Telangana High Court
Maruthi Udyog Ltd Ors vs Dcl.Fin.Ltd,7 Ors on 2 March, 2023
Bench: P Naveen Rao, J Sreenivas Rao
HON'BLE SRI JUSTICE P.NAVEEN RAO
AND
HON'BLE SRI JUSTICE J.SREENIVAS RAO
CITY CIVIL COURT APPEAL NOS.42, 55 AND 71 OF 2002
Date: 02.03.2023
CCCA No.42 of 2002:
Between:
Maruti Udyog Limited,
11th Floor, Jewan Prakash,
25, Kasturba Gandhi Marg,
New Delhi, rep.by its Managing
Director and others.
.... petitioners
And
M/s.DCL Finance Limited,
situated at 6-3-569/1, DCL Chambers,
Somajiguda, Hyderabad, rep.by its
Dy.Manager (Legal), K.V.Prasad,
s/o. K.V.Subbaiah, 42 years,
r/o.6-3-569/1, DCL Chambers,
Somajiguda, Hyderabad and others.
.... Respondents
This Court made the following :
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
HON'BLE SRI JUSTICE P.NAVEEN RAO
AND
HON'BLE SRI JUSTICE J.SREENIVAS RAO
CITY CIVIL COURT APPEAL NOS.42, 55 AND 71 OF 2002
COMMON JUDGMENT: (Per Hon'ble Sri Justice P.Naveen Rao)
O.S.No.96 of 1998, O.S.No.95 of 1998 and O.S.No.558 of 1998
are filed by M/s.DCL Finance Limited in the Court of III Additional
Chief Judge, City Civil Court at Hyderabad against Maruti Udyog
Limited, Mahalaxmi Motors Limited and RKS Motors Private Limited.
All the three suits are filed for recovery of money. In O.S.No.96 of 198
money claimed was respondent 8,04,142.46 Ps.; in O.S.No.95 of
1998 money claimed was 59,00,633.20 Ps., and O.S.No.558 of 1998
money claimed was 4,59,269/-. In addition plaintiff also claimed
subsequent interest at the rate of 24% per annum. All the suits were
decreed in favour of plaintiff.
2. In O.S.No.96 of 1998, the trial Court granted decree directing the
1st defendant to pay the plaintiff sum of 5,84,400/- with interest at
the rate of 18% per annum from the date of encashment of demand
drafts i.e., 05.03.1997. In O.S.No.95 of 1998, the trial Court granted
decree directing the 1st defendant to pay the plaintiff a sum of
47,02,036/- with interest at the rate of 18% per annum from the
date of encashment of respective demand drafts. In O.S.No.558 of
1998, the trial Court passed decree directing the 1st defendant to pay
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
plaintiff a sum of 3,15,704/- with interest at the rate of 18% per
annum from 25.01.1997. In all the suits, Maruti Udyog Limited
represented by its Managing Director is the 1st defendant.
3. These three appeals are filed by the Maruti Udyog Limited
challenging the respective judgments and decrees in the three suits.
As the parties to these appeals and issues involved are same, they are
heard together and by this common judgment they are disposed of.
The parties are referred to as arrayed in O.S.No.95 of 1998.
4. The 1st defendant is engaged in manufacture of passenger
vehicles. Its factory is located at Palam-Gurgoan Road, Gurgoan, State
of Haryana. The 1st defendant appoints dealers at various places in the
country and sells its Cars through the dealers. The 1st defendant
enters into dealership agreements with its dealers. Those agreements
determine the relationship of manufacturer with the dealers. In the
said manner, 4th and 5th defendants were appointed as dealers in
Hyderabad and Vijayawada.
5. M/s. DCL Finance Limited is in the business of hire purchase
and renders financial assistance to its customers. Some of the
customers approached the defendant no. 1 company for financial
assistance to purchase motor vehicles being manufactured by the 1st
defendant company, Maruti Udyog Limited, through its authorized
dealers Defendant nos.4 and 5, Mahalaxmi Motors, Hyderabad and
Vijayawada, respectively.
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
CCCA No.42 of 2002:
6. On 03.03.1997, the plaintiff company in the course of their
business issued Demand Drafts amounting to 5,84,400/- in favor of
the 1st defendant company to book two Maruti Zen Cars for its
customers. The Demand Drafts along with the requisite forms and
documents were handed over to the authorized dealer/Defendant No.4.
According to the terms and conditions of the forms, the authorized
dealer was duty bound to deliver the motor vehicles in stipulated
period of 2-3 months. It is the case of plaintiff that even upon repeated
requests by the plaintiff company, the Defendant No.4, authorized
dealer, failed to deliver the motor vehicles as per the terms.
7. On 27.11.1997, plaintiff company issued legal notice to the 1st
defendant/manufacturer and Defendant No.4/dealer demanding
refund of 5,84,400/- with interest @ 30% P.A. due to non-delivery of
the booked vehicles.
8. As the amount was not refunded, defendant No.1 company filed
O.S.No.96 of 1998 before the III Additional Chief Judge, City Civil
Court, Hyderabad for recovery of the amounts with the interest.
