Shriram Finance Company Limited Previously Referred as Shriram Transport Finance Company Limited vs State of U.P. and 4 Others

HIGH COURT OF JUDICATURE AT ALLAHABAD MATTERS UNDER ARTICLE 227 No. - 671 of 2025

Shriram Finance Company Limited Previously Referred As Shriram Transport Finance Company Limited

.....Petitioner(s)

	Versus
State Of U.P. And 4 Others			.....Respondent(s)
Counsel for Petitioner(s)	: Ekansh Srivastava	Varma,	Vishnu Kumar
Counsel for Respondent(s)	: G.A.
Court No.- 89

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HON'BLE ANIL KUMAR-X, J.

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Heard Sri Ekansh Varma, learned counsel for petitioner and Sri K.K. Gupta, learned AGA for State.

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The present application has been filed by the petitioner with a prayer to set aside the impugned order dated 27-09-2024 passed by Session Judge, Aligarh in Misc. Civil Appeal no. 51 of 2024, Chandrashekhar @ Lalit vs. State of U.P. as well as the impugned order dated 19-07-2024 passed by Additional District Magistrate Finance and Revenue,Aligarh in Case No. 4875 of 2024, State of U.P. vs. Chandrashekhar @ Lalit and allow the present application.

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Learned Counsel for petitioner submitted that petitioner Shriram Finance Company finances light and heavy vehicles on hypothecation, repayable in monthly installments. If borrowers default in payment of loan, then Company takes back the vehicle from borrowers, and sells it in auction as per agreement. Vehicle no. T1023HR6960BV (temporary number) Hyundai Aura BS6 CNG-P was financed to one Chandrashekhar vide agreement no. GRGAN2309280003 dated 21-10-2023 for Rs. 6,60,000/with interest of Rs. 2,28,849/-, repayable in 48 installments ending on 05-112027. On 18-04-2024, while returning from Khair, Aligarh, the borrower was stopped near Hirnaty petrol pump by respondent no.5. After a dispute, he was allegedly falsely implicated under the U.P. Excise Act. An FIR dated 18-04-2024 under Sections 60, 62 and 72 of the U.P. Excise Act, bearing Case Crime No. 0157 of 2024, Police Station Gonda, District Aligarh, was registered. Pursuant to the FIR, the vehicle was confiscated. The borrower

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submitted a reply dated 02-07-2024 denying the allegations. The learned Additional District Magistrate (Finance & Revenue) passed a confiscation order directing deposit of the vehicle's value for release, failing which it was to be auctioned. Aggrieved, the petitioner filed an appeal under Section 72 of the U.P. Excise Act before the District Judge (Annexure-6). The learned District Judge dismissed the appeal without proper consideration. Both authorities failed to consider that only 12 liquor bottles were alleged and no independent public witness was present at the time of checking.

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Learned counsel for the petitioner submitted that in a hire purchase agreement, the finance company (lender) remains the real owner of the vehicle. The borrower only gets possession and use of the vehicle, but ownership continues with the financer until the entire loan is repaid. It was further argued that the borrower is only a trustee or bailee of the vehicle on behalf of the finance company and cannot be treated as the full owner, as the vehicle is under hypothecation. In support of these submissions, reliance was placed on the judgments of M/s Damodar Valley Corporation vs State of Bihar, AIR 1961 SC 440 , Charanjit Singh Chadha vs Sudhir Mehra,(2001) 7 SCC 417 , and Anup Sarmah vs Bhola Nath Sharma, (2012) 10 SC CK 0041 , wherein, it has been held that the financer continues to be the owner. It was lastly submitted that no notice was issued to the petitioner company during the confiscation proceedings. It is mandatory to provide an opportunity of hearing to the owner before passing any confiscation order. Since no such opportunity was given, the orders passed by the authorities are illegal and liable to be set aside, and the matter be remanded with directions to decide afresh after giving proper opportunity of hearing to the petitioner.

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Heard learned Counsel and considered the judgments relied upon by petitioner. The core issue before the Supreme Court in M/s Damodar Valley Corporation (Supra), Charanjit Singh Chadha (Supra) Anup Sarmah (Supra) was:-

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(1) whether a hire-purchase agreement amounts to a sale?, and

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(2) who is the real owner of the vehicle?, and

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(3) whether the financer can repossess the vehicle without attracting criminal liability?

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It was held by Supreme Court that:-

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(1) A hire-purchase agreement is not a sale. The Finance Company would buy the goods from the dealer and let them to the customer under hire purchase agreement. Under the hire purchase agreement, hirer is simply paying the for the use of the goods and for the option to purchase them.

