1. Instant writ petition under Article 226 of the Constitution of India is filed for the relief in the form of direction against the respondent No.1, Hinduja Leyland Finance Company (hereinafter referred to as the respondent-company) for release of the Excavator Machine on supardgi subject to payment of necessary dues regularly on monthly instalments and further relief incorporated by way of amendment vide order dated 03/02/2014 in the form of direction to newly added respondents' No.3 and 4 to take action and register criminal case against the respondent No.2 and his companions on the basis of complaints made by the petitioner with further direction to respondent No.4 to give possession of the Machine in question to the petitioner forthwith.
2. Facts relevant and necessary for disposal of this writ petition are to the effect that petitioner had approached respondent- company, a finance company registered under the Companies Act, 1956 for purchase of new Hyundai R215 LC-7 Excavator Machine with Sr. No.N603D0042 and Engine No.84093664 (hereinafter referred to as the 'Machine') under the loan scheme of the respondent-company. The loan agreement No.MPIDGW00041 dated 30/04/2013 was entered into between the petitioner (the borrower) with one Brijendra Singh as guarantor and the respondent-company (the lender). The loan amount advanced was to the tune of Rs.36,60,000/-. The same was required to be repaid in 33 instalments at the rate of Rs.1,38,550/- per month commencing from 01/06/2013. The loan amount was released and the Machine was purchased by the petitioner from a dealer. The terms and conditions are contained in the loan agreement. Article 2.9 of the Agreement deals with repayment of loan, Article 2.10 of the Agreement deals with mode of payment of the instalments. Article 13 deals with events of default and Article 14 of the Agreement deals with lender's right of recovery of loan and inter alia Article 14.1 provides that upon occurrence of any/all of the events of default, the borrower shall be liable to pay to the lender as provided for therein. Article 14.2 thereof provides as under:
"14.2 In the event of failure of the Borrower in complying with the demand in the said notice the Borrower shall be bound to surrender to the Lender at the cost of the Borrower at such location, as the Lender may designate, in the same condition in which it was originally delivered to the Borrower, ordinary wear and tear expected, failing which, the Lender shall be entitled to seize the Asset wherever, is without any further notice. The Borrower shall not prevent or obstruct the Lender from taking the possession of the Asset. For purpose, the Lender's authorised representatives, employees, officers and agents will have unrestricted right to entry and shall entitled to enter upon the premises, or garage, or godown, where the Asset shall be lying or kept, and to seize the Asset. In the event of the Borrower not cooperating, the Lender, if necessary have the right to break open any such place where the Asset is believed to kept and to seize the Asset. The Lender will be well within its rights to use tow-van or any carrier to carry away the Asset. The Borrower shall be liable to pay any towing charges and other such expenses incurred by the Lender in connection with the seizure of the Asset and for its sale etc."
Article 14.3 of the Agreement provides that after seizure, Lender's authorised representative, employees, officers or agents will prepare an Inventory of the Asset. Thereafter, the Lender will send a notice with a copy of the inventory, granting the borrower 10 days time to settle the contract and to take back the vehicle by following the other conditions contained therein.
Article 22 of the Agreement provides for law, jurisdiction and arbitration which reads as under:
22.1 (a) All disputes, differences and / or claim arising out of this Agreement whether during its subsistence or there after shall be settled by arbitration in accordance with the provision of the Arbitration and Conciliation Act, 1996, or any statutory amendments thereof and shall be referred to the sole Arbitration of an Arbitrator nominated by the by the Managing Director of the Lender. The award given by such an Arbitrator shall be final and binding on the Borrower to this Agreement.
(b) The venue of arbitration proceedings shall be at Chennai.
(c) The arbitrator so appointed herein above, shall also be entitled to pass an Award on the hypothecated asset and also on any other securities furnished by or on behalf of the Borrower.
3. Upon perusal of the aforesaid relevant provisions, it is clear that in the event the petitioner continues to be a defaulter or fails to pay any of the loan instalments within the schedule time or commits any breach of the agreement or fails to perform his loan agreement as defined under Article 13, the lender is conferred with the right to take possession of the Machine in question and recover the balance amount of the loan instalments as well as claim damages for breach of the contract. Besides, the respondent-company is also entitled to put to sale the seized asset/Machine in question and appropriate the sale proceeds towards satisfaction of the claim against the petitioner on the basis of the terms and conditions of the agreement.
4. The aforesaid narration of facts are beyond any cavil of doubt.
5. Petitioner does not dispute the principal amount of the loan and the schedule of instalments to be paid towards repayment of loan. However, it is submitted that due to poor financial condition, petitioner could not deposit the instalments at scheduled intervals. The petitioner is ready and willing to deposit the rest of the instalments/amount due in time though the respondent-company has acted contrary to the Reserve Bank of India guidelines.
