Sri. G.V.Balasubramanya<br /> Member,<br /> <br /> 1. The opposite party has financed the complainant a sum of Rs.1,35,000/- to purchase a Tata Indica car bearing No. KA 09 M 8733. The vehicle which was earlier in the name of one Shri.M.P.Swamy was transferred to the complainant on 29.12.2005. Shri.Swamy had, also, been financed by the opposite party to purchase the said vehicle.<br /> <br /> 2. According to the complainant the hire purchase agreement between the opposite party and himself came into effect from the date of transfer of the vehicle. The monthly instalment was fixed at Rs.5250/- and the complainant was liable to pay the first instalment on 30.1.2006. But, the opposite party illegally seized the vehicle on 19.1.2006 without serving any notice even before the first instalment had become due. <br /> <br /> 3. It is stated by the complainant that his daughter is an actress in kannada films and the vehicle was purchased for her to travel to shooting locations. The complainant has, also, stated that he was earning magnificent profit from the use of the vehicle. <br /> <br /> 4. The complainant sent a legal notice to the opposite party along with a cheque for Rs.5250/- demanding immediate release of the vehicle. There was no reply from the opposite party. <br /> <br /> 5. The complainant has prayed that the opposite party be directed to release the vehicle and pay him compensation of Rs.2,00,000/- for depriving the vehicle. The complainant has, also, sought additional compensation of rupees ten lakhs for depreciation of bright prospects in the cine field for his daughter who could have become a heroine. Complainant, also, wants cost of Rs.5000/-.<br /> <br /> 6. The opposite party has put in his appearance through his counsel. He is the manager of ICICI Bank, Ramavilas Road, Mysore branch. He has admitted the loan transaction but has given a different date. He says the agreement came into existence on 29.9.2005 and the loan was repayable in 36 months. <br /> <br /> 7. The opposite party has averred that the complainant has not pay any money towards the instalments till date. He, also, admits seizing the vehicle on 22.12.2005. He says that the complainant is liable to pay the Bank Rs.1,58,094 and seizure charges of Rs.6700/-. <br /> <br /> 8. The opposite party has denied receiving the cheque alleged to have been sent along with legal notice sent by the complainant. <br /> <br /> 9. From the allegations and counter allegations, the following points arise for our consideration:<br /> <br /> a) Whether the complainant proves that the agreement between himself and the opposite party is a “hire purchase” agreement?<br /> <br /> b) Whether the complainant proves that seizure of the vehicle amounts to deficiency of service?<br /> <br /> c) Whether the complainant proves that he is entitled to the relief claimed by him?<br /> <br /> d) What relief or order?<br /> <br /> 10. We have answered the above points as under:<br /> <br /> Point 9(a) : In the negative<br /> <br /> Point 9(b) : In the negative<br /> <br /> Point 9(c) : In the negative<br /> <br /> Point 9(d) : As per final order<br /> <br /> REASONS<br /> <br /> POINT 9(a)<br /> <br /> 11. The opposite party has produced a photocopy of the agreement between the complainant and the bank. The agreement is titled as “UNATTESTED DEED OF HYPOTHECATION”. As the learned counsel for complainant protested that the opposite party has produced an unreadable copy of the agreement, a specimen copy of the agreement was produced by the opposite party later. We find that the complainant has used the words “hire purchase” in place of “hypothecation” rather casually. The difference between “hire purchase” and “hypothecation” is well known. The Hon’ble supreme Court has brought out the difference between the two in lucid sentences in Sundaram Finance Ltd., V/s State of Kerala [AIR 1966 SC 1178]. We reproduce here below a few lines from the said judgment:<br /> <br /> Para 23:- A hire purchase agreement is normally one under which an owner hires goods to another party called the hirer and further agrees that the hirer shall have an option to purchase the chattel when he has paid a certain sum, or when the hire rental payments have reached the hire purchase price stipulated in the agreement. But there are variations when a financier is interposed between the owner of the goods and the customer. The agreement, ignoring variations of detail, broadly takes one or the other of two forms : (1) when the owner is unwilling to look to the purchaser of goods to recover the balance of the price, and the financier who pays the balance undertakes the recovery. In this form, goods are purchased by the financier from the dealer, and the financier obtains a hire-purchase agreement from the customer under which the latter becomes the owner of the goods on payment of all the installments of the stipulated hire and exercising his option to purchase the goods on payment of a nominal price. The decision of this Court in AIR 1965 SC 1082 dealt with a transaction of this character. (2) In the other form of transactions, goods are purchased by the customer, who in consideration of executing a hire purchase agreement and allied documents remains in possession of the goods, subject to liability to pay the amount paid by the financier on his behalf to the owner or dealer, and the financier obtain a hire-purchase agreement which gives him a license to seize the goods in the event of failure by the hire purchase to abide by the conditions of the hire purchase agreement.