Whether reporters of local papers may be allowed to see the judgment? IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA. RFA No.97 of 2003. Judgment reserved on 29.3.2011. Date of Decision: 7th April, 2011. Suresh Kumar. ….. Appellant. Versus M/s Dignity Motors Finance Limited and others. …. Respondents. Coram Hon’ble Mr. Justice Surinder Singh, J. Whether approved for reporting1? Yes. For the Appellant : Mr. Atul Jhingan, Advocate. For the Respondent: Mr. Bhuvnesh Sharma, Advocate, for respondent No.1. None for respondents No.2 (a) to 2(c). SURINDER SINGH, J. The present appeal is directed by the defendant Suresh Kumar against the judgment and decree passed by the learned District Judge, for the recovery of an amount of ` 4,70,000/- with pendente lite and future interest @ 22% per annum. 2. The factual matrix giving rise to the present appeal are that the respondent-company, hereinafter referred as ‘the plaintiff’ is registered under the Companies Act and is engaged in the business of hire- purchase of motor vehicles and for this purpose they - 2 - have been advancing loans. Shri Piar Chand is one of its Directors, authorized to file the suit against the appellants and proforma respondent, hereinafter to be referred as ‘the defendants’ as they were before the learned trial Court. Plaintiff’s Case: 3. Defendant No.1 Suresh Kumar approached the plaintiff Company for advancement of the loan for the purchase of the truck. He was made to understand the terms and conditions of the Company for advancing loan. After admitting the terms and conditions for the loan, the defendant aforesaid put a demand of loan to the tune of `2,90,000/- to be liquidated by him within two years, which was accepted by the plaintiff- Company and Hire and Purchase agreement Ex.PC was executed on 17.7.1996. His father Bali Ram (defendant No.2) and Amar Nath, predecessor-in- interest of the proforma respondents herein stood sureties to repay the loan by the principal borrower. A cheque of ‘Kangra Central Cooperative Bank’, Barsar branch amounting to ` 2,90,000/- was issued on the same date by the plaintiff Company. As per the terms of loan agreement, the repayment of the aforesaid - 3 - amount was agreed to be paid in 24 equal monthly instalments of `18,000/- each except the last instalment for ` 9,400/- it included the interest @ 22% per annum. The details of the payment was mentioned in Schedule- ‘B’ attached to the said agreement. It is alleged that defendant No.1 only repaid an amount of `1,000/- on 30.7.1996 and committed default in the repayment of loan as per schedule. The copy of ledger is Ex.PF. As per the accounts maintained by the plaintiff-Company, an amount of `4,70,000/- was due upto 10.12.1998, which was neither repaid by the principal borrower nor the liability was discharged by his sureties aforesaid, who were jointly and severally liable to repay the same. Despite the repeated requests, the defendants failed to repay the amount of loan. It is alleged that the defendant Suresh Kumar removed the material parts of the machinery of his truck bearing registration No.HP- 22-4205 mischievously, so that the plaintiff-Company would not be in a position to recover the loan amount even by impounding the said vehicle. When the loan was not repaid by the defendants, a notice was issued and suit was filed for the recovery of the aforesaid amount alongwith interest as aforesaid. - 4 - Defendants Case: 4. Defendants resisted and contested the claim of the plaintiff-Company. Defendants No.1 and 2 filed their joint written statement and defendant No.3 Amar Nath contested the suit by filing a separate reply. According to defendants No.1 and 2 the plaintiff- Company committed a fraud in connivance with defendant No.3 and prepared a false document and suppressed the material facts. Further that it did not meet the standards and conditions of the Reserve Bank of India, thus it cannot carry out the trade of hire- purchase violating the financial rules and also that Piar Chand has no locus-standi to file the suit vis-a-vis took up the preliminary objections of estoppel and sought better particulars. 5. On merits, defendants denied the case of the plaintiff in toto and specifically pleaded that defendant No.1 Suresh Kumar had approached the plaintiff-Company on 10.10.1994 for advancement of the loan to the tune of `1,00,000/- with respect to Vehicle No.HP-22-4205 and executed an agreement and his father Bali Ram and Amar Nath stood guarantors for repayment of loan amount. Pursuant to - 5 - that on 11.10.1994, the plaintiff Company issued a Cheque to the tune of `1,90,000/- of Punjab National Bank, Barsar, representing that the Company had to give loan to the tune of `90,000/- to some other party who was out of station and after encashment he returned ` 90,000/- to the plaintiff company and retained `1,00,000/-. It was also his case that at that time, the plaintiff-Company got his signatures on blank hire-purchase agreement, which was later forged by the plaintiff-Company on the basis of which the present suit was filed. It was also their case that the amount of `1,00,000/- was repaid with interest. Defendants also pleaded that thereafter the Registration Certificate of the vehicle aforesaid has