# M/S. MAGMA FINCORP LTD v. RAJESH KUMAR TIWARI

- **Citation:** [2020] 11 S.C.R. 59
- **Court:** Supreme Court of India
- **Decided:** 2020-10-01
- **Case number:** Civil Appeal No. 5622 of 2019
- **Bench:** D. Y. Chandrachud, Indira Banerjee
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-magma-fincorp-ltd-v-rajesh-kumar-tiwari-34524
- **Pages:** 58

## Headnote

Consumer Protection Act, 1986:
ss.2(1)(r) and 12 - Complaint alleging unfair trade practice
and deficiency in service - Against the appellant-financier, with
whom the complainant had entered into hire-purchase agreement
for purchase of a vehicle - Alleging that even though the
complainant had paid 7 out of 35 instalments, the Financier took
possession of the vehicle without notice and sold the vehicle refusing
to concede to his request for opportunity to clear the outstanding
instalments - Fora below allowed the complaint directing the
financier to refund the instalments paid by the complainant with
interest and to pay damages and litigation cost and also the amount
which was paid to dealer of vehicle directly by the complainant -
Appeal to Supreme Court - Held: Under a Hire-Purchase agreement,
goods are let out on hire, with an option to purchase, in accordance
with the terms of the agreement - The financier continues to be
owner of the goods until the option to purchase (upon payment of
agreed amounts) is exercised by the hirer - There is no legal
impediment to the financier taking repossession of the goods, upon
default in payment of instalments - The Consumer Protection Act
does not override the contract Act - Requirement of notice to the
hirer before repossession would depend on the terms and conditions
of the agreement - If stipulation of notice are violated, non-service
would tantamount to deficiency in service and the consumer would
be entitled to compensatory damages - If non-service of notice
causes loss to the hirer, consumer/hirer is entitled to punitive damages
- In the present case there is no evidence of any loss suffered by
hirer due to non-receipt of notice - There is no deficiency in service
and no case of unfair trade practice is made out - The direction of
fora below has given a defaulting hirer, benefit of free use of the
vehicle.
[2020] 11 S.C.R. 59
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SUPREME COURT REPORTS
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Allowing the appeal, the Court
HELD: 1.1 Section (2)(1)(r) of Consumer Protection Act,
1986 defines "unfair trade practice" to mean a trade practice, for
the purpose of promoting provision of any service, by adoption
of unfair method or unfair or deceptive practice, including any of
the practices enumerated in Sections 2(1)(r)(i) to (x), 2(r)(2),
2(r)(3) and 2(r)(3A). The complaint in the present case does not
make out any case of unfair trade practice within the meaning of
Section 2(1)(r) of the Consumer Protection Act 1986. [Para 25]
[98-D-E]
1.2 Under the terms and conditions of the hire purchase
agreement, the ownership of the vehicle was to stand transferred
to the Complainant from the Financier, upon payment of all the 35
instalments and other dues, if any. Until then, the ownership was
to be with the Financier. As all the 35 instalments had not been
paid by the complainant to the Financier, the ownership of the
vehicle remained with the Financier. The hire purchase agreement
clearly enabled the Financier to take possession of the vehicle,
on default in payment of any of the instalments. There is no term
in the Hire Purchase Agreement, that requires the Financier to
give notice to the Complainant before terminating the Hire
Purchase Agreement, upon breach of any term thereof, or before
taking possession of the vehicle. On the other hand, clause 15 of
the Hire Purchase Agreement expressly provides for
determination of the Hire Purchase Agreement without notice to
the Complainant, upon default in hire instalments. [Paras 2830][98-H; 99-A-D]
1.3 The Complainant has only made a vague assertion that
the action of the Financier in taking possession of the vehicle,
admittedly for default in payment of instalments, and in not
releasing the vehicle to the Complainant, in spite of the
Complainant's assurance to the Financier to clear outstanding
instalments and pay future instalments timely, amounts to an act
of unfair trade practice and constitutes deficiency of service. The
repossession of a vehicle u

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M/S. MAGMA FINCORP LTD.
v.
RAJESH KUMAR TIWARI
(Civil Appeal No. 5622 of 2019)
OCTOBER 01, 2020
[D. Y. CHANDRACHUD AND INDIRA BANERJEE, JJ.]
