DR.INDER JIT SINGH, MEMBER

1.       The present Revision Petition (RP) has been filed by the Petitioner against Respondents as detailed above, under section 21 of Consumer Protection Act 1986, against the order dated 04.08.2017 of the State Consumer Disputes Redressal Commission, Madhya Pradesh, Bhopal, (hereinafter referred to as the ‘State Commission’), in First Appeal (FA) No.997 of 2013 in which order dated 30.03.2013 of District Consumer Disputes Redressal Commission, Indore (hereinafter referred to as District Commission) in Consumer Complaint (CC) no 1143 of 2009 was challenged, inter alia praying for setting aside the order dated 04.08.2017 passed by the State Commission.

2.       While the Revision Petitioner(s) (hereinafter also referred to as Petitioner/Complainant) was Respondent, the Respondent(s) (hereinafter also referred to as OPs) were Appellants in the said FA 997/2013 before the State Commission. The Revision Petitioner was Complainant and Respondent(s) were OPs before the District Commission in the CC no 1143 of 2009. Notice was issued to the Respondent(s) herein on 24.11.2017. Notice to Respondent No. 3 was received back undelivered with postal remarks ‘Refused”. Hence, vide order dated 05.04.2018, Respondent-3 was proceeded ex-parte.  Parties filed Written Arguments/Synopsis on 22.01.2019 and 03.05.2023 respectively.

3.       Brief facts of the case, as emerged from the RP, Order of the State Commission, Order of the District Commission and other case records are that:-

(i)    On 07.11.2007, Petitioner booked/purchased a ‘Mahindra Renault Logan’ (hereinafter referred to as the car) from Respondent no.3, who is the authorized dealer of Respondent-1/Respondent-2 manufacturing company, availed a bank loan of Rs. 6 lakhs from Oriental Bank of Commerce, made payment to Respondent No.3, obtained an insurance policy from ICICI Lombard Motor Insurance on 29.11.2007, and Respondent no.3 issued a retail invoice for Rs. 6,40,197/- and a sale certificate on 20.12.2007, the car was registered with number MP 09 CC 0245 and a receipt of registration charges was issued by Respondent no.3 on 20.12.2007.

(ii)   First free service of the car was got done on 20.12.2007 at Respondent no.3’s service centre at 1898 km in which certain complaints/observations about noise in the front door were mentioned in the job card. On 12.05.2008 second free service was got done at 7582 kms, the petitioner again stated that there was increase in noise rather than reduction, and inter alia mentioned in the job card ‘all door noise’. On 08.10.2008, the third free service of the car was got done at 13566 kms, petitioner mentioned various items to be done in the job card, which include ‘all door and dickey setting’. On 09.10.2008, Respondent no.3 issued cash memo for third free service, petitioner refused to take delivery after signing the gate pass for not rectifying defects.

(iii)  The petitioner alleges that on 22.10.2008, Respondent no.3 after having continuous possession of car from 08.10.2008, opened a new job card under the category “Accident Service” and kms noted is 13566 kms, same as noted in third free service job card dated 08.10.2008. According to petitioner, Respondent no.3 instead of opening a job card for ‘Repeat Service’ opened a new card under ‘Accident Service’ category, noting there in ‘Qtr Panel Painting’. This Qtr Panel Painting of ‘front side damage’ of left door amounting to approximately Rs. 12000/- was done free of charge. The car was with Respondent No.3 from 08.10.2008 to 24.10.2008. According to Petitioner, when accidental job card was opened on 22.10.2008, the car was in the workshop in continuation of third free service from 08.10.2008, the kms reading of 13566 as mentioned in job card dated 08.10.2008 and job card dated 22.10.2008 confirms the presence of car in workshop in continuation of third free service. Even in the cash memo dated 24.10.2008, 13566 kms is mentioned. The Petitioner claims that he was assured that all the problems in the car were rectified and petitioner has to use the car in order to know whether the problem still exists and if there is a problem, then the car will be replaced. Based on the assurance, the petitioner took delivery of the car.

(iv)  As per petitioner, on 18.11.2008, he realized that defect have not been rectified, so he went back to Respondent No.3 asking them to fulfil their assurance of replacing the car with a new one. Respondent no.3, instead of replacing the car, opened a new job card under the category ‘Repeat Service’ at 14255 kms, which makes a mention of various items, including black smoke, engine oil consumption, under body noise etc. Petitioner further states that there was no mention about requirement to open the engine and damage to intercooler while opening the job card, repeat service can only be started when one is addressing the issue for the second time, otherwise it would have been opened under the category ‘paid service’. From 18.11.2008 till date, the car is in possession of Respondent no.3, engine is opened and dismantled from the chassis. According to petitioner, the job card dated 18.11.2008 bears a footnote dated 05.12.2008 by the husband of petitioner ‘all accessories and loose items return to customer except LCD and fitted VCD player’, which conveys the intention of petitioner for the replacement of the car.

