Allahabad High Court
Mahindra & Mahindra Financial Services ... vs State Of U.P. Thru. Prin. Secy. ... on 16 December, 2019
Equivalent citations: AIRONLINE 2019 ALL 2350
Author: Rajan Roy
Bench: Devendra Kumar Upadhyaya, Rajan Roy, Rajesh Singh Chauhan
HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH AFR Judgment reserved on:19.07.2019 Judgment delivered on:16.12.2019 Court No. - 10 Case :- MISC. BENCH No. - 4529 of 2018 Petitioner :- Mahindra & Mahindra Financial Services Ltd. Thru. Shahid Ans Respondent :- State Of U.P. Thru. Prin. Secy. Transport & Others Counsel for Petitioner :- Amol Kumar Counsel for Respondent :- C.S.C. Hon'ble Devendra Kumar Upadhyaya,J.
Hon'ble Rajan Roy,J.
Hon'ble Rajesh Singh Chauhan,J.
(Per : Rajan Roy, J.) The following questions have been referred for our consideration by a Division Bench of this Court vide reference order dated 24.05.2018 passed in Writ Petition No. 4529(M/B) of 2018; Mahindra & Mahindra Financial Services Ltd. Vs. State of U.P. through Principal Secretary, Transport & Others:-
"1. Whether in view of Sections 2(g), 2(h), 4, 9, 10, 12, 13, 14 and 20 of the Act, 1997 read with Sections 39, 50 and 51 of the Act, 1988 and other relevant provisions of the said enactments and the Rules of 1998 and 1989, a Financier of a motor vehicle/ transport vehicle in respect of which a hire-purchase, lease or hypothecation agreement has been entered, is liable to tax from the date of taking possession of the said vehicle under the said agreements, even if, its name is not entered in the Certificate of Registration or not? If not, who is liable in this regard?
2. Whether the judgments rendered in the case of Lakhimpur Finvest Company Ltd. (supra), Manish Mukhriya (supra) and Shri Prakash (supra) and/or the judgments rendered in the case of Amar Nath Chaubey (supra) and Shriram Transport Finance Company Limited (supra), lay down the law correctly on the issue framed as Question No. 1 ?"
The Court had issued notice to opposite party no. 4 but inspite of service being sufficient as per Rules of the Court no one has appeared before us to argue the matter on his behalf.
We have heard Shri Amol Kumar, learned counsel for the petitioner and Shri Amitabh Kumar Rai, learned Additional Chief Standing Counsel for the State.
Facts Although, we are not required to decide any factual issues involved in the writ petition nevertheless a brief narration of relevant facts would help in understanding the issues before us. Petitioner is the Financier who had extended a loan to opposite party no. 4 for purchase of a transport vehicle. The terms of loan were reduced in writing in form of an agreement dated 26.06.2012. It is not in dispute that the agreement involved hypothecation of the vehicle, thereby creating a charge in respect thereof in favour of the Financier as security for loan advanced. It is also not in dispute that said agreement contained a condition entitling the petitioner to take possession of the hypothecated vehicle in the event of default and also the right to sell it. Opposite party no. 4 defaulted in payment of loan amount. Accordingly, Petitioner-Financier took possession of the vehicle in question on 09.12.2014. Opposite party no. 4 informed the Registering Authority on 09.12.2014 about possession of the vehicle having been taken by Financier. Opposite party no. 4-registered owner had paid all taxes prior to the date of such possession. Tax in respect of the vehicle for the period 01.01.2015 to 31.12.2017 remained unpaid. Accordingly, a notice dated 06.07.2016 was issued to opposite party no. 4 i.e. registered owner, who, being aggrieved, filed a writ petition before this Court bearing No. 11147(M/B) of 2019; Jamil Ahmad Vs. State of U.P. challenging said notice on the ground that possession of the vehicle having been taken by the Financier he was not liable to pay tax for the period subsequent to such possession and it was the Finance Company which was under an obligation to pay the same. Writ Court, without issuing notice to the petitioner-Financier, who was a party therein, decided the petition vide judgment dated 22.05.2017 observing therein that it is not disputed by the learned counsel for the parties that controversy involved in the said writ petition is similar to the one decided in the case of Daya Shanker Yadav Vs. State of U.P. and Anr. reported in 2008(1) AWC 801 and is squarely covered by it and, accordingly, it disposed of the petition of opposite party no. 4 in terms of judgment in Daya Shanker Yadav' case (supra) by permitting the petitioner to submit a fresh representation before the Taxation Officer who was directed to take a decision thereon in terms of Para 28(1) of the judgment in Daya Shanker Yadav (supra). Petitioner, who is the Financier, was not heard in the said writ petition. Consequent to the above, a notice dated 06.01.2018 was issued to the petitioner-Financier under Rule 18(2) of the U.P. Motor Vehicles Taxation Rules, 1998 holding him liable to pay the tax due and it is this notice which is under challenge in the writ petition filed by the Financier out of which the instant reference has arisen for our consideration.
The vehicle in question is a public service vehicle as per Section 2(o) of the U.P. Motor Vehicles Taxation Act, 1997 read with Section 2(35) of the Motor Vehicles Motor Vehicles Act, 1988, therefore, it is a ''transport vehicle' within the meaning of Section 2(n) of the Act, 1997.
Contention of rival parties Contention of Shri Amol Kumar, learned counsel for the petitioner was that since transport vehicle in question was not registered in name of the petitioner-company and it continued to be registered in name of the borrower, therefore, he alone was responsible, and not the Company, for payment of any tax, additional tax and/or penalty. Fact that the vehicle had been possessed by the finance company on 09.12.2014 under a loan/hypothecation agreement was not relevant in this regard in view of Section 9(2) of the Act, 1997 and also in view of the fact that even as per definition of ''Owner' and ''Operator', it is the registered owner who is the ''Owner'. It was also his contention that mere taking of possession by the Financier is not relevant unless Certificate of Registration and other documents are also surrendered by the registered owner and vehicle is registered in its name, as, otherwise, finance company would not be able to either use the vehicle or sell it. He took us through various provisions of Section 2(g), 2(h), 4, 9, 10, 12, 13, 14, 20 and Section 37, 50 and 51 of the Act, 1988. He relied upon various decisions rendered in the case of Lakhimpur Finvest Company Ltd. Vs. State of U.P. and Ors. reported in 2005 (2) AWC 1608 All., Amar Nath Chaubey Vs. State of U.P. and Ors. rendered in Writ Tax No. 521 of 2017, Manish Mukhriya Vs. State of U.P. reported in 2015 (4) ALJ 248, Sri Prakash Vs. State of U.P. and Ors. rendered in Writ Tax No. 41 of 2016, Radhika Prasad Vs. State of U.P. and Ors. rendered in Writ Petition No. 333 (M/B) of 2015, Sriram Transport Finance Company Ltd. Vs. State of U.P. and Ors. rendered in Writ Tax No. 217 of 2017, HDFC Bank Ltd. Vs. Reshma and Ors. reported in 2013 (3) SCC 679, Purnya Kala Devi Vs. State of Assam and Anr. reported in 2014 (4) SCC 142, Naveen Kumar Vs. Vijay Kumar and Ors. reported in 2018 (3) SCC 1. His contention was that it is the registered owner who was liable to pay tax even for the period subsequent to the date of taking possession by the Financier till the vehicle was got registered in the name of the Financier. It was also his contention that for the period prior to such possession also it was the registered owner who was responsible to pay tax.
On the other hand Shri Amitabh Kumar Rai, learned Additional Chief Standing Counsel appearing for the State also took us through various provision of the Act, 1997 as referred hereinabove, especially Section 9(2), 9(3), 13 and 20. He contended that Section 9(2) was not attracted in the present case as it did not involve transfer of vehicle. He relied upon decision of the Supreme Court in the case of Purnya Kala Devi (supra), wherein, definition of ''Owner' contained in Section 2(30) of the Act, 1998, similar to the definition in Section 2(h) of the Act, 1997, was considered and it was held that person in possession and control of the vehicle under an agreement of lease, hypothecation or hire-purchase would be the owner. Based on it he contended that finance company having taken possession of the vehicle on 09.12.2014 was liable to tax from date of such possession, it being the owner, as, after such possession the registered owner was neither in possession nor in control of the vehicle and the fact that he was the registered owner or had a permit in his name, was irrelevant. In this regard he also relied upon definition of ''Operator' in Section 2(g) of the Act, 1997 which according to him supported his contention. He referred to provisions of Section 13 of the Act, 1997 to contend that after having taken possession of the transport vehicle, petitioner-Financier should have submitted a declaration in Form-A as per Rule 7 of the Rules, 1998 and if it failed to do so it can not take any advantage of its lapse. In this context he also contended that if the petitioner-Financier claims that the vehicle is not in use as such no tax is required to be paid, then it had to take recourse to Section 12 of the Act, 1997.
With reference to Section 20 of the Act, 1997 Shri Rai contended that Section 20 of the Act, 1997 provides for recovery of tax/additional tax/ penalty as arrears of land revenue. Section 20(3) of the Act, 1997 provides that the Taxation Officer shall raise a demand in the form as may be prescribed, from the ''Owner' or ''Operator', as the case may be, for arrears of tax and additional tax and penalty of each year, which shall also include arrears of tax/ additional tax/ penalty, if any, of the preceding years. Section 20(3) is the only provision requiring the Taxation Officer to raise a demand for payment of taxes and penalty. It is so, because the liability is already fixed on the ''Owner' or ''Operator' to make a declaration in the prescribed form and to pay taxes according to the declaration as per Section 13 of the Act, 1997 read with Rule 7 and 8 of the Rules, 1998. Rule 18 (1) of the Rules, 1998 envisages a situation when the ''Owner' or the ''Operator' has not made any declaration under Section 13 of the Act, 1997 and in such a situation the Taxation Officer on receiving information shall require the concerned person to file declaration in Form ''A' (as provided under rule 7) and may further serve upon the person a special notice in Form ''E'. The notice in Form ''E' requires filing of declaration and also to pay the tax due within 15 days from the date of service of the notice, meaning thereby, that the person not filing the declaration under Section 13 of the Act, 1997 is given a notice under rule 18(1) by the Taxation Officer for filing a declaration and to pay the taxes which are due, within 15 days. The notice under rule 18(1) also does not postulate determination of taxes by the Taxation Officer, but, it requires payment of taxes which are due as per the declaration to be filed in pursuance to the notice in Form ''E'.
Section 20(3) of the Act, 1997 read with rule 18(2) and (3) envisages a situation when despite service of notice under rule 18(1) or in case of default of owner operator in payment of taxes despite making declaration under Section 13, the Taxation Officer is required to raise demand in the prescribed Form E-1. Form E-1 requires the Taxation Officer to raise a specific demand with respect to tax/ additional tax and penalty and hence, while issuing notice under Section 20(3) and raising a demand in ''Form E-1', the Taxation Officer has to determine the liability to tax and penalty.
It was further submitted that in a case where a declaration is filed under Section 13, the Taxation Officer under Section 20(3) is in a position to raise demand for each year, otherwise, in a case where no such declaration is filed, the demand can be raised on receiving information as provided under rule 18(1) of the Rules, 1998. Section 20(3) of the Act, 1997, thus, provides for raising of a demand from the ''Owner' or ''Operator, determining their liability, as the case may be, which means that the Taxation Officer while raising a demand has to fix the liability of payment of tax under the scheme of the Act, 1997 otherwise, the definition of ''Operator' or ''Owner' in the Act, 1997 as in the manner defined may have no relevancy. It was submitted that thus, while raising a demand under Section 20(3), Taxation Officer is required to fix liability of the person liable to pay the tax for the period it is due.
According to him Section 50 of the Act, 1988 relates to transfer of ownership of motor vehicle which does not get attracted in the present case and the relevant provision which is attracted is Section 51 relating to motor vehicles under hypothecation/lease/hire-purchase agreement. In this regard he contended that Petitioner-finance company did not take any steps in terms of Section 51(5), as such, it is not open for it to say that unless the Financier becomes the registered owner it is not liable to pay taxes, specially as, being in possession of the vehicle, a Financier is liable to pay such tax and penalty, if any, for the period vehicle is in its possession.