9. According to the plaintiff, in accordance with the terms and
conditions mentioned in the booking form, the first defendant is
supposed to deliver the vehicles within stipulated time of 2 to 3
months. Though the first defendant got encashed the Demand Drafts
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
drawn by the plaintiff and sent to Defendant no.1 through Defendant
no.4, the first defendant did not deliver the vehicles in spite of repeated
requests. The first defendant, however, wrote a letter on 12.07.1997 to
plaintiff to submit copies of relevant documents to 5th defendant, which
the plaintiff accordingly submitted along with its letter dated
29.07.1997, which was also acknowledged by the 5th defendant on
30.07.1997. Even thereafter the vehicles were not delivered. In view of
non-delivery of the vehicles, the plaintiff's customers had cancelled
their agreement with the plaintiff. Finally on 27.11.1997, the plaintiff
got issued registered notice to all the defendants demanding repayment
of 5,84,400/-, which was sent by the plaintiff to the first defendant
in the form of demand drafts through defendant No.4, together with
interest at 30% per annum. In spite of receipt of the registered notice,
the defendants kept quiet without paying the same. Since the first
defendant-company neither delivered the vehicles nor returned the
money back to the plaintiff, the plaintiff is entitled to claim interest at
24% p.a. Since the demand drafts along with requisite booking forms
were sent to the first defendant through defendant No.4 who is the
then dealer of the first defendant and the 5th defendant is the present
dealer, all the defendants are jointly and severally liable for the suit
amount. Hence, the Suit.
10. All the material averments in the plaint are denied by the
defendants 1 to 3. The first defendant denied the booking of vehicles
with the first defendant by the customers mentioned by the plaintiff
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
and the plaintiff extending financial assistance to them. The first
defendant also denies specifically the purchase of demand drafts by the
plaintiff and sending the same to the first defendant along with
booking forms through defendant No.4. The first defendant also denied
non-delivery of vehicles to defendant no.4. It is further averred that
the suit is not maintainable and Civil Court has no jurisdiction to try
the same. There is no privity of contract between the plaintiff and the
first defendant, and, therefore, the plaintiff is not entitled for the relief
sought for. It is the authorized dealer, who enters into contract with its
customers but not the first defendant. It is the authorized dealer, who
invoices the vehicles to its customers after paying the Andhra Pradesh
General Sales Tax and upon receiving the ex-showroom price at the
time of the delivery. It is the authorized dealer who issues the sale
certificate in favour of the customers. Thus, there is never any privity
of contract between the plaintiff and the first defendant.
11. The third defendant addressed letter dated 12.7.1997 to the
plaintiff to ascertain the customers bookings and to confirm the same
upon receiving the relevant records through defendant No.4. The 6th
defendant upon ascertainment had delivered back the documents to
the plaintiff and it was ascertained by the first defendant that the
plaintiff had not made any bookings with defendant No.4. The first
defendant denies addressing of letter dated 12.7.1997 to the plaintiff.
The first defendant is not liable either for delivery of the vehicles or for
refund of any amount whatsoever. The plaintiff failed to produce any
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
document authorizing it to file the suit or to initiate any legal
proceedings on behalf of its alleged customers. This suit is also bad for
non-joinder of necessary parties. The first defendant initiated separate
criminal proceedings by terminating the dealership of 4th defendant for
its omission and commission and irregularities in drawing excess
vehicles. The suit is, therefore, liable to be dismissed.
12. According to the 4th defendant, when the demand drafts are
purported to be in favour of the first defendant, 4th defendant could not
have encashed the same and as such, the question of defendant No.4
not delivering the vehicles to the plaintiff does not arise. That he has
not received notice dated 27.11.1997. This Court had no jurisdiction
and there is no cause of action. The suit is liable to be dismissed and
the 4th defendant is entitled for exemplary costs.
13. All the allegations made in the plaint are denied by the
6th defendant and the plaintiff is put to strict proof of the same. The 6th
defendant had no privity of contract with the plaintiff. The 6th
defendant had no knowledge of the terms and conditions that were
agreed upon between the plaintiff on one hand and the defendant No.4
on the other after termination of the authorized dealership of defendant
No.4 by the first defendant. The first defendant had instructed the 6th
defendant to receive certain documents in respect of bookings pending
with defendant No.4 and accordingly, the first defendant appeared to
have intimated the same to the alleged customers of the plaintiff to
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
approach 6th defendant for receiving documents on behalf of the first
defendant. The 6th defendant having received certain documents
acknowledged the same and after their verification by the third
defendant returned back the same under acknowledgement due. No
amounts were paid either by the plaintiff or its customers to this
defendant. The first defendant neither sent any vehicles nor gave any
instructions for delivery of vehicles to the 6th defendant. The 6th
defendant being an authorized dealer of the first defendant, it is acting
wholly on the instructions of the first defendant. There is no cause of
action against the 6th defendant for filing the suit. The 6th defendant is
not a necessary party to the suit. The suit is also bad for mis-joinder of
parties. This suit may, therefore, be dismissed with exemplary costs
against the 6th defendant.
14. On analyzing the pleadings, evidence and submissions, trial
Court held issues 2, 5 and 6 in favour of plaintiff and against first
defendant. Additional issues were held in favour of 6th defendant.
