IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMAN & THE HONOURABLE MR. JUSTICE V.K.MOHANAN TUESDAY, THE 8TH APRIL 2008 / 19TH CHAITHRA 1930 AS.No. 328 of 1991(C) --------------------- OS.182/1987 of II ADDL.SUB COURT, KOZHIKODE .................... APPELLANT/IST DEFENDANT --------------------------------------- V.NARAYANAN NAMBISAN, S/O. SANKARAN NAMBISAN, AGED 58 YEARS, RESIDING IN KANNAMKARA AMSOM AND DESOM, KOZHIKODE TALUK. BY ADV. SRI.K.P.BALASUBRAMANYAN SRI.K.M.KURIAN RESPONDENTS/PLAINTIFF & DEFENDANTS 2 AND 3: ----------------------- 1. CHATHAMPARAMBATH BALACHANDRAN, AGED 30 YEARS, S/O. SANKARAN NAMBISAN, PADINHATTUMMURI AMSOM AND MOOTTOLI DESOM OF KOZHIKODE. 2. K.P.KELUKUTY, AGED 39 YEARS, FATHER'S NAME NOT KNOWN, PROPRIETOR M/S. GOLDEN AUTO GARRAGE ERANHIPALAM, KOZHIKODE TALUK. 3. PUKHRAJ MAHENDRAKUMAR BATALA, FATHER'S NAME NOT KNOWN, FINANCIER, 58/A, ELEPHANT GATE STREET, SOWCARPET, MADRAS - 600 079. BY ADV. SRI.K.K.BHASKARAN SRI.K.P.DANDAPANI SMT.SUMATHY DANDAPANI SRI.K.B.SURESH SRI.T.R.ASWAS THIS APPEAL SUITS HAVING BEEN FINALLY HEARD ON 28-3-2008, ALONG WITH AS NO. 509 OF 1991 AND CROSS APPEAL, THE COURT ON 8-4-2008, ELIVERED THE FOLLOWING: P.R.RAMAN & V.K.MOHANAN,JJ. ---------------------------------------------- A.S.Nos.N0.328/91, 509/91 & Cross Appeal in A.S.328/91 ---------------------------------------------- Dated 8th April, 2008. JUDGMENT Mohanan,J. The above two appeals and the cross appeal in A.S.No.328/91 are arising out of the judgment and decree dated 31-1-91 in a Pauper O.S. No.182/1987 of the court of the Subordinate Judge, Kozhikode. A.S.No.328 /91 is filed by the Ist defendant in the above suit and the cross appeal in the above appeal was field by the plaintiff in the above suit. The 3rd defendant in the above suit is the appellant in A.S. No.509/91. The suit is for recovery of amount and by the impugned judgment, the suit is decreed for a sum of Rs.45,500/- together with interest at the rate of 18% p.a. from the date of suit till realisation with costs of suit. Defendants 1 and 3 who are the appellants in the above appeals are ordered to pay the decree amount to the plaintiff. Therefore defendants 1 and 3 challenged the above judgment and decree by preferring the A.S328 & 509/91. -:2:- above appeals. Though the plaint was for the realisation of total sum of Rs.1,22,050/- the court below had allowed the plaintiff to realise only a sum of Rs.45,500/- Aggrieved by the denial of the full amount as demanded in the plaint, the plaintiff preferred the above cross appeal in A.S.320/91. Suffice to say, no cross appeal has been filed by the plaintiff in A.S.509/91. 2.The plaint averment in brief are as follows: The Ist defendant who was the owner of the bus bearing Regn.No.KLZ 695. entered into an agreement with one K.T. Ramakrishnan on 26-3-1982 fixing the purchase price together with the route permit of the bus and the vehicle was given in possession to the said K.T.Ramakrishnan. But the entire amount by way of sale consideration was not paid by K.T. Ramakirshnan to the Ist defendant and hence the registration certificate was not transferred to his name. However, he was plying the said bus and entered into a partnership for the purpose of plying the vehicle in which the plaintiff and others were made as partners. According to the plaintiff, even before the partnership, the said K.T.Ramakrishnan entered into a “hire A.S328 & 509/91. -:3:- purchase agreement” with the 3rd defendant. It is the further case of the plaintiff that he had invested Rs.12,000/- in the partnership and while so the right in respect of the partnership business was released in favour of the plaintiff for a total consideration of Rs.1,28,500/- towards which the plaintiff was to pay Rs.44,500/- to the said Ramakrishnan and the balance amount was agreed to be paid to the 3rd defendant towards hire purchase amount and the plaintiff paid the said amount to Ramakrishnan. According to the plaintiff, the arrangement between the said Ramakrishnan and 3rd defendant was really an arrangement by way of loan and the plaintiff was made to believe that an amount of Rs.79,000/- is due to the 3rd defendant on the date of the release of right of other partners. It is further averred that subsequently, he came to know that an amount of Rs.36,361/- has been advanced by the 3rd defendant to Ramakrishnan by way of loan. Towards this amount, the plaintiff has paid an amount of Rs.34,900/- in instalments to the 3rd defendant. It is also the claim of the plaintiff that he had expended an amount of Rs.7800/- for the purchase of tyres and A.S328 & 509/91. -:4:- the bus required major repairs and the plaintiff met the expenditure