CC Filed on 25.11.2010

         Disposed on 03.09.2011

BEFORE THE DISTRICT CONSUMER DISPUTES REDRESSAL FORUM, KOLAR.

Dated: 03^rd day of September  2011

PRESENT:

                        HONORABLE T. RAJASHEKHARAIAH,  President.

  HONORABLE T.NAGARAJA,  Member.

       HONORABLE K.G.SHANTALA,  Member.

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Consumer Complaint No. 232/2010

Between:

ORDERS

This is a complaint filed under section 12 of the Consumer Protection Act, 1986.    The complainant had purchased a tractor and trailer and for that purpose she had taken a financial assistance from the Opposite Party in the year July 2006.   The Opposite Party sanctioned loan of Rs.3 lakhs for the tractor and Rs.75,000/- for the trailer and fixed 16 monthly installments of Rs.27,375/- for the tractor and Rs.6,900/- for the trailer, it includes interest on both the loans.    The installments was payable from 15.11.2006 to 15.10.2010.     The complainant paid the installments regularly till now, she has paid Rs.4,16,675/-.   The complainant is due only Rs.1,31,125/-.    Due to the failure of rains and due to loss in agriculture, the complainant could not pay the installments from May 2010.    On 02.11.2010 the Opposite Party without notice to the complainant forcibly taken away the tractor and trailer from the complainant through their gangmen and clearing agent Sree Balaji Clearing Agents Private Limited.    On 08.11.2010 the Opposite Party issued notice to the complainant threatening to sell the said tractor and trailer, wrongly stating that the complainant has surrendered the said vehicle to the Opposite Party.    It is stated that the Opposite Party has taken away the said vehicle from the custody of the complainant without any notice before seizure and he has not surrendered the vehicle as alleged.    The Opposite Party is now trying to sell the said tractor and trailer to lesser amount.  Hence this complaint is filed for a direction to return the seized tractor and trailer and to direct the Opposite Party to recalculate the loan amount and collect Rs.7,000/- per month till repayment and it is prayed to award damages of Rs.4,00,000/-.

2. The Opposite Party has filed the version and has contended that the complainant does not fall within the definition of ‘Consumer’ as there is no unfair trade practice adopted by the Opposite Party.    The complainant is bound by the contract between the parties and he cannot challenge the contractual terms.      The allegation of taking loan and the details of the repayment are not disputed.    However the OP denies the contention that the complainant was regularly paying the installments.   It is stated that relating to the loan of the tractor, the complainant was liable to pay Rs.1,13,325/- and he was required to pay additional finance charges i.e. penal interest of Rs.73,809/- and out of it he has paid Rs.1,700/- and liable to pay balance of Rs.72,109/- towards the finance charges.    It is stated relating to the loan of the trailer the Opposite Party was due to pay Rs.1,10,400/- and he is only paid Rs.89,800/-.    Hence as on 04.02.2011 the complainant was liable to pay Rs.20,600/- towards this loan.   In addition to it, the complainant was liable to pay Rs.12,235/- towards the additional finance charges i.e. penal interest payable due to default in payment of installment.   It is stated that under agreement Clause 2(b) the Opposite Party is entitled to claim interest equal to 3% per month in case of delayed payments.    The complainant was a chronic defaulter and notice was also issued on 17.09.2008 to pay the entire outstanding amount.    The tenure of repayment of loan amount has already expired on 15.08.2010.   Under the agreement the Opposite Party is authorised to take possession of the vehicle in the event of default in payment of installment.    The same has been agreed by the complainant under Clause 12.1(ii) of the terms and conditions of the agreement.   Hence the Opposite Party has acted only as per the terms and conditions of the agreement and taken possession of the vehicle and he is entitled to sell the same if the complainant fails to pay the balance amount.     It is contended that the complainant himself has surrendered the vehicle to the Opposite Party and for realizing the finance amount the Opposite Party is entitled to seize and sell the vehicle.    Hence there is no merit in this complaint and the complaint is liable to be dismissed.

3. The points that arise for our consideration are:

Point No.1:  Whether the complainant has proved there   is       

                      relationship of ‘Consumer’ and ‘Service Provider’?

Point No.2:  Whether the complainant has proved the alleged

                       deficiency in service by the OP?