In the context of Section 9(3) he contended that the expression ''jointly and severally' for the purpose of fixing liability of taxes and penalty used in Section 9(3) of the Act, 1997 connotes that the owner and operator are liable for payment of tax to the extent of their liability, however, the State Government is authorized to recover the liability of taxes from either of them. However, the Taxation Officer while raising a demand for payment of taxes and penalty under Section 20(3) has to determine the liability of each separately. Section 20(3) of the Act, 1997 categorically provides that the Taxation Officer shall raise a demand in the form as may be prescribed from the owner or operator, as the case may be, meaning thereby that the Taxation Officer has to determine the liability of each separately and raise a demand accordingly, however, recovery by the State Government can be made from either of them. Section 13 and 20 of the Act, 1997 read with rule 7, 8 and 18 of the Rules, 1998 also postulate raising a demand separately from the owner/operator. In the present case, it is not disputed that by virtue of definition of the term ''operator' and ''owner' in the Act, 1997 it is the petitioner-company which is solely liable for payment of tax from the date of taking possession of the vehicle. He submitted that none of the decisions relied upon by learned counsel for the petitioner supported the petitioner-Financier's case. Section 9(2) of the Act, 1997 is not attracted in a case where the vehicle after possession by the Financier is not transferred. It is attracted only when the vehicle is transferred by the registered owner or by the Finance Company after possession. In Amar Nath Chaubey's case (supra) Section 9(3) of the Act, 1997 was not taken into consideration. In Kamil Hussain's case (supra) Section 51(5) of the Act, 1988 as well as Section 9(3) of the Act, 1997 were not taken into consideration. He relied upon the decisions rendered in the case of Purnya Kala Devi (supra), Manish Mukhriya (supra), Lakhimpur Finvest Company Ltd. Vs. State of U.P. and Ors.; 2011 (29) LCD 2601, Lakhimpur Finvest Company Ltd. (supra), Shriram Transport Finance Company Ltd. (supra), Khenyei Vs. New India Assurance Company Ltd. and Ors.; 2015 (9) SCC 273 and J. Jeyasingh Vs. Deputy Commercial Tax Officer; 1993 Legal Eagle 837.
Discussion on Question No. 1U.P. Motor Vehicles Taxation Act, 1997 (hereinafter referred to as ''the Act, 1997') is a Taxing Statute which as per its long title provides for imposition of tax and additional tax in the State of Uttar Pradesh on motor vehicles engaged in transport of passengers and goods for hire. Motor vehicles to which it applies, are regulated by an enactment of Parliament known as the Motor Vehicles Act, 1988 (hereinafter referred to as ''the Act, 1988'). Rules known as Central Motor Vehicles Rules, 1989 (hereinafter referred to as ''the Rules, 1989) have been made by the Central Government, under the Act, 1988. U.P. Motor Vehicles Rules, 1998 (hereinafter referred to as ''the Rules, 1998) have also been made by the State Government under the Act, 1988.
Before referring to provisions of the Act, 1997 it would be fruitful to refer to relevant provisions of the Act, 1988 especially those relating to registration of motor vehicles as contained in Chapter-IV and some of the definitions contained in Chapter-I. The Act, 1988 and Rules, 1989 Section 39 of the Act, 1988 prohibits use and driving of any motor vehicle in any public place or any other place unless the vehicle is registered in accordance with Chapter- IV of the Act, 1988. Section 40 obligates every owner of a motor vehicle to get it registered in terms thereof.
An application for registration of a vehicle is required to be moved under Section 41 by or on behalf of the owner of a motor vehicle. As per Rule 47 of the Rules, 1989 an application for registration of a motor vehicle is to be made in Form-20 to the Registering Authority and it should be accompanied by the documents mentioned in the said Rule including a Sale Certificate in Form-21. At Serial No. 1 of Form-20 full name of the person to be registered as registered owner is required to be mentioned. At the bottom there is a ''Note' wherein it is to be mentioned as to whether the motor vehicle is subject to hire-purchase agreement/lease agreement or hypothecation, with details of the Financier with whom such agreement is entered. After these details the Financier has to put his signature.
Form-21 i.e. the Sale Certificate also contains a stipulation as to whether the vehicle is held under an agreement of hire-purchase/lease/ hypothecation, if so, the person with whom such agreement has been entered.
On completion of formalities in terms of Section 41 of the Act, 1988 read with Rule 48 of the Rules, 1989, the Registering Authority is required to issue to the owner of the motor vehicle a Certificate of Registration in Form-23 which contains name of the registered owner and at the bottom there is a ''Note' with regard to the motor vehicle being subject to hire-purchase/lease/hypothecation agreement and the Financier with whom such agreement has been entered, if it is so. Below these details, the specimen signature of the Financier has to be affixed. This is in keeping with the requirement of Section 51(1) and (2). Similar provision exists in Section 43(3) for temporary certificate of registration.
Thus, the name of the Financier is not entered in the Certificate of Registration as the registered owner. It is the name of the hirer, lessee or hypothecator which is mentioned as registered owner where the vehicle is subject to such agreement.
Section 50 deals with action to be taken by the transferor and transferee consequent to transfer of ownership of a motor vehicle for recording transfer of ownership in the Certificate of Registration by the registering authority. This is required when the motor vehicle changes hands due to sale, or inheritance or purchase in public action conducted by the Government. It lays down penal consequences for non reporting of such transfer. The Rules corresponding to Section 50 are Rules 55, 56 and 57 of the Rules, 1989.
Section 50 is as under:-
"50. Transfer of ownership.--(1) Where the ownership of any motor vehicle registered under this Chapter is transferred,--
(a) the transferor shall,--
(i) in the case of a vehicle registered within the same State, within fourteen days of the transfer, report the fact of transfer, in such form with such documents and in such manner, as may be prescribed by the Central Government to the registering authority within whose jurisdiction the transfer is to be effected and shall simultaneously send a copy of the said report to the transferee; and
(ii) in the case of a vehicle registered outside the State, within forty-five days of the transfer, forward to the registering authority referred to in sub-clause (i)--
(A) the no objection certificate obtained under section 48; or (B) in a case where no such certificate has been obtained,-- (I) the receipt obtained under sub-section (2) of section 48; or
(II) the postal acknowledgment received by the transferee if he has sent an application in this behalf by registered post acknowledgment due to the registering authority referred to in section 48, together with a declaration that he has not received any communication from such authority refusing to grant such certificate or requiring him to comply with any direction subject to which such certificate may be granted;
(b) the transferee shall, within thirty days of the transfer, report the transfer to the registering authority within whose jurisdiction he has the residence or place of business where the vehicle is normally kept, as the case may be, and shall forward the certificate of registration to that registering authority together with the prescribed fee and a copy of the report received by him from the transferor in order that particulars of the transfer of ownership may be entered in the certificate of registration.
(2) Where--
(a) the person in whose name a motor vehicle stands registered dies, or
(b) a motor vehicle has been purchased or acquired at a public auction conducted by, or on behalf of, Government, the person succeeding to the possession of the vehicle or, as the case may be, who has purchased or acquired the motor vehicle, shall make an application for the purpose of transferring the ownership of the vehicle in his name, to the registering authority in whose jurisdiction he has the residence or place of business where the vehicle is normally kept, as the case may be, in such manner, accompanied with such fee, and within such period as may be prescribed by the Central Government.
(3) If the transferor or the transferee fails to report to the registering authority the fact of transfer within the period specified in clause (a) or clause (b) of sub-section (1), as the case may be, or if the person who is required to make an application under sub-section (2) (hereafter in this section referred to as the other person) fails to make such application within the period prescribed, the registering authority may, having regard to the circumstances of the case, require the transferor or the transferee, or the other person, as the case may be, to pay, in lieu of any action that may be taken against him under section 177 such amount not exceeding one hundred rupees as may be prescribed under sub-section (5):
Provided that action under section 177 shall be taken against the transferor or the transferee or the other person, as the case may be, where he fails to pay the said amount.
(4) Where a person has paid the amount under sub-section (3), no action shall be taken against him under section 177.
(5) For the purposes of sub-section (3), a State Government may prescribe different amounts having regard to the period of delay on the part of the transferor or the transferee in reporting the fact of transfer of ownership of the motor vehicle or of the other person in making the application under sub-section (2).
(6) On receipt of a report under sub-section (1), or an application under sub-section (2), the registering authority may cause the transfer of ownership to be entered in the certificate of registration.
(7) A registering authority making any such entry shall communicate the transfer of ownership to the transferor and to the original registering authority, if it is not the original registering authority."
Rule 55 of the Rules, 1989 which is relevant, is as under:-
"55. Transfer of ownership.- (1) Where the ownership of a motor vehicle is transferred, the transferor shall report the fact of transfer in Form 29 to the registering authorities concerned in whose jurisdiction the transferor and the transferee reside or have their places of business.
(2) An application for the transfer of ownership of a motor vehicle under sub-clause (z) of clause (a) of sub-section (1) of section 50 shall be made by the transferee in Form 30, and shall be accompanied by--
(i) the certificate of registration;
(ii) the certificate of insurance; and
(iii) the appropriate fee as specified in rule 81.
(3) An application for transfer of ownership of a motor vehicle under subclause (ii) of clause (a) of sub-section (1) of section 50 shall be made by the transferee in Fonn 30 and shall, in addition to the documents and fee referred to in sub-rule (2), be accompanied by one of the following documents, namely:--
(a) a no objection certificate granted by the registering authority under subsection (3) of section 48; or
(b) an order of the registering authority refusing to grant the no objection certificate under subsection (3) of section 48; or (c) where the no objection certificate or the order, as the case may be, has not been received, a declaration by the transferor that he has not received any such communication together with--
(i) the receipt obtained from the registering authority under subsection (2) of section 48; or
(ii) the postal acknowledgement received from the registering authority where the application for no objection certificate has been sent by post."
Transfer of ownership under Section 50(a)(i) and (ii) read with Rule 55 also covers a transfer of ownership of a vehicle by the borrower with consent of the Financier to a third person free from encumbrances as is evident from Form 29 and 30.
Transfer of ownership of a motor vehicle is not dependent upon compliance of Section 50. It is complete when ingredients of transfer as prescribed in law are satisfied. In case of Sale such transaction is regulated by the Sale of Goods Act. Non compliance of Section 50 merely makes the transferor or transferee, as the case may be, liable to penal action under the Act, 1988 but it does not avoid liability to tax etc. nor does it make the transfer invalid or void. Section 50 (Old Section 31 of the Act, 1939) is attracted only as a consequence of such transfer of ownership of motor vehicle.
A separate and special provision has been made regarding motor vehicles subject to hire-purchase, lease or hypothecation agreement and transactions based thereon, in Section 51. Rules corresponding to it are Rule 60 and 61 of the Rules, 1989.
Section 51 is as under:-
"51. Special provisions regarding motor vehicle subject to hire-purchase agreement, etc.-- (1) Where an application for registration of a motor vehicle which is held under a hire-purchase, lease or hypothecation agreement (hereafter in this section referred to as the said agreement) is made, the registering authority shall make an entry in the certificate of registration regarding the existence of the said agreement.
(2) Where the ownership of any motor vehicle registered under this Chapter is transferred and the transferee enters into the said agreement with any person, the last registering authority shall, on receipt of an application in such form as the Central Government may prescribe from the parties to the said agreement, make an entry as to the existence of the said agreement in the certificate of registration and an intimation in this regard shall be sent to the original registering authority if the last registering authority is not the original registering authority.
(3) Any entry made under sub-section (1) or sub-section (2), may be cancelled by the last registering authority on proof of the termination of the said agreement by the parties concerned on an application being made in such form as the Central Government may prescribe and an intimation in this behalf shall be sent to the original registering authority if the last registering authority is not the original registering authority.
(4) No entry regarding the transfer of ownership of any motor vehicle which is held under the said agreement shall be made in the certificate of registration except with the written consent of the person whose name has been specified in the certificate of registration as the person with whom the registered owner has entered into the said agreement.
