Repossession
Default - Banking
Financier is the real owner of the vehicle which is the subject of a hire purchase agreement, and there can not be any impediment to the Financier, taking repossession of the vehicle
Hire-purchase agreement – Financier is the real owner of the vehicle which is the subject of a hire purchase agreement, and there can not be 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.
In case the vehicle is seized by the financier, no criminal action can be taken against him as he is re-possessing the goods owned by him
Hire Purchase – Repossession - Banking – In an agreement of hire purchase, the purchaser remains merely a trustee/bailee on behalf of the financier/financial institution and ownership remains with the latter. Thus, in case the vehicle is seized by the financier, no criminal action can be taken against him as he is re-possessing the goods owned by him.
Loan Transaction - Repossession
Loan - Repossession – 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.
Recovery of possession of the vehicle by financier-owner as per terms of the hire purchase agreement, does not amount to a criminal offence.
In case of default to make payment of instalments financier had a right to resume possession even if the hire purchase agreement does not contain a clause of resumption of possession for the reason that such a condition is to be read in the agreement. In such an eventuality, it cannot be held that the financier had committed an offence of theft and that too, with the requisite mens rea and requisite dishonest intention. The assertions of rights and obligations accruing to the parties under the hire purchase agreement wipes out any dishonest pretence in that regard from which it cannot be inferred that financier had resumed the possession of the vehicle with a guilty intention.
K.A. Mathai alias Babu & Anr. v. Kora Bibbikutty & Anr., (1996) 7 SCC 212
No theft
Repossession – Theft - 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.
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
Hire-purchase – Loan transaction - A hire-purchase is, is a 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 - Held, 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. 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 - 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.
Recovery of possession of the vehicle by financier-owner as per terms of the hire purchase agreement, does not amount to a criminal offence.
Recovery of possession of the vehicle by financier-owner as per terms of the hire purchase agreement, does not amount to a criminal offence. Such an agreement is an executory contract of sale conferring no right in rem on the hirer until the transfer of the property to him has been fulfilled and in case the default is committed by the hirer and possession of the vehicle is resumed by the financier, it does not constitute any offence for the reason that such a case/dispute is required to be resolved on the basis of terms incorporated in the agreement. The Court elaborately dealt with the nature of the hire purchase agreement observing that in a case of mere contract of hiring, it is a contract of bailment which does not create a title in the bailee. However, there may be variations in the terms and conditions of the agreement as created between the parties and the rights of the parties have to be determined on the basis of the said agreement. The Court further held that in such a contract, element of bailment and element of sale are involved in the sense that it contemplates an eventual sale. The element of sale fructifies when the option is exercised by the intending purchaser after fulfilling the terms of the agreement. When all the terms of the agreement are satisfied and option is exercised a sale takes place of the goods which till then had been hired.
(2001-3)129 P.L.R. 833 (S.C.),
Sale of vehicle repossessed
Hire-purchase agreement – Repossession - Sale - Consumer Protection Act, 1986 - The Financier being the owner of the vehicle, there was no obligation on the part of the Financier, to divulge details of the sale of that vehicle, and that too on its own, without being called upon to do so - State Commission terming Sale of vehicle as “dubious” as there was no mention of the amount due to be paid by the Complainant to the Financier, of when the vehicle had been sold and the amount for which the vehicle had been sold, whether such amount was more than or less than the amount due from the Complainant to the Financier, in the Written Statement - The aforesaid observation, of the sale being dubious, has been made, overlooking the terms and conditions of the hire purchase agreement, and without considering the law governing hire purchase agreements - Financier remains the owner of the vehicle taken by the complainant on hire, on condition of option to purchase, upon payment of all hire instalments - The hire instalments are charges for use of the vehicle as also for the exercise of option to purchase the vehicle in future - The Financier being the owner of the vehicle, there was no obligation on the part of the Financier, to divulge details of the sale of that vehicle, and that too on its own, without being called upon to do so.
Repossession - Notice
Hire-purchase agreement – Repossession - Notice - Issuance of – Intent of - 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 the said agreement, upon payment of all outstanding dues together with damages, as might be mutually agreed upon - 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 - 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.