P L D 1975 Karachi 385 (PLP)

Rustam J. E. Kaikobad for Defendant. Date of hearing : 7th May 1974. This suit has been brought by the plaintiff to recover from the defendant a sum of Rs 65,000 with costs and interest. The facts which form the background of the plaintiff's claim are these : On 12th June 1965, the defendant sold to the plaintiff, under an agreement Exh. 5/1, a new Bed Ford "Truck bearing No. J‑6 R.

1. A. 6431 for Rs. 66,000 only. The possession of the truck was handed over to the plaintiff, who paid a sum of Rs. 15,000 by way of advance towards the price of the truck and agreed to pay the balance of Rs. 51,00 by monthly instalments of Rs. 2,500., It is the admitted position that the plaintiff paid to the plaintiff Rs. 30,000 by way of these instalments, and the total payment made by the plaintiff to the defendant comes to Rs. 45,000 only. On 1st of August 1966, the truck, while it was in the possession of the defendant, met an accident at Sadiqabad. The evidence, which has come on record, shows that,. after this accident, the plaintiff abandoned the truck at the place where it met. the accident, and it was the defendant who, on or about 29th August 1966,. had the truck carried to Rawalpindi, where he had it repaired by P. W. 5,.. Gulzar Ahmad. The contention of the defendant is that he incurred au. expenditure of Rs. 20,000 and paid a further amount of Rs. 1,235 towards motor vehicle taxes and insurance premium. In all, the defendant says he spent Rs. 21,235 in this way. The truck remained in the defendant's possession who refused to part with it unless the plaintiff paid the balance of the instalments and the amount spent by the defendant on the repairs of the truck and in payment of taxes and insurance premium. There upon, three transporters intervened between the parties to bring about a settlement between them. These three persons are D. Ws. Baboo Sarfraz,. Pir Hamayun (Exh. 9) and D. W. Baboo Khurshid (Exh. 10). In evidence,. on commission, these three persons stated that an oral agreement was reached between the parties on the intervention of these persons, and, under this: agreement, it was agreed that, if the plaintiff paid to the defendant the balance of the instalments and the expenditure incurred by the defendant oft the repairs of the truck and in payment of taxes and insurance premium by November 1966, then the truck will be handed over to the plaintiff and, failing that, the defendant would have the right to retain the truck and forfeit the amount already paid by the plaintiff to the defendant towards the. price of the truck. It is the defendant's contention that the plaintiff failed to abide by the settlement, whereupon the defendant retained the truck and started running it on his own account. The plaintiff then brought a suit to recover Rs. 65,000 from the defendant on the allegation that he was the purchaser for value of the truck ; that, after the accident, the plaintiff himself carried out the repairs to the truck, but that, after completion of the repairs, the defendant wrongfully took possession of the truck and started running it on his own account. The claim of the plaintiff for Rs, 65,000 consists of two heads, that is, (i) Rs. 45,000 paid by the plaintiff to the defendant towards the price of the truck, and (ii) Rs. 20,000 which the plaintiff claimed to have spent on the repairs of the truck. The allegations of the plaintiff were denied by the defendant in his written statement, the defendant's contention being that the agreement, Exh. 5/1, was, in effect, a hire purchase agreement and the ownership of the truck throughout remained with the defendant ; that the plaintiff had abandoned the truck at the place where it met the accident, and it was the defendant who carried it to Rawalpindi and had it repaired at his own expense as stated above that the plaintiff had= failed to abide by the agreement, Exh. 5/1, and therefore, the defendant, in exercise of the right which he had under this agreement, took over the truck and forfeited the sum of Rs. 45,000 which the plaintiff had paid to him towards the price of the truck. On the pleadings between the parties, the following issues were settled by the Court on 5‑9‑1967: (1) is the suit beyond the territorial jurisdiction of this Court? (2) Did the defendant assure and promise the plaintiff not to enforce the instalment clause under the agreement Annexnre `A' and in fact waive such right by accepting accumulated instalments? (3) Which of the parties paid the charges for repairs, insurance and the taxes? (4) Did the defendant acquire the possession of the truck in suit as alleged by the plaintiff or as stated by the defendant in para. 6 of the written statement? If so, what is its effect? (5) Is the plaintiff entitled to any relief as claimed? On 12‑1‑1971, the case came before me in the presence of the learned Advocates of both the parties. The plaintiff examined himself. But no evidence was led before me by the defendant, presumably on the ground that the defendant thought that his case had been proved by the evidence on commission of D. Ws. Baboo Sarfraz (Exh. 8), Pir Hamayun (Exh. 9) and Baboo Khurshid (Exh. 10). On i6‑1‑1971, the learned Advocates for both the parties addressed their arguments and the case was reserved for judgment. It may here be stated that the defendant rested his whole case on the conten tion that the agreement, Exh. 5/1, was, in effect, a hire purchase agreement and the ownership of the truck throughout remained with the defendant. While writing the judgment, however, I noticed that their Lordships of the Supreme Court in their judgment in Shewrarn Das Agarwala v. Arobinda Podder (PLD1961SC321) had laid down an important test to determine whether a transac tion is in the nature of outright sale or of hire purchase agreement. The test laid down by their Lordships is that, where the hirer is not given under the agreement any right to terminate the contract, then such contract cannot be treated as a contract of hire purchase. The learned Advocate for the? defendant had, perhaps due to inadvertence, failed to take notice of this case, and therefore I considered it necessary to rehear the parties on the question whether the agreement, Exh. 5/1, was a hire purchase contract or a contract of outright sale of the truck and what would be the effect on the suit in either case. I also noticed that material evidence had not been led by either party to enable the Court to adjudicate the dispute between them. Therefore, the parties were required, by this order, to address the Court again and were also given opportunity to lead further evidence. On 25‑2‑1971, the plaintiff examined two more witnesses, namely, Abdul Ghani (Exh. 11) and Muhammad lahangir (Exh. 12). The defendant examined himself and his evidence is Exh. 14 and also D. W. Gulzar Ahmad. In addition, the plaintiff examined himself again and, in the course of his further examination, produced several documents, that is to say, documents purporting to be receipts of payments made by him for repairs of the truck. These docu ments are Exhs. 5/7/1 to 5/7/18. During this further examination, the plaintiff also produced the First Information Report (Exh 5/1), Insurance Company's letter (Exh. 5/3), Motor Vehicles Surveyor's recommendation (Exh. 5/A), estimate of repairs (Exh. 5/5) survey report of the damage to the truck carried out by a surveyor, Ahmad Hussain Hashmi (Exh. 5/6), certifi cates of insurance for the period 24‑5‑1966 to 23‑5‑1967 and the motor vehicle insurance policy with Pakistan General Insurance Company Limited for the said period (Exh. 5/9). The defendant also produced, in his examination on 25‑2m1971, receipts of payments made for repairs Exhs. 13/1/1 to 13/1/21, amounting to Rs. 17,714 and the account of the running of the truck (Exh. 13/2), registration certificate of the truck (Exh. 13/1), certificate of insurance showing payment of Rs. 987 and issued by Pakistan General Insurance Company Limited for the period from July 1966 to July 1967 and the receipt of Rs. 938 on account of premium paid by the defendant (Exh. 13/5). (2) At the hearing on 6‑5‑1974, the defendant's learned Advocate, Mr. Rustam J. E. Kaikobad, dropped Issue No. 1 and, likewise, the plaintiff's learned Advocate, Diwan Bashir Ahmad, dropped Issue No.

