FA No.728 OF 2011 AGAINST C.C.No.209 OF 2010 DISTRICT FORUM-II, VIJAYAWADA

Between:

Mahindra & Mahindra Financial Services Ltd.,
Zoom Complex, Dr.No.54-15-4A, 3^rd Floor
New Vinayaka Theatre NH-5, Vijayawada-8
Krishna Dist. Rep. by their Power of Attorney
Holder Sri A.S.Venkatesh S/o ASN Murthy
aged 53 years, Occ: Senior Manager in Legal R/o Hyd

                                                        Appellant/opposite partyno.1

        A N D

1.     Avuthu Vijaya Lakhsmi W/o Sambasiva Reddy

        33 years, R/o Dr.No.56-6-6, Patamata (PO) Panta

        Kaluva Road, Near Gummadi Paradise, Patamata

        Vijayawada Krishna Dist.

Respondent/complainant

2.     The Regional Transport Officer

        Regional Transport Office, M.G.Road

        Labbipet, Vijayawada-19

                                                        Respondent/opposite party no.2

Counsel for the Appellants            Sri Valluri Mohan Srinivas

Counsel for the Respondent No.1    Sri M.Hari Babu

Counsel for the Respondent No.2   G.P. for State

QUORUM:    SRI R.LAKSHMI NARASIMHA RAO, HON’BLE MEMBER

                               AND

      SRI T.ASHOK KUMAR, HON’BLE MEMBER

  WEDNESDAY, THE THIRTIETH DAY OF NOVEMBER,

                     TWO THOUSAND ELEVEN

    Oral Order:(Per Sri R.Lakshmi Narasimha Rao, Hon’ble Member.)

***

1.     The first respondent  purchased Tractor bearing AP 16BK 5591 on finance  for a sum of ` 3 lakh from the appellant company  in the month of December 2008.  The first respondent entered into loan Agreement dated 22-10-2008 with the appellant company.  The loan amount is payable with interest in 12 equated quarterly installments @ ` 38,067/-.   The first respondent committed default in payment of the installments as a result of which the appellant company repossessed the vehicle and sold it away to third party.

2.     The first respondent contends that she had obtained loan to the tune of `3,00,000/- repayable in quarterly installments @ `38,000/- and  the amount  of `76,135/- fell due  till the month of Jaunary,2010. The appellant seized the vehicle without issuing any notice and subsequently issued notice informing the first respondent to settle the overdue finance installment amount and take back the vehicle. The first respondent paid the two installments due on 19-03-2010 and 22-03-2010. The appellant company has not restored possession of the vehicle and it had been trying to sell the vehicle to third parties.

3.     The appellant company’s defence is that the first respondent had been irregular in payment of installments and she is a defaulter. The first respondent surrendered the vehicle since she was unable to pay the installments to the appellant company. By the date of seizure the first respondent was due an amount of `3,05,609/- by the date of payment of the amount on 19-03-2010 and 22-03-2010 the first respondent again fell due subsequent installments. After the vehicle was surrendered, the appellant company informed the first respondent, guarantor and the  nearest police station on 17-02-2010 and 24-02-2010. The first respondent expressed her inability to pay the installments amount and issued consent letter dated 29-07-2010 to sell the vehicle and appropriate the sale proceeds to her loan account. As per clause 12 of the Agreement, the appellant can sell the vehicle, with or without notice to the borrower, at a public or private sale.

4.     The appellant disposed of the vehicle, after obtaining the valuation report from the surveyor, in an open auction on 14-09-2010 and the sale proceeds of `1,90,000/- were appropriated to the account of the first respondent. After the appropriation of the amount, the first respondent is still due shortfall amount of `1,15,609/- to the appellant company. A resident of the first respondent’s village purchased the vehicle. The appellant issued notice on 01-01-2009, 01-02-2009, 01-05-2009 and 4-11-2009 to the first respondent and the guarantor with regard to  the pending of the installments due. The first respondent used the vehicle for commercial purpose. The consumer forum has no jurisdiction to entertain the complaint. As per clause 27 of the Agreement the courts in Mumbai alone have jurisdiction to entertain the complaint. As per clause 26 of the Agreement, the dispute is to be resolved by taking recourse to arbitration proceedings.

5.     The second respondent resisted the claim by filing counter and contending that the Tractor bearing registration number AP-16BK 5591 was registered in the name of the first respondent and covered by finance of the appellant company. The second respondent has not received any application for transfer of the vehicle .The second respondent is not a necessary party to the proceedings.

