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theft

Theft is defined in a. 378 of the Indian Penal Code as follows:


" Whoever, intending to take dishonestly any movable property out of the possession of any' person without that person's consent, moves that property in order to such taking, is said to commit theft. "


Commission of theft, therefore, consists in (1) moving a movable property of a person out of his possession without his consent, (2) the moving being in order to the taking of the property with a dishonest intention. Thus, (1) the absence - of the person's consent at the time of moving, and (2) the presence of dishonest intention in so taking and at the time, are the essential ingredients of the offence of theft.



Since the definition of theft requires that the moving of the property is to be in order to such taking, " such " meaning " intending to take dishonestly ", the very moving out must be with the dishonest intention. It is accordingly necessary to consider what " dishonest " intention consists of under the Indian Penal Code. Section 24 of the Code says that " whoever does anything with the intention of causing wrongful gain to one person or wrongful loss to another person is said to do that thing dishonestly". Section 23 of the Code says as follows: "Wrongful gain' is gain by unlawful means of property to which the person gaining is not legally entitled. 'Wrongful loss' is the loss by unlawful means of property to which the person losing it is legally entitled. A person is said to gain wrongfully when such person retains wrongfully, as well as when such person acquires wrongfully. A person is said to lose wrongfully when such person is wrongfully kept out of any property, as well as when such person is wrongfully deprived of property. "

Taking these two definitions together, a person can be said to have dishonest intention if in taking the property it is his intention to cause gain, by unlawful means, of the property to which the person so gaining is not legally entitled or to cause loss, by wrongful means, of property to which the person so losing is legally entitled.

It is further clear from the definition that the gain or loss contemplated need not be a total acquisition or a total deprivation but it is enough if it is a temporary retention of property by the person wrongfully gaining or a temporary " keeping out " of property from the person legally entitled. This is clearly brought out in illustration (1) to s. 378 of the Indian Penal Code and is uniformly recognised by various decisions of the High Courts which point out that in this respect " theft " under the Indian Penal Code differs from " larceny " in English law which contemplated permanent gain or loss.



Supreme Court of India

K. N. Mehra vs The State Of Rajasthan on 11 February, 1957


P and the appellant were cadets on training in the Indian Air Force Academy, jodhpur, but P had been discharged on the ground of misconduct, and on the day of the incident the appellant was due for a local flight in a Dakota as part of his training as a Navigator. With the help of P, who knew flying, he took off another type of aircraft, Harvard H.T. 822, without authorisation, and on the same day they force-landed at a place in Pakistan. Some days later they

contacted the authorities in the Indian High Commission and on their way to India they were arrested at jodhpur and prosecuted for the theft of the aircraft. It was contended

for the appellant that as a cadet under training he was entitled to take an aircraft on flight and therefore there was an implied consent to the "moving" of the aircraft within the meaning of s. 378 of the Indian Penal Code, and consequently there could be no dishonest intention, much less such an intention at the time when the flight was started, so as to constitute theft. It was found that the purpose for which the flight was undertaken was to go to Pakistan with a view to seeking employment there.


Supreme court held - "This is not a case where a person -in the position of the appellant started on an authorised flight and exploited it for a dishonest purpose in the course thereof. In such a case, inference of initial dishonest intention may be difficult. The question, however, is whether the wrongful gain and the wrongful loss were intentional. It is urged that the well-known distinction which the Penal Code -makes, in various places, between intention to cause a particular result and the knowledge of likelihood of causing a particular result has not been appreciated. It is also suggested that the decided cases have pointed out that the maxim -that every person must be taken to intend the natural consequence of his acts, is a legal fiction which is not recognised for penal consequences in the Indian Penal Code. Now whatever may be said about these distinctions in an appropriate case, there is no scope for any doubt in this case, that though the ultimate purpose of the flight was to go to Pakistan, the use of the aircraft for that purpose and the unauthorised and hence unlawful gain of that use to the appellant and the consequent loss to the Government of its legitimate use, can only be considered intentional. This is not by virtue of any presumption but as a legitimate inference from the facts and circumstances of the case. We are, therefore, satisfied that the facts proved constitute theft. The conviction of the appel. lant under s. 379 of the Indian Penal Code is, in our opinion, right and there is no reason to interfere with the same. Result - Appeal dismissed.