for the repair work and the bus was entrusted to the workshop of the 2nd defendant for major repairs. According to the plaintiff, route permit was released in favour of the plaintiff. Because of the interference of the Ist defendant and other partners of the firm, he had preferred O.S.No.404/1983 before the Munsiff's court, Kozhikode for perpetual injunction. It is the further case of the plaintiff that subsequently, a compromise decree was passed on 23-12-1983 in the above suit. According to the plaintiff, he had complied with the terms of the compromise decree. It is further alleged that the Ist defendant obtained temporary route permit and the bus was being plied in the Gandhiroad - Medical College route and in the meanwhile, the bus was taken to the workshop of 2nd defendant for major repair and kept in the custody of the 2nd defendant for three months. The amount due to the 3rd defendant was paid by the plaintiff and a total sum of Rs.4900/- was paid by the plaintiff. Therefore according to the plaintiff the Ist defendant has no right or possession over the vehicle even though the registration A.S328 & 509/91. -:5:- certificate stood in his name. It is the further case of the plaintiff that the defendants 1 and 3 colluded and handed over the vehicle to the 3rd defendant and thus the vehicle was seized by the 3rd defendant and sold the same to third party. The plaintiff has raised the following claim against the defendants under various heads. According to the plaintiff, he had paid an amount of Rs.44,500/- to K.T.Ramakrishnan, he spent Rs.12,000/- for becoming a partner and an amount of Rs.1000/- paid to the said Ramakrishnan at the time of compromising O.S.No.404/83, spent Rs.7800/- for purchase of tyres, Rs.13,000/- by way of compensation and other benefits to the employees making a total sum of Rs.65,300. He has paid Rs.34,900/- to the 3rd defendant and Rs.5000/- to the Ist defendant on 25-3-1983 and Rs.3,850/- on 31-7-1983. Thus according to the plaintiff, he had sustained a loss of Rs.1,22,050/- and the defendants are jointly and severally liable to compensate the plaintiff. Therefore he demanded the amount by notice for which the defendants had replied with false statements. A.S328 & 509/91. -:6:- 3. Controverting the plaint averments and denying the claims, defendants 1 to 3 filed separate written statements. The appellant in A.S. 328/91 has contended that the suit is not maintainable and he has not caused any loss to the plaintiff and not colluded with the 2nd defendant for removing the bus from his workshop and not handed over the same to the 3rd defendant. According to the Ist defendant , he was not aware of the seizure of the vehicle and he was aware of it only when brought to his knowledge by the plaintiff. It is also the specific case of the Ist defendant that he was not in possession of the vehicle during that time and he is not liable for any loss or damages, if any, caused to the plaintiff due to the alleged seizure of the vehicle by the 3rd defendant. The Ist defendant has specifically denied and stated that the plaintiff had paid no amount towards tax even though he was the absolute owner and liable to pay as per the compromise decree. Revenue Recovery proceedings were initiated against him and he was compelled to make payment towards the vehicle. Ist defendant stated that the suit was filed to wreak vengeance and he is not A.S328 & 509/91. -:7:- liable to pay any amount as stated in the plaint and the statements regarding the payments are incorrect, and thus the suit is mischievous, false frivolous and vexatious and prayed for dismissal of the same with compensatory costs. 4. The 2nd defendant by filing a separate written statement contended that there was no talk or agreement to carry on any work in the said bus and even though the vehicle was kept in the premises of the 2nd defendant, 2nd defendant has not effected any repair due to the lack of instruction and entrustment by the plaintiff. According to the 2nd defendant, he never acted as a bailee and has no liability towards the vehicle or damages and he is an unnecessary party to the suit. According to the 2nd defendant, as per the request of the plaintiff, he obtained a letter from him to the effect that the 3rd defendant has removed the vehicle from the possession of the Ist defendant so as to avoid further tax on the vehicle. 