Gujarat High Court
Hdfc Bank Ltd. Thro-Nitinkumar ... vs State Of Gujarat & 3 on 16 February, 2017
Author: J.B.Pardiwala
Bench: J.B.Pardiwala
R/SCR.A/7291/2016 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CRIMINAL APPLICATION (QUASHING) NO. 7291 of 2016
With
SPECIAL CRIMINAL APPLICATION NO. 7489 of 2016
With
SPECIAL CRIMINAL APPLICATION NO. 7502 of 2016
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE J.B.PARDIWALA
==========================================================
1 Whether Reporters of Local Papers may be allowed to see the judgment ? YES 2 To be referred to the Reporter or not ?
YES
3 Whether their Lordships wish to see the fair copy of the
judgment ? NO
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of India NO or any order made thereunder ?
========================================================== HDFC BANK LTD. THRO-NITINKUMAR BALDEVBHAI PATEL....Applicant(s) Versus STATE OF GUJARAT & 3....Respondent(s) ========================================================== Appearance:
MR RR MARSHALL SENIOR ADVOCATE WITH MR NIKUNJ D BALAR, ADVOCATE for the Applicant(s) No. 1 DS AFF.NOT FILED (N) for the Respondent(s) No. 3 MR JM PANCHAL ADVOCATE WITH MR ASHISH H SHAH, ADVOCATE for the Respondent(s) No. 4 NOTICE UNSERVED for the Respondent(s) No. 2 APP for the Respondent(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA Page 1 of 23 HC-NIC Page 1 of 23 Created On Sun Aug 13 10:48:54 IST 2017 R/SCR.A/7291/2016 JUDGMENT Date : 16/02/2017 ORAL COMMON JUDGMENT 1 Since the issues raised in all the three captioned applications are interrelated and the challenge is also to a common order passed by the Additional City Sessions Judge, Court No.9, Ahmedabad, those were heard analogously and are being disposed of by this common judgment and order.
2 The Special Criminal Application No.7291 of 2016 is filed by the H.D.F.C. Bank Private Limited, through its authorised signatory.
Whereas the other two connected applications are filed by a private party claiming possession of the car seized by the police as a muddamal in connection with a criminal offence.
3 The Special Criminal Application No.7291 of 2016 filed by the Bank is with the following prayers:
"7)(a) Be pleased to admit and allow this petition.
(b) Be pleased to issue a Writ of Certiorari or any other appropriate writ, order or direction for quashing and setting aside the order passed by the learned Additional Sessions Judge Court No.9, Ahmedabad city in Criminal Revision Application NO.97 of 2016, with respect to the part by which, the Sale Permission is not granted to the petitioner and consequently be pleased to quash and set aside the order dated 1532016, passed by the learned Metropolitan Magistrate Court No.22 Ahmedabad in Criminal Miscellaneous Application No.10 of 2016 and further be pleased to grant application Exhibit 19 filed in Criminal Miscellaneous Application NO.10 of 2016. And further be pleased to modify the condition of furnishing personal bond considering the amount as per valuation report instead of the Bank Guarantee by present Bank.
(C) Be pleased to grant any other relief which deems fit and proper in the interest of justice."Page 2 of 23
HC-NIC Page 2 of 23 Created On Sun Aug 13 10:48:54 IST 2017 R/SCR.A/7291/2016 JUDGMENT 4 The Special Criminal Applications Nos.7489 of 2016 and 7502 of 2016 are with the following prayers:
"6 a) This Hon'ble Court be pleased to admit and allow this Special Criminal Application.
b) This Hon'ble Court be pleased to issue appropriate writ, order or direction quashing and setting aside the impugned judgment and order dated 03.09.2016 passed by the learned Additional Sessions Judge, Court No.9, Ahmedabad in Criminal Revision Application NO.97/2016 and further be pleased to allow the said Criminal Misce. Application No.10/2016 with cost throughout.
c) Pending admission, final hearing and disposal of this petition, this Hon'ble Court be pleased to stay the execution, operation and implementation of the impugned judgment and order dated 03.09.2016 passed by the learned Additional Sessions Judge, Court No.9, Ahmedabad in Criminal Revision Application No.97/2016;
d) That exparte ad interim relief in terms of the aforesaid prayer clause be granted.
e) Any other relief which this Hon'ble Court deems fit and expedient be granted in the interest of justice."
