address,

shall communicate by registered
post acknowledgment due to the financier
that such entry has been made.

(11) A registering authority
registering the new vehicle, or issuing the
duplicate certificate of registration or a no
objection certificate or a temporary
certificate of registration, or issuing or
renewing,
a
fitness
certificate
or
substituting entries relating to another
motor vehicle in the permit, shall intimate
the financier of such transaction.

(12) The registering authority
where it is not the original registering
authority, when making entry under subsection
(1)
or
sub-section
(2),
or
cancelling the said entry under sub-section
(3) or issuing the fresh certificate of
registration under sub-section (5) shall
communicate the same to the original
registering authority."

27. Rule 60 and 61 of the Rules,
1989 are as under:-

"60.
Endorsement
of
hirepurchase agreements, etc.-An application
for making an entry of hire-purchase,
lease or hypothecation agreement in the
certificate of registration of a motor
vehicle required under sub-section (2) of
section 51 shall be made in Form 34 duly
signed by the registered owner of the
vehicle and the financier and shall be
accompanied
by
the
certificate
of
registration and the appropriate fee as
specified in rule 81."

"61.
Termination
of
hirepurchase
agreements,
etc.-
(1)
An
application for making an entry of
termination of agreement of hire purchase,
lease or hypothecation referred to in subsection (3) of section 51 shall be made in
Form 35 duly signed by the registered
owner of the vehicle and the financier, and
shall be accompanied by the certificate of
registration and the appropriate fee as
specified in rule 81.

(2) The application for the issue
of a fresh certificate of registration under
sub-section (5) of section 51 shall be made
in Form 36 and shall be accompanied by a
fee as specified in rule 81.

(3) Where the registered owner
has refused to deliver the certificate of
registration to the financier or has
absconded then the registering authority
shall issue a notice to the registered owner
of the vehicle in Form 37."

28.