B.N. Banerjee, J.
1. The plaintiff firm allege that they are dealers in motor vehicles and that they also let out motor vehicles on hire. They say that by an agreement, dated December 10, 1063, amongst the plaintiff firm as the ''owner', the defendant No. 1 as the 'hirer' and the defendant No. 2 as the 'guarantor', they agreed to let and the defendant No. 1 agreed to take on hire, a Fiat 1100 motor car (being the car in suit), inter alia, on condition (i) the hirer defendant No. 1 would pay to the plaintiff a sum of Rs. 3,565 as an initial payment by way of hire, which would become the absolute properly of the plaintiff and would further pay to the plaintiff 21 consecutive instalments of Rs. 589, on the 19th day of each succeeding month, the first instalment being payable on January 19, 1964; in default or punctual payment there was a stipulation for payment of interest on sums overdue at the rate of 1 per cent per mensem, (ii) the hirer defendant No. 1 would be at liberty at any time to terminate the hiring, on return of the motor car, (iii) the hirer defendant No. 1 would hold the car as a bailee and shall not have any proprietary right or purchaser's interest therein until he has paid the whole amount due under the agreement and also exercised his option to purchase, (iv) the plaintiff owner would be at liberty to terminate the contract of hiring and recover possession of the motor car.
(a) if any monthly hire or part thereof he left unpaid after a specified period, or
(b) if the hirer defendant No. 1 commit any bread) of the terms of the agreement,
(v) any such termination would be without prejudice to the claims the plaintiff owner might have under the agreement. The defendant No. 2, it is said, guaranteed due performance of the terms of the agreement by the hirer defendant No. 1. and agreed to pay an sums due under the agreement, if the hirer defendant No. 1 Failed, to pay. The plaintiff firm say further that on payment of Rs. 3,565, at the time of the execution of the agreement, the possession of the Fiat car in suit was made over to defendant No. 1 on behalf of the plaintiff firm. They say also that defendant No. 1 paid seven monthly instalment as agreed upon, and also part of the 8th instalment but failed and neglected to pay the instalments thereafter. Thereupon, on March 23, 1965. the plaintiff determined the agreement but could not recover possession of the car, in spite of demands. In these circumstances, they filed this suit claiming that upon determination of the agreement, they became entitled to Rs. 4,944, being the amount of arrears of instalments together with interest and expenses, return of the vehicle or the market price thereof and damages or mesne profits for wrongful possession and use of the vehicle by defendant No. 1, after the termination of the agreement.
2. The defendant No. 1 alone filed a Written Statement and contested the suit. He alleged, that, in September 1963, the Government of West Bengal made a special allocation of a Fiat car, in replacement of an old taxi cab owned by him, and directed him to acquire the car from Auto Distributors Ltd., within 60 days. Unable to procure the price of the car, except to the extent of Rs. 5000 by sale of his old taxi cab. within the time originally allowed or within the extended time thereafter allowed, he, approached the plaintiff firm, money lenders and financiers, for a loan of the balance required. The plaintiff firm agreed and advanced the money on the following terms, namely, (i) out of Rs. 5,000 which the defendant had in hand, Rs. 1,000 would be appropriated by the plaintiff as financiers commission and Rs. 1,000 utilised in part payment of the car to be purchased, (ii) the balance of the price as well as the charges for insurance of the cur for two years would be advanced by the plaintiff and the said sum would he repayable with interest in 24 monthly instalments of Rs. 359 cash. The plaintiff Firm were never the owners of the car to be purchased and were not in a position to let or hire out the same. Nevertheless, it was alleged, they made defendant No. 1 sign the hire purchase agreement hereinbefore mentioned and execute a promissory note for Rs. 13,000, before they made the advance. The advance did not wholly cover the price and Auto Distributors Ltd., the dealers, realised from defendant No. 1 further sum of Rs. 35 before they delivered the car to him. Thereafter, between February 10, 1964 and February 12, 1965, defendant No. 1 paid to the plaintiff firm Rs. 5,743 towards the money advanced but the plaintiff firm never granted any receipts therefor. Also, the plaintiff firm refused to make over the insurance certificate to defendant No. 1, until the insurance charges were separately paid to them, although they were liable, under the agreement, to meet the insurance charges for two years. On receipt of the notice, dated March 23, 1965, determining the hire purchase agreement, the defendant No. 1. it is alleged, saw the plaintiff, verbally disputed the claim, asked for accounts from the commencement of the transactions and demanded that the insurance certificate be made over to him. On that day, it is further alleged, the defendant No. 1 paid to the plaintiff firm a further sum of Rs. 500 and it was agreed that the plaintiff would be entitled to no further payment until accounts were rendered to defendant No. 1, In violation of the last agreement, the plaintiff firm filed this suit, on March 29, 1985. and obtained forcible possession of the vehicle on April 30, 1865. The defendant No. 1 denied the claim made by the plaintiff firm and in particular denied their alleged interest in the vehicle or their right to have or retake possession thereof. The defendant No. 1 disputed the validity or the legality of the alleged hire purchase agreement, alternatively the termination thereof. In paragraph 2(j) of the written statement, he no doubt admitted his liability to pay, by instalments, whatever was justly due from him but in paragraph 6 took up the stand that on accounts being rendered nothing would be found due from him.