(5) Where the person whose name has been specified in the certificate of registration as the person with whom the registered owner has entered into the said agreement, satisfies the registering authority that he has taken possession of the vehicle from the registered owner owing to the default of the registered owner under the provisions of the said agreement and that the registered owner refuses to deliver the certificate of registration or has absconded, such authority may, after giving the registered owner an opportunity to make such representation as he may wish to make (by sending to him a notice by registered post acknowledgment due at his address entered in the certificate of registration) and notwithstanding that the certificate of registration is not produced before it, cancel the certificate and issue a fresh certificate of registration in the name of the person with whom the registered owner has entered into the said agreement:
Provided that a fresh certificate of registration shall not be issued in respect of a motor vehicle, unless such person pays the prescribed fee:
Provided further that a fresh certificate of registration issued in respect of a motor vehicle, other than a transport vehicle, shall be valid only for the remaining period for which the certificate cancelled under this sub-section would have been in force.
(6) The registered owner shall, before applying to the appropriate authority, for the renewal of a permit under section 81 or for the issue of duplicate certificate of registration under sub-section (14) of section 41, or for the assignment of a new registration mark under section 47, or removal of the vehicle to another State, or at the time of conversion of the vehicle from one class to another, or for issue of no objection certificate under section 48, or for change of residence or place of business under section 49, or for the alteration of the vehicle under section 52, make an application to the person with whom the registered owner has entered into the said agreement, (such person being hereafter in this section referred to as the financier) for the issue of a no objection certificate (hereafter in this section referred to as the certificate).
Explanation.--For the purposes of this sub-section and sub-sections (8) and (9), "appropriate authority" in relation to any permit, means the authority which is authorised by this Act to renew such permit and, in relation to registration means the authority which is authorised by this Act to issue duplicate certificate of registration or to assign a new registration mark.
(7) Within seven days of the receipt of an application under sub-section (6) the financier may issue, or refuse, for reasons which shall be recorded in writing and communicated to the applicant, to issue, the certificate applied for, and where the financier fails to issue the certificate and also fails to communicate the reasons for refusal to issue the certificate to the applicant within the said period of seven days, the certificate applied for shall be deemed to have been issued by the financier.
(8) The registered owner shall, while applying to the appropriate authority for the renewal of any permit under section 81, or for the issue of a duplicate certificate of registration under sub-section (14) of section 41, or while applying for assignment of a new registration mark under section 47, submit with such application the certificate, if any, obtained under sub-section (7) or, where no such certificate has been obtained, the communication received from the financier under that sub-section, or, as the case may be, a declaration that he has not received any communication from the financier within the period of seven days specified in that sub-section.
(9) On receipt of an application for the renewal of any permit or for the issue of duplicate certificate of registration or for assignment of a new registration mark in respect of a vehicle which is held under the said agreement, the appropriate authority may, subject to the other provisions of this Act,--
(a) in a case where the financier has refused to issue the certificate applied for, after giving the applicant an opportunity of being heard, either--
(i) renew or refuse to renew the permit, or
(ii) issue or refuse to issue the duplicate certificate of registration, or
(iii) assign or refuse to assign a new registration mark;
(b) in any other case,--
(i) renew the permit, or
(ii) issue duplicate certificate of registration, or
(iii) assign a new registration mark.
(10) A registering authority making an entry in the certificate of registration regarding--
(a) hire-purchase, lease or hypothecation agreement of a motor vehicle, or
(b) the cancellation under sub-section (3) of an entry, or
(c) recording transfer of ownership of motor vehicle, or
(d) any alteration in a motor vehicle, or
(e) suspension or cancellation of registration of a motor vehicle, or
(f) change of address, shall communicate by registered post acknowledgment due to the financier that such entry has been made.
(11) A registering authority registering the new vehicle, or issuing the duplicate certificate of registration or a no objection certificate or a temporary certificate of registration, or issuing or renewing, a fitness certificate or substituting entries relating to another motor vehicle in the permit, shall intimate the financier of such transaction.
(12) The registering authority where it is not the original registering authority, when making entry under sub-section (1) or sub-section (2), or cancelling the said entry under sub-section (3) or issuing the fresh certificate of registration under sub-section (5) shall communicate the same to the original registering authority."
Rule 60 and 61 of the Rules, 1989 are as under:-
"60. Endorsement of hire-purchase agreements, etc.-An application for making an entry of hire-purchase, lease or hypothecation agreement in the certificate of registration of a motor vehicle required under sub-section (2) of section 51 shall be made in Form 34 duly signed by the registered owner of the vehicle and the financier and shall be accompanied by the certificate of registration and the appropriate fee as specified in rule 81."
"61. Termination of hire-purchase agreements, etc.- (1) An application for making an entry of termination of agreement of hire purchase, lease or hypothecation referred to in sub-section (3) of section 51 shall be made in Form 35 duly signed by the registered owner of the vehicle and the financier, and shall be accompanied by the certificate of registration and the appropriate fee as specified in rule 81.
(2) The application for the issue of a fresh certificate of registration under sub-section (5) of section 51 shall be made in Form 36 and shall be accompanied by a fee as specified in rule 81.
(3) Where the registered owner has refused to deliver the certificate of registration to the financier or has absconded then the registering authority shall issue a notice to the registered owner of the vehicle in Form 37."
Section 51(1) requires that, where the application is for registration of a motor vehicle held under any of the agreements referred above, the registering authority shall make an entry in the Certificate of Registration regarding the existence of said agreement. Sub-section 2 of Section 51 relates to a situation where ownership of any motor vehicle registered under Chapter-IV of the Act, 1988 is transferred and the transferee enters into a hire-purchase, lease or hypothecation agreement with any person subsequent to such registration and in such an eventuality the application as mentioned in Rule 60 of the Rules, 1989 is required to be made in Form-34 which should be duly signed by the registered owner of the vehicle and the Financier. Sub-section 3 of Section 51 relates to cancellation of entry made under Sub-section (1) and (2) on proof of termination of such agreement obviously on satisfaction of the conditions of such agreement. The result is striking off the ''Note' in the Certificate of Registration regarding the vehicle being the subject of such agreement on an application being filed in terms of Rule 61(1) in Form- 35 which is as under:-
"FORM -35 [See Rule 51(1)] Notice of termination of an agreement of Hire-Purchase/Lease/Hypothecation (To be made in duplicate and in triplicate where the original Registering Authority is different, the duplicate copy and the triplicate copy with the endorsement of the Registering Authority to be returned to the Financier and Registering Authority simultaneously on making the termination entry in the Certificate of Registration and Form 24).
To The Registering Authority We hereby declare that the agreement of Hire-Purchase/Lease/Hypothecation entered into between us has been terminated. We, therefore, request that the note endorsed in the Certificate of Registration of Vehicle No............in respect of the said Agreement between us be cancelled.
The Certificate of Registration together with the fee is enclosed.
Date.................. Signature or thumb impression of Registered owner Date................... Signature of the Financier with official seal and address *Strike out whichever is inapplicable.
Office endorsement Ref. Number...........................Office of the...................... The cancellation of the entry of an agreement as requested above is recorded in this office Registration record in Form 24 and Registration Certificate on .......................(date).
Date................ Signature of Registering Authority To The Financier ................................................ ................................................ The Registering Authority ..................................... .....................................
(To be sent to both the above parties by Registered Post Acknowledgment Due) Specimen signature of the Financier are to be obtained in original application for affixing and attestation by the Registering Authority with his office Seal in Forms 23 and 24 in such a manner that the part of impression of seal or stamp and attestation shall fall upon each signatures.
1. 2."
Sub-section 4 of Section 51 prohibits any entry regarding transfer of ownership of a motor vehicle held under above-mentioned agreements without written consent of the ''Financier'. This provision by itself does not bar an otherwise valid transfer nor does it invalidate such transfer.
Sub-section 5 of Section 51 deals with a situation where the ''Financier' takes possession of the vehicle from the registered owner owing to default of the latter under provisions of the agreement and registered owner refuses to deliver the Certificate of Registration or has absconded. In this situation if the Financier satisfies the Registration Authority about existence of these facts then such authority can cancel the Certificate and issue a fresh Certificate of Registration in the name of the ''Financier' in terms of the said provision. Though the word ''Financier' has not been used as such in Sub-section (5), description of the person referred therein is of the ''Financier' as defined in Rule 2(d) of the Rules, 1998. Corresponding Rule in this regard is Rule 61(2), which has already been quoted earlier. The relevant Forms in this regard are Form 36 and 37 which are as under:-
"FORM-36 [See Rule 61(2)] Application for issue of a fresh Certificate of Registration in the name of the Financier To The Registering Authority .........................................
I/We....................................(financier) have taken possession of motor vehicle No...............make............model............owing to the default of the Registered owner................... (name) ............(full address) under the provisions of the agreement of hire-purchase/lease/hypothecation:
*(1) The certificate of registration of the said vehicle is surrendered herewith.
* (2) The registered owner has refused to deliver the certificate of registration to me/ us.
*(3) The registered owner is absconding.
I/We request you to cancel the certificate and issue a fresh certificate of registration in my/ our name.
I/We enclose a fee of Rs..........................................
Date................ Signature of the financier Specimen signatures of the financier: 1......................... 2........................ Copy to the original registering authority * Strike out whichever is inapplicable." Form- 37 referable to Section 61(3) is as under:- "FORM-37 [See Rule 61(3)]
Notice to the Registered Owner of the Motor Vehicle to surrender the Certificate of Registration for cancellation and issue of fresh Registration Certificate in the name of the Financier (To be made in duplicate and duplicate copy to be sent to the financier simultaneously on issue of notice) Office of the Registering Authority.............................. Ref. Number............................ Dated...................... Shri/Smt. /Kumari .............................(Regd. Owner) is/are hereby informed that .........................(financier) has/have reported that he/they have taken possession of the Motor Vehicle bearing registration number....................covered by an agreement of Hire-purchase/Lease/Hypothecation, owing to your default under the provisions of the said agreement and that;
*(l) You have refused to deliver the Certificate of Registration to him/her/them.
*(2) You have absconded.
He/She/They have requested to cancel the Certificate of Registration and issue a fresh Certificate of Registration in his/her/their name.
You are, therefore, directed to surrender the Certificate of Registration of the said motor vehicle which has been retained by you inspite of your having lost the possession and hereby the ownership of the Motor Vehicle under section 2(30) and to send your representation in this regards, if any, to this office within seven days from the date of receipt of this notice by you, failing which a fresh Certificate of Registration will be issued in the name of the Financier, cancelling the Certificate of Registration held by you, in accordance with section 51(5).
Date............. Signature of Registering Authority *Strike out whichever is inapplicable. To
The Financier...................................................................
(To be sent by registered post acknowledgment due)"
Even at the cost of repetition it needs to be stated that section 51 is a special provisions dealing with motor vehicles subject to hire-purchase, lease and hypothecation agreement and is separate from Section 50 which deals with transfer of ownership by sale, inheritance or purchase in public auction.
We may also refer to definition of ''Owner' contained in Section 2(30) of the Act, 1988, which is as under:-
"(30) "owner" means a person in whose name a motor vehicle stands registered, and where such person is a minor, the guardian of such minor, and in relation to a motor vehicle which is the subject of a hire-purchase, agreement, or an agreement of lease or an agreement of hypothecation, the person in possession of the vehicle under that agreement;"
The term ''Financier' is defined in Rule 2(d) of the Central Motor Vehicle Rules, 1989 as under:-
"2. Definitions.- In these rules, unless the context otherwise requires,-
(a) ...............................
(b) ...............................
(c) .............................
(d) ''financier' means a person with whom the registered owner of a motor vehicle has entered into an agreement of hire-purchase, lease or hypothecation in respect of such vehicle and whose name is entered in the certification of registration as referred to in Form 34;"
This discussion of the provisions of the Act, 1988 would be relevant when we consider the liability to tax and penalty under the Act, 1997.
The Act, 1997 and Rules, 1998 Tax on such motor vehicles which are registered under the Act, 1988, is required to be paid as per the Act, 1997.
Section 4 of the Act, 1997 is the taxing provision. In respect of motor vehicles other than a transport vehicle a one-time tax is to be paid at the rate applicable in respect of such motor vehicles subject to the provisos to the said section. In respect of other vehicles, monthly, quarterly, or annual tax is required to be paid under Section 4(1-A) to (3), subject to the provisos to the said provisions.
Section 4-A deals with levy of special tax in respect of certain vehicles covered by temporary permit. Section 6 deals with additional tax on public service vehicle.
