State Consumer Disputes Redressal Commission
S. Sreenivasulu Khammam vs M/S. Kotak Mahendra Finance Ltd., And ... on 15 December, 2008
BEFORE THE A BEFORE THE A.P STATE CONSUMER DISPUTES REDRESSAL COMMISSION AT HYDERABAD. F.A. 423/2005 against C.D. 45/2002, Dist. Forum-I, Hyderabad. & F.A. 425/2005 against C.D. 214/2003, Dist. Forum-I, Hyderabad. Between: S. Sreenivasulu S/o. Janaiah, Age: 35 years Business, Presently R/o. H. No. 10-6-178/2 Bhuranpura Khammam *** Appellants/ Complainant And 1) M/s. Kotak Mahendra Finance Ltd., 6-3-1109/1/p/202, 2nd Floor Somajiguda, Rajbhavan Road Hyderabad-500 082 Rep. by its Managing Director 2) M/s. Kotak Mahendra Finance Ltd., Consumer Finance Division Opp. AIR, Bandar Road Vijayawada. *** Respondents/ Opposite Parties Counsel for the Appellants: Mr. Sreenivas Karra Counsel for the Respondent: Mr. K. V. Simhadri. QUORUM: HONBLE SRI JUSTICE D.APPA RAO, PRESIDENT. & SMT.M.SHREESHA, LADY MEMBER.
MONDAY, THIS THE FIFTEENTH DAY OF DECEMBER TWO THOUSAND EIGHT.
ORAL ORDER: (Per Honble Sri Justice D. Appa Rao, President.) *** These appeals are preferred by the unsuccessful complainant against the common order of the Dist. Forum-I, Hyderabad in C.D. No. 45/2002 and C.D. No. 214/2003.
The facts leading to the filing of these appeal are as follows :
The complainant/appellant herein entered into hire purchase agreement on 27. 3. 2001 Ex. B2) with the respondent for purchase of passenger bus for Rs. 5,50,000/- with a stipulation that the amount shall be repayable in 35 monthly instalments at Rs. 18,991/- each payable on or before 20th of every month for the period commencing from 1.5.2001 to 1.3.2004. He had hired the said vehicle to APSRTC at Rs. 3,500/- per day. He had committed default in payment of 7th to 10th instalments by January, 2002. On that the respondent financier seized the vehicle on 4. 1. 2002 from the possession of APSRTC without any notice to him invoking clause-9 of the hire purchase agreement. He thereupon sent two demand drafts on 15.1.2002 for Rs. 40,000/- and Rs. 35,694/- towards the amount due by him, and requested them to release the vehicle. The financier refused to receive the demand drafts on which he filed C.D. 45/2002 seeking redelivery of the vehicle, reimbursement of Rs.
3,500/- per day for loss of income till the date of delivery and compensation of Rs. 40,000/- towards mental agony and costs of Rs. 10,000/-.
He also filed I.A. No. 15/2002 seeking interim relief of release of vehicle. The Dist. Forum on contest passed interim order Dt. 5.2.2002 directing the complainant to pay Rs. 1,13,950/- to the financier and further to execute a personal bond for Rs. 6 lakhs and on that the financier was directed to return the vehicle. Accordingly, he sent demand draft for Rs. 1,13,950/- and executed personal bond evidenced under Ex. A7 Dt. 10.2.2002. Though he complied the conditions, the financier refused to deliver the vehicle. Aggrieved by the said order the financier preferred revision before this Commission and the same was dismissed and on that the financier returned the vehicle on 27. 2. 2002. Later he continued to pay instalments to a tune of Rs. 4,36,793/-
While so the financer again seized the vehicle without any notice on 18.3.2003 when he was away. Thereupon his wife gave a complaint to the financier, and enquired as to the reason for seizure, on which the financier informed that penal interest of Rs. 44,933/- was due.
Though he was not due he paid Rs.
8,000/- by way of cash on 24.3.2003 and Rs. 36,000/- on 26.3.2003 to the financier who refused to receive the same vide Ex. A5.
When he personally visited the office and requested him to release the vehicle, the financier did not consider his request and demanded him to withdraw the C.D. 45/2002. On that he sent a FAX under Ex. A12 requesting him to release the vehicle. As the vehicle was not released he filed C.D. No. 214/2003 for return of the vehicle, compensation and costs and along with it I.A. No. 141/2003, for a direction to release the vehicle. The financier contested that the total amount due was Rs. 3,26,260/-.