Consumer Protection Act, 1986:
ss.2(1)(r) and 12 - Complaint alleging unfair trade practice
and deficiency in service - Against the appellant-financier, with
whom the complainant had entered into hire-purchase agreement
for purchase of a vehicle - Alleging that even though the
complainant had paid 7 out of 35 instalments, the Financier took
possession of the vehicle without notice and sold the vehicle refusing
to concede to his request for opportunity to clear the outstanding
instalments - Fora below allowed the complaint directing the
financier to refund the instalments paid by the complainant with
interest and to pay damages and litigation cost and also the amount
which was paid to dealer of vehicle directly by the complainant -
Appeal to Supreme Court - Held: Under a Hire-Purchase agreement,
goods are let out on hire, with an option to purchase, in accordance
with the terms of the agreement - The financier continues to be
owner of the goods until the option to purchase (upon payment of
agreed amounts) is exercised by the hirer - There is no legal
impediment to the financier taking repossession of the goods, upon
default in payment of instalments - The Consumer Protection Act
does not override the contract Act - Requirement of notice to the
hirer before repossession would depend on the terms and conditions
of the agreement - If stipulation of notice are violated, non-service
would tantamount to deficiency in service and the consumer would
be entitled to compensatory damages - If non-service of notice
causes loss to the hirer, consumer/hirer is entitled to punitive damages
- In the present case there is no evidence of any loss suffered by
hirer due to non-receipt of notice - There is no deficiency in service
and no case of unfair trade practice is made out - The direction of
fora below has given a defaulting hirer, benefit of free use of the
vehicle.
[2020] 11 S.C.R. 59
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SUPREME COURT REPORTS
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Allowing the appeal, the Court
HELD: 1.1 Section (2)(1)(r) of Consumer Protection Act,
1986 defines "unfair trade practice" to mean a trade practice, for
the purpose of promoting provision of any service, by adoption
of unfair method or unfair or deceptive practice, including any of
the practices enumerated in Sections 2(1)(r)(i) to (x), 2(r)(2),
2(r)(3) and 2(r)(3A). The complaint in the present case does not
make out any case of unfair trade practice within the meaning of
Section 2(1)(r) of the Consumer Protection Act 1986. [Para 25]
[98-D-E]
1.2 Under the terms and conditions of the hire purchase
agreement, the ownership of the vehicle was to stand transferred
to the Complainant from the Financier, upon payment of all the 35
instalments and other dues, if any. Until then, the ownership was
to be with the Financier. As all the 35 instalments had not been
paid by the complainant to the Financier, the ownership of the
vehicle remained with the Financier. The hire purchase agreement
clearly enabled the Financier to take possession of the vehicle,
on default in payment of any of the instalments. There is no term
in the Hire Purchase Agreement, that requires the Financier to
give notice to the Complainant before terminating the Hire
Purchase Agreement, upon breach of any term thereof, or before
taking possession of the vehicle. On the other hand, clause 15 of
the Hire Purchase Agreement expressly provides for
determination of the Hire Purchase Agreement without notice to
the Complainant, upon default in hire instalments. [Paras 2830][98-H; 99-A-D]
1.3 The Complainant has only made a vague assertion that
the action of the Financier in taking possession of the vehicle,
admittedly for default in payment of instalments, and in not
releasing the vehicle to the Complainant, in spite of the
Complainant's assurance to the Financier to clear outstanding
instalments and pay future instalments timely, amounts to an act
of unfair trade practice and constitutes deficiency of service. The
repossession of a vehicle under hire, in accordance with the terms
and conditions of a hire purchase agreement, upon default in
payment of hire instalments and refusal to release the same on
mere assurance of the Complainant to clear outstanding arrears
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of hire instalments, and pay future instalments in time, does not
constitute 'deficiency' in service. [Paras 26 and 31][98-E;
99-D-E]
1.4 The object of a notice before taking possession of a
vehicle on hire under a Hire Purchase Agreement, is to enable
the hirer, to make a written request to the Financier to revive the
hire purchase agreement in terms of Clause 12 of the said
agreement, upon payment of all outstanding dues together with
damages, as might be mutually agreed upon. A notice also draws
the attention of the hirer to the alleged breaches of agreement
on the part of the hirer, on the basis of which, the Financier claims
to be entitled to take possession. Such notice gives the hirer an
opportunity to show that the hirer had not, in fact, committed any
breach of agreement. [Paras 34, 35][100-B-D]
2.1 A District Forum constituted under the Consumer
Protection Act derives its power to grant relief from Section 14
of the said Act. If the District Forum is satisfied that the allegations
contained in the complaint about the services are proved, it may
direct the service provider to (i) return the charges paid by the
Complainant [Section 14(1)(c)]; (ii) to pay such amount, as may
be awarded by the District Forum as compensation to the
consumer for any loss or injury suffered by the Complainant/
Consumer, due to the negligence of the service provider [Section
14(1)(d)]; (iii) to pay punitive damages in such circumstances as
the District Forum deems fit [Proviso to Section 14(1)(d)]; (iv) to
remove the deficiencies in the service in question. [Section
14(1)(a)]; (v) to discontinue the unfair trade practice [Section 14(1)
(f)] [Para 38][100-G; 101-A-C]
2.2 Before a District Forum can grant relief to the consumer
of a service, it has to be satisfied that the allegations in the
complaint, and/or in other words, the allegations which constitute
a valid complaint, that is allegations of unfair or restrictive trade
practice adopted by the service provider, or the allegations of
deficiency in the service hired, or availed of or agreed to be
availed of by the Complainant from the service provider, or the
allegations of the service provider charging a price in excess of
the price fixed for the service, under any law, for the time being
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in force or agreed between the parties or allegations of offering
spurious services or services hazardous to life or safety, are
proved. [Para 39][101-D-E]
2.3 Section 13(2)(b) of the Consumer Protection Act, 1986
casts an obligation on the District Forum to decide a complaint
on the basis of the evidence brought to its notice by the
