JUDGMENT
D.K. Jain, J.
1. In this suit for permanent injunction and recovery of damages, restraining the defendant from interfering with her possession of five Ambassador cars; for transferring of the said cars in the name of the plaintiff in the records of the State Transport Authority, the return of one of the vehicles, seized by the defendant to the plaintiff, and for a decree for
the recovery of a sum of Rs. 5,05,000/-, the plaintiff has filed an application (IA No. 3373/94) for grant of an ad interim injunction. On the said application, notice with an ex parte ad interim injunction order was issued on 11th April, 1994, restraining the defendant from taking possession of four Ambassador cars and from disposing of, alienating or parting with
possession of the seized Ambassador car.
On being served with summons/notice, the defendant has moved an application (IA No. 1052 / 94) for vacation of the said ex parte order.
2. This order will dispose of both the applications.
3. According to the plaintiff, in October, 1990 she applied to the defendant-finance company for a term loan of Rs. 6,74,000/- repayable in 36 monthly instalments for financing five Ambassador cars; on 20th October, 1990 the defendant insisted the cars being registered in its name, sanctioned and disbursed the said amount only then; that till 21st August, 1993
it had paid 34 instalments i.e. Rs. 9,23,032/- towards the initial loaned amount and interest; although she has made a payment in excess of the entire principal amount with interest calculated at 15% per annum but according to the defendant two instalments of September and October, 1993, totalling Rs. 54,296/- were still due. Plaintiff’s case further is that at the time of disbursement of the said loan, the defendant had taken forty
blank cheques and a bunch of blank proformas signed by her; the defendant Company itself later filled up and presented the said cheques for payment before arrangement for their encashment could be made and when the cheques were thus dishonoured due to insufficient funds, the defendant threatened to institute proceedings under the Negotiable Instruments Act, 1881; she
requested the defendant to supply a copy of her account and also a no dues certificate on the payment of the said balance amount of Rs. 54,296/- before she had made final payment but the defendant refused to do so; the transaction in fact was merely a term loan and the plaintiff has been ready and willing to abide by it; the defendant intercepted one of the cars and forcibly took it in its possession on 18th March, 1994, and despite her report to the police no action was taken in the matter. It is alleged that the defendant has no right to take over the vehicles as the plaintiff has returned more than what was disbursed to her and only two instalments remain to be paid; the defendant is threatening to take over the other four vehicles and unless they are restrained from doing so, she is likely to suffer irreparable loss and injury.
4. The defendant has not filed written statement and instead has moved an application under Section 34 of the Arbitration Act, 1940 (IA No.9967/94) for stay of proceedings in the suit and reference of disputes to an Arbitrator on the plea that there is an arbitration agreement between
the parties. However, as noticed above, in its application under Order 39, Rule 4, CPC, the defendant has contested the plaintiff’s application for interim relief on the plea that under the lease agreement dated 30th October, 1990, the vehicles in question were given to the plaintiff only for user for a period of three years at a monthly rental of Rs. 27,148/- pay-
able on the 20th of each month with a specific understanding that no right,title or interest in them will pass on to the plaintiff/lessee and there being defaults on the part of the plaintiff in payment of monthly rentals, the defendant is within its right to repossess the vehicles. It is alleged that a number of cheques issued by the plaintiff towards rental were dishonoured with the result that the defendant had to file against the plaintiff complaints under Section 138 of the Negotiable instruments Act, which are still pending. It is claimed that as on 31st August, 1994 an amount of Rs. 1,62,888/- (six instalments) was still due to the defendant towards lease
rentals alongwith late payment charges, legal charges, cheque dishonour charges etc., amounting to Rs., 4,04,309/-. It is denied that the plaintiff has paid 34 instalments. It is asserted that since the plaintiff had failed to make payment of the amounts due, despite notice dated 16th December, 1993, the defendant had rightly seized one of the vehicles on 18th March, 1994.
5. The plaintiff has filed replies to the defendant’s two aforenoted applications, wherein, while reiterating its stand that there was no lease agreement between the parties and the amount of Rs. 6,74,000/- was disbursed by the defendant as a term loan, repayable in 36 monthly instalments it has been denied that any of the vehicles belonged to the defendant. It
has been reiterated that the total cost of the vehicles was Rs. 8,99,000/- out of which the defendant financed a sum of Rs. 6,74,000/- and the rest of the amount of Rs. 2,25,000/- was contributed by the plaintiff for acquiring the five vehicles.
