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Gurmukh Singh Vs. Mis Inderprasth Finance Co. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtDelhi High Court
Decided On
Case NumberCivil Revision Appeal Nos. 420, 421, 422, 423, 424, 425, 426, 427, 428, 429 and 430 of 1975
Judge
Reported in1976RLR1
ActsCode of Civil Procedure (CPC), 1908 - Sections 115 - Order 39, Rule 1; Constitution of India - Article 227
AppellantGurmukh Singh
RespondentMis Inderprasth Finance Co.
Advocates: K.L. Arya,; D.R. Thakur,; Y.P. Narulla,;
Cases ReferredGopal Krishan v. Ramesh Chander
Excerpt:
.....by supreme court it was obvious that the arrangements between the parties were in the nature of hire purchase arrangements ;and that the petitioners had no title to the property until they had exercised an option to purchase them after having paid the requisite amounts. (5) after hearing learned counsels for the parties it appears to me that having regard to the well established tests for the determination of the question if an interim protection should be given to a plaintiff, and in the facts and circumstances of this case the petitioners would be entitled to an interim protection prayed for by them. on an examination of the dictionary meaning of the terms 'prima facie' and'prima facie case' and some english and indian decisions, having a bearing on the question, i had come to the..........motor vehicles under identical arrangements which purport to be and have the appearance of hire purchase agreement. it is the case of the financing company that, in terms of the hire purchase agreements in question, the hirers were under an obligation to pay a monthly installment of a specified amount with the option to purchase the property after a specified amount had been paid to the financing company. it is the further case of the financing company that in terms of the agreements, if the petitioners made default in the payment of any installment, the financing company was entitled to terminate the agreements, with or without notice, and to exercise its license to seize the motor vehicles. it is further claimed that the agreements, contained an arbitration clause. according to.....
Judgment:

H.L. Anand, J.

(1) By these petitions under Section 115 of the Code of Civil Procedure, the petitioners who are plaintiffs in different suits filed by them against a financing Company, respondent in the present petitions, challenge an order of the First Appellate Court by which the petitioner's applications, under Order 39 Rules 1 & 2 of the Code of Civil Procedure, to restrain the financing company from seizing the vehicles in dispute, were dismissed.

(2) It appears that the financing company concerned had financed to the extent of different amounts and on different dates, the purchase by the petitioners of different motor vehicles under identical arrangements which purport to be and have the appearance of hire purchase agreement. It is the case of the financing company that, in terms of the hire purchase agreements in question, the hirers were under an obligation to pay a monthly Installment of a specified amount with the option to purchase the property after a specified amount had been paid to the financing company. It is the further case of the financing company that in terms of the agreements, if the petitioners made default in the payment of any Installment, the financing company was entitled to terminate the agreements, with or without notice, and to exercise its license to seize the motor vehicles. It is further claimed that the agreements, contained an arbitration clause. According to the financing company, the several petitioners made default in the payment of certain Installments as a result of which the agreements were terminated and the company became entitled to exercise the license to seize the motor vehicles. Apprehending such unilateral action, the petitioners filed suits for a permanent injunction to restrain the financing company from seizing the motor vehicles on the allegations that the petitioners had purchased these motor vehicles partly or wholly with the funds advanced to them by the financing company by way of loan, that the transactions were, thereforee, that of loans on the security of the vehicles ; that the ownership in the vehicles vested in the petitioners ; that the petitioners had repaid to the financing company much more than the amounts which had been advanced by the company besides a reasonable return on such amounts, and that in any event, any default in the repayment of the loan would not entitle the financing company to seize the property which belonged to the petitioners. Along with the suits, application under order 39 rules 1 & 2 of the Code of Civil Procedure were also filed and the petitioners obtained ex-parte injunctions restraining the financing company from seizing the motor vehicles concerned. On the applications being opposed, the ex-parte injunctions were vacated and the applications were dismissed by the trial court. The financing company at the same time made a motion under Section 34 of the Arbitration Act for stay of the proceedings which was opposed on behalf of the petitioners on the ground that there were no valid hire purchase agreements and that the several petitioners had signed blank forms at the instance of the financing company when the loan was advanced to them. The trial court, thereforee, framed an issue whether there was no valid hire purchase agreement between the parties. The order of the trial court dismissing the application for an injunction has been upheld by the First Appellate court.

