IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN FRIDAY, THE 17TH DECEMBER 2010 / 26TH AGRAHAYANA 1932 SA.No. 202 of 2003() -------------------- ( AS.69/1990 of SUB COURT, MANJERI OS.454/1988 of MUNSIFF COURT, MANJERI) .................... APPELLANTS/APPELLANTS/DEFENDANTS ------------------------------------------------------------ 1. KERALA AGRO INDUSTRIES CORPORATION LTD., REPRESENTED BY THE MANAGING DIRECTOR, TRIVANDRUM. 2. JUNIOR ENGINEER, KERALA AGRO INDUSTRIES CORPORATION LTD., WANDOOR. BY ADV. SRI.A.M.SHAFFIQUE, SENIOR ADVOCATE SMT.PRIYA MAHESH RESPONDENTS/RESPONDENTS/PLAINTIFFS --------------------------------------------------------------- 1. T.P.ZUHARABI, MALIYAKKAPARAMBIL HOUSE, KUZHIMANNA, MALAPPURAM DISTRICT 2. P.K.MOHAMMED, MALIYAKKAPARAMBIL HOUSE, KUZHIMANNA, MALAPPURAM DISTRICT. R1 & R2 BY ADV. SRI.P.VIJAYAKUMAR THIS SECOND APPEAL HAVING BEEN FINALLY HEARD ON 17/12/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: JUDGMENT ----------------- Today also there is no representation for the appellant. Appeal dismissed. No cost. 17.12.2010 Sd/- P.S.GOPINATHAN, JUDGE / TRUE COPY / P.A. TO JUDGE VK HARUN-UL-RASHID,J. ------------------------------- S.A. NO. 202 OF 2003 ------------------------------- DATED THIS THE 21ST DAY OF JUNE, 2011 JUDGMENT The substantial question of law framed in the appeal at the time of admission is as follows: “Are the courts below justified in denying decree for the entire plaint claim for the reason that the defendants did not take steps to terminate the agreement and to seize the vehicle before the period of agreement?” 2. Defendants in O.S.No.454/1988 on the file of the Munsiff's Court, Manjeri are the appellants. The appeal is directed against the judgment and decree in A.S.No.69/90 on the file of the Sub Court, Manjeri. The suit is one for permanent prohibitory injunction restraining the defendants from taking any action for recovery of any amount from the plaintiffs following the letter dated 22/6/1988. The trial court granted a decree as prayed for. The Appellate Court confirmed the judgment and decree passed in -2- S.A.No.202/2003 the suit. The parties are hereinafter referred to as the plaintiffs and defendants as arrayed in the suit. 3. The first plaintiff entered into a hire purchase agreement with the lst defendant on 17/12/1980 for hire of a Kubote power tiller. The 2nd plaintiff is a guarantor. The amount payable by the lst plaintiff to the lst defendant, namely, the Kerala Agro-Indusrties Corporation with interest at 14-5% was divided into 14 equal half yearly instalments of `4,294.64. It is not disputed that after taking delivery of the machinery, the plaintiff did not remit the instalments. Since the plaintiff failed to pay the instalments, the defendants terminated the hire purchase agreement. Notice was issued to the lst plaintiff on 25/2/1984 directing her to remit the amount due with interest at 14-5% per annum from 5/2/1984. The lst defendant also informed the lst plaintiff that in case she failed to pay the amount, the lst defendant-Corporation will be constrained to take steps under the Kerala Revenue Recovery Act for recovery of the dues. -3- S.A.No.202/2003 4. It is the case of the plaintiffs that having exercised the option the lst defendant is bound to re-possess the machinery. The avement in the plaint is that instead of re-possessing the machinery, the lst defendant has been threatening the plaintiffs with recovery of the entire cost of machinery. It is further averred that the defendants are not entitled to recover the price of the tiller, but only entitled to proceed under clauses 13 and 14 of the agreement, as they have terminated the agreement on 23/4/1984. The suit was filed for an injunction to restrain the defendants from taking any action for recovery of any amount from the plaintiff pursuant to the letter dated 22/6/1988, which according to the plaintiffs, is in breach of the terms of the agreement. In the written statement filed by the lst defendant it is inter alia contended that after taking delivery of the machinery, the lst plaintiff did not remit the instalments, though several notices were given to her requesting to remit the instalments, that when five instalments over due, the lst defendant issued a notice of seizure to the lst plaintiff, that even -4- S.A.No.202/2003 after that the plaintiff did not pay the arrears, and that thereafter, the lst defendant terminated the hire purchase agreement as per the terms and conditions of the hire purchase agreement. It is also averred that the total amount due from the plaintiff was worked out and a notice was issued to her on 25/2/1984 requesting her to remit Rs.52,740-40 with interest at 14.5% per annum from 5/2/1984. The defendants denied the averments in the plaint that the plaintiff has a right to opt out of the agreement. It is further averred in the written statement that the plaintiff is not entitled to back out of the agreement. 5. The case set up by the plaintiff is that the defendants are not entitled to recover the price of the vehicle, but only entitled to proceed under clauses 13 and 14 of the agreement. According to the plaintiff, the defendants are not entitled to get the entire sale price of the power tiller from the plaintiffs. The trial court considered the contention of the plaintiff as to whether the plaintiffs are liable to pay the entire amount of the power tiller or not. -5- S.A.No.202/2003 Relying on clause 7 of Ext.A1 the trial court held that the hire purchase transaction will not come within the ambit of pacca sale which warrants sales tax. 6. The trial court after reading causes 13 of Ext.A1, held that the defendants are entitled to levy only arrears till the date of the termination of the hire purchase agreement and that as per clause 14 the defendants are entitled to levy the damages and the depreciation in the value of the tiller after re-possessing the machinery. The trial court decreed the suit stating that the defendants have claimed the entire sale price of the tiller. The trial court also held that the lst plaintiff has every right to exercise her option to back out of the agreement and the prayer of the plaintiffs to restrain the defendants from recovering the amount specified in the letter dated 22/6/1988 was granted. The main reason for extending the said relief is on the basis of the view taken by the trial court that the lst plaintiff has got every right to opt out of the agreement. The trial court also held that the defendants cannot -6- S.A.No.202/2003 claim the entire sale price of the tiller, since they failed to seize the tiller from the lst plaintiff. The Lower Appellate Court reversed the finding of the trial court that the lst plaintiff has every right to exercise her option and to back out of the agreement. After reading Ext.A1 agreement, the Lower Appellate Court took the view that none of the provisions contained in Ext.A1 agreement envisages the lst plaintiff to opt out of the agreement and therefore held that the plaintiff has got no right to opt out of the hire purchase agreement. 