Supreme Court of India

Pyare Lal Bhargava vs State Of Rajasthan on 22 October, 1962

The appellant was convicted under s. 379 of the Indian Penal Code. He was a Superintendent in the Chief Engineer's office and got a file removed from the Secretariat through a clerk, took it home and made it available to his friend, the co-accused, who removed certain documents by substituting others. The appellant returned the file to the office that next day. He made a confession when the Chief Engineer threatened that if he did not disclose the truth the matter

would be placed in the hands of the Police. That confession was later retracted.The three courts below were of the opinion that the statement of the Chief Engineer did not amount to a threat in the circumstances of the case.


Apex Court held " . We cannot agree that the appellant was in session of the file. The file was in the Secretariat of the Department concerned, which was in charge of the Chief Engineer. The appellant was only one of the officers working in that, department and it cannot, therefore, be said that he was in legal possession of the file. Nor can we accept the argument that on the assumption that the Chief Engineer was in possession of the said file, the accused had not taken it out of his possession. To commit theft one need not take movable property permanently out of the possession of another with the intention not to return it to him. It would satisfy the definition if he took any movable property out of the possession of another person though he intended to return it later on. We cannot also agree with learned counsel that there is no wrongful loss in the present case.


Wrongful loss is loss by unlawful means of property to which the person losing it is legally entitled. It cannot be disputed that the appellant unauthorisedly took the file from the office and handed it over to Ram Kumar Ram. He had, therefore, unlawfully taken the file from the department, and for a short time he deprived the Engineering Department of the possession of the said file. The loss need not be caused by a permanent deprivation of property but may be caused even by temporary dispossession, though the per-son taking it intended to restore it sooner or later. A temporary period of deprivation or dispossession of the property of another causes loss to the other. That a person- will act dishonestly if he temporarily dispossesses another of his property is made clear by illustrations (b) and (1) of s.378 of the Indian penal code.

It will be seen from the said illustrations that a temporary removal of a dog which might ultimately be returned to the owner or the temporary taking of an article with a view to return it after receiving some reward constitutes theft, indicating thereby that temporary deprivation of another person of his property causes wrongful loss to him. "

Result - Appeal dismissed.




Supreme Court of India

State Of Maharashtra vs Vishwanath Tukuram Umale & Ors on 2 August, 1979


It must be appreciated that the allegation against accused 1, 2, S and the absconding accused was that they had removed the seven tyres from the Down Yard at Bhusawal railway station by breaking open the wagon. That was in fact the reason why they were charged for the commission of offences under section 379, 461 and 411 I.P.C. It is however an essential ingredient of the offence of "theft" that the movable property which was the subject matter of the theft should have been "moved" out of the possession of any person without his consent. As is obvious, that could be possible only if the person moving the property had taken it out of the possession of the person concerned and transferred it to his own possession in order to move it for the purpose of taking it dishonestly. It follows that transfer of possession of the property, however transient, is an essential ingredient of an offence of theft. Result - "the appeal is allowed, the impugned judgment of the High Court dated November 30, 1972, is set aside, and the trial court is directed to frame a charge under section 3 of the Act against accused 1, 2, 5 and the absconding accused in addition to the charge under sections 379/34 and 461/34 I.P.C"


Supreme Court of India

Gulzar vs State Of M.P on 4 January, 2007


Background facts in a nutshell are as follows:

