Equivalent citations: 2001VIIAD(SC)75, AIR2001SC3721, 2001(2)ALT(CRI)291,
2001(3)ARBLR497(SC), II(2007)CPJ41(SC), 2001CRILJ4255, JT2001(7)SC226,
RLW2001(3)SC405, 2001(6)SCALE29, (2001)7SCC417, AIR 2001 SUPREME
COURT 3721, 2001 (7) SCC 417, 2001 AIR SCW 3487, 2002 (1) ALL CJ 141,
(2002) 33 SCCRIR 477, (2001) 4 CTC 102 (SC), 2001 CRILR(SC&MP) 561, 2001
SCC(CRI) 1557, 2001 (6) SCALE 29, 2001 (3) ARBI LR 497, 2001 (4) CTC 102,
2001 (9) SRJ 74, (2001) 7 JT 226 (SC), 2001 CRILR(SC MAH GUJ) 561, 2002
ALL CJ 1 141, (2001) 4 CRIMES 264, (2001) 4 PAT LJR 83, (2001) 3 EASTCRIC
186, (2001) 3 ARBILR 497, 2001 CHANDLR(CIV&CRI) 409, (2002) 33 SC CR R
477, (2001) 2 KER LJ 609, (2002) 1 MAH LJ 401, (2002) 1 MAHLR 51, (2002) 1
MPLJ 321, (2001) 21 OCR 520, (2001) 3 PUN LR 833, (2001) 3 RAJ LW 405,
(2001) 4 RECCRIR 192, (2001) 3 CURCRIR 232, (2001) 7 SUPREME 239, (2001)
3 ALLCRIR 2480, (2001) 6 SCALE 29, (2001) 2 UC 582, (2001) 43 ALLCRIC 691,
(2002) 2 BLJ 119, (2001) 4 ALLCRILR 60, (2001) 4 CRIMES 26, (2007) 2 CPJ 41,
2001 (2) ANDHLT(CRI) 291 SC
Author: K.G. Balakrishnan
Bench: K.T. Thomas, K.G. Balakrishnan
JUDGMENT
K.G. Balakrishnan, J.
1. Leave granted.
2. The appellants are running a non-banking financial institution, by name, Messrs Deluxe Leasing
Private Limited. The respondent, Sudhir Mehra, partner of a partnership firm, entered into a hire
purchase agreement with the appellants on 3.5.1994 whereunder a motor vehicle was handed over
to the respondent. The total consideration agreed to be paid by the respondent was Rs. 3,02,884/-
and the respondent made an initial payment of Rs. 69,308/- and the balance amount was to be paid
in 36 monthly instalments of Rs. 8,400/- each starting from 3.6.1994. According to the respondent,
he had been paying the instalments regularly. The respondent filed a criminal complaint before the
Judicial Magistrate, Amritsar on 3.12.1998 alleging that the motor vehicle in question had developed
some trouble and it was entrusted to a motor mechanic on 14.9.1996 for carrying out repairs and
Charanjit Singh Chadha And Ors. vs Sudhir Mehra on 31 August, 2001
that in the night of 16.9.1996 the appellants forcibly took away the vehicle from the motor mechanic
and thus committed offences u/s 406/420/120-B IPC. Pursuant to the complaint, the Magistrate
took cognizance of the offences and issued summons to the appellants. Appellants filed a petition
under section 482 of Criminal Procedure Code before the High Court of Punjab & Haryana to quash
the complaint proceedings. In the petition, it was alleged by the appellants that respondent had
committed default in paying the instalments and that as on 1.9.1996 an amount of Rs. 1,34,887/-
was outstanding against the respondent and therefore the appellants were constrained to terminate
the hire purchase agreement and that the respondent surrendered the motor vehicle to the
appellants. The learned Single Judge of the High Court declined to quash the proceedings and held
that the allegations in the complaint were capable of making out offences punishable especially
under Section 379 IPC and, therefore, the petition under Section 482 Cr.P.C. was dismissed.
Aggrieved by the same, the appellants have filed the instant appeal.
3. We heard learned counsel on either side. The counsel for the appellants contended that the
allegations made in the complaint would not make out an offence punishable under law and that the
appellants had exercised their right under the hire purchase agreement. It was argued that even if it
is proved that the vehicle was forcibly taken away from the custody of the respondent, that may not
be an offence punishable under law as the hire purchase agreement clearly provided for
re-possession of the vehicle by the owner, namely, the appellants, in the event of default by the
respondent.
4. Admittedly, the respondent entered into a hire purchase agreement with the appellants and
pursuant thereto the respondent obtained a motor vehicle and agreed to pay the balance
consideration in instalments. According to the appellants, the respondent committed default in
paying the instalments and the hire purchase agreement was terminated, whereas the respondent
would contend that he had been paying the instalments regularly thought in the complaint it is
admitted that a cheque issued by the respondent for a sum of Rs. 84,000/- was dishonoured by the
bank and the appellants had filed a criminal complaint under Section 138 of the Negotiable
Instruments Act.