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(2) Ordinarily, a contract of hire and purchase confers no title on the hirer and ownership remains with the financer until the conditions for transfer of the property to him have been fulfilled.

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(3) Financier is legally entitled to repossess the vehicle on default without committing any criminal offence, if done in accordance with the agreement.

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It is clear that above judgments deal with the nature of hire-purchase agreements, ownership of the vehicle, and the right of the financer to repossess the vehicle on default without attracting criminal liability. However, the present case relates to confiscation of a vehicle by statutory authorities under the provisions of the U.P. Excise Act, which stands on a different footing. The power of confiscation is exercised by the State under a special statute and is not dependent upon the contractual rights between the financer and the borrower. At this stage, it is also relevant to take note of the law laid down by the Hon'ble Supreme Court in HDFC Bank Ltd vs Kumari Reshma, 2015 (3) SCC 679, (3 Judges Bench) wherein Section 2(30) of the Motor Vehicles Act, 1988 was considered and it was held as under:

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"To appreciate the said submission, it is appropriate to refer to Section 2(30) of the Act which reads as follows:-

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"(30). "owner" means a person in whose name a motor vehicle stands registered, and where such person is a minor, the guardian of such minor, and in relation to a motor vehicle which is the subject of a hire-purchase agreement, or an agreement of lease or an agreement of hypothecation, the person in possession of the vehicle under that agreement."

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On a plain reading of the aforesaid definition, it is demonstrable that a person in whose name a motor vehicle stands registered is the owner of the vehicle and, where motor vehicle is the subject of hire-purchase agreement or an agreement of hypothecation, the person in possession of the vehicle

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under that agreement is the owner."

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Similar view was expressed in Purnya Kala Devi vs State Of Assam & Anr, AIRONLINE 2014 SC 254(3 Judges Bench) , wherein it was observed that the person who has actual possession and control of the vehicle under a hypothecation or similar agreement can, in appropriate cases, be treated as the owner. This principle was laid down in the context of motor accident claims, where liability is fixed upon the person who had control over the vehicle at the time of accident. The Court emphasized that where a vehicle is being used under the control and direction of a person other than the registered owner, such person may be held responsible. Although the said principle arises from motor accident cases, it indicates that the concept of "ownership" may vary depending upon the context and the purpose of the statute, and in certain situations, greater importance is given to the person who has actual possession and control of the vehicle.

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In view of the above legal position, even though the financier may have certain contractual rights, the person in possession of the vehicle is treated as "owner" for statutory purposes. Now sole question for consideration is; Whether the petitioner-financier, being the owner of the vehicle under a hirepurchase agreement, is entitled to claim an absolute right of hearing in confiscation proceedings? Confiscation proceedings are quasi-civil as well as quasi-criminal in nature. They are quasi-civil in as much as liability of the owner of the vehicle is adjudicated after affording an opportunity of hearing, enabling such person to establish that the vehicle was used in the alleged offence without his knowledge or consent. At the same time, they are quasicriminal because the State proceeds on the presumption that a vehicle used in transportation of contraband or illegal goods has been involved in unlawful activity.

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In such proceedings, the person best suited to explain the circumstances in which the vehicle was used is the one who had actual control and possession of the vehicle at the relevant time. The financier, being only a lender and not in possession of the vehicle, cannot be presumed to have knowledge of the manner in which the vehicle was used. Therefore, the judgments relied upon by the petitioner, which relate to contractual ownership under hire-purchase agreements, are of no assistance in the present case involving statutory confiscation. Hence, petitioner can not claim any right of hearing in connection with confiscation proceedings.

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In view of the aforesaid discussion, this Court is of the considered opinion that the petitioner-financier, not being in possession and control of the vehicle at the relevant time, cannot claim an absolute or independent right of hearing in confiscation proceedings initiated under the provisions of the U.P. Excise Act. The impugned orders have been passed by the competent authorities in accordance with law and do not suffer from any illegality, perversity or infirmity warranting interference by this Court in exercise of its writ jurisdiction.

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11 . The writ petition, being devoid of merits, is accordingly dismissed .

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April 1, 2026 Mukesh

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(Anil Kumar-X,J.)

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Digitally signed by :- MUKESH SRIVASTAVA High Court of Judicature at Allahabad

Shriram Finance Company Limited Previously Referred as Shriram Transport Finance Company Limited v. State of U.P. and 4 Others

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Shriram Finance Company Limited Previously Referred as Shriram Transport Finance Company Limited v. State of U.P. and 4 Others

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