5 The facts giving rise to all the three applications may be summarised as under:
5.1 The applicant of the Special Criminal Applications Nos.7489 of 2016 and 7502 of 2016 respectively is engaged in the business of automobiles. He owns an automobile garage running in the name of Chirag Motors situated in Ahmedabad. He lodged a First Information Report being C.R. No.I220 of 2015 at the Ellisbridge Police Station, Ahmedabad city on 14th December 2015 for the offence punishable under Sections 406, 420, 465, 467, 471 and 120B of the Indian Penal Code. It is his case that one Randhirbhai (accused), serving as a 'Manager' of the Infinity Motors Private Limited at Mumbai, informed him on 25th September 2015 that one of his customers was intending to Page 3 of 23 HC-NIC Page 3 of 23 Created On Sun Aug 13 10:48:54 IST 2017 R/SCR.A/7291/2016 JUDGMENT sell the "PORSCHE 911 CARRERA 4" car for Rs.1.35 Crore. The photographs of the car were sent on WhatsApp to the applicant. After few negotiations, the deal was struck and the applicant purchased the car for Rs.1.20 Crore. On 26th September 2015, an amount of Rs.5 lac was paid by the applicant to Randhirbhai and Rs.1.10 Crore were paid through the RTGS in the account of the SBK Films Private Limited. The SBK Films Private Limited was the owner of the car in question. An amount of Rs.13 Lac was paid in cash and a receipt thereof was also issued. On 12th October 2015, the applicant visited Mumbai to arrange for the transport of the car. One Shri Lalit Chaudhary (accused No.1) informed his Manager to hand over the invoices and documents of the car to the applicant along with the delivery of the car.
5.2 The necessary arrangements were made for the transport of the car to Ahmedabad. The car was loaded in a vehicle meant for the purpose of transport. On the next day, the applicant inquired about the location of the car. At that point of time, the transporter informed the applicant that the car had been intercepted while on its way to Ahmedabad by the accused persons and the same was deloaded and the possession was taken over. The applicant, in such circumstances, immediately thought fit to file the F.I.R. referred to above.
6 In the course of the investigation, the police seized the car.
7 At this stage, let me look into the case of the H.D.F.C. Bank. It is the case of the Bank that the car in question has been hypothecated. One SBK Films Private Limited, through its Director, namely, Shaikh Basheed Ibrahim applied for the auto premium loan to purchase the car from a dealer namely, Aadya Motor Company (India) Private Limited by submitting a loan application form dated 11th June 2015. The Bank Page 4 of 23 HC-NIC Page 4 of 23 Created On Sun Aug 13 10:48:54 IST 2017 R/SCR.A/7291/2016 JUDGMENT acceded to the request of the respondents Nos.2 and 3 of the Special Criminal Applications Nos.7291 of 2016 and sanctioned the loan for the sum of Rs.1,80,00,000/ (Rupees One Crore Eighty Lac only). In pursuance to the said application, the respondents Nos.2 and 3 of the Special Criminal Application No.7291 of 2016 executed a loan agreement and other documents with the Bank. On execution of the security document, the loan was disbursed by the Bank to the respondents Nos.2 and 3 and the payment of Rs.1,79,27,158/ was made on 20th June 2015 directly to the dealer namely, Aadya Motor Company (India) Private Limited, through the RTGS, and on behalf of the respondents Nos.2 and 3 for the purchase of the car.
8 It is the case of the Bank that the dealer also provided them an account generated invoice. It is the case of the Bank that the account generated invoice goes to show that the car in question was sold to the principal borrower and is under the hypothecation agreement of the Bank. The dealer also issued the Form - 21 for the purpose of temporary registration. The document confirms the fact that the car in question is under the hypothecation agreement with the Bank. It is also pointed out by the Bank that the respondents Nos.2 and 3 thereafter obtained an insurance from the TATA AIG, for which the insurance company issued a cover note. The cover note seized with the vehicle in question was under
the hypothecation agreement with the Bank. The car in question was temporarily registered with the R.T.O. Mumbai on 23rd June 2015 bearing the temporary registration No.NH01TRH590. The certificate would indicate that the owner is one SBK Films Private Limited. The dealer's name is shown as Aadya Motor Company (India) Private Limited. The engine and chassis number also figured in the Insurance Cover Note.
9 It is the case of the Bank that in the month of January 2016, the
Page 5 of 23
HC-NIC Page 5 of 23 Created On Sun Aug 13 10:48:54 IST 2017
R/SCR.A/7291/2016 JUDGMENT
respondents Nos.2 and 3 defaulted in making payment of the EMI. The inquiry in this regard revealed that an F.I.R. had been filed against the respondents Nos.3 and the police had seized the vehicle.
10 In the aforesaid background, two applications came to be filed under Section 451 of the Cr.P.C. before the learned Metropolitan Magistrate, Court No.22 at Ahmedabad. One application being the Miscellaneous Criminal Application No.10 of 2016 filed by Shri Chirag Jayantilal Patel. Whereas the application filed by the Bank was not separately numbered, but the same was treated as a part of the application filed by Shri Chirag Jayantilal Patel. To be precise, the application filed by the Bank for release of the car was registered as Exhibit : 19.