3. The car which was seized from the defendant No. 1 was released to him by this Court against security furnished. On the pleadings the following issues were raised:
1. Is the agreement, dated December 10, 1963, a Hire Purchase agreement as alleged in paragraph 2 and the sub-paragraphs thereunder? If not, what is the nature and effect of the said agreement?
2. How much was paid by defendant No. 1 to the plaintiff in respect of transaction between them?
3. Did the plaintiff determine the agreement as alleged in paragraph 6 of the plaint?
4. Is the plaintiff entitled to Rs. 4,944.60P. as claimed in paragraph 7 of the plaint?
5. Is the plaintiff entitled to damages or mesne profits as alleged in paragraph 9 of the plaint?
6. Has this Court jurisdiction to entertain, try and determine this suit?
7. To what relief, if any, is the plaintiff entitled.
My findings on the issues are hereinafter recorded.
4. Issue 1. A contract of hire purchase is one of the variations of the contract of bailment, but it is a modern development in commercial life. This form of agreement has come to stay as part of social service in the commercial world. It enables a person of ordinary means to buy the necessaries of life, which modern scientific advancement offers, say a motor car, a refrigerator or a cooking apparatus, on easy instalments. Eulogising this form of mercantile social service Simonds J. observed in Transport and General Credit Corporation Ltd. v. Morgan, (1939) 2 All ER 17 (at p. 28):
'It must be remembered that hire purchase agreements now play a very large part in the commercial and social life of the community, and the financing of those hire purchase agreements is an enormous business, both in the city of London and elsewhere. It appears to me that the financiers and the dealers co-operate in the common venture of making feasible the whole business of hire purchase agreements, which is now, for good or for evil, a necessary part of our social life. To regard one party to that common venture, which is now a recognised mercantile service, as carrying on the business of a money lender is, as I have said before, an abuse of language.'
What is true of England is, to a lessor degree, also true of India, particularly in her big offices, where standards of living are fast being oriented in Western Patterns.
5. In the first stage of its evolution, a transaction of hire purchase used to take place between the owner or the dealer and the customer--the former wanting to sell his goods and the latter lacking the money necessary for paying the price in one payment. The parties, therefore used to enter into an agreemnt (called hire-purchase, agreement) under which the customer was allowed to use the goods but the owner or dealer continued to be the owner till the entire consideration was paid by the customer, in agreed instalments, and till he exercised his option to buy. But the owner or the dealer had not always enough financial solvency to wait till such time as the instalments were paid. This cause led to the next stage of evolution, under which a financier intervened between the dealer and the customer--the financier purchasing goods from the dealer and then entering into an agreement with the customer. Under such an agreement, the financier became the owner and the customer became the hirer, until such time as the customer carried out the terms of the agreement. A variation of the transaction is that the customer purchases the goods by paying the entire consideration to the dealer, with the help, either in whole or in part, of the financier and then sells the goods to the financier and enters into an agreement of hire purchase with him. In this type of transaction, the dealer goes out of the picture altogether, the financier takes the place of the dealer and the customer continues to be the hirer.