5. Hire-purchase agreements are executory contracts under which the goods are let on hire and the
hirer has an option to purchase in accordance with the terms of the agreement. These types of
agreements were originally entered into between the dealer and the customer and the dealer used to
extend credit to the customer. But as hire-purchase scheme gained popularity and in size, the
dealers who were not endowed with liberal amount of working capital found it difficult to extend the
scheme to many customers. Then the financiers came into picture. The finance company would buy
the goods from the dealer and let them to the customer under hire purchase agreement. The dealer
would deliver the goods to the customer who would then drop out of the transaction leaving the
finance company to collect instalments directly from the customer. Under hire purchase agreement,
the hirer is simply paying for the use of the goods and for the option to purchase them. The finance
charge, representing the difference between the cash price and the hire purchase price, is not
interest but represents a sum which the hirer has to pay for the privilege of being allowed to
discharge the purchase price of goods by instalments.
Charanjit Singh Chadha And Ors. vs Sudhir Mehra on 31 August, 2001
6. Though in India the Parliament has passed a Hire Purchase Act, 1972, the same has not been
notified in the official gazette by the Central Govt. so far. An initial notification was issued and the
same was withdrawn later. The rules relating to hire purchase agreements are delineated by the
decisions of higher courts. There are series of decisions of this Court explaining the nature of the
hire purchase agreement and mostly these decisions were rendered when the question arose
whether there was a sale so as to attract payment of tax under the Sales Tax Act.
7. In M/s Damodar Valley Corporation vs. State of Bihar, , this Court took the view that a mere
contract of hiring, without more, is a species of the contract of bailment, which does not create a title
in the bailee, but the law of hire purchase has undergone considerable development during the last
half a century or more and has introduced a number of variations, thus leading to categories and it
becomes a question of some nicety as to which category a particular contract between the parties
comes under. Ordinarily, a contract of hire purchase confers no title on the hirer, but a mere option
to purchase on fulfilment of certain conditions. But a contract of hire purchase may also provide for
the agreement to purchase the thing hired by deferred payments subject to the condition that title to
the thing shall not pass until all the instalments have been paid. There may be other variations of a
contract of hire purchase depending upon the terms agreed between the parties. When rights in
third parties have been created by acts of parties or by operation of law, the question may arise as to
what exactly were the rights and obligations of the parties to the original contract.
8. In K.L. Johar & Co. vs. The Deputy Commercial Tax Officer , this Court took the view that a hire
purchase agreement has two elements: (1) element of bailment; and (2) element of sale, 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 the option is exercised a sale takes place of the goods which till then had
been hired.
9. Similar views were expressed earlier in Instalment Supply (Pvt.) Ltd. & Anr. vs. Union of India &
Ors. ; and reiterated in Sundaram Finance Ltd. vs. State of Kerala .
10. The agreement executed by the parties in this case also is to the effect that the hirer would not
become the owner of the property until he pays the entire instalments. A copy of the agreement is
produced as Annexure P-1 wherein the appellants are referred to as the first party and the
respondent as the second party and it is specifically stated that the first party would be the absolute
owner of the vehicle and the respondent-second party agreed to pay all the instalments punctually.
Clause 7 of the agreement says that the hirer may at any time before the final payment under the
hire purchase agreement falls due and after giving the owners not less than fourteen days notice in
writing of his intention to do so and re-delivering the vehicle to the owners at their office, terminate
the hire purchase agreement. Clause 8(viii) gives a right to the owner to re-possess the vehicle in
case of default by the hirer. Clause 9(ii) gives the owner an irrevocable licence to enter any building,
premises or place where the vehicle may be or supposed to be for the purpose of inspection,
re-possession or attempt to repossess the vehicle and the owner of the vehicle will not be liable for
any civil or criminal action at the instance of the hirer. It is also made clear that the hirer would be
liable for all the expenses of the owner in obtaining re-possession or attempting to obtain
Charanjit Singh Chadha And Ors. vs Sudhir Mehra on 31 August, 2001
re-possession of the vehicle.
11. The whole case put forward by the respondent-complainant is to be appreciated in view of the
stringent terms incorporated in the agreement. If the hirer himself has committed default by not
paying the instalments and under the agreement the appellants have taken re-possession of the
vehicle, the respondent cannot have any grievance. The respondent cannot be permitted to say that
the owner of the vehicle has committed theft of the vehicle or criminal breach of trust or cheating or
criminal conspiracy as alleged in the complaint. When the agreement specifically says that the
owner has got a right to re-possess the vehicle, there cannot be any basis for alleging that the
appellants have committed criminal breach of trust or cheating.
12. Before the learned Single Judge, the respondent had contended that the vehicle was in the
possession of the respondent and it was taken out of his custody without his consent and therefore,
the offence of theft is made out. This plea is also without any basis as the appellants have taken
re-possession of the vehicle in exercise of their right under the agreement. There may be instances
where the owner of the goods may commit theft of his own goods. The illustration (k) of Section 378
IPC, which is an instance of such a theft, is to the following effect:
“Again, if A, having pawned his watch to Z, takes it out of Z’s possession without Z’s
consent, not having paid what he borrowed on the watch, he commits theft, though
the watch is his own property in as much as he takes it dishonestly.”