Issues 1, 3 and 4 are held against defendants and in favour of plaintiff
and decreed the suit 5,84,400/- together with interest at 18% per
annum from the date of the encashment of the respective drafts till the
date of payment with proportionate costs against the first defendant.
The suit against defendants 2 to 4 and 6 is dismissed, but in the
circumstances without costs.
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
CCCA No.55 of 2002:
15. According to plaintiff, financial assistance was extended to two
persons to acquire Maruti Van 800 CC on hire purchase basis. As per
their instructions, plaintiff purchased two Demand Drafts for
1,57,852/- each in favour of authorized dealer of defendant no.1
i.e., the defendant no.4 and handed over to 4th defendant along with
booking order form through its two customers. On 22.01.1997,
defendant no.4 issued receipt Nos.368 and 330. As per order form, the
vehicles were to be delivered within three months. In the meantime,
6th defendant was substituted in place of 4th defendant. On
07.08.1997, 6th defendant intimated plaintiff's customers to deposit
balance amount. Accordingly, balance amount of 25,496/- each was
paid by way of pay orders dated 19.08.19097. It is asserted that even
after payment of balance price the vehicles were not delivered inspite of
repeated requests. As vehicles were not delivered, customers cancelled
the agreement and the plaintiff's amount is lying with the defendants
from 22.01.1997. On 27.11.1997, plaintiff issued registered demand
notice to the defendants demanding an amount of 3,66,696/- along
with 30% interest per annum. In spite of the demand notice
defendants did not turn up to pay the amount. Hence, the suit.
16. First defendant raised preliminary objection on maintainability of
the suit contending that as the business of first defendant is carried
out in New Delhi Courts in Hyderabad have no jurisdiction. Further,
there was no privity of contract between the plaintiff and the first
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
defendant. Further, objection is on non-joinder of necessary parties,
the alleged customers of defendants. It is denied that defendant
assured to hand over vehicles in three months. It is also denied that
defendant no.6 is substituted dealer in place of defendant no.4. It is
asserted that plaintiff has not made any bookings either with 4th
defendant or 6th defendant.
17. This defendant submits that generally bookings are made by the
prospective customers with the authorized dealers of this defendant by
depositing a demand draft equal to the dealer destination price payable
to ANZ Grindlays Bank, Hyderabad. The customers execute the order
booking form containing the terms and conditions of sale, approximate
delivery period of vehicles besides the details of vehicles booked.
Authorized dealer upon receiving the demand drafts hands over a copy
of the order booking form and issues a receipt for the demand draft
received by the authorized dealer. Thus, the authorized dealer enters
into a contract with the customers. The authorized dealer further
maintains the Payment and Delivery Register and the seniority of its
customer for the delivery of his vehicle. Thus, a contract for sale of
vehicle is created between the dealer and the customer concerned. The
authorized dealer who receives the demand draft deposits the same in
the ANZ Grindlays Bank for crediting the process into the dealer
control vehicle purchase account.
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
18. According to the availability of the funds in the said dealer
control account, the vehicles are sold by this defendant in favour of its
authorized dealers. Thus, this defendant cannot correlate the
individual bookings made by the customer through its authorized
dealers. The authorized dealers are also not required to send the
details of the customers, who have made the bookings of the vehicles.
This defendant maintains the dealer control account indicating the
payments received in ANZ Gridlays Bank and the vehicles sold to its
authorized dealers against the availability of the funds in the said
account. This defendant invoices the vehicle after making payment of
the Central Sales Tax and invoices the vehicle in favour of various
dealers. This defendant does not earmark the vehicle in favour of any
individual customers. The authorized dealer invoices the vehicles to its
customers after paying the A.P. General Sales Tax and upon receiving
the ex-showroom prevailing price at the time of the delivery. The
authorized dealer also issues the sale certificate in favour of their
customers. Thus, there is no privity of contract between the plaintiff
and this defendant.
19. It is further averred that for the acts of commissions and
omissions and also irregularities committed in drawing excess vehicles,
the first defendant initiated criminal proceedings against 4th defendant
by terminating his dealership.
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
20. In the written statement filed by the 4th defendant, it is
contended that when demand drafts were issued in favour of defendant
no.1, the 4th defendant could not have encashed the said demand
drafts and therefore the question of this defendant delivering the
vehicles did not arise. Further, there was no demand or request made
by the plaintiff to this defendant. Deponent also denies of receiving
notices from the plaintiff.
21. In the written statement filed by the 6th defendant, he denies
existence of privity of contract with the plaintiff and that suit filed does
not show any cause of action with this defendant.
22. In reply to the allegations made by the plaintiff in paragraph-5
of the plaint, this defendant submits that he has no knowledge of the
terms and conditions that were agreed upon by the plaintiff, and
defendant no.4. After the termination of the authorized dealership of
defendant no.4 by defendant no.1, the 1st defendant had instructed
this defendant to accept the documents of certain bookings pending
with defendant no.4. It also appears that the first defendant had
intimated the customers viz., K.Prabhakar and B.V.Subba Rao to
approach this defendant, for receiving the documents on behalf of the
first defendant. This defendant was instructed to receive the
documents for verification by the Area Manager of the first defendant
and also to receive the balance amount. In anticipation of clearance to
be obtained from defendant no.1, he received two pay orders of
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
25,496/- each from the said Prabhakar and Subba Rao, who made
bookings on their own behalf, this defendant released the vehicle
arrival intimation.
