Srei Equipment Finance Ltd. vs Ramjan Ali

CRIMINAL APPEAL NO. 6 of 2021 (arising out of SLP (Crl.) No.3893/2020)

SREI EQUIPMENT FINANCE LTD. ...APPELLANT(S)

VERSUS

RAMJAN ALI & ORS. ...RESPONDENT(S)

J U D G M E N T

ASHOK BHUSHAN,J.

Leave granted.

2. This appeal has been filed challenging the

judgment dated 28.01.2020 of High Court of Judicature

at Allahabad, Lucknow Bench allowing the application

under Section 482 Cr.P.C. filed by respondent No.1.

By impugned judgment, High Court has directed for

release of vehicle JCB No.UP 51 AT 5709 in favour of

the respondent No.1. The appellant, who was

respondent No.3 before the High court aggrieved by

the judgment has come up in this appeal. Signature Not Verified Digitally signed by MEENAKSHI KOHLI Date: 2021.01.05 16:43:43 IST Reason:

3. Brief facts of the case and events necessary to

be noted for deciding this appeal are:- 1

3.1 One Amarnath Yadav purchased the JCB machine

and entered into a finance agreement dated

22.10.2016 with the appellant under which

agreement the appellant financed an amount of

Rs.19,83,360/-. Under the agreement, Shri

Amarnath Yadav (hereinafter referred to as

“original owner”) agreed to repay the loan in

46 monthly instalments @ Rs.56,300/- for each

month from 15.12.2016 to 15.09.2020.

3.2 The original owner being resident of District

Basti, State of Uttar Pradesh applied for

registration of the vehicle to the Regional

Transport Officer, Basti. The vehicle was

registered by Regional Transport Officer,

Basti, Shri Amarnath Yadav as owner of JCB

machine bearing Registration No. UP 51 AT

5709 and there being agreement of finance

with appellant, in the registration

certificate the entry was made of the

appellant as person in whose favour the

vehicle was hypothecated as required by

Section 51 of the Motor Vehicles Act, 1988.

The original owner failed to pay any

2 instalment of loan. The appellant as per

terms of the finance agreement dated

22.10.2016 referred the dispute to an

arbitrator. The arbitrator proceeded to

decide the reference as per Arbitration and

Conciliation Act, 1996. Notices were issued

by Arbitrator to original owner. Original

owner failed to appear before the arbitrator.

The arbitrator gave an award dated 26.03.2018

in favour of the appellant namely M/s. Srei

Equipment Finance Private Limited for an

amount of Rs.25,97,053/- with interest @ 10%

p.a. from the date of notice of termination

(07.03.2017).

3.3 The original owner made an application with

the Regional Transport Officer, Basti praying

for seeking cancellation of entry of the

appellant as person with whom the vehicle was

hypothecated. Regional Transport Officer,

Basti issued an order on 16.08.2018

cancelling the entry of appellant as

financer. The Regional Transport Officer,

Basti without any information to the

3 appellant cancelled the entry of the

appellant from the registration certificate

and issued a fresh registration certificate

in the name of original owner. On

16.08.2018, the Regional Transport Officer,

Basti issued a clearance certificate in

favour of original owner noticing the fact

that vehicle has been sold to Ramjan Ali, the

respondent No.1 in the jurisdiction of other

registration authority, i.e., Sitapur.

3.4 On the basis of clearance certificate issued

by Regional Transport Officer, Basti, the

respondent No.1, Ramjan Ali submitted an

application for certificate of registration

to Transport Department, Sitapur and a

registration certificate dated 27.08.2018 was

issued in the name of Ramjan Ali as owner.

The registration certificate dated 27.08.2018

also noted the entry of hypothecation in

favour of Magma Fincorp Limited. The

respondent No.1 after obtaining transfer from

original owner has been using the vehicle.