(3) Shri K.L. Arya, who appears for the petitioners, contends that the suits out of which the petitions have arisen a substantial question whether the agreements entered into between the parties were in the nature of hire purchase agreements or mere loaning transactions which has to be decide d at the hearing of the suits not only on the construction of the documents, said to have been executed between the parties but also on a consideretion of the facts and circumstances preceding and attending on the transactions with a view to determine the true nature of the transactions and the real intent of the parties. He, thereforee, urged that the petitioners had a Prima facie case for the interim protection being given to the petitioners and that the trial court, thereforee committed material irregularity in the exercise of its jurisdiction and transgressed the limit of its jurisdiction by going into the question at the preliminary stage of the proceedings which could be only gone into at the hearing of the suit. It was further urged that the balance of convenience and equities were in favor of the petitioners, who wera petty taxi drivers and had invested large amounts and had paid substantial amounts to the financing company and were being compelled, on pain of losing their property, to pay fantastic return on the money advanced to them. It is further alleged that grave and serious hardship would be caused to the petitioners if the interim protection was denied to them. It was further urged that, assuming that the arrangements were in the nature of hire purchase agreements, the financing company was nevertheless net entitled to seize the vehicles without the invervention of the court and, in any event could not invoke the provision with regard to the seizure without terminating the agreements in writing, which they had admittedly not done.

(4) Shri R.L. Aggarwal, who appears for the finaccing company in all these petitions, on the other hand, contends that in the face of the documents which bear the signatures of the various petitioners, it could not be said that the petitioners have a prima facie case for the contention that the arrangements were merely loaning transactions that having regard to the well known tests laid down by Supreme Court it was obvious that the arrangements between the parties were in the nature of hire purchase arrangements ; and that the petitioners had no title to the property until they had exercised an option to purchase them after having paid the requisite amounts. It was further contended that the petitions do not raise any question of Jurisdiction nor could it be slid that in dismissing the applications the courts below had committed any material irregularity in the exercise of their jurisdiction and that, thereforee, having regard to the limited nature of the jurisdiction of this court under Section 115 of the Code of Civil Procedure, this Court would have no power to interfere. He further urged that in any event, having regard to all the facts and circumstances, an interference would not be justified.

(5) After hearing learned counsels for the parties it appears to me that having regard to the well established tests for the determination of the question if an interim protection should be given to a plaintiff, and in the facts and circumstances of this case the petitioners would be entitled to an interim protection prayed for by them.

(6) In the case of Gopal Krishan v. Ramesh Chander 1973. Raj L.R. 542, I had occasion to consider the true meaning of the expression' prima facie case' and the scope of the function of the court when called upon to consider if the plaintiff had a prima facie case so as to entitle him to interim protection. On an examination of the dictionary meaning of the terms ''Prima facie' and'Prima facie case' and some English and Indian decisions, having a bearing on the question, I had come to the conclusion that the expression 'Prima facie case' would mean a case which is not likely to fail on account of any technical defect and is based on some material which if accepted by the tribunal would enable the plaintiff to obtain the relief paryed for by him and would, thereforee. justify an investigation'. In arriving at the aforesaid conclusion I had sought support, inter alia. from the following observations of the judicial committee in 1865. L.R.(l). P.O. 50.

''THE real point before us upon this appeal is not how these questions ought to be decided at the hearing of the cause, but whether the nature and difficulty of the question is such that it was proper that the injunction should be granted until the time for deciding them should arise.'

It was further pointed out in that case that for the purpose of granting an injunction, it was sufficient.. in the language of the judicial Committee,' If there be a question upon the point proper to be determined upon the hearing of the cause.'

(7) For determining whether the petitioners had a prima facie case all that the courts below had to consider was if, on the allegations made by the petitioners and the material that the petitioners may be able to place before the court, it could be said that the case sought to be set up by the petitioners deserved consideration, or that it must fail because it suffered from any fatal infirmity. It is, however, not open to the court at the preliminary stage of the proceedings to decide how the court would look at the controversy at the hearing of the suit or to scrutinise the material that may be available to determine if the case was likely to succeed. To do so, would be prejudicial to the interest of the parties because the parties still have to produce the material in support of their respective contentions. The claim of the petitioners that though purporting to be hire purchase agreements, the arrangements in question in substance must be held, in the face of the surrounding circumstances, to be transactions of loan, certainly deserved consideration and could not possibly be thrown out of hand. To construe the various terms of the hire purchase agree- ment, thereforee, was to ignore the contention that though a hire purchase agreement in form, it was in fact, having regard to the surrounding circumstances a transaction of loan, and that when the money was advanced the financing company obtained the signatures of the petitioners on the various printed forms and that there was thereforee, no valid hire purchase agreement. These allegations ex-fade disclose a case which deserved consideration.