  (v)   On 23.12.2008, respondent No.3 issued a letter to petitioner, seeking instructions to carry out work on chargeable basis, this letter is subsequent in time from ‘history sheet’ of ‘repeat service’ as per which parts have already been charged.

  (vi)  On 22.01.2009, a legal notice was sent to Respondents, on 24.01.2009, Respondent no.2 sent a letter to petitioner, referring to estimate given by Respondent no.3 and seeking approval for same. On 03.02.2009, Respondent no.1 gave an interim reply to legal notice of petitioner. On 26.02.2009, Respondent no.1 gave final reply stating that transactions of dealings between the dealer and the company are on principal-to-principal basis and the dealer is not the agent of the company for any purpose.

  (vii) On 13.08.2009, petitioner filed CC No. 1143/2009 before District Commission. On 30.03.2013, District Commission vide its judgement allowed the complaint and, inter alia, directed Respondents to provide a new car to Petitioner subject to depreciation on amount of its use for 15000 kms. Petitioner, not satisfied with the judgement, preferred an appeal 775/2013 before the State Commission, on 16.05.2013, State Commission while confirming the order dated 30.03.2013 passed by District Commission, dismissed the petitioner’s appeal. Aggrieved by the judgement of State Commission, petitioner filed a revision petition No. 3255/2013 before National Commission, which was dismissed on 19.09.2013, stating that proper course for the petitioner is to seek execution of decree as has been passed by both the fora. Respondents have not challenged the order of National Commission.

(viii)          Respondent no.1 and Respondent no.2 filed appeal 997/2013 before State Commission against order dated 30.03.2013 of District Commission. Respondent No.3 neither filed any appeal nor entered appearance in appeal 997/2013, in which he was arrayed as Respondent no.2. A stay was granted on 17.06.2013 to the order of District Commission, which was modified on 23.11.2016 to the extent that it shall remain operative only in respect of Respondent No.1 and Respondent no.2 and stay in respect of Respondent no.3 stand vacated. Vide final order dated 04.08.2017, the State Commission modified the judgement of District Commission to the extent that directions given in clause 1 to 4 of para 21, were set aside and directions given by District Commission in clause 5 to 7 so far as they relate to Respondent no.1 and Respondent No.2 only were set aside.                      

4.       Petitioner has challenged the said Order dated 04.08.2017 of the State Commission inter alia on following grounds:

(i)      That in accidents, it is impossible for internal engine damage to occur without corresponding external damage, suggesting a manufacturing defect. All vehicles require engine oil for proper operation, and there is no evidence of engine seizure or the vehicle being inoperable. Running a vehicle without engine oil would result in immediate engine seizure. The final job card, labelled as "Repeat Service," indicates vibrations in the 1st and 2nd gears. The underlying manufacturing defect was not addressed, causing further interconnected issues.

(ii)     The State Commission made an erroneous judgment by disregarding clear evidence of a manufacturing defect. The respondents engaged in deceptive practices by creating a new job card labelled as "Accident Service" with noting Painting and re-fitting on a different date. That the vehicle has remained in the respondents' custody at Respondent No.3's service centre since 18.11.2008 until now. Additionally, the vehicle was dismantled and the engine was opened without proper authorization from the petitioner, indicating a violation of proper procedure.

(iii)    The Petitioner consistently reported an increase in noise from the first servicing of the vehicle, which was properly documented in the job card as various noise issues. The State Commission made an error in concluding that the vehicle could not have covered such a long distance with a manufacturing defect. The vehicle remained operational throughout, even at the time of handing it over to the Respondents. The Respondents failed to identify the defect early on, resulting in additional interconnected problems. Rather than taking responsibility for the manufacturing defect, the Respondents unfairly placed the blame and burden on the Petitioner.

(iv)    That the vehicle was covered by insurance, and the Petitioner always had the option to claim insurance if the damage was due to an accident. Insurance companies typically cover claims for accidents, but they do not cover claims for manufacturing defects. The State Commission failed to appreciate this distinction and wrongly disregarded the fact that internal damage cannot occur without external damage in accidents. The State Commission also overlooked that the vehicle was in the possession of Respondent No.3 from 08.10.2008 to 24.10.2008, until the opening of a new job card under the "Accident Category." It is evident that Respondent No.3 could not detect the actual fault in the vehicle as it was an internal problem in the engine and instead focused on external diagnostics.

