M/S. MAGMA FINCORP LTD v. RAJESH KUMAR TIWARI

or by necessary implication, inter alia, in view of the applicable law, for which the consumer has paid, or has agreed to pay a consideration. The said Act also protects consumers from being overcharged for any service obtained and/or agreed to be obtained. The consumer of a service may also be entitled to damages for any loss suffered by the consumer, by reason of denial or deficiency in service for which the consumer has paid or agreed to pay (if the parties have agreed to deferred payment), charges and/or in other words, price for the service. In cases of breach of contract, liquidated damages may be imposed on the party in breach, if the agreement provides for liquidated damages, that is a fixed amount by way of damages. Where the parties to an agreement have not agreed to liquidated damages, the party in breach of agreement may be directed to pay unliquidated damages which are compensatory. Such compensatory damages are not to punish the party in breach, but to compensate the party not in breach, for losses suffered as a result of the breach. Where, however, the damages caused by the breach are severe and extensive, the party in breach may be required to pay to the party not in breach, such damages as would restore the position of the party not in breach, to the position before the breach occurred. [Paras 57-59][105-D-H]

4.3 Apart from compensatory damages, an Adjudicating Authority may impose on the party in breach, punitive damages or nominal damages. Punitive damages are awarded where the party in breach of agreement has behaved in a manner, which is reprehensible and calls for punishment. Nominal damages are awarded where there is no real harm done, by reason of the breach of the contract. [Para 60][106-A-B]

4.4. Section 14 of the Consumer Protection Act, 1986 empowers the District Forum to award compensation to the party not in breach by directing the party in breach to return the price or the charges as may have been paid by the complainant [Section 14(1)(c)]. The said Section also enables the District Forum to award compensatory damages to the consumer for loss or injury suffered by the consumer due to negligence of the party in breach [Section 14(1)(d)]. The Forum may direct removal of the deficiency in service, if the deficiency can be removed and it can direct dis- continuation of unfair trade practices or restrictive practices and A B C D E F G H SUPREME COURT REPORTS [2020] 11 S.C.R. direct the same not to be repeated [Section 14(1)(e) and (f)]. The proviso to Section 14(1)(d) of Consumer Protection Act, 1986 empowers the District Forum to grant punitive damages in such circumstances as it deems fit. Punitive damages are not generally awarded in cases of breach of contract unless the act is so reprehensible that it calls for punishment of the party in breach, by imposition of punitive and/or exemplary damages. Compensation which is compensatory, has to be assessed taking into account relevant factors, such as the loss incurred by the claimant, though some amount of guess work and/or estimation may be permissible. In the instant case, the District Forum did not even undertake the exercise of assessment of the loss/ damages, if any, suffered by the complainant by reason of non- service of notice before taking possession of the vehicle. [Paras 61 and 62][106-B-F]

5.1 Goods are let out on hire under a Hire Purchase Agreement, with an option to purchase, in accordance with the terms and conditions of the Hire Purchase Agreement. The hirer simply pays for the use of the goods and for the option to purchase them. Until the option to purchase is exercised by the hirer, upon payment of all amounts agreed upon between the hirer and the Financier, the financier continues to be owner of the goods being the subject of hire purchase. Till such time the hirer remains a trustee and/or bailee of the goods covered by the Hire Purchase Agreement. The Financier continues to remain the owner of a vehicle, covered by a hire purchase agreement till all the hire instalments are paid and the hirer exercises the option to purchase. Thus, when the Financier takes re-possession of a vehicle under hire, upon default by the hirer in payment of hire instalments, the Financier takes re- possession of the Financier’s own vehicle. When the agreement between the Financier and the hirer permits the Financier to take possession of a vehicle financed by the Financier, there is no legal impediment to the Financier taking possession of the vehicle. When possession of the vehicle is taken, the Financier cannot be said to have committed theft. [Paras 77- 80][111-F-H; 112-A-C]