4 3.5 On 09.01.2019, the vehicle was taken

possession by four persons, with regard to

which an FIR Case Crime No.08 of 2019 under

Sections 364 and 392 was lodged by respondent

No.1, Ramjan Ali in Police Station Sidhauli

District Sitapur. The vehicle was seized on

27.01.2019 by the police. Ramjan Ali filed

an application before the Chief Judicial

Magistrate, Sitapur for release of the

vehicle No. UP 51 AT 5709. Police submitted

a report before the Chief Judicial

Magistrate, Sitapur on the application of

respondent No.1. The appellant also appeared

before Chief Judicial Magistrate, Sitapur and

filed an objection claiming to be the

financer of the vehicle. The appellant’s

objection stated that the registration

certificate, which was in the name of

Amarnath Yadav, the original owner, there was

entry in favour of appellant as the person

with whom the vehicle was hypothecated. The

original owner had not paid any amount and an

award dated 26.03.2018 was passed in favour

5 of the appellant against the original owner.

Objection further stated that original owner

and respondent No.1 had manufactured

fraudulent documents and in collusion with

officials of Regional Transport Office, Basti

had managed to obtain clearance certificate

dated 16.08.2018. The Regional Transport

officer, Sitapur had transferred the vehicle

and registration of the vehicle in the name

of respondent No.1 which is illegal. The

Chief Judicial Magistrate after noticing the

case of the respondent No.1 as well as the

appellant, who had filed a detailed

objections observed that there is a dispute

over ownership of vehicle between respondent

No.1 and appellant and hence there is no

justifiable ground to release the vehicle in

favour of any of the parties. The

application filed by respondent No.1 for

release as well as the objection of the

appellant were rejected by order dated

04.05.2019. Before the aforesaid order dated

04.05.2019 was passed, the appellant filed an

6 application before the Regional Transport

Officer, Basti on 30.04.2019 claiming that

the appellant was person with whom the

vehicle was hypothecated and entry of

hypothecation in favour of the appellant in

the registration certificate was got

cancelled on the basis of forged Form-35 and

the clearance certificate was wrongly issued

in favour of original owner for transfer of

the vehicle.

3.6 The Regional Transport Officer after receipt

of the application by the appellant dated

30.04.2019 issued notices to original owner

on 30.04.2019, 08.05.2019, 15.05.2019 and

01.06.2019, the original owner did not appear

before the Regional Transport Officer nor

gave any reply. The Assistant Regional

Transport Officer after considering the

materials produced by the appellant by

application dated 30.04.2019 and other

materials passed an order on 29.06.2019

setting aside the order of cancellation of

finance agreement as well as the no objection

7 certificate earlier issued by Regional

Transport Officer, Basti. The Regional

Transport Officer held that registration

certificate issued by Regional Transport

Officer, Basti in Form-23 in respect of

vehicle(JCB Machine) bearing No. UP 51 AT

5709 and no objection certificate shall be

treated as null and void. The Assistant

Regional Transport Officer also wrote to the

Superintendent of Police, Basti to register a

case under appropriate section of the Indian

Penal Code against the original owner.

3.7 The respondent No.1 filed an application

under Section 482 Cr.P.C. before the High

Court challenging the order dated 04.05.2019

passed by the Chief Judicial Magistrate

rejecting his application for release of the

vehicle. The appellant was subsequently

impleaded as respondent No.3 in the

application under Section 482 Cr.P.C.

3.8 The High Court vide its impugned judgment

dated 28.01.2020 allowed the application

under Section 482 Cr.P.C., set aside the

8 order of Chief Judicial Magistrate dated

04.05.2019 and directed the release of the

vehicle in favour of respondent No.1 Ramjan

Ali. The appellant aggrieved by the said

order dated 28.01.2020 has come up in this

appeal.

4. On 27.10.2020 while issuing the notice following

order was passed:-

“Issue notice, returnable in four weeks.

We further direct that the vehicle

bearing No.UP51AT-5709 in question shall not be further transferred by the respondent no.1.”

5. The counter affidavits have been filed by

respondent Nos.2 and 3 as well as respondent No.1.

6. We have heard learned counsel for the appellant,

learned counsel appearing for respondent No.1 as well

as learned counsel appearing for the State.

