Wednesday, November 29, 2023

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CASE LAWSCONTRACTLEGAL AFFAIRS

PRIVITY OF CONTRACT

Tata Motors Ltd v Anonio Paulo Vaz and Another, SC 2021

FACTS – Vaz approached the dealer to purchase a car; he was informed about the availability.Thereafter, he appears to have been told to have the car registered (after payment of the consideration), which he did. The vehicle delivery note and invoice (issued to Vaz) are both dated 25.1.2011. Then, he discovered in the showroom, that the car was old, a 2009 model and that it had many features (corrugated undercarriage, scratches,etc.) clearly pointing to its being used and old. The vehicle registration document, hypothecation, invoice and gate pass issued, as well as the vehicle delivery document,all show that the car was of 2009 make. Vaz refused to take delivery, and insisted upon delivery of a new car. The dealer refused. The matter stood thus. On 08.02.2011,Vaz wrote a letter to the dealer. In this, he claimed that the vehicle was old, and levelled allegations about it being used and certain features noticed by him, which caused him to refuse to take delivery. On 18.02.2011, the dealer denied Vazโ€™s legal notice and stated that no representation was ever made, that the vehicle was not of 2009 make and that replacement was out of the question. Upon no further response, Vaz caused a legal notice to be issued on 11.11.2011. The consumer complaint was filed on his behalf, on 14.12.2011.

Before the district forum, the dealer and the appellant were served with notices; the former never appeared and went unrepresented; it was therefore set down ex- parte. The appellant entered appearance, contested its liability and alleged that its relationship with the dealer was not one of agent principal, but rather, principal to principal and that it could not be held liable. The dealership agreement in this case, dated 31.07.2008 as observed earlier, was not produced before the fora below. However, it was produced with an application after seeking this courtโ€™s leave in that regard. The district forum determined ‘deficiency in service’ and held the dealer and the appellant (i.e. manufacturer of the car) to be jointly and severally liable.

Aggrieved, the manufacturer preferred an appeal to the State Commission under Section 15 of the Consumer Protection Act (hereafter โ€œthe Actโ€). The state commission dismissed the appeal with costs of 5,000/-. It held that Vaz was a โ‚นconsumer as defined under Section 2 (d) (i) of the Act; and that he was awaiting delivery of the car.

Before the National Commission, the appellant urged two contentions: one that Vaz was not a โ€œconsumerโ€ since he did not accept delivery of the car from the dealer,and two that its relationship with the dealer was on principal-to-principal basis and that therefore, no liability could be fastened upon it. The impugned order negatived both arguments.

CAUSE – the National Commission held that the relationship of the dealer and the appellant in the facts appearing from the record, did not absolve it of
liability.

ARGUMENTS – The appellant contested the findings in the impugned order, and mainly focused its submissions on the conclusions drawn by the National Commission regarding the absence of a principal-to-principal relationship. It was highlighted that besides impleading the appellant and seeking relief, no allegations against it were made in the complaint by Vaz before the District Forum. The appellant highlighted that the entire drift of the complaint was that the 2009 make car manufactured by it, which had been sold by the dealer, was an old one, and that Vaz was misled into agreeing to purchase it, without being aware of the model, or that the particular car had already been used. The appellant therefore, urged that there was neither averment, nor allegation by Vaz, on the basis of which any liability could be pinned upon it, a third party to the entire transaction, merely because it was the manufacturer. It was submitted that the complainant never alleged or proved that any one of its employees was privy to the transaction in question, or had led Vaz to purchase the car in question from the dealer.It was urged that unless Vaz, the complainant, could establish that there was a defect in the product, i.e. the car, the manufacturer could not be fastened with liability.Stressing that the manufacturer had no relationship with the consumer, i.e. Vaz, it was urged further that neither was any special knowledge on the part of the appellant attributed to it, nor proved during the proceedings, nor was in any fact a word in any of the pleadings in this regard.

Refuting the appellantโ€™s arguments, it is urged on behalf of Vaz that the impugned order has no error calling for interference, and that this Court should not exercise its discretion to upset the findings conferred by it in exercise of its powers under Article 136 of the Constitution of India. It is reiterated that the consumer, i.e.,Vaz was informed at the time of the vehicleโ€™s booking that it was fitted in accordance with the specifications required by him. At that time, he was never informed that the vehicle (the car) in question had been used and had been manufactured in 2009 and,was therefore old. After registering the vehicle, the complainant returned to the showroom and then discovered that the car had several defects, including that the undercarriage was fully corrugated and the body had several scratch marks. These Flaws were immediately pointed out to the dealer; the dealer was also requested to replace the vehicle. However, they refused to do that.

Learned counsel submitted that arguendo, even if the dealership agreement were to be taken into account, it is apparent that the commercial relationship between the appellant and its dealer remains that of a principal and agent. It is urged that nomenclature apart, three factors portray the relationship between the two parties.Firstly, customers cannot purchase vehicles manufactured by the appellant directly and have to purchase them through an authorised dealer like the one in the present case. Secondly, the dealer exclusively sells cars manufactured by the appellant in the designated territories. Its sales policy, pricing etc. are entirely dictated by the appellant and consideration paid towards the product/car is remitted to the appellant by the dealer.

ISSUE – Whether the manufacturer had a relationship with the consumer or not?

DECISION – The record establishes the absolute dearth of pleadings by the complainant with regard to the appellantโ€™s role, or special knowledge about the two disputed issues, i.e. that the dealer had represented that the car was new, and in fact sold an old, used one, or that the undercarriage appeared to be worn out. This, in the opinion of this court, was fatal to the complaint. No doubt, the absence of the dealer or any explanation on its part, resulted in a finding of deficiency on its part, because the car was in its possession, was a 2009 model and sold in 2011. The findings against the dealer were, in that sense, justified on demurrer. However, the findings against the appellant, the manufacturer, which had not sold the car to Vaz, and was not shown to have made the representations in question, were not justified. The failure of the complainant to plead or prove the manufacturerโ€™s liability could not have been improved upon, through inferential findings, as it were, which the district, state and National Commission rendered.

Clearly, the dealer, in the facts of that case, acknowledged the defects in the car. In the present case, the dealer did not acknowledge any such deficiency; furthermore, the car had been made over to the dealer on 28.02.2009 (as is evident from an invoice issued to the dealer, a copy of which is on the record). Therefore, it is difficult to expect the appellant, a manufacturer, to be aware of the physical condition of the car, two years after its delivery to the dealer. During that period, a number of eventualities could have occurred; the dealer may have allowed people to use the car for the distance it is alleged to have covered. Also, the use of the car and prolonged idleness without proper upkeep could have resulted in the undercarriage being corrugated. All these are real possibilities. Unless the manufacturerโ€™s knowledge is proved, a decision fastening liability upon the manufacturer would be untenable,given that its relationship with the dealer, in the facts of this case, were on principal-to-principal basis.

For all the above reasons, the findings of the National Commission and the lower forums against the appellant are set aside.

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