23. The defendant avers that except the aforementioned two pay
orders of 25,496/- each, no other amount was received by this
defendant. As the documents were presented on the instructions of
the first defendant, this defendant had to acknowledge the receipt of
the original receipts and the other documents made by the parties and
these are the documents referred to at pages 7 and 8 of the documents
filed by the plaintiff. The first defendant neither sent any vehicle nor
any instructions for delivery of vehicle and directed the defendant to
return the documents to the persons who had deposited them with this
defendant.
24. As this defendant was acting only on the instructions of
defendant no.1, this defendant returned all the documents received
from the parties mentioned above by registered post with
acknowledgement due. The documents sent to K.V.Subba Rao were
received and the postal acknowledgment is filed herewith. Whereas the
documents sent to Prabhakar were returned. This fact has also been
intimated to the plaintiff vide letter of this defendant dated 21.11.1998.
As the above two bookings were made by the plaintiff, the amounts
which were received by us viz., 25,496/-, in each case were returned
to the plaintiff by two cheques bearing nos.500959 and 500960. This
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
defendant avers that both these cheques were encahsed by the
plaintiff. As such this defendant has absolutely no privity of contract
with the plaintiff and the suit as filed is not maintainable against this
defendant. There is also no cause of auction alleged against this
defendant for filing the suit. This defendant is also not liable to pay
back the suit amounts.
25. On analyzing the pleadings, evidence and submissions, trial
Court held issues 2, 5 and 6 in favour of plaintiff and against first
defendant. Additional issues were held in favour of 6th defendant.
Issues 1, 3 and 4 are held against defendants and in favour of plaintiff
and decreed the suit for 3,15,074/- together with interest at 18%
per annum from 23.01.1997 till the date of realization with
proportionate costs against first defendant. The suit against
defendants 2 to 4 and 6 is dismissed without costs.
CCCA No.71 of 2002:
26. The plaint averments disclose that on the request of its
customers, the plaintiff provided financial assistance on hire purchase
basis to acquire Maruti Vans 800 CC, standard and A/C. The plaintiff
purchased demand drafts on their behalf in favour of defendant no.1
and handed over to the customers. The customers have filed order
booking forms enclosing Demand Drafts and handed over to first
respondent's authorized dealers in Hyderabad and Vijayawada,
defendants 4 & 5, and obtained receipts from them. The defendants
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
were required to deliver the vehicles within two to three months but not
delivered in spite of repeated requests even though the defendants
have encashed the Demand Drafts. On 12.07.1997, first defendant
wrote letter requesting plaintiff to submit further documents for
delivery of vehicles and accordingly required documents were
submitted vide letter dated 29.7.1997, copy of which was sent to 6th
defendant. On 30.7.1997, 6th defendant has given acknowledgment.
However, vehicles were not delivered. It is further case of plaintiff that
when the plaintiff demanded the installment amount from the
customers, the customers have cancelled the agreements on the
protest that defendants have not delivered the vehicles. On 27.11.1997
plaintiff issued notice sent through registered post to the defendants
demanding refund of 47,02,036/- along with interest @ 30 % per
annum. As there was no response to the said notice instant suit is
filed. It is its further case that as the amount is lying with the
defendants, it is entitled to recover the money with interest @ 24 % per
annum and that defendants jointly and severally liable to pay
59,00,633.28 till 10.3.1998.
27. In the written statement of defendant no.1, on the
maintainability of the suit, the procedure of booking and delivery of
vehicles, the same averments are made as averred in the written
statement filed in CCCA No. 55 of 2002.
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
28. It is further averred that third defendant addressed letter dated
12.7.1997 to the plaintiff t ascertain the status of customer booking
and to reconfirm the same upon receiving the records from the
defendants 4 and 5. Upon ascertaining, the 6th defendant delivered
back the document to the plaintiff. It is asserted that the plaintiff had
not made booking of vehicles with defendants 4 to 6. The first
defendant denied receiving letter dated 12.7.1997 or sending the letter
to the 6th defendant from the plaintiff for submission of further
documents. The first defendant denies its liability either to deliver
vehicles or refund of amount. It is further averred that it has initiated
separate criminal proceedings by terminating the dealership of the 4th
and 5th defendants for the acts of omissions and commission and
irregularities in drawing excess vehicles.
29. This defendant submits that the suit is bad for non-joinder of
necessary parties. This defendant further submits that the suit is not
maintainable in law against this defendant. This defendant further
submits that there is no privity of contract between the plaintiff and
this defendant. This defendant further submits that the Civil Courts in
Hyderabad have no jurisdiction to entertain the suit filed by the
plaintiff against this defendant. There is no agreement much less a
contract between the plaintiff and this defendant. This defendant
further submits that the agreement having entered into by the plaintiff
with the defendant Nos.4 and 5 cannot be enforced against this
defendant. This defendant further submits that the suit is not
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
maintainable and is liable to be summarily rejected inasmuch as the
plaintiff has not entered into any contract with the defendant Nos.4
and 5. This defendant further submits that the alleged customers of
the plaintiff having failed to initiate or take any steps against defendant
Nos.4 and 5, ipso facto disentitles the plaintiff from claiming any relief
whatsoever.