11 It appears from the materials on record that both the applications i.e. one filed by Shri Chirag Jayantilal Patel and the other filed by the Bank came to be rejected by the Additional Chief Metropolitan Magistrate, Court No.22, Ahmedabad by a common order dated 15th March 2016. While rejecting the application, the learned Metropolitan Magistrate noticed many discrepancies in the documents produced by the Bank. The learned Metropolitan Magistrate, on account of such discrepancies in the documents, took the view that it was not possible to arrive at any conclusion as regards the car in question being hypothecated with the Bank.
12 Being dissatisfied and grieved by the order passed by the learned Metropolitan Magistrate rejecting both the applications, two criminal revision applications were filed in the Sessions Court. The Criminal Revision Application No.96 of 2016 was filed by Shri Chirag Jayantilal Patel, whereas the Criminal Revision Application No.97 of 2016 was Page 6 of 23 HC-NIC Page 6 of 23 Created On Sun Aug 13 10:48:54 IST 2017 R/SCR.A/7291/2016 JUDGMENT filed by the H.D.F.C. Bank.
13 The learned Additional Sessions Judge, by a common order dated 3rd September 2016, rejected the Criminal Revision Application No.96 of 2016 filed by Shri Chirag Patel, whereas allowed the Criminal Revision Application No.97 of 2016 filed by the H.D.F.C. Bank.
14 The Bank is here before this Court being dissatisfied with the order passed by the Sessions Court not permitting them to sell. Shri Chirag Patel has preferred two applications before this Court, one so far as the rejection of the Criminal Revision Application No.96 of 2016 is concerned and the second one so far as allowing the Criminal Revision Application No.97 of 2016 filed by the Bank is concerned.
15 Thus, the picture that emerges from the materials on record is that the purchaser of the car namely, Chirag Patel has been denied the possession of the car pending the trial. Whereas the Bank has been permitted to take over the possession on furnishing bank guarantee of the amount of Rs.1.50 Crore. The Bank wants to sell the car or put it to auction so that it can recover the amount due and payable by the accused persons, but the Revisional Court has declined to grant such permission.
● SUBMISSIONS ON BEHALF OF THE BANK:
16 Mr. R.R. Marshall, the learned senior counsel appearing for the
Bank vehemently submitted that although the Revisional Court has ordered to hand over the possession of the car to his client on furnishing the bank guarantee of the amount of Rs.1.50 Crore, yet the Revisional Court erred in not permitting the Bank to sell the car and do the needful Page 7 of 23 HC-NIC Page 7 of 23 Created On Sun Aug 13 10:48:54 IST 2017 R/SCR.A/7291/2016 JUDGMENT in tune with the decision of the Supreme Court in the case of General Insurance Council and others vs. State of Andhra Pradesh and others [2010 AIR SCW 2967]. Mr. Marshall submits that the two applications filed by Shri Chirag Patel deserve to be rejected and the application filed by the Bank deserves to be allowed and this Court may permit the Bank to put the car to auction. Mr. Marshall submits that whatever may be the dispute between the purchaser of the car namely, Shri Chirag Patel and the accused persons, the same has nothing to do so far as the Bank is concerned. The accused persons availed of loan facility from the Bank to the tune of Rs.1.79 Crore and has also executed a hirepurchase agreement. It is the Bank, who could be said to be the lawful owner of the vehicle in question. If Mr. Patel has been cheated by the accused persons, then it is open for him to initiate appropriate proceedings in accordance with law before the appropriate forum, but he cannot resist the delivery of the possession of the car and the sale for the purpose of recovering the entire loan amount with interest. Mr. Marshall submitted that the question of public money is involved in this litigation. The Court should lean to protect and safeguard the public money and the interest of the Bank. Mr. Marshall submits that there is no discrepancy worth the name so far as the identity of the car is concerned. The car in question is the very same car which has been financed by the Bank. Mr. Marshall invited the attention of this Court to the various documents which are on record.
17 In such circumstances referred to above, Mr. Marshall prays that both the applications filed by Shri Chirag Patel be rejected and the application filed by the Bank may be allowed and permission be granted to sell the vehicle. In support of his submissions, reliance has been placed on the decision of the Supreme Court in the case of General Page 8 of 23 HC-NIC Page 8 of 23 Created On Sun Aug 13 10:48:54 IST 2017 R/SCR.A/7291/2016 JUDGMENT Insurance (supra), Industrial Credit and Development Syndicate Limited vs. Commissioner of Income Tax, Mysore and another [(2013) 3 SCC 541] and few orders passed by this Court.
