ORDER
The Court
1. The petitioner in this petition is a Company registered under the Companies Act, 1956 and it is stated that it is engaged in non-banking financial activities like leasing, corporate financing, hire-purchase and other allied financial services.
2. In this petition, the petitioner has called in question the correctness of endorsement dated 20th October, 1997 issued by the third respondent, a copy of which has been produced as Annexure-G to the writ petition, and also has prayed for a further direction to the third respondent to issue a fresh registration certificate in terras of the provisions contained in Sub-section (5) of Section 51 of the Motor Vehicles Act (hereinafter referred to as “the Act”), without insisting upon the petitioner for payment of stamp duty in terms of Article 20(3)(a) of the Karnataka Stamp Act, 1957.
3. Facts that may be relevant for the disposal of this petition may briefly be stated as hereunder.
4. According to the case set out by the petitioner, the petitioner, on the request made by the fourth respondent, agreed to lease a motor vehicle (Maruti Van) bearing Registration No. KA 02 M 7286, Engine No. 1141057, Chassis No. 111049 and Model 1995, to the fourth respondent on a monthly rental for 36 months, at a monthly rent fixed for the first month at Rs. 5,730A and for the remaining 35 months at Rs. 5,830/-; the lease rent was fixed on the basis of the advance paid to the fourth respondent to purchase the said vehicle and also the interest which is made payable on the said amount; and since the fourth respondent committed default in payment of the instalment fixed, the petitioner took possession of the vehicle referred to above and made an application before the third respondent to cancel the registration certificate of the said vehicle and to issue fresh registration certificate in the name of the petitioner as provided under Sub-section (5) of Section 51 of the Act, as amended by Motor Vehicles Act, 1988; and on the said application, though the notice was issued to the fourth respondent, he remained absent. It is the further case of the petitioner that the third respondent, by means of notice Annexure-G, dated 20th October, 1997, which is impugned in this petition, informed the petitioner that the application filed by the petitioner to issue fresh registration certificate would be considered and disposed off only on the petitioner paying the stamp duty as provided under Article 20(3)(a) of the Karnataka Stamp Act as amended by means of Act No. 8 of 1995 (hereinafter referred to as “the Stamp Act”).
5. Sri Manjunath, learned Counsel appearing for the petitioner challenging the correctness of the notice, Annexure-G submitted that since the petitioner is the owner of the vehicle, there was no transfer of ownership of the vehicle from the fourth respondent to the petitioner and as such, the petitioner is not liable to pay stamp duty as provided under Article 20(3)(a) of the Stamp Act. It is his submission that the claim made by the third respondent on the basis of the communication issued by the second respondent informing the third respondent that even in respect of hire-purchase agreements the hirer of the vehicle is required to pay stamp duty, is totally erroneous in law. In support of this submission, he drew my attention to various stipulations contained in the lease agreement, a copy of which has been produced as Annexure-A entered into between the petitioner and the fourth respondent; and he particularly drew my attention to Clause 24 of the agreement. He also relied upon the Division Bench decision of this Court in the case of Shriram Transport Finance Company Limited, Bangalore v. R. Khaishiulla Khan and Anr. , wherein this Court had taken the view that, in the case of transaction relating to hire-purchase agreement, the ownership continues with the owner or lessor of the vehicle, and the title in the vehicle would not pass on to the hirer. It is also the submission of the learned Counsel for the petitioner that it is only in the case of transfer done in terms of Section 50 of the Act, the parties are liable to pay stamp duty as there is a transfer of ownership of the vehicle and in cases falling under Sub-section (5) of Section 51, the hirer is not liable to pay any stamp duty for obtaining fresh registration certificate in the place of the original registration certificate.
6. Sri Satish, learned Government Pleader appearing for the respondents strongly supported the impugned endorsement and submitted that since the registration certificate of the vehicle stands in the name of the fourth respondent and as the petitioner requested for transfer of registration certificate of the vehicle from the name of the fourth respondent to the name of the petitioner, the provisions contained in Article 20(3)(a) of the Stamp Act would apply; and as such the petitioner is liable to pay the required stamp duty. He submits that for the purpose of stamp duty, there is not much of distinction between the provisions contained in Section 50 and Sub-section (5) of Section 51 of the Act. According to the learned Government Pleader, in both the cases, there is a transfer of ownership of the vehicle. In support of his submission, he referred to me the observation made by this Court in the case of Karnataka State Financial Corporation and Anr. v. State of Karnataka, wherein this Court at paragraph 7 has directed the transfer of registration certificate in the name of the purchaser of the vehicle from the Karnataka State Financial Corporation. The learned Government Pleader also relied upon the decision of this Court in the case of Chief Controlling Revenue Authority v. D.S. James, Tahsildar, Gokak and Ors. According to him, the principle laid down in the said decisions would squarely apply to the facts of the case of the petitioner. Sri Satish relying upon Section 23 of the Act, further submitted that since it is the case of the petitioner that it has acquired possession of the vehicle, if it wants to get the registration certificate transferred in its name, it is required to pay the stamp duty as claimed.