7. Learned counsel for the appellant submits that

the vehicle was registered with Regional Transport

9 Office, Basti in October, 2016 in the name of

Amarnath Yadav, the original owner, with entry of

appellant as a person with whom the vehicle was

hypothecated. The original owner failed to pay the

loan EMI and on a reference made to the arbitrator an

arbitration award dated 26.08.2018 was passed and

after the arbitration award having been passed

against the original owner, he hatched a plan to

cheat the appellant. The original owner by

submitting the forged documents including forged

Form-35, got cancelled the entry of appellant in the

registration certificate and a clearance certificate

was issued on 16.08.2018 by Regional Transport

Office, Basti. On the basis of clearance certificate

vehicle was got registered in the name of respondent

No.1 at Regional Transport Office, Sitapur. The

transfer by original owner was wholly illegal and

without jurisdiction. The vehicle having been

hypothecated to appellant, it could not have been

transferred without clearing the loan and without

consent of the appellant. The respondent No.1, who is

beneficiary of fraud was not entitled to the release

of the vehicle and the High Court committed an error

10 in releasing the vehicle in favour of respondent

No.1. It is further submitted that Regional

Transport Office, Basti having passed an order on

29.06.2019 cancelling the registration certificate

issued in the Form 23 as well as the No Objection

Certificate, High Court committed error in directing

the release of the vehicle in favour of respondent

No.1. The vehicle being hypothecated to appellant

and there being award against original owner, the

vehicle can neither be transferred to respondent No.1

nor there is any right in respondent No.1 to claim

the vehicle.

8. Learned counsel appearing for the respondent No.1

submits that respondent No.1 is bonafide purchaser,

who had paid amount of Rs.7,50,000/- to original

owner and has obtained finance of Rs.10 lakhs from

M/s. Magma Fincorp Limited, the vehicle was rightly

released by the High Court in his favour. It is

submitted that in the registration certificate, which

was produced by original owner, there was no entry of

the hypothecation in favour of the appellant. The

respondent No.1 has diligently obtained the transfer

11 and got the vehicle registered in his name with

Regional Transport Office, Sitapur. The JCB machine,

which was purchased by respondent No.1 was not under

any hire purchase agreement, there is no error in

purchase of the vehicle by respondent No.1. The

respondent No.1 after purchase of the vehicle has

obtained insurance cover and is paying the tax for

the use of JCB to registering authority, Sitapur.

The vehicle having been forcibly taken possession on

09.01.2019, the same has rightly been released to the

respondent No.1.

9. Learned counsel appearing for the State submits

that after register of the FIR investigation was

initiated by the Sub-Inspector and it was found that

Amarnath Yadav, the original owner died of cancer on

08.07.2019. In the counter affidavit filed by the

State, necessary facts of the case have been

mentioned.

10. We have considered the submissions of the learned

counsel for the parties and have perused the records.

12

11. The Motor Vehicles Act, 1988 contains detail

provisions regarding registration of vehicle,

transfer of ownership and special provisions

regarding motor vehicle subject to hire purchase

agreement. The present is a case where the appellant

had entered into hire purchase agreement with

original owner Amarnath Yadav on 22.10.2016. An

entry regarding hypothecation was made in the

registration certificate while registering the

vehicle No. UP 51 AT 5709. Section 51(1), (3) and

(4) which are relevant for the present case are as

follows:-

“51. Special provisions regarding motor vehicle subject to hire-purchase agreement, etc.—(1) Where an application for registration of a motor vehicle which is held under a hire-purchase, lease or hypothecation agreement (hereafter in this section referred to as the said agreement) is made, the registering authority shall make an entry in the certificate of registration regarding the existence of the said agreement.

XXXXXXXXXXXXX (3) Any entry made under sub-section (1) or sub-section (2), may be cancelled by the last registering authority on proof of the termination of the said agreement by the parties concerned on an application being made in such form as the Central Government may prescribe and an intimation

13 in this behalf shall be sent to the original registering authority if the last registering authority is not the original registering authority.

(4) No entry regarding the transfer of ownership of any motor vehicle which is held under the said agreement shall be made in the certificate of registration except with the written consent of the person whose name has been specified in the certificate of registration as the person with whom the registered owner has entered into the said agreement.