6 I have heard Mr. P.K. Aggarwal for the plaintiff and Mr. Amit S. Chadha for the defendant.
7. The main thrust of arguments of Mr. Aggarwal is that assuming that there has been default on the part of the plaintiff in making payment of the said amounts in time, so far having paid 34 of the 36 instalments, the defendant cannot seize the vehicles in question forcibly, without taking recourse to a legal remedy which may be available to it. He maintains that the agreement between the parties was of a term loan for financing the cars; the plaintiff gave the margin money to the supplier, the defendant provided the balance sale price but on the defendant’s insistence the cars were purchased in its name; the so called lease agreement was sham having been subsequently scribed on blank papers got signed from the plaintiff.
8. On the other hand, Mr. Chadha denies it and has urged that under the lease agreement between the parties, the defendant is authorised to take possession of the vehicles and sell them without the intervention of the Court as there were defaults by the plaintiff in payment of the instalments fixed under the agreement and therefore, the defendant cannot be restrained
from taking in its custody the vehicles in question. In support reliance has been placed on a decision of this Court in M/s. Gopal Singh Hira Singh, Merchants Vs. Punjab National Bank and Another, , interalia, holding that in the case of hypothecation of goods, the borrower holds the actual physical possession not in his own right as an owner of
the goods but as the agent of the Bank, and a decision of the Andhra Pradesh High Court in State Bank of India Vs. S.B. Shah Ali (died) and Others,
, wherein it was held that when there is any specific clause in the hypothecation agreement empowering the hypothecate to take possession of the goods and sell the same, in the event of default in payment, as per the said terms the hypothecate can proceed ahead without intervention of the Court.
9. I have considered the matter. There is no quarrel with the proposition that in the case of hypothecation, possession of the hypothecated goods remains with the hypothecator but the hypothecate has a right to take possession of the hypothecated property and sell it for realisation of the debt secured by it. But the question for consideration is whether on the
facts and circumstances of the present case, the defendant could proceed to take possession of the subject vehicles by force and sell them without intervention of the Court.
10. On the pleas in contest raised by the parties, it will depend on whether the transaction was in fact a finance agreement as contended by the plaintiff or a lease agreement as set up by the defendant. Either way it would depend whether the ownership in the cars was acquired by and vested in the plaintiff or the defendant. If the real transaction contemplated was only a finance agreement, the cars were purchased by or for the plaintiff, though in defendant’s name as explained, the defendant was to have charge/lien on them for recovery of it’s dues, the lease agreement set up by the defendant would be fake, as alleged by the plaintiff. The issue will rest on trial. The defendant has filed IA No. 9967/94 under Section 34 of the Arbitration Act for stay of proceedings in the suit. The arbitration clause referred to is in the lease agreement set up by the defendant, factum and validity of which is disputed by the plaintiff. The question would thus, depend on whether there is an arbitration agreement. If so, the main issue about the nature of transaction raised by the parties will be for adjudication by the Arbitrator. If not by the court. Either way it is not determinable right at this stage.
11. In this view of the matter, I feel that the plaintiff having undisputably paid 30 instalments (though it claims to have paid 34 instalments), a prima facie case exists in favour of the plaintiff insofar as the question of taking possession of the remaining four vehicles is concerned; balance of convenience also lies in its favour and if the defendant is not
restrained from taking the vehicles in its custody, the plaintiff is likely to suffer irreparable loss. However, having regard to the fact that even according to the plaintiff two instalments of Rs. 27,148/- each are due to the defendant, and there is a dispute with regard to the remaining four instalments, in the circumstances and in the interests of justice, equity and fair play, it seems necessary to put the plaintiff to terms and maintain status quo. Accordingly I would direct the plaintiff to pay to the defendant a sum of Rs. 54,296 /- within three weeks and deposit in this Court a further sum of Rs. 1,08;592 / – within six weeks from today on which the ad interim order dated 11th April, 1994 shall stand confirmed till the disposal of the suit. The amounts so deposited will be put in a
fixed deposit receipt, initially for a period of one year, to be renewed from time to time till disposal of the suit. Since there is serious controversy with regard to the rate of interest and other charges, totalling Rs. 2,41,421 /- (as on 31st August, 1994), I am not inclined to direct the return of one vehicle already taken possession of by the defendant from the
custody of the plaintiff. However, I would direct that the said vehicle will neither be sold nor used by the defendant without the leave of the Court. It will be parked in such a way that no undue damage is caused to it on account of idle parking. Similarly, the plaintiff shall also not sell or dispose of any one of the four vehicles with her. The plaintiff will also
ensure that except for normal wear and tear no damage is caused to the subject vehicles.
In the result, IA No. 3373/94 is allowed in the above terms and IA N.
1052/94 is dismissed.
IA No. 3373/94 allowed.
IA No. 1052194 dismissed.