been coming in the name of the defendant Suresh Kumar throughout, thus, there was no question of subsequent hire and purchase as alleged, at all. In nut-shell, he also denied the receipt of the aforesaid loan amount and the execution of the agreement dated 17.7.1996. It was also pleaded that the plaintiff Company had taken over the possession of the vehicle in question unauthorizedly and illegally and the defendant was deprived of running the business, hence denied their liability. - 6 - 6. Defendant No.3 Amar Nath vide separate written statement pleaded that defendants No.1 and 2 somewhere in the year 1996 told him to become the witness and sign some papers, but he was never told about the repayment schedule by either of the defendants for the repayment of the loan amount. He having admitted the receipt of the notice from the plaintiff Company for repayment of loan in the middle of the year 1997, lest the truck in question which was purchased by defendant No.1 against the loan amount would be intercepted. It was then he came to know that he was shown as guarantor of the said amount and approached the plaintiff-Company, but they told that the defendants aforesaid were paying the loan amount regularly after the truck was impounded by them. He insisted upon the plaintiff- Company not to release it, till the realisation of their amount and he should be absolved from his liability. Even the defendant No.1 had told him that he would get the vehicle refinanced for which the plaintiff also agreed, but what happened thereafter, he was not aware. - 7 - 7. In replication, the plaintiff Company denied the preliminary objections and reaffirmed the even paras on merits. Parties At Issue. 8. On the pleading of the parties, the following issues were framed:- 1. Whether the plaintiff advanced an amount of ` 2,90,000/- to defendant No.1 on 17.7.1996 ? .. OPP. 2. Whether the defendant No.1 had promised and undertaken to return `.4,23,400/- within two years to the plaintiff? …OPP. 3. Whether the said loan was guaranteed by defendants No.2 and 3. If so, what is its effect on the liability of defendant No.1? …OPP. 4. Whether Sh.Piar Chand has got locus standi to file the suit? …OPP. 5. Whether the suit is maintainable having cause of action? …OPP. 6. Whether the document date 17.7.96 is fictitious and forged one? …OPD 1 & 2. 7. Whether the plaintiff is entitled to charge interest at the rate of 22 percent per annum. If not, to what rate of interest the plaintiff is entitled to? … OPD 1 & 2. 8. Whether the defendant No.1 had approached the plaintiff for loan to the extent of `.1,00,000/- on October 10, vide agreement dated 10/11-10-94. If so, its effect? …OPD 1 & 2. - 8 - 9. Whether the plaintiff company was being run in violation of the terms and conditions imposed by the Reserve Bank of India? If so, its effect? …OPD 1 & 2. 10. Whether defendant No.2 being guarantor of the defendants No.1 and 2 has connived with the plaintiff. If so, is effect? …OPD 1 and 2. 11.Relief. Findings of the Learned District Judge: 9. The parties led their evidence and after the complete trial, the learned District Judge held that Piar Chand was competent to file the suit on behalf of the plaintiff-Company and also that on 10/11-10-1994, defendant No.1 had approached the plaintiff- Company for the advancement of the loan amount to the tune of `2,90,000/-, which was advanced to him and was repayable as per loan schedule, since principal borrower failed to return the balance amount with agreed interest @ 22% P.A. thus he alongwith defendants being guarantors were liable jointly and severally to repay the same. Further that the plaintiff company was not being run in violation of the terms and conditions of the Reserve Bank of India. It was also held that earlier the defendant No.1 had taken the loan of `1,00,000/- but it does not have any effect on the present and subsequent transaction and also that - 9 - there was confusion between defendants No.1 and 2 to implicate defendant No.3 as guarantor. Hence, the suit was decreed as aforesaid. 10. Feeling aggrieved and dissatisfied by the impugned judgment and decree passed by the learned trial Court, the defendants Suresh Kumar and his father Bali Ram filed the present appeal against the plaintiff-Company impleading Amar Nath as respondent No.2. But during proceeding in appeal, Bali Ram appellant had died and vide order dated 15.9.2010 his name was ordered to be deleted and Amar Nath defendant-respondent had also died thus his legal representatives were brought on record. Contention of learned counsel for appellant: 11. Shri Atul Jhingan, learned counsel for the defendant appellants vehemently argued that the plaintiff Company failed to prove the agreement dated 17.7.1996 and also the advancement of the loan. To support his arguments, he took me through the evidence on record and ventilated that the vehicle in question remained in the name of defendant No.1 throughout. Therefore, there was no question of execution of a hire-purchase agreement and it was a - 10 - simple loan transaction and its payment to the defendant No.1 could also not be proved by the plaintiff and further that the truck was reprocessed b the plaintiff-Company which caused loss to the defendants and in any case, the interest awarded is too exorbitant, therefore, the impugned judgment and decree are unsustainable. Contention of the learned counsel for respondent. 