30. In the written statement filed by 6th defendant, the defendant
denies privity of contract with the plaintiff. According to this defendant
after termination of dealership of 4th and 5th defendant, the first
defendant instructed this defendant to receive the documents of
certain bookings pending with 4th and 5th defendants, for verification
by the Area Manager of the first defendant and to return the
documents to the customers. He denied of any amount paid to the 6th
defendant. Defendant asserted that the Court below has no jurisdiction
to decide the suit.
31. On consideration of pleadings, submissions and evidence, the
trial Court answered issues 2, 5 and 6 in favour of the plaintiff and
against first defendant and additional issues in favour of the 6th
defendant. Issues, 1, 3 and 4 answered in favour of plaintiff and
against defendants. The trial Court decreed the suit for 47,02,036/-
together with interest @ 18 % per annum from the date of encashment
of respective demand drafts till the date of payment with proportionate
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
costs against the first defendant. The suit against defendants 2 to 6 is
dismissed without costs.
32. Based on the pleadings, the trial Court formulated seven issues
and two additional issues in each suit and on assessment of evidence,
recorded findings in the three suits. The issues, additional issues,
evidence relied on and findings are shown in a table format as under:
Sl. Suit No. Issues/Additional issues Evidence Findings
No.
(1) (2) (3) (4) (5)
1. Whether the suit as framed is On behalf of plaintiff, P.W.1
pleadings, evidence and
of 1998 maintainable? was examined and marked
Exs.A1 to A22. On behalf of submissions, trial Court
defendants, DWs.1 to 3 were held issues 2, 5 and 6 in
examined and Exs.B1 to B8 favour of plaintiff and
2.Whether there is any privity of contract
were marked. against first defendant.
between the plaintiff and defendants 1 to 3?
Additional issues were held
in favour of 5 defendant.
th
3. Whether the suit is bad for mis-joinder of Issues 1, 3 and 4 are held
parties? against defendants and in
favour of plaintiff and
decreed the suit
4. Whether this Hon'ble court has got 5,84,400/- together with
territorial jurisdiction? interest at 18% per annum
from the date of the
encashment of the
5. Whether the plaintiff is claimed exorbitant
respective drafts till the
interest?
date of payment with
proportionate costs against
6. Whether the plaintiff is entitled for the first defendant. The
recovery of amount in the suit with interest suit against defendants 2 to
thereon? 5 is dismissed, but in the
circumstances without
costs.
7.To what relief?
On 01.04.1999, the following additional
issues were framed:
1. Whether there is any privity of contract
between the plaintiff and the 5th defendant?
2.Whether the plaintiff is entitled for a
decree for the suit amount against defendant
No.5? "
2 O.S.No.558 On behalf of plaintiff, one On analyzing the
of 1998 1. Whether the suit as framed is witness was examined and pleadings, evidence and
maintainable? 24 documents were marked.
submissions, trial Court
On behalf of defendants,
three witnesses were held issues 2, 5 and 6 in
examined and 13 documents favour of plaintiff and
2.Whether there is any privity of contract
were marked. against first defendant.
between the plaintiff and defendants 1 to 3?
Additional issues were held
in favour of 5 defendant.
th
3. Whether the suit is bad for mis-joinder of Issues 1, 3 and 4 are held
parties? against defendants and in
favour of plaintiff and
decreed the suit for
4. Whether this Hon'ble court has got 3,15,074/- together with
territorial jurisdiction? interest at 18% per annum
from 23.01.1997 till the
date of realization with
5. Whether the plaintiff is claiming
proportionate costs against
exorbitant interest?
first defendant. The suit
against defendants 2 to 5 is
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
6. Whether the plaintiff is entitled for dismissed without costs.
recovery of amount in the suit with interest
thereon?
7.To what relief?
On 01.04.1999, the following additional
issues were framed:
1. Whether there is any privity of contract
between the plaintiff and the 5th defendant?
2.Whether the plaintiff is entitled for a
decree for the suit amount against
defendant No.5? "
3. O.S.No.95 of On behalf of plaintiff, two On consideration of
1998 1. Whether the suit as framed is witnesses were examined pleadings, submissions and
maintainable? and marked 67 documents.
evidence, the trial Court
On behalf of defendants
three witnesses were answered issues 2, 5 and 6
examined and marked 20 in favour of the plaintiff and
2.Whether there is any privity of contract
documents. against first defendant and
between the plaintiff and defendants 1 to 3?
additional issues in favour
of the 6th defendant.
3. Whether the suit is bad for mis-joinder of Issues, 1, 3 and 4 answered
parties? in favour of plaintiff and
against defendants. The
trial Court decreed the suit
4. Whether this Hon'ble court has got for 47,02,036/- together
territorial jurisdiction? with interest @ 18 % per
annum from the date of
encashment of respective
5. Whether the plaintiff is claiming
demand drafts till the date
exorbitant interest?
of payment with
proportionate costs against
6. Whether the plaintiff is entitled for the first defendant. The
recovery of amount in the suit with interest suit against defendants 2 to
thereon? 6 is dismissed without
costs.
