18. The short question raised by the Financier in this appeal is, whether the Financier is the real owner of the vehicle which is the subject of a hire purchase agreement, and if so, whether there can be 16 any impediment to the Financier, taking repossession of the vehicle, when the hirer does not make payment of instalments in terms of the hire purchase agreement.

19. Another question which arises for determination in this appeal is, whether service of proper notice on the hirer is necessary for repossession of a vehicle which is the subject of a hire purchase agreement, and if so, what is the consequence of non-service of proper notice.

24. Section 11 of the Consumer Protection Act confers jurisdiction on the District Forum, having territorial jurisdiction, to entertain a complaint, subject to the pecuniary limit of the value of the goods or services and/or the compensation claimed. In this case the territorial or the pecuniary jurisdiction of the District Forum, to entertain the complaint, is not in dispute. There can also be no dispute that the Complainant was a consumer of services provided by the Financier. The question is whether the complaint filed by the Complainant is a ‘complaint’ within the meaning of Section 11, read with Section 2(1) 29 (c) of the Consumer Protection Act, 1986. In other words, do the ingredients of a complaint as provided in Sections 2(1)(c) (ii), (iv), (v) and (vi) of the Consumer Protection Act exist in this case? Is there any deficiency in the services availed by the Complainant from the Financier, within the meaning of Section 2(1)(g) of the Consumer Protection Act 1986? Has the Financier, as service provider adopted any unfair trade practice within the meaning of Section 2(1)(r) of the said Act?

25. Section (2)(1)(r) defines “unfair trade practice” to mean a trade practice, for the purpose of promoting provision of any service, by adoption of unfair method or unfair or deceptive practice, including any of the practices enumerated in Sections 2(1)(r)(i) to (x), 2(r)(2), 2(r)(3) and 2(r)(3A). The complaint does not make out any case of unfair trade practice within the meaning of Section 2(1)(r) of the Consumer Protection Act 1986.

26. The Complainant has only made a vague assertion that the action of the Financier in taking possession of the vehicle, admittedly for default in payment of instalments, and in not releasing the vehicle to the Complainant, in spite of the Complainant’s assurance to the Financier to clear outstanding instalments and pay future instalments timely, amounts to an act of unfair trade practice and constitutes deficiency of service.

27. As observed above, deficiency has been defined in Section 2(1)(g) set out herein above, as any fault, imperfection or shortcoming or inadequacy in the quality, nature or manner of performance which is required to be maintained by or under any law, for the time being in force, or undertaken to be performed by a person, in pursuance of a contract or otherwise, in relation to any service.

28. Under the terms and conditions of the hire purchase agreement, the ownership of the vehicle was to stand transferred to the Complainant from the Financier, upon payment of all the 35 instalments and other dues, if any. Until then, the ownership was to be with the Financier. As all the 35 instalments had not been paid by the complainant to the Financier, the ownership of the vehicle remained with the Financier.

29. The hire purchase agreement, a copy of which is annexed to the Paper Book, clearly enabled the Financier to take possession of the vehicle, on default in payment of any of the instalments. There is no term in the Hire Purchase Agreement, that requires the Financier to give notice to the Complainant before terminating the Hire Purchase Agreement, upon breach of any term thereof, or before taking possession of the vehicle.

30. On the other hand, clause 15 of the Hire Purchase Agreement expressly provides for determination of the Hire Purchase Agreement without notice to the Complainant, upon default in hire instalments. Clause 15 enables the Financier and/or its agent to enter the premises of the Complainant, where the vehicle under hire may be lying, and to take possession of the same.

31. The repossession of a vehicle under hire, in accordance with the terms and conditions of a hire purchase agreement, upon default in payment of hire instalments and refusal to release the same on mere assurance of the Complainant to clear outstanding arrears of hire instalments, and pay future instalments in time, does not constitute ‘deficiency’ in service.

33. The question which follows is, whether the Financier could have been directed to return the entire amount paid by the Complainant, by way of instalments or otherwise, including Rs.1,04,000/- paid by the Complainant directly to the dealer, and also to pay damages of Rs.10,000 for physical and mental suffering, only because of an error in the address of the Complainant, in the notice sent by the Financier, and that too, without even considering how the Complainant was prejudiced by the error, when the vehicle had been taken away for non payment of hire instalments and sold after about four months.

