NCDRC Orders Ashok Leyland's Dealer To Pay Rs 50k For Unauthorized Transfer Of Vehicle To Financer Without Buyer's Consent

Brief Facts:

The case stemmed from defects in the truck purchased by Sunil Kumar on 9th June 2016 from Shimla Auto Zone for self-employment and livelihood purposes. After a defect occurred on 11th August 2016, Sunil Kumar reported it to the dealer, who repaired the vehicle and returned it. However, on 22nd November 2016, when the truck had covered 16,781 km, another defect occurred, and the engine, including the accelerator, malfunctioned. Sunil Kumar reported it again, but Shimla Auto Zone failed to fix the issue, and the vehicle has remained in their workshop since then.

Sunil Kumar filed a complaint in the District Commission, Kangra, Himachal Pradesh (“District Commission) against Ashok Leyland, the manufacturer of the truck and Shimla Auto Zone, the authorized dealer alleging them jointly liable. Consequently, he sought either a replacement or a refund of the vehicle's purchase price. The District Commission partly allowed the complaint, directing Shimla Auto Zone to hand over the vehicle to Sunil Kumar after rectifying the defects at no cost. If they failed to do so, Shimla Auto Zone was required to pay the Insured Declared Value (“IDV”) of the vehicle as per the insurance policy, along with interest at 9% per annum from the date of the complaint till realization. In simple words, IDV is the maximum sum insured fixed by the insurer which is provided on theft or total loss of the insured vehicle.

Shimla Auto Zone challenged this order before the State Consumer Disputes Redressal Commission, Himachal Pradesh (“State Commission”), which partially allowed the appeal, setting aside the IDV payment order to Sunil Kumar. Sunil Kumar then approached the National Consumer Disputes Redressal Commission (“NCDRC”), arguing that the dealer i.e., Shimla Auto Zone was legally obligated to pay the entire IDV mentioned in the insurance policy, as the insurance company had assessed it and there was no contract between him and the repairer regarding the IDV.

Sunil Kumar's argument was that the vehicle was wrongfully handed over to the financer, ‘Hinduja Leyland Finance’ by Shimla Auto Zone. Shimla Auto Zone countered his submissions by stating that the vehicle had already covered a considerable distance, making it unlikely to have manufacturing defects. The State Commission's interpretation of the IDV payment was disputed, with Sunil Kumar claiming that Shimla Auto Zone should be held liable for it. Ashok Leyland, the manufacture, argued that they were not responsible for Shimla Auto Zone's actions.

Observations of the Commission:

After carefully considering the arguments presented by both parties, the NCDRC agreed with the District Commission's decision to direct Shimla Auto Zone to either repair the vehicle's engine by replacing defective parts free of cost or pay the Insured Declared Value (IDV) as per the insurance policy, along with 9% per annum interest from the date of the complaint until the date of realization. The NCDRC clarified that the IDV was a method used by the District Commission to assess the depreciated value of the car as of either the date of their order or the date of the last policy taken by the Petitioner, rejecting the State Commission's notion that the IDV should be paid by the insurance policy and not by Shimla Auto Zone, the dealer/repairer.

Furthermore, the NCDRC upheld the State Commission's findings that Shimla Auto Zone was responsible for wrongfully allowing the vehicle to be taken by the financer, namely Hinduja Leyland Finance, without Sunil Kumar’s consent. However, the NCDRC absolved the manufacturer, Ashok Leyland, of liability for this wrongful action, citing the principal-to-principal relationship between the manufacturer and dealer.

NCDRC upheld the District Commission's order with modifications. Shimla Auto Zone was ordered to pay the depreciated value as of 22.11.2016 with 9% interest from the complaint date, along with an additional compensation of Rs. 50,000 for wrongfully transferring the vehicle to the financer and Rs. 5,000 as litigation cost.

Case: Sunil Kumar vs M/S. Shimlaauto Zone & Anr

Case No.: Revision Petition No. 128 Of 2021

Advocate for the Complainant: Mr. Aditya Dhawan, Advocate and Mr. Kiran Dhawan, Advocate

Advocate for the Respondent: Mr. Arjun Jain, Advocate For R-1 and Mr. Vijay Valsan, Advocate For R-2

Click Here To Read/Download Order