Point No.3:   To what order?

            4.  Our findings to these points are as hereunder:

1.      Affirmative

2.      Affirmative

3.      As per final order.

R E A S O N S

5. POINT NO.1: It is the contention of the Opposite Party that there is no relationship of ‘Consumer’ and ‘Service Provider’ and the dispute is not ‘Consumer’ dispute.   It is contended that the relationship between the parties is that of Borrower and Creditor and because of it, complainant cannot be said as ‘Consumer’.   Relying on the decision of the Hon’ble Karnataka State Consumer Disputes Redressal Commission rendered in Appeal No. 85/1993, the Opposite Party contends that there is no relationship of ‘Consumer’.   In our opinion this contention is not acceptable.    In view of the decision of the Hon’ble National Commission reported in III (2007) CPJ 161 (NC).   In that decision,  the right of the parties which were governed by hypothecation agreement is considered and necessary reliefs are granted.   In the present case also, the parties are governed by the hypothecation agreement.   Hence the ratio of the said decision of the Hon’ble National Commission is applicable to the facts of the present case also.    Hence there is no merit in the contention of the Opposite Party.    Hence there is no relationship of ‘Consumer’ and ‘Service Provider’.   Hence this point is held against the Opposite Party.

6. POINT NO.2:  It is the specific contention of the complainant that the parties are governed by hypothecation agreement and the seizure of the vehicle of the complainant by the Opposite Party without issuing any notice is illegal.   There is no dispute about the fact that the vehicle has been seized by the Opposite Party and the Opposite Party does not contended that any notice was issued prior to the seizure of the vehicle.   It is the contention of the Opposite Party that the Opposite Party is entitled to seize the vehicle as they are governed by a hire purchase agreement.    The Opposite Party has relied on several decisions including the decision one reported in 1995(3) page 293, wherein it is observed that in hire purchase agreement, the owner of the vehicle is authorized to seize the vehicle in case of default to pay the amount, etc.,    In our opinion the ratio of this decision is not at all applicable to the facts of the case, because the agreement between the parties is not hire purchase agreement and it was only a loan agreement where the vehicle was hypothecated.    The agreement has been produced to the Forum and there is no dispute about that agreement.    The heading of the agreement itself shows that it was a “loan agreement” and it specifically describes the complainant as a “borrower” and Opposite Party as the “lender”.   It is stated that the lender has considered the application and agreed to grant to the borrower the loan for the product as described on the terms and conditions stated therein.   The Clause -5 of the agreement reads as follows:

The Borrower in whose name the Product is going to be registered acknowledges with the express consent of the Co-Borrower and the Guarantor that the Borrower hereby hypothecates the Product in favour of the Lender in order to secure the Lender’s dues and charges on the terms and conditions contained in this Loan Agreement.

            The above contents of the agreement clearly goes to show that it is an hypothecation agreement between the parties and the transaction is only a loan transaction and the complainant was the borrower and the Opposite Party was a lender.    Hence this agreement does not constitute a hire purchase agreement as contended by the Opposite Party.    No other clauses of this agreement are brought to our notice which makes the transaction as an hire purchase agreement.   Hence we hold that the agreement between the parties is hypothecation agreement and not hire purchase agreement.   If that is so, whether the seizure of the vehicle, by the Opposite Party, without notice is valid is the question for consideration.   In the decision reported in III (2007) CPJ 161 (NC), the Hon’ble National Commission has held as follows:

“In a loan agreement for financing goods on hypothecated basis the creditor cannot forcibly repossess the hypothecated item, though he can enforce the security through the Court.    If the agreement is held to be a loan agreement and rights of the creditor are held to be those of a hypothecatee, rights of the parties under the agreement would be different.   A hypothecatee, cannot take possession of the security without intervention of the Court, though he has a right to take possession or to sell the hypothecated property though Court or to give notice to the hypothecator to enforce the security.   Permitting a hypothecatee to physically repossess the hypothecated goods against the wishes of the hypothecator will enable the hypothecatee to take law in to his own hands and deprive the hypothecator of his defence by depriving him of the use of goods even when his claim may be that he does not owe any money.

The finding that the hypothecatee cannot 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.”