7.To what relief?
On 01.04.1999, the following additional
issues were framed:
1. Whether there is any privity of contract
between the plaintiff and the 6th defendant?
2.Whether the plaintiff is entitled for a
decree for the suit amount against
defendant No.6? "
33. As can be seen from the table above issues in all three suits are
same, the parties are same, all evidence relied on is same, the stand of
respective parties is same and findings recorded by the trial Court are
same. Inspite of service of notices, plaintiff has not chosen to enter
apperance. As we were informed that the company is in liquidation, we
have issued notice to official Liquidator, but he has also not chosen to
make submissions. Further, implead respondent No.4 not filed counter
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
nor denied the claim of the defendants 1 to 3. Only learned counsel for
appellants/defendants 1 to 3 made submissions.
34. Having heard learned counsel for appellants, the issues that
arise for consideration are:
"1. Whether there is privity of contract between the plaintiff and
the defendants 1 to 3 ?
2. Whether the impugned judgments and decrees passed by the
trial Court are sustainable under law ?
3. To what relief ?
ISSUE NO.1:
35. The crux of the issue in these three appeals is whether there
was privity of contract between the plaintiff and the defendants 1 to 3?
36. The primary defence of defendants 1 to 3 is that there is no
privity of contract between the plaintiff and defendants 1 to 3 and,
therefore, suit is liable to be dismissed on that ground. According to
these defendants, by separate contract, Dealerships were awarded to
the defendants 4 and 5 and the terms of the contract clearly disclose
that the vehicles are delivered to the dealer by the manufacturer after
receiving the sale consideration excluding local taxes and commission
and the dealer in-turn sells the vehicle after collecting local taxes and
commission. There is no contract between the customer and the
manufacturer. Defendants 1 to 3 also challenged the maintainability of
the suit to recover the money by the plaintiff as plaintiff is not the
customer of defendants 4 and 5, but he was only financier to the
customers.
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
37. On both aspects, the trial Court overruled the objections and
held the issues in favour of the plaintiff. On the issue of privity of
contract, trial Court observed that only the manufacturer delivers the
vehicles to its customers, whereas authorized dealer acts as mere agent
for the manufacturer and receives a commission for its service
rendered to the manufacturer. Certain portions of the depositions of
DWs.1 to 3 were noted to hold that defendants 1 to 3 are alone
responsible for delivery of vehicles and if vehicles are not delivered,
liable to refund the money to the customers. The trial Court observed
that the evidence of DWs.2 and 3 contradicts the evidence of DW.1.
According to DWs.2 and 3, payments were made favouring Maruti
Udyog Limited, payments were sent to Delhi and that no part of the
amount was paid directly to the 4th and 5th defendants. According to
DW.3, who is the Manager of 6th defendant, he acted on instructions of
manufacturer, that the dealer would incorporate the terms and
conditions in the order booking form supplied to the customers, that
Demand Drafts should be drawn in favour of 1st defendant and the 1st
defendant alone would encash the same. Relying on these depositions,
trial Court discarded the deposition of DW.1.
38. Trial Court observed that dealer is only an Agent. If he becomes
purchaser of the vehicle sold by the manufacturer then he should have
freedom of selling the vehicles as per the price determined by him and
to his choice of customers, whereas the price payable to the vehicle
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CCCA Nos.42, 55 & 71 of 2002
including dealer commission is determined by the manufacturer and
the dealer is only required to collect the money as fixed by the
manufacturer and dealer has no discretion to prescribe price of the
vehicle. Therefore, the dealer cannot be called as separate vendor.
Further, if dealer is an independent vendor, there was no requirement
for the dealer to forward the names of the customers in a given
document along with Demand Drafts to the first defendant. Trial Court
observed that dealer acts on behalf of the manufacturer and receives
fixed commission, which component is already included in the price of
the vehicle.
39. On the issue of locus standi, trial Court observed that
admittedly plaintiff paid the amount to purchase the vehicles by his
customers and that plaintiff is not insisting for delivery of the vehicles
for seeking repayment of money paid by him and, therefore, he has
locus standi to file the suit. Admittedly, amount was paid by the
plaintiff and received by the defendants and non-refund of money
would amount to undue enrichment and, therefore, first defendant
cannot escape from liability to return back the money received from the
plaintiff.
40. Extensive submissions are made by the learned counsel for
appellants and has taken through exhibits filed on behalf of the
defendants before the trial Court. According to learned counsel, there
is no privity of contract between the plaintiff and the defendants 1 to 3
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CCCA Nos.42, 55 & 71 of 2002
and that plaintiff cannot maintain suit against the defendants as he is
not the customer of the defendants 4, 5 and 6 as the case may be.