5.       Heard counsels of both sides. Contentions/pleas of the parties, on various issues raised in the RP, Written Arguments, and Oral Arguments advanced during the hearing, are summed up below.

5.1 The Respondent no.1 and Respondent no.2 argued that there is no definitive evidence to support the existence of a manufacturing defect in the vehicle in question. That even the State Commission acknowledged the absence of any allegations or complaints regarding a manufacturing defect. According to the expert report, the vehicle had been continuously running for a significant period, suggesting that if there had been a manufacturing defect, it would have manifested earlier and prevented such extensive usage. The respondents further contended that the complainants never raised concerns about a manufacturing defect during the initial three services of the vehicle. It was only after the vehicle was involved in an accident and sustained damage that the complainants began alleging a manufacturing defect. The expert report explicitly concluded that there was no manufacturing defect in the vehicle. In support of their contentions, the Respondent no.1 and Respondent no.2 relied on the judgement of Hon’ble State Commission in Maruti Udyog Ltd. v. Hasmukh Lakshmichand [2009 SCC Online NCDRC 74], Honda Siel Cars India Ltd. v. Major General M.J.S. Virk & Anr. [2016 SCC Online NCDRC 2085] and Tata motors Ltd. v. Ashish Aggarwal [2014 SCC online NCDRC 263].     

5.2. The Petitioner on the other hand contended that the State Commission erred by relying on inaccurate facts and submissions. They asserted that the State Commission failed to properly consider the legal precedents established by both the National Commission and the Supreme Court, which emphasize that courts should not substitute their own opinions for expert opinions. The complainants argued that the impugned order, based on flawed factual and legal premises, should be set aside. The complainant asserts that from the beginning of their car purchase, they encountered significant mechanical problems, which they promptly reported to the dealer/authorized service centre during regular servicing and other occasions. Despite servicing the vehicle several times in a year, the respondents failed to detect or rectify the manufacturing defects, thereby exacerbating the mechanical issues. The complainant denies any involvement in an accident, suggesting that if an accident had occurred, the respondents would have charged for painting and re-fitting instead of providing these services free of cost. Moreover, the vehicle was insured, and any repair costs would have been covered by the insurance company. The complainant argues that during a "Repeat Service" on 18.11.2008, the respondents completely dismantled the engine without their permission, rendering it unusable and unsafe for the road. After the warranty expired, the respondents claimed that the engine required extensive repairs and provided an estimate of Rs. 72,485/-. The expert report, conducted by court-appointed commissioners, revealed that the vehicle was immobile, showed no visible signs of severe accidents on the body, and had a disassembled engine. The inspection report also suggests evidence tampering by the respondents and highlights the difficulty of causing internal damage without external part breakage, supporting the complainant's contentions.

6.       The issue of Manufacturer-Dealer relationship came up for consideration before the Hon’ble Supreme Court in Tata Motors Ltd. Versus Antonio Paulo Vaz & Anr. (Civil Appeal No. 574/2021 decided on 18.02.2021).  In this case, the Hon’ble Supreme Court, after taking note of terms of dealership agreement, held that the relationship between manufacturer-dealer was that of Principal to Principal and not that of Principal to Agent. However, it is to be noted that this case is distinguishable on facts from the present case.  In Tata Motors, the dealer sold a 2009 model car representing it to be a 2011 model, which had some defects, including fully corrugated under carriage etc. and the car had already run 622 Kms.  In a Principal to Agent relationship, the Principal is responsible for wrong doings of his agent/acts done on behalf of the Principal.  However, in a Principal to Principal relationship, which is generally entered into by car manufacturers with their authorized dealers under some kind of a dealership agreement, while the Principal (Manufacturer) may not be responsible for the wrong doings/acts of negligence of the Principal (Dealer), it surely is responsible for the warranties it has given with respect to removing any defects or replacement of parts or replacement of car itself in case of manufacturing defect(s), as long as conditions of warranties have been observed/complied with. Hence, even if it is presumed that relationship between manufacturer and dealer of a car is that of Principal to Principal, the manufacturer can only resist/avoid his responsibility/his liabilities for wrong doings/acts of omissions and commissions of dealer, but for warranties offered to the customer during the warranty period, and subject to due compliance of terms of such warranties by the customer, it is the manufacturer who is liable for repairs/replacement of any parts or replacement of car itself due to manufacturing defect, if the terms of warranty so provide for.  Dealer alone cannot be made to bear the liabilities for repair/replacement of parts and/or replacement of car on account of manufacturing defect during the warranty period even in a Principal to Principal relationship.  This becomes amply clear when one looks at the stand taken by the manufacturer in Tata Motors Ltd.(supra), who had claimed lack of knowledge on the part of manufacturer about the fact that  make of car was represented to be 2011.  The manufacturer (Tata Motors) in this case stated “During the period of warranty, the appellant could have notified the manufacturer of any latent or obvious defect in the product. In such an event, if the manufacturer, i.e. the appellant (Tata Motors), were to not take adequate action to repair the car or replace it, then, it could have been held liable.”