2. Therefore, only Issues 3, 4 and 5 remain to be decided by the Court, though I may add that these issues do not fully reflect the actual controversy between the parties, with which controversy I would have occasion to deal with later in the course of this judgment. (3) Issue No. 3 is as to which of the parties, that is, the plaintiff or the defendant, bad paid the charges for repairs of the truck and insurance premium and the motor vehicle taxes. The plaintiff's contention is that it is he who incurred these charges. However, I do not find myself in a position to place any reliance on the plaintiff's words. In his evidence, the plaintiff has not given the name of the person who carried out the repairs. Nor has he examined this person either in Court or on commission, though he did admit that the repairs were done at Rawalpindi. In his evidence recorded on 12th January 1971, the plaintiff admitted that he had not filed any papers in Court to prove that be spent Rs. 20,000 on the repairs of the truck. As a matter of fact, up to 25‑2‑1971, when fresh evidence was recorded, the plaintiff did not file any documents at all to show that he carried out the repairs or that the amount of expense were incurred by him in this connection. It was only in the course of his further examination on 25‑2‑1971 that he filed some receipts of payments alleged. to relate to repairs, which were brought on record as Exhs. 5/7/1 to 5/7/18. But by whom these repairs were carried out, the plaintiff was unable to say anything in Court. Even the very genuineness of these documents is not free from suspicion. The plaintiff's case throughout had been that it was he who had carried out the repairs. But he did not care to file documentary evidence right up to 25‑2‑1971, when his further evidence was recorded. I am, therefore, not prepared to believe the plaintiff that it was he who carried out the repairs, particularly when the plaintiff even failed to prove that he had the truck carried to Rawalpindi for repairs and even to give a reasonable explanation as to why he allowed the truck to remain for nearly a month at the plate where the accident occurred. On the other band, the defendant had even before the commencement of evidence, and within the time allowed by the Court, filed documents, that is, Exhs. 13/1 to 13/21, showing the amount of expenditure incurred by him in carrying out repairs to the truck. Further, the defendant also examined in Court D. W. Gulzar Ahmad, the mechanic who carried out the repairs, and this witness clearly stated that the repairs were carried out on the instructions of the defendant and the payments also in this connection were made by the defendant himself. Further, the plaintiff also failed to prove that he paid motor vehicle taxes or the insurance premium for the truck for the period during which it was under repairs. On the other hand, the defendant has proved, by documentary evidence Exhs. 13/3 to 13/5, the payment of motor vehicle taxes and insurance premium by him. I, therefore, hold under this issue that it was the defendant who paid the repairs charges in the sum of Rs. 17,714 and the insurance premium and motor vehicle taxes in the sum of Rs. 1925 the total amount paid by the defendant coming to Rs. 19,639. (4) Under Issue No. 4, the main controversy between the parties, though not properly reflected in the language of this issue, is whether the defendant took over possession of the truck wrongfully or in pursuance of a hire purchase agreement or otherwise in pursuance of the rights conferred on him under Exh. 5/