On that the Dist. Forum directed him to pay Rs. 3,26,260/-. Accordingly, he deposited the amount. Though the respondent released the vehicle but did not issue NOC in spite of his request.
The respondent financier resisted the case by filing counter in C.D. No. 45/2002.
While admitting that it was engaged in the business of financing, leasing etc. it alleged that the finance was taken for commercial purpose and therefore the Forum has no jurisdiction. The financing schemes introduced by them were approved by the Reserve Bank of India. The complainant and his wife also own two more buses financed by them. They had to pay Rs. 18,991/- per month. Altogether they had to pay Rs. 24,000/- each for 28 months and Rs. 10,288/- each for seven months, put together they were liable to pay Rs. 66,991/- per month. They were irregular in payment of amounts. By virtue of clause-9 of the agreement they repossessed the vehicle at Khammam by exercising their legally vested right. Having committed default, he cannot take advantage of his own wrong. The complainant was put on due notice demanding him to pay the entire overdue amount which he failed to respond. Issuance of prior notice is not mandatory as per the terms of the contract. They were entitled to seize the vehicle. The complainant cannot seek the relief of possession of the vehicle in view of his default, and therefore prayed for dismissal of the complaint.
The financier filed counter in C.D. 214/2003. It alleged that when the complainant had committed default of payment of monthly instalments aggregating to Rs. 1 lakh up to 9 instalments, repossession of the vehicle was made, upon which C.D. 45/2002 was filed. Since he had committed default again amounting to Rs.
3,31,911/- possession was taken. However, by virtue of interim order in I.A. No. 141/2003 the vehicle was released. He cannot seek the very same relief by filing a different complaint. He was fully aware that loan amounts were not paid. Since he had committed default, they were constrained to repossess the vehicle once again. There was no deficiency in service on their part.
Therefore it prayed for dismissal of the complaint with costs.
Both the matters were clubbed together. The complainant in support of his case filed affidavit evidence and filed Exs. A1 to A8 in C.D. 45/2002 and Exs. A1 to A17 in C.D. No. 214/2003 while the respondent financier filed affidavit evidence and Exs. B1 to B5 in C.D. No. 45/2002 and Exs. B1 to B8 in C.D. No. 214/2003. Exs. A9 and A10 are marked as additional evidence on behalf of appellant/complainant in F.A. No. 423/2005 against C.D. 45/2002.
The Dist. Forum after considering the evidence placed on record opined that since the complainant had re-possessed the vehicle by virtue of interim orders of the Dist. Forum, and since he had paid the amount he was directed to retain the possession of the vehicle, however, declined to grant amounts towards loss of income and compensation etc. Aggrieved by the said order, the complainant preferred appeal F.A. No. 423/2005 against the order C.D. 45/2002 and F.A. No. 425/2005 against C.D. No. 214/2003 raising the very same grounds in both the appeals. He contended that the vehicle was in possession of the financier for 53 days from 4.1.2002 to 26.2.2002 and as such he suffered a loss of Rs. 3,500/- per day. So also it was in their possession from 18.3.2003 to 14.6.2003 for 88 days for second time. He was entitled to an amount of Rs. 3,500/- per day. As against Rs. 6,64,675/- he paid Rs. 7,76,345/- in excess of Rs. 1,11,670/-. It ought to have awarded a compensation of Rs. 40,000/- in each case which was refused without assigning any reason.
The point that arises for consideration is whether the appellant/complainant is entitled to any amount towards loss of income and compensation?
It is an undisputed fact that the complainant/appellant entered into an agreement with the respondent evidenced under Ex. B2 Dt. 27.3.2001 for purchase of a passenger bus for Rs. 5,50,000/- with a stipulation that the amount shall be repayable in 35 monthly instalments @ Rs. 18,991/- p.m. payable on or before 20th of every month for the period from 1.5.2001 to 1.3.2004. In all he had to pay Rs. 6,64,720/- inclusive of interest and other amounts. The complainant had taken insurance policy evidenced under Ex. A3 in his name. R.C. book of the bus stands in his name evidenced under Ex. A5.
While so on 4.1.2002 the vehicle was seized on the ground that he had committed default in payment of instalments by invoking clause
-9 of the agreement. Clause-9 reads as follows :
On failure of the borrower to pay any dues to the lender, the lender or its agent or servant or any other person duly authorized by the lender shall be entitled to enter upon any premises where the vehicle may be or is believed to be and take possession of the same without being liable to any Court or other proceedings by the borrower or any person claiming under him or otherwise.
