'Registered Owner Refuses To Surrender RC Or Absconds' Not Mandatory Conditions To Exercise Power U/S 51(5) Motor Vehicle Act: Allahabad High Court

The Allahabad High Court has held that refusal of registered owner to surrender registration certificate or his abscondance are not mandatory conditions to exercise power under Section 51 (5) of the Motor Vehicle Act, 1988 to cancel and issue fresh certificate of registration.

A bench comprising of Justices Manoj Kumar Gupta and Manish Kumar Nigam observed,

“The main ingredient for exercise of power under sub section (5) of Section 51 is the establishment of the fact that the registered owner had purchased vehicle by taking finance and had defaulted in repayment of the amount in terms of the said agreement. The other necessary ingredient is that the financier has taken possession of the vehicle from the registered owner. All these ingredients are fully established in the instant case. The stipulation regarding refusal on part of registered owner to hand over certificate of registration or that he had absconded is not sine qua non for exercise of the power. It only indicates that notwithstanding the aforesaid two contingencies, the registering authority still has power to cancel the certificate and issue a fresh certificate of registration in the name of person with whom the registered owner had entered into the agreement of finance.”

In this case, the Petitioner took financial assistance from Respondent for purchasing a truck and on account of default in repayment by the Petitioner, Respondent proceeded to possess the vehicle.

Respondent filed Form-36 (Application for issue of a Fresh Certificate of Registration in the name of Financier) before the concerned RTO to issue fresh Registration Certificate (RC) in its name. Due to inordinate delay, a writ petition was filed before the High Court for directing the RTO to take a decision on Form-36 filed by the Respondent herein.

Thereafter, Form 37 (Notice to the Registered Owner of the motor vehicle to surrender the Certificate of Registration for cancellation and issue of fresh Registration Certificate in the name of Financier) was issued to the Petitioner inviting objections to transfer of RC in favour of the Respondent.

In response to the objections, Respondent stated that the Petitioner had defaulted in payments to be made despite notices being served upon it. On being satisfied that Petitioner had taken financial assistance for purchasing the vehicle and possession of the vehicle was taken owing to default on part of the registered owner in repaying the loan in terms of the agreement, Assistant RTO (Administration) directed grant of fresh RC in favour of Respondent, in exercise of power under Section 51(5) of the Act.

Petitioner challenged this by stating that Section 51(5) of the Act could be invoked only in case the registered owner refuses to deliver the certificate of registration or has absconded. It was submitted that the original RC was lying in the vehicle at the time its possession was taken by Respondent and therefore, it was not a case of refusal to deliver the RC.

The Court held that the financer becomes entitled to a fresh certificate of registration in his name when the registered owner fails to make good the loan. Such is the scheme of the Act and Rules thereunder, as reflected in Section 51(5) read with Rule 61(2) and 61(3).

Court held it is mandatory for the registered owner to surrender the RC so as to enable the issuance of fresh RC in the name of the financer. In case the registered owner does not surrender RC or absconds, he is put to notice vide Form-37. The non-obstante clause empowers the RTO to issue new RC to the financier notwithstanding the fact that the original RC has been withheld by the registered owner or he has absconded.

Since the petitioner was unable to answer the Court with respect to the loan amount and repayment thereof, the writ petition was dismissed.

Case Title: Shahrukh Saleem. vs. State of UP and 2 others [Writ A No. 10418 of 2023]

Case Citation: 2023 LiveLaw (AB) 209

Counsel For Petitioner: Virendar Jaiswal

Counsel For Respondents: C.S.C.

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