Complainant and the service provider. Irrespective of whether
the service provider adduces evidence or not, the decision of
the District Forum has to be based on evidence relied upon by
the Complainant. The onus of proof is on the Complainant making
the allegation. Section 27 of the Consumer Protection Act casts
an obligation on the District Forum, the State Commission or the
National Commission to dismiss frivolous complaints with costs
not exceeding Rs.10,000/-. [Para 40][101-F-G]
2.4 The Complainant produced a delivery receipt in respect
of the vehicle, some payment receipts, Insurance papers in respect
of the vehicle, an FIR unconnected with the Financier and/or
copies thereof and some documents relating to the filing of the
Complaint and payment of Court Fees etc., none of which establish
any deficiency of service or unfair trade practice on the part of
the Financier. [Para 41][101-G-H; 102-A]
2.5 The District Forum drew adverse inference against the
Financier for not producing the Hire Purchase Agreement and
assumed that there was no provision in the Hire Purchase
Agreement for taking the vehicle back or selling it to a third
party. No adverse inference could have been drawn against the
Financier for not producing the Hire Purchase Agreement before
the District Forum, when there was no allegation in the complaint of
breach by the Financier of the Hire Purchase Agreement, in taking
possession of the vehicle. The District Forum did not exercise its
power under Section 13(4)(ii) to call upon the Financier to produce
the Hire Purchase Agreement. Even otherwise, the District Forum
did not direct the Financier to produce the Hire Purchase Agreement.
[Paras 42, 43][102-B-D]
2.6 The finding of the District Forum, of the vehicle having
been lifted "forcefully" or "snatched" is, contrary to the
Complainant's own case made out in the Complaint, and therefore
perverse. It is well settled that a new case cannot be made out by
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way of evidence, when there are no pleadings to support the same.
[Para 44][102-E-F]
3.1 The State Commission assumed that the error in the
address of the complainant in the notice despatched by the Financier
was deliberate, in order to sell the vehicle without the knowledge of
the Complainant. Such assumption was not based on any materials
on record but patently conjectural. The State Commission observed
that the Complainant had been deprived of the opportunity to deposit
the amount, due from him to the Financier, which again is contrary
to the Complainant's own pleadings in his complaint. The State
Commission further found that there was no mention of the
amount due to be paid by the Complainant to the Financier, in the
Written Statement filed by the Financier before the District Forum.
There was also no mention in that written statement of when the
vehicle had been sold and the amount for which the vehicle had
been sold, whether such amount was more than or less than the
amount due from the Complainant to the Financier. Observing
that the silence on the part of the Financier in not divulging
anything about the sale rendered the sale 'dubious', the State
Commission concluded that the Financier had surreptitiously sold
the vehicle, without the knowledge of the Complainant, without
notice to the Complainant, and without disclosing the details of
the sale. The aforesaid observation, of the sale being dubious,
has been made, overlooking the terms and conditions of the hire
purchase agreement, and without considering the law governing
hire purchase agreements. The Financier remains the owner of the
vehicle taken by the complainant on hire, on condition of option to
purchase, upon payment of all hire instalments. The hire instalments
are charges for use of the vehicle as also for the exercise of option
to purchase the vehicle in future. The Financier being the owner of
the vehicle, there was no obligation on the part of the Financier, to
divulge details of the sale of that vehicle, and that too on its own,
without being called upon to do so. [Paras 46-48][102-G-H;
103-A-E]
3.2 The finding of the State Commission that the Financier
sold the vehicle without the knowledge of the Complainant is contrary
to the Complainant's own case in his complaint before the District
Forum. The Complainant has established that there was a discrepancy
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and/or error in the address of the Complainant in the notice for
repossession, from which all the three fora under the Consumer
Protection Act, 1986, have concluded that possession of the vehicle
was taken without notice. It was not the case of the Complainant
that the vehicle was sold without notice to or knowledge of the
complainant. The error and/or discrepancy in the address is minor
and there are no materials on the basis of which the State Commission
concluded that the error was deliberate. The finding of the State
Commission, of the error in the address being deliberate, is
unsubstantiated. [Paras 49, 50 and 51][103-F-H; 104-A-C]
3.3. By directing the Financier to pay to the Complainant, the
entire amount paid by the Complainant to the Financier from the
inception, as also the amount paid by the Complainant to the dealer
directly, along with interest at the rate of 10% per annum, damages
of Rs.10,000/- and litigation costs, the fora constituted under the
Consumer Protection Act, 1986, have given a defaulting hirer the
benefit of free use of the vehicle of the value of Rs.4,21,121/- for
almost twelve months, plus damages, oblivious to the depreciation
in the value of the vehicle by reason of wear and tear, due to use by
the hirer, as also an admitted accident for which the vehicle lay seized
with the Police for some time. [Para 53][104-E-G]
4.1 The Consumer Protection Act, 1986, which creates fora
for expeditious adjudication and settlement of consumer disputes,
is not in derogation of any law in existence, but in addition thereto,
as provided in Section 3 thereof. The said Act protects consumers
of services from being charged a price in excess of the price fixed
for the service under any law or the price agreed between the
parties and also redressal of deficiency in the services availed by
the Consumer and/or against restrictive or unfair trade practices,
and/or spurious services. The Consumer Protection Act, 1986 does
not override the Contract Act, 1872, and other enactments in force,
applicable to the service availed by the consumer from the service
provider. [Paras 55, 56][105-B-C]
4.2 The protection, to which the consumer of a service is
entitled under the Consumer Protection Act, is against loss of money,
by reason of being denied service, of a quality agreed upon expressly
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or by necessary implication, inter alia, in view of the applicable law,
for which the consumer has paid, or has agreed to pay a consideration.