12. Shri Bhuvnesh Sharma, learned counsel for the respondent-Company repelled the above arguments and supported the impugned judgment and decree of the learned trial Court and urged that it is a commercial transaction and the interest awarded by the learned trial Court is contractual rate of interest which may not be interfered with. My Findings: 13. I have given my thoughtful consideration to the rival contentions of the parties and have carefully gone through the evidence on record. 14. From the rival contentions, the following questions arises for its determination:- - 11 - (i) Whether the plaintiff has been successful in proving the hire-purchase agreement Ex.PC dated 17.7.96 and advancement of the loan as alleged? (ii) Whether the loan in question is not a hire-purchase agreement but a term loan, if so its effect? (iii) Whether the interest awarded by the learned trial Court is exorbitant? 15. First two points are inter-connected, hence taken up together for its decision. 16. In fact, ‘hire-purchase agreement’ is the one under which an owner hires goods to a hirer, giving the hirer an option to purchase the goods. On the other hand, when a person borrows money and pays it to vendor, transaction between the customer and the lender will be a loan transaction, in a hire-purchase agreement, the hirer is under no obligation to buy. Where the customer is himself the owner and with a view to finance his purchase, he enters into an arrangement in the form of hire purchase agreement, it will be a loan transaction. A hire-purchase agreement may in substance be a loan transaction and label of such an agreement is not conclusive. Thus, it is open to the Court to determine whether a particular transaction is a loan or a hire-purchase agreement. - 12 - 17. In the instant case, the plaintiff-Company is not a dealer of motor vehicles, but runs an independent business of finance. Undoubtedly defendant No.1 has been the owner of the vehicle in question on the date of alleged agreement (Ex.PC). Vide Clause No.2 of the said agreement, the plaintiff-Company on the payment of token amount of `100/- as initial payment of hire, became its absolute owner and this entry was also found mentioned in favour of the plaintiff- Company in the Registration Certificate Ex.DW5/B of the vehicle in question and the agreement witnessed that the defendant Suresh Kumar was an hirer and plaintiff-Company became its absolute owner by consent. Vide Clause No.3 the amount of hire instalments mentioned in Schedule ’B’ were required to be punctually paid on or before the date mentioned therein to the owners i.e. the plaintiff-Company and Clause 4 thereof inter-alia provided that the hirer is debarred to challenge its right of ownership. The Hirer was required to keep the vehicle in question, mentioned in Schedule ‘A’ in good condition. The perusal of Ex.PC shows that it satisfies the requirement of Hire and purchase agreement and is not a simple - 13 - loan transaction. The intention of the parties was to create and execute the Hire and purchase agreement on the terms and conditions mentioned therein. Now the question arises whether defendant No.1 executed hire-purchase agreement and defendants No.1 and 2 stood guarantee for the loan amount as alleged. 18. The case of the plaintiff has been that the defendant No.1. took the loan of Rs.1,00,00/- from the plaintiff-Company in the year 1994 and signed a blank hire-purchase agreement, but instead of `1,00,000/- , the plaintiff-Company issued a Cheque to the tune of `1,90,000/- and by opening his own savings bank account, money was transferred by Punjab National Bank Barsar branch to its account and ` 90,000/- was returned to the plaintiff-Company on the pretext that they had to make the payment of `90,000/- to some other loanee, but defendant No.1 denied the execution of hire-purchase agreement on 17.7.96 as alleged. 19. PW1 Piar Singh stated that the aforesaid agreement was executed on 17.7.96 whereby defendant No.1 agreed to pay 22% annual interest. He further stated that the agreement in question was read - 14 - over to him to which he admitted to be correct and thereafter appended his signatures thereon. He also stated that defendant aforesaid produced his father Bali Ram and Amar Nath as sureties who stood guarantors to the repayment of loan. They also signed the document aforesaid in the presence of the witnesses Babu Ram and Bakshi Ram on the same day knowing fully well its contents. He further stated that on the same day, Voucher Ex.PD for the loan amount was also filled in and the money was advanced through bank to him. He admitted that in the year 1994, the defendant aforesaid had taken loan of `2,00,000/- which was repaid by him, but according to him insofar as the present loan amount is concerned, he only paid `1,000/-. In his cross-examination he stated that the agreement in question was executed in his presence. He denied that the truck in question was not taken on hire-purchase basis. PW2 Babu Ram witness to Ex.P3 supported the case of the plaintiff. He also stated that the