Holding

The vehicle shall be released in favour of the financier, who is the legal owner under the hire‑purchase agreement and registration certificate, subject to the same conditions imposed on the hirer.

Summary

The appellant, a financier under a hire‑purchase agreement, sought the release of a lorry seized under the Tamil Nadu Prohibition Act. The vehicle had been released earlier in favour of the hirer (respondent No.2) on certain conditions, which the hirer failed to fulfil. The appellant argued that the hire‑purchase agreement and the registration certificate named it as the legal owner, entitling it to possession under sections 451 and 457 of the Code of Criminal Procedure, 1973. The High Court dismissed the revision, holding that only the hirer, as the registered owner, could claim release. The Supreme Court held that the financier, being the owner under the agreement and registration, could obtain release, but only subject to the same conditions imposed on the hirer. Consequently, the appeal was allowed and the vehicle was ordered to be released to the financier upon compliance with those conditions.

Issues considered

Whether a financier named as owner in a hire‑purchase agreement and registration certificate is entitled to possession of a seized vehicle under sections 451 and 457 CrPC.
Whether the conditions imposed on the hirer for release of the vehicle must be complied with before the financier can obtain release.
Interpretation of the scope of sections 451 and 457 of the Code of Criminal Procedure, 1973 in the context of hire‑purchase arrangements.

Legislation cited

Code of Criminal Procedure, 1973s. 451, s. 457

Subjects

hire purchasevehicle seizurerelease ordersections 451 CrPCsections 457 CrPCownershipregistration certificateTamil Nadu Prohibition Actfinancier

Judgment

[2008] 5 S.C.R. 478

A BHARATH METHA
V.
STATE BY INSPECTOR OF POLICE CHENNAI
(Criminal Appeal No. 549 of 2008)
MARCH 25, 2008
B
(DR. ARIJIT PASAYAT AND P. SATHASIVAM, JJ.)

Code of Criminal Procedure, 1973:
ss. 451 and 457 - Release of vehicle in favour of financier
C - HELD: In .the hire purchase agreement the financier is
described as owner- In the Registration Certificate also name
of financier is indicated - Hirer had failed to comply with
release order - Therefore, vehicle be released in favour of
financier on same conditions, as were imposed on hirer- Hire-
D Purchase Law.
The lorry in question, which was subject to a hire (
purchase agreement between the hirer-respondent no. 2
and the appellant-Financier, was seized under the Tamil
E Nadu Prohibition Act. Subsequently it was released in
favour of respondent no. 2, but he did not comply with
the conditions of the release order. Thereafter, the
appellant filed an application u/ss. 451 and 457 of the Code
of Criminal Procedure, 1973 stating that in the hire-
purchase ·agreement the appellant-financier was
F described as owner of the vehicle and as such he was
entitled to possession of the vehicle. The application was
rejected by the Judicial Magistrate. The High Court, in the
revision petition, held that since respondent no. 2 was
registered as owner of the vehicle and the revisionist was
G only the financier, the vehicle could not be released in
favour of the latter. Aggrieved, the financier filed the instant
appeal.
Allowing the appeal, the Court
H 478
BHARATH METHA v. STATE BY INSPECTOR OF 479
POLICE CHENNAI [DR. ARIJIT PASAYAT, J.]
-r HELD: Undisputedly, in the Registration Certificate A
the name of the financier has been indicated and the
factum that the vehicle was subject to such an agreement
was also noted. In the agreement, appellant is described
as owner, and respondent no. 2 as hirer. It is noticed that
respondent no. 2 had applied for and the High Court had B
directed release of the vehicle on certain conditions.
-'>
Undisputedly, those conditions have not been fulfilled.
The vehicle is, therefore, .lying with the seizing authorities
for nearly eight years now. In view of the factual position,
~ the vehicle is directed to be released in favour of the c
' appellant subject to fulfillment of the conditions which
were stipulated for respondent no.2. [para 9] [475-D, E & F]
Charanjit Singh Chadha vs. Sudhir Mehra (2001) 7 SCC
417; and Sunderbhai Ambalal Desai vs. State of Gujarat
(2002) 1o sec 283 - relied on . D
.,,.
CRIMINAL APPELLATE JURISDICTION : Criminal
Appeal No. 549 of 2008.
From the final Judgment dated 25/11/2004 of the High
Court of Judicature at Madras in Crl. R.C. No. 267/2004. E
Siddhartha Dave and Senthil Jagadeesan for the
Appellant:
V.G. Pragasam, S.J.Aristotle and Praburma Subramanian
for the Respondent. F
... The Judgment of the Court was delivered by
DR. ARIJIT PASAYAT, J. 1. Leave granted.
2. Challenge in this appeal is to the order of a learned
Single Judge of the Madras High Court dismissing the petition G
filed by the appellant. The Criminal Revision was filed against
order dated 22.12.2003 made in CMP No. 7255 of 2003 by the

"' Court of Judicial Magistrate No. 11, Ponneri, dismissing the
petition filed by the appellant under Sections 451 and 457 of
the Code of Criminal Procedure, 1973 (in short the 'Cr.P.C.'). H
480 SUPREME COURT REPORTS [2008] 5 S.C.R.