The said Act also protects consumers from being overcharged for
any service obtained and/or agreed to be obtained. The consumer
of a service may also be entitled to damages for any loss suffered
by the consumer, by reason of denial or deficiency in service for
which the consumer has paid or agreed to pay (if the parties have
agreed to deferred payment), charges and/or in other words, price
for the service. In cases of breach of contract, liquidated damages
may be imposed on the party in breach, if the agreement provides
for liquidated damages, that is a fixed amount by way of damages.
Where the parties to an agreement have not agreed to liquidated
damages, the party in breach of agreement may be directed to
pay unliquidated damages which are compensatory. Such
compensatory damages are not to punish the party in breach, but
to compensate the party not in breach, for losses suffered as a
result of the breach. Where, however, the damages caused by the
breach are severe and extensive, the party in breach may be required
to pay to the party not in breach, such damages as would restore the
position of the party not in breach, to the position before the breach
occurred. [Paras 57-59][105-D-H]
4.3 Apart from compensatory damages, an Adjudicating
Authority may impose on the party in breach, punitive damages or
nominal damages. Punitive damages are awarded where the party in
breach of agreement has behaved in a manner, which is reprehensible
and calls for punishment. Nominal damages are awarded where there
is no real harm done, by reason of the breach of the contract.
[Para 60][106-A-B]
4.4. Section 14 of the Consumer Protection Act, 1986
empowers the District Forum to award compensation to the party
not in breach by directing the party in breach to return the price
or the charges as may have been paid by the complainant [Section
14(1)(c)]. The said Section also enables the District Forum to
award compensatory damages to the consumer for loss or injury
suffered by the consumer due to negligence of the party in breach
[Section 14(1)(d)]. The Forum may direct removal of the deficiency
in service, if the deficiency can be removed and it can direct discontinuation of unfair trade practices or restrictive practices and
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direct the same not to be repeated [Section 14(1)(e) and (f)]. The
proviso to Section 14(1)(d) of Consumer Protection Act, 1986
empowers the District Forum to grant punitive damages in such
circumstances as it deems fit. Punitive damages are not generally
awarded in cases of breach of contract unless the act is so
reprehensible that it calls for punishment of the party in breach,
by imposition of punitive and/or exemplary damages.
Compensation which is compensatory, has to be assessed taking
into account relevant factors, such as the loss incurred by the
claimant, though some amount of guess work and/or estimation
may be permissible. In the instant case, the District Forum did
not even undertake the exercise of assessment of the loss/
damages, if any, suffered by the complainant by reason of nonservice of notice before taking possession of the vehicle. [Paras
61 and 62][106-B-F]
5.1 Goods are let out on hire under a Hire Purchase
Agreement, with an option to purchase, in accordance with the
terms and conditions of the Hire Purchase Agreement. The hirer
simply pays for the use of the goods and for the option to purchase
them. Until the option to purchase is exercised by the hirer, upon
payment of all amounts agreed upon between the hirer and the
Financier, the financier continues to be owner of the goods being
the subject of hire purchase. Till such time the hirer remains a
trustee and/or bailee of the goods covered by the Hire Purchase
Agreement. The Financier continues to remain the owner of a
vehicle, covered by a hire purchase agreement till all the hire
instalments are paid and the hirer exercises the option to purchase.