6. I have now to see under which form of hire purchase the present agreement falls, if it does at all. Before, however, I do so, I need take note of certain undisputed facts in this case. The defendant No. 1 had obtained a permit to buy a new car in replacement of an old taxi cab (Exs. 7 and 8). He was short of funds and time set by the authorities for the defendant No. 1 to purchase the car was fast running out (Exs. 9 and 10). By how much he was short of funds is a disputed question of fact and I shall decide that later on. Admittedly, the defendant No. 1 made an initial payment of Rs. 3,565/-to the plaintiff at the time of the execution of the hire purchase agreement. To that extent at least he was not short of funds. Be that as it may, the defendant No. 1 approached the plaintiff firm for financial assistance. Thereupon they entered into the disputed agreement, on December 10, 1963. Under the agreement plaintiff was misdescribed as 'a Company registered under the Companies Act, 1956', which, however, it was not, being only a partnership firm. The plaintiff was also described in the agreement as the 'owner' of the car. The defendant No. 1 was described as the 'hirer' and the defendant No. 2 as the 'guarantor'. Clauses I to IV of the agreement (Ex. A) read as follows:
Clause I.--The Owners being the Owners of the Motor Vehicle with fittings, tools and accessories and additions more particularly described in the Schedule hereto and hereinafter collectively called 'the vehicle' agree to let and the Hirer agrees to hire the vehicle from the date here of subject to the terms and conditions herein contained, and hereto annexed and which shall be taken and read as part of this Agreement.
Clause II.--On the execution of the Agreement the Hirer shall pay to the Owners in cash
a sum of Rupee one in consideration of option to purchase given to the Hirer by Clause IV hereof and the said sum shall become the absolute property of the Owners.
Clause III.--The Hirer shall pay to the Owners on the execution of this Agreement the mm of Rs. 3565.00 as an initial payment by way of hire which shall become the absolute property of the Owners and will punctually pay to the Owners at their address for the time being at Calcutta and without previous demand, the sums mentioned in the margin hereof by way of rent for the hire of the vehicle the first payment to be made on the 19th day of January, 1964 and each subsequent payment on or before the 19th day of every succeeding calendar month unless the Hirer shall have terminated this Agreement as hereinafter provided.
Clause IV.--If the Hirer shall duly per-form and observe all the terms and conditions in this Agreement contained on his part to be performed and observed and shall in the manner aforesaid pay to the owners monthly sums by way of rent amounting together with the said sum of Rs. 3565.00 so paid on the execution of this Agreement as aforesaid to the sum of Rs. 17,701.00 and shall also pay to the Owners all other sums of money which may become payable to them by the Hirer under this Agreement the hiring shall come to end and the vehicle shall at the option of the Hirer become his property and the Owners will assign and make over all their right, title and interest in the name of the Hirer; but until such payments as aforesaid have been made the vehicle shall remain the absolute properly of the Owners.
In the margin referred to in Clause III quoted above, 24 monthly instalments, each of Rs. 589, totalling Rs. 14,136, were written under the heading 'Payments by way of hire'. I need not concern myself with different penal and onerous clauses concerning payment, excepting that I need refer to conditions 3, 4, 5 and 9 for the purposes of this suit. The said conditions read as follows :--
'3. The hirer agrees to pay to the Owners interest at the rate of one percent per mensem on the amount of any sums overdue including any sum for rates, taxes, fees, repairs, insurance and supplies, which may be due from the Hirer to the Owners in respect of the vehicle or which the Owners may have incurred to save, protect or free the vehicle from the claims of the third parties. But this provision shall not in any way affect or prejudice the right of the owners as provided herein to recover possession of the vehicle and to determine this Agreement on default of payment of any of the monthly hire payment or of other dues payment by the Hirer to the owners. It is further agreed that the payment of Hire moneys and other sums due under this agreement is not subject to suspension or delay by reason of the Vehicle requiring or undergoing repairs or being suspended by any traffic authority or by reason of delay in registration of the Vehicle or its non-registration or by reason of delay of non-receipt of the permit by the hirer or of the pending of an insurance claim or by any causes or reasons whatsoever.
4. The hirer acknowledges that he holds the vehicle as a bailee of the owners and shall not have any proprietary right or interest as purchaser therein until he shall have exercised his option of purchase as herein before provided and shall have paid the whole amount due under this agreement or under any term thereof.
5. The owners may terminate with or without notice the contract of hiring and forthwith retake and recover possession of the vehicle :
(a) If any monthly hire or part thereof is in arrear and left unpaid for a period of seven days after the date fixed for its payment for any reason whatsoever and particularly notwithstanding any claim which the hirer may have in respect of insurance herein after mentioned.
(b) If the hirer commits or suffers any breach of the conditions and obligations herein stipulated to be observed and performed by him or does anything or suffers any act to be done which in the opinion of the Owners may prejudice their title to the vehicle.
(c) If the hirer omits to inform the owners within 48 hours thereafter, (in case the vehicle is insured) of any accident which causes either damage to the vehicle, bodily injury to any third party or damage to any other vehicle or property.