7. In the light of the rival contentions advanced by the learned Counsels appearing for the parties, the only question that would arise for consideration is as to whether the parties who are entitled for the benefit of Sub-section (5) of Section 51 of the Act, are required to pay the stamp duty as provided under Article 20(3)(a) of the Stamp Act?
8. It is not in serious dispute that the petitioner is a company engaged in non-banking financial activities like leasing, corporate financing, hire-purchase and other allied financial services. Clause 24 of the lease agreement dated 26th May, 1995 entered into between the petitioner and the fourth respondent reads that it is an agreement entered into between the parties where the petitioner is described as the lessor and the fourth respondent is described as the lessee and the vehicle, referred to in the schedule given to that agreement, was given on lease to the fourth respondent as per the terms and conditions set out in the said lease agreement. Clause 24 of the agreement which is strongly relied upon by Mr. Manjunath reads as follows.-
“24. The equipment is and shall remain the property of the lessor and the lessee shall have no right, title or interest therein otherwise than as lessee”.
The clause referred to above states that the property given on lease to the lessee i.e., fourth respondent shall remain the property of the lessor and the lessee shall have no right, title or interest therein otherwise than as lessen. Therefore, it is clear that the parties have agreed that the title i.e., ownership in respect of the vehicle, referred to above, continued to remain with the petitioner. However, the registration certificate of the vehicle stood in the name of the fourth respondent.
9. This Court in the case of Shriram Transport Finance Company Limited, supra, at paragraph 7 has observed that the absolute ownership of the vehicle on the basis of the hire-purchase agreement does not pass on to the hirer until all the conditions in the hire-purchase agreement are fulfilled or unless he opts to purchase the vehicle, and till such conditions are complied with, it would continue with the lessor. It is useful to extract paragraph 7 of the judgment which reads as hereunder.-
“7. It thus becomes apparently clear that if at all the hirer is recognised as an owner to obtain registration certificate in respect of a vehicle which is a subject of hire-purchase agreement it is only to facilitate him to obtain fitness certificate, get the vehicle insured, road permit etc., under the relevant provisions of the Motor Vehicles Act to enable him to run it on the roads without any let or hindrance. The absolute ownership of the vehicle does not pass to him until all the conditions in the agreement are fulfilled or he opts to purchase the vehicle. It would be a fallacy to equate the hirer with an absolute owner having proprietary rights in the vehicle.
Therefore, from the said judgment of this Court, it is clear that as per the terms of the hire-purchase agreement where the vehicle is leased to a hirer, the ownership of the vehicle continues with the lessor/financier of the vehicle. In the instant case also, though the registration certificate stands in the name of the fourth respondent, the ownership of the vehicle continued with the financier. Further, as rightly pointed out by Mr. Manjunath, it is also necessary to notice the distinction between the provisions contained in Section 50 which provides for transfer of the ownership of a vehicle and the provisions contained in Sub-section (5) of Section 51 of the Act. Section 50 of the Act provides for the steps to be taken by the transferor and the transferee for transfer of ownership of the vehicle from one person to another on various circumstances set out in the said section. Section 51 is a special provision made regarding
motor vehicle subject to hire-purchase agreement. Sub-section (1) of Section 51 provides that where an application for registration of a motor vehicle which is held under a hire-purchase agreement or hypothecation agreement is made, the registering authority should make an entry in the certificate of registration regarding the existence of the said agreement. Sub-section (3) of Section 51 provides for cancellation of the entry made regarding the hire-purchase agreement in the registration certificate on proof of termination of the said agreement. Sub-section (5) of Section 51 provides for cancellation of the certificate of registration earlier issued in the name of a person and issue of fresh registration certificate in the name of the person with whom the registered owner has entered into an agreement of hire-purchase. It is useful to extract subsection (5) of Section 51 which reads as hereunder.-
“(5) Where 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, satisfies the registering authority that he has taken possession of the vehicle from the registered owner owing to the default of the registered owner under the provisions of the said agreement and that the registered owner refuses to deliver the certificate of registration or has absconded, such authority may, after giving the registered owner an opportunity to make such representation as he may wish to make by sending to him a notice by registered post acknowledgement due at his address entered in the certificate of registration and notwithstanding that the certificate of registration is not produced before it, cancel the certificate and issue a fresh certificate of registration in the name of the person with whom the registered owner has entered into the said agreement:
Provided that a fresh certificate of registration shall not be issued in respect of a motor vehicle, unless such person pays the prescribed fee:
Provided further that a fresh certificate of registration issued in respect of a motor vehicle, other than a transport vehicle, shall be valid only for the remaining period for which the certificate cancelled under this sub-section would have been in force”.