Thus, when the Financier takes re-possession of a vehicle under
hire, upon default by the hirer in payment of hire instalments, the
Financier takes re- possession of the Financier's own vehicle. When
the agreement between the Financier and the hirer permits the
Financier to take possession of a vehicle financed by the Financier,
there is no legal impediment to the Financier taking possession
of the vehicle. When possession of the vehicle is taken, the
Financier cannot be said to have committed theft. [Paras 7780][111-F-H; 112-A-C]
5.2 Whether the transaction between a Financier and a
purchaser/hirer is a hire purchase transaction, or a loan
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transaction, might be determined from the terms of the
agreement, considered in the light of surrounding circumstances.
However, even a loan transaction, secured by right of seizure of
a financed vehicle, confers licence to the Financier to seize the
vehicle. [Para 81][112-C-D]
5.3 In the present case, the agreement executed by and
between the Financier and the Complainant is a Hire Purchase
Agreement as will appear from the terms and conditions thereof.
In any event, the fora under the Consumer Protection Act, have
not arrived at any specific finding to the contrary. There is no
discussion of the nature of the agreement between the Financier
and the Complainant. Be that as it may, the agreement clearly
permits the Financier to take possession of the vehicle, upon
default in payment of instalments. [Para 82][112-E]
5.4 The Financier being the owner of the vehicle which is
the subject of a Hire Purchase Agreement, there can be no
impediment to the Financier taking possession of the vehicle when
the hirer does not make payment of instalments/hire charges in
terms of the Hire Purchase Agreement. However, such
repossession cannot be taken by recourse to physical violence,
assault and/or criminal intimidation. Nor can such possession be
taken by engaging gangsters, goons and musclemen as so called
Recovery Agents. [Para 87][113-G-H; 114-A-B]
5.5 Whether the service of proper notice on the hirer would
be necessary for repossession of a vehicle, which is the subject
matter of a Hire Purchase Agreement, would depend on the terms
and conditions of the Hire Purchase Agreement, some of which
may stand modified by the course of conduct of the parties. If the
hire purchase agreement provides for notice on the hirer before
repossession, such notice would be mandatory. Notice may also
be necessary, if a requirement to give notice is implicit in the
agreement from the course of conduct of the parties. If the hirer
commits breaches of the conditions of a hire purchase agreement
which expressly provides for immediate repossession of a vehicle
without further notice to the hirer, in case of default in payment
of hire charges and/or hire instalments repossession would not
be vitiated for want of notice. [Paras 88, 89][114-C-G]
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5.6. In a case where the requirement to serve notice before
repossession is implicit in the hire purchase agreement, non
service of proper notice would tantamount to deficiency of service
for breach of the hire purchase agreement giving rise to a claim
in damages. The Complainant consumer would be entitled to
compensatory damages, based on an assessment of the loss
caused to the complainant by reason of the omission to give notice.
Where there is no evidence of any loss to the hirer by reason of
omission to give notice, nominal damages may be awarded. Where
a Financier erroneously and/or wrongfully invokes the power to
repossess without notice to the hirer, causing thereby extensive
pecuniary loss to the hirer or loss of goodwill and repute, a forum
constituted under the Consumer Protection Act may award
punitive damages. [Paras 90 and 91][114-G-H; 115-A-C]
5.7 In the instant case, there is no evidence of any loss
suffered by the complainant by reason of non-receipt of notice.
Admittedly, several instalments, remained unpaid. After
repossession the complainant contacted the Financier and was
informed of the reasons for the repossession. He only made an
offer to pay outstanding instalments and gave an assurance to
pay future instalments in time. If the Financier was not agreeable
to accept the offer, the Financier was within its rights under the
hire purchase agreement. This is not a case where payment had
been tendered by the hirer but not accepted by the Financier/
lender. The Complainant had not tendered payment. [Para 92][115C-E]
6. The Financier admittedly paid Rs.3,15,000/- for acquisition
of the vehicle, out of which the Financier had been able to realize
Rs.1,19,000/- inclusive of all charges. There was depreciation in
the value of the vehicle by reason of usage by the Complainant,
for about a year. The District Forum did not even notionally assess
the depreciation in the value of the vehicle. The District Forum
was not justified in directing the Financier to pay the Complainant
Rs.2,23,335/- being the entire amount paid by the Complainant
to the Financier from the inception as well as the payment of
Rs.1,04,000/- made by the Complainant to the dealer along with
damage of Rs.10,000/- and litigation costs of Rs.1,000/- after the
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Complainant had held and used the vehicle for almost a year.
The Complainant, admittedly a defaulter, has in effect, been
allowed free use of the vehicle for about a year, plus damages, for
an error in the notice of repossession, without considering the
prejudice, if any, caused to the complainant by the error and
consequential non receipt of the notice, and without making any
assessment of the loss, if at all, to the Complainant by reason of
the error/omission. [Paras 93, 94][115-E-H; 116-A]
Charanjit Singh Chadha & Ors. v. Sudhir Mehra
(2001) 7 SCC 417; K. L. Johar & Co. v. Deputy
Commercial Tax Officer, Coimbator AIR 1965 SC 1082
: [1965] SCR 112; Anup Sarmah v. Bhola Nath Sharma
and Others (2013) 1 SCC 400 : [2012] 11 SCR 360;
Orix Auto Finance (India) Ltd. v. Jagmander Singh and
Another (2006) 2 SCC 598 : [2006] 2 SCR 169; K. A.