(8) There has been considerable controversy both in England and in this country as to when would a transaction which has the appearance of a hire purchase agreement be said to be that of a loan. In such cases, the form of the arrangement is immaterial and it was necessary for the' court to see the substance of the arrangement and look into the surrounding circumstances to determine whether the property was subject matter of a hire purchase agreement or was merely intended to be a security for the amount advanced by the financing company. The determination of these questions would obviously involve more than a mere look at the documents or the construction of the various terms of the agreements. The court would have to look into all the surrounding circumstances such as the mechanism by which the payment was made by the financing company to the seller, the person in whose favor the initial sale was completed, the conduct of the parties, to gather the true intent of the arrangement. All these questions obviously could not be determined at the preliminary stage of the proceedings. Any enquiry into these questions would involve both oral and documentary evidence, most of which the parties have yet to produce at the trial of the suit. When the courts below, thereforee, proceeded to examine the various provisions of the documents purporting to be hire purchase agreements, they were obviously traveling beyond their limited function at the preliminary stage of the proceedings. The only question that they had to address themselves at that stage was if the case with which the petitioners had come to the court deserved to be considered at the trial and not to answer as to how the courts would look at the question at that stage. The prefacing of the observations on the merits by the expression 'Prima facie' even on more than a dozen occasions in the course of the order, as has been done by the first Appellate Court would nevertheless be incapable of concealing that the courts were virtually examining the various contentions of the petitioners with reference to the documents on record rather than to confine their attention to the sole question to be determined at that stage whether the case deserved consideration. The question whether there was any valid hire purchase agreement is subject matter of an issue already framed by the trial court on the motion of the financing company under Section 34 of the Arbitration Act and was also a matter that required consideration.

(9) In considering the questions before them, the Courts below appear, unfortunately, to have been completely indifferent to the historical background of the hire purchase agreements in India, the socio-economic implications of such arrangements and the effect, if any, of legislative intervention both in England and recently in India in restricting the untrammelled right of the financing company even under genuine hire-purchase agreements to have recourse to unilateral seizure of the property forming subject matter of such agreements. If the courts below had devoted some attention to this aspect of the matter, they would have found that such restrictions were imposed in England as early as the year 1938 and the Act No. 26 of 1972 was added to the Statute Book in India only recently incorporating a number of such restrictions although, for reasons which are not clear, the Act has not been put into force as yet. While the petitioners would not have been entitled to take advantage of these provisions, it would have indicated to the Courts below how the legislature had frowned on these agreements and sough to restrict the contractual rights of the financing companies particularly in the matter of seizure of property forming subject matter of these arrangements. A reference to some of these matters would have certainly fortified the case of the petitioners that the contention that they were raising deserved to be considered.

(10) The question whether inspire of the provision in the agreement, the financing company could seize the vehicle without recourse to a court of law and whether the termination of such an agreement must be by a written instrument are further questions that require consideration although they need not detain me for the present because these questions were not raised either in the plaint or in the courts below.

(11) On the question of balance of convenience and equities, there is hardly any doubt that even though the financing company has invested large funds, the vehicles are the only source of income of the petitioners and the petitioners have also paid substantial amounts from time to time to the financing company. While it is true that the financing company advanced funds for the purchase of motor vehicles to the drivers who are not men of means without any other security and there may not, thereforee, be some justification for the fabulous return that may ultimately work out on these arrangements, it is not difficult to find an adequate means to strike a reasonable balance between the requirement of the hirer and the financing company. Effective & appropriate directions can always be made to ensure that the interest of the financing company would not be prejudiced if an interim protection is given to the hirers in such cases during the pendency of proceedings. Where, thereforee, the operators of these vehicles had raised substantial questions the answer to which would eventually determine the quantum of their real liability and which deserve consideration, it is not possible to permit the financing company to deprive them of their source of livelihood during the pendency of the consideration of these questions. If such a course was allowed and the petitioners succeeded in their contentions they would get very little comfort because meanwhile they would have been deprived of their source of livelihood for months and perhaps years. The proceedings in the court of law do not merely involve the high sounding principles and provisions of law but human element as well and such an element must be given its due weight in considering the question of balance of convenience and equities.

(12) Faced with the heavy odds on the merit of the controversy, learned counsel for the financing company sought to take refuge behind the technical plea as to the limited nature of the jurisdiction of this court under section 115 of the code of civil procedure to frustrate the attempt of the petitioners at judicial intervention. It was, thereforee, contended that the courts below having merely turned down the pleas of the petitioners in exercise of their respective discretion while legitimately seized of the motions for interim protection in suits and appeals, which they were competent so try and hear,, it could not be said that the Court below had either 'exercised a jurisdiction so vested' in them by law or 'to have failed to exercise the jurisdiction so vested' or to have even acted in the exercise of their jurisdiction 'illegally or with material irregularity'. It was further urged that the aforesaid expressions occurring in clause(c) of the Section had relation to the manner in which the impugned decision was arrived at and not the decision itself and that the correctness or otherwise of the decision was, thereforee, not open to review under that provision. Reliance was placed on the decision N.S. Venkatagiri Ayyangar Vs H.R.E Borad 1949. P.C. 156, Chaube Jagdish Prasad Vs Ganga Prasad : AIR1959SC492 , Pandurang Dhongi Vs Maruti : [1966]1SCR102 & Bhan Singh Vs Kanwaljit : AIR1969Delhi349 .