6. This writ petition was filed on 26/12/2013. Certain facts are sought to be incorporated by way of amendment which was allowed by this Court vide order dated 03/02/2014 related to the period upto 05/12/2013 but there is no plausible justification offered as to why the aforesaid facts were not pleaded at the time of filing the writ petition. By the aforesaid amendment, the petitioner sought to bring on record that the respondent-company has not allowed the petitioner to deposit the amount of instalments, the possession of the Machine has been taken forcibly and seized. Complaints though have been lodged with the Police Station, Kwasi, District Aligarh, State of Uttar Pradesh and Police Station, Madhoganj, District Gwalior, State of Madhya Pradesh but no action has been taken against the respondent-company. The act of taking possession of the Machine by force was an illegal act and contrary to the loan agreement and, therefore, the complaints filed by the petitioner deserves to be registered for further action by the concerned police station.
7. Respondent No.1-company has filed the counter-affidavit and raised a preliminary objection that the present writ petition under Article 226 of the Constitution of India is not maintainable in the light of the judgment of the Hon'ble Apex Court reported in 2003 (10) SCC 733, Federal Bank Ltd., v. Sagar Thomas and others as the respondent No.1-company does not fall in the class of "other authority" within the fold of definition of "other authority" as enshrined under Article 12 of the Constitution of India to make it amenable to the writ jurisdiction. According to the respondent- company though it is a finance company but it is a private company registered under the Companies Act engaged in the business of finance but it does not perform any public duty or is not a body corporate under law to discharge any statutory functions. That apart, on merits, it is submitted that the amount of loan advanced was to the tune of Rs.36,60,000/- and the same was required to be paid in 33 monthly instalments each at the rate of Rs.1,38,550/- by the petitioner. The conduct of the petitioner as regards repayment of instalments is catalogued in the form of chart which reads as under:
| Sl. No. | Instalment | Details |
| 1. | 1st instalment | Cheque bounced on scheduled date. |
| 2. | 2nd instalment | Paid. |
| 3. | 3rd instalment | Cheque bounced on scheduled date. |
| 4. | 4th instalment | Cheque bounced on scheduled date. |
| 5. | 5th instalment | Part-payment made. |
| 6. | 6th instalment | Cheque bounced on scheduled date. |
| 7. | 7th instalment | Not paid. |
8. During pendency of the proceedings before this Court, an attempt was made that the dispute between the parties may be settled amicably and the matter was referred to the mediation by this Court. It appears that certain terms and conditions were incorporated in the mediation report for resolution of the dispute between the parties but yielded no results. This Court vide order dated 20/02/2015 passed the following order:
"Counsel for the petitioner is directed to deposit Bank Draft of Rs.26,06,348/- as agreed before Mediator Shri Padam Singh in the name of Principal Registrar, High Court of M.P., Bench at Gwalior within 10 days.
List this petition for further orders and direction in the light of the mediation report dated 27/11/2014 after ten days."
9. Thereafter, till the date of hearing of the petition on 19/03/2015, petitioner has not complied with the aforesaid order passed by this Court. Under such circumstances, this Court proceeded to decide the writ petition.
10. The moot question to be addressed is as regards maintainability of the writ petition against a private company incorporated under section 617 of the Companies Act?
11. In somewhat similar facts and circumstances of the case in hand, the Hon'ble Supreme Court in the case of Federal Bank Ltd., (supra) has held that a private company registered under the Indian Companies Act carrying on banking business as a scheduled bank, cannot be termed as an institution or a company carrying on any statutory or public duty. As such, such company is essentially a commercial venture company involved in the activities to make profits. Financing is also one of such commercial activities. In course of business transaction, finance company enters into agreements having within its fold various terms and conditions of advancement of finance as in the present case. It has its own Board of Directors elected by its share holders having no monopoly status at all. Being a registered company, it has rights and obligations under the terms and conditions of the Agreements entered into and are enforceable at law. Advancement of loan and recovery thereof are part of the business activities. The private banking company is not set up for the purpose of building the economy of the State; on the other hand such private company has been voluntarily established for its own purposes and business interests. Of course, subject to regulatory measures of financial discipline having no adverse effect on the economy of the country in general or not put in conflict with or against the fiscal policies of the State and for such purpose guidelines are provided by the Reserve Bank of India. Such regulatory measures are to keep a check and provide guidelines but in no case can be termed to have a participatory dominance or control over the affairs of the company in its business intercourses. As regards, Reserve Bank of India regulations applicable to private companies/finance companies and the consequences flowing therefrom in the context of maintainability of writ petition under Article 226 of the Constitution of India, the Hon'ble Supreme Court observed as under:
"33. Merely because the Reserve Bank of India lays the banking policy in the interest of the banking system or in the interest of monetary stability or sound economic growth having due regard to the interests of the depositors etc. as provided under Section 5(c)(a) of the Banking Regulation Act does not mean that the private companies carrying on the business or commercial activity of banking, discharge any public function or public duty. These are all regulatory measures applicable to those carrying on commercial activity in banking and these companies are to act according to these provisions failing which certain consequences follow as indicated in the Act itself. As to the provision regarding acquisition of a banking company by the Government, it may be pointed out that any private property can be acquired by the Government in public interest. It is now a judicially accepted norm that private interest has to give way to the public interest. If a private property is acquired in public interest it does not mean that the party whose property is acquired is performing or discharging any function or duty of public character though it would be so for acquiring authority.
