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Unless knowledge proven, manufacturer not liable given the relationship with dealer: SC

Unless knowledge proven, manufacturer not liable given the relationship with dealer: principal to principal basis: SC


CIVIL APPEAL NO. 574/ 2021 (ARISING OUT OF SLP (C) NO. 10220 OF 2020)

Decided on February 18th, 2021

The present case was decided by a bench of the Supreme Court consisting of Justice Uday Umesh Lalit, Justice Hemant Gupta and Justice S. Ravindra Bhat.

The incident came to light in 2011 when Vas bought a car paying the agreed-upon total for a car. Vaz availed a loan to buy the 2009 car which already had 622 km on the odometer when it was sold to him. Vaz, after realising that it is an old car requested for refund of the price paid or replacement of the car. The dealer did not refund the money or replaced the car. Vaz refused to take the delivery of the 2009 car and filed a complaint before Goa District Consumer Redressal Forum (District Forum).

The district forum order said that there are a few defects in the car including the undercarriage of the vehicle that was fully corrugated and had scratch marks on the body. The alloy wheels were also corrugated inside and car also had 622 km on the odometer before the delivery. Other parts like the music system were not provided as promised. The forum held the manufacturer and the dealer jointly and severally liable to replace the car with interest at 10 per cent from the date of delivery. Both manufacturer and the dealer were severally directed to pay Rs 20,000 towards mental stress and agony, in addition to Rs 5,000 for the costs.

The appellant contested the findings in the impugned order, and mainly focused its submissions on the conclusions drawn by the National Commission regarding the absence of a principal-to-principal relationship. It was highlighted that besides impleading the appellant and seeking relief, no allegations against it were made in the complaint by Vaz before the District Forum. The appellant highlighted that the entire drift of the complaint was that the 2009 make car manufactured by it, which had been sold by the dealer, was an old one, and that Vaz was misled into agreeing to purchase it, without being aware of the model, or that the particular car had already been used. The appellant therefore, urged that there was neither averment, nor allegation by Vaz, on the basis of which any liability could be pinned upon it, a third party to the entire transaction, merely because it was the manufacturer. It was submitted that the complainant never alleged or proved that any one of its employees was privy to the transaction in question, or had led Vaz to purchase the car in question from the dealer. [Para 8]

It was urged that unless Vaz, the complainant, could establish that there was a defect in the product, i.e. the car, the manufacturer could not be fastened with liability. Reliance was placed upon the decisions of this court in Maruti Udyog Ltd. v. Susheel Kumar Gabgotra and Indian Oil Corporation v. Consumer Protection Council.

Refuting the appellant’s arguments, it is urged on behalf of Vaz that the impugned order has no error calling for interference, and that this Court should not exercise its discretion to upset the findings conferred by it in exercise of its powers under Article 136 of the Constitution of India. It is reiterated that the consumer, i.e., Vaz was informed at the time of the vehicle’s booking that it was fitted in accordance with the specifications required by him. At that time, he was never informed that the vehicle (the car) in question had been used and had been manufactured in 2009 and, was therefore old. After registering the vehicle, the complainant returned to the showroom and then discovered that the car had several defects, including that the undercarriage was fully corrugated and the body had several scratch marks. These flaws were immediately pointed out to the dealer; the dealer was also requested to replace the vehicle. However, they refused to do that. [Para 13]

The record establishes the absolute dearth of pleadings by the complainant with regard to the appellant’s role, or special knowledge about the two disputed issues, i.e. that the dealer had represented that the car was new, and in fact sold an old, used one, or that the undercarriage appeared to be worn out. This, in the opinion of this court, was fatal to the complaint.The liability of a manufacturer, such as the present appellant, was the subject matter of a decision of this court in Indian Oil Corporation v. Consumer Protection Council, Kerala. [Para 26]

The three-judge bench of the Supreme Court also reiterated the fact that the vehicle registration document, hypothecation, invoice and gate pass all showed that the car was of a 2009 make. They also observed that no role or wrong-doing was attributed to the appellant in the District Forum and as per the previous case of Indian Oil Corporation v. Consumer Protection Council, Kerala wherein the Court had held that all contracts and agreements entered into by a Distributor and Customer are of a principal-principal basis, it is proved beyond reasonable doubt that the unauthorized acts of the second respondent had deemed the distributorship cancelled.

Further, the very fact that the dealer had represented that the car was new, and in fact sold an old, used one, or that the undercarriage appeared to be worn out proved to be fatal to the complaint in itself. Thereby making the allegations against the dealer valid however, the same against the manufacturer were unfounded as he had neither made the delivery of the car nor had he made the representations in question. Thus, the above discussion led the Supreme Court to rule in favor of the manufacturer.

The Supreme Court considered the case of General Motors (I) (P) Ltd. v. Ashok Ramnik Lal Tolat and held that the concurrent findings of the three forums under the Consumer Protection Act were that the appellant was guilty of unfair trade practice, leading to award of punitive damages.

The Supreme Court also weighed the arguments of both the parties and stated that it is shameful that a defective car was sought to be sold as a brand-new car. It is further regrettable that, instead of acknowledging the defects, the 1st respondent chose to deny liability and has contested this matter. The court said unless the manufacturer’s knowledge is proved, a decision fastening liability upon the manufacturer would be untenable.

Keerthana R