No Ownership Right In Financed Vehicle Till Loan Clearance; Gauhati High Court Upholds Refund Of Earnest Money To Third-Party Buyer In Truck Sale Dispute
Sanchayita Lahkar
The Gauhati High Court, Single Bench of Justice Susmita Phukan Khaund dismissed a woman’s appeal and upheld directions requiring her to refund over ₹4 lakh (₹4.90 lakh, with interest) to a purchaser who had paid her advance money under an agreement for sale of a Tata truck. The dispute arose after the woman bought the vehicle under a hire-purchase loan and stopped paying instalments after 23.06.2011; the sale deed recorded that the purchaser would continue paying ₹13,500 per month to the finance company until the loan was cleared. The Court held that, during the subsistence of the loan, she had no ownership right to sell or transfer the truck to a third party.
The dispute arose out of an agreement dated 16.10.2012 for the sale of a public carrier truck between the plaintiff and the defendant. The agreed consideration was ₹8,90,000, out of which the plaintiff paid ₹4,90,000 as advance/earnest money. Under the agreement, the plaintiff was to pay the remaining ₹4,00,000 by monthly instalments of ₹13,500 directly to Sriram Transport Finance Corporation, which had financed the vehicle. It was recited in the agreement that the defendant had already paid ₹1,00,000 to the finance company.
The plaintiff alleged that when he approached the finance company on 05.11.2012 to pay the instalment, he was informed of outstanding dues of ₹67,500 and that only one instalment had been paid earlier by the defendant. Alleging suppression of material facts and fraudulent execution of the agreement, the plaintiff sought refund of the amount paid. The defendant denied fraud and contended that the plaintiff failed to perform his obligations. Evidence was led by both sides, including witnesses from the finance company, and documents relating to the hire-purchase agreement and instalment payments were exhibited. The Trial Court decreed the suit directing refund with interest, which was affirmed by the First Appellate Court. The defendant preferred the second appeal raising a substantial question of law on the sustainability of the money decree.
The Court recorded that “the execution of the deed of agreement was an admitted fact,” and that the dispute centred on whether the defendant had paid ₹1,00,000 to the finance company as stated in the agreement. It noted the evidence showing that “only one installment… was paid way back on 05.05.2011 whereas the deed was executed on 16.10.2012,” and observed that the defendant was aware of outstanding dues but still executed the agreement stating otherwise.
Referring to witness testimony, the Court stated that PW-5 had deposed that the defendant purchased the vehicle under a hire-purchase agreement and “failed to pay the installments after 23.06.2011,” and that the agreement with the plaintiff was executed during subsistence of the loan. The Court observed that the defendant “failed to rebut the evidence of PW-1 and PW-5” regarding outstanding dues.
On the legal effect, the Court recorded that “fraudulent object of an agreement is not lawful and thus the agreement is void,” and held that liability was imposed on the plaintiff on a premise that was factually incorrect. The Appellate Court’s reasoning was also noted, including the finding that during subsistence of the loan the defendant “could not have sold the vehicle to the 3rd party as she had no ownership or right over the vehicle and it is the finance company which is the owner.”
The Court further recorded that the defendant had admitted receipt of ₹4,90,000 and had not produced any proof of payment of ₹1,00,000 to the finance company. It was observed that “when the agreement was executed fraudulently, the question of part performance of contract does not arise at all.” On the standard of proof, the Court stated that the plaintiff had established entitlement “on pre-ponderance of probabilities.”
The Court ordered that “appeal stands dismissed as this appeal is devoid of merits. The order of the learned appellate court in Money Appeal No.1/2021 dated 23.12.2022 as well as the order of the learned trial court in Money Suit No.02/2014 dated 15.03.2021 is hereby upheld. Send back the original trial court records as well as the appellate court records to their respective courts.”
Advocates Representing the Parties
For the Appellant: Mr. M. H. Rajbarbhuiyan, Advocate
For the Respondents: Ms. R. Choudhury, Advocate
Case Title: Khurshida Ahmed v. Enuish Ali & Ors.
Neutral Citation: 2025: GAU-AS:16754
Case Number: RSA/52/2023
Bench: Justice Susmita Phukan Khaound