1. The defendant's case was that Exh. 5/ 1 was in effect an agreement of hire‑purchase. But I have perused the whole agreement and no power has been reserved therein, to the hirer, namely, the plaintiff, to termi nate the contract of hire‑purchase. Therefore, according to the test laid down by their Lordships of the Supreme Court to Shewram Das Agarwala v. Arobinda Podder this agreement cannot be treated as one of hire purchase, but as a sale of truck by the defendant to the plaintiff with certain rights reserved to the defendant pending full payment of the instalments. Now, this agreement is ether in the nature of a contract of sale or an agreement to sell the truck. In either case, the possession of the truck was given by the defendant to the plaintiff. Under this agreement Rs. 15,000 were paid as advance towards the price of the truck and the balance of Rs 51,000 was agreed to be paid by monthly instalments of Rs. 2,

500. It is the admitted position that the plaintiff in all paid to the defendant Rs. 45,000, leaving a balance of Rs. 21,000 still to be paid to the defendant. Clause (2) of the agreement provides that, on payment of the full price, the plaintiff would become absolute owner of the truck. Under clause (1), two provisions were made, that is, (i) that if the plaintiff failed to make payment of the instalments, the defendant would be entitled to take back the possession of the truck, and (ii) to forfeit all the payments which 8 might have been made by the plaintiff to the defendant. Under this second provision it was contended on behalf of the defendant that the whole amount of Rs. 45,000 had been forfeited by the defendant. But, in my opinion, this provision is in the nature of a penalty clause and is unenforceable in view of the decisions of their Lordships of the Supreme Court to The Province of West Pakistan v. Messrs Mistri Patel & Co. (PLD 1969 S C 80) and Syed Sibte Raza and another v. Habib Bank Ltd. (PLD1971 SC743). The d:fendant is, therefore, not entitled to forfeit the amounts paid to him by the plaintiff towards the price of the truck. As regards the first provision, whereby the defendant was entitled to take back the possession of the truck in the event of the plaintiff's failure to pay the instalments, I am of the view that this provision, read with the other clauses of the agreement, created a kind of hypothecation of the truck in favour of the defendant. In other words, so long as the full price of the truck remained unpaid, the defendant had a charge on the truck, particularly in view of the fact that until then the truck was required to remain in the name of the defendant himself. This being the position, that is, the defendant being a hypothecatee of the truck, he was entitled to take over the possession of the truck for non‑payment of the remaining price, particularly in view of the fact that the evidence shows that, after the accident, the plaintiff abandoned the truck at the place where the accident had occurred. Under Issue No. 4, therefore, I hold that the defendant took over possession of the truck in pursuance of the rights reserved to him under the agreement Exh. 5/1 as hypothecatee. (5) Under Issue No. 5., the question is whether the plaintiff is entitled to any relief. Now, the agreement Exh. 5/1, under which the truck in question was delivered by the defendant to the plaintiff is dated 12‑6‑1965. The accident occurred on 1‑8‑1966, more or less after one year of the delivery of the truck by the defendant to the plaintiff. The depreciated value of the truck would, therefore, under Income‑tax Rules published on 27th March 1962, be less by twenty‑five per cent., that is, on the date of the accident, the value of the truck would be Rs. 49,