Complainant Vinod Kumar Aggrawal lodged report at the Police Post Bakaner on 25.12.1992 at about 7.30 p.m. that he had come to Manawar, Bakaner, Singhana, Gandhwani for recovery of due money from the merchants of the tea leaves supplied by him. In the morning, he had received money from Sugam Kirana and Gani Mohammad etc. in Bakaner and after recovery of money from Singhana Gandhwani had come to Manawar and also recovered the money from the parties in Manawar and took seat in the Manawar - Dhamnod Bakshi Bus at 6.30 p.m. in the evening. He had kept one attache containing Rs.50-60 thousands of all denominations inside by his side. On arrival at Bakaner, he went to meet Kailash Rathore for five minutes. When he returned back he did not find his attache. Someone had stolen about Rs.50-60 thousand alongwith the attache. Two receipt books in the name of the shop Atul & Shyam, tea leaves sample, one diary and one blue colour muffler were also lying in the said attache. On the basis of this report of the complainant, an FIR bearing No. 8/60 was registered with Police Post Bakaner and thereafter the Main Crime No. 717/92 was registered with the Police Station Manawar and investigation was started. On completion of investigation, charge sheet was submitted against the accused in the Court.


Supreme Court held - "We find that the evidence of PW 9 is clear and cogent. He had identified the attache which was recovered from the possession of the accused. Explanation was offered about the source of money and the same was found to be wholly unacceptable. The source of the sum of about Rs.55,000/-, the possession of which was established was not explained.

We do not find any infirmity in the conclusion arrived at by the courts below in analyzing the evidence to fasten the guilt on the accused." (However , matter was remitted back to High Court to consider if whether benefit of section 360 Cr.PC or Probations of offenders Act can be given)




REMEMBER , TAKING WITHOUT DISHONEST INTENTION IS NOT THEFT :

Thus In Rameshwar Singh (1936) 12 Luck 92 - where a respectable person just pinches the cycle of another person as his own cycle was missing and brings it back , the important element of criminal intention is completely missing and he did not intend to cause wrongful gain to himself or wrongful loss to the owner. It was held that accused did not committed theft.



Supreme Court of India

Ram Ratan Alias Ratan Ahir And ... vs The State Of Bihar And Another on 22 September, 1964


Till the property is moved, no offence of theft can be committed even if the alleged offender had intended to take dishonestly the property out of the possession of any other person without his consent. Mere seizure of cattle found trespassing on land does not amount to moving the cattle. The act of moving the cattle would be subsequent to seizing them. A person is said to do a thing dishonestly when' he does anything with the intention of causing wrongful gain to one person or wrongful loss to another person. In the case of illegal seizures and impounding of cattle, the person seizing the cattle does not gain anything. He simply takes the cattle to the pound. He does not use them for his purpose. He, in fact, exercises no greater dominion over those cattle than that of being in their custody on their journey to the pound. It is said that it causes wrongful loss to the owner of the cattle inasmuch as he keeps the owner out of possession of the cattle as he was wrongfully deprived; of the property for the time being, it being not necessary that the deprivation of property be of a permanent character. We do not think that in such circumstances, the owner of the cattle can be said to be deprived of his property. The person seizing the cattle can act in either of these three ways. He can keep, them himself. This may, in certain circumstances, make him guilty of theft. He can let them loose after taking them out of the field. This action will not remove the danger of the cattle trespassing again on the land. He can take them to the pound. When a person seizes cattle on the ground that they were trespassing on his land and causing damage to his crop or produce and gives out that he was taking them to the pound, he commits no offence of theft however mistaken he may be about his right to that land or crop.


THEFT OF ORIGINAL FOR PHOTOCOPIES : -

Supreme Court of India

Birla Corporation Ltd. vs Adventz Investments And Holdings ... on 9 May, 2019


“Temporary removal of original documents for the purpose of replicating the information contained in them in some other medium would thus fulfill the requirement of “moving” of property which is the of the offence of theft as defined under Section 378 (theft) of the Indian Penal Code, . To commit theft, one need not take movable property permanently out of the possession of another with the intention not to return it to him. It would satisfy the definition if he took any movable property out of the possession of another person though he intended to return it later on.The loss need not be caused by a permanent deprivation of property but may be caused even by temporary dispossession, though the person taking it intended to restore it sooner or later."