5. Similarly, the 3rd defendant has also filed a separate written statement in which he raised a contention to the effect that there is no privity of contract between the plaintiff and A.S328 & 509/91. -:8:- himself. It is contended that the plaintiff is not entitled to any relief against the 3rd defendant. He had denied and stated that he was not aware of the dealings entered into by the plaintiff and defendants 1 and 2. According to the 3rd defendant, he is not liable for any damages claimed in the suit and the vehicle is subject to the hire purchase agreement. According to him, he is not liable for any relief claimed in the plaint and the suit is bad for misjoinder of cause of action and parties. 6. On the basis of the plaint averments and the rival contentions raised in the written statements and the rival pleadings of the parties, the trial court has formulated 10 issues. During the trial of the suit, oral evidence was adduced by examining PW1 from the side of the plaintiff and Dws 1 and 2 from the side of defence. From the side of the plaintiff Ext.A1 to A22 were marked and from the side of the defence, Exts.B1 to B6 were marked. After hearing the parties to the suit, finally, by the impugned judgment, the court below allowed the suit partially decreeing for a sum of Rs.45,500/- only while rejecting the other claims and allowed interest on the above amount at the A.S328 & 509/91. -:9:- rate of Rs.18% per annum from the date of the suit till the realisation of the amount with cost and defendants 1 and 3 are held liable to pay the decree amount to the plaintiff. It is the above judgment and decree are challenged by defendants 1 and 3 by filing the above appeals. The plaintiff preferred the cross appeal in A.S.No.328/91 to the extent the court below has rejected the other claim and demand of the plaintiff especially, towards the expense incurred by him in connection with the above transaction. 7. We have heard Sri K.P.Balasubramanian, the counsel appearing for the appellant in A.S.328/91 and Sri K.P.Dandapani, the counsel appearing for the cross appellant/plaintiff in the cross appeal filed in A.S.328/91. Sri K.P.Balasubramanian, counsel appearing for the appellant in A.S.328/91 submitted that the Ist defendant has no role in the removal of the vehicle by the 3rd defendant from the workshop of the 2nd defendant. It is also submitted that the plaintiff has miserably failed to prove and establish th alleged collusion among the defendants 1 and 3. It is also submitted that in A.S328 & 509/91. -:10:- fact, regarding the seizure of the vehicle, the Ist defendant came to know only from the plaintiff when he disclosed the same to the Ist defendant. According to him, the plaintiff was liable to pay tax for the vehicle in terms of the compromise decree, i.e. Ext. A4. According to the learned counsel that though Ext.A4 contained specific clause that the plaintiff has to pay tax, the official authorities initiated proceedings against the Ist defendant for the default of payment of tax, since the registration of the vehicle was in the name of the Ist defendant and accordingly, he had paid the amount. It is in the above circumstances, he has instituted the suit for recovery of the amount paid by him. The contention raised by the 3rd defendant is that the vehicle is subject to hire purchase agreement and as such, the 3rd defendant is entitled to seize the vehicle for default payment of the instalment. Counsel for the cross appellant in A.S.328/91 submitted that the finding of the court below that the plaintiff has not complied with the terms of Ext.A4 compromise decree is absolutely incorrect. According to the counsel, there was no arrears of tax in respect of the vehicle as on 1-11-82 and the Ist A.S328 & 509/91. -:11:- defendant ought to have executed an agreement transferring all his rights with respect to the vehicle as on 1-11-82. It is also contended that as per the so called hire purchase agreement, the ownership of the vehicle has been transferred to K.T.Ramakrishnan and as such, the 3rd defendant cannot be said to be the owner of the vehicle. It is also contended that the 3rd defendant has no right to seize the vehicle for default of payment of dues and there is a glaring mistake and the court below has committed error in finding under issue No.3 that the 3rd defendant is entitled to seize the vehicle. According to the counsel, the court below has committed error in not granting various amounts claimed by the plaintiff though the claims are supported by documents. 