● SUBMISSIONS ON BEHALF OF THE THIRD PARTY:
18 Mr. J.M. Panchal, the learned senior counsel assisted by Mr.
Ashish H. Shah, the learned advocate appearing for the third party i.e. the purchaser of the car vehemently submitted that both the Courts below committed a serious error in passing the impugned order. Mr. Panchal submits that the identity of the car is a big issue in the present case. He submits that the interest of his client should also be protected as an amount of Rs.1.23 Crore has been paid to the accused persons. Mr. Panchal pointed out that the bill produced by the Bank is in respect of 911 CARRERA Car, whereas the car seized is 011 CARRERA - S. He pointed out that model of the car differs. He submitted that the insurance cover note produced by the Bank is also forged and no such policy exists. The invoice was incomplete and the details regarding the V.A.T. Registration number were also missing. He submits that the certificate issued by the R.T.O. is also doubtful.
19 Mr. Panchal submitted that the car should be handed over to his client as his client is ready and willing to furnish a bank guarantee of the amount of Rs.1.23 Crore. Mr. Panchal submits that as his client is engaged in the business of automobiles and owns a garage, he will be in a position to take good care of the vehicle and will produce as and when directed by the Trial Court. Mr. Panchal pointed out that as on date i.e. past almost two years, the car has been parked in one bungalow owned by the friend of his client and his client is taking good care of the car.
The police also realised that it would not be proper and reasonable to keep the car open in the premises of the police station and therefore, Page 9 of 23 HC-NIC Page 9 of 23 Created On Sun Aug 13 10:48:54 IST 2017 R/SCR.A/7291/2016 JUDGMENT permitted the purchaser to take care of the car.
20 The learned Additional Public Prosecutor appearing for the State submits that no interference is warranted with the impugned order passed by the learned Additional Sessions Judge and all the three applications deserve to be rejected.
● ANALYSIS:
21 Having heard the learned counsel appearing for the parties and
having considered the materials on record, the only question that falls for my consideration is who should be handed over the custody of the vehicle in question pending the final disposal of the criminal proceedings.
22 At this stage, it would not be out of place to state that the investigation carried out so far reveals that Shri Chirag Patel has been cheated outright by the accused persons. The learned A.P.P. appearing for the State pointed out from the papers of the investigation that Shri Chirag Patel purchased the car by making payment of Rs.1.20 Crore and while the car was bring brought to Ahmedabad in a vehicle, the same was intercepted and was taken away.
23 Section 451 enables the Magistrate to provide for the interim custody of such property pending the conclusion of enquiry or trial. It is only a temporary arrangement and what is contemplated is only an interim provision to provide the custody with a proper person as the Court thinks fit with the liability to produce the property back as and when directed by the Court. The maximum duration of the arrangement is only till the conclusion of the enquiry or trial. It follows that the arrangement is only temporary and the main object is to protect or preserve the property pending trial. Even if the person entrusted with Page 10 of 23 HC-NIC Page 10 of 23 Created On Sun Aug 13 10:48:54 IST 2017 R/SCR.A/7291/2016 JUDGMENT interim custody is the owner, his possession or custody during the period of entrustment is only as a representative of the Court and not in his own independent right. He is bound by the terms of entrustment and the bond executed by him in favour of the Court. Any failure to comply with the terms will entail the necessary consequences also. His ownership or right to possession may not operate against his obligation to the Court. The entrustment or custody will not invest him with any preferential right to ownership or even possession. In the eye of law his possession or custody is only that of Court.
24 The arrangement once made is not even final till the conclusion of the inquiry or trial. The Court has the power or right to terminate the entrustment, get back the property from him and entrust it to somebody else whom the Court deems fit in appropriate cases even before the conclusion of the inquiry or trial. So much so, the person entrusted with the property may also be entitled to seek termination of the entrustment and surrender the property even before the conclusion of trial. Cases may arise where the person to whom interim custody was ordered may not care to undertake the obligation. In such cases the Court may have to make other arrangements for the custody pending trial. After giving custody the Court may for reasons think that his custody may not be proper. In such cases the Court can terminate the arrangement and make other arrangements. Pending the inquiry or trial more than one such arrangement could be made.
25 Even in cases of rival claims for interim custody, the preference made to one person does not settle any right to the ownership or possession. Irrespective of the defeat in a contest for interim custody, the defeated party can successfully enforce his claim for custody if ultimately he comes out with flying colours. The ultimate consideration is only who Page 11 of 23 HC-NIC Page 11 of 23 Created On Sun Aug 13 10:48:54 IST 2017 R/SCR.A/7291/2016 JUDGMENT is the proper person considered by the Court for the entrustment of the property. In doing so, the Court may have many considerations like safety of the property, the possibility of getting it back without damage etc. The arrangement is being made by the Court only for the preservation of property for being handed over to the person to whom the custody has to be ordered under Section 452 after the conclusion of trial or to be dealt with otherwise.