CASES OF ACADEMIC IMPORTANCE :-

Calcutta High Court

E.J. Judah And Ors. vs Emperor on 10 July, 1925

The case for the prosecution is that the accused No. 1 gave a kettle for repairs to the complainant who has an electric repair-shop at 7/1, Middleton Street, 11 or 12 days before the occurrence (as stated by the complainant) or on the 28th March as stated by the accused in the petition filed in this Court. The complainant promised to finish the repairs within 6 or 7 days. On the 18th April the accused went to the shop and demanded return of the kettle. The complainant refused to part with it as the repairs were not complete and ultimately agreed to return it to the accused if he was paid Rs. 5 for the repairs already done the amount fixed for the repair of the kettle was Rs. 6. The accused refused to pay the amount, took away the kettle from the almirah and walked out with it. He was accompanied by the other accused and all of them were tried and found guilty by trial court.


Court held - Dishonest intention was lacking in the case and quashed the conviction and gave an illustration :

"If I give a piece of cloth to a tailor to make a coat and he sends only a sleeve but does not do the rest of the work within the time stipulated or within a reasonable time, I have no right, according to the view urged on behalf of the Crown, to take back the cloth until I have paid for the work done. In the present case the complainant failed to perform his part of the contract, namely to do the work within 6 or 7 days and the accused was justified in asking for a return of the article if the work was not done within a reasonable time. A man may require to have this household article repaired with as little delay as possible. According to the accused it was retained by the complainant for 20 days and according to the complainant for 11 or 12 days. Conceding that the accused acted improperly in demanding and taking back the article, they have not certainly acted dishonestly. Their intention was not to cause wrongful loss to complainant or wrongful gain to themselves but to recover their thing after lapse of reasonable time. In my opinion the conviction cannot stand."


Supreme Court of India

Harmanpreet Singh Ahluwalia & Ors vs State Of Punjab & Ors on 5 May, 2009

movable property when they are in joint possession of husband and wife ,then no offence of theft would be made out (unless dishonest intention is clearly established , remember husband can be convicted of theft of stridhan if ingredients of offence are made out , similarly if wife steals property of husband and dishonest intention is proved , then she will also be liable for theft.).




THEFT AND BONAFIDE CLAIM :


Supreme Court of India

Suvvari Sanyasi Apparao And Anr vs Boddepalli Lakshminarayana ... on 5 October, 1961

"It is settled law that where a bona fide claim of right exists, it can be a good defence to a prosecution for theft. An act does not amount to theft, Unless there be not only no legal right but no appearance or colour of a legal right."

By the expression "colour of a legal right" is meant not a false pretence but a fair pretence, not a complete absence of claim but a bona fide claim, however weak. Apex Court observed in the same case that the law was stated in 2 East PC 659 to be :

"If there be in the prisoner any fair pretence of property or right, or if it be brought into doubt at all, the court will direct an acquittal."

"It is not theft if a person, acting under a mistaken notion of law and believing that certain property is his and that he has the right to take the same . . . . . . removes such property from the possession of another."


Supreme Court of India

Chandi Kumar Das Karmarkar And ... vs Abanidhar Roy on 9 October, 1963


The offence of theft consists in the dishonest taking of any moveable property out of the possession of another without his consent. Dishonest intention exists when the person so taking the property intends to cause wrongful gain to himself or wrongful loss to the other. This intention is known as animus furandi and without it the offence of theft is not complete. Fish in their free state are regarded as ferae naturae but they are said to be in the possession of a person who has possession of any expanse of water such as a tank, where they live but from where they cannot escape. Fishes are also regarded as being in the possession of a person who owns an exclusive right to catch them in a particular spot known as a fishery but only within that spot. There can thus be theft of fish from a tank which belongs to another and is in his possession, if the offender catches them without the consent of the owner and without any bona fide claim of right.


