BEFORE THE A.P.STATE CONSUMER DISPUTES REDRESSAL COMMISSION: AT HYDERABAD.

F.A.No. 58  OF 2009 AGAINST C.C.NO.55 OF 2008 DISTRICT CONSUMER FORUM MAHAUBNAGAR

Between

The Manager,
Mahindra & Mahindra Financial Services Ltd.,
D.No.4-5-107/4/A, C/o Sree Rama Engineering Co.,
Mettuguda, Mahabubnagar, rep. by its
GPA Holder and Associate Manager Legal
Mr.A.S.Venkatesh

Appellants/opposite parties

        A N D

Smt S.Yadama W/o G.Tirupathi Reddy
R/o Annasagar, Bhoothpur Mandal
Mahabubnagar District

Respondent/complainant

Counsel for the Appellant              Sri Valluri Mohan Srinivas

Counsel for the Respondent           Sri K.Venkatesh Gupta

 QUORUM:                 SRI SYED ABDULLAH, HON’BLE MEMBER

      &

                            SRI R.LAKSHMINARSIMHA RAO, HON’BLE MEMBER

                        THURSDAY THE THIRTIETH DAY OF SEPTEMBER

                                            TWO THOUSAND TEN

Oral Order ( As per R.Lakshminarsimha Rao, Member)
           ***

1.     The opposite party is the appellant. 

2.     The factual matrix that led to filing of this appeal is that the complainant purchased Mahindra 475 DI Tractor from Sri Jaya Rama Automotives Pvt. Ltd., Mahabubnagar with registration No. AP 22V 2397 under Hire Purchase agreement with the opposite party.  The complainant paid a total sum of `2,54,500/- on different dates to the authorized signatory of Sri Jayarama Automotives Pvt. Ltd.  The total cost of the tractor was  `5,34,352/- and out of which  `3 lakhs was provided by the opposite party.  The hire purchase period was from 3.5.2007 to 2.8.2010.  The opposite party fixed repayment schedule for six installments @  `71,000/- each.  The first instalment will commence from 3.8.2007.   The opposite party prior to the first instalment due date seized the tractor of the complainant when it was parked in front of his house.  After seizure of the vehicle, the opposite party sold away the tractor to third parties for  `3,15,000/- without the knowledge and consent of the complainant.  The opposite party also retained the blank cheques obtained from the complainant and also retained the title deeds, books of the complainant pertaining to her land.  Therefore, the complainant got issued a legal notice dated 8.5.2008 to the opposite party and filed the complaint seeking direction to the opposite party to return Mahindra 475 DI Tractor bearing No.AP 22V 2397 by receiving the loan amount in installments or in the alternative to pay the sum of  `2,54,500/- along with titled deeds and compensation.

3.     The opposite party resisted the claim on the ground that it has possessed the right to seize the vehicle for default of single installment as per clause 12(i)(ii)(iii) of the agreement.  It was contended that the loan amount was repayable by the complainant in six half yearly installments at `71,000/- commencing from 3.8.2007 with moratorium period of 92 days.  The complainant has not paid the first instalment amount.  The opposite party issued notice on 6.10.2007 requesting the complainant to pay the due installment.  On failure of the complainant to respond to the notice, the opposite party had sent telegram dated 15.11.2007 to settle the account else it will take appropriate action.  The opposite party seized the tractor with intimation to the complainant.  The value of the tractor was assessed through its licensed surveyor and the tractor was sold to the highest bidder at `3,15,000/-. 

4.     The opposite party issued reply on 23.5.2008 to the notice of the complainant informing her that all the documents obtained from her for security purpose would be handed over after the clearance of the remaining balance loan amount.  It was pleaded that the opposite party got issued notice dated 17.12.2007 after effecting seizure of the vehicle and requested the complainant and the guarantors to settle the account.  The transaction being a loan transaction and the relationship between the complainant and the opposite party is that of borrower and lender, the complainant is not a consumer as defined in the C.P. Act.  There was no deficiency in service on the part of the opposite party and the complainant has no cause of action to file the complaint. 