13. But in the instant case, the owner re-possessing the vehicle delivered to the hirer under the hire
purchase agreement will not amount to theft as the vital element of ‘dishonest intention’ is lacking.
The element of ‘dishonest intention’ which is an essential element to constitute the offence of theft
cannot be attributed to a person exercising his right under an agreement entered into between the
parties as he may not have an intention of causing wrongful gain or to cause wrongful loss to the
hirer. It is appropriate to note that the term ‘dishonestly’ is defined under Section 24 of the IPC as
follows:
“Dishonestly”–Whoever does anything with the intention of causing wrongful gain to
one person or wrongful loss to another person, is said to do that thing “dishonestly”.
14. It is also to be noticed that learned author R.M. Goode, in his book Hire Purchase Law & Practice
(Second Edn.) has observed as follows at page 846:-
“It would seem that so long as the hirer is in possession of the goods they belong to
him for the purpose of the Act [The Theft Act, 1968] even though his possession is
unlawful, e.g. because the hire-purchase agreement has come to an end. If the owner
has an enforceable right to possession then he will not be guilty of theft in seizing the
goods if he knew of his legal rights since he will not be acting dishonestly but will
have taken the goods in the well founded belief that he has a right to resume
possession.”
Charanjit Singh Chadha And Ors. vs Sudhir Mehra on 31 August, 2001
15. This Court also had occasion to consider this question. One of the earlier decisions is Sardar
Trilok Singh & Ors. vs. Satya Deo Tripathi . In that case, the parties had entered into a hire purchase
agreement. The complainant alleged that the accused, in a high handed manner during his absence
came to his house and forcibly removed the truck and thereby committed the offence of dacoity. The
police investigated the case and filed a final report. The accused filed his objection before the
Magistrate, but the objection was not considered. The accused filed a revision before the session
court which was dismissed. Thereafter the accused filed a petition under section 482 Cr.P.C. to
quash the proceedings. That was summarily dismissed by the High Court and the matter reached up
to this Court at the instance of the accused. In paragraph 5 of the judgment, this Court observed:
“We are clearly of the view that it was not a case where any processes ought to have
been directed to be issued against any of the accused. On the well-settled principles of
law it was a very suitable case where the criminal proceeding ought to have been
quashed by the High Court in exercise of its inherent power. The dispute raised by
the respondent was purely of a civil nature even assuming the facts stated by him to
be substantially correct. Money must have been advanced to him and his partner by
the financier on the basis of some terms settled between the parties… Even assuming
that the appellants either by themselves or in the company of some others went and
seized the truck on July 30, 1973 from the house of the respondent they could and did
claim to have done so in exercise of their bona fide right seizing the truck on the
respondent’s failure to play the third monthly instalment in time. It was, therefore, a
bona fide civil dispute which led to the seizure of the truck”.
16. In K.A. Mathai & Anr. vs. Kora Dibbikutty & Anr. , the bus was obtained by the complainant on a
hire purchase agreement. The complainant paid only part of the consideration and defaulted in
paying the instalments and the vehicle was taken possession of by the financial and at that time,
both the first accused who had derived away the bus from the possession of the complainant and the
second accused were present in the bus. They were prosecuted for the offence punishable under
Section 379 read with Section 114 IPC. This Court holding that the bus was taken away at the
instance of the financier and the accused had not committed any offence observed as under:
“Though we do not have the advantage of reading the hire-purchase agreement, but
as normally drawn it would have contained the clause that in the event of the failure
to make payment of instalments the financier had the right to resume possession of
the vehicle. Since the financier’s agreement with A-2 contained that clause of
resumption of possession, that has to be read, if not specifically provided in the
agreement, as part of the sale agreement between A-2 and the complainant. It is in
these circumstances, the financier took possession of the bus from the complainant
with the aid of the appellants. It cannot thus be said that the appellants, in any way,
had committed the offence of theft and that too, with the requisite mens rea and
requisite dishonest intention.”
17. The hire-purchase agreement in law is an executory contract of sale and confers no right in rem
on hire until the conditions for transfer of the property to him have been fulfilled. Therefore, the
Charanjit Singh Chadha And Ors. vs Sudhir Mehra on 31 August, 2001
re-possession of goods as per the term of the agreement may not amount to any criminal offence.
The agreement [Annexure P-1] specifically gave authority to the appellants to re-possess the vehicle
and their agents have been given the right to enter any property or building wherein the motor
vehicle was likely to be kept. Under the hire purchase agreement, the appellants have continued to
be the owner of the vehicle and even if the entire allegations against them are taken as true, no
offence was made out against them. The learned Single Judge seriously flawed in his decision and
failed to exercise jurisdiction vested in him by not quashing the proceedings initiated against the
appellants. We, therefore, allow this appeal and set aside the impugned judgment. The complaint
and any other proceedings initiated pursuant to such complaint are quashed.