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Judgment
D.H. Nasir, J.—Heard the learned Counsel Sri P. Rambhoopal Reddy for the appellant. None present for the respondent.
The only point which is challenged in this appeal is the finding of the Trial Court as recorded in paragraph 13 of the impugned judgment that "out of the sale proceeds of the suit shed, the plaintiff is entitled to appropriate the balance hire due till the date of possession, the amount spent for recovering possession and if any surplus is found, the defendant is entitled for the same."
The learned Judge seems to have wholly misconceived the contract of hire purchase which is admitted in evidence at Ex.A-3. The fact that the respondent has committed breach of the terms and conditions of the hire purchase agreement is not disputed, inasmuch as the respondent had to pay the first instalment on or before 1-10-1977, second instalment on or before 5-1-1978, which the respondent failed and neglected to pay. The suit shed which was allotted to the respondent by the appellant - Corporation was valued at Rs. 53,000/- out of which the respondent had to make down payment of Rs. 5,300/- at the rate of 10% of the value of the shed, and the balance to be paid in eight yearly instalments. The respondent did pay the initial amount of Rs. 5,300/- to be paid as down payment, but failed and neglected to pay the amount falling due in yearly instalments. Therefore, on account of failure on the part of the respondent to pay the instalments, the allotment was cancelled by the appellant-Corporation by an Order dated 18-11-1978 (Ex.A-5) and the respondent was called upon to hand over the vacant possession of the shed which was allotted to him and which was in his possession. A notice dated 4-6-1980 was also issued to the respondent. The respondent went on giving assurances for making payment of instalments by letters dated 23-12-1978, 1-1-1979,20-2-1979 and 31-3-1979, but in spite of repeated assurances given by the respondent, no payment was forth coming from the respondent. The termination notice, therefore, served by the appellant - Corporation had to be enforced.
Under Clause (c) of the hire purchase agreement, it is provided as under:
".......the hirer agreed that the right under the agreement shall stand forfeited if he fails to pay instalments fixed and on his such failure, the agreement stands cancelled and purchaser shall not be entitled to refund of any amount paid by him and he shall vacate the premises and hand over vacant possession to the Corporation without any objection and the purchaser is not entitled for any compensation".
It becomes abundantly clear from the above clause of the hire purchase agreement that on account of defaults committed by the respondent, the hire purchase agreement stood terminated and the respondent became liable to hand over the vacant possession to the Corporation and also forfeited the initial amount paid by way of 10% down payment.
According to the hire purchase agreement, as soon as the termination takes effect on account of default committed by the hirer, the owner at once becomes entitled to take possession of the premises which was given to the hirer on hire purchase basis. Apart from this condition of the agreement, it is also provided therein that any default of the terms and conditions of the hire purchase agreement would entitle the owner to take possession and forfeit the amount if any paid by the hirer.
The Trial Judge has referred to several Sections of the Hire Purchase Act, 1972 in paragraph 8 of his impugned judgment, and arrived at a finding that in case of default by the hirer, the owner was entitled to terminate the hire purchase agreement and recover possession and out of the sale proceeds the owner can recover arrears of hire rents. The learned Trial Court Judge has also considered the effect of the Full Bench decision of this High Court reported in AIR 1955 Hyd 105 (K. Narayana v. Laxmi Narasimam) and extracted the observations made by the Full Bench to the effect that, in the case of the hire purchase agreement if the hirer fails to perform his part of the contract, the owner of the goods is entitled to damages and that the owner is entitled to such rental upto the date of delivery of the goods.
The hirer also becomes liable to vacate the premises and hand over vacant possession to the owner in the event of any default committed by the hirer. The legality of this condition of the contract is not questioned and nothing is urged before the Court that after the forfeiture of the amount paid, the owner was not entitled to recover possession of the shed. The contract of hire purchase, in my opinion is analogous to the contract of bailment. u/s 160 of the Contract Act, it is the duty of the bailee to return, or deliver according to the bailor''s directions, the goods bailed, without demand, as soon as the time for which they were bailed has expired, or the purpose for which they were bailed had been accomplished. In the book entitled "The Law of Contracts and Tenders" by T.S. Venkatesa Iyer''s (6th edition), on page 559 there is a reference to the case of Isufali Hassanally v. Ibrahim (23 Bom. LR 403) wherein it was held that in cases where the article bailed or hired, does not serve the purpose, the bailee may give notice to the bailor that it is unfit for the purpose and that the bailee is not bound to return it. But if by the default of the bailee, the goods are not returned, delivered or tendered at the proper time, the bailee will be responsible to the bailor for loss or deterioration.
Since the nature of the hire purchase contract in my view is analogous to the contract of bailment, an inference could safely be made by substituting, the word "owner" in place of "bailor" and "hirer" in place of "bailee" that in the event of default the hirer is bound to return the goods and would also be liable to compensate the owner for any loss or deterioration.
However, since the Hire Purchase Act of 1972 clearly provides for the rights of the owner and hirer, it is no longer necessary to look upon the provisions of Contract of bailment on the proposition of law that the contract of hire purchase is analogous to the contract of bailment. u/s 18 of the Hire Purchase Act, 1972 it is clearly provided as under:
"18 (1) Where a hirer makes more than one default in the payment of hire as provided in the hire-purchase agreement then, subject to the provision of Section 21 and after giving the hirer notice in writing of not less than-
(i) one week, in a case where the hire is payable at weekly or lesser intervals; and
(ii) two weeks, in any other case, the owner shall be entitled to terminate the agreement by giving the hirer notice of termination in writing:
Provided that if the hirer pays or tenders to the owner the hire in arrears together with such interest thereon as may be payable under the terms of the agreement before the expiry of the said period of one week or, as the case may be, two weeks, the owner shall not be entitled to terminate the agreement.
(2) Where a hirer:
(a) does any act with regard to the goods to which the agreement relates which is inconsistent with any of the terms of the agreement; or
(b) breaks an express condition which provides that, on the breach thereof, the owner may terminate the agreement, the owner shall, subject to the provisions of Section 22, be entitled to terminate the agreement by giving the hirer notice of termination in writing".
In the case before us, there is no dispute about the fact that the allotment of shed in question was cancelled by an Order dated 18-11-1978 (Ex.A-5) and the respondent was called upon to handover the vacant possession of the shed which was allotted to him and which was in his possession. A notice dated 4-6-1980 was also issued to the respondent. The cancellation of allotment and calling upon the hirer to hand over the vacant possession of the suit shed amply and substantially meets with the requirement of Section 18 of the Hire Purchase Act, and therefore, there could be no constraint on directing the respondent to hand over the vacant possession of the suit shed to the owner.
In the above view of the matter, therefore, the learned Trial Court Judge committed an error by giving a direction in para 13 of the impugned judgment that "out of the sale proceeds of the suit shed, the plaintiff was entitled to appropriate the balance hire due till the date of possession, the amount spent for recovering possession and if any surplus is found, the defendant is entitled for the same". As already stated earlier, it is this part of the judgment which the appellant has challenged in the present appeal and which is sought to be set aside.
The aforesaid part of the judgment, in view of the discussion with regard to the nature of hire purchase agreement, is quashed and set aside and it is substituted by the following directions-
(1) The amount of Rs. 5,300/- paid by the defendant is forfeited against the defendant and in favour of the plaintiff.
(2) The defendant is directed to hand over forth with the vacant possession of the suit shed to the plaintiff.
The remaining part of the judgment is not challenged and is not covered by this judgment. The appeal is accordingly allowed. No costs.