<br /> Para 24:- If the real transaction is a loan of money secured by a right of seizure of the goods, the property ostensibly passes under the documents embodying the transaction, but subject to the terms of the hiring agreement, which become part of the buyer’s title, and confer a license to seize. When a person desiring to purchase goods and not having sufficient money on hand borrows the amount needed from a third person and pays it over to the vendor, the transaction between the customer and the lender will unquestionably be a loan transaction. The real character of the transaction would not be altered if the lender himself is the owner of the goods and the owner accepts the promise of the purchaser to pay the price or the balance remaining due against delivery of goods. But a hire purchase agreement is a more complex transaction. The owner under the hire purchase agreement enters into a transaction of hiring out goods on the terms and conditions set out in the agreement, and the option to purchase exercisable by the customer on payment of all the installments of hire arises when the installments are paid and not before. In such a hire purchase agreement there is no agreement to buy goods; the hirer being under no legal obligation to buy, has an option either to return the goods or to become its owner by payment in full of the stipulated hire and the price for exercising the option. This class of hire purchase agreement must be distinguished from transaction in which the customer is the owner of the goods and with a view to finance his purchase he enters into an arrangement which is in the form of a hire purchase agreement with the financier, but in substance evidences a loan transaction, subject to hiring agreement under which the lender is given the license to seize the goods.<br /> Para 28:- In the light of these principles the true nature of the transactions of the appellants may now be stated. The appellants are carrying on the business of financiers; they are not dealing in motor vehicles. The motor vehicle purchased by the customer is registered in the name of the customer and remains at all material times so registered in his name. In the letter taken from the customer under which the latter agrees to keep the vehicle insured, it is expressly recited that the vehicle has been given as security for the loan advanced by the appellants. As a security for repayment of the loan, the customer executes a promissory note for the amount paid by the appellants to the dealer of the vehicle. The so called “sale letter” is a formal document which is not made effective by registering the vehicle in the name of the appellants and even the insurance of the vehicle has to be effected as if the customer is the owner. Their right to seize the vehicle is merely a license to ensure compliance with the terms of the hire purchase agreement. The customer remains qua the world at large the owner and remains in possession, and on condition of performing the covenants has a right to continue to remain in possession. The right of the appellants may be extinguished by payment of the amount due to them under the terms of the hire purchase agreement even before the dates fixed for payment. The agreement undoubtedly contains several onerous covenants, but they are all intended to secure to the appellants recovery of the amount advanced. We are accordingly of the view that the intention of the appellants in obtaining the hire purchase and the allied agreements was to secure the return of loans advanced to their customers, and no real sale of the vehicle was intended by the customer to the appellants. The transactions were merely financing transactions.<br /> <br /> 12. The complainant herein has except for using the words “hire purchase” agreement has not come out with the details of the other essential elements of the hire purchase agreement. Further, from the copy of the agreement produced by the opposite party it is clear the transaction is essentially a hypothecation and not “hire purchase”. It is no body’s case that the opposite party is the owner of the vehicle and the complainant was the hirer. The complainant himself says that the vehicle was transferred to his name on 29.12.2005. Thus, there is virtually no element of “hire purchase” here. Therefore, we answer the point in the negative.