M.S. Nesargi, J.
1. In this petition filed under Section 482 of the Cr. P.C., the order dated 2-1-1978 passed by the Judicial Magistrate, First Class, (IInd Court), Mangalore, Dakshina Kannada, in F.I.R. No. 456 of 1977 directing handing over possession of a motor car (Premier Padmini bearing registration No. MEN 399 to respondent-2, is challenged.
2. This petition has been filed on 4-1-1978. Sri. Mohandas M. Hegde, learned Advocate appearing for the petitioner submitted that he may be permitted to argue the petition as if it is a criminal revision petition; because, it has been filed under Section 482 of the Cr. P.C. due to misconception of the effect of Section 397 (2) of the Cr. P.C., but that misconception has been recently removed as the law came to be settled by the Supreme Court in Dec. 1977. The permission is granted and this petition is heard and disposed of in exercise of the revisional jurisdiction of this Court.
3. The undisputed facts are that respondent-2 Mary George is the wife of C. X. George (now deceased). C. X. George entered into a hire purchase agreement with the petitioner finance company and secured possession of the car aforementioned as per the terms of the agreement. He went on abiding by the terms. It may be stated that the registration certificate of the vehicle was made out in the name of C. X. George. Even after his death, respondent-2 made payments towards the instalments and the amounts so paid by her totalled to about Rs. 6,000/-. Later on one C. X. Alexander, who is a brother of late C. X. George and who is not a party to this petition, filed a complaint before the police that the said car had been stolen by about 5.00 p.m. on 4-12-1977 when the same had been parked and when he and the members of his family had gone to Church.
In the meantime the petitioner intimated the R.T.O. that as there was default in regard to payment of instalments as per the hire purchase agreement, the Company had secured possession of the car and as the certificate of registration was not available to them - the same being with the registered owner and the registered owner had not returned it to them - the necessary endorsements in the certificate of registration be cancelled and a duplicate be issued in their name. They produced the car before the police and the police seized it. When the car was produced before the Magistrate, the petitioner, respondent-2 and Alexander filed applications purporting to be under Sections 451 and 457 of the Cr. P.C. claiming that each one of them was entitled to the possession of the car and it may be handed over to their possession.
4. The learned Magistrate after considering the said applications produced the impugned order and he has styled it as an order made under Section 451 of the Cr. P.C. It may be mentioned at this stage itself that the Magistrate has, in fact, exercised his powers under Section 457 of the Cr. P.C. and appears to have wrongly thought that he had passed the order under Section 451 of the Cr. P.C.
5. No charge-sheet had been filed before the Magistrate. Only the F.I.R. was before the Magistrate. Therefore Section 457 of the Cr. P.C. would apply and not Section 451 of the Cr. P.C. The hire purchase agreement and the necessary documents had been produced before the Magistrate while he passed the impugned order.
6. The contention on behalf of the petitioner is, before the Magistrate and here as well, that the petitioner had purchased the car from the dealer and therefore, it had become the owner and C. X. George entering into the hire purchase agreement with them, they had handed over possession of the car to him on hire and if he had abided by all the terms of the agreement, he would have ultimately become the owner and further that one of the terms viz., term No. 12 of the agreement made it necessary for them to intimate the Regional Transport Officer to register the name of C. X. George as the registered owner in the certificate of registration, and as such his name came to be registered as owner and that he was not the de facto owner but only a registered owner. It is on the basis of this contention they claim to be the real owners and entitled to possession. Further, in support of this contention another relevant term in the hire purchase agreement was made use of by the petitioner. That term is to the effect that whenever default is made in the payment of instalments, the petitioner was entitled to take possession of the car from wherever it stood.
7. Sri. Tukaram S. Pai, learned Counsel appearing on behalf of respondent-2 argued that the fact that the name of C. X. George has been admittedly shown in the certificate of registration as the registered owner is by itself sufficient to establish prima facie that he was the owner of the car and in fact, it was in the possession of his wife viz., respondent-2, and it was from her possession the petitioner took away the car and therefore, she was entitled to the possession of the car.