34. The object of a notice before taking possession of a vehicle on hire under a Hire Purchase Agreement, is to enable the hirer, to make a written request to the Financier to revive the hire purchase agreement in terms of Clause 12 of the said agreement, upon payment of all outstanding dues together with damages, as might be mutually agreed upon.

35. A notice also draws the attention of the hirer to the alleged breaches of agreement on the part of the hirer, on the basis of which, the Financier claims to be entitled to take possession. Such notice gives the hirer an opportunity to show that the hirer had not, in fact, committed any breach of agreement. For example, the hirer might be able to show that the Financier had erroneously omitted to give credit to the hirer for payments made, or had not presented a cheque in its possession for payment, even though there were sufficient funds in the concerned bank account of the hirer, to honour the cheque.

36. Many self-employed hirers, operate vehicles taken on hire, to earn a livelihood. Such vehicles are often run over long distances. A notice ensures that the hirer is not taken by surprise and has time to stop operating the vehicle, so that third persons using the vehicle on payment of charges are not put to sudden inconvenience by reason of re-possession of the vehicle.

37. On the face of the averments in the Complaint, the Complainant had approached the Financier after possession of the vehicle was taken, to be told that the Financier had taken possession of the vehicle, as the Complainant had defaulted in payment of instalments. The Financier had not agreed to release the vehicle, on the assurance of the Complainant to clear outstanding instalments and to pay future instalments in time.

40. Section 13(2)(b) of the Consumer Protection Act, 1986 casts an obligation on the District Forum to decide a complaint on the basis of the evidence brought to its notice by the Complainant and the service provider. Irrespective of whether the service provider adduces evidence or not, the decision of the District Forum has to be based on evidence relied upon by the Complainant. The onus of proof is on the Complainant making the allegation. Section 27 of the Consumer Protection Act casts an obligation on the District Forum, the State Commission or the National Commission to dismiss frivolous complaints with costs not exceeding Rs.10,000/-.

41. The evidence to which the Complainant drew the attention of the District Forum is apparent from its judgment and order. The Complainant produced a delivery receipt in respect of the vehicle, some payment receipts, Insurance papers in respect of the vehicle, an FIR unconnected with the Financier and/or copies thereof and some documents relating to the filing of the Complaint and payment of Court Fees etc., none of which establish any deficiency of service or unfair trade practice on the part of the Financier.

42. The District Forum drew adverse inference against the Financier for not producing the Hire Purchase Agreement and assumed that there was no provision in the Hire Purchase Agreement for taking the vehicle back or selling it to a third party. Significantly it was not even the case of the Complainant in his complaint, that the Hire Purchase Agreement, which the complainant had signed, did not authorize the Financier to take possession of the vehicle upon default, or to sell the same to a third party.

43. No adverse inference could have been drawn against the Financier for not producing the Hire Purchase Agreement before the District Forum, when there was no allegation in the complaint of breach by the Financier of the Hire Purchase Agreement, in taking possession of the vehicle. The District Forum did not exercise its power under Section 13(4)(ii) to call upon the Financier to produce the Hire Purchase Agreement. Even otherwise, the District Forum did not direct the Financier to produce the Hire Purchase Agreement.

44. In the Complaint, a copy of which is annexed to the Paper Book, there is not a whisper of application of any force in taking possession of the vehicle. The finding of the District Forum, of the vehicle having been lifted “forcefully” or “snatched” is, with the greatest of respect, contrary to the Complainant’s own case made out in the Complaint, and therefore perverse. It is well settled that a new case cannot be made out by way of evidence, when there are no pleadings to support the same.

50. The Complainant has established that there was a discrepancy and/or error in the address of the Complainant in the notice for repossession, from which all the three fora under the Consumer Protection Act, 1986, that is the District Forum, the State Commission and the National Commission have concluded that possession of the vehicle was taken without notice. It was not the case of the Complainant that the vehicle was sold without notice to or knowledge of the complainant.

51. The error and/or discrepancy in the address is minor and there are no materials on the basis of which the State Commission concluded that the error was deliberate. The finding of the State Commission, of the error in the address being deliberate, is unsubstantiated.