5.2 Whether the transaction between a Financier and a purchaser/hirer is a hire purchase transaction, or a loan 66 A B C D E F G H M/S. MAGMA FINCORP LTD. v. RAJESH KUMAR TIWARI 67 transaction, might be determined from the terms of the agreement, considered in the light of surrounding circumstances. However, even a loan transaction, secured by right of seizure of a financed vehicle, confers licence to the Financier to seize the vehicle. [Para 81][112-C-D]

5.3 In the present case, the agreement executed by and between the Financier and the Complainant is a Hire Purchase Agreement as will appear from the terms and conditions thereof. In any event, the fora under the Consumer Protection Act, have not arrived at any specific finding to the contrary. There is no discussion of the nature of the agreement between the Financier and the Complainant. Be that as it may, the agreement clearly permits the Financier to take possession of the vehicle, upon default in payment of instalments. [Para 82][112-E]

5.4 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 instalments/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. Nor can such possession be taken by engaging gangsters, goons and musclemen as so called Recovery Agents. [Para 87][113-G-H; 114-A-B]

5.5 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. If the hirer commits breaches of the conditions of a hire purchase agreement which expressly provides for immediate repossession of a vehicle without further notice to the hirer, in case of default in payment of hire charges and/or hire instalments repossession would not be vitiated for want of notice. [Paras 88, 89][114-C-G] A B C D E F G H SUPREME COURT REPORTS [2020] 11 S.C.R.

5.6. 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. Where a Financier erroneously and/or wrongfully invokes the power to repossess without notice to the hirer, causing thereby extensive pecuniary loss to the hirer or loss of goodwill and repute, a forum constituted under the Consumer Protection Act may award punitive damages. [Paras 90 and 91][114-G-H; 115-A-C]

5.7 In the instant case, there is no evidence of any loss suffered by the complainant by reason of non-receipt of notice. Admittedly, several instalments, remained unpaid. After repossession the complainant contacted the Financier and was informed of the reasons for the repossession. He only made an offer to pay outstanding instalments and gave an assurance to pay future instalments in time. If the Financier was not agreeable to accept the offer, the Financier was within its rights under the hire purchase agreement. This is not a case where payment had been tendered by the hirer but not accepted by the Financier/ lender. The Complainant had not tendered payment. [Para 92][115- C-E]

#6. The Financier admittedly paid Rs.3,15,000/- for acquisition of the vehicle, out of which the Financier had been able to realize Rs.1,19,000/- inclusive of all charges. There was depreciation in the value of the vehicle by reason of usage by the Complainant, for about a year. The District Forum did not even notionally assess the depreciation in the value of the vehicle. The District Forum was not justified in directing the Financier to pay the Complainant Rs.2,23,335/- being the entire amount paid by the Complainant to the Financier from the inception as well as the payment of Rs.1,04,000/- made by the Complainant to the dealer along with damage of Rs.10,000/- and litigation costs of Rs.1,000/- after the 68 A B C D E F G H M/S. MAGMA FINCORP LTD. v. RAJESH KUMAR TIWARI 69 Complainant had held and used the vehicle for almost a year. 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. [Paras 93, 94][115-E-H; 116-A] Charanjit Singh Chadha & Ors. v. Sudhir Mehra (2001) 7 SCC 417; K. L. Johar & Co. v. Deputy Commercial Tax Officer, Coimbator AIR 1965 SC 1082 : [1965] SCR 112; Anup Sarmah v. Bhola Nath Sharma and Others (2013) 1 SCC 400 : [2012] 11 SCR 360; Orix Auto Finance (India) Ltd. v. Jagmander Singh and Another (2006) 2 SCC 598 : [2006] 2 SCR 169; K. A. Mathai alias Babu & Anr. v. Kora Bibbikutty & Anr. (1996) 7 SCC 212; Sundaram Finance Ltd. v. The State of Kerala & Anr. AIR 1966 SC 1178 : [1966] SCR 828 – relied on.