Ex.B2 is the list of documents including plaint in O.S.No.2466 of 1998
in Delhi High Court. At running page Nos.146 to 177 of material
papers compilation in CCCA No.42 of 2002 is the Dealer Agreement
along with Schedules. Clause-5 of Article-I deals with limits of
authority. Clause17 of Article-IV deals with commission. According to
this clause, dealer should receive from his customer a commission
specified by the Company based on the type of the product booked and
sold. Clause-18 deals with delivery of products. It specifically refers
to sale by the Company. It holds that company would not be liable for
any failure, delay, or error in delivery or consequential loss arising
therefrom. It also says that if it is not possible to supply fully the
demand of the dealer, the company reserves the right to apportion
products which are available among its dealers and other customers.
Clause-19 envisages that after dispatch of the products from the
company's factory, the company's liability in respect of any defect in
the products would be limited to the company's obligations under the
warrantee clause and would have no other liability. Clause 35 in
Article-VIII talks about selling of parts to the dealer.
41. From the reading of the various clauses of the Dealer Agreement
and the deposition of DW.1, it is manifest that manufacturer delivers
the vehicles as per the indent placed by the dealer. When vehicles are
delivered by the manufacturer, he does not verify as to which vehicle
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CCCA Nos.42, 55 & 71 of 2002
would go to which customer. The delivery of vehicle to the customer is
prerogative of the dealer. The manufacturer does not maintain list of
customers to whom the vehicles are delivered. The authorized dealer
only maintains payment and delivery register and seniority of the
customers for the delivery of the vehicles.
42. It is the assertion of DW.1 that contract for sale of vehicle is
created between the dealer and the customer concerned. In his
deposition, the deponent explained the procedure as under:
"The authorized dealer who receives the demand drat deposits
the same to the ANZ Gridlays Bank for crediting the proceeds into the
dealer control vehicle purchase account at Delhi. According to the
availability of the funds in the said dealer control account, the vehicles
are sold by this defendant in favour of its authorized dealers.
Defendant nos.1 to 3 cannot correlate the individual bookings made by
the customer through its authorized dealers. The authorized dealers
are also not required to send the details o the customers, who have
made the bookings of the vehicles to D1 to D3. Defendant nos.1 to 3
maintains the dealer control account indicating the payments received
in ANZ Grindlays Bank and the vehicles sold to its authorized dealers
against the availability of the funds in the said account. Defendant
nos. 1 to 3 invoices the vehicle after making payment of the central
sales tax and invoices the vehicles in favour of various dealers.
Defendant nos.1 to 3 further does not earmark the vehicle in favour of
any individual customers. The authorized dealer invoices the vehicles
to its customers after paying the A.P.General Sales Tax and upon
receiving the ex-showroom prevailing price at the time of the delivery.
The authorized dealers also issue the sale certificate in favour of their
customers. Thus, there is first sale by D1 to D3 in favour of
authorized dealers or enabling the dealer to re-sell the vehicles in
favour of customers and as such there is no privity of contract
between the plaintiff and this defendant. The plaintiff never made
bookings either with D1 to D3 or D3 and D5."
43. What is deposed by DW.2 was that plaintiff did not make
payment by cash or cheque or Demand Drat favouring Mahalakshmi
Motors Private Limited and made payments favouring Maruti Udyog
Limited and all the payments were sent to Maruti Udyog Limited, Delhi
and that 4th defendant is not liable to pay suit amount in all the three
suits. In the deposition of DW.3, deponent clearly stated that "Maruti
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CCCA Nos.42, 55 & 71 of 2002
Udyog Limited sells vehicles to us and we sell them to customers". This
assertion of DW.3 is ignored and trial Court considered the other
averments. In the cross-examination by the plaintiff, DW.3 stated that
demand drafts were drawn in favour of Maruti Udyog Limited and it
alone encashes the demand drafts and when demand drafts are
received from the customers, they would pass receipts on behalf of
Maruti Udyog Limited and that there is a condition in the order
booking form that the dealer is not responsible and the deponent also
stated that he gets commission for running services to Maruti Udyog
Limited for booking and delivery of the vehicles.
44. On a careful consideration of the respective depositions of
defendant witnesses, it cannot be said that there is material
contradiction among the witnesses. The trial Court erred in not
properly analyzing the depositions and exhibits marked on behalf of
defendants 1 to 3.
45. It is not in dispute that initial payment was made by demand
drafts drawn in favour of Maruti Udyog Limited. From the extracted
averments of DW.1, it is noticed that these amounts get credited to the
specific account maintained in ANZ Grindlays Bank, which is called
'dealer control vehicle purchase account'. Such accounts are maintained
dealer-wise all over the country. For convenience sake, the demand
drafts were drawn in favour of Maruti Udyog Limited, but those
demand drafts are credited in the 'dealer control vehicle purchase
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
account'. It is the practice in vogue in automobile sector. As explained
by the deponent and as can be seen from the various clauses in the
Dealer Agreement, the manufacturer verifies the amount lying in the
'dealer control vehicle purchase account' of a dealer and dispatches the
vehicles based on the amount accumulated in the account. At the
stage of dispatch of the vehicles, the company does not verify the
customers to whom the vehicles are to be delivered. It is not the
responsibility of the company to deliver a particular vehicle to a
particular customer. That is left to the dealer and it is the dealer's
responsibility to deliver the vehicle to his customer.