5.     The complainant has filed her affidavit and the documents Exs.A1 to A11.  The Manager of the opposite party filed his affidavit and got marked the documents Exs.B1 to B15.  Both the parties filed their respective written arguments.

6.     The District Forum has allowed the complaint holding that the opposite party had not issued proper notice and seized the tractor without terminating hire purchase agreement and sold it at unjustifiable low price.

7.     Aggrieved by the impugned order, the opposite party has preferred the appeal contending that the hire purchase Act 1972 was not promulgated nor was brought into force was relied upon by the District Forum and that the complainant had no right to demand in for release of the documents that are given as collateral security to the opposite party as there was still amount due in the complainant’s loan account.  It was contended that the complainant had not paid any amount to the opposite party.  Finally, it was contended that as per the repayment schedule the due date of first instalment was 3.8.2007 and the vehicle was repossessed only after the said date and sold it to the person who quoted highest price. 

8.     The points for consideration are:

1)           Whether the complainant was a default?

2)           Whether the opposite party has properly exercised its right in possessing the vehicle?

3)           To what relief?

9.     POITNS NO.1 AND 2 The complainant obtaining finance assistance of `3,00,000/- on 3.5.2002 from the opposite party for purchase of Mahendra 475 B1 model tractor for agricultural purpose and getting the vehicle registered with registration No.AP 2200 and 2397 are not in dispute.  The parties are not at logger heads as to the payment schedule of the loan amount in 36 months @ `35000/- per month towards interest from 3.5.2007 to 28.2.2010.  The loan amount was agreed to be cleared of in six half yearly installments together with interest and with a moratorium period of 92 days in each instalment.  It was agreed that the complainant would pay `71,000/- under each instalment with the installments commencing from 2.8.2002 and concluded by 3.2.2007.  In case of delay in payment of the installments, the complainant has agreed to pay penal interest @ 36% per annum.

10.    The complainant and the opposite party relied upon the terms and conditions of hire purchase agreement particularly with reference to clause 12 (i)(ii)(iii) which read as under:

12          Consequences upon event of default.

12.1    Upon the occurrence of any event of default and any time thereafter, the Lenders shall without prejudice to its rights in law, be entitled to declare all sums due and to become due hereunder for the full term of the agreement as immediately due and payable including that the Borrower shall be liable to pay to the Lender foreclosure charges calculated as the percentage (as per Schedule 1) of the balance principal outstanding along with other dues including unpaid installments, service taxes, late charges etc., due as on date of such declaration and upon the Borrower failing to make the said payments in full within 7 days thereof, the Lender may, at its sole discretion, do any one or more of the following:

(i)                  Upon notice to the Borrower terminate this agreement;

(ii)                 Demand that the Borrower should return the Produce to the Lenders at the risk of expense of the borrower, in the same condition it was delivered to him (Ordinary wear 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 produce 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 produce 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 it rights herein including in connection with the product to recover its dues under this Agreement.

(iii)                Of such terms and conditions and for such consideration as the Lender may deem fit with or without any notice to the Borrower sell the product at a public or private sale, otherwise dispose of upon such return of the product or use, or operate, lease to others or keep idle such product, all free and clear of any rights to the Borrower and without any duty to account to the Borrower for such action or inaction or for any proceeds in respect thereof”

11.    The complainant has in breach of the clause 12(i)(ii)(iii) of the Agreement, failed to pay the first instalment whereby opposite party had issued notice on 16.1.2007 and a telegram dated 15.7.2007 requesting the complainant to clear the installments of which the due date was 3.8.2007.  The District forum has referred to 18 and 19 of the Hire Purchase Act.  The learned counsel for the appellant/opposite party has contended that the Hire Purchase Act has not been promulgated nor the assent of the president was given.  Therefore, it is submitted that the District Forum erred in referring to the provisions of a law which has not been in force at relevant time.  It is true the District forum is not right in referring to the provisions of Sec.18 and 19 of the Hire Purchase Act as the Hire Purchase Act repelled and the Amended Act had not been brought into force at the relevant time or till date.