34. For the discussion held above, in our view, a private company carrying on banking business as a scheduled bank, cannot be termed as an institution or company carrying on any statutory or public duty. A private body or a person may be amenable to writ jurisdiction only where it may become necessary to compel such body or association to enforce any statutory obligations or such obligations of public nature casting positive obligation upon it. We don't find such conditions are fulfilled in respect of a private company carrying on a commercial activity of banking. Mere regulatory provisions to ensure such activity carried on by private bodies work within a discipline, do not confer any such status upon the company nor put any such obligation upon it which may be enforced through issue of a writ under Article 226 of the Constitution. Present is a case of disciplinary action being taken against its employee by the appellant Bank. The respondent's service with the bank stands terminated. The action of the Bank was challenged by the respondent by filing a writ petition under Article 226 of the Constitution of India. The respondent is not trying to enforce any statutory duty on the part of the Bank. That being the position, the appeal deserves to be allowed. "
12. The Hon'ble Apex Court in the aforesaid case has also applied six factors test laid down in the case of Ajay Hasia v. Khalid Mujib Sehravardi, (1981) 1 SCC 722 to determine as to whether a company incorporated under the Companies Act (not being a Government Company) under section 617 thereof can fall within the definition of 'other authority' under Article 12 of the Constitution of India. The respondent No.1-company is a finance company registered under the Companies Act engaged in the business of financing and, therefore, the conclusion drawn by the Hon'ble Supreme Court in the aforesaid case has full application to the facts and circumstances of the present case. The tests read as under:
"(i) Application of Ajay Hasia Tests 1 and 2
Share capital of the appellant Bank is not held at all by the Government nor is any financial assistance provided by the State; nothing to say which may meet almost the entire expenditure of the company;
(ii) Application of Ajay Hasia Test 3
The third factor is also not answered since the appellant Bank does not enjoy any monopoly status nor can it be said to be an institution having State protection.
(iii)Application of Ajay Hasia Test 4
So far as control over the affairs of the appellant Bank is concerned, they are managed by the Board of Directors elected by its shareholders. No Governmental agency or officer is connected with the affairs of the appellant Bank nor is any one of them a member of the Board of Directors. In the normal functioning of the private banking company there is no participation or interference of the State or its authorities. The statues have been framed regulating the financial and commercial activities so that fiscal equilibrium may be kept maintained and not get disturbed by the malfunctioning of such companies or institutions involved in the business of banking. These are regulatory measures for the purpose of maintaining a health economic atmosphere in the country. Such regulatory measures are provided for other companies also as well as industries manufacturing goods for importance. Otherwise these are purely private commercial activities. It would hardly make any difference if such supervisory vigilance is kept by the Central Government in place of Reserve Bank of India.
(iv)Application of Ajay Hasia Test 5
Any business or commercial activity, whether it may be banking, manufacturing units or related to any other kind of business generating resources, employment, production and resulting in circulation of money are no doubt, such which do have an impact on the economy of the country in general. But such activities cannot be classified as one falling in the category of discharging duties or functions of a public nature.
(v) Application of Ajay Hasia Test
Again, the activity which is carried on by the appellant is not one which have been earlier carried on by the Government and transferred to the appellant company.
13. The aforesaid six factors test in Ajay Hasia's case (supra) was considered by seven-Judge Bench of the Hon'ble Supreme Court in the case of Pradeep Kumar Biswas v. Institute of Chemical Biology, (2002) 5 SCC 111 wherein it was observed as under:
"40. The picture that ultimately emerges is that the tests formulated in Ajay Hasia are not a rigid set of principles so that if a body falls within any one of them it must, ex hypothesi, be considered to be a State within the meaning of Article 12. The question in each case would be - whether in the light of the cumulative facts as established, the body is financially, functionally and administratively dominated by or under the control of the Government. Such control must be particular to the body in question and must be pervasive. If this is found then the body is a State within Article 12. On the other hand, when the control is merely regulatory whether under statue or otherwise, it would not serve to make the body a State."