In this case, it was stated by the manufacturer that products and spare parts are sold to dealer by the Company (manufacturer) for resale by dealer.    In the Tata Motors (Supra case), it was observed that the said dealers agreement (under Principal to Principal Relationship) binds the appellant (manufacturers) to conform to the warranty published by it, the relevant portion of which is reproduced here “The Dealer agrees that the only warranty binding on the Company shall be the warranty published by the Company and all implied warranties under law are hereby excluded. The Dealer shall have no authority to give to his purchasers a different warranty binding upon the Company. ……” However, considering the customer has made payments to the dealer, who has given warranted on behalf of manufacturer, and customer had no direct dealings with the manufacturer, both dealer and manufacturer have to be held liable jointly & severally for any liabilities towards customers in this regard even in a Principal to Principal relationship.  It is left to dealer to recover such liabilities from manufacturer in case it had been recovered from him. 

Even in the case of Indian Oil Corporation Vs. Consumer Protection Council Kerala 1993 SCC (1) 397, 1993 SCALE (4)620, where the issue of Principal to Principal relationship came up for consideration before the Hon’ble Supreme Court, the Indian Oil Corporation pleaded Principal to Principal relationship with its dealer.  But in this case also, it was a situation where dealer had given unauthorized connections to the customers.  The relevant para stated “If it was a legal connection nothing would have been easier than to produce the subscription voucher. Such a voucher as rightly pointed out by the learned counsel for the appellant, is important and will bind the appellant-Corporation.”

From the above, it is clear that even if Principal to Principal relationship is assumed in case of manufacturer and dealer of a car, the manufacturer is liable for its published warranties with respect to repair/replacement of spare parts/car during the warranty period, subject to due observance of the conditions of warranty by the customer.  For the reasons stated above, in such cases dealer will also be liable severally and jointly along with the manufacturers. Although, in the present case, no dealer agreement has been produced/available on records to establish Principal to Principal relationship between the manufacturer and dealer, we shall examine the respective liabilities of manufacturing and dealer, assuming a Principal to Principal relationship as pleaded by the manufacturer.  As stated earlier the facts of present case are distinguishable from that of Tata Motors (supra), as in the latter case, it was case of misrepresentation by the dealer, without the knowledge of manufacturer, portraying the 2009 model car as that of 2011 model by the dealer to the customer.  But in the present case, it is a case of repeated troubles to the car right from day one, which makes the Petitioner herein, the purchaser of car believe/contend that car had a manufacturing defect and hence need to be replaced in accordance with warranty conditions and both manufacturer and dealer are jointly and severally liable. 

7.       Upon careful consideration of all facts and circumstances, the available evidence and documents, it is apparent that the Respondents' account of events lacks credibility and consistency. There are many significant factors that lend support to the Complainant's arguments. Firstly, the discrepancy between the "free service" and "accidental category" mentioned in different Job Cards raises doubts about the Respondents' version. The Job Card indicating "accident service" was prepared while the vehicle was under the possession of Respondent No. 3, making it implausible for the Complainant to be held responsible for an accident without having custody of the vehicle. Secondly, the Respondent No. 3 voluntarily undertook repairs at their own expense, despite being a profit-oriented business. It is highly improbable for a business to invest time and money in rectifying a fault that was not their liability. The inspection report also suggests that there is no accident it is difficult to damage internal parts without breaking of external parts etc., thereby supporting the Complainant's assertions. Thirdly, even if the Respondent No. 3's argument of the Complainant's fault leading to an accident is considered, the fact remains that the Complainant had insurance coverage for the vehicle. In such a scenario, it would have been more reasonable for the Complainant to file an insurance claim rather than seeking repairs directly. The Complainant's consistent payment of insurance premiums, even during the period of non-possession, further underscores their diligence in maintaining coverage. Lastly, the Respondent No. 3 has failed to present compelling evidence substantiating their claim of a pre-existing accident involving the vehicle. Furthermore, they have not provided any explanation as to how a vehicle could be involved in an accident without being driven even a single kilometer (from the 3^rd free service on 08.10.2018). Based on these considerations, it is evident that the Respondents' arguments lack merit and the Complainant's position is well-founded.