(d) If the hirer dies, becomes insolvent or has a receiving order made against him or allows the vehicle to be seized in distress or execution or under any other process of law.'
Any such termination shall be without prejudice to the claims the Owners may have in respect of any terms or conditions of this Agreement and it is further agreed that if the hiring is terminated by Owners or by the Hirer in the manner herein provided all hire (and damages for the breach of this Agreement) up to the date of such termination shall be paid by the Hirer to the Owners and no payment, credit or allowance, in respect of payment previously made shall be made or allowed to the Hirer.
*** *** ***
9. The Hirer agrees to pay on demand all expenses incurred by the Owners in collecting or attempting to collect moneys due to them by the Hirer, or for repossession or attempted repossession of the vehicle and for the purpose of such repossession, leave and licence is hereby given to the Owners, their agents or any other person or persons employed, designated or authorised by them to enter any building, premises or place where the vehicle may be or may be supposed to be and take possession of the same from the Hirer or any other person using or possessing the same without being liable to any suit or other proceeding by the Hirer or any person claiming under him.'
On the same day, the defendant executed in favour of the plaintiff a promissory note (Ex. C) for Rs. 14.136/-. Two days thereafter, on December 12, 1963, the plaintff paid to Auto Distributors Ltd. the dealers, a sum of Rs. 13,970/-towards price of the car and obtained a receipt (EM. D) couched in the following language :--
'Received with thanks from Syam Sunder Bubna and Co., 26/4 Armenian Street, Calcutta 1, account Manindra Nath Ghosh the sum of Rupees thirteen thousand nine hundred and seventy only by cheque on account of payment against Fiat Car and our Bill No. 774 dated 11-12-63'.
Two days further thereafter the defendant No 1 paid a further sum of Rs. 35/- to Auto Distributors Ltd., towards balance of the price of the car and obtained a receipt (Ext. 6) dated December 14, 1963. Whether this sum was paid by the defendant No. 1 out of his own kinds or by loan from the plaintiff is a disputed question of hid and I shall refer to that question hereinafter. After purchase, the car was registered under the Motor Vehicles Act in the name of the defendant No. 1 with the following note: 'H/P Syan Sunder Bubna and Co. (Exts. 5, 5-A)'
7. Ram Avatar Bubna, a partner of the plaintiff firm gave evidence in this case. He admits that the business of the plaintiff firm is to finance cars. In answer to Q. 3, he says, 'We are the financiers in respect of the vehicles, viz. trucks, taxis, cars'. He explained further the nature of the business carried on by the plaintiff firm in his answer to Q. 110 :
'You have told my Lord that you are financiers in respect of motor vehicles; would you tell my Lord what you mean by the words 'financier of vehicles'?/ For example, a party wants to purchase a vehicle; he is short of funds; the initial payment is to be made by him. Thereafter if the fund falls short, he approaches us: we finance him; we charge commission and other incidental charges; My Lord, we do not charge any commission; we charge interest on the amount which we invest'.
About the ownership of the car in suit, at the time of the execution of the agreement, ha gave different versions. In answer to Qq. 14 to 16, he said that the car belonged to the plaintiff firm, which had purchased the car and thereafter hired out to the defandant. He could not stick to this answer. The hire-purchase agreement (Ext. A) is dated December 10, 1963; the receipt granted by Auto Distributors Ltd., evidencing sale of the car, is dated December 12, 1963. Confronted with this receipt, the language of which I have already set out, he gave the following answers in cross examination :--
Q. 118 'You have told my Lord that you first purchased the vehicle from Auto Distributors and thereafter you entered into (sic) purchase agreement with them?/ When we purchase we do not take delivery of the cars; we cause delivery to be given to the parties concerned.
Q. 114. Have you got any evidence to show that you purchased this vehicle from Auto Distributors any time prior to the hire purchase agreement dated 10th December, 1963P/ No, there is a bill; there is a receipt.
Q. 115. Your evidence is that the receipt and the bill are prior to the hire purchase agreement?/ That is not so.
Q. 116. (Shown)--I am showing you Ex. D; look at it, the date you find is 12th December, 1963P/ Yes.
Q. 117. From the hire purchase agreement you will admit that the date is 10th December, 1963--do you find that? Yes.
Q. 118. You find that this receipt is two days after the execution of the hire purchase agreement?/ Yes.
Q. 119. This receipt came into existence after the hire purchase agreement was executed?/ Yes.
Q. 120. And that is why it has been stated that the payment was made on account of Manindra Nath Ghosh, that is, the defendant No. IP/ Yes.