46. The trial Court failed to appreciate the specific mechanism
created for the purpose of assessing the availability of funds in the
'dealer control vehicle purchase account' for delivery of vehicles as per
the indent placed by the dealer. For example, if dealer places indent for
20 vehicles of different models and price range, the company verifies
the vehicles prices and verifies the balance amount available in the
'dealer control vehicle purchase account' and to the extent of amount
available in the account, it delivers the vehicles. In a given situation,
the company may not deliver all the 20 vehicles indented if the amount
is not sufficient to meet the vehicles price. There is a separate contract
between the customer and the dealer and it is dealer's responsibility to
deliver the vehicle booked by the customer or to refund the amount
secured from him. This finer distinction is not appreciated by the trial
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CCCA Nos.42, 55 & 71 of 2002
Court in holding that the defendants 1 to 3 are responsible for
repayment of the amount due.
47. Manufacturer is responsible for the quality of the vehicle
manufactured and spare parts provided by the manufacturer. It is not
the responsibility of the manufacturer for the deficiency in service by
the dealer on delivery of vehicle or spare parts. If there is deficiency in
service in delivery of the vehicle, it is the dealer who is responsible and
answerable to the customer. The terms of the contract clearly envisage
this and make clear distinction between the role of manufacturer and
the dealer.
48. The quality of service provided by the dealer has an impact on
sales of the vehicles manufactured by the company. Therefore, the
manufacturer keeps tab on service provided by the dealer and
wherever there is deficiency in service takes remedial steps. Therefore,
in its own interest, defendant-company requires to keep tab on
functioning of a dealer. That does not mean it is responsible for
deficiency of service by the dealer. Having found that defendants 4 and
5 committed several irregularities and were not providing quality
service to the customers, it has terminated the dealerships and has
initiated criminal and civil action.
49. It is the responsibility of the authorized dealer to issue invoice
and sale certificate to its customer and charge local sales tax and
commission and credit the local sales tax to the State Government
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CCCA Nos.42, 55 & 71 of 2002
Treasury. The transaction between the dealer and its customer
concludes on the delivery of the vehicle to the customer. Whereas, the
sale of a vehicle between the company and the authorized dealer
concludes as soon as the vehicle is handed over to the transporter for
dealer's destination.
50. Thus, there was no privity of contract between plaintiff and
defendants 1 to 3. The relationship between defendants 4 and 5 and
defendants 1 to 3 is on the basis of principal to principal as held by the
Hon'ble Supreme Court in identical fact situation in Indian Oil
Corporation vs. Consumer Protection Council, Kerala1.
51. On the issue of locus standi also, the trial Court erred in holding
in favor of the plaintiff. Plaintiff is a finance company, which enters
into hire purchase agreements with its customers to provide finances
to the customers to purchase vehicles. They are called 'hire purchase
agreements'. On entering into agreement, plaintiff releases the money
to the customer. However, instead of paying the money directly to the
customer, the plaintiff seems to have adopted the mechanism of paying
initial amount to book a vehicle with the dealer directly and arrange
the full amount at the time of delivery of the vehicle. It is only a
convenience and understanding between the plaintiff and its
customers. But its customers are the actual customers to the vehicle
dealer and the agreement to deliver the vehicle is between the customer
(1994) 1 SCC 397
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
and the dealer. Merely because plaintiff arranged the initial vehicle
booking money, it does not step into the shoes of the customer, take
the role of the customer to prosecute litigation against the dealer and
the manufacturer of the vehicle, as in these cases. At any rate, there is
absolutely no contractual relationship between the plaintiff and the
defendants 1 to 3. Merely because Demand Drafts were drawn for
initial vehicles booking amount favouring Maruti Udyog Limited, it
does not create relationship with plaintiff and issue of enforcement of
contract with the defendants 1 to 3 does not arise. Therefore, the trial
Court grossly erred in holding that plaintiff has locus standi in
instituting the suits and claim to refund the amounts paid by the
plaintiff.
52. Thus, the issue is held in favour of defendants 1 to 3 and against
the plaintiff.
ISSUE No.2:
53. The findings recorded by the trial Court on privity of contract
and locus standi are not sustainable. That being so, the trial Court
grossly erred in holding the issues in favour of the plaintiff and against
the appellants. Once issue no.1 is decided in favour of defendants 1 to
3, all other issues fall to the ground. The judgments and decrees of
trial Court under Appeal are not sustainable.
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
ISSUE NO.3:
54. With the result, Appeals are allowed and the judgments and
decrees made by the trial Court in O.S.No.96 of 1998, O.S.No.95 of
1998 and O.S.No.558 of 1998 are set aside. Pending miscellaneous
applications, if any, shall stand closed.
_______________________
P.NAVEEN RAO, J
_______________________
J.SREENIVAS RAO, J
Date: 02.03.2023
KKM
PNR,J & JSR,J
CCCA Nos.42, 55 & 71 of 2002
HON'BLE SRI JUSTICE P.NAVEEN RAO
AND
HON'BLE SRI JUSTICE J.SREENIVAS RAO
CITY CIVIL COURT APPEAL NOS.42, 55 AND 71 OF 2002
Date: 02.03.2023
KKM