12.    The District Forum has held that the complainant did not respond to the notice issued by the opposite party on 6.10.2007, 15.11.2007 and on 17.12.2007.  The inaction on the part of the complainant to the notice issued by the opposite party calling upon to clear of first installment would be sufficient to hold that the opposite party could exercise its right in terms of Clause 12(i)(ii)(iii) of the Hire Purchase Act.

13.    The complainant had not cleared the first instalment due by the due date nor did give response to the notice issued in this regard by the opposite party.   As such the opposite party had repossessed the vehicle.  The complainant has not stated as to on which date her tractor was seized by the opposite party.  Equally the opposite party was negligent in refraining himself from stating the date of repossession of the vehicle.  Both the parties being negligent in revealing the actual date of seizure of the vehicle, it is not left open to them to contend otherwise on the aspect of the time of repossession of the vehicle.  

14.    The complainant in her notice dated 8.5.2008 has admitted that the first instalment to be paid on 3.8.2007.  It was stated in the notice that the opposite party had seized the vehicle prior to 3.8.2007.  It is for the complainant to prove by the cogent evidence that the opposite arty had violated the terms and conditions of the agreement by taking repossession of the vehicle prior to the actual due date.  Be that as it may.  The complainant has contended that he came to know that the opposite party sold the vehicle for `3,15,000/- and despite the fact she claimed for return of the vehicle stating that she was ready to pay the installments as agreed and in the alternative she had claimed the balance amount due after settlement of her account.  Therefore, in the light of the complainant’s request made in her notice dated 8.5.2008 it is to be seen whether any amount can be paid to her by the opposite party.  The vehicle was sold by the opposite party on 8.2.2008 for a consideration of `3,15,000/-.  The surveyor assessed the value of the vehicle at `3,15,000/-.  The vehicle was purchased on 3.5.2007 for a total consideration of `5,34,352/- out of which the complainant has obtained financial assistance of `3 lakhs from the opposite party and paid the balance amount.  Therefore, a barely one year old vehicle whose consideration is  `5,34,352/- was assessed by the surveyor at `3,15,000/-.  The surveyor has not given mode of assessment nor for any reason for evaluating vehicle at `3,15,000/-. 

15.    The opposite party submitted that it has disposed of the vehicle to the highest bidder for `3,15,000/- but he has not brought on record any evidence in this regard.  Insofar as the question of repossession of the vehicle and its sale is concerned, the opposite party has got unquestionable right in terms of hire purchase agreement.  However, the right conferred on the opposite party by itself does not take away the right of the complainant as to the proper assessment of the vehicle and sale of the same by transparent and proper mode to be adopted by the opposite party. The value of the vehicle being `5,34,352/- after 20% depreciation is deducted therefrom and 10% depreciation on other miscellaneous counts such as maintenance of the vehicle, road condition and skill of the driving etc., the actual market value of the vehicle comes to 3,74,047/- against which the opposite party has sold the vehicle at 3,15,000/- only which by any means cannot be said to be proper market value of the tractor.  Therefore, taking into consideration of the circumstances of the case, we are inclined to allow the appeal as the impugned order does not reflect the facts of the case.  The opposite party shall not insist on balance loan amount if any and the difference amount of `59,047/- (`3,74,047 – 3,15,000) shall be adjusted to the amount due in the loan account of the complainant and the complainant cannot found entitled to the amount of `2,37,450/- as awarded by the District forum.

In the result the appeal is allowed.  The order dated 27.11.2008 passed by the District Forum is modified.  The direction to the opposite party to pay `2,37,415/- towards margin money of `6600/- towards expenditure for availing loan and `1,000/- towards costs is set aside.  The opposite party is directed to return all the documents received at the time of sanctioning of the loan, to the complainant.  No costs.  Time for compliance four weeks.

                                                                MEMBER

                                                                MEMBER

                                                            Dt.30.09.2010

KMK*