THEFT BY STARVING PERSON :-

The Latin phrase from common law is necessitas inducit privilegium quod jura privata ("Necessity induces a privilege because of a private right") it has no application in case of theft , hence a starving man if he steals bread to satisfy his hunger he would be guilty of theft. (a trick problem : A hung his coat at club counter , when he returned he found his coat missing. Angry at this , he decided that he will take coat of anyone which he finds at club counter next day. He finds a coat similar to his own the next day , turns out it his own coat which the accused didn't know. Can he be prosecuted for theft or its attempt ? Answer is no . One cannot steal his own property not in lawful possession of anyone and secondly act of the accused was inherently defective.)


Some illustrative examples which are subject of theft :


1.Removal of paddy crop

2. stealing of Ballot paper

3.Earth , stones , minerals and soil.

4. Timber 5.Salt formed on surface of swamp owned by government

(Human body is not movable property hence not subject of theft , human corpses, which are in the form of anatomical specimen, such as those found in museums and owned by them (mummies), are personal property and stealing of such human corpses would amount to theft under Sections 378 and 379 of IPC. )

6. Idol , is both juridical person and subject to theft.

7.water conveyed in pipes and reduced into subject of possession is subject of theft , similarly water supplied by a water company to a consumer and standing in his pipes may be subject of theft.


8.A bull dedicated to idol is not res nullis and hence capable of theft , however a bull set at large in accordance of religious usage with no dedication is not.


9.Peacock, doves and Birds not only caged but also tamed are also subject to theft.

FIshes in tanks are capable of theft but fishes in river , open irrigation tank (not enclosed on all sides) and sea are farae naturae and not capable of theft.


10.Stealing wood and timbre from forest without licence and permission of forest officer , is also theft.


11.A person who obtains cigar from automatic box by inserting a false coin will be guilty of theft.


12. Removing ornaments from dead body is not theft , but it amounts to criminal misappropriation under 404 - Dishonest misappropriation of property possessed by deceased person at the time of his death.


13.If a coparcener or a joint owner dishonestly takes the property belong to his co-owner , he would be liable for theft , if dishonest intention is established. (though some high courts have conflicting view as well)


14.Animals in reserve forest are farae naturae and are incapable of possession unless they are tamed and domesticated by the Governemnt. (Perumal v. State (1955 Mad 295)


15. If a creditor takes some articles from debtors house forcefully with a view to compel return of debt , that would also amount to theft . (it should not be under a hire purchase agreement or under a contractual right)


English law ( present day) Consent obtained by tricks or consent obtained by fraudulence is also no consent hence a person who causes a person to lose property by obtaining his consent by tricks will also be liable for theft ( Regina V. Gomez (1991) 1 WLR 1334 CLA)


Where the accused a taxi driver , swindled his victim who had no knowledge of english and under pretence of taking 1 $ from his wallet took 6$ (the victim held the wallet open from him) , he was held liable for theft. (Lawrenece v. Commissioner of Police , The metropolis (1971) 2 ALL ER 1253)





THEFT OF ELECTRICITY :-

(i) Avtar Singh v. State of Punjab MANU/SC/0191/1964 : AIR 1965 SC 666


A theft of electricity is an offence under the Electricity Act. Since electricity is not a movable property, the provisions of Sections 378 & 379 IPC are not attracted.


(ii) J.K. Cotton Spinning & Weaving Mill v. State of U.P. MANU/SC/0287/1960 : AIR 1961 SC 1170.


When there is a conflict between the specific provisions and the general law, the specific provision prevails over the general provision. General provision applies to only such cases which are not covered by special provision. Rule applies to resolve conflict between different provisions in different statute as well. This ruling is in respect of Uttar Pradesh Industrial Disputes Act and authority of the Board to entertain application under clause 5(a).