8. The learned Magistrate has, in the course of his order referred to the decisions in K. L. Johar & Co. v. Deputy Commercial Tax Officer AIR 1965 SC 11082; Sundaram Finance Ltd. v. State of Kerala : 2SCR828 and D.V. Corporation v. State of Bihar : 1SCR118 . He has reasoned that when the principles laid down in the aforementioned decisions were taken into consideration, he was convinced that respondent-2's husband was the owner; that after his death respondent-2 became the owner and the car had been taken from out of her possession and therefore, she was entitled to possession.
9. The Supreme Court has, in th aforementioned decisions, gone into the question of hire purchase agreements while considering the liability to pay sales tax.
10. In my opinion, it would be at this stage, necessary to look into the provisions of the Motor Vehicles Act, 1939 regarding the hire purchase agreement, registration of a vehicle and the effect of endorsement of hire purchase agreement in the registration certificate and under what circumstances the same should be changed.
11. Section 2 (19) of the Motor Vehicles Act, 1939 (hereinafter referred to as the Act) reads as follows:
'owner' means, where the person in possession of a motor vehicle is a minor, the guardian of such minor, and in relation to a motor vehicle which is the subject of a hire purchase agreement, the person in possession of the vehicle under that agreement.
Section 24 of the Act lays down that an application by or on behalf of the owner of a motor vehicle for registration shall be in Form B as set forth in the First Schedule, shall contain the information required by that form and shall be accompanied by the prescribed fee. Thereafter, the provisions deal with the registration of a vehicle in favour of the owner who has submitted such an application.
12. In view of the provisions in Sections 22 and 24 of the Act, it is plain that for all practical purposes, a person who is shown as the registered owner in the certificate of registration is the owner of the vehicle. But Section 2 (19) of the Act makes out an exception by widening the meaning of the word 'owner' to the effect that a person who is in possession of the concerned vehicle which is the subject of hire purchase agreement, is also the owner for the purposes of the Act. Therefore, a person who is in possession of a vehicle, which is a subject of hire purchase agreement, can submit an application as per Section 24 of the Act and get his name entered as the registered owner in the certificate of registration, This is to be borne in mind while considering the claims of the parties in this case,
13. It Is appropriate at this stage itself to refer to two decisions relied upon by Sri. Tukaram S. Pai learned Advocate for respondent-2. The first one is in T.C. Gopalan Nair v. P. Kelu (1973) 1 Mys LJ 420 : 1974 Cri LJ 210. While considering Section 516-A of the Cr. P.C., 1898 it has been held that as against a person claiming to be in possession and who has no document in his favour, the registered owner would be entitled to possession of the vehicle. There can be no quarrel about this proposition. The next decision is in Shantakumar v. Mohanlal (1969) 2 Mys LJ 304 : therein the owner of a motor vehicle had entered into a hire purchase agreement with accused-1 and on default of payment of instalments, the accused had taken possession of the vehicle and the complainant had complained that offences under Sections 379, 411 and 114 of the I.P.C. had been committed. The case ended in discharge.
The question that arose was as to who was entitled to the possession of the vehicle. This Court has held that the ownership and title of the complainant was not, in dispute and therefore, he was entitled to the possession of the vehicle. This principle would be of assistance to respondent-2 if she is able to show prima facie that she is the owner of the car. As already pointed out it is the contention of Sri. Tukaram S. Pai that because the name of the husband of respondent-2 is entered in the certificate of registration, she is the owner and there is no material to show that at any point of time, the ownership had been transferred in favour of the petitioner. It is on this basis that Sri. Tukaram has made use of the above cited decision.