XXXXXXXXXXXXXX”

12. From the facts, which have been brought on the

record, it is clear that when the vehicle was

initially registered at Regional Transport Office,

Basti, the name of original owner was Amarnath Yadav

and entry in the name of appellant as the person with

whom the vehicle was hypothecated was there in the

registration certificate. Rule 61 of The Central

Motor Vehicle Rules, 1989 deals with termination of

hire purchase agreement etc. Rule 61, which is

relevant is as follows:-

“61. Termination of hire-purchase agreements, etc.—(1) An application for making an entry of termination of agreement of hire purchase, lease or hypothecation referred to in sub-section (3) of section 51 shall be made in Form 35 duly signed by the registered owner of the vehicle and the financier, and shall be 14 accompanied by the certificate of registration and the appropriate fee as specified in rule 81.

(2) The application for the issue of a fresh certificate of registration under sub-section (5) of section 51 shall be made in Form 36 and shall be accompanied by a fee as specified in rule 81.

(3) Where the registered owner has refused to deliver the certificate of registration to the financier or has absconded then the registering authority shall issue a notice to the registered owner of the vehicle in Form 37.”

13. The entry of the appellant’s name in the

registration certificate of the vehicle was got

cancelled by submission of Form 35 by original owner

and thereafter fresh registration certificate in Form

23 dated 14.08.2018 was issued in the name of

Amarnath Yadav as original owner without any entry of

hypothecation. The clearance certificate dated

16.08.2018 was also issued by Regional Transport

Office, Basti for transfer of the vehicle to Ramjan

Ali within the jurisdiction of registering authority,

Sitapur. In the FIR No.08/2019 under Sections 364

and 392, the vehicle was seized on 27.01.2019. Chief

Judicial Magistrate in his order dated 04.05.2019

rejecting the application of respondent No.1 for 15 release has noticed the claim of the appellant, who

had filed objection to the release application. The

award dated 26.03.2018 was also placed before the

Chief Judicial Magistrate where it was noted that

outstanding amount in favour of the appellant is

Rs.25,97,053/-. Chief Judicial Magistrate noticed

the case of the appellant that original owner and the

second owner had manufactured fraudulent documents

and in collusion with the officials of the Regional

Transport Office, Basti managed to get the clearance

certificate dated 16.08.2018 whereas No Objection

Certificate could not have been issued. The Chief

Judicial Magistrate has rejected the application for

release.

14. The Regional Transport Office, Basti had passed

an order dated 29.06.2019 in exercise of power under

Section 55(5) of the Motor Vehicles Act. Section

55(5) under which the order dated 29.06.2019 was

passed is to the following effect:-

“55. Cancellation of registration.—

XXXXXXXXXXXXXX

(5) If a registering authority is satisfied that the registration of a motor 16 vehicle has been obtained on the basis of documents which were, or by representation of facts which was, false in any material particular, or the engine number or the chassis number embossed thereon are different from such number entered in the certificate of registration, the registering authority shall after giving the owner an opportunity to make such representation as he may wish to make (by sending to the owner a notice by registered post acknowledgement due at his address entered in the certificate of registration), and for reasons to be recorded in writing cancel the registration.

XXXXXXXXXXXXXX”

15. The order dated 29.06.2019 was filed before the

High Court, which order has been looked into and

commented by the High Court. The last paragraph of

the order of the Assistant Divisional Transport

Officer, Basti, which is relevant is as follows:-

“Under the aforementioned facts and circumstances, I have arrived at the conclusion that Sh. Amarnath Yadav with the intention to cheat in a dishonest manner had fraudulently manufactured the Form 35 and on the basis of such fake document had managed to get the financial contract of the aforementioned vehicle cancelled. It is a settled position of the law and that of the Motor Vehicle Act that an act which is void ab initio can never hold good with the efflux of time. (Quad initio vitionism est non protest tractu temporis convales cere). Keeping in mind the aforementioned maxim, I have arrived at the bonefide conclusion that Sh.