26 What is stated above does not mean that the power of the Court is arbitrary. Even though the power is discretionary it has to be exercised in a judicial manner. It is likely that there may be a contest for getting the interim custody like the case at hand. The person entitled to ownership or possession may be interested in getting the custody to himself in preference to the opponents due to various reasons. He may have the fear that at the hands of somebody else the property is liable to damage or misappropriation of the proceeds. The questions of prestige also may be there. For that reason itself there may be stiff opposition also. Custody to a wrong person may result in irreparable loss to the rightful claimant. Even though the power is discretionary, it is rather of a quasicivil nature. In the choice of the person to be entrusted with interim custody in such cases the Court may have to take into consideration all the relevant aspects.
27 Normally the Courts will be inclined to prefer the person who was having possession or custody just prior to the custody of Court. But that is not a rule of invariable application. Sometimes the origin of his possession may be illegal just like the possession of a thief or receiver of stolen property. In such cases the Court may not prefer him. In considering the question the Court may be interested in giving importance to the right to possession. In the absence of better claim Page 12 of 23 HC-NIC Page 12 of 23 Created On Sun Aug 13 10:48:54 IST 2017 R/SCR.A/7291/2016 JUDGMENT from any other source the Court may prefer the person who had possession. I referred to these aspects because in this case both the sides have laid claim on the basis of ownership as well as right to possession. [See: V. Parakashan vs. K.P. Pankajakshan, 1985 Cr.L.J. 951].
28 The nature of hirepurchase agreement has been noted by the Supreme Court in Charanjit Singh Chadha vs. Sudhir Mehta [(2001) 7 SCC 417] as follows:
"5. Hirepurchase agreements are executory contracts under which the goods are let on hire and the hirer has an option to purchase in accordance with the terms of the agreement. These types of agreements were originally entered into between the dealer and the customer and the dealer used to extend credit to the customer. But as hirepurchase scheme gained popularity and in size, the dealers who were not endowed with liberal amount of working capital found it difficult to extend the scheme to many customers. Then the financiers came into picture. The finance company would buy the goods from the dealer and let them to the customer under hire purchase agreement. The dealer would deliver the goods to the customer who would then drop out of the transaction leaving the finance company to collect instalments directly from the customer. Under hire purchase agreement, the hirer is simply paying for the use of the goods and for the option to purchase them. The finance charge, representing the difference between the cash price and the hire purchase price, is not interest but represents a sum which the hirer has to pay for the privilege of being allowed to discharge the purchase price of goods by instalments.
6. Though in India the Parliament has passed a Hire Purchase Act, 1972, the same has not been notified in the official gazette by the Central Govt. so far. An initial notification was issued and the same was withdrawn later. The rules relating to hire purchase agreements are delineated by the decisions of higher courts. There are series of decisions of this Court explaining the nature of the hire purchase agreement and mostly these decisions were rendered when the question arose whether there was a sale so as to attract payment of tax under the Sales Tax Act.
7. In M/s Damodar Valley Corporation vs. State of Bihar [AIR 1061 SC 440], this Court took the view that a mere contract of hiring, without more, is a species of the contract of bailment, which does not create a title in the bailee, but the law of hire purchase has undergone considerable Page 13 of 23 HC-NIC Page 13 of 23 Created On Sun Aug 13 10:48:54 IST 2017 R/SCR.A/7291/2016 JUDGMENT development during the last half a century or more and has introduced a number of variations, thus leading to categories and it becomes a question of some nicety as to which category a particular contract between the parties comes under. Ordinarily, a contract of hire purchase confers no title on the hirer, but a mere option to purchase on fulfilment of certain conditions. But a contract of hire purchase may also provide for the agreement to purchase the thing hired by deferred payments subject to the condition that title to the thing shall not pass until all the instalments have been paid. There may be other variations of a contract of hire purchase depending upon the terms agreed between the parties. When rights in third parties have been created by acts of parties or by operation of law, the question may arise as to what exactly were the rights and obligations of the parties to the original contract.
8. In K.L. Johar & Co. vs. The Deputy Commercial Tax Officer [AIR 1065 SC 1082], this Court took the view that a hire purchase agreement has two elements: (1) element of bailment; and (2) element of sale, in the sense that it contemplates an eventual sale. The element of sale fructifies when the option is exercised by the intending purchaser after fulfilling the terms of the agreement. When all the terms of the agreement are satisfied and the option is exercised a sale takes place of the goods which till then had been hired."
29 The scope and ambit of Section 451 of the Cr.P.C. was highlighted by the Supreme Court in Sunderbhai Ambalal Desai vs. State of Gujarat [(2002) 10 SCC 283].