52. Be that as it may, we proceed on the basis of the concurrent factual findings of the District Forum, the State Commission and the National Commission, that the Financier took possession of the vehicle without notice. Since the Financier deemed it necessary to issue notice to the complainant, and accordingly dispatched a notice, the notice should have been sent to the correct address of the Complainant, as recorded in the Hire Purchase Agreement. The question which arises is, whether repossession of the vehicle without proper notice, for admitted default in payment of hire instalments, warranted the order passed by the District Forum, which has been affirmed by the State Commission and the National Commission.

74. A hire-purchase is, however a more complex transaction where the owner enters into a transaction of hiring out goods on the terms and conditions set out in the agreement, and the option to purchase, exercisable by the customer on payment of all the instalments of hire, arises when the instalments are paid and not before. In such a hire-purchase agreement there is no agreement to buy goods; the hirer being under no obligation to buy, has an option either to return the goods or to become its owner by payment in full of the stipulated hire and the price for exercising the option. This class of hire-purchase agreements must be distinguished from transactions in which the customer is the owner of the goods and with a view to finance his purchase he enters into an arrangement which is in the form of a hire-purchase agreement with the financier, but in substance evidences a loan transaction, subsequent to a hiring agreement, under which the lender is given the license to seize the goods.

75. In the aforesaid case, the majority of the judges were of the view that the intention of the appellants in obtaining the hire-purchase and allied agreements was to secure the return of the loans advanced to their customers and no real sale of the vehicle was intended by the customer to the appellants. The transactions were merely financial transactions. The judgment of this Court in Sundaram Finance Ltd. (supra) was rendered in the context of the liability of a hirer to pay sales tax on the goods acquired under the Hire Purchase Agreement.

77. The law which emerges from the judgments of the Court referred to above, is that goods are let out on hire under a Hire Purchase Agreement, with an option to purchase, in accordance with the terms and conditions of the Hire Purchase Agreement. The hirer simply pays for the use of the goods and for the option to purchase them.

78. Until the option to purchase is exercised by the hirer, upon payment of all amounts agreed upon between the hirer and the Financier, the financier continues to be owner of the goods being the subject of hire purchase. Till such time the hirer remains a trustee and/or bailee of the goods covered by the Hire Purchase Agreement.

79. The Financier continues to remain the owner of a vehicle, covered by a hire purchase agreement till all the hire instalments are paid and the hirer exercises the option to purchase. Thus, when the Financier takes re-possession of a vehicle under hire, upon default by the hirer in payment of hire instalments, the Financier takes repossession of the Financier’s own vehicle.

80. When the agreement between the Financier and the hirer permits the Financier to take possession of a vehicle financed by the Financier, there is no legal impediment to the Financier taking possession of the vehicle. When possession of the vehicle is taken, the Financier cannot be said to have committed theft.

81. Whether the transaction between a Financier and a purchaser/hirer is a hire purchase transaction, or a loan transaction, might be determined from the terms of the agreement, considered in the light of surrounding circumstances. However, even a loan transaction, secured by right of seizure of a financed vehicle, confers licence to the Financier to seize the vehicle.

82. In this case, the agreement executed by and between the Financier and the Complainant is a Hire Purchase Agreement as will appear from the terms and conditions thereof. In any event, the fora under the Consumer Protection Act, have not arrived at any specific finding to the contrary. There is no discussion of the nature of the agreement between the Financier and the Complainant. Be that as it may, the agreement clearly permits the Financier to take possession of the vehicle, upon default in payment of instalments.

87. The question raised by the Financier in this appeal, that is, whether the Financier is the real owner of the vehicle, which is the subject of a Hire Purchase Agreement, has to be answered in the affirmative in view of the law enunciated by this Court in Haranjit Singh Chadha (supra), K.L. Johar & Co. (supra) and Anup Sarmah (supra). The Financier being the owner of the vehicle which is the subject of a Hire Purchase Agreement, there can be no impediment to the Financier taking possession of the vehicle when the hirer does not make payment of instalments/hire charges in terms of the Hire Purchase Agreement. However, such repossession cannot be taken by recourse to physical violence, assault and/or criminal intimidation. Nor can such possession be taken by engaging gangsters, goons and musclemen as so called Recovery Agents.