(iii) Vinaykumar Sing v. State of Bihar MANU/BH/0296/2011


FIR was lodged against the applicants for offences u/s. 406, 420, 465, 467, 468, 120B IPC and 135 of Electricity Act. In this case, electric meters were inspected and those disclosed 13 instances of C.P. short between a period of 11 days. Data of the meter was downloaded. After referring to the provisions of Electricity Act, which empowers authorized officer for various acts with regard to misuse of electricity or electric meters, relying on T.T. Antony v. State of Kerala MANU/SC/0365/2001 : (2001) 6 SCC 181, it was held that second FIR against the officials of Electricity Board was not maintainable as those accusations were part of the transaction which resulted into Case No. 67/2008. It was held that, the Board authorities were acting bona fide and were protected under Section 168 of Electricity Act. With regard to the first FIR No. 67/2008, it was held that, the last cause was misconceived. The accusations had become redundant, therefore, both the FIRs were quashed.


(iv) Solidare India v. Fair Growth Finance MANU/SC/0009/2001 : 2001 (3) SCC 71


With reference to special court, trying offences relating to transactions in Securities Act, 1992, it is held that those provisions would prevail over the earlier act of Sick Industrial Companies Act, 1985. In view of the conflict between the two acts, later one prevails.



Syed Yaqoob Syed Masood Vs. The State of Maharashtra and Ors....decided on 09.02.2018


Sections 378 and 379 IPC deal with the theft of movable property. Electricity is energy and not property. There is no provision in the IPC to prosecute any person for committing theft of electricity. Therefore the provisions of Electricity Act are enacted to take various offences relating to electricity. Judgement also held that electric meter is not a document and held that consequently accused can also not be prosecuted for 420 , 468 and 471.


Biswanath Patra vs Divisional Engineer (E) S and LP and the State


The High Court of Calcutta held that “whenever there is special law dealing with the theft of electricity general provision of section 379 of Indian Penal Code will not be applicable”.


Mosmat Swaran @ Swaran Manraw vs The State of Bihar


The High Court Of Patna held that “Electricity theft is not to be considered as movable property”. It is not theft under the meaning of Section 379 of Indian Penal Code 1860.


(Punishment for electricity theft under Electricity Act, 2003

Section 135 to section 150 talks about the penalties.

Important Case Laws

The Executive Engineer vs M/s Sri Seetaram Rice Mill


The supreme court held that mens rea is an essential factor for making a person liable under Section 135 of the Act. This offence falls within the scope of Criminal Jurisprudence and the intention of the legislature is to bring the case of malpractice and unauthorized use of electricity within the scope of Section 135 of Act.


MP Electricity Board vs Harsh Woods


The Supreme Court held that “Whenever a licensee prima facie finds that the consumer has committed the theft of electricity, the licensee without giving an opportunity of being heard or without any notice disconnects the line and the line is restored only after the consumer compensates to the licensee.”


“Torrent Power AEC Ltd vs Gayatri Intermediaries Pvt Ltd.


The High Court of Gujarat held that “The special court constituted under Section 153 or sub-section (5) of section 154 is being empowered to decide the quantum of civil liability in the case of power theft”.


Suresh Ganpati Halvankar vs The State of Maharashtra


The Supreme Court held that “interference with the electric meter under Section 138 of the Electricity Act, 2003 is a compoundable offence. The Supreme Court gave guidelines also.)



Expression Building , tent and vessel - what do they imply ?

Rajasthan High Court

Dal Chand vs The State on 27 August, 1964

In Indian houses generally there is a court-yard which is not covered. It may be a matter of some difficulty in such cases to say that when a man commits criminal trespass and enters the court-yard of the house, he is not guilty of 'house trespass.' Moreover, there may be cases where a man may be living in a house the roof of which has fallen down, but he has put up some sort of a shelter inside within the boundaries In such cases too it may be difficult to say that the man has not been guilty of 'house trespass' simply because the roof of the house has fallen down. It would depend on the facts of each case whether the trespass hag been committed of a building used for human dwelling as to come within the definition of the word house trespass'.