6.     The first respondent has filed her affidavit and the documents ExA1 to A5. On behalf of the appellant company its legal officer Avula Shiva Ganesh Babu has filed his affidavit and the second respondent has also filed his affidavit.  ExB1 to B19 had been marked.

7.     The District forum allowed the complaint on the premise that the appellant company seized the vehicle and kept it idle for more than 210 days without issuing notice and without following the procedure as required by law.

8.     The District Forum has directed the appellant company to release the vehicle without demanding any other charges and to give three months time for the respondent no.1 to pay the sixth instalment as also to follow the quarterly instalments pattern.  The District Forum directed the second respondent not to transfer the vehicle in the name of any other person.

9.     Aggrieved by the order of the District Forum, the opposite party no.1 has filed the appeal contending that the first respondent has not paid the amount due nor did she take possession of the vehicle for 210 days from the date of repossession of the vehicle by the appellant company.  The respondent no.1 was due a sum of `3,05,609/- by the date of surrender of the vehicle.  The first respondent had given consent in writing on 29.7.2010 to auction the vehicle and to appropriate the amount into her loan account. 

10.    The points for consideration are:

i) Whether the opposite party no.1 is entitled to repossess the vehicle from the complainant?

ii) Whether the opposite party no.1 has rendered deficient service to the complainant?

iii) To what relief?

11.    POINTS NOs 1 AND 2:  The sanction of the loan in favour of the complainant by the opposite party no.1 is not disputed. The opposite party no.1 entered into agreement with the appellant company and agreed to pay an amount of `4,56,804/- including financial charges in 12 quarterly instalments @ `38,067/- each.  The husband of the first respondent is co-borrower of the transaction.  The complainant executed Hypothecation Agreement in favour of the appellant company. According to the opposite party no.1 the complainant paid first instalment in part payment till 26.2.2009 and she has paid the second instalment in part payments upto 26.9.2009.  The third instalment was to be paid on or before 25.7.2009 which the complainant has paid by 8.2.2010.   Thereafter she became defaulter whereas the complainant states that she had paid the EMIs till 22.3.2010.  The first opposite party repossessed the vehicle and intimated the complainant, guarantor and the police on 17.2.2010 and 24.2.2010.  The complainant states that the opposite party no.1 had taken away the vehicle without informing her while the opposite party no.1 state that the complainant had issued consent letter in its favour expressing her inability to pay the rest of the installments. Whether the repossession is by consent or forcible, we will deal this aspect after we have considered the aspect of the payment of the EMIs by the complainant. 

12.    The consent letter stated to have been issued by the complainant contains the date 29.7.2010.  The complainant denies the letter.  A bare perusal of the letter shows that the signature of the complainant was obtained and thereafter the matter was typed.  It is not attested by any witnesses.  Strengthening the inference, the statement of the appellant company that it has given intimation of repossession of the vehicle to the complainant, guarantor and the police indicates the complainant has not given her consent for repossession of the vehicle by the appellant company.  Though the appellant company attempted to justify its action of selling the vehicle by virtue of Clause 12 of the Agreement, its obligation  to take repossession of the vehicle by lawful means has not been discharged resulting the repossession of the vehicle culminating into an illegal act. 

13.    In “Citi Corp Vs Vijayalakshmi” in Civil Appeal No.9711 of 2011 decided on 14.11.2011,  the Supreme Court approved the procedure to reposes the vehicle by lawful means and upheld the decision of the National Commission that the financier cannot reposes the vehicle except by adopting the procedure in accordance with law.  The principle laid down in the decision  is squarely applicable to the facts of the present case. 

14.    The opposite party no.1 has sold the vehicle to third party.  The District Forum has disbelieved the statement of the appellant company as there was no transfer of the vehicle effected in the registration certificate.  However, the statement of the appellant company that the vehicle was sold to the resident of the village of which the first respondent belongs to, is not denied by the first respondent drawing support to the fact that the appellant has sold the vehicle to a third party. 

15.    The appellant has not proved that the vehicle was sold in auction and for a reasonable sale consideration.  The vehicle was allowed to be idle for a period of 210 days from the date of repossession.  According to the appellant company, the vehicle was sold for sale consideration of `1,90,000/-.  After the vehicle was repossessed the first opposite party has paid the instalments due on 24.2.2010 and 19.3.2010 and 22.3.2010.  Prior to payment of the amount, the appellant company promised the first respondent that on payment of the instalments due as on the date of repossession of the vehicle, it would release the vehicle.  The appellant company has refused to release the vehicle and it has not kept its promise by stating that the respondent no.1 fell due further instalments by the date of clearance of the dues as on the date of repossession of the vehicle.  In the circumstances, the appellant company has committed deficiency in service.