<br /> <br /> POINT 9(b)<br /> 13. The question whether the seizure of the vehicle by the opposite party is an illegal act or not has to be examined with reference to the terms and conditions contained in the hypothecation deed. Clause no.2(ii) of the deed reads as under: <br /> In the event of any breach or default by the borrower in the performance of its obligations hereunder or any of the terms, covenants, obligations and conditions stipulated in the loan terms and/or the other transaction documents or in the event of the charge on the assets having become enforceable for any reason whatsoever, the bank or their nominees or authorized persons shall, incase such breach or default is not remedied by the borrower to the satisfaction of the bank without any notice and without assigning any reason and at the risk and expense of the borrower and if necessary as attorney for and in the name of the borrower be entitled (without prejudice to any other rights and remedies) exercise such rights and remedies, including (but not limited to) : (i) To enter into and upon the premises of the borrower and/or any other person who then has possession of the assets, (ii) To seize, recover, collect, withdraw, receive the assets and/or or nay income, profits and benefits thereof without interruption or hindrance by the borrower and/or by any person(s), (iii) To remove, and/or sell by public auction or buy private contract, dispatch or consign for realization or otherwise dispose of or deal with all or any part of the assets and enforce, realize, settle, compromise and deal with any rights or claims relating there to without being bound to exercise any of these powers or be liable for any losses in the exercise or non-exercise thereof…………………..(vii) To direct the borrower and/or other concerned person in writing to deliver the assets to the bank on a date and time indicated by the bank in which event the borrower shall at its own expense (a) deliver/forthwith cause the same to be delivered too the bank……………….<br /> Hypothecation is a species of pledge and constitutes a contract between the hypothecator and hypothecatee. Hence, parties are bound by the terms and conditions of the contract unless one of the parties to the contract is able to show that it is a void or voidable contract or that he need not perform his part of the obligation for various reasons as provided in the Contract Act. As such, if the contract provides for seizure of the vehicle for default in payment of instalment/s, then there is no any illegality. As already stated, hypothecation being a species of pledge provisions applicable to it can be imported to the concept of hypothecation. Thus, we have Section 176 of the Contract Act which states that <br /> “If the pawnor makes default in payment of the debt, or performance, at the stipulated time of the promise, in respect of which the goods were pledged, the pawnee may bring a suit against the pawnor upon the debt or promise, and retain the goods pledged as a collateral security, or he may sell the thing pledged, on giving the pawnor reasonable notice of the sale…………..<br /> Two inferences can be drawn from the above section. Firstly, that a notice is mandatory only for selling the pledged goods and secondly the word “retain” should be taken to mean that pledged goods is already in the possession of the pawnor and he only retains such goods as collateral security. Perhaps, this is the only difference between hypothecation and pledge because, in the case of hypothecation, the hypothecator will have physical possession of the goods while the hypothecatee will only have constructive possession. Thus, the hypothecator is the owner of the goods and he, also, has physical possession of it. We have two decisions on this issue, one from our own High Court in In Re S.Y.C & S.Mills[AIR 1969 Mys 280] and another of High Court of Punjab and Haryana in Tarun Bhargava v/s State of Haryana [AIR 2003 P & H 98]. Our Hon’ble High Court is of the opinion that “In the case of hypothecation or pledge of movable goods, there is no doubt about the creditor’s right to take possession, to retain possession and to sell the goods directly without the intervention of court for the purpose of recovering his dues. Hypothecation is only extended idea of a pledge, the creditor permitting the debtor to retain possession either on behalf of or in trust for himself (the creditor)”. The Punjab and Haryana High Court is of the view that “A question may further arise whether hypothecate can take over the security or acquire higher rights by putting a clause in the agreement authorizing him to take over the security and sell the same without intervention of the court. The court can not ignore that in these days off advertisement and consumerism, a common man is tempted to acquire luxury consumer items on account of demonstration effect in the society. On account of that interest, there is a temptation to fall prey to advertisement for easy loans. Once easy loan is promised and dreams are shown, the financier tends to tighten the noose on the neck of the borrower by making the borrower to sign on dotted lines. Is ‘freedom to contract’ answer to the situation, in which a common man finds himself after signing the agreement on the dotted lines? The above finding that the hypothecate can not be permitted to take over the hypothecated goods under repossession clause, without intervention of the court is also supported by events which have been taken cognizance of by the legislature, which shows that the public policy requires safeguards to be provided against arbitrary repossession clauses. Now, I take up question No.4 as to the remedy of the complainant against unjustified repossession by a financier. No doubt, the borrower will have a remedy of going to a civil court or a consumer court. Is the remedy of criminal law barred? Once it is held that the creditor