            From the aforesaid law laid down by the Apex Court as well as the High Court of Delhi, it is clear that even though the hire-purchase agreement may give right to take possession of the vehicle, money lenders/financial institution/banks have no power to take possession by use of force and have to follow the statutory remedy which may be available under the law.

            In our opinion the ratio of the above decision is directly applicable to the facts of the case.     Hence even though, under the agreement the Opposite Party will be entitled to seize the vehicle in case of default, that cannot be done without following the due process of law.   Hence the Opposite Party cannot directly seize the vehicle as done in this case.     Hence it ought to be held that the seizure of the vehicle is illegal.   As the seizure of the vehicle is illegal, it amounts to deficiency in service and the complainant will be entitled for the consequential relief.    Hence we hold this point in favour of complainant. 

7. POINT NO.3:  In the said decision of the Hon’ble National Commission, the proper relief that can be granted is also discussed at Para. 44 of that Order and the relevant para of the said decision reads as follows:

V. The next question which requires consideration is when the repossession of the vehicle is held to be unfair what relief should be given to the complainant?

(a) If not sold, it is to be returned to the complainant

with adequate compensation/damages suffered by the

complainant?

            In view of the aforesaid discussion, in our view, where the vehicle is forcefully seized and sold by the money lender/financier/banker it would be just and proper to award reasonable compensation to the Complainant.   ‘Reasonable compensation’ would depend upon facts of each case’.

As the vehicle is illegally seized, we are of the opinion that the complainant is entitled for return of the vehicle as held by the said decision of the Hon’ble National Commission.   In addition to it, the complainant is entitled for adequate compensation.    In our opinion for fixing the quantum of compensation we have to take into consideration the EMI that was payable and the income which could have been earned by the complainant by using the vehicle for his livelihood.    Admittedly the EMI that was payable for the tractor and the trailer was together Rs.34,275/- for 3 months.    Hence it will be Rs.11,400/- per month.    This fact that EMI was fixed at that rate implies that the complainant will be able to earn so much by using the vehicle and repay the same.   In addition to it, some amount must be remaining with her, out of her earning from the tractor for her livelihood.   Hence atleast 50% of the EMI must be her earning by using the vehicle for her livelihood.    Hence the damage caused to her on the loss of income may be assessed Rs.11,400/- + Rs.5,700/- = Rs.17,100/- per month.   Hence at that rate the damage and compensation should be awarded from the date of seizure of the vehicle i.e. 02.11.2010 until the vehicle is returned to the complainant.

The Opposite Party has contended that in view of the delay in paying the amount, the complainant was liable to pay Rs.1,13,325/- towards the loan amount balance relating to the said tractor.    In addition to it, she was liable to pay Rs.72,109/- towards penal interest.   It is further stated that relating to the trailer the complainant was liable to pay Rs.20,600/- towards the loan amount balance, in addition to it, the complainant was liable to pay Rs.12,235/- as penal interest.   In our opinion as the vehicle has been illegally seized and the complainant has been deprived of its earning, it will not be proper to claim penal interest.   The Opposite Party will not prejudiced if simple interest is recovered as per the terms of agreement and there is no reason for imposing penal interest and it amounts to unfair trade practice.    Hence the Opposite Party may recover only the balance amount without claiming the said penal interest of Rs.72,109/- relating to the tractor loan and Rs.12,235/- relating to the loan of the trailer.     Hence we pass the following:

O R D E R

The complaint is allowed.     The Opposite Party is directed to return the tractor and trailer to the complainant in the same condition, as it was, at the time of seizure.    The Opposite Party shall pay damage and compensation at Rs.17,100/- per month from 02.11.2010 until redelivery of the vehicle to the complainant.   The Opposite Party may recover the remaining amount at the same rate of the EMI as agreed between the parties.    However the Opposite Party shall not be entitled to claim the amount Rs.72,109/- as penal interest for the tractor loan and Rs.12,235/- as penal interest of the trailer loan.   The balance amount shall be payable in future at the rate of EMI that was agreed between the parties. 

            Dictated to the Stenographer, corrected and pronounced in open Forum this the 03^rd day of September 2011.

T. NAGARAJA                        K.G.SHANTALA            T. RAJASHEKHARAIAH  

   MEMBER                                 MEMBER                                PRESIDENT