Recently, the Bombay High Court dismissed a petition filed by a bank challenging the orders of the lower courts that granted interim custody of a seized vehicle to a bonafide purchaser. The Court observed that at the stage of deciding interim custody, the question of document forgery cannot be examined, and the determining factors are the ownership and possession of the vehicle.
Brief Facts:
The case arose when a bank lodged a criminal complaint alleging that a borrower, after securing a vehicle loan, sold the financed vehicle to a third party using forged documents. The police registered an FIR for offences of cheating and forgery, following which the vehicle, a Bolero Pick-up, was seized from the purchaser.
Both the purchaser and the bank sought interim custody of the vehicle before the Judicial Magistrate under Section 454 of the Code of Criminal Procedure. While the Magistrate allowed the purchaser’s plea and denied custody to the bank, the decision was later affirmed by the Additional Sessions Judge. Aggrieved, the bank approached the High Court under Article 227 of the Constitution.
Contentions of the Petitioner:
The counsel for the bank contended that the borrower had defaulted on the loan and sold the vehicle on the basis of forged documents, including Form 35 and a fabricated No Objection Certificate. It was argued that since the loan had not been repaid, the bank retained ownership rights over the vehicle. The bank relied on the precedent B.C.L. Financial Services Ltd. v. State of Maharashtra, asserting that such transactions through forged papers have become a “modus operandi” by defaulters to evade liability.
Contentions of the Respondent:
Opposing the plea, counsel for the respondent purchaser submitted that the vehicle was purchased for valid consideration through a fresh loan from Mahindra & Mahindra Finance Ltd., and his name was duly registered as the owner by the RTO. The Magistrate had directed registration of the offence only against the borrower, not the purchaser, establishing that the latter was not involved in any wrongdoing.
It was further argued that the respondent had been regularly paying instalments for the vehicle and that denial of custody would cause severe financial hardship, as the vehicle was his family’s sole source of income. Reliance was placed on Vaibhav Jain v. Hindustan Motors Pvt. Ltd., wherein the Supreme Court clarified that “ownership” under Section 2(30) of the Motor Vehicles Act extends to a person in possession and control of the vehicle.
Observations of the Court:
The Court while affirming the concurrent findings of the lower courts, made significant observations on the scope and purpose of granting interim custody under Section 452 of the Code of Criminal Procedure.
Justice M.M. Nerlikar emphasized that the law does not intend to deprive a person in bonafide possession of his livelihood merely because allegations of forgery are under investigation. The Court clarified that custody at the interim stage is a practical measure aimed at preserving the property and ensuring its proper use, not a determination of title or ownership on merits.
Referring to the Apex Court’s ruling in Vaibhav Jain v. Hindustan Motors Pvt. Ltd., the Court underscored that the term “owner” under Section 2(30) of the Motor Vehicles Act must be understood contextually. It held that where a person is in lawful possession and has control over the vehicle, and where the registration certificate stands in his name, he must be deemed the “owner” for the purpose of interim custody, unless proven otherwise.
The Court observed, “At the stage of deciding interim custody, the Court is not expected to enter into a detailed inquiry regarding the authenticity of documents or the alleged act of forgery. These are matters to be established during trial. What must guide the Court at this stage is possession, use, and the balance of convenience.”
It further noted that the vehicle in question was purchased through a subsequent loan from another financial institution, and that the respondent had been regularly paying instalments. Thus, depriving him of possession would directly affect his livelihood and cause disproportionate hardship, especially when no material on record suggested his involvement in the alleged forgery. The Court also remarked that the Magistrate had imposed adequate conditions to safeguard the bank’s interests, such as prohibiting the sale or transfer of the vehicle and requiring its production as and when directed. Therefore, the apprehension of the bank that the vehicle might be misused or alienated was unfounded.
In conclusion, the Court held that “the right of a bonafide purchaser, who holds possession and registration in his name, cannot be defeated merely by a pending investigation, unless cogent evidence shows his complicity.”
The decision of the Court:
Finding no infirmity in the concurrent findings of the lower courts, the Court dismissed the writ petition, upholding that the bonafide purchaser was entitled to interim custody of the vehicle. The Court concluded that denial of possession would cause “irreparable loss” to the purchaser, who was repaying his loan through income derived from the vehicle. Accordingly, the petition was dismissed, and the rule discharged.
Case Title: M/s. AU Small Finance Bank Limited Vs. State of Maharashtra & Ors.
Case No.: Criminal Writ Petition No. 657/2024
Coram: Justice M.M. Nerlikar
Advocate for Petitioner: Adv. A.Tripathi, A.Nawab Navi Mohd. Ansari
Advocate for Respondent: Adv. S.V. Kolhe (A.P.P.), P.R. Agrawal
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