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Non-service of notice would tantamount to deficiency of service, even if implied in agreement: SC



Magma Fincorp Ltd v. Rajesh Kumar Tiwari

CIVIL APPEAL NO. 5622 OF 2019 (ARISING OUT OF SLP (C) NO. 33720 OF 2018) DECIDED ON: 01.10.2020 The bench consisting of Hon’ble Justice D.Y Chandrachud and Hon’ble Justice Indira Banerjee decided this civil appeal. The present case is an appeal is against an order dated 2nd August, 2018 passed by National Commission, dismissing Revision Petition No.5 of 2018, filed by the Appellant, under Section 21(b) of the Consumer Protection Act, 1986, against an order dated 31st August, 2017 passed by the State Commission, Uttar Pradesh. The district forum gave an order favoring the appellant which was reversed by State commission. The case was relating to default of payments in a hire purchase agreement.


In a case where the requirement to serve notice before repossession is implicit in the hire purchase agreement, non service of proper notice would tantamount to deficiency of service for breach of the hire purchase agreement giving rise to a claim in damages. The Complainant consumer would be entitled to compensatory damages, based on an assessment of the loss caused to the complainant by reason of the omission to give notice. Where there is no evidence of any loss to the hirer by reason of omission to give notice, nominal damages may be awarded. (Para 90)

The main issues were

I. Whether service of proper notice on the hirer is necessary for repossession of a vehicle which is the subject of a hire purchase agreement, and if so, what is the consequence of non service of proper notice?


II. Whether the Financier (appellant) is the real owner of the vehicle which is the subject of a hire purchase agreement, and if so, whether there can be any impediment to the Financier, taking repossession of the vehicle, when the hirer does not make payment of installments in terms of the hire purchase agreement?

The Court provided the relevant provisions and it relied upon various judgments like Citicorp Maruti Finance Ltd. v. S. Vijaylaxmi ((2012) 1 SCC 1) , K.L. Johar & Co.v.Deputy Commercial Tax Officer, Coimbatore (AIR 1965 SC 1082) and ICICI Bank Ltd. v. Prakash Kaur & Ors ((2007) 2 SCC 711)

The Court decided all the provided issues and stated that, the Financier being the owner of the vehicle which is the subject of a Hire Purchase Agreement, there can be no impediment to the Financier taking possession of the vehicle when the hirer does not make payment of installments/hire charges in terms of the Hire Purchase Agreement. However, such repossession cannot be taken by recourse to physical violence, assault and/or criminal intimidation.

“Whether the service of proper notice on the hirer would be necessary for repossession of a vehicle, which is the subject matter of a Hire Purchase Agreement, would depend on the terms and conditions of the Hire Purchase Agreement, some of which may stand modified by the course of conduct of the parties. If the hire purchase agreement provides for notice on the hirer before repossession, such notice would be mandatory. Notice may also be necessary, if a requirement to give notice is implicit in the agreement from the course of conduct of the parties.”(Para 88)

The Complainant, admittedly a defaulter, has in effect, been allowed free use of the vehicle for about a year, plus damages, for an error in the notice of repossession, without considering the prejudice, if any, caused to the complainant by the error and consequential non receipt of the notice, and without making any assessment of the loss, if at all, to the Complainant by reason of the error/omission.


It was decided that the Financier shall, however, pay a composite sum of Rs.15,000/- to the Complainant towards damages for ‘deficiency’ in service and costs for omission to give the Complainant a proper notice before taking repossession of the vehicle.

Thus the Court set aside the orders provided by various commissions and appeal was allowed. -Kamalini

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