88. Whether the service of proper notice on the hirer would be necessary for repossession of a vehicle, which is the subject matter of a Hire Purchase Agreement, would depend on the terms and conditions of the Hire Purchase Agreement, some of which may stand modified by the course of conduct of the parties. If the hire purchase agreement provides for notice on the hirer before repossession, such notice would be mandatory. Notice may also be necessary, if a requirement to give notice is implicit in the agreement from the course of conduct of the parties.

89. If the hirer commits breaches of the conditions of a hire purchase agreement which expressly provides for immediate repossession of a vehicle without further notice to the hirer, in case of default in payment of hire charges and/or hire instalments repossession would not be vitiated for want of notice. In this case, however a duty to give notice to the Complainant before repossession, was implicit in the Hire Purchase Agreement. The Hire Purchase Agreement was a stereotype agreement in a standard form, prepared by the Financier. The same kind of agreements, containing, identical terms, except for minor modifications are executed by all hirers of vehicles, equipment, machinery and other goods, who enter into hire purchase agreements with the Financier. The Financier who set down the terms and conditions of the hire purchase, construed the hire purchase agreement to contain an implied term for service of notice and accordingly despatched a notice, but did not address it to the correct address of the Complainant as given in the hire purchase agreement.

90. In a case where the requirement to serve notice before repossession is implicit in the hire purchase agreement, non-service of proper notice would tantamount to deficiency of service for breach of the hire purchase agreement giving rise to a claim in damages. The Complainant consumer would be entitled to compensatory damages, based on an assessment of the loss caused to the complainant by reason of the omission to give notice. Where there is no evidence of any loss to the hirer by reason of omission to give notice, nominal damages may be awarded.

91. A forum constituted under the Consumer Protection Act has, as observed above, the power to award punitive damages. Punitive damages should, however, be granted only in exceptional circumstances, where the action of the Financier is so reprehensible that punishment is warranted. To cite an example, where a Financier erroneously and/or wrongfully invokes the power to repossess without notice to the hirer, causing thereby extensive pecuniary loss to the hirer or loss of goodwill and repute, a forum constituted under the Consumer Protection Act may award punitive damages.

92. In the instant case, there is no evidence of any loss suffered by the complainant by reason of non-receipt of notice. Admittedly, several instalments, remained unpaid. After repossession the complainant contacted the Financier and was informed of the reasons for the repossession. He only made an offer to pay outstanding instalments and gave an assurance to pay future instalments in time. If the Financier was not agreeable to accept the offer, the Financier was within its rights under the hire purchase agreement. This is not a case where payment had been tendered by the hirer but not accepted by the Financier/lender. The Complainant had not tendered payment.

93. The Financier admittedly paid Rs.3,15,000/- for acquisition of the vehicle, out of which the Financier had been able to realize Rs.1,19,000/- inclusive of all charges. There was depreciation in the value of the vehicle by reason of usage by the Complainant, for about a year. The District Forum did not even notionally assess the depreciation in the value of the vehicle.

94. The District Forum was not justified in directing the Financier to pay the Complainant Rs.2,23,335/- being the entire amount paid by the Complainant to the Financier from the inception as well as the payment of Rs.1,04,000/- made by the Complainant to the dealer along with damage of Rs.10,000/- and litigation costs of Rs.1,000/- after the Complainant had held and used the vehicle for almost a year. The Complainant, admittedly a defaulter, has in effect, been allowed free use of the vehicle for about a year, plus damages, for an error in the notice of repossession, without considering the prejudice, if any, caused to the complainant by the error and consequential non receipt of the notice, and without making any assessment of the loss, if at all, to the Complainant by reason of the error/omission.

95. For the reasons discussed above, the impugned orders of the National Commission, the State Commission and the District Forum, under the Consumer Protection Act, 1986 cannot be sustained and the same are set aside.

96. The appeal is accordingly allowed. The Financier shall, however, pay a composite sum of Rs.15,000/- to the Complainant towards damages for ‘deficiency’ in service and costs for omission to give the Complainant a proper notice before taking repossession of the vehicle.