8.       For an average person/purchaser of a car without any sound technical  knowledge about automobiles, even if he/she is an educated person, if a problem persists in a newly purchased vehicle, it is reasonable to logically conclude that there may be an inherent defect/manufacturing defect in the product. Common sense dictates that if issues continue to arise despite repeated servicing and attempts at repair, there is likely an underlying problem with the vehicle. This logical understanding aligns with the expectations of a consumer who expects a newly purchased item to function properly without recurring issues. By paying full price for a new car, every purchaser on being assured by the dealer/manufacturer of trouble free running of such vehicle, especially during the warranty period, reasonably expects value for the price paid in terms of smooth and trouble free service, occurrence of even small defects in the vehicle within a short period after purchase, not attributable to any act of omission or commission on the part of purchaser, has the potential of causing mental agony and pain to the purchaser of a new vehicle, who in many cases even raise loans to purchase such vehicle.  One can understand the level of mental agony, pain and hardship which such purchasers may have to undergo if such newly bought vehicle develops a major defect/snag right in the beginning.  Hence, notwithstanding that manufacturer’s warranty in most of such cases may extend to only repair or replacement of a defective part(s), if the quantum of defective parts to be replaced is large and /or such major defects in various parts are occurring frequently  in short durations after purchase, in particular facts of the case, under the warranty, such manufacturer can be held liable for even total replacement of the vehicle with inherent/manufacturing defects with a new one of same make/model, notwithstanding that such warranty may not have provided for replacement of defective car but only defective parts.  In case such replacement of car is not feasible/possible due to any valid reason, like production of such models having been discontinued etc., then dealer/manufacturer can even be ordered to refund the full price of such vehicle. 

9.       In the present case, it is evident that the Complainant was not responsible for any accident and the car was having some serious issues right from beginning, which could be only due to a manufacturing/inherent defect.  As such defects have manifested itself right from beginning during the warranty period. Even if contention of Principal to Principal relationship,  as contended by the Respondent 1 & 2 is accepted, both manufacturer (Respondent 1 & 2) and dealer (Respondent-3) are jointly and severally responsible for the deficiency in service and liable to compensate the Petitioner herein.

10.     Now coming to the reliefs which can be granted to the petitioners, considering that the car is lying with Respondent No. 3 since 24.11.2008 i.e. more than 14 years have lapsed and manufacturing of same/similar models of cars have been stopped by the manufacture (Respondent 1 & 2) and the fact that Petitioner have actually used the car for about 15000 Kms. It will not be possible to order replacement of the car in question with a same/similar car or order total repair of the car to make it road-worthy at the cost of Respondents,.  It would be in the interest of justice if Respondents are ordered to refund the amount equal to price of car paid by the Petitioner less an amount of depreciation towards use of car for about 15000 Kms. within first one year of purchase by the Petitioner, alongwith a reasonable compensation in the form of interest on such amount.  Keeping in view all relevant facts and average life span of such vehicles, we fix the depreciation value for use of 15000 kms within one year of purchase by the Petitioner at 25% of the purchase price.  The Respondents shall be entitled to retain the car/its salvage value and/or dispose of the same and retain the sale proceeds.

11.     For the reasons stated hereinabove, and after giving a thoughtful consideration to the entire facts and circumstances of the case, various pleas raised by the learned Counsel for the Parties, the RP is allowed/disposed off with the following directions/reliefs: -

1. Respondents herein shall pay to the Petitioner herein an amount of Rs.4,80,148/- (Rs.6,40,197/- Sale Price of car less 25% depreciation (Rs.1,60,049/-) alongwith interest @ 9%  w.e.f. 18.11.2008 (date since when the car is lying with Respondent No.3) till the date of actual payment to the Petitioner.

2. Respondents shall also pay litigation cost of Rs.25,000/- to the Petitioner.

3. Simultaneously, on receipt of  payments as per above orders, Petitioner shall handover all original documents relating to car to the Respondents and sign required documents necessary to transfer the ownership of said car to Respondents or in the name of any person as desired by Respondents.

4. All payments under the order to be made within a maximum of three months.

5. Liability of all the Respondents herein shall be joint and several. 

6. Order dated 04.08.2017 of the State Commission and dated 30.03.2013 of District Forum stand modified to that extent.

12.     The Revision Petition stands disposed off accordingly. The pending IAs in the case, if any, also stand disposed off.