14. In view of the authoritative law settled by Hon'ble Apex Court referred to hereinabove, in the opinion of this Court, the respondent- company, a private company engaged in the business of finance cannot be classified as 'other authority' to bring it in the fold of definition of "State" under Article 12 of the Constitution of India to make it amenable to writ jurisdiction under Article 226 of the Constitution of India. Therefore, the writ petition is found to be not maintainable considering the factual matrix of the case in hand and the nature of relief claimed therein.
15. Even otherwise, the action taken by the respondent-company is in the light of the loan agreement binding between both the parties inter alia contained in the provisions as regards Article 2.9 repayment of loan, Article 2.10 Mode of payment of instalments, Article 13 events of default, Article 14 Lender's Right, 14.1 and 14.3 (particularly) and the documents on record as D/2 to D/8 filed by the respondent-Bank. Hence, in the light of the law laid down by the Hon'ble Supreme Court in the case of Charanjit Singh Chadha v. Sudhir Mehra, (2001) 7 SCC 417, Sardar Trilok Singh v. Satya Deo Tripathi, (1979) 4 SCC 396, Orix Auto Finance (India) Ltd. v. Jagmander Singh and another (2006) 2 SCC 598 and Anup Sarmah v. Bhola Nath Sharma and others (2013) 1 SCC 400 wherein in paragraphs 4, 5 and 6 observed as under:
"4. In Sardar Trilok Singh v. Satya Deo Tripathi, (1979) 4 SC 396, this Court examined a similar case wherein the truck had been taken in possession by the financier in terms of hire-purchase agreement, as there was a default in making the payment of instalments. A criminal case had been lodged against the financier under Sections 395,468, 465,471, 120-B/34 IPC. The Court refused to exercise its power under Section 482 CrPC and did not quash the criminal proceedings on the ground that the financier had committed an offence. However, reversing the said judgment, this Court held that proceedings initiated were clearly an abuse of process of the court. The dispute involved was purely of civil nature,even if the allegations made by the complainant were substantially correct. Under the hire-purchase agreement, the financier had made the payment of huge money and he was in fact the owner of the vehicle. The terms and conditions incorporated in the agreement gave rise in case of dispute only to civil rights and in such a case,the civil court must decide as to what was the meaning of those terms and conditions.
5. In K.A.Mathai v. Kora Bibbikutty, (1996) 7 SCC 212, this Court had taken a similar view holding that in case of default to make payment of instalments, the financier had a right to resume possession even if the hire-purchase agreement does not contain a clause of resumption of possession for the reason that such a condition is to be read in the agreement. In such an eventuality, it cannot be held that the financier had committed an offence of theft and that too, with the requisite mens rea and requisite dishonest intention. The assertion of rights and obligations accruing to the parties under the hire-purchase agreement wipes out any dishonest pretence in that regard from which it cannot be inferred that the financier had resumed the possession of the vehicle with a guilty intention.
6. In Charanjit Singh Chadha v. Sudhir Mehra, (2001) 7 SCC 417, this Court held that recovery of possession of the vehicle by the financier owner as per terms of the hire-purchase agreement, does not amount to a criminal offence. Such an agreement is an executory contract of sale conferring no right in rem on the hirer until the transfer of the property to him has been fulfilled and in case the default is committed by the hirer and possession of the vehicle is resumed by the financier, it does not constitute any offence for the reason that such a case/dispute is required to be resolved on the basis of terms incorporated in the agreement. The Court elaborately dealt with the nature of the hire-purchasing agreement observing that in a case of mere contract of hiring, it is a contract of bailment which does not create a title in the bailee. However, there may be variations in the terms and conditions of the agreement as created between the parties and the rights of the parties have to be determined on the basis of the said agreement. The Court further held that in such a contract, element of bailment and element of sale are involved in the sense that it contemplates an eventual sale.
"8. The element of sale fructifies when the option is exercised by the intending purchaser after fulfilling the terms of the agreement. When all the terms of the agreement are satisfied and the option is exercised a sale takes place of the goods which till then had been hired." (Charanjit Singh Chadha case (supra), SCC p.422, para 8)
While deciding the said case, this Court placed reliance upon its earlier judgments in Damodar Valley Corpn. v. State of Bihar, AIR 1961 SC 440, Instalment Supply (P) Ltd. v. Union of India, AIR SC 53 (SCC p.744, para 8), K.L.Johar and Co. v. CTO, AIR 1965 SC 1082 (AIR p.1090, para 17) and Sundaram Finance Ltd. v. Sate of Kerala, AIR 1966 SC 1178."
and provisions contained under Articles 13 and 14 of the Loan Agreement (supra) and documents on record as regards intimation of pre and post stage repossession and further opportunity to the petitioner, as discussed in para 7 of the order, no direction is warranted in the context of second relief claimed in the instant writ petition.
16. Petition sans merit and is accordingly dismissed.
Petition dismissed.