5 Important Supreme Court Cases on Hire Purchase / Hypothecation Agreement

Now law is well settled with regard to release of vehicle in a case where there is hypothecation agreement executed between registered owner and financer/banker; once borrower fails to pay installment in terms of agreement then, the financer/banker has a right to take possession of the vehicle back or get the vehicle released in its favour.

1. Sardar Trilok Singh v. Satya Deo Tripathi, AIR 1979 SC 850

In Hire Purchase agreement, if financer takes back motor vehicle due to default in payment of installment, no process could be issued against the financer u/s 395 IPC on the basis of exaggeration version of the complainant.

The truck had been taken in possession by the financier in terms of hire purchase agreement, as there was a default in making the payment of instalments. A criminal case had been lodged against the financier under Sections 395, 468, 465, 471, 12-B/34, I.P.C. The Court refused to exercise its power under Section 482, Cr.P.C. and did not quash the criminal proceedings on the ground that the financier had committed an offence. However, reversing the said judgment, Apex Court held that proceedings initiated were clearly an abuse of process of the Court. The dispute involved was purely of civil nature, even if the allegations made by the complainant were substantially correct. Under the hire purchase agreement, the financier had made the payment of huge money and he was in fact the owner of the vehicle. The terms and conditions incorporated in the agreement gave rise in case of dispute only to civil rights and in such a case, the Civil Court must decide as what was the meaning of those terms and conditions.

2. Charanjit Singh Chadha v. Sudhir Mehra, AIR 2001 SC 3721

Re-possession of vehicle on hire purchase agreement does not amount to criminal offence of 379 IPC.

3. Anup Sarmah v. Bhola Nath Sharma, 2012 (4) ACC 697

In an agreement of hire purchase, the purchaser remains merely a trustee/bailee on behalf of the financier/financial institution and ownership remains with the latter. Thus, in case the vehicle is seized by the financier, no criminal action can be taken against him as he is re-possessing the goods owned by him.

4. K.A. Mathai @ Babu v. Kora Bibbikutty, (1996) 7 SCC 212

In case of default to make payment of installments financier had a right to resume possession even if the hire purchase agreement does not contain a clause of resumption of possession for the reason that such a condition is to be read in the agreement. In such an eventuality, it cannot be held that the financier had committed an offence of theft and that too, with the requisite mens rea and requisite dishonest intention. The assertions of rights and obligations accruing to the parties under the hire purchase agreement wipes out any dishonest pretence in that regard from which it cannot be inferred that financier had resumed the possession of the vehicle with a guilty intention.

5. Charanjit Singh Chadha v. Sudhir Mehra, JT 2001 (7) SC 226 : (2001) 7 SCC 417

Recovery of possession of the vehicle by financier-owner as per terms of the hire purchase agreement, does not amount to a criminal offence. Such an agreement is an executory contract of sale conferring no right in rem on the hirer until the transfer of the property to him has been fulfilled and in case the default is committed by the hirer and possession of the vehicle is resumed by the financier, it does not constitute any offence for the reason that such a case/dispute is required to be resolved on the basis of terms incorporated in the agreement. The Court elaborately dealt with the nature of the hire purchase agreement observing that in a case of mere contract of hiring, it is a contract of bailment which does not create a title in the bailee. However, there may be variations in the terms and conditions of the agreement as created between the parties and the rights of the parties have to be determined on the basis of the said agreement. The Court further held that in such a contract, element of bailment and element of sale are involved 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 option is exercised a sale takes place of the goods which till then had been hired.

See Also:

M/s. Damodar Valley Corporation v. State of Bihar, AIR 1961 SC 440
Instalment Supply (Private) Ltd. v. Union of India, AIR 1962 SC 53
K.L. Johar & Co. v. The Deputy Commercial Tax Officer, Coimbatore III, AIR 1965 SC 1082
Sundaram Finance Ltd. v. State of Kerala, AIR 1966 SC 1178

Whether Plaint can be Rejected only against one of the Defendant(s) [SC JUDGMENT]

The Civil Procedure Code, 1908 - Order 7 Rule 11 (d) – Rejection of Plaint - Relief of reject the plaint only against one of the defendant(s) – Held, Such a relief “cannot be entertained” in exercise of power under Order 7 Rule 11(d) of CPC - the relief of rejection of plaint in exercise of powers under Order 7 Rule 11(d) of CPC cannot be pursued only in respect of one of the defendant(s) - the plaint has to be rejected as a whole or not at all, in exercise of power Order 7 Rule 11 (d) of CPC - the plaint as presented must proceed as a whole or can be rejected as a whole but not in part.

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