30 In Industrial Credit and Development Syndicate Limited (supra), the Supreme Court considered the provisions of the Motor Vehicles Act in context with the claim of the assessee for depreciation under Section 32 of the Income Tax. I may quote the relevant observations made in paras 26, 27, 28.1, 28.2 and 28.3 as under:
"26 We agree with the following observations of the Tribunal in this regard:
"20. It is evident from the above that after the lessee takes possession of the vehicle under a lease deed from the appellant company it (sic.) shall be paying lease rent as prescribed in the schedule. The ownership of the vehicles would vest with the Page 14 of 23 HC-NIC Page 14 of 23 Created On Sun Aug 13 10:48:54 IST 2017 R/SCR.A/7291/2016 JUDGMENT appellantcompany viz., ICDS as per clause (4) of the agreement of lease. As per clause (9) of the Lease agreement, M/s. ICDS is having right of inspection at any time it wants. As per clause (18) of the Lease agreement, in case of default of lease rent, in addition to expenses, interest etc. the appellant company is entitled to take possession of the vehicle that was leased out. Finally, as per clause (19), on the expiry of the lease tenure, the lessee should return the vehicle to the appellant company in working order.
21. It is true that a lease of goods or rental or hiring agreement is a contract under which one party for reward allows another the use of goods. A lease may be for a specified period or in perpetuity. A lease differs from a hire purchase agreement in that lessee or hirer, is not given an option to purchase the goods. A hiring agreement or lease unlike a hire purchase agreement is a contract of bailment, plain and simple with no element of sale inherent. A bailment has been defined in S.148 of the Indian Contract Act, as "the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them.
22. From the above discussion, it is clear that the transactions occurring in the business of the assesseeappellant are leases under agreement, but not hire purchase transactions. In fact, they are transactions of 'hire'. Even viewed from the angle of the author of 'Lease Financing and Hire Purchase', the views of whom were discussed in pages 16 and 17 of this order, the transactions involved in the appellant business are nothing but lease transactions.
23. As far as the factual portion is concerned now we could come to a conclusion that leasing of vehicles is nothing but hiring of vehicles. These two aspects are one and the same. However, we shall discuss the case law cited by both the parties on the point."
27 The only hindrance to the claim of the assessee, which is also the lynchpin of the case of the Revenue, is Section 2(30) of the MV Act, which defines ownership as follows:
"2. (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 hirepurchase agreement, or an agreement of lease or an agreement of a hypothecation, the person in possession of the vehicle under that agreement."
The general opening words of the Section say that the owner of a motor Page 15 of 23 HC-NIC Page 15 of 23 Created On Sun Aug 13 10:48:54 IST 2017 R/SCR.A/7291/2016 JUDGMENT vehicle is the one in whose name it is registered, which, in the present case, is the lessee. The subsequent specific statement on leasing agreements states that in respect of a vehicle given on lease, the lessee who is in possession shall be the owner. The Revenue thus, argued that in case of ownership of vehicles, the test of ownership is the registration and certification. Since the certificates were in the name of the lessee, they would be the legal owners of the vehicles and the ones entitled to claim depreciation. Therefore, the general and specific statements on ownership construe ownership in favour of the lessee, and hence, are in favour of the Revenue.
28.1 Section 2(30) is a deeming provision that creates a legal fiction of ownership in favour of lessee only for the purpose of the MV Act. It defines ownership for the subsequent provisions of the MV Act, not for the purpose of law in general. It serves more as a guide to what terms in the MV Act mean. Therefore, if the MV Act at any point uses the term owner in any Section, it means the one in whose name the vehicle is registered and in the case of a lease agreement, the lessee. That is all. It is not a statement of law on ownership in general. Perhaps, the repository of a general statement of law on ownership may be the Sale of Goods Act;
28.2 Section 2(30) of the MV Act must be read in consonance with sub sections (4) and (5) of Section 51 of the MV Act, which were referred to by Mr. S. Ganesh, learned senior counsel for the assessee. The provisions read as follows:
"51.(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 Page 16 of 23 HC-NIC Page 16 of 23 Created On Sun Aug 13 10:48:54 IST 2017 R/SCR.A/7291/2016 JUDGMENT 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 subsection would have been in force."
Therefore, the MV Act mandates that during the period of lease, the vehicle be registered, in the certificate of registration, in the name of the lessee and, on conclusion of the lease period, the vehicle be registered in the name of lessor as owner. The Section leaves no choice to the lessor but to allow the vehicle to be registered in the name of the lessee Thus, no inference can be drawn from the registration certificate as to ownership of the legal title of the vehicle; and 28.3 If the lessee was in fact the owner, he would have claimed depreciation on the vehicles, which, as specifically recorded in the order of the Appellate Tribunal, was not done. It would be a strange situation to have no claim of depreciation in case of a particular depreciable asset due to a vacuum of ownership. As afore noted, the entire lease rent received by the assessee is assessed as business income in its hands and the entire lease rent paid by the lessee has been treated as deductible revenue expenditure in the hands of the lessee. This reaffirms the position that the assessee is in fact the owner of the vehicle, in so far as Section 32 of the Act is concerned."