is not the owner irrespective of the label put on the agreement and as a creditor, the financier can not take over the property without intervention of the court, the financier will be criminally liable for forcibly taking away the property. Forcible repossession without intervention of the court may involve commission of an offence and what offence has been committed will depend on facts of an individual case”. <br /> 14. Thus, while our High Court is of the view that creditor can take possession of the property, the High Court of Punjab and Haryana is of the view that such forceful repossession amounts to commission of an offence. It is interesting to note that in hire purchase though the physical possession of the property is with the hirer, repossession of such property by the owner for defaulting to pay the hire is not considered to illegal. <br /> 15. When the position regarding repossession [a cultured word for seizure] was clouded the Hon’ble Supreme Court came up with its judgment in Managing Director, Orix Auto Finance (India) Ltd., v/s Jagmander Singh & Another [2006 CTJ 209 (Supreme Court) (CP)]. Though the judgment deals primarily with “hire purchase’ agreement, one paragraph towards the end has been devoted to ‘agreements’ in general or ‘contract between parties’. It reads as under:<br /> Essentially these are matters of contract and unless the party succeeds in showing that the contract is unconscionable or opposed to public policy the scope of interference in writ petitions in such contractual matters is practically non existence. If agreements permit the financier to take possession of the financed vehicles, there is no legal impediment on such possession being taken. There can not be any generalization in such matters. It would not be therefore proper for the High Courts to lay down any guideline which would in essence amount to variation of the agreed terms of the agreement”.<br /> 16. It has to be understood that Consumer Fora can look into deficiency in service under two heads only viz., legal and contractual. Thus, if the terms of the contract provided for repossession of the vehicle only after issuing a notice, then repossession without notice would amount to contractual deficiency. Similarly, if any law prohibits repossession without notice, then such repossession without notice would amount to legal deficiency. But under no circumstance can we look beyond the terms of the contract or circumstances under which the contract was concluded. It can be done only in a civil court. The ratio decidendi of the judgment of the Apex Court is not that repossession is permissible only in hire purchase agreement but that repossession is permissible where agreement between the parties provide for it. The Apex Court has, also, made it clear in the same judgment that the hirer can avail such legal remedies as are open to him. It goes without saying that the same applies to a hypothecator also. The binding effect of the judgment of the Apex Court need not be stressed here.<br /> 17. The complainant has not drawn our attention to any clause of the agreement which provides for issuance of notice before repossession. Under these circumstances we have no other option but to hold that the repossession of the vehicle by the opposite party does not amount to deficiency in service.<br /> 18. The learned counsel for the complainant has argued that the vehicle was repossessed even before the payment of instalment had commenced. That is not true. It is seen from the agreement that the loan was disbursed on 29.9.2005 and the first installment became due on 1.11.2005. The vehicle was repossessed on 19.1.2006. Hence, we answer the point in the negative.<br /> <br /> POINT 9(c)<br /> 19. This point does not really merit any discussion in view of the fact that we have already answered the above points in the negative. However, because the relief claimed by the complainant is such that every conceivable and inconceivable type of compensation and damages has been claimed we feel that it is necessary to address this point. The Hon’ble National Commission has come down heavily on the growing tendency to make imaginary claims before Consumer Fora. In Unit Trust of India v/s Ms.Kavita Gupta & Others (1986-99 Consumer page-3941 (N.S) Vol.III) the Hon’ble National Commission has observed that presumptive loss based on principles of lost opportunity can not be the basis for awarding compensation. Once again in Archana Strips Pvt Ltd v/s The Oriental Insurance Complainant Ltd & others (1986-02 Consumer page-6748 (N.S) Vol.IV) the Hon’ble National Commission had an occasion of addressing this issue. In that case the claim was for Rs.80.83 lakhs. It was observed that it was clearly an abuse of the process of the Consumer Protection Act, 1986 as no court fee is payable and there is no limit to any claim that would be advance. The Hon’ble Commission said that it was one of those complaints, which is clearly an abuse of the process of the Act and brings the very object to the naught. Therefore, we answer the point in the negative and proceed to pass the following order:<br /> ORDER<br /> A. Complaint is dismissed.<br /> B. Parties to bear costs.<br /> C. Give a copy of this Order to both parties. <br /> <br />