Admittedly no notice to the complainant was issued before invoking this clause. Since the financier seized the vehicle on the ground that the complainant committed default from 7th to 10th instalments, he sent demand drafts for Rs. 40,000/- and Rs. 35,694/- on 15.1.2002 and requested the financier to release the vehicle. When the financier refused to receive the same he filed C.D. 45/2002 and got the bus re-possessed by an interim order in I.A. No. 15/2002 Dt. 5.2.2002. While ordering delivery of the vehicle, the Dist. Forum directed the complainant to pay Rs. 1,13,950/- and the same was complied vide Ex. A7. The financier preferred revision against the direction for re-possession of the vehicle and the same was dismissed. Thereupon the financier released the vehicle on 27.2.2002.
The complainant admittedly was paying the instalments.
Again the financier seized the vehicle without any notice invoking the very same clause-9 on 18.3.2003 alleging that the complainant had to pay penal interest of Rs. 44,933/- vide Ex. A7. The complainant paid Rs. 8,000/- on 24.3.2003 and Rs. 36,000/- on 26.3.2003 evidenced under Ex. A2. Again they refused to receive the amount evidenced under Ex. A5. Despite his request the financier refused to release the vehicle as such C.D. 214/2003 was filed and sought directions for return of the vehicle. When the financier alleged that an amount of Rs. 3,26,260/- was due, the said amount was deposited, and on that the vehicle was re-delivered as per the directions of the Dist. Forum in I.A. No. 141/2003. While delivering the vehicle the financier did not issue No Objection Certificate (NOC).
Thereupon interim direction was given on 30.3.2005 to issue NOC, basing on which the NOC was issued.
Since possession of the vehicle has been given to the complainant, in both the C.Ds, and as one of the reliefs is to re-deliver the possession, the said reliefs have become infructuous, and therefore the Dist. Forum was right in not passing any order in regard to the said reliefs.
The complainant claimed compensation of Rs. 40,000/- in each of the case on the ground that the vehicle was unauthorizedly seized.
He also claimed Rs. 3,500/- per day for loss of income for the period for which the financier was in illegal possession of the vehicle. Admittedly it was hired to APSRTC for Rs. 3,500/- per day evidenced under agreement Ex. A9. We may clarify herein that the financier was in possession of the vehicle in two spells from 4.1.2002 to 26.2.2002 for 53 days and from 18.3.2003 to 14.6.2003 for 88 days viz., for a total period of 141 days on the ground that the instalments were not paid by due date.
It is not in dispute that as against Rs. 6,64,675/-
payable by the complainant, he had paid an amount of Rs. 7,76,345/- in excess of Rs. 1,11,670/- The agreement period under which he had to pay the amount was from 1.5.2001 to 1. 3. 2004.
We may state herein that up to 24.3.2003 he paid Rs. 4,36,793/-. He paid balance of Rs. 44,933/- towards penal interest as claimed under Ex. A7 by 26.3.2003.
When the financier contended that the complainant was due an amount of Rs. 3,26,260/- by 29.3.2003 he deposited the said amount.
The question of granting compensation would depend upon the determination whether the financier had illegally seized the vehicle or not. The financier asserts that he need not give any notice by virtue of Clause-9 of the agreement. However, Clause-9 does not indicate that no notice be given before seizing the vehicle.
In Citi Corpo Maruti Finance Ltd. Vs. S. Vijayalaxmi reported in III (2007) CPJ 161 (NC) after exhaustively considering the scheme under hire purchase agreement and the guidelines issued by the Reserve Bank of India, it was opined that :
The Transfer of Property Act provided an elaborate procedure for termination of the hire purchase agreement. It also provided that notice is to be given and, in some cases, instituting a suit or an application before the Court before taking possession. But, it nowhere provided taking of the possession by use of force.
16. Similarly, Section 69 of Transfer of Property Act, 1882 would have also no bearing with regard to contract entered into between the complainant and the petitioner.19
: We would like to observe that a large number of similar cases are being filed in Courts. Therefore, apart from deciding the controversy involved in this case, we deem it appropriate to formulate general guidelines so that similar problems are not to be encountered or repeated in similar cases.
(i) The finance companies must inform the hirers regarding the details of instalments due and payable by a written communication.