10. Rule 55 of the Central Motor Vehicles Rules, 1989 provides for the procedure to be followed in the case of transfer of registration certificate. Rule 61 of the said Rules provides for issue of fresh registration certificate in cases of hire-purchase agreements entered into between the parties. Insofar as the case of transfer falling under Section 50 of the Motor Vehicles Act read with Rule 55 is concerned, both the transferor and the transferee are required to make an application in Form 30. However, in the case of issue of fresh registration certificate, after cancelling the original registration certificate issued, an application is required to be made in Form No. 36 and the said application is required to be made only by the financier. It is useful to extract the said form.
“FORM 36
[See Rule 61(2)]
Application for issue of a fresh certificate of registration in the
name of the financier
To
The Registering Authority
I/We, ….. (Financier) have taken possession of motor vehicle
No. ….. Make. ….. Model. ….. owing to the default of
the registered owner. ….. (Name). …..
….. (full address) under the provisions of the agreement of
hire-purchase/lease/hypothecation:
*(1) The certificate of registration of the said vehicle is surrendered herewith.
(2) The registered owner has refused to deliver the certificate to me/us.
(3) The registered owner is absconding.
I/We request you to cancel the certificate and issue a fresh certificate of registration in my/our name.
I/We enclose a fee of Rs …..
Date .... Signature of the financier Specimen signatures of the financier: 1. .... Copy to the original registering authority *Strike out whichever is inapplicable".
The Form 36 referred to above makes it clear that the certificate of registration of a vehicle which is the subject-matter of hire-purchase agreement is surrendered to the registering authority for the purpose of cancellation of certificate of registration and for the purpose of issue of a fresh certificate of registration in the name of the financier. Therefore, the composite reading of Section 50, Sub-section (5) of Section 51 and Rules 55 and 61 of the Central Motor Vehicles Rules make it clear that there is a distinction between transfer of ownership of the vehicle in the cases falling under Section 50 and issue of a fresh registration certificate after the cancellation of the original registration certificate falling under Sub-section (5) of Section 51. Under these circumstances, as noticed by me earlier, the question is whether the provisions of Article 20(3)(a) of the Stamp Act can be made applicable in cases falling under Sub-section (5) of Section 51 of the Act? In my view, the said provision is not attracted in cases where fresh certificate of registration is issued after cancelling the original certificate of registration. It is useful to extract Article 20(3)(a) of the Stamp Act which reads as hereunder.-
“(3)(a) If relating to the transfer of ownership of motor vehicle registered or deemed to have been registered under the Motor Vehicles Act, 1988 (Central Act 59 of 1988).
… .Two rupees for every rupees
one hundred or part thereof”.
The language employed in clause (3) makes it clear that it is only in the case of transfer, the stamp duty is made leviable. In my view, in the case of the hire-purchase agreement, the ownership of the vehicle as laid down by this Court in Shriram Transport Finance Company Limited’s case, supra, continues with the financier. Sub-section (5) of Section 51 only provides for issue of a fresh registration certificate after cancellation of the registration certificate originally issued in the name of the hirer. There is no transfer of ownership of the vehicle from one person to the other. Therefore, in my considered view, in a case of hire-purchase agreement, the provisions contained in Article 20(3)(a) cannot be made applicable and the financier cannot be asked to pay the stamp duty prescribed under Article 20(3)(a) of the Stamp Act.
11. Therefore, in the light of the discussion made above, the notice, Annexure-G, dated 20th October 1997 is liable to be quashed. Accordingly, it is quashed. Since during the pendency of this writ petition, the petitioner has paid the stamp duty and obtained a fresh certificate of registration in terms of Section 51 of the Act, a direction is required to be issued to the respondents only to refund the said stamp duty to the petitioner, which he had paid. The respondents shall do so within four weeks from the date of receipt of a copy of this order.
12. In terms stated above, this petition is allowed and disposed off. Rule issued is made absolute. However, no order is made as to costs.
13. Sri B.H. Satish, learned Government Pleader is permitted to file memo of appearance for respondents within four weeks.