500. In other words, the depreciation allowed under the Income‑tax Rules would come to Rs. 16.500 and the depreciated value would be Rs. 49,

500. The defendant received Rs. 45,000 from the plaintiff, leaving a balance of Rs. 21,

000. It is conceded by both the parties that the defendant bad earned a profit of Rs. 20.000, according to the accounts filed by him in this Court, from the running of the truck. This amount may be adjusted against the cost of repairs and motor vehicle taxes and insurance _premium. The plaintiff vehemently contended that the defendant had sold the truck for Rs. 20,000 according to the affidavit of one Muhammad Niaz filed on 26‑2‑1967. This affidavit has not been brought on record as au exhibit. Nor has Muhammad Niaz been examined in Court by the plaintiff. However, even if I accept the statements contained in this affidavit to be true, the,, after deducting the amount of Rs. 20,000 from the balance of Rs. 21,000 mentioned above, the plaintiff would still be owing a sum of Rs. 1,000 to the defendant. Here I must take note of two points in this case. Firstly, the plaintiff has not made any efforts to prove the market value of the truck after repairs and, secondly, it has been the defendant's case that the truck was taken over by the Military Authorities during the war in December 1971 and has not been returned to him. the above calculations are according to the contentions of the plaintiff, and as I have shown, if these calculations are accepted, the plaintiff would still be owing Rs. 1,000 to the defendant. However, the proper approach in this case would be to determine the value of the plaintiff's interest in the truck before the accident. The value of this interest is Rs. 45,000 which is the amount paid by the plaintiff to the defendant towards the price of the truck. The accident admittedly happened when the truck was in the possession of the plaintiff, and he should, therefore, take responsibility therefor and also for its repairs and since the plaintiff used the truck and earned a profit therefrom in the sum of Rs. 30,000 or Rs. 20,000 (these being the conflicting versions of the plaintiff himself), the depreciation also should be deducted from this value. The depreciation, as mentioned above, comes to Rs. 16,500 according to the Income‑tax Rules referred to above and the cost of repairs, motor vehicle taxes and the insurance premium paid by the defendant come to Rs. 19,

639. The total amount of depreciation and the amount of these costs etc. come to Rs. 36,

139. This amount, when deducted from the value of the plaintiff's interest in the truck in the sum of Rs. 45,000 would leave a balance of Rs. 8,

861. At best, the plaintiff can claim from the defendant only this much amount, though I would reiterate that according to the Plaintiff's own approach in this connection, he would still be owing Rs. 1,000 to the defendant. However, I would not take into consideration the approach adopted by the plaintiff himself and would adopt the alternative method, that is. to deduct from the value of the plaintiff's interest in the truck, that is, Rs. 45,000, the total of Rs. 36,139 no account of depreciation of the truck for one year and costs of repairs etc. Accordingly, I hold that the plaintiff m entitled to a decree of Rs. 8,861 with proportionate costs and interest and six per cent. per annum from the date of the snit until payment and accordingly a decree in these terms is given to the plaintiff K. B. A. Suit decreed.