Mathai alias Babu & Anr. v. Kora Bibbikutty & Anr.
(1996) 7 SCC 212; Sundaram Finance Ltd. v. The State of
Kerala & Anr. AIR 1966 SC 1178 : [1966] SCR 828 -
relied on.
ICICI Bank Ltd. v. Prakash Kaur & Ors. (2007) 2 SCC
711 : [2007] 3 SCR 253; Citicorp Maruti Finance Ltd. v.
S. Vijaylaxmi (2012) 1 SCC 1 : [2011] 14 SCR 1050 -
distinguished.
Jagdish Chandra Nijhawan v. S.K. Saraf (1999) 1 SCC
119; Smt. Lalmuni Devi v. State of Bihar & Ors. (2001)
2 SCC 17 - held inapplicable.
Case Law Reference
(2001) 7 SCC 417
relied on
Para 64
[1965] SCR 112
relied on
Para 66
[2012] 11 SCR 360
relied on
Para 67
[2006] 2 SCR 169
relied on
Para 68
(1996) 7 SCC 212
relied on
Para 69
(1999) 1 SCC 119
held inapplicable
Para 70
M/S. MAGMA FINCORP LTD. v. RAJESH KUMAR TIWARI
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SUPREME COURT REPORTS
[2020] 11 S.C.R.
(2001) 2 SCC 17
held inapplicable
Para 70
[1966] SCR 828
relied on
Para 73
[2007] 3 SCR 253
distinguished
Para 83
[2011] 14 SCR 1050
distinguished
Para 85
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5622
of 2019.
From the Judgment and Order dated 02.08.2018 of the National
Consumer Disputes Redressal Commission, New Delhi in Revision
Petition No. 05/2018.
Rajiv Ranjan Dwivedi, Kunal Cheema, Ms. Aditi Parkhi, Advs.
for the appearing parties.
The Judgment of the Court was delivered by
INDIRA BANERJEE, J.
1. This appeal is against an order dated 2nd August, 2018 passed
by the National Consumer Disputes Redressal Commission [hereinafter
referred to as the 'National Commission'], dismissing Revision Petition
No.5 of 2018, filed by the Appellant [hereinafter referred to as the
Financier], under Section 21(b) of the Consumer Protection Act, 1986,
against an order dated 31st August, 2017 passed by the State Consumer
Disputes Redressal Commission, Uttar Pradesh [herein after referred
to as the 'State Commission'], dismissing Appeal No. 1704 0f 2008 filed
by the Financier, and affirming the order dated 22nd August, 2008 passed
by the District Consumer Disputes Redressal Forum, Ambedkar Nagar,
Uttar Pradesh [hereinafter referred to as the 'District Forum'], whereby
the District Forum allowed Complaint Case No. 105/2005 filed by the
Respondent, Rajesh Kumar Tiwari [hereinafter referred to as the
'Complainant'], and directed the Financier to pay Rs. 2,23,335/- to the
Complainant, along with interest at 10% per annum, Rs 10,000/- towards
physical and mental injury and Rs 1000/- as litigation expenses.
2. On or about 2nd August 2002, the Complainant entered into a
hire-purchase agreement with the Financier, then known as Magma
Leasing Ltd. for hire-purchase of a Mahindra Marshal Economic Jeep
bearing the Registration No. UP-42-T/1163, which is hereinafter referred
to as the 'vehicle', the cost whereof was Rs.4,21,121/- of which the
complainant made an initial payment of Rs.1,06,121/-. According to the
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Financier, an amount of Rs.1,04,000/- from out of the initial payment of
Rs.1,06,121/- was paid by the complainant to the dealer directly. The
balance amount of Rs.3,15,000/- was paid by the Financier.
3. The Complainant agreed to repay a sum of Rs.4,38,585/-
which was inclusive of finance charges of Rs.83,650/- to the Financier in
35 monthly instalments of Rs.12,531/-, commencing from 1st August, 2002.
The monthly instalments were to be paid till 1st June, 2005. The
Complainant apparently deposited post dated cheques of Rs.12,531/-.
4. A part of the recital and some of the relevant terms and conditions
of the said hire purchase agreement between the Financier and the
Complainant, are set out hereinbelow for convenience:
".....
WHEREAS the Hirer has agreed to deposit post dated
cheques with the company at its registered office at 24, Park
Street, Calcutta-700016 towards security for payment of
monthly/quarterly hire charge and undertakes to ensure
encashment of the same on the respective due dates.