Section 4 of the Act, 1997 is as under:-
"4. Imposition of tax.- (1) Save as otherwise provided in this Act or the rules made thereunder, no motor vehicle other than a transport vehicle, shall be used in any public place in Uttar Pradesh unless a one-time tax at the rate applicable in respect of such motor vehicle, as may be specified by the State Government by Notification in the Gazettee has been paid in respect thereof:
Provided that in respect of an old motor vehicle instead of a one time tax, annual tax applicable to such motor vehicle as may be specified by the State Government by Notification in the Gazette may be paid.
Provided further that in respect of an old motor vehicle instead of a one-time tax, annual tax applicable to such motor vehicle, as specified in Part ''C' of the First Schedule may be paid.
Provided also that from the date of commencement of the Uttar Pradesh Motor Vehicles Taxation (Amendment) Act, 2014 no motor vehicles other than a transport vehicle shall be sued in any public place after the expiry of validity of registration under the Motor Vehicles Act, 1988 unless a green tax at the rate applicable to such motor vehicles as may be specified by notification, by the State Government has been paid in respect thereof.
(1-A) Save as otherwise provided in this Act or the rules made thereunder no three wheeler motor cab and goods carriage having gross vehicle weight not exceeding 3000 kilograms, shall be used in any public place in Uttar Pradesh unless yearly tax at such rate of such motor vehicle, as may be specified by the State Government by notification in the Gazette, has been paid in respect thereof:
Provided that in respect of a motor vehicle under this sub-section in lieu of yearly tax such amount of one time tax may be payable as specified by the State Government by notification in the Gazette.
(2) Save as otherwise provided by or under this Act no goods carriage other than those specified in sub-section (1-A), construction equipment vehicles, specially designed vehicles, motor cab (other than three wheeler motor cab), maxi cab and public service vehicles owned or controlled by the State Transport Undertaking, shall be used in any public place in Uttar Pradesh unless a quarterly tax at the rate applicable to such motor vehicle as may be specified by the State Government by notification in the Gazette, has been paid in respect thereof.
Provided that in respect of a motor vehicle under this sub-section instead of quarterly tax, an yearly tax at such rate as may be specified by the State Government may be payable.
(2-A) Save as otherwise provided by or under this Act no public service vehicle other than those referred in sub-section (1-A) and sub-section (2) shall be used in any public place in Uttar Pradesh unless a monthly tax at such rate as may be notified by the State Government is paid in respect thereof:
Provided that in respect a motor vehicle under this sub-section instead of monthly tax, a quarterly or an yearly tax at such rate as may be notified by the State Government may be payable.
(2-B) Where any reciprocal agreement relating to taxation of goods carried by road is entered into between the Government of Uttar Pradesh and any other State Government or a Union Territory, the levy of a tax under sub-section (1-A) or sub-section (2) shall, notwithstanding anything contained in the said sub-section, be in accordance with the terms and conditions of such agreement:
Provided that the tax so levied shall not exceed the tax which would otherwise been levied under the Act.
(3) Where any motor vehicle other than a transport vehicle is found plying as a transport vehicle, such tax therefore as may be notified by the State Government, shall be payable."
Various Sub-sections of Section 4 deal with various categories of vehicles. Sub-section 1 deals with motor vehicles other than transport vehicles. Sub-section (1-A) to (3) deals with transport vehicles of various categories such as three wheeler motor cab and goods carriage; construction equipment vehicles; specially designed vehicles; motor cab (other than three wheeler motor cab); maxi cab and public service vehicle owned and control by the State Transport Undertaking; public service vehicle other than those referred in Section (1-A) and Sub-section (2). Sub-section (2-B) and (3) relate to taxation of goods carrier and taxation of a motor vehicle other than a transport vehicle which is found plying as a transport vehicle.
Tax is in respect of a motor vehicle and is required to be paid before its use. If one keeps a vehicle liable to tax without paying tax or taking recourse to section 12 then he is liable to tax.
As per Sections 4, 9 and 10 of the Act, 1997 no motor vehicle including a transport vehicle can be used unless tax payable under Section 4 read with Section 9 of the said Act, has been paid. Such tax is required to be paid at the time of registration in the event of one-time tax, as also in the event of first payment of tax in cases where tax is to be paid on monthly, quarterly or annually basis, as the case may be.
Section 9 of the Act, 1997 deals with payment of tax and penalty. It reads as under:-
"9. Payment of tax and penalty.-(1) Subject to the provisions of Section 11 :
(i) the tax payable under sub-section (1) of Section 4 shall be paid at the time of the registration of the vehicle under the Motor Vehicles Act, 1988 :
Provided that in respect of an old motor vehicle, the tax shall be payable in advance on or before the fifteenth day of January in each year;
(ii) the tax payable under sub-section (1-A) of Section 4, shall be payable in advance for one year at the time of the registration of the vehicle under the Motor Vehicles Act, 1988 and thereafter on or before the fifteenth day of the first calendar month of each year next following;
(iii) the tax payable under sub-section (2) Section 4 shall be payable in advance for one quarter at the time of registration of the vehicle under the Motor Vehicles Act, 1988 and thereafter on or before the fifteenth day of the first calendar month of each quarter next following.
(iv) (a) the tax payable under sub-section (2-A) of Section 4 shall be payable in advance for one year calendar month at the time of the registration of the vehicle under the Motor Vehicles Act, 1988 and thereafter on or before the fifteenth day of each calendar month next following;
(b) the special tax payable under Section 4-A in respect of vehicles covered by temporary permit issued for the conveyance of passengers on special occasions, such as to and from fairs and religious gathering or to carry marriage parties, tourist parties or such other reserved parties shall be paid at the time of issuance of such temporary permit.
(2) When any person transfers a motor vehicle registered in his name to any other person, then without prejudice to the liability of the transferor in this regard, the transferee shall be liable to pay the arrears of tax, additional tax and penalty, if any, in respect of motor vehicle so transferred, due on or before the date of its transfer, as if the transferee was owner of the said motor vehicle during the period for which such tax, additional tax or penalty is due.
(3) Where the tax or additional tax in respect of a motor vehicle is not paid within the period specified in sub-section (1), in addition to the tax or the additional tax due, a penalty at such rate not exceeding the due amount as may be prescribed, shall be payable, for which the owner and the operator if any shall be jointly and severally liable.
(4) In computing the amount of tax, additional tax or penalty under this Act, the amount shall be rounded off to the nearest rupee, that is to say a fraction of a rupee being fifty paise or more shall be rounded off to the next higher rupee and any fraction less than fifty paise shall be ignored."
As per Section 9(1), Tax referred in Section 4(1) i.e. one-time tax in respect of motor vehicles other than transport vehicles, is payable at the time of registration of the vehicle under the Act, 1988 subject to the proviso contained therein. Tax under Sub-section 1 of Section 4-A- in respect of other vesicles (Transport Vehicles) referred therein is payable in advance for one year at the time of registration of the vehicle under the Act, 1988 and thereafter, on or before the 15th day of the first calendar month of each year next following. Such tax as referred in Sub-section (2) of Section 4 is payable in advance for one quarter similarly at the time of registration and, thereafter, on or before the 15th day of the first calendar month of each quarter next following. The tax referred under Sub-section (2-A) of Section 4 is accordingly payable for one calendar month at the time of registration and thereafter, on or before the 15th day of each calendar month next following. Special tax under Section 4-A is to be paid at the time of issuance of temporary permits.
Section 9(2) deals with liability to pay tax, additional tax and penalty due on or before the date of transfer of a motor vehicle which is transferred by the registered owner to any other person i.e. it deals with arrears of such tax and penalty pertaining to the period prior to such transfer. It does not deal with liability to tax due after the date of such transfer.
This provision makes the transferee liable to arrears of tax and penalty due on or before the date of transfer of a motor vehicle deeming him to be owner of the said motor vehicle for the period relating to which such tax and penalty is due, although, he was not actually the owner of it during such period. A legal fiction has thus been created treating the transferee to be the owner for the said period. This, however, is without prejudice to the liability of transferor in this regard.
In cases covered by transfers referred in Section 9(2) both the transferor (registered owner) and the transferee (deemed owner) are liable to pay tax, additional tax and penalty due on or before the date of its transfer as per option of the Taxation/Recovery Officer, leaving them to sort out their claims inter se, as per law.
The object of the provision is to facilitate smooth realization of tax/revenue by the State in a case of transfer of a vehicle. The rationale behind such provision is that whosoever purchases a vehicle should satisfy himself that all taxes etc. in respect thereof have been duly paid by the transferor. If not, he should ask him to do so before the transfer takes place. This secures the interest of revenue under the Act, 1997. However, if he does not do so, then, he buys not only the vehicle but also the liability to pay tax etc. even for the period prior to such transfer, knowingly.
The sine qua non of Section 9(2) is that it applies to transfer of a vehicle by the registered owner, to any other person. If the transfer is not by the registered owner and it is not to any other person then Section 9(2) will not apply. Secondly, it deals with liability to pay tax etc. due on or before the date of such transfer but not after such transfer.
The term ''Transfer' used in Section 9(2) is not defined under the Act, 1997 nor the Act, 1988 or the Rules made thereunder. In a case involving sale of a motor vehicle it would be regulated by the Sale of Goods Act.
The transfer envisaged under Section 9(2) is not dependent on compliance of Section 50 of the Act, 1988 and Rule 55 of the Rules, 1989 nor is it invalidated or incomplete for this reason, meaning thereby, even if such transfer is not recorded in the registration records and Certificate of Registration, it is still valid and consequences will follow in law accordingly. Reference may be made in this regard to the decisions reported in AIR 1986 AP 62;Madineni Kondaiah and others etc. Vs. Yaseen Fatima and others, etc., AIR 1980 SC 871;Panna Lal Vs. Chand Mal and Ors., 1992 Cr.L.J. 2476;Virendrakumar J. Handa Vs. Dilawarkhan Alij Khan and Ors., 1985 Cr.L.J. 951 (Para 17);V. Parakashan Vs. K.P. Pankajakshan and Anr., (1979) 16 ACC 274; Kalpnath Singh Vs. Sheo Nath Rai, 1977 MhLJ 656; Kishan Panduranj Kagde Vs. Baldev Singh Gian Singh and Ors. and (1999) 3 SCC 754; G. Govindan Vs. New Assurance Co. Ltd. and ors. (Para 14 and 18) wherein the Full Bench of Andhra Pradesh High Court in the case of Madineni Kondaiah (supra) has been approved. All these decisions relate to the Old Act, 1939 and Section 31 thereof but the observations and principles expounded apply to the New Act of 1988 also, as the provision is similar to Section 51 thereof.
This, however, does not take away the obligation under Section 40 of the Act, 1988 upon the owner to get the vehicle registered nor does it avoid other consequences including penal consequences which may follow under the Act, 1988 or the Act, 1997 for failure to do so.
What it means is that if a motor vehicle has been validly transferred, liability under Section 9(2) will get attracted irrespective of non compliance of Section 50 and Rule 55 referred above. Section 50 and Rule 55 are only a consequence of such transfer which is also evident from the language used therein.
Section 9(3) deals with non payment of tax or additional tax within the period specified under Section 1 of Section 9 and the liability in this regard. In such an eventuality it provides that in addition to the tax or the additional tax due, a penalty, as may be prescribed, shall be payable for which the owner and the operator, if any, shall be jointly and severally liable. The use of the words ''in addition to the tax or the additional tax due' followed by the words ''a penalty......' leaves no doubt that the provision not only makes the ''Owner' and ''Operator', if any, jointly and severally liable with regard to the ''penalty' but also with regard to ''tax or additional tax due'. The use of the words - ''where the tax or additional tax in respect of a motor vehicle is not paid within the period specified in Sub-section 1......' is indicative of the fact that the provision speaks of liability to pay arrears of tax and additional tax.
Thus, it is the ''Owner' and the ''Operator', if any, of a motor vehicle who is liable to pay the tax or the additional tax due within the period specified in Section 9(1) in respect of a motor vehicle, and the penalty, if any, as well as the arrears thereof in the event of its non payment within such period. If in respect of a vehicle there is an ''Owner' and an ''Operator', both, then they are jointly and severally liable.
Section 9(3) speaks of ''Owner' and ''Operator'. It does not speak of registered owner alone.
This is in consonance with Section 13 which requires the ''Owner' or "Operator' of every motor vehicle to make a declaration in respect of such vehicle and makes them liable to pay tax, accordingly. The procedural provision corresponding to Section 13 is contained in Rule 7.