(ii) Even before repossession another written notice must be sent to the hirers and only thereafter the vehicles be repossessed.
Finance companies are restrained from stopping the running vehicles on the roads and forcibly pulling out the driver and take possession of the vehicle against all provisions of law.
20. Mr. Mittal, learned Counsel for the complainant referred to the decision of the High Court of Punjab and Haryana in Tarun Bhargava v. State of Haryana & Anr., AIR 2003 P & H 98. The relevant portion of the judgment reds as under :
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 his own hands, 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.
23. 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.
24. May be that the procedure of law is slow, but that is no excuse for use of force for repossessing the vehicle. If the contention of the petitioner that it can take possession of the vehicle by means of force is accepted the rule of jungle would prevail and might would be right.
Coming to the facts, admittedly, no notice was given to the complainant before taking possession of the vehicle. Undoubtedly, it could but be held that it was illegal. They did not stop at that. When the vehicle was released by the Dist. Forum, and the Revision preferred against the order was dismissed, the financier without any compunction had taken repossession of the vehicle solely on the ground that penal interest was not paid. Thereupon the complainant was forced to pay the entire amount including penal interest, and even then the financier did not return. The complainant was forced to file another C.D. The Dist. Forum ordered release of vehicle again on depositing the entire amount. Equally no notice was issued for the second time even, when the possession of the vehicle was taken. The very same reason would apply when it took illegal possession of the vehicle, for the second time.
Learned counsel for the respondent relied a decision of this Commission in F.A. No. 411/2003 Dt. 6. 6. 2005. This commission had no occasion to consider the decision of the National Commission and therefore it held that the Consumer Protection Act will not extend to the cases arising under Hire Purchase agreements. However, the decision relied by us would undoubtedly show that the consumer courts can extend benefit to these consumers also under the Act.
Evidently, the respondent financier was bent upon collecting dues after dues without giving any notice as stated above. They have no respect to the orders of the Dist. Forum or State Commission. Curiously when the complainant had altogether paid Rs. 7,76,345/- by 29.3.2003 as against an amount of Rs. 6,64,675/-, adding mythical amounts on the ground of penal interest etc., mulcted the amount. Necessarily the respondent financier had to reimburse the loss sustained by the complainant in this regard. The complainant could not run the bus between 4.1.2002 and 26.2.2002 for 53 days and also from 18.3.2003 to 14.6.2003 for 88 days altogether for 141 days, thus denying earnings @ Rs. 3,500/- per day. But for the illegal seizure and possession of the vehicle the complainant would have got the said amount uninterruptedly from APSRTC. Therefore, we are of the opinion that the seizure being illegal, the complainant is entitled to be compensated for the period from 4.1.2002 to 26.2.2002 for 53 days and from 18.3.2003 to 14.6.2003 for 88 days i.e., for 141 days @ Rs. 3,500/- per day. Though the complainant claimed an amount of Rs. 1,11,670/- on the ground that he had paid excess, viz. as against Rs.
6,64,675/-, he paid Rs. 7,76,345/-, however, as we could see that the complainant did not pay the instalments by due dates. In fact, he himself agreed to pay penal charges for delayed payments vide Ex. B4. In the light of above facts, we are unable to award any amount under this head.
We reiterate that despite depositing the entire amount of Rs. 3,26,260/- which was deposited as per the orders of the Dist. Forum in I.A. No. 141/2003 in C.D. 214/2003, it did not release the vehicle. Considering the adamant attitude of the financier, we are of the opinion that compensation had to be awarded for the actions of the financier, which was illegal, arbitrary and criminal in nature. We award a compensation of Rs. 10,000/- which we feel reasonable and modest.
In the result the appeals are allowed in part. Consequently the complaints in C.D. No. 45/2002 and C.D. No. 214/2003 are allowed in part directing the respondent financer to pay Rs. 4,93,500/-
with interest @ 9% p.a., from the date of complaint in C.D. No. 214/2003 i.e., 10. 4. 2003 till the date of realization together with compensation of Rs. 10,000/-. The relief granted by the Dist. Forum as far as retention of the vehicle with the complainant, is confirmed. The respondent financier is directed to pay the costs awarded by Dist.
Forum, and also the costs in appeals quantified at Rs. 2,000/-. Time for compliance four weeks.
PRESIDENT LADY MEMBER Dt. 15. 12. 2008.