The expression 'building ' more especially having regard to the expressions 'Tent' and 'Vessel' that follow must be regarded as indicating some structure intended for affording some sort of protection to the persons dwelling inside it or for the property placed there for custody. Any structure which does not afford any such protection by itself but merely serves as a fencing or other means of merely preventing ingress or egress. cannot make the place a building or a house within the meaning of either of those two sections.


The question what constitutes a building must depend upon what is ordinarily understood by that term. Thus, a question whether a particular structure is a building must in an ultimate analysis be a question of fact to be decided on the evidence and materials of the case.


Then, the further requirement of Section 442 is that the building should be used as a human dwelling or as a place for worship. The expression "human dwelling" denotes a building demarcated for use as a residence by an individual or the members of a family enjoying shelter and protection not only from the winds and the Sun but also from the unauthorised entries and Interference by strangers. No doubt, the primary determining factor is the nature of the actual user but it must be added that the meaning of the expression should not be over stretched by unduly emphasising the actual user. A distinction must be drawn between what may be considered an ordinary and normal use than between a casual and an abnormal use and regard must be had not only to the actual user but also to the normal adaptability of the building to the purpose for which it was put to use as also to the general notions and habits of the people in relation to residence.



In Babulal v. State AIR 1952 All 146 is considering the expression "building for custody of property" a distinction ought to be drawn between the word "custody" and the word "keeping". The word "custody", it was observed, is undoubtedly different from the word "keeping" and it implies a sense of security which would be wanting in the case of a shed, which is only meant to provide shelter from Sun and rain 'and which has no doors etc. Thus the question {whether a particular building is used as a human dwelling or as a place for the custody of the property cannot be determined on rigid and inflexible formula but must be considered and determined after due consideration of the nature of the actual user of .the structure as also the normal adaptability of the property to a particular use as also the general notions of the people in relation to residence and custody of property. It follows that each case must be decided on its own facts and circumstances.




HIRE PURCHASE AGREEMENT AND THEFT :-



What is Hire purchase agreement : -

Hire-Purchase Agreements


In a hire-purchase agreement, the owner hires goods to the hirer with an option to purchase the goods when he has made the payment of a certain sum.

By this system, the purchaser who is unable to pay the full price of the asset at one lump sum, gets facilities to acquire an asset and after making the payment of an initial amount called premium, the purchaser pays the balance consideration money in installments.

After the payment of all the installments, the property in the goods passes to the hirer.

The hirer has an option to return the goods during the period of hire. In a hire-purchase agreement, the hirer has the right to terminate the agreement for hire at his pleasure and is not bound to pay the value of the goods.

A hire-purchase agreement is a form of bailment; the hirer is given the right to purchase the goods on certain conditions. That, however, is an option not an obligation to purchase.

The hirer may elect to purchase the goods and when he does so, after he fulfills all the conditions prescribed in the agreement, the title to the goods will pass to him. But he may elect not to do so, and in that event he is entitled to return the goods and terminate the agreement in the manner provided therein.


The hire-purchase agreement can be terminated in any of the following ways:-

In terms of the agreement- The hire-purchase agreement stipulates the circumstances in which the agreement can be terminated. The agreement is generally terminated by return of the goods by the hirer, notice of termination by the owner on account of hirer's breach of conditions or notice of termination by the hirer.

By performance- The hire-purchase agreement is terminated by performance on the exercise of the option to purchase the goods by the hirer.

By renewal- The parties to an agreement may enter into a fresh agreement terminating the hire-purchase agreement, which has not already been terminated.

Notice by either party- The hire-purchase agreement can be terminated by notice given by either party.