17 Amarnath Yadav while concealing the actual facts had submitted fraudulently manufactured documents and thereby had managed to get the order dated 19.6.2018 for cancellation of the financial agreement in respect of the Vehicle No. UP 51 AT 5709 JCB and the order dated

16.8.2018 for issuance of the no-objection certificate of the vehicle. As such, I, while exercising the powers vested on me U/s 55 (5) of the Central Motor Vehicle Act 1988, do hereby set aside the previously Issued order of cancellation of finance agreement and the no-objection certificate. From today i.e. from 29.6.2019, the registration certificate issued by this office in the Form 23 in respect of the aforementioned vehicle and the no-objection certificate shall be treated null and void. Sending a request letter to the Registration Officer, Sitapur, with the expectation that he shall cancel the orders passed by his office on the basis of the forms issued by this office earlier and remit back the no- objection certificate of the vehicle to this office. That apart, let correspondence be made with the Superintendent of Police, Basti to lodge case under the appropriate sections of the IPC for the act done by Sh. Amarnath Yadav. Accordingly, the application dated 30.4.2019 of the Financier Srei Equipment Finance Limited made in connection with the Vehicle No. UP 51 AT 5709 JCB is being finally disposed of in the light of the aforementioned conclusion and provision of the Law.

Sd// Registration Officer Motor Vehicle Department, Basti”

18

16. The registering authority has come to the

conclusion that Form 35 on the basis of which the

entry in the name of the appellant as person with

whom the vehicle was hypothecated was fraudulently

removed. The Assistant Divisional Transport Officer

has cancelled the order dated 16.08.2016 as well as

the No Objection Certificate of the vehicle and,

thus, the registration certificate given by office of

Regional Transport Office, Basti in Form 23, which

has been filed as Annexure CA-2 to the counter

affidavit of respondent No.1 has been held to be null

and void. All subsequent proceedings including

certificate of registration obtained by respondent

No.1 on 27.08.2018 on the basis of certificate of

clearance dated 16.08.2018 shall also automatically

be treated non est. The order of the Assistant

Divisional Transport Officer, Basti dated 29.06.2019

has not been shown to have been either set aside or

stayed by any competent court. The High Court in

paragraph 10 of the judgment has noted about the

order of the Assistant Divisional Transport Officer.

The High Court has observed that the contents of the

order dated 29.01.2019 are baseless and the action of

19 the Assistant Regional Transport Office, Basti is

also derogatory. We fail to see that on what basis,

the High Court proceeded to make the following

observations:-

“10. ……………the contents of the order dated 29.01.2019 are baseless and the action of ARTO, Basti is also derogatory,…………..”

17. Although High Court was right in its observation

that the record of office of Assistant Regional

Transport Office, Basti was provided by the officials

to the owner of vehicles, but there were ample

materials before Assistant Regional Transport

Officer, which were submitted by application dated

30.04.2019 of the appellant and other records

available with the Assistant Regional Transport

Officer including four notices issued to original

owner which has been noticed by Assistant Regional

Transport Officer in his order. More so, when order

of the Assistant Regional Transport Officer dated

29.06.2019 has neither been set aside nor stayed,

High Court could not have ignored the effect and

consequences of the order. The order dated

29.06.2019 having been passed in exercise of the

statutory power of the registration authority under 20 Section 55(5), the legal consequence of the said

order is that registration certificate issued in Form

23 by Regional Transport Office, Basti showing the

name of only Amarnath Yadav with no entry of

appellant has been treated to be null and void.