7. In this case on the default committed by the lst plaintiff in payment of instalments the defendants terminated the hire purchase agreement by sending Ext.B8 letter dated 23/4/1984. Subsequently, they sent Ext.A3 letter dated 22/6/1988 to the lst plaintiff demanding payment of `52,290/-. The Appellate Court held that the defendants did not choose to re-possess the machinery and that instead of re-possessing the machinery they sent Ext.A3 demanding payment of `52,290/- from the plaintiffs which included the total price of the tiller. The Appellate Court did not interfere -7- S.A.No.202/2003 with the decree and judgment passed by the trial court stating that if the defendants terminate the agreement as provided under clause 13 and if they do not re-possess the vehicle but claim the entire amount from the hirer, it would create a situation where the hirer is compelled to purchase the machinery. The learned Appellate Judge observed that in other words, by adopting such a course, the defendants really convert the transaction into sale. The Appellate Judge also observed that the trial court has come to the correct conclusion that the defendants are not entitled to realise the entire price of the tiller from the plaintiff on termination of the agreement as provided under clause 13. 7. The trial court decreed the suit and the lower Appellate Court confirmed the same after reading the relevant clause in Ext.A1 hire purchase agreement. Both the courts below took the view that if the defendants terminate the agreement as provided under condition No.13 and if they do not re-possess the vehicle but claim the entire amount from the hirer, it would create a -8- S.A.No.202/2003 situation where the hirer is compelled to purchase the machinery. In such a situation, the courts below held that the defendants really converted the transaction into a sale. Such view was taken after reading of clause 13. Both the courts below are of the view that after termination of the agreement, the owner is bound to re-possess the vehicle and thereafter only can claim whatever amount due from the hirer. In other words, the learned Judge is of the view that the owner cannot claim the amount due under the hire purchase agreement without re-possessing the vehicle. 8. Clause 13 envisages two situations. Both the situations arise when the hirer failed to remit the amount due by way of instalment. The remedy available in such situation is stated in clause 13. There is no doubt that clause 13 enables the owner to terminate the agreement and re-possess the vehicle. The learned counsel for the appellant submits that clause 13 enables the owner to claim the amount due by issuing notice after termination of the agreement. No doubt, there are two limbs of condition No.13. One -9- S.A.No.202/2003 is to terminate the contract and re-possess the vehicle and the other is to terminate the contract and claim the amount due. If condition No.13 envisages the owner to claim the amount due from the hirer after terminating the hire purchase agreement, there is nothing wrong in demanding the amounts due from the plaintiffs by issuing Ext.A3 and B8 notices. The question whether the plaintiffs are entitled to any reliefs, depends upon the terms and conditions in Ext.A1 agreement. There is no provision in Ext.A1 enabling the hirer to opt out of the agreement. Even then the trial court held that the lst plaintiff has every right to exercise her option and to back out of the agreement. The question to be decided is as to whether notice issued demanding the amount due from the plaintiff is legally sustainable or not. There is no case for the plaintiff that the claim is barred by limitation. Her case is that since she opted out of agreement, the owner is not entitled to realise the price of the tiller. This is a case where the lst plaintiff has defaulted payment of instalments right from the beginning and through out the -10- S.A.No.202/2003 instalment period. Ext.A3 notice was issued on 22/6/1988 i.e. after the expiry of instalment period. The question to be decided is as to whether the owner has right to demand the amounts due without seizure of the machinery. For that purpose the relevant clause in Ext.A1 agreement is to be interpreted correctly. The trial court as well as the Appellate Court failed to read and interpret the relevant clause in the correct manner for the purpose of passing a just decision. In such circumstances, this Court is of the view that the suit shall be heard and disposed of afresh by the trial court, after going through the materials on record. In this case, no oral evidence was adduced by the parties. The case was decided on the basis of the pleadings and documentary evidence. Therefore, the trial court shall proceed to decide the case afresh in the light of the materials available on record. The parties are not permitted to amend the pleadings or to adduce further evidence. In the result, the appeal is allowed. The judgment and decree passed by the courts below are set aside. The trial court shall -11- S.A.No.202/2003 hear and dispose of the suit afresh, untrammelled by any of the observations made in this judgment and the judgments of the courts below within a period of four months from the date of receipt of a copy of the judgment. No order as to costs. The parties shall appear before the trial court on 18/7/2011. The counsel shall inform the parties. HARUN-UL-RASHID, Judge. kcv.