Q. 121. You have told my Lord that you purchased the vehicle from Auto Distributors, although you have no evidence to show that? After the hire purchase agreement was entered into, we would give delivery to the party concerned.
Q. 122. Therefore, you now come to the position that you did not actually purchase the vehicle but you issued delivery order?/ The vehicle was purchased in our account because we made payments.'
The delivery order spoken of by the witness was neither produced nor proved. Questioned further on the point by the Court, he said
Q. 124. 'Who produced the permit for purchase of the car?/ The party obtained.
Q. 125. With that permit did the defendant approach you for the financial assistance?/ He did not come to us with the permit; he said that he would be getting a car; he further said that as his fund was short, he needed some more money and he approached us to become the financiers.
Q. 126. In other words, he approached you for a loan?/ No, it cannot be treated as a loan; it should be treated as financing.'
Again questioned by the Court on the point he gave the following answer :--
Q. 128. 'When the hire purchase agreement was entered into, you yourself had no car to hire out?/ That is so'
The answer to Q. 128 falsifies his answer to Qq. 14 to 16. The plaintiff did have no interest in the car in suit, prior or at the time of the execution of the hire purchase agreement, on December 10, 1968. Even after the purchase of the car from Auto Distributor Ltd., on December 12, 1963 the defendant No. 1 did not execute any sale letter in favour of the plaintiff, 10 as to give to the agreement any of the colour variations of a hire purchase agreement. All that appears from the evidence of the plaintiff's witness Bubna is that the defendant No. 1 purchased the car with financial assistance obtained from the plaintiff firm (Qq. 130, 131) The receipt (Ext. D) for Rs. 13,970 shows that the plaintiff firm paid the price to Auto Distributors Ltd., the dealers, not as buyers themselves but on the first defendant's account. This financial assistance, repayable in instalments together with interest, insurance charges, etc. was calculated to total of Rs. 14,136 and a promissory note (Ext. C) was taken from the defendants thereby treating the entire transaction as a loan. The car, it appears from Ext. 5. was registered under the Motor Vehicles Act, in the name of the defendant No. 1, with the following note therein added: 'H/P--M/s. Shyam Sunder Bubna and Co.' The combined effect of Exts. C and D and Ext. 5, read with the evidence of Bubna, is not such as makes the plaintiff firm the owner of the car, at any stage. The present hire purchase agreement thus does not fall within any of the three types of hire purchase agreements mentioned hereinbefore. Nevertheless, in the hire purchase agreement (Ext. A) the plaintiff is described as the owner. The question is, whether this court can go beyond the agreement and find out the true nature of the transaction between the plaintiff and the defendant No. 1. In the case of Sundaram Finance Ltd. v. State of Kerala, (Civil Appeals Nos. 673 to 677 of 1964 unreported): (Since reported in AIR 1960 SC 1178), the Supreme Court had to consider the true character and effect of hire purchase agreements, in their several variations, in a case in which a financing company, carrying on the business of financing motor vehicles on the security of those vehicles, was proceeded against for realisation of sales tax. The manner in which the financing company carried on the business was found to be 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. 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 amount of the bill describing it as the value of the vehicle sold to the appellants: (5) an agreement failed the hire-purchase agreement under which the appellants agree to let out to the customer and me 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 thereon 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. The scheme for financing the purchase of the vehicle is therefore that the customer purchases the vehicle from the dealer directly and gets it registered in his name. At his request the appellants agree 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. On repayment of the amount stipulated to be paid, the vehicle becomes the sole and absolute property of the customer.'
8. The hire purchase agreement, which their Lordships had to consider contained clauses similar to the clauses in the agreement, which T have to consider. Interpreting the, true nature of the transaction Shah, J. (Sikri, J agreeing with him, Subba Rao. J dissenting) observed :
'The true effect of a transaction may be determined from the terms of the agreement considered in the light of the surrounding circumstances. In each case, the Court has, unless prohibited by statute, power to go behind the documents and to determine the nature of the transaction, whatever may be the form of the documents. An owner of goods who purports absolutely to convey or acknowledges to have conveyed goods and subsequently purports to hire them under a hire-purchase agreement is not estopped from proving that the real bargain was a loan on the security of the goods. If there is a bona fide and completed sale of goods, evidenced by documents, anterior to and independent of a subsequent and distinct hiring to the vendor, the transaction may not be regarded as a loan transaction, even though the reason for which it was entered into was to raise money, if the real transaction is a loan of money secured by a right of seizure of the goods, the properly ostensibly passes under the documents embodying the transaction, but subject to the terms of the hiring agreement, which become part of the buyer's title, and confer a licence to seize. When a person desiring to purchase goods and not having sufficient money on hand borrows the amount needed from a third person and pays it over to the vendor, the transaction between the customer and the lender will unquestionably be a loan transaction. The real character of the transaction would not be altered if the lender himself is the owner of the goods and the owner accepts the promise of the purchaser to pay the price or the balance remaining due against delivery of goods. But a hire-purchase agreement is a more complex transaction. The owner under the hire-purchaser agreement 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 legal 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 agreement which is in the form of a hire-purchase agreement with the financier, but in substance evidences a loan transaction, subject to a hiring agreement under which the lender is given the license to seize the goods.'