18. The High Court in its order has relied on

judgment of this Court in Manoj and Ors. Vs. Shriram

Tpt. Finance Co. Ltd. and Ors., JT 2002(1) SC 293,

where this Court has observed that vehicle having

been released in favour of the registered owner

though it was open for the financier to approach in

the civil court for proper relief. In the above

case, the motor vehicle was registered in the name of

the appellant Manoj Sharma. On his application, the

Magistrate has directed for release of the vehicle in

favour of Manoj Sharma. The said order was reversed

by the High Court in revisional jurisdiction. The

argument which was made before this Court was that

there was a civil suit pending where an order of

status quo was passed due to which the High Court was

not justified in releasing the vehicle to Manoj

21 Sharma. In the above case, this Court in paragraph 4

of the judgment has made following observations:-

“4. Mr. Rao appearing for the financier vehemently contended that in view of the pendency of the civil suits, and the order of the status quo passed therein, the magistrate was not justified in passing the order granting the vehicle in possession of Shri Manoj Sharma. We do not find any substance in the aforesaid contention inasmuch as the magistrate has categorically held in the order that the order delivering possession of the property to Shri Manoj Sharma is subject to any variation to be made by the civil court. If the financier was aggrieved by the order directing release of the vehicle in favour of Shri Manoj Sharma, who continues to be the registered owner of the vehicle, it was open for the financier to approach the civil court in the pending civil suit for interference. In this view of the matter, we set aside the impugned order of the High Court and direct that the order of the magistrate dated 3.4.2000 be complied with, and in case Shri Manoj Sharma furnishes a necessary bond to the extent of Rs. 5 lacs, then the vehicle could be given to Shri Manoj Sharma, which would be subject to any variation of the order by the civil court.”

19. In the above case, there was no dispute that

Manoj Sharma was registered owner of the vehicle. The

present is a case where registration certificate

which was issued by Regional Transport Office, Basti

in Form 23 stood cancelled including the setting

aside of the clearance certificate dated 16.08.2018. 22 The subsequent registration obtained from Regional

Transport Office, Sitapur on the strength of

clearance certificate dated 16.08.2018 shall also be

of no avail to the respondent No.1 in view of

registration certificate having been set aside on

29.06.2019. The above case, thus, has been wrongly

relied by the High Court in support of the claim of

the respondent No.1.

20. The statutory authority while cancelling the

registration certificate of the vehicle issued by

Regional Transport Office, Basti in Form 23 has

recorded his conclusion that entry of the appellant

as a person in whose favour the vehicle was

hypothecated, which was there in the original

registration certificate has been fraudulently

deleted. In consequence of above, all subsequent

acts including the registration certificate issued in

the name of respondent No.1 by Regional Transport

Office, Sitapur became non est. The respondent No.1

although claimed that he is a bonafide purchaser but

fact remains that he is beneficiary of fraud.

23

21. The High Court unduly influenced by the fact that

application for release of vehicle was filed by

respondent No.1, the High Court lost sight of the

fact that the appellant has also filed objection to

the application of release filed by respondent No.1

objecting the release and claiming itself to be

entitled to the vehicle as being person with whom the

vehicle was hypothecated, whose hypothecation entry

was fraudulently removed to facilitate the transfer

in favour of respondent No.1, which was illegal and

void.

22. The High Court in paragraph 9 has observed that

registration certificate obtained from the office of

Regional Transport Office, Basti, was in the name of

Amarnath Yadav as registered owner with no

endorsement of hypothecation, which fact was relied

by the High Court in the impugned order. The High

Court failed to notice that entry of hypothecation of

the vehicle in favour of the appellant was very much

there in the original registration certificate, which

entry was got deleted by submitting a forged Form 35

by original owner, which finding has been recorded in

24 the order of Assistant Regional Transport Officer

dated 29.06.2019 cancelling the registration

certificate on which reliance has been placed by the

High Court in paragraph 9. The basis of the order of

the High Court was the certificate of registration in

name of Amarnath Yadav, which has been filed before

us as Annexure CA-2. Without considering the fact

that by order dated 29.06.2019, the said certificate

stood cancelled and was declared void and non est,

the High Court decided in favour of respondent No.1.

23. In view of the foregoing discussions, we are of

the considered opinion that the High Court committed

error in directing the release of the vehicle in

favour of respondent No.1 in whose name the vehicle

was registered at Regional Transport Office, Sitapur,

but in view of order dated 29.06.2019, the

registration in favour of Amarnath Yadav (CA-2) and

of certificate of clearance dated 16.08.2018 having

been set aside, there was no right in respondent No.1

to claim the release of the vehicle. The order of

the High Court, thus, is unsustainable and is hereby

set aside. We further order that vehicle No. UP 51

25 AT 5709 be released in favour of the appellant.

Chief Judicial Magistrate, Sitapur shall ensure that

vehicle is received back from respondent No.1 and

released in favour of appellant on such terms and

conditions as may be deemed fit and proper, which

exercise shall be completed within a period of four

weeks from today. The appeal is allowed accordingly.

......................J. ( ASHOK BHUSHAN )

......................J. ( R. SUBHASH REDDY )

......................J. ( M.R. SHAH ) New Delhi, January 05, 2021.

26