Section 13 of the Act, 1997 reads as under:-
"13. Declaration by person keeping vehicle, for use.-(1)The owner or operator of every motor vehicle shall make a declaration in respect of it in the prescribed form and shall deliver the declaration within the prescribed time to the Taxation Officer and shall pay to him the tax or the additional tax which he appears by such declaration to be liable to pay in respect of such vehicle, as required by or under this Act.
(2) Where a motor vehicle is altered so as to render the owner or operator thereof liable to payment of enhanced tax or additional tax under Section 14, such owner or operator shall make, within the prescribed time, an additional declaration in the prescribed form showing the nature of the alteration made and shall deliver it to the Taxation Officer and shall pay to him the difference in tax or additional tax payable under Section 14."
Rule 7 of the Rules, 1998 as substituted by the notification dated 28.04.1999 reads as under:-
"7. Presentation of declaration.- (1) Every person who either on the commencement of the Act or thereafter, on becoming possessed of a motor vehicle which becomes liable to tax shall within fifteen days of such vehicle becoming so liable, complete, sign and deliver to the Taxation Officer the declaration in Form A. (2) A separate declaration shall be made in respect of every motor vehicle."
Rule 7 as substituted vide Notification dated 28.04.1999 requires every person who either on the commencement of the Act or thereafter, on ''becoming possessed' of a motor vehicle which becomes liable to tax, to complete, sign and deliver to the Taxation Officer the declaration in Form ''A' within 15 days of such vehicle becoming so liable.
Form-A referred in Rule 7 of the Rules, 1998 is as under:-
"FORM A [See Rule 7] Declaration by Owner of a Motor Vehicle under Section 13 Part I (To be completed by the owner of the motor vehicle) I, ............. residing at .............. hereby apply for issue of a token under Section 13 of the Uttar Pradesh Motor Vehicle Taxation Act in respect of the motor vehicle described below and for the registration of the said motor vehicle under the Motor Vehicles Act.
1. Full Name of owner..........son/daughter/wife/husband of......
2. Permanent Address..............................
3. Temporary address (if any) ................................
4. Year of manufacture .......................................
5. Engine Number or Motor number in respect of Battery operated vehicle ..................................
6. Chassis Number .....................................
7. Category of Vehicle ...............................
(If motorcycle, then with gear or without gear)
8. Type of vehicle -
(a) Non-transport vehicle (Motorcycle/Motor car/Omni/Bus/Tractor-trailer/Institutional Bus/Private service vehicle/Construction equipment vehicle/Specially designed vehicle.
9. Unladen weight ....................................
10. Laden weight .....................................
11. Seating capacity (including driver) ........................
12. Engine Capacity (c.c.) .....................................
13. Fuel used...................................................
14. Type and colour of body..................................
15. For transport vehicle only -
(a) front axle
(b) rear axle
(c) any other axle
(d) tandem axle
(e) number, description and size of tyre on each axle.
16. The Motor vehicle is -
(a) new vehicle
(b) ex-army vehicle
(c) imported vehicle
(d) migrated from other State.
17. Validity of insurance ..................(Enclose certificate, if any)
18. In case of exemption in tax, indicate it ...............(Enclose certificate)
19. Validity of permit, if any..........(Enclose certificate) I claim exemption from payment of the tax under rule............ and attach hereto proof of my claim.
I hereby declare that my name, address and other particulars described hereinabove are true.
Date......... Signature of the applicant (cut, which is not applicable) Part II (To be completed by the Taxation Officer)
Certified that the motor vehicle described above is exempted from tax under rule and that tax certificate has been issued on date...........
Or Certificate that according to the above declaration the tax payable on the motor vehicle described therein in Rs...........
Certified also that a sum of Rs.......... Has been paid as tax in respect of the said vehicle for the period ending........... and that, subject to the correctness of the above declaration, tax certificate has been issued to the applicant on date...........
Date............
Signature of Taxation Officer Region/Sub-region................
Part III (To be completed by the Registering Authority) Certified also that motor vehicle herein described has been registered under the Uttar Pradesh Motor Vehicles Rules, 1998 and that a Registration Certificate valid until............. Has been issued and that the registration number of the vehicle has been entered in the Certificate of Tax. Registration number of vehicle.................
Date............ Signature of Registering Authority Region/sub-region.................."
Thus, as per Section 13, the ''Owner' or ''Operator' of every motor vehicle is required to make a declaration in respect of it in Form A, deliver it within the prescribed time (as per Rule 7) to the Taxation Officer and pay to him Tax which he appears by such declaration to be liable to pay in respect of such vehicle as required by or under the Act, 1997.
Provisions of Section 13 and Rule 7 apply when any person comes into possession of a motor vehicle which becomes liable to tax, which will include a Financier in possession of such vehicle under a lease, hire-purchase or hypothecation agreement as also the borrower in such possession. This aspect shall be further dealt with hereinafter while considering Section 2(h) and 2(g) which define ''Owner' and ''Operator'.
The contents of Form-A are also indicative of the fact that it is imperative on the part of such person to get the vehicle registered in his name and submit such declaration. Its contents are to be read in consonance with the substantive provision contained in Section 13 read with Rule 7 and not in conflict with it.
Thus, tax under the Act, 1997 is on the vehicle and has to be paid before its use.
The tax payable is thus determined in terms of Section 4 read with Section 9 based on the aforesaid declaration under Section 13 read with Rule 7 depending upon the category of the vehicle and the use to which it is to be subjected.
Reference may also be made in this regard to Rule 18(1) and (2) according to which the Taxation Officer on receiving information that a person is keeping or operating a motor vehicle, may require him to furnish a declaration in Form- ''A' in respect thereof and may serve upon him at once a special notice in Form- ''E'. Rule 18(1) and (2) read as under:-
"18. Notice to owners or operators of Motor Vehicles.- (1) The Taxation Officer on receiving information that a person is keeping or operating a motor vehicle, may require him to complete, sign and deliver a declaration in Form ''A' in respect thereof, and may serve upon him at once a special notice in Form ''E'. Such notice may be sent to the person by registered post or may be served personally on him or if the service cannot be affected personally on him, on any adult male member of his family residing with him. If the notice cannot be served in the manner aforesaid, it may be served by affixing it to some conspicuous part of his place of residence or business, or in such other manner as the Taxation Officer may think fit.
(2) Nothing in this rule shall be deemed to absolve any person who keeps or operates a motor vehicle from the obligation imposed upon him by sub-section (1) of Section 13 and Rule 7 in respect of making a declaration in the event of no notice having been served."
Form- E is as under:-
"Form - E [See Rule 18] Notice to Owner of a Motor Vehicle To, ...........................
Address........................
Take notice that you are hereby required to fill up, sign and deliver to the undersigned the form of declaration enclosed in respect of every motor vehicle kept by you for use, and to pay the tax due on every such vehicle before the expiration of 15 days from the date of service of this notice.
Failure to deliver the declaration or to pay the constitutes an offence under Section 10 of the Uttar Pradesh Motor Vehicles Taxation Act.
Date..........20........
Signature of Taxation Officer"
Reference may also be made in this regard to Rule 9(3) of the Rules, 1998 which in the context of method of payment of tax mentions that every person who is required to make a declaration under Rule 7 or additional declaration under Rule 8 shall pay the tax due on the motor vehicle at the time of presenting the declaration in respect thereof. Rule 9(3) is as under:-
"9. Method of payment of tax.- (1).........
(2) Every person who is required to make a declaration under Rule 7 or additional declaration under Rule 8 shall pay the tax due on the motor vehicle at the time of presenting the declaration in respect thereof."
As already stated the ''person' required to make the declaration under Rule 7 or 8 has to be the one who has ''become possessed' of the motor vehicle as is mentioned in Rule 7 which will include a possession by the Financier under a hire-purchase, lease or hypothecation agreement as also such possession by the borrower. This aspect shall be further dealt with hereinafter.
Another provision which is relevant for our purpose is Section 20 which reads as under:-
"20. Recovery of tax.--(1) Arrears of any tax or additional tax or penalty payable under this Act shall be recoverable as arrears of land revenue.
(2) The tax, the additional tax and penalty payable under this Act shall be first charge on the motor vehicle including its accessories, in respect whereof it is due.
(3) The Taxation Officer shall raise a demand in the form as may be prescribed from the owner or operator, as the case may be, for the arrears of tax and additional tax and penalty of each year, which shall also include the arrears of tax, additional tax or penalty, if any, of preceding years."
The recovery envisaged under Section 20 therein is of arrears of tax, additional tax or penalty. These are recoverable as arrears of land revenue. The arrears of such tax as is mentioned in Section 20(3) include arrears for the preceding years. Thus, arrears can be of the same year and also of the preceding years.
The arrears of such tax are ''first charge' on the motor vehicle under Sub-section 2 of Section 20, meaning thereby, in the event of non payment of arrears of tax, the motor vehicle in respect to which the tax is payable can be attached or detained and put to sale so as to recover the dues as arrears of land revenue, as, this is one of the modes prescribed for recovery of arrears of land revenue.
Even as per Section 22(1) of the Act, 1997 if it is found that a motor vehicle has been or is being used without payment of tax, additional tax or penalty it can be detained under Section 22(1) and if the tax etc. due in respect thereof is not paid within forty-eight hours of its seizure, the Transport Commissioner, apart from other action under the said Act, can cause the vehicle to be sold by public auction in the manner prescribed and sale proceeds of such vehicle shall be adjusted towards the tax etc. which is due as per Section 22(3). Section 22 is as under:-
"22. Detention of a motor vehicle in case of non-payment of tax.- (1) Where an officer authorized by the State Government in this behalf, has reason to believe that a motor vehicle has been or is being used by a person without payment of tax, additional tax or penalty if any, he may seize and detain the a motor vehicle and for the purpose take, or cause to be taken, such steps as may be considered, by him necessary, for the safe-custody of the motor vehicle and, in particular, require the driver of such vehicle to convey it to the nearest police station or any other place specified by him :
Provided that the officer seizing the vehicle, shall, within forty-eight hours of such seizure, send a report of such seizure to the concerned Taxation Officer.
(2) A motor vehicle seized or detained under this section shall be released by the Taxation Officer immediately on payment of the tax, additional tax, penalty or other amount due for the non-payment whereof the vehicle was so seized or detained.
(3) Where the tax, additional tax, penalty or other amount due for the non-payment whereof a motor vehicle has been seized or detained under this section, is not paid under sub-section (2) within the period of forty-five days from the date of seizure or detention of the Vehicle, the Transport Commissioner may, without prejudice to any other action that may be taken under this Act, cause the vehicle to be sold by public auction in the manner prescribed and the sale proceeds of such vehicle shall be adjusted towards the tax, additional tax, the penalty or the other amount due in respect of such vehicle and the expenses, if any, of such auction and the balance, if any, shall be refunded to the owner of the operator of the vehicle."
Section 20(3) of the Act, 1997 is also in consonance with the provisions contained in Section 9(3), as, it obligates the Taxation Officer to raise a demand for tax etc. in the form as may be prescribed from the ''Owner' or ''Operator', as the case may be. Now, the words ''as the case may be' have been understood to mean ''depending upon the circumstances' or ''as the situation may be' or ''whichever is appropriate in the events which happen'. Reference may be made in this regard to the decision of the Supreme Court in the case of Subramaniam Shanmugham Vs. M.L. Rajendran and Ors. reported in (1987) 4 SCC 215.
Thus, the language used in Section 20(3) is also indicative of the fact that if in a given situation there is an ''Owner' as also an ''Operator' then the demand could be raised from either of them as their liability under Sub-section 3 of Section 9 is joint and several, however, in a given case, such as that of a ''motor vehicle other than a transport vehicle', where there is no operator, the Taxation officer will raise a demand from the owner alone. This is what the words ''as the case may be' mean and they convey the same meaning as is the consequence of use of the words ''if any' in Sub-section 3 of Section 9. The words ''as the case may be' are indicative of a scenario where there is an owner as also an operator or only an owner or an operator, and action to be taken under Section 20(3) accordingly. This is how we understand the provision contained in Section 20(3).
(Emphasis supplied by us) On similar lines the corresponding Rule to Section 20(3) is Rule 18(3) wherein also the Taxation Officer is required to send a notice under Sub-section (3) of Section 20 in Form E-1 to the owner or operator, as the case may be, of the vehicle.