14. Though the learned Magistrate has cited three decisions of the Supreme Court, the matter on hand can be understood and disposed of by looking into the decisions of the Supreme Court in K. L. Johar & Co.'s case : AIR1965SC1082 and in Sundaram Finance Ltd.'s case : 2SCR828 . In K. L. Johar & Co's case it has been laid down as follows (at p. 1088):
A hire purchase agreement is distinct from a sale in which the price is to be paid later by instalments. In the case of a sale in which the price is to be paid by instalments, the property passes as soon as the sale is made, even though the price has not been fully paid and may later be paid in instalments. The essence of a sale is that the property is transferred from the seller to the buyer for a price, whether paid at once or paid later in instalments. On the other hand a hire purchase agreement, as its very name implies, has two aspects. There is first an aspect of bailment of the goods subjected to the hire purchase agreement, and there is next an element of sale which fructifies when the option to purchase, which is usually a term of hire purchase agreements, is exercised by the intending purchaser. Thus the intending purchaser is known as the hirer so long as the option to purchase is not exercised, and the essence of a hire purchase agreement properly so called is that the property in the goods does not pass at the time of the agreement taut remains in the intending seller, and 'only passes later when the option is exercised by the intending purchaser. The distinguishing feature of a hire-purchase agreement is that the property does not pass when the agreement is made but only passes when the option is finally exercised after complying with all the terms of the agreement.
15. It has been further laid down as follows (at p. 1090):
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. When this sale takes place it will be liable to sales tax under the Act for the taxable event under the Act is the taking place of the sale, the Act providing for a multi-point sales tax at the relevant time. Where, however, option is not exercised or cannot be exercised because of the inability of the intending purchaser to fulfil the terms of the agreement, there is no sale at all. As the taxable event is the sale of goods, the tax can only be levied when the option is exercised after fulfilling all the terms of the hire purchase agreement. Even though eventually most cases of hire purchase may result in sales by the exercise of the option and the fulfilment of the terms of the agreement, tax is not exigible at the time when the hire purchase agreement is made, for at that time the taxable event has not taken place; it can only be exigible when the option has been exercised and all the terms of the agreement fulfilled and the sale actually takes place. When sale takes place in a particular case will depend upon the terms of the hire purchase agreement but till the sale takes place there can be no liability to sales tax under the Act.
16. In Sundaram Finance Ltd.'s case : 2SCR828 the Bench consisted of K. Subba Rao, J. C. Shah and S. M. Sikri, JJ. Sundaram Finance Co. had been assessed to sales tax on a particular transaction and the High Court of Kerala rejected the petition of Sundaram Finance Co, and they took up the matter to the Supreme Court, The matter involved a hire purchase agreement. The salient features of that agreement are narrated in para 15 of the majority judgment as follows:
A customer desirous of purchasing a motor vehicle, but unable to pay the price to the dealer agrees to purchase the vehicle and makes part payment of the price to the dealer and he then approaches the appellants and requests that a loan be advanced to him. On the appellants' agreeing to grant a loan, the customer executes nine documents -
(1) an application requesting the appellants to grant a loan of a stated amount on the security of the motor vehicle;
(2) a 'sale letter' reciting that the customer had on the date of the application for loan sold to the appellants the motor vehicle;
(3) A bill which recites that for the amount mentioned in the 'sale letter' and received in full, the customer has sold to the appellants the vehicle belonging to the customer:
(4) a receipt for the appellants;
(5) an agreement called the hire-purchase agreement under which the appellants agree to let out to the customer and the customer agrees to take on hire the motor vehicle for a specified term subject to determination in conditions mentioned therein;
(6) a promissory note agreeing to pay the difference between the price of the vehicle and the amount paid by the customer to the dealer and interest therein at the stipulated rate;
(7) a letter from the customer requesting the appellants to pay to the dealer the amount agreed to be advanced to him;
(8) a letter addressed to the appellants agreeing and undertaking to keep the vehicle on the security of which the loan was granted, insured against comprehensive risks; and
(9) a letter addressed to the Motor Vehicles authorities intimating that the motor vehicle 'is the subject of hire purchase agreement between' the customer 'as owner' and the appellants and requesting the authorities to 'make a note of the hire purchase agreement' in the registration certificate standing in the name of the customer.