A The application was filed for release of lorry bearing Registration r-
No. TN-01-F-9797 which was alleged to have been involved in
a case registered for offences punishable under various
provisions of the Tamil Nadu Prohibition Act. The case of the
appellant before the High Court was that money was provided
B to the respondent No. 2 to purchase the said lorry under a hire
purchase agreement. In terms of the agreement, the hirer was
1,-
required to pay 32 monthly instalments of Rs.14,875/- between
the period from 24.6.2000 and 24.1.2003. Under the hire
purchase laws, the hirer can become the owner of the vehicle
c by exercising the option to purchase after paying the entire
amount due and till that time the financier is the owner. The
financier is also entitled to possession of the vehicle since he is
the owner. In the agreement, appellant is described as the owner
and the respondent no.2 as the hirer. The appellant tried to take
possession of the vehicle as an owner but the vehicle was not
D
available at the premises and on enquiry appellant came to know
that the police had seized the same on 6.9.2000 when the vehicle
,.
was operating with a fake number plate for transporting
prohibited spirit. The First Information Report was lodged
against respondent No.2 and therefore the appellant prayed for
E release of the vehicle. The prayer was resisted by the State on
the ground that the vehicle had already been directed to be
returned to the respondent No.2 as he was the owner as per the
Registration Certification.

F 3. The High Court noted that the vehicle was involved in
commission of offences punishable under Sections 4(1)(A) and
4(1 )(aaa) of the Act read with Rules 5 & 6 of Rectified Spirit
Rules. High Court also noted that though an order had been
..
passed for releasing the vehicle in favour of respondent No. 2,
he had not taken custody of the same though the order was
G
passed on 23.1.2001. The High Court also noted that since the
respondent No.2 was registered as owner of the .vehicle and
appellant was only the financier, the vehicle could not be released
as prayed for. Accordingly, as noted above, the criminal revision "
petition was dismissed.
H
BHARATH METHA v. STATE BY INSPECTOR OF 481
POLICE CHENNAI [DR. ARIJIT PASAYA'{, J]
......
4. Learned counsel for the appellant submitted that in the A
certificate of registration there is clearly an endorsement to the
effect that the vehicle was hired under the hire purchase
agreement. It was also clearly endorsed that the hirer had
entered into hire purchase agreement with Subham Credits
represented by the appellant. B
j
5. Learned counsel for the State clearly stated that though
an order was passed permitting to respondent No.2 that release
of the vehicle by executing bond of Rs.1,00,000/- with two
sureties of like sum and other condition that he shall not alienate
or encumber or alter the vehicle and .shall produce the vehicle c
as and when required by the trial court, the said condition has
not been complied with.
6. It is to be noted that respondent No. 2 did not appear
before the High Court in the connected proceedings.
D
7. The nature of hire purchase agreement has been noted
by this Court in Charanjit Singh Chadha v. Sudhir Mehra
(2001(7) sec 417). At page 421 it was noted as follows:
"5. Hire-purchase agreements are executory contracts
.... under which the goods are let on hire and the hirer has an E
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 in popularity and in size, the F
... dealers who were not endowed with liberal amount of
to
working capital found it difficult extend the scheme to
many customers. Then the financiers came into the picture.
The finance company would buy the goods from the dealer
and let them to the customer under hire-purchase G
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 ttie option H
482 SUPREME COURT REPORTS [2008] 5 S.C.R.

A 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.
B 6. Though in India, Parliament has passed the Hire
Purchase Act, 1972, the same has not been notified in the
Official Gazette by the Central Government so far. An initial
notification was issued and the same was withdrawn later.
The rules relating to hire-purchase agreements are
c delineated by the decisions of higher courts. There are a
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
D Tax Act.

7. In Damodar Valley Corpn. v. State of Bihar (AIR 1961
SC 440) this Court took the view that a mere contract of
hiring, without more, is a species of the contract of

E
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
F 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 c. hire
purchase may also provide for the agreement to purchase
the thing hired by deferred payments subject tc the
G condition that title to the thing shall not pass unti! a'.) the
ins'.alments have been paid. There may be other va~iat1ons
of a contract of hire purchase depending up8G the terms
agreed between the parties. When rights in third pan:es
have been created by acts of parties or by operation of
H law, the question may arise as to what exactly were the
BHARATH METHA v. STATE BY INSPECTOR OF 483
POLICE CHENNAI [DR. ARIJIT PASAYAT, J.]

rights and obligations of the parties to the original contract. A
8. In K.L. Johar & Co. v. CTO (AIR 1965 SC 1082) 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 8
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.
c
8. The scope and ambit of Section 451 Cr.P.C. was
highlighted by this Court in Sunderbhai Amba/a/ Desaiv. State
of Gujarat (2002(10) SCC 283).
9. Undisputedly, in the Registration Certificate the name
of the financier has been indicated and the factum that the vehicle D
was subject to such an agreement was also noted. In the
agreement, appellant is described as owner, but respondent
no.2 as hirer. It is noticed that the respondent No.2 had applied
for the release of the vehicle and the High Court had directed
the release of vehicle on certain conditions. Undisputedly, those E
conditions have not been fulfilled. The vehicle is, therefore, lying
with the seizing authorities for nearly eight years now. In view of
the factual position highlighted above, we direct release of the
vehicle in favour of the appellant subject to fulfillment of the
conditions which were stipulated for the respondent No.2. F
10. The appeal is allowed to the aforesaid extent.
R.P. Appeal allowed.