Vehicle hypothecated with financial company was wrongly picked up, seized and sold-Appellant shall get compensation with interest @ 7.5% (SC-4/11/2022)

The Motor Vehicles Act, 1988 contains detail provisions regarding registration of vehicle, transfer of ownership and special provisions regarding motor vehicle subject to hire purchase agreement.

The present is a case where the appellant had entered into hire purchase agreement with original owner Amarnath Yadav on 22.10.2016. An entry regarding hypothecation was made in the registration certificate while registering the vehicle No. UP 51 AT 5709. Section 51(1), (3) and (4) which are relevant for the present case are as follows:-

“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.

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(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.

Respondent No.1 has no right to claim the release of the vehicle frm CJM Court

FACT: One Amarnath Yadav purchased the JCB machine and entered into a finance agreement dated 22.10.2016 with the appellant under which agreement the appellant financed an amount of Rs.19,83,360/-. Under the agreement, Shri Amarnath Yadav (hereinafter referred to as “original owner”) agreed to repay the loan in 46 monthly instalments @ Rs.56,300/- for each month from 15.12.2016 to 15.09.2020.

The original owner being resident of District Basti, State of Uttar Pradesh applied for registration of the vehicle to the Regional Transport Officer, Basti. The vehicle was registered by Regional Transport Officer, Basti, Shri Amarnath Yadav as owner of JCB machine bearing Registration No. UP 51 AT 5709 and there being agreement of finance with appellant, in the registration certificate the entry was made of the appellant as person in whose favour the vehicle was hypothecated as required by Section 51 of the Motor Vehicles Act, 1988. The original owner failed to pay any instalment of loan.

The High Court in its order has relied on judgment of this Court in Manoj and Ors. Vs. Shriram Tpt. Finance Co. Ltd. and Ors., JT 2002(1) SC 293, where this Court has observed that vehicle having been released in favour of the registered owner though it was open for the financier to approach in the civil court for proper relief. In the above case, the motor vehicle was registered in the name of the appellant Manoj Sharma.On his application, the Magistrate has directed for release of the vehicle in favour of Manoj Sharma. The said order was reversed by the High Court in revisional jurisdiction. The argument which was made before this Court was that there was a civil suit pending where an order of status quo was passed due to which the High Court was not justified in releasing the vehicle to Manoj Sharma. In the above case, this Court in paragraph 4 of the judgment has made following observations:-

“4. Mr. Rao appearing for the financier vehemently contended that in view of the pendency of the civil suits, and the order of the status quo passed therein, the magistrate was not justified in passing the order granting the vehicle in possession of Shri Manoj Sharma. We do not find any substance in the aforesaid contention inasmuch as the magistrate has categorically held in the order that the order delivering possession of the property to Shri Manoj Sharma is subject to any variation to be made by the civil court.

If the financier was aggrieved by the order directing release of the vehicle in favour of Shri Manoj Sharma, who continues to be the registered owner of the vehicle, it was open for the financier to approach the civil court in the pending civil suit for interference. In this view of the matter, we set aside the impugned order of the High Court and direct that the order of the magistrate dated 3.4.2000 be complied with, and in case Shri Manoj Sharma furnishes a necessary bond to the extent of Rs. 5 lacs, then the vehicle could be given to Shri Manoj Sharma, which would be subject to any variation of the order by the civil court.”

19. In the above case, there was no dispute that Manoj Sharma was registered owner of the vehicle. The present is a case where registration certificate which was issued by Regional Transport Office, Basti in Form 23 stood cancelled including the setting aside of the clearance certificate dated 16.08.2018. The subsequent registration obtained from Regional Transport Office, Sitapur on the strength of clearance certificate dated 16.08.2018 shall also be of no avail to the respondent No.1 in view of registration certificate having been set aside on 29.06.2019. The above case, thus, has been wrongly relied by the High Court in support of the claim of the respondent No.1.

20. The statutory authority while cancelling the registration certificate of the vehicle issued by Regional Transport Office, Basti in Form 23 has recorded his conclusion that entry of the appellant as a person in whose favour the vehicle was hypothecated, which was there in the original registration certificate has been fraudulently deleted. In consequence of above, all subsequent acts including the registration certificate issued in the name of respondent No.1 by Regional Transport Office, Sitapur became non est. The respondent No.1 although claimed that he is a bonafide purchaser but fact remains that he is beneficiary of fraud.

21. The High Court unduly influenced by the fact that application for release of vehicle was filed by respondent No.1, the High Court lost sight of the fact that the appellant has also filed objection to the application of release filed by respondent No.1 objecting the release and claiming itself to be entitled to the vehicle as being person with whom the vehicle was hypothecated, whose hypothecation entry was fraudulently removed to facilitate the transfer in favour of respondent No.1, which was illegal and void.

22. The High Court in paragraph 9 has observed that registration certificate obtained from the office of Regional Transport Office, Basti, was in the name of Amarnath Yadav as registered owner with no endorsement of hypothecation, which fact was relied by the High Court in the impugned order.

The High Court failed to notice that entry of hypothecation of the vehicle in favour of the appellant was very much there in the original registration certificate, which entry was got deleted by submitting a forged Form 35 by original owner, which finding has been recorded in the order of Assistant Regional Transport Officer dated 29.06.2019 cancelling the registration certificate on which reliance has been placed by the High Court in paragraph 9. The basis of the order of the High Court was the certificate of registration in name of Amarnath Yadav, which has been filed before us as Annexure CA-2. Without considering the fact that by order dated 29.06.2019, the said certificate stood cancelled and was declared void and non est, the High Court decided in favour of respondent No.1.

23. In view of the foregoing discussions, we are of the considered opinion that the High Court committed error in directing the release of the vehicle in favour of respondent No.1 in whose name the vehicle was registered at Regional Transport Office, Sitapur, but in view of order dated 29.06.2019, the registration in favour of Amarnath Yadav (CA-2) and of certificate of clearance dated 16.08.2018 having been set aside, there was no right in respondent No.1 to claim the release of the vehicle.

The order of the High Court, thus, is unsustainable and is hereby set aside. We further order that vehicle No. UP 51 AT 5709 be released in favour of the appellant. Chief Judicial Magistrate, Sitapur shall ensure that vehicle is received back from respondent No.1 and released in favour of appellant on such terms and conditions as may be deemed fit and proper, which exercise shall be completed within a period of four weeks from today.

REF- SREI Equipment Finance Ltd. Vs. Ramjan Ali & Ors. [Criminal Appeal No. 6 of 2021 arising out of S.L.P. (Crl.) No. 3893/2020]