Rule 18(3) records as under:-
"18. Notice to owners or operators of Motor Vehicles.- (1) ...............
(2) ...................
(3) The Taxation Officer, for arrears of tax or additional tax or penalty, shall send a notice under sub-section (3) of Section 20 in Form -1 to the owner or operator, as the case may be, of the vehicle. The notice shall be served in the manner prescribed under sub-rule (1)."
Form E- 1 is as under:-
"FORM E-1 Notice in case of dues on Motor Vehicles [See Rule 18(2)]
1. Name of the Registered Owner..........................
2. Full Address..........................................
The due tax/additional tax of vehicle no.........................has not been paid after............... an amount of Rs.................as tax/additional tax is due under Section 4/Section 6 of the Uttar Pradesh Motor Vehicles Taxation Act, 1997 and an amount of Rs.............as penalty is due under sub-section (3) of Section 9 of the aforesaid Act read with Rule 24 of the Uttar Pradesh Motor Vehicles Taxation Rules, 1998.
Therefore, a notice is, hereby, sent to you for payment of due amount/production of payment certificate (if already paid) within 15 days from the date of issue of this notice. If the due amount is not paid/payment certificate (if any) is not produced within the above prescribed time, the due amount shall be recovered as arrears of land revenue under the provisions of Section 20 of the aforesaid Act.
Date............ Signature of Taxation Officer Region/Sub-region....... Copy to Financer (if any) for information and necessary action. 1. Name of the Financer 2. Address.................. Date.............. Signature of Taxation Officer Region/Sub-region........."
Although, Section 20(3) refers to owner or operator, as the case may be, the notice issued under corresponding Rule 18(3) in Form-E-1 is addressed to the ''registered owner' obviously as the Registering Authority's/ Taxation Officer's records would contain his name.
Thus, even under Rule 18(3) there is a reference to liability of ''Owner' or ''Operator', as the case may be, as is referred in Section 20(3), which is tune with the use of the words ''Owner or Operator', if any, in Section 9(3).
This view is further fortified by a reading of Section 12 of the Act, 1997. Sub-section 1 of Section 12 speaks of ''any person' in the context of non use of vehicle and refund of tax relating to transport vehicles but in Sub-section 2 which applies to motor vehicles, including a transport vehicle, the words ''operator or, as the case may be, owner.......' have been used which leave no doubt that the provision will apply ''as the case may be', which means depending upon the circumstances, meaning thereby, depending whether in a given case there is an operator (as in the case of transport vehicle) or only an owner (as in the case of other vehicles) or both (Transport vehicles). While referring to a ''motor vehicle other than a transport vehicle' in Sub-section (5) only the word ''owner' has been used obviously as the Act, 1997 does not envisage an ''operator' in respect of such vehicles. Again in Sub-section 7 the words ''an operator of a transport vehicles' are used. In Sub-section 8, with reference to motor vehicle, which includes a transport vehicle, the words ''operator, or, as the case may be, the owner.......' have been used and the rationale behind it has already been explained earlier in the context of discussing Section 9(3) and 20(3). Corresponding Rule 22 of the Rules, 1998 however refers to the term ''owner' only. The rule however can not be read in conflict with the substantive provision contained in Section 12 and has to be read, understood and applied in consonance with it and not otherwise.
Under Section 9(3) it is the ''Owner' and the ''Operator', if any, of the motor vehicle who shall be jointly and severally liable. Likewise under Section 20(3) it is the ''Owner' or ''Operator', as the case may be, who can be proceeded for recovery of arrears of tax etc. Section 13 also refers to liability of ''Owner' or ''Operator' in this regard. Rule 7 and Rule 9(3) have also to be understood and applied accordingly. It is therefore imperative to consider the terms ''owner' and ''operator' as defined in the Act, 1997.
The term ''owner' has been defined in Section 2(h) of the Act, 1997 as under:-
"(h) "owner" in respect of motor vehicle means the person whose name is entered in the Certificate of Registration issued in respect of such vehicle, and where such vehicle is the subject of an agreement of hire purchase or lease or hypothecation, the person in possession of the vehicle under that agreement and where any such person is a minor, the guardian of such minor;"
The definition of ''Owner' applies to ''motor vehicles'. As the term ''motor vehicle' occurring in Section 2(h) of the Act, 1997 in the context of the definition of ''Owner' has not been defined in the Act, 1997 it takes within its sweep all motor vehicles irrespective of their sub-categories in view of Section 2(28) of the Act, 1988 read with Section 2(o) of the Act, 1997. It includes transport vehicles.
In the definition of ''Owner' in Section 2(30) of the Act, 1988, which has been quoted earlier, the words ''and in relation to a motor vehicle' have been used, whereas, in Section 2(h) of the Act, 1997 the words ''where such vehicle is' have been used in the context of a vehicle being under a hire-purchase, lease or hypothecation agreement. In Section 2(30) the opening line starts with the words ''unless the context otherwise requires' whereas, it is not so in Section 2(h). Except for these differences, which are not relevant in the context of the questions referred to us, the two definitions are similar.
The definition of ''owner' contained in Section 2(30) of the Act, 1988 came up for consideration before the Supreme Court in the case of Purnya Kala Devi Vs. State of Assam and Anr. report in (2014) 14 SCC 142 in the context of liability in an accident claim and the Supreme Court explained the provision and the intent of the legislature in this regard in Paragraph 16 as under:-
"The High Court failed to appreciate that at the relevant time the offending vehicle was under the requisition of Respondent No. 1 State of Assam under the provisions of the Assam Act. Therefore, Respondent No. 1 was squarely covered under the definition of "owner" as contained in Section 2(30) of the 1988 Act. The High Court failed to appreciate the underlying legislative intention in including in the definition of "owner" a person in possession of a vehicle either under an agreement of lease or agreement of hypothecation or under a hire-purchase agreement to the effect that a person in control and possession of the vehicle should be construed as the "owner" and not alone the registered owner. The High Court further failed to appreciate the legislative intention that the registered owner of the vehicle should not be held liable if the vehicle was not in his possession and control."
Thus, the Supreme Court while considering the provision of Section 2(30) took note of the underlying legislative intention in including in the definition of ''Owner' a person in possession of a vehicle under the agreements referred therein to the effect that a person in control and possession of the vehicle should be construed as the ''Owner' and not alone the registered owner. Thus, both were to be the owners but in the facts of the said case which related to a motor accident claim the person in possession and control of the vehicle was held liable.
As per Section 2(h) ''Owner' in respect of a motor vehicle is its registered owner and if such vehicle is the subject of an agreement of hire-purchase or lease or hypothecation, the person in possession thereof under that agreement is also its owner. Thus, the registered owner alone is not the owner. It depends upon the factual position, whether the vehicle is the subject of hire-purchase, lease or hypothecation agreement or not ? If it is, then the person in possession of such vehicle under that agreement would be the owner, irrespective of the fact whether his name is entered in the Certificate of Registration or not. If the vehicle is not the subject of such agreement it is the person whose name is entered in the Certificate of Registration who is the owner. The analogy is the same as in Purnya Kala Devi's case (supra), though, the context is different.
The intention of the Legislature is clear that the registered owner should not be held liable to tax etc. if the vehicle is not in his possession and control instead it is in the possession of someone else under the agreements referred hereinabove who would become its owner based on such possession, except of course if there are arrears of tax etc. for the period during which he was in possession and control.
The provision contained in Section 2(h) is in two parts. The first part refers to the registered owner, whereas, the second part refers to the person in possession under the agreements referred therein. There is no reference to ''registered owner' in the second part of Section 2(h). Thus, the person in possession under the second part even if he is not the registered owner, yet, he falls within the definition of ''Owner' as contained in Section 2(h). It does not require the person in possession of the vehicle under such agreements to be its registered owner also so as to qualify as ''Owner'. Further, possession under such agreement under Section 2(h) refers to actual possession of the vehicle whether it be of the borrower or Financier. This is how a similar definition contained in Section 2(30) of the Act, 1988 has been understood by the Supreme Court. Rule 7 of the Rules, 1998, as discussed earlier, needs to be seen in this regard. A contrary understanding of Section 2(h) by a Division Bench of this Court in Amar Nath Chaubey's case (supra) is, thus, incorrect.
Thus, the first part of section 2(h) applies to a scenario where there is no such agreement nor any possession under it and the second part applies where the vehicle is under such agreement and its possession is under such agreements, whether of the borrower or Financier.
Possession under such agreements as is referred in the second part of Section 2(h) does not mean only the possession of the ''Financier' consequent to a breach of agreement by the borrower based on the existence of a clause permitting such possession. It also covers possession of the vehicle by the borrower (registered owner) himself, if it is also under such agreement, which is possible, as, normally, such agreements are entered prior to purchase (except when they are entered subsequently as per Section 51(2) of the Act, 1988) and a reference to such agreement is made in the Sale Certificate in Form-21 referred in Rule 47(1)(a). Reference may be made in this regard to Form-21 as it indicates that it is to be issued by the Manufacturer/Dealer who delivers the vehicle to the purchaser with an endorsement thereon that the vehicle is held under an agreement of hire-purchase/ lease/hypothecation, therefore, the possession referred in the second part of Section 2(h) includes the possession of the borrower in the normal course under such agreement (who may also be the registered owner) and also the possession taken by the Financier consequent to breach of such agreements, as the case may be.
At this stage, it is necessary to clarify that in the definition of ''Owner' whether contained in Section 2(30) of the Act, 1988 or Section 2(h) of the Act, 1997, the reference in the first part of definition to the person whose name is entered in the Certificate of Registration or a person in whose name the motor vehicle has been registered refers to the registered owner and not the entry made in such Certificate with regard to the Financier as is mentioned in Section 41 of the Act, 1988 which has already been discussed earlier. Any other understanding of the said words would be incongruous to the object and scheme of the Act, the provision contained therein and would make it unworkable.
''Operator' is defined in Section 2(g) of the Act, 1997 as under:-
"(g) "operator" in respect of a transport vehicle means a person whose name is entered in the permit or in an authorisation certificate issued under the Uttar Pradesh Motor Vehicles (Special Provisions) Act, 1976, and where there is no such permit or authorisation certificate, the person whose name is entered in the Certificate of Registration in respect of such vehicle, and where the transport vehicle is the subject of a hire purchase agreement, the person in possession of the vehicle under that agreement and where any such person is a minor, the guardian of such minor;"
The definition of operator applies only to transport vehicles.
The term ''transport vehicle' is defined in Section 2(n) of the Act, 1997 to mean a goods carriage or a public service vehicle. Goods carriage is further defined in Section 2(d) of the said Act. Public service vehicle is not defined in the Act, 1997, therefore, in view of Section 2(0) of the said Act the meaning assigned to it under Section 2(35) is to be applied to the Act, 1997.
On a reading of Section 2(h), what comes out is that ''Operator', in respect of a transport vehicle, is the person whose name is entered in the Permit or Authorization Certificate. If not, then the person whose name is entered in the Certificate of Registration in respect of such vehicle and if such vehicle is the subject of a hire-purchase agreement then the person in possession of it under that agreement is the owner. This is based on the same analogy as referred in the context of Section 2(h). Thus, if the vehicle is under a hire-purchase agreement the person in possession of the vehicle under such agreement, who could be the borrower (registered owner) or the Financier, is the owner, otherwise it is the permit holder or authorization certificate holder and in its absence the registered owner who is the owner.
Although, under Section 66 of the Act, 1988 a permit is mandatory for using the vehicle as a transport vehicle, Section 2(g) covers a situation where there is no such permit, such as, in the case of illegal plying of a vehicle as a transport vehicle. Moreover, the registered owner and the permit holder may be two different persons, as such, this possibility has also been taken into account.
Noticeably, the third part of Section 2(g) is confined to a transport vehicle which is the subject of a hire-purchase agreement and does not extend to a transport vehicle which may be the subject of other two types of agreements referred in the definition of ''Owner' in Section 2(h) i.e. a lease or hypothecation.
The definition of operator in Section 2(4) of the Bombay Motor Vehicles (Taxation of Passengers) Act, 1958 which was considered by the Supreme Court in the case of State of Maharashtra and Ors. Vs. Sundaram Finance and Ors. reported in (1999) 9 SCC 1 is different from the definition of ''Operator' contained in Section 2(g) of the Act, 1997, therefore, reliance placed on the said decision by Shri Amol Kumar learned counsel for the petitioner, is misplaced.