9. His Lordships thereafter examined the principles laid down in certain English decisions, namely, In re: Watson; Ex parte Official Receiver in Bankruptcy, (1890) 25 QBD 27; Maas v. Pepper. (1905) AC 102; Polsky v. S. and A Services, (1951) 1 All ER 185 (195) and observed:
'In the light of these principles the true nature of the transactions of the appellants may now be stated. The appellants are carrying on the business of financiers: they are not dealing in motor vehicles. The motor-vehicle purchased by the customer is registered in the name ot the customer and remains at all material times so registered in his name. In the letter taken from the customer under which the latter agrees to keep the vehicle insured, it is expressly recited that the vehicle has been given as security for the loan advanced by the appellants. As a security for repayment of the loan, the customer executes a promissory-note for the amount paid by the appellants to the dealer of the vehicle. The so-called 'sale letter' is a formal document which is not made effective by registering the vehicle in the name of the appellants and even the insurance of the vehicle has to be effected as if the customer is the owner. Their right to seize the vehicle is merely a licence to ensure compliance with the terms of the hire-purchase agreement. The customer remains qua the world at large the owner and remains in possession, and on condition of performing the covenants has a right to continue to remain in possession. The right of the appellants may be extinguished by payment of the amount due to them under the terms of the hire-purchase agreement even before the dates fixed for payment. The agreement undoubtedly contains several onerous covenants, but they are all intended to secure to the appellants recovery of the amount advanced. We are accordingly of the view that the intention of the appellants in obtaining the hire-purchase and the allied agreements was to secure the return of loans advanced to their customers, and no real sale of the vehicle was intended by the customer to the appellants. The transactions were merely financing transactions.'
10. The instant case is stronger in facts than the case which their Lordships of the Supreme Court had to decide in Sundaram Finance Ltd., C. A. Nos. 673 to 677 of 1964: : 2SCR828 (Supra). Here the defendant No. 1 did not even execute a sale letter in favour of the plaintiff firm for the vehicle, although the execution of such a letter even might have been of doubtful value. There was no receipt, as in the case before the Supreme Court, for the amount of the bill describing it as value of the vehicle sold to the plaintiff. There was also no letter as in the case before the Supreme Court, addressed to the plaintiff by the defendant No. 1, agreeing and undertaking to get the vehicle insured against 'comprehensive risks', although there was such a term included in the agreement. Thus the plaintiff was never the owner of the car and had nothing to hire out. I am accordingly of the view that the real intention of the plaintiff in obtaining the hire purchase agreement was to secure the return of the loan advanced to defendant No. 1 and the transaction was merely a financing transaction. The defendant No. 1 is and always has been the owner of the car, by right of purchase from Auto Distributors Ltd., the dealers, even though he purchased the car with borrowed money. He had no further right in the car to acquire from the plaintiff. He is only liable to pay the debt due to the plaintiff firm. The plaintiff's right, under the agreement, to take possession of the vehicle, need be treated as merely a licence to ensure compliance of the terms as to repayment under the agreement. In pith and substance the transaction is merely a financing transaction and should not be treated as hire purchase agreement. The plaintiff lent a sum of money to the defendant No. 1 secured on the hypothecation of the, car. I answer this issue accordingly. (After adjudicating upon other issues in paras 11 to 18 the judgment proceeds).
11. Thus the plaintiff is entitled to a decree for a sum of Rs. 7,726.76 (Rs. Seven thousand seven hundred twenty six and seventy six paise) realisable in the manners aforesaid. The plaintiff is entitled to interim interest and interest on the decrial amount at 6 per cent per annum, I pass decree for costs in favour of the plaintiff roughly proportionate to the success, namely, at half the rate throughout.