8. Learned counsel appearing for the cross appellant/plaintiff further submitted that the finding entered into by the court below under issued No.3 is against the settled principles of law. The counsel submitted that in fact there is no hire purchase agreement between defendants 1 and 3 or between the said K.T.Ramakrishnan and the 3rd defendant. It is A.S328 & 509/91. -:12:- borne out from the records and the submissions of the parties to the suit that the registration of the vehicle is in the name of the Ist defendant and as long as the name of the registered owner is not changed, the transfer of ownership in the name of K.T.Ramakrishnan has not been effected, Ext.B5 cannot be treated as hire purchase agreement. In support of the above submission, the learned counsel invited our attention to the decision of the Apex Court in Sundaram Finance Ltd. v. State of Kerala (AIR 1966 SC 1178) In paragraph 23 of the above decision, the Apex Court has held: “A hire purchase agreement is normally one under which an owner hires goods to another party called the hirer and further agrees that the hirer shall have an option to purchase the chattel when he has paid a certain sum, or when the hire-rental payments have reached the hire-purchase price stipulated in the agreement. But there are variations when a financier is interposed between the owner of the goods and the customer. The agreement, ignoring variations of detail, broadly takes one or the other of two forms. (1) when the owner is unwilling to look to the purchaser of goods to recover the balance of the A.S328 & 509/91. -:13:- price, and the financier who pays the balance undertakes the recovery. In this form, goods are purchased by the financier from the dealer and the financier obtains a hire-purchase agreement from the customer under which the latter becomes the owner of the goods on payment of all the instalments of the stipulated hire and exercising his option to purchase the goods on payment of a nominal price. The decision of this Court in AIR 1956 SC 1082 dealt with a transaction of this character. (2) In the other form of transactions, goods are purchased by the customer, who in consideration of executing a hire- purchase agreement and allied documents remains in possession of the goods, subject to liability to pay the amount paid by the financier on his behalf to the owner or dealer, and the financier obtains a hire- purchase agreement which gives him a license to seize the goods in the event of failure by the customer to abide by the conditions of the hire- purchase agreement”. In the light of the above observation, and the finding of the Honourable Supreme Court, Ext.B5 cannot be treated as hire purchase agreement. On the other hand, the same can be treated only as an agreement between the financier and the A.S328 & 509/91. -:14:- registered owner and therefore the 3rd defendant cannot seize the vehicle or take the same into possession without the intervention of a court of law. A learned Judge of the High Court of Punjab and Haryana in the decision reported in Tarun Bhargava v.State of Haryana (AIR 2003 P & H 98) held that in a loan agreement for financing goods on hypothecated basis the creditor cannot forcibly repossess the hypothecated item, though he can enforce the security through the Court. It is further held that if the agreement is held to be a loan agreement and rights of the creditor are held to be those of a hypothecatee, rights of the parties under the agreement would be different. A hypothecatee, cannot take possession of the security without intervention of the Court, though he has a right to take possession or to sell the hypotecated property through Court or to give notice to the hypothecator to enforce the security. In the very same decision it is further held that if a specific clause is inserted in an agreement of loan authorizing repossession of a vehicle or any other goods by the hypothecatee such a clause may be unconscionable unless otherwise shown by A.S328 & 509/91. -:15:- the hypothecates and such a clause inserted in the case would be held to be void. In the light of the above decisions, the finding of the court below under issue No.3 is absolutely incorrect and against the settled position of law and therefore we set aside the above finding of the court below. The consequence is that the seizure of the vehicle by the 3rd defendant is illegal and therefore, the liability has to be fixed upon the 3rd defendant who is the appellant in A.S.509/91. 