31 In General Insurance Council (supra), the Supreme Court took up the issue as regards disposal of the seized motor vehicle. The Supreme Court noticed the noncompliance by the police investigating agencies with the directions issued in the case of Sunderbhai Ambalal Desai (supra). While disposing of the writ petition, the Court observed in paras 14 and 15 as under:
"14. In our considered opinion, the aforesaid information is required to be utilised and followed scrupulously and has to be given positively as and when asked for by the Insurer. We also feel, it is necessary that in addition to the directions issued by this Court in Sunderbhai Ambalal Desai (supra) considering the mandate of Section 451 read with Section 457 of Page 17 of 23 HC-NIC Page 17 of 23 Created On Sun Aug 13 10:48:54 IST 2017 R/SCR.A/7291/2016 JUDGMENT the Code, the following further directions with regard to seized vehicles are required to be given.
"(A) Insurer may be permitted to move a separate application for release of the recovered vehicle as soon as it is informed of such recovery before the Jurisdictional Court. Ordinarily, release shall be made within a period of 30 days from the date of the application.
The necessary photographs may be taken duly authenticated and certified, and a detailed panchnama may be prepared before such release.
(B) The photographs so taken may be used as secondary evidence during trial. Hence, physical production of the vehicle may be dispensed with.
(C) Insurer would submit an undertaking/guarantee to remit the proceeds from the sale/auction of the vehicle conducted by the Insurance Company in the event that the Magistrate finally adjudicates that the rightful ownership of the vehicle does not vest with the insurer. The undertaking/guarantee would be furnished at the time of release of the vehicle, pursuant to the application for release of the recovered vehicle. Insistence on personal bonds may be dispensed with looking to the corporate structure of the insurer."
15. It is a matter of common knowledge that as and when vehicles are seized and kept in various police stations, not only they occupy substantial space of the police stations but upon being kept in open, are also prone to fast natural decay on account of weather conditions. Even a good maintained vehicle loses its road worthiness if it is kept stationary in the police station for more than fifteen days. Apart from the above, it is also a matter of common knowledge that several valuable and costly parts of the said vehicles are either stolen or are cannibalised so that the vehicles become unworthy of being driven on road. To avoid all this, apart from the aforesaid directions issued hereinabove, we direct that all the State Governments/Union Territories/Director Generals of Police shall ensure macro implementation of the statutory provisions and further direct that the activities of each and every police stations, especially with regard to disposal of the seized vehicles be taken care of by the Inspector General of Police of the concerned Division/Commissioner of Police of the concerned cities/Superintendent of Police of the concerned district."
32 A learned Single Judge of this Court in the case of Chetanbhai Vasantbhai Mistary vs. State of Gujarat [2004 (2) G.L.H. 726] considered the provisions of Sections 451 and 457 of the Cr.P.C. and Page 18 of 23 HC-NIC Page 18 of 23 Created On Sun Aug 13 10:48:54 IST 2017 R/SCR.A/7291/2016 JUDGMENT observed in para 5.4 as under:
"It is obvious from the above legal scheme of the Code of Criminal Procedure that, in the matter of disposal of property, the Criminal Court is invested with wide discretion and the guiding principle is that the property should be delivered to the person who is entitled to the possession thereof and, if such person cannot be ascertained, the Court has to make appropriate order in respect of the custody and disposal of such property. The Code of Criminal Procedure, 1973 being the law relating to criminal procedure, it can be presumed to be primarily concerned with fair trial of the criminal case before it and other matters incidental thereto and cannot be presumed to invest the Court with the power of deciding issues of title to the property regarding which an offence appeared to have been committed, or which appeared to have been used for the commission of any offence. The task of exercising the discretion by the Criminal Court in such circumstances is easier at the end of the trial. But pending trial it can be hazardous to decide the issue of entitlement. The emphasis has, therefore, to be laid on the phrase: "entitled to the possession thereof". Therefore, the related question that can be addressed at the pretrial stage should be restricted to entitlement to the possession of the property and possible consequences of handing over the possession to a party who appears to be entitled to it can be taken care of by imposing suitable conditions. If the question of title remains in controversy even at the end of trial, the course adopted by the Andhra Pradesh High Court in Rajalingam v. Vangala Venkata Rama Chary [1977 Cri.L.J. 575] relying upon Muthiah Muthirian v. Vairaperumal Muthirian [AIR 1954 Madras 214], may be the proper course, viz. to direct the parties to establish their claim over the properties before the Civil Court..."