In view of this the majority opinion was that the scheme for financing the purchase of the vehicle was therefore that the customer purchases the vehicle from the dealer directly and gets it registered in his name. At his request the Sundaram Finance Ltd. agreed to advance the balance of the price remaining to be paid and pay it to the dealer on the customer's executing a promissory note for repayment of the amount, a hire purchase agreement and other related documents and got them executed and on repayment of the amounts to be paid the vehicle became the sole and absolute property of the customer.
17. It has been already mentioned that the hire purchase agreement entered into by C. X. George with the petitioner has been produced before the Magistrate. A copy of the same is made available to this Court. It consists of 22 clauses. Perusal of the same has made it clear to me that the scheme of financing or whatever it may be, has been radically changed by the petitioner from the scheme that was the subject-matter of the decision in Sundaram Finance Ltd.'s case. As per the hire purchase agreement in question the petitioner purchased the vehicle from the dealer on behalf of hirer, who would be the intending purchaser from the petitioner paying certain initial amount. The balance of the amount would be paid to the dealer by the petitioner. That balance is made returnable to the petitioner by the hirer who is the intending purchaser from the petitioner by way of instalments.
On full payment of the instalments he would become the absolute owner of the vehicle as having purchased the same from the petitioner. To safeguard the interest of the petitioner, certain clauses are provided. One of the clauses entitles the petitioner on the happening of certain events like default etc., to seize the vehicle from the possession of the hirer. Clause 12 is to the effect that the owner viz., the petitioner agrees to permit the hirer, who would be C. X. George, to have the registration of the vehicle in his own name provided that the hirer shall transfer the registration in the name of the owner whenever required to do so by them and especially when the hirer commits a breach of any of the conditions of this agreement stated supra and the owner is obliged to seize the vehicle.
18. In Sundaram Finance Ltd.'s case : 2SCR828 the majority judgment was that there was one sale and that was between the dealer and the customer but not Sundaram Finance Ltd. and therefore, Sundaram Finance Ltd., the appellant before the Supreme Court, was not liable to pay sales tax, It, reversed the judgment of the Kerala High Court.
19. Along with the copy of the hire purchase agreement a duplicate invoice has been produced before me for perusal. The original invoice, it is stated, has been produced before the learned Magistrate. It is clearly seen therefrom that the dealer has collected sales tax at 7% from the petitioner while making an invoice for sale of the concerned vehicle in favour of the petitioner.
20. The aforementioned facts have not been clearly grasped by the learned Magistrate while applying the principles laid down by the Supreme Court in Sundaram Finance Ltd.'s case : 2SCR828 and K. L. Johar & Co.'s case : AIR1965SC1082 . It is as clear as day light : that as per the hire purchase agreement between the petitioner and C. X. George, the husband of respondent-2, the petitioner purchased the car in question for giving it on hire to C. X. George through the hire purchase agreement, the main clauses of which have been referred to in one of the earlier paragraphs, and then handed over possession of the very car to C. X. George as hirer on certain conditions. On C. X. George fulfilling the conditions as provided in the hire purchase agreement, he was to become the absolute owner of the vehicle. It is also plain that he was shown as the registered owner in the certificate of registration because of clause-12 of the agreement and in view of the definition of the term 'owner' in Section 2 (19) of the Act. Therefore, the contention of Sri. Tukaram S. Pai, that the name of C. X. George was shown as the registered owner in the certificate of registration because he was the owner in the real sense, cannot be upheld.
21. It is undisputed that the vehicle was seized from the possession of the petitioner. When it is seen that they are the owners and they were entitled to possession even from C. X. George consequent upon certain defaults being committed, and it is further found that the police seized the vehicle from their custody, the Magistrate, ought to have, while exercising his powers under Section 457 of the Cr. P.C. directed the vehicle to be returned to the possession of the petitioner.
22. In the result, this petition is allowed and the order dated 2-1-1978 passed by the Judicial Magistrate, First Class (II Court) Mangalore in F.I.R. No. 456 of 1977 is set aside. It is hereby ordered that the vehicle viz., the car (Premier Padmini) bearing registration No. MEN 399 be returned to the possession of the petitioner, who is entitled to the possession thereof.