defendants had signed the aforesaid agreement in his presence after admitting its correctness and no portion thereof was blank. Further PW4 Bakshi Ram afforded corroboration to his statement. - 15 - 20. Pertinently, PW3 Manohar Lal, Manager of Kangra Central Cooperative Bank stated that the plaintiff-Company had an account in their bank and Cheque No.329572 dated 17.7.96 was issued in favour of defendant No.1 Suresh Kumar to the tune of `2,90,000/-, which was encashed by him. He also produced the original cheque in his further cross- examination and no cross-examination was conducted on this aspect of the case. 21. In view of the above facts and circumstances, it is clearly established that the hire-purchase agreement dated 17.7.96 (Ext.PC) was executed inter-se the plaintiff-Company and defendant No.1 and an amount of `2,90,000/- was advanced to defendant No.1 through cheque to which defendants No.2 and 3 stood guarantee. The agreement Ex.P3 stands proved. The repayment schedule was mentioned in agreement aforesaid, which was to be paid in 24 equal monthly instalment of `18,000/- except the last instalment of `9,400/-. 22. PW5 Narinder Kumar Thakur, Advocate proved the case of the plaintiff-Company. He has proved having sent a notice Ex.PW5/A on behalf of defendant - 16 - Suresh Kumar to the plaintiff-Company, whereby defendant admitted having financed the truck No.HP22-4205 worth ` two lacs aforesaid on 17.7.96 by the plaintiff-Company, which was returnable on or before 17.8.2008 and vide the said notice informed the plaintiff-Company that the said truck had met with an accident, thus he could not clear the dues as per the agreement, but despite that the plaintiff-Company took the possession of the said truck on 19.9.97 when it was under repair at Nadaun which created financial loss and mental tension to defendant No.1. It was also mentioned that defendant No.1 was ready and willing to clear the outstanding amount, but in case said truck is not handed over back, the plaintiff-Company would be responsible for the entire losses at the rate of `1,000/- per day. 23. The aforesaid facts clearly prove that defendant No.1 had executed an agreement Ex.PC on 17.7.96 and he is also proved to have been advanced the amount of `2,90,000/- through bank from the account of the plaintiff-Company which was to be repaid as per the Schedule. Since defendant No.1 agreed the repayment schedule, therefore, the denial - 17 - of the execution of agreement by the defendant- appellants and advancement of amount pursuant to it is dishonest. Defendant No.3 also vide his written statement admitted this fact in so many words. Further defendant No.1 as DW3 admitted his signatures on the agreement aforesaid and on Vouchers Ex.PD and PE and also that of the other defendants, but his case was that at the relevant time, it was not filled in, which goes contrary to the facts proved on the record. 24. As already stated above, there is an agreement to repay the loan amount to the tune of `2,90,000/- with interest in instalments as aforesaid. The parties are bound by this agreement. The possession of the truck was taken by the plaintiff-Company on 19.7.1997, as stated by defendant No.1, but according to the plaintiff, defendant No.1 committed theft of the said truck and FIR was lodged, for which he was facing trial and later it was given on supurdari to the plaintiff- Company and it is also in evidence that the said truck did not have the engine and other material parts and was not in a road worthy condition. Since defendant No.1 failed to repay the loan amount as per agreed schedule and the Guarantors i.e. defendants No.2 and - 18 - 3 also did not discharge their liability, the learned trial Court rightly held the defendants jointly and severally liable to repay the said amount under the Hire and purchase agreement and interim custody of truck on supurdari to the plaintiff-Company has no effect. Both the points aforesaid are accordingly decided. 25. But insofar as the third point qua pendente lite and future interest is concerned, it appears to be exorbitant. Section 34 of the Code of Civil Procedure gives discretion to the Court for ordering the interest on the principal sum adjudged and may order the interest at such rates as the Court deems reasonable to pay at such sum from the date of institution of the suit till its payment. 26. Although, in a simple suit of recovery of money from a commercial concern, it will not be inequitable to award higher interest, but having regard to the fact that it was a commercial transaction, the case falls within first proviso to Section 34 of the Code of Civil Procedure thus the interest by the Court can be granted at the rate more than 6% per annum. 27. Therefore, in the facts and circumstances of the case, in my opinion, the plaintiff- Company is entitled to - 19 - simple interest @ 9% per annum from the date of filing of the suit till its realisation. Thus, the impugned judgment and decree is modified to the above extent and the appeal is partly allowed. Costs on parties. The points aforesaid are accordingly answered. 28. No other point is urged before me. 29. Send down the records of the trial court forthwith. (Surinder Singh) 7th April, 2011. Judge. (Pds)