(13) In my view the contention is misconceived and is an argument of despair. Ordinarily, jurisdiction denotes the power that a court or a tribunal has to take when seized of a cause. It connotes in that sense the initial jurisdiction and when it does not have that it is a case of utter lack of jurisdiction. The concept of jurisdiction is, however, not limited to that. Even where the court has such initial jurisdiction to entertain and adjudicate a cause, questions do arise if, while dealing with such a matter at the different stages of the proceedings, the court had the power, and in a limited sense the jurisdiction, to make certain orders, embark on certain investigation and take a certain course of action. Some of the orders that the court may be empowered to make may even involve a pure exercise of discretion. But where for the purpose of making such orders or taking such course or making an enquiry, the Courts have, by virtue of legal limitations or by judicial practice, come to have defined functions and an obligation, as it were, to confine within specified limits, any transgression of these limits or the extension of the scope of such functions does not raise a mere question of exercise of discretion or correctness or propriety of an order etc. but one of jurisdiction in that limited sense. I am unable to read in the decisions cited at the Bar any principle to the contrary. Where thereforee, the courts below extended the scope of their functions and travelled beyond the well recognised limits while considering the question if the petitioners had a prima facie case, and thereby denied them the judicial protection to which they are entitled, this court would have not only undoubted jurisdiction both under Section 115 of the Code and Article 227 of the Constitution of India but also a duty to ensure that justice was done. It is difficult in such a situation to ignore the well recognised dictum that the rules of procedure are intended to further and not to obstruct the course of justice. There is, thereforee, ample power in this court to interfere.

(14) Having regard, thereforee, to all the circumstances, I am of the view that these petitions must succeed and financing company must be restrained, till the decision of the suits, from seizing the various motor vehicles.

(15) It is, however, necessary to adequately protect the interest of the financing company because it has admittedly financed large amounts either on the security of or for the purposes of purchase of these vehicles and if these suits have their full run and the vehicles are left to be plied by the petitioners in the meanwhile without any restriction, there would be very little realisable property left in the vehicles from which the financing company could recover its dues. I would thereforee direct that the injunctions would be subject to the condition that each of the petitioners would file, on or before the 10th of each month, in the trial court an account of the gross earning of the petitioners from the operation of the vehicles during the preceding month and deposit Along with the account a sum equal to one and a half times the monthly Installments provided for in the hire purchase agreement. The amounts when deposited may be withdrawn by the financing company without prejudice to its various pleas and on furnishing adequate security to the satisfaction of the trial court, after notice to the petitioners. This condition would, however, cease to operate as soon as the petitioners have paid by making the deposit or by payments earlier, a sum which is equivalent to the amount stipulated in the hire purchase agree- ments as the total hire money.

(16) In the result the petitions succeed. The impugned orders are set aside and an injunction would issue in the aforesaid terms and subject to the aforesaid conditions and would subsist till the decision of the suits.

(17) Before parting with these cases, it is necessary to draw the attention to two matters which deserve the consideration of the autho- rities concerned. In the first instance, even though the Hire Purchase Act was passed in the year 1972 regulating the contractual relations between the hirers and the financing company and in particular restricting the right of the financing company to take recourse to the property forming subject matter of the hire purchase agreement, the Act has not as yet come into force although almost three years have elapsed. It was a piece of social legislation presumably necessitated^ by certain socioeconomic realities which called for legislative intervention. If that be so, what is it that stands between such a useful piece of legislation and its enforcement Secondly. It appears surprising that in spite of the much publicised reorientation of banking policy in India after the introduction of social control of bankingfollowed by the nationalisation of the major banking institutions and the consequent availability of easy credit to petty traders, artisans etc. including the truck and taxi operators on easy terms, the operators, like the petitioners, have still to depend on financing companies to finance the purchase by them of motor vehicles for their sustenance on terms which, whether or not unconscionable, are certainly less favorable than those on which bank credits sought to be made available for such a purpose. It is because the portals of the banking institutions are still too lofty to be within the easy reach of the petty taxi operators Or is it because the re-oriented credit policy of the Nationalised banks and other financial institutions has yet to be implemented in some of the hitherto financially starved sectors of the economy Or are there snags in the new policy which needs to be removed These matters certainly call for closer examination at appropriate level.


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