9. Counsel for the cross appellant further submitted that the trial court has wrongly rejected the other claims of the plaintiff. Under issue Nos.5 and 8, the trial court has found that no evidence was adduced by the plaintiff to substantiate his claim under various heads. The trial court has also found that though the plaintiff has claimed Rs.1,28,000/- the purpose for the amount paid were not stated in the plaint. Another reason given by the trial court is that in Ext.A4 compromise decree it is stated that if any party violates the terms and conditions, other parities can take action against the person. It is also found that the aggrieved party can approach before the court of law for A.S328 & 509/91. -:16:- proper remedy. After analyzing the available materials and evidence, the trial court found that the plaintiff paid Rs.44,500/- at the time of releasing the partnership business in the name of plaintiff and Rs.1000/- as per compromise decree to K.T.Ramakrishnan and therefore, the plaintiff is entitled to realise only that amount from defendants 1 and 3. In the absence of any further evidence to substantiate the claim of the plaintiff, we have to confirm the finding of the court below that the plaintiff is entitled to get only Rs.45,500/-. 10. The learned counsel appearing for the appellant in A.S.328/91 strenuously argued that that the plaintiff failed to establish any collusion between defendants 1 and 3 and therefore no liability can be fixed against the Ist defendant. It is true that the Ist defendant is the registered owner of the vehicle. But the plaintiff has not adduced any evidence to show that there was collusion between defendants 1 and 3. In the absence of concrete evidence to show collusion, no liability can be fixed. What is borne out from the records and held by the court below is that the vehicle was kept in the premises of the 2nd A.S328 & 509/91. -:17:- defendant and it was kept there for a period of more than 2 months. From the above, the court below has inferred that the vehicle was entrusted to the 2nd defendant. Therefore, according to the court below the contention of the 2nd defendant that it was not entrusted to him is not acceptable. Another circumstance relied on by the court below is that at the time of seizing the vehicle by the 3rd defendant, the Ist defendant was the R.C.owner and it was not proved that the plaintiff was present in the premises of the 2nd defendant when the vehicle was seized. The court below has also stated that it is not proved that the vehicle was seized with the knowledge of the plaintiff. On the basis of Ext.A10 receipt, the court below has held that the vehicle was entrusted by the Ist defendant to the 3rd defendant and the Ist defendant has not answered about the statement that it was entrusted by him. It appears that the court below came into the conclusion purely based on surmises and conjectures that the vehicle was entrusted to the 3rd defendant by the Ist defendant. But according to the plaintiff, the vehicle was seized by the 3rd defendant due to collusion A.S328 & 509/91. -:18:- between defendants 1 and 3. But there is no concrete evidence as to how the collusion was taken place and the modus operandi of such collusion. Merely because the Ist defendant was the R.C.owner and he did not deny the allegation that he had entrusted the vehicle with the 3rd defendant, it cannot be presumed for a while that there was collusion between defendants 1 and 3. On the other hand, it is the burden of the plaintiff to establish collusion among the defendants by adducing concrete and positive evidence. In the absence of such materials and evidence, we are unable to endorse the finding of the court below that there was collusion among defendants 1 and 3. Therefore, we set aside the finding of the court below that there is collusion between defendants 1 and 3 for entrusting the vehicle to the 3rd defendant. 11. In the light of the above discussion and the above settled position of law, we are of the opinion that seizure of the vehicle by the 3rd defendant, the appellant in A.S.509/91 is illegal and the finding of the court below justifying the seizure by the 3rd defendant is set aside. Since there is no evidence to A.S328 & 509/91. -:19:- substantiate the allegation of collusion between defendants 1 and 3, no liability can be fixed against the appellant/defendant in A.S.328/91. In the absence of any positive and further evidence to substantiate the claim of the plaintiff, other than what allowed by the court below, we confirm the finding of the court below that the plaintiff is entitled to get only an amount of Rs.45,500/- together with interest at the rate of 18% per annum from the date of suit till realisation with cost of suit. But the finding of the court below that the Ist defendant is also liable to pay the decree amount is set aside and such liability is confined only to the 3rd defendant. Since no cross appeal is preferred by the plaintiff in A.S.509/91, our finding in A.S.328/91 and the cross appeal therein became final and accordingly A.S.No.509/91 is dismissed. 12. In the result, A.S.328/91 is allowed and A.S. No.509/91 is dismissed and the cross appeal in A.S.328/91 is allowed partially holding that the seizure of the vehicle by the 3rd defendant is