33 So far as the various orders passed by this Court are concerned on which strong reliance has been placed by the Bank, I take notice of the fact that in all those cases, there was no claim of ownership or right to possess the vehicle by a third party. In all those cases, the person who had availed of the loan facility had either defaulted or the vehicle had been used in commission of an offence and seized by the police. In such circumstances, this Court, by relying upon the two decisions of the Supreme Court referred to above, permitted the Bank and other financial institutions to sell the vehicle so that the value of the vehicle may not get depreciated. I am very clear in my mind that I should not permit the Page 19 of 23 HC-NIC Page 19 of 23 Created On Sun Aug 13 10:48:54 IST 2017 R/SCR.A/7291/2016 JUDGMENT Bank to sell the vehicle. The endeavour on the part of the Court should be to preserve the property till the conclusion of the trial, and more particularly, in the case like one at hand. Under the Motors Vehicle Act, a registration certificate is essential before the vehicle is used on the road. Therefore, the person in whose favour the certificate of registration is issued or stands, ordinarily and obviously, is the proper person for the interim custody of the vehicle seized and produced in the Criminal Court. Of course, there may be cases where it may be permissible to entrust the interim custody of the vehicle to a person not being a registered owner, where the person from whose possession the vehicle is seized was in unlawful possession.
34 In the case at hand, Shri Chirag Patel could be said to have been put in possession of the car when he took the delivery from Bombay. Even while the car was in transit, he could be said to be in possession of the car.
35 The entire claim putforward by the Bank is on the basis of the hirepurchase agreement. As between the registered owner of the vehicle and the person with whom he has the hirepurchase agreement, merely because the one has invested money or has some stake in the vehicle, it may not be proper to entrust the custody of the vehicle to him; because these provisions of Sections 451 and 457 are not remedial providing a remedy about the risks involved. Although in such cases of hirepurchase agreement (i) element of bailment and (ii) element of sale are present and sale is complete only when the option is exercised by the intending purchaser after fulfilling the terms of agreement yet, as pointed out earlier, the certificate of registration, if not a document of title, is primary and prima facie evidence of ownership.
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R/SCR.A/7291/2016 JUDGMENT
36 There is one more reason why I want the property to be preserved.
The investigation is still in progress. As noted above, there are many discrepancies which will have to be looked into by the Investigating Agency for the purpose of proper identification of the car. At this stage, if the Bank is permitted to sell the car, the investigation might get hampered in some manner or the other. Once I decline the permission to the Bank to sell the vehicle, the question would be even if the possession is handed over to the Bank of the car, how will they be able to take care of the car. This question needs some consideration. On the other hand, the purchaser is in the business of automobiles. He has a garage. Even as on date, he is taking care of the car and can be asked to continue to take care of the car till the conclusion of the trial or the respective claims are adjudicated and set at rest.
37 In such circumstances, I am inclined to reject the application filed by the Bank and allow both the applications filed by the purchaser i.e. Mr. Chirag Jayantilal Patel.
38 In the result, the Special Criminal Applications Nos.7489 of 2016 and 7502 of 2016 are allowed. The Investigating Agency is directed to hand over the possession of the car in question to Shri Chirag Jayantilal Patel on he executing a bank guarantee of the amount of Rs.1.50 Crore before the Trial Court. The following additional conditions are imposed upon Shri Patel:
[A] The vehicle shall not be transferred, sold or alienated in any manner till the conclusion of the trial. The possession of the vehicle shall not be parted with. Nothing shall be removed from Page 21 of 23 HC-NIC Page 21 of 23 Created On Sun Aug 13 10:48:54 IST 2017 R/SCR.A/7291/2016 JUDGMENT the car and the car shall be preserved as it is.
[B] The bank guarantee shall be continuing one i.e. till the conclusion of the trial and appropriate orders are passed by the Trial Court as regards the disposal of the muddamal under Section 452 of the Cr.P.C.
[C] The car shall be produced as and when called upon by the Trial Court or the Investigating Officer for the purpose of investigation if any.
[D] The custody of the vehicle with Mr. Chirag Jayantilal Patel will be on behalf of the Court and this arrangement is only till the stage when the Court passes the order regarding disposal of the property on conclusion of the trial.
39 This order shall not preclude the Bank from initiating any civil proceeding if it intends to with respect to the subjectmatter.
40 The Special Criminal Application No.7291 of 2016 filed by the Bank is hereby rejected.
41 In the peculiar facts of the case and having regard to the value of the vehicle, the Investigating Agency is directed to expedite the investigation and see to it that the same is completed at the earliest and appropriate report is filed in the Court concerned. Once an appropriate chargesheet or report is filed, the Court concerned shall immediately proceed to frame the charge and start with recording of the evidence of the witnesses.
Page 22 of 23 HC-NIC Page 22 of 23 Created On Sun Aug 13 10:48:54 IST 2017 R/SCR.A/7291/2016 JUDGMENT Direct service is permitted. (J.B.PARDIWALA, J.) chandresh Page 23 of 23 HC-NIC Page 23 of 23 Created On Sun Aug 13 10:48:54 IST 2017