Joint and Several liability of ''Owner' and Operator under Section 9(3) of the Act, 1997.
Having discussed the term ''Owner' and ''Operator' as appearing in the Act, 1997, their meaning and scope, we proceed to discuss their joint and several liability as prescribed in Section 9(3).
As per Section 9(3) the liability to pay tax, additional tax and penalty under the Act, 1997 is upon the owner and the operator, if any, jointly and severally.
Joint and several liability referred in Section 9(3) applies when there is an ''Owner' and ''Operator' both. It is only when both of them exist that the concept has any application, not otherwise. This is borne out from the use of the words ''if any' after the words ''Owner' and ''Operator' in Section 9(3), which means, ''if there is any such operator', as, the Legislature was conscious of the fact that the Act, 1997 did not envisage an ''Operator' in respect of ''motor vehicles other than transport vehicles', though it did so in respect of a ''Transport Vehicle'. Hence, the use of the words ''if any' in Section 9(3).
The Act, 1997 does not envisage an ''Operator' for the purposes of ''motor vehicles other than transport vehicles', as such, there is no question of joint and several liability in respect of such vehicles under Section 9(3) and it is the ''Owner' alone who would be liable.
This principle is thus restricted in its application to ''transport vehicles', as, the Act, 1997 envisages an ''Owner' and ''Operator' both, only in respect thereof as per Section 2(h) and Section 2(g).
Principle of ''joint and several liability' as applicable in the field of contract, Tort, taxation etc. has been applied statutorily through Section 9(3) of the Act, 1997. The rationale behind such a principle is to facilitate easy realization and recovery of tax. What if, one of them (owner or operator) is an insolvent? Hence, such a provision.
Reference may be made in this regard to Jowitt's Dictionary of English Law wherein the term ''Joint and Several' has been explained as under:-
"Joint and several. An obligation entered into by two or more persons is joint and several when each is liable severally and all are liable jointly. A liability may be imposed, whether by statute, contract or otherwise, on two or more persons jointly and severally; in which case, again, each is liable severally and all are liable jointly. For judicial and statutory constructions and definitions in different contexts see Stroud's Judicial Dictionary."
Same term has been explained in Black Law Dictionary as under:-
"joint and several, (Of liability, responsibility, etc.) apportionable at an adversary's discretion either among two or more parties or to only one or a few select members of the group; together and in separation."
The term Joint and Several liability has been explained in Advanced Law Lexicon as under:-
"Joint and several liability. A liability is said to be joint and several when the creditor may sue one or more of the parties to such liability separately or all of them together at his option"
When the liability is joint and several it is open to the claimant to claim relief against both or either one of them, may be, the softer target, as regards the entire claim and not merely his share, leaving the two who are jointly liable to work out there relative liability or responsibility. This is what is meant by liability being joint and several. This legal proposition is borne out from a reading of the decision of the Supreme Court in the case of Khenyei (supra) wherein the phrase ''jointly and severally liable', its purport and import came up for consideration. The decision of the Madras High Court in the case of J. Jeyasingh (supra) is also relevant in this regard.
Now, in a scenario involving ''transport vehicles', in respect to which, the Act, 1997 envisages two persons i.e. the owner and operator, liability to arrears of tax, additional tax and penalty being joint and several under Section 9(3) of the Act, 1997 as already discussed, considering the object and rationale behind such principle of joint and several liability and its incorporation by the Legislature in Section 9(3) of the Act, 1997, which is a taxing statute, either can be held liable for the entire liability irrespective of his/their share of the liability, leaving the parties to sort out and work out their relative and respective liabilities inter se, as per law.
As already stated, as per Section 20(3) read with Rule 18(3), the Taxation Officer is required to raise a demand in prescribed Form from the ''Owner' or ''Operator', as the case may be. No doubt the prescribed Form E-I is addressed to the registered owner but this, as stated earlier, is only on account of the fact that it is the registered owner alone who would be recorded in the records of the Registering Authority and Financier would only be mentioned in the ''Note' and there would be no mention of possession having been taken by the Financier unless intimation in this regard is given either by the registered owner or the Financier himself or otherwise but as and when such information is given by the concerned person, may be after issuance of notice to the registered owner or is otherwise received, the Taxation Officer would come to know about the aforesaid facts and would be at liberty to proceed against either the registered owner or the one in possession of the transport vehicle under an agreement of hire-purchase/lease/ hypothecation, as per his choice, especially as, the contents of Form E-1 will not supersede or override the substantive provision contained in Section 9(3) and 20(3) nor the provision of Rule 18(3).
As regards contention of Shri Amitabh Kumar Rai, learned Additional Chief Standing Counsel for the State in this regard that the Taxation Officer can determine their proportionate liability, well, if both the parties are available and there is material which enables him to do so, he can do it, especially where indisputably the liability is of arrears of tax and/or penalty for the period prior to the date of possession of the vehicle by the Financier, when the vehicle was in possession of the registered owner, as, there is no bar in the Act, 1997 in this regard. However, in the event he is unable to do so, he has the option to proceed against either of them i.e. the owner or operator where both exit, as in the case of a transport vehicle, for the entire liability as per his choice, leaving it open to them to settle their inter se claim separately as per law.
Thus, the concept of joint and several liability for the reasons already mentioned, will not have any application in respect of ''motor vehicle other than transport vehicle'. It will apply in case of ''transport vehicle', as aforesaid.
Current liability to tax, additional tax and penalty from the date of possession by Financier Now, the Question No. 1, which has been referred to us, is essentially as to whether the Financier is liable to tax from the date of taking possession of the vehicle under the agreements referred earlier, even if, its name is not entered in the Certificate of Registration, or not ? If not, who is liable in this regard.
As regards liability to pay tax etc. from the date of taking possession, in respect of a ''motor vehicle other than a transport vehicle', the Financier becomes its owner under Section 2(h) when he takes possession of the vehicle under an agreement of hire-purchase, lease or hypothecation, irrespective of the fact whether he is the registered owner or not as already discussed, and as thereafter he alone can use it, as such, he is liable to pay tax, additional tax and penalty which fall due for payment after such possession i.e. current tax and additional tax including arrears arising in respect thereof and penalty if any from the date of such possession.
He is in possession of the vehicle on which there is a statutorily ordained ''first charge' for the tax etc. due under the Act in view of Section 20(2) of the Act. 1997, therefore, he is liable from the date of possession.
Moreover, as already discussed, even as per Rule 7 of the Rules, 1998 once the Financier ''becomes possessed' of the vehicle he is required to submit a declaration in Form- A and as per Rule 9(3) of the Rules, 1998 and one who presents the declaration referred in Rule 7 has to pay the tax. This declaration is obviously in the context of current liability to tax from the date of possession and arrears which arise therefrom.
Language of Section 9(3) determines current liability to pay tax, additional tax etc. and arrears thereof, both.
In respect of a ''transport vehicle' also, the Financier on taking possession of such a vehicle under a hire-purchase, lease or hypothecation agreement, becomes its ''Owner', and also its ''Operator' if the agreement is of hire-purchase. Even if it is not a hire-purchase agreement, and the Financier does not becomes its operator from the date of such possession, it is still its owner under Section 2(h) who is in possession under the other two types of agreement, and, thus, would be liable along with the permit holder/authorization certificate holder or the registered owner, as the case may be, who, in this case, would be the ''Operator', jointly and severally, in terms of Section 9(3), as discussed earlier. Their liability would be in keeping with the concept of joint and several liability as elucidated in the earlier part of this judgment.
The fact that the Financier's name is not yet entered in the Certificate of Registration would be of no consonance as it is not a prerequisite for being the ''Owner' or ''Operator' in such a scenario under Section 2(h) and 2(g). In fact ''Ownership' and ''Operatership' based on possession of a vehicle which is subject to the aforesaid agreements and that with reference to entry in the name of Certificate of Registration have been defined separately and distinctly in Section 2(g) and Section 2(h).
The Financier is thus liable to pay tax etc. as aforesaid.
In this context, the Financier can very well say that the Certificate of Registration or permit, not being in his possession and the same being in possession of the borrower who has not delivered the same to the Financier, inspite of possession of the vehicle being taken by the latter, it is therefore not liable to pay tax even from the date it takes possession of the vehicle unless it is registered in its name and till then liability will continue with the registered owner, as was in fact argued by Shri Amol Kumar, especially when, it did not intend to use the vehicle and intended to get the benefit of Section 2 of Section 12 of the Act, 1997. However this argument is fallacious for the reason which follows.
Apart from the reasons already given, this argument would not be available to the Financier for the simple reason that from the date of such possession of the vehicle it becomes the owner under Section 2(h) and if the vehicle is under a hire-purchase agreement its ''Operator' also under Section 2(g), may be, along with the registered owner or permit holder or holder of authorization certificate, as the case may be. The ownership or operatorship based on possession as is referred in Section 2(h) and Section 2(g) is not dependent on the name of such person in possession being entered in the Certificate of Registration as its registered owner etc., as already discussed, and as is also evident from the provisions themselves.
Moreover, if the Certificate of Registration or token is not given by the registered owner, such Financier, under Sub-section 5 of Section 51 of the Act, 1988 read with Rule 61 of the Rules, 1989, can satisfy the Registering Authority that he has taken possession of the vehicle from the registered owner owing to his default under the said agreement and that the registered owner refuses to deliver the Certificate of Registration or has absconded, and such authority, may, after giving the registered owner an opportunity to make such representation as he may wish to make and notwithstanding that the Certificate of Registration is not produced before it, cancel the Certificate and issue a fresh Certificate of Registration in the name of the person with whom the registered owner had entered into such agreement, but, if the Financier does not take recourse to Section 51(5) then he can not take advantage of his lapse, especially in view of Section 2(g), 2(h), 9(3), 20(3) and Section 13 of the Act, 1997 read with Rule 7, 9(3) and 18 of the Rules, 1998 as discussed hereinabove. As stated earlier Form-A referred in Section 13 read with Rule 7 is also indicative of the requirement of the Financier, in such a situation, to get its name entered in the Certificate of Registration in respect of the vehicle in question and submit a declaration in Form-A. This is also the requirement under the Act, 1988.
Section 51(5), it appears, applies, even in cases where, on possession being taken by the Financier, as aforesaid, Certificate of Registration is handed over by the registered owner to it, as is evident from the contents of Form- 36, as already quoted, which is referred in Rule 61(2) of the Rules, 1989 read with Section 51(5) of the Act, 1988.
Liability to pay arrears of tax, additional tax and penalty from the date of possession by the Financier The words ''from the date of taking possession of the said vehicle' occurring in Question No. 1 can not only be understood as a reference to current liability to pay tax etc. arising from the date of such possession which has already been dealt with by us, but, it can also be understood as a reference to liability to pay tax etc. as existing on the date of taking possession i.e. arrears of tax etc., which may become payable by the Financier once it takes possession of the vehicle. As for example, if there are arrears of tax of Rs. 1 lac in respect of a motor vehicle, as also penalty thereon, which had not been paid by the registered owner (borrower) and the Financier takes possession of such vehicle on account of breach of agreement by the borrower (registered owner), then, whether in this scenario the Financier would be liable for these arrears in respect of such vehicle under Section 9(3) and 20(3) ?
Section 9(3) and 20 of the Act, 1997 speak of liability to pay tax etc. which has not been paid in time i.e. arrears thereof and recovery of such arrears of tax etc., not only of the current year, but, also of preceding years. The liability is on the ''Owner' or ''Operator', if any, jointly and severally, under Section 9(3) and ''as the case may be' under Section 20(3). These phrases have already been discussed by us earlier.
As already stated, in the case of ''a motor vehicle other than a transport vehicle, as, one time tax is required to be paid, that too, at the time of registration of the vehicle, without which, it would not be registered nor can it be used, there would normally not be any dispute relating to liability to pay such arrears nor regarding their recovery.
In the case of a ''transport vehicle', both the ''Owner' and ''Operator' would be jointly and severally liable under Section 9(3) and 20(3) as per the application of this concept, which has already been discussed in the earlier part of the judgment.