By acceptance of repudiation by other party- An agreement is terminated, when a party to an agreement renounces his future obligations under the agreement or commits a breach of the agreement, which indicates that he does not want to remain bound by its provisions, and the other party accepts the renunciation or breach as discharging the contract.

By release- Where one party to an agreement releases the other party from the performance of the obligations by him under the agreement, the agreement comes to an end.

By frustration- When performance of the agreement becomes impossible by reason of some act or event occurring subsequent to the formation of the agreement, comes to an end and the parties will be discharged from further obligations under the agreement e.g. when the goods are destroyed during the currency of hire-purchase agreement without negligence on the part of the hirer, the agreement comes to an end.

By efflux of time- When the hirer is given time to exercise option to purchase the goods within a stated period and he does not exercise the option within the said period, the agreement comes to an end.



It is also to be noticed that learned author R.M. Goode, in his book Hire Purchase Law & Practice (Second Edn.) has observed as follows at page 846:-


"It would seem that so long as the hirer is in possession of the goods they belong to him for the purpose of the Act [The Theft Act, 1968] even though his possession is unlawful, e.g. because the hire-purchase agreement has come to an end. If the owner has an enforceable right to possession then he will not be guilty of theft in seizing the goods if he knew of his legal rights since he will not be acting dishonestly but will have taken the goods in the well founded belief that he has a right to resume possession."




In M/s Damodar Valley Corporation vs. State of Bihar, , APEX Court took the view that a mere contract of hiring, without more, is a species of the contract of bailment, which does not create a title in the bailee, but the law of hire purchase has undergone considerable development during the last half a century or more and has introduced a number of variations, thus leading to categories and it becomes a question of some nicety as to which category a particular contract between the parties comes under. Ordinarily, a contract of hire purchase confers no title on the hirer, but a mere option to purchase on fulfilment of certain conditions. But a contract of hire purchase may also provide for the agreement to purchase the thing hired by deferred payments subject to the condition that title to the thing shall not pass until all the instalments have been paid. There may be other variations of a contract of hire purchase depending upon the terms agreed between the parties. When rights in third parties have been created by acts of parties or by operation of law, the question may arise as to what exactly were the rights and obligations of the parties to the original contract.


In K.L. Johar & Co. vs. The Deputy Commercial Tax Officer , APEX Court took the view that a hire purchase agreement has two elements: (1) element of bailment; and (2) element of sale, in the sense that it contemplates an eventual sale. The element of sale fructifies when the option is exercised by the intending purchaser after fulfilling the terms of the agreement. When all the terms of the agreement are satisfied and the option is exercised a sale takes place of the goods which till then had been hired. (Similar views were expressed earlier in Instalment Supply (Pvt.) Ltd. & Anr. vs. Union of India & Ors. ; and reiterated in Sundaram Finance Ltd. vs. State of Kerala .)



This Court also had occasion to consider this question. One of the earlier decisions is Sardar Trilok Singh & Ors. vs. Satya Deo Tripathi . In that case, the parties had entered into a hire purchase agreement. The complainant alleged that the accused, in a high handed manner during his absence came to his house and forcibly removed the truck and thereby committed the offence of dacoity. The police investigated the case and filed a final report. The accused filed his objection before the Magistrate, but the objection was not considered. The accused filed a revision before the session court which was dismissed. Thereafter the accused filed a petition under section 482 Cr.P.C. to quash the proceedings. That was summarily dismissed by the High Court and the matter reached up to this Court at the instance of the accused. In paragraph 5 of the judgment, this Court observed:


"We are clearly of the view that it was not a case where any processes ought to have been directed to be issued against any of the accused. On the well-settled principles of law it was a very suitable case where the criminal proceeding ought to have been quashed by the High Court in exercise of its inherent power. The dispute raised by the respondent was purely of a civil nature even assuming the facts stated by him to be substantially correct. Money must have been advanced to him and his partner by the financier on the basis of some terms settled between the parties... Even assuming that the appellants either by themselves or in the company of some others went and seized the truck on July 30, 1973