WHEREAS the Hirer has agreed to hold the Hired Article in
Trust for the company subject to user right and not to deal
with the same in the manner specified in Clause 3(1) hereof
until the entire amounts due under this agreement are duly
paid to the company on the terms and conditions more
particularly set out hereunder.
........
01. HIRED ARTICLE AND TENURE
The company shall provide funds for acquisition of the hired
articles set out in the Schedule. I hereto and the hirer shall
hold the same in trust for the company from the date of
commencement of this agreement regardless of the date of
physical delivery of the hired article for the period as stated
in Schedule-II hereof subject only to Hirer's user rights upon
the terms and conditions, herein contained.
The Hirer shall not be entitled to make any claim
whatsoever on the company in respect of the Hired Article
and/or relating to its specification and/or its condition and/
or in any other manner whatsoever.
M/S. MAGMA FINCORP LTD. v. RAJESH KUMAR TIWARI
[INDIRA BANERJEE, J.]
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The Annexure hereto shall form an integral part of this
agreement.
02. The Hirer shall duly perform and observe all the terms
and condition contained in this agreement and the covenants
on his part to be performed and observed and shall in the
manner aforesaid, pay to the company, monthly/quarterly sums
by way of hire instalments as mentioned in Schedule-II and
Schedule-III of this agreement and shall also pay to the
company all other sums of money which may become due
and payable under this agreement, upon execution thereof
regardless of the date of delivery of the Hired Article.
03. HIRER'S WARRANTIES
 The Hirer shall:
a) HIRE PAYMENTS
Punctually and promptly pay to the company without any
demand in respect thereof by the company, at its registered
office the stipulated down payments/initial payment/
instalments as mentioned in Schedule-III/other charges on
the due dates, whether or not it has received delivery of
the Hired Article.
b) MAINTENANCE
Maintain and keep the Hired Article in good and serviceable
condition at his own cost. The company and/or its Bankers
shall have all the rights to inspect and to call for the Hired
Article to be produced at any time for any time for any
reason whatsoever. The Hirer shall be responsible and liable
for damage, if any, caused to the Hired Article and/or to
any other third party.
c) LOCATION
Keep the Hired Article at the Hirer's said premises and
shall permit the company and/or its agent at all times to
enter upon any premises at which the Hired Article is kept/
parked for the purpose of verification and also repossession
the Hired Article under the provisions of clause 15 of this
agreement and shall not under any circumstances change
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the location of the Hired Article, without express approval
of the company.
d) INSURANCE
Insure and keep comprehensively insured the Hired Article
in the name of the company and/or its Banker against loss
or damage by fire, accident, flood, earthquake, theft or
any other cause and including against third party claims
with an insurance company for the full cost of the Hired
Article, such insurance policy shall be lodged with the
company and/or its bankers duly assigned in their favour
promptly and regularly. And loss and/or liability arising to
the company for the Hirer's omission or neglect to keep
the Hired Article so comprehensively insured shall be
entirely to the account of the Hire and the Hirer and shall
immediately make payment to the company in respect of all
such losses suffered and/or liabilities incurred by the
company.
In the event, the company effects or renews the insurance
of the Hired Article, the Hirer will on demand, reimburse to
the company such sum or sums as shall have been so spent
by the company together with interest at 3% per month
calculated from the date of insurance till date of actual
payment.
The Hirer confirms that he/it will get the benefit of the
insurance only if no amount is overdue by him to the
company. If the contract of hiring is terminated either by
the company or by the Hirer as provided in this agreement,
the Hirer's interest in the insurance policy and his/its right
of claiming anything there under shall IPSO FACTO come
to an end. The Hirer further agrees that whenever he/it is
not entitled to the benefit of insurance under the clause,
the same would go to the company and the company shall
be considered to be the insured in his/its place.
However, the said insurance shall not absolve the
Hirer from his/its liabilities towards the company under
this agreement and in no case shall the Hirer be entitled to
claim any benefit from the company beyond any amount of
claim received from the insurance company.
M/S. MAGMA FINCORP LTD. v. RAJESH KUMAR TIWARI
[INDIRA BANERJEE, J.]
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e) REGISTRATION
Notwithstanding the fact that the company continues to
remain the owner of the Hired Article until payment of the
entire dues by the Hirer, the company agrees to permit the
Hirer to have the Registration under the Motor Vehicles
Act of the Hired Article in his/its own name with
endorsement of the company's name as financier, provided
that the Hirer shall be deemed to have transferred the
registration in the name of the company when the Hirer
commits a breach of any of the conditions of this agreement
and the company is entitled to retake the possession of the
Hired Article. The Hirer has, in order to facilitate taking
possession of the vehicles, in the event of the Hirer
committing breach of the agreement, executed necessary
documents and has authorised the company to use the same
as and when the occasion so arises.
f) ALIENATION OF HIRED ARTICLE
Ensure not to sell, assign, mortgage, pledge, hypothecate
or otherwise deal with the Hired Article or any part thereof,
to part with possession of the Hired Article without the
express written permission of the company previously
obtained and not to use the Hired Article for any purpose
other than that declared in the application.
g) ........
h) .......
i) ....
j) ........