16.    The pleading in 3^rd paragraph of the written version of the appellant company would falsify its plea that it had repossessed the vehicle by following the due process as per the terms of the agreement. It is pleaded that the surrender of the vehicle was informed to the first respondent, guarantor and the nearest police station on 17-02-2010 and24-02-2010. The appellant company does not state on which date it had repossessed the vehicle. The intimation given to the complainant about the purported surrender of the vehicle speaks volumes of falsehood of the statement that the first respondent has surrendered the vehicle. The appellant company states that in terms of clause 12.1(ii) of the Agreement it is permissible to repossess the vehicle and sell it with or without issuing notice to the borrower. Clause 12.1 of the Agreement reads as under:

12.1(ii) Demand that the Borrower should return the Product to the Lenders at the risk and expense of the borrower, in the same condition it was delivered to him (Ordinary war and Tear Excepted) at such Location as the lender may designate and upon failure of the borrower to do so within the period of demand the lender/agents/allies as agent and constituted attorney of the Borrower can enter upon premises where the product is located and take immediate possession of and remove the same without liability to the lenders or their agents of such entry or for damage to property or otherwise.  Upon such return of the product or upon the lender taking possession of the product as herein before stated the loan agreement can be foreclosed or terminated by the lender at its discretion and provided however the remedies available to the lender as herein given shall survive such foreclosure and termination of loan and the lender shall be entitled and authorized to exercise its rights herein including in connection with the product to recover its dues under this Agreement.

17.      The power confided by the Agreement to sell the vehicle is restricted by the procedure to be followed by the mandate of clause 12.1 of the Agreement. Clause 12.1 specifically provides for issuance of notice. We have already held herein above that the appellant company has not repossessed the vehicle after giving notice to the first respondent.  As contemplated by Clause 12.1(ii) of the Agreement, after giving notice to the respondent no.1 and on her failure to surrender the vehicle, the appellant company is entitled to repossess the vehicle. The appellant company had not followed the procedure as agreed upon under the Agreement for repossessing the vehicle.

18.    The appellant company had sold the vehicle  to a third party whose name is not stated anywhere in the written version filed by the appellant company before the District Forum. The respondent no.1 had denied execution of the document dated 29-07-2010 on the basis of which the appellant company defended the sale transaction of the vehicle. The recitals of the document show that the matter is typed later after obtaining signature of the first respondent. The procedure not followed at the time of repossession of the vehicle seeps into the question whether the sale is valid.  The matter contained in the letter dated29-07-2010 goes to show that the appellant company demanded for payment of the amount due only after taking repossession of the vehicle.  To cap it all, the “No objection certificate” issued by the appellant company denotes that there is no due from the first respondent. The appellant company issued the certificate expressing its intention that it has no objection for deletion of its name from the Hypothecation Clause in the Registration Certificate.

19.    According to the version of the appellant company the respondent no.1 was due an amount of `1,15,609/- after the sale proceeds of the vehicle were appropriated to the loan account of the first respondent. The vehicle was purchased on 22-10-2008 for a consideration of `5,00,000/- of which the appellant company had lent an amount of `3,20,000/- on down payment of `1,80,000/- by the first respondent. The appellant states that the vehicle was sold in auction for a consideration of `1,90,000/- in the year,2010.  The appellant company had kept the vehicle for a period of 210 days after the respondent no.1 paid the two installments amount demanded by the appellant company. The vehicle having been kept idle for such a long time would naturally loses its value and the appellant alone is responsible for the condition of the vehicle as it has neither given the possession of the vehicle to the first respondent nor did it put to sale . Even assuming that the vehicle was used by the appellant company during the period of 210 days while it was in possession of the appellant company ,  it cannot be sold for `1,90,000/-. Taking into consideration of depreciation at 15% on the sale consideration of the vehicle, its price approximately would be `3,50,000/-.. Taking into consideration of the condition of the vehicle and the lapse on the part of the appellant company , we hold the appellant company to pay an amount of `1,25,000/- on all counts. The relief granted by the District Forum to deliver possession of the vehicle which has been sold to third party is not sustainable. As such the order of the District Forum is liable to be modified.

20.    In the result, the appeal is allowed . The order of the district Forum is modified. The appellant company is directed to pay an amount of `1,25,000/- together wit costs of `3,000/- to the first respondent/complainant. The complaint against the respondent no.2 dismissed. The parties shall bear their own costs in the appeal. Time for compliance four weeks.

                                                                           Sd/-

                                                                                MEMBER

                                                                                   Sd/-

                                                                                MEMBER

                                                                             Dt.30.11.2011

KMK*