In case of arrears of tax etc. pertaining to the period prior to taking of possession of vehicle by Financier i.e. the period during which the registered owner/ permit holder etc. was in possession and control of it, as the latter was the owner or operator, as the case may be, during such period, and must have furnished a declaration in this regard in Form-A under Section 13 read with Rule 7, he was liable to pay such tax etc., therefore, recovery of such arrears should primarily and firstly be made from him. The Taxation Officer should proceed to recover such arrears from such registered owner or permit holder or authorization certificate holder, who was primarily liable in this regard. Only when it is not possible to recover it from such a person, may be on account of the fact that he is absconding or is untraceable or his whereabouts are not known or he has become insolvent or there are similar other reasons jeopardizing the interest of revenue, Taxation Officer can proceed to recover such arrears from the Financier who has taken possession of the vehicle, in respect of which such arrears are due.
It could be asked why should the Financier be made liable for recovery of arrears of tax and penalty for a period prior to such possession merely because he had taken possession of the vehicle on account of breach of agreement, that too, subsequently ? Would it not be unfair and equitable ? Would it not put a premium on default by the registered owner (borrower), by making the Financier unfairly liable ?
This is where Section 20(2) becomes relevant. According to this provision, such tax, additional tax and penalty payable under Act, 1997, which has not been paid i.e. the arrears thereof, as is mentioned in Section 20(1), shall be the ''first charge' on the motor vehicle including its accessory under Section 20(2). Thus, the ''first charge' regarding arrears of tax etc. being on such motor vehicle, possession of which has been taken by the Financier, his liability in this regard is self evident for this very reason. If such arrears can not be recovered from the registered owner as aforesaid then recovery of arrears of tax etc. as arrears of land revenue under Section 20 may have to be effected by attachment and sale of the motor vehicle which is in possession of the Financier. In such a scenario the Taxation Officer can proceed against the Financier to recover the arrears accordingly. The Financier may in order to avoid attachment and sale of the vehicle pay the arrears and, if possible, recover the amount from the borrower by adopting such legal remedies as may be prescribed and permissible, but, it can not escape the rigour of Section 20(2) read with Section 22 of the Act, 1997.
As stated earlier, under Section 22 if such a vehicle regarding which tax etc. have not been paid has been or is being used it can be detained and if the tax due is not paid within forty-eight hours it can be put to public auction and sale proceeds derived from it can be used to satisfy the dues.
Thus, process of recovery can be adopted for arrears of tax due in respect of such vehicle, including arrears for the period prior to taking of possession of the transport vehicle by the Financier in this manner by detaining and selling the vehicle in possession of the Financier, unless the Financier chooses to avoid such action by paying the arrears. In such an eventuality he can, if possible, recover the payment from the registered owner, as per law. This is the scheme of the Act, 1997, which is a taxing statute.
In view of the above discussion, the decisions relied upon by Shri Amol Kumar, learned counsel for the petitioner, including the decisions in the case of Naveen Kumar (supra) and HDFC Bank Ltd. (supra), do not lead us to any other view of the matter, especially in view of the scheme of the Act, 1997 and Rules, 1998 and as the liability which has been considered herein is tax liability.
Liability under Section 9(2) Although we are of the view that a transaction such as the one under the agreements referred above attracts the definition of owner and operator under section 2(g) and 2(h) and not the concept of ''deemed ownership' under Section 9(2) and consequently it attracts the liability under section 9(3)and 20(3) and not section 9(2) as it is not a voluntary act of transfer of ownership by the registered owner, assuming that it is covered under the term ''transfer' under section 9(2), the financier, as transferee/ deemed owner, would still be liable to pay tax etc due on or before the date of such transfer i.e. arrears of tax as already discussed. The rationale behind the provision has already been mentioned. Here again this would be without prejudice to liability of the transferor in this regard. Thus the taxation officer can proceed against both of them on almost the same analogy as discussed in the context of section 9(3).
The distinction if any between Section 9(2) and 9(3) in this regard is on account of existence of a deeming clause in Section 9(2) and the transfer referred therein being a voluntary act as already discussed earlier, whereas, taking of possession based on breach of agreement is more of a compulsion to avoid loss and secure the loan and there is no deeming clause applicable in this regard nor does the concept of joint and several liability come into play when the Financier was neither owner nor operator during the period of such arrears.
Whether it be the liability under Section 9(2) or 9(3), the fact that the name of the transferee or Financier, as the case may, has not yet been entered in the Certificate of Registration, after such transfer or possession of the vehicle, is, for reasons already given, irrelevant so far as tax due on the vehicle is concerned.
As already stated, as regards ''motor vehicles other than a transport vehicle' liability regarding arrears in respect thereof would be practically Nil as one time tax is paid. If a dispute regarding liability to pay arrears of tax etc. in respect of motor vehicles other than transport vehicles does arise it will have to be determined keeping in mind the enunciation of the law as aforesaid. The Financier on taking possession of the vehicle will be liable accordingly.
It is not out of place at this stage to mention that when the registered owner (borrower) is in arrears of tax etc. then intimation of such arrears and the liability of the registered owner to pay such arrears of tax is sent not only to the registered owner but is also sent to the Financier under Rule 18(3) read with Form E-I of the Act, 1997, as quoted earlier, on his address, meaning thereby, the Financier can avoid such further liability by taking suitable action either for possession of the vehicle treating it to be a breach of agreement, if there is any such condition in the agreement or, they can avoid such liability by ensuring such conditions being incorporated in the agreements with the borrower.
Question No. 1 is answered accordingly.
Discussion on Question No. 2.
In view of the discussion made by us in the context of Question No. 1 and after having gone through the judgments referred in Question No. 2 we are of the view that the decision of this Court in the case of Manish Mukhriya (supra) and another decision in both the cases of Lakhimpur Finvest Company Ltd. of 2005 and 2011 some of the provisions such as Section 9(2), 20(2), 51 and the concept of joint and several liability under Section 9(3), which we have considered, have not been considered, therefore, in so far as the said decisions are not in consonance with our judgment and are in conflict with it, they do not lay down the law correctly.
As regards decision of this Court in the case of Daya Shanker Yadav (supra), it does not decide any of the issues referred to us. It only considers the requirement of issuance of notice prior to recovery of tax, therefore, the said decision is not relevant to the questions which we have considered.
As regards decision in the case of Shri Prakash (supra) the petition in the said case was dismissed only on the failure of the petitioner to show to the Court the relevant provision under which a registered owner ceased to be liable to tax because possession of the vehicle had been taken over by the Financier. The decision does not consider relevant provisions of the Act and the Rules nor the law on the subject, as has been done by us, therefore, it does not contain any ''ratio decidendi' which may constitute a binding precedent on the subject nor is it relevant in the context of the questions under consideration.
The Division Bench in Amar Nath Chaubey's case (supra) incorrectly introduced the concept de jure and de facto possession to the second part of the definition of owner in Section 2(h) of the Act, 1997 requiring the person in possession to be its registered owner also. The Division Bench also erred in applying Section 9(2) the way it did ignoring the stipulation in the provision which makes the transferee i.e. the deemed owner, liable to arrears of tax for the period prior to transfer of the vehicle, without prejudice to the liability of the transferor i.e. the registered owner, as such, it is for the Taxation Officer to proceed against either of the two as per his choice keeping in mind the principle of fairness and reasonableness as also the interest of the revenue which the provision seeks to protect. The Division Bench in Amar Nath Chaubey's case (supra) did not consider Section 9(3) at all. The provisions of Section 50 and 51 are a consequence of an otherwise valid transfer of a movable property in law and they by themselves do not constitute a prior requirement for a valid transfer as already held by us hereinabove. There is nothing in Section 51 or any other provision of the Act, 1988 to persuade us to hold that a lease, hire-purchase or hypothecation agreement is determined or terminated only when recourse is taken to Section 51. In fact, Section 51(3) is to the contrary and it applies where both the parties to the agreement have determined the agreement and they are required to apply under the said provision with proof of termination of such agreement which negates the proposition advanced by the Division Bench. The liability of a Financier who takes possession of a vehicle to pay tax etc. including arrears thereof is unrelated to the factum of its name being entered in the Certificate of Registration, as already opined by us.
The Division Bench in Amar Nath Chaubey's case (supra) has also observed that in the event a person in physical possession of the vehicle is held liable to pay tax it may cause difficulties for the Transport Authorities to find out the person in possession of the vehicle in absence of any information or proper application regarding the use or transfer of the vehicle so as to saddle him with the liability, therefore, completion of formalities regarding transfer or change of possession are necessary before shifting the liability of payment of tax from the registered owner to any other person. No doubt, the view expressed by the Division Bench has practical relevance but in a taxing statute we are required to consider the liability to pay tax, additional tax, penalty etc. in the light of the provisions contained therein construing the statutory provisions strictly. While it is true that in the event a Financier takes possession of the vehicle but does not get a fresh Certificate of Registration issued in his name in terms of Section 51(5), then, the Taxation Officer would not be able to know of the said transaction so as to impose and enforce liability to tax upon the Financier but then in such an eventuality he would make the registered owner liable as per the Act, 1997 and the Rules, 1998 as already discussed in the context of question no. 1 whereupon, the registered owner would obviously come forward and inform him about the transaction, unless he disputes it. In the latter case he would be liable and in the former, the Taxation Officer, on getting knowledge of the possession by the Financier, will issue notice to him under Rule 18 of the Rules, 1998 for the tax payable from the date of such possession as the details of the Financier are also mentioned in the Certificate of Registration and registration records maintained by the Registering Authority. Moreover, intimation of arrears of tax is also sent to the Financier under Rule 18(3) read with Form-E-1 of the Act, 1997 on his address.
The fact that the name of the Financier, after taking possession of such vehicle, is not entered in the Certificate of Registration as the registered owner, is of no consequence in this regard, as, the provisions contained in Sub-section (3) of Section 9, Sub-section (3) of Section 20 and Section 2(g) and 2(h) do not contemplate any such requirement in the case of a vehicle, covered under the relevant agreements, already discussed hereinabove, which is in possession of the Financier under such agreement. All that is necessary is the possession of the motor vehicle. If it has been taken by the Financier under such agreement, he would be liable, of course, along with the operator, if any, jointly and severally.
Moreover, for the reasons already given, neither the provisions of Section 50 and 51 nor the corresponding Rules contained in Rule 61 regarding entry of name in the Certificate of Registration or issuance of fresh certificate to Financier have any relevance whatsoever so far as liability in such a scenario to pay tax, additional tax or penalty under Sub-Section 3 of Section 9 read with Section 20 of the Act, 1997 is concerned. If the action under Section 51(3) and/or (3) read with Rule 61(2) is held to be a necessary prerequisite for liability to tax etc. then it would render part of definition of ''Operator' and ''Owner' regarding possession meaningless and superfluous in this context, as, such eventuality would in any case be covered by the first part of Section 2(h) and second part of Section 2(g). The words ''Owner' and ''Operator' occurring in Section 9 and 20 have to be read in consonance with the definition clause contained in Section 2(g) and (h) as already discussed.
The word used in Section 9(3) and 20 of the Act, 1997 is not ''registered owner' but ''Owner', therefore, for purposes of liability to tax etc., the Act, 1997, in view of Section 2(h) therein, envisages the onus not only on the ''registered owner' but also on the person in possession under the agreements referred earlier. The same analogy/principle applies to the liability of ''Operator' under Section 2(g). In the context of the questions referred to us the fact that the name of the Financier is not entered in the Certificate of Registration, is irrelevant. What is relevant is whether he has taken possession of the vehicle under the agreements referred earlier or not.
As such, for the reasons given hereinabove and the reason already given in the context of our discussion while answering Question No. 1, we are of the view that the decision in Amar Nath Dubey' case (supra), in so far as it is contrary to the law as clarified and declared by us by this judgment, can not be said to be good law.
For these very reasons the decisions in Writ Tax No. 201 of 2017; Kamil Hussain and Writ Tax No. 217 of 2017; Shriram Transport Finance Company Ltd. also do not lay down the law correctly.
Question No. 2 is answered accordingly.
Registry is directed to place the record of the writ petition along with our judgment before the appropriate Bench for further proceedings.
Order Date :- 16.12.2019
R.K.P. (Devendra Kumar Upadhyaya, J.)
(Rajan Roy,J.)
(Rajesh Singh Chauhan,J.)