04. ...........
05. LOSS AND DAMAGE
In the event of the Hired Article, being from any cause
whatsoever, wholly lost to the company during the said hiring,
the measure of damages as admitted to be payable by the
Hirer to the company shall be the aggregate of all arrears
amounts. If any, and the total amount of the installment which
would have been payable during the residue of the said hire
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purchase form. For the purpose of this clause, the Hired
Article, if damaged and not forthwith repaired and restored
to its original condition, shall be deemed to be wholly lost to
the company. However, every opportunity and reasonable time
shall be given to the hirer to restore the Hired Article to
working condition subject to the hirer continuing to pay the
hire installments as per the agreement.
06. RELEASE OF PROPERTY.
If the event sic of the hiring continues for the full period
referred to in Schedule-III hereof and the following sums of
money been punctually paid:-
a. all installments due under this agreement.
b. other sums of money due hereunder then in such event the
company shall release and relinquish all its rights and interest
in the Hired Article. Until such payments, the company shall
continue to have all rights and interest created by these
presents over the hired Article together with any accession,
improvements and additions made thereto by the hirer as
clearly provided in clause 3(i) of this agreement and rights of
the Hirer shall be subject to the beneficial rights of the company
and the Hirer shall be deemed to be holding the Hired Article
in trust for the company.
The company shall be at liberty to hypothecate the Hired
Article in favour of the Bankers until the Hirer shall pay the
entire amount due hereunder.
07. .....
08. USE OF THE HIRED ARTICLE FOR UNLAWFUL
PURPOSE
The Hirer undertakes not to use Hired Article either by
itself/himself or through its/his servants or agents, for
any unlawful purpose prohibited as per the terms and
conditions of the insurance policy or do or permit to be
done any act or thing which might render the insurance
invalid, and in particular, not to use the Hired Articles in
any acts liable to contravention of any of the provisions
of the Acts of the Central and State Legislatures.
M/S. MAGMA FINCORP LTD. v. RAJESH KUMAR TIWARI
[INDIRA BANERJEE, J.]
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09. COLLATERAL SECURITY
The monthly/quarterly payment of hire charges for the Hired
Article shall be secured by the delivery to the company of a
promissory note to be executed by the Hirer for the value
of Rs.438585/- (Rupees Four Lac Thirty Eight Thousand
Five Hundred Eighty Five only)
10. .........
11. ......
12. REVIVAL OF THE AGREEMENT
In the event of the company repossessing the Hired Article
under any of the circumstances stated in this agreement,
the Hirer may request the company in writing to revive
the agreement and apply for restoration of the same to it
on payment of all sums which might have been arrived at
as due thereon had the agreement not been determined or
the Hired Article not repossessed by the company together
with damages to be mutually agreed upon between the
company and the Hirer, and the expenses which the
company has incurred in repossessing the same and/or as
a consequence of the agreement being determined and such
request may be entertained by the company at its absolute
discretion and upon such further or other terms as it thinks
fit and proper in the circumstances. The company shall be
under no compulsion to accept the request for revival of
this agreement as stated supra.
13. ......
14. .....
15. DETERMINATION
In case the Hirer shall during the continuance of this
agreement do or suffer one or more of the following:-
a) Fail to pay any of the hire installments or the interest or
other amounts (for example; insurance premium, expenses
incurred for collection of installments, additional taxes,
additional, finance charges for late payment of installments
etc.) having fallen due hereunder within 7 (seven) days of
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the amount falling due for payment whether demanded
or not;
b) .......
c) .......
d) pledge or mortgage or hypothecate or sell or attempt to
pledge or sell or part with possession of or otherwise
alienate or transfer the said Hired Article;
e)....
f) fail to keep the said Hired Article comprehensively
insured as agreed hereinbefore during the period of the
agreement.
g) fail to pay to the government or any public authority
and taxes or charges due in respect of the Hired Article.
h) remove the Hired Article to any other State i.e. all such
States other than the State in which the Hired Article is
registered under Motor Vehicles, Act without prior written
permission of the company;
i) break or fail to perform or observe any conditions on
his/its part herein contained;
j) ......
k) .....
l) .......
then on the occurrence of any of the above such events, the
rights of the Hirer under this Agreement shall forthwith
stand determined "IPSO FACTO" without any notice to
the Hirer and all installments due and remaining unpaid,
all future instalments in terms of this agreement and any
other charges. Expenses realizable from the Hirer shall
become due and payable forthwith by the Hire and the
company and/or its bankers and/or its agent shall
thereupon be entitled to enter into the premises of the Hirer
at such place the vehicle may be lying and remove and
take possession of the Hired Article situated in any land or
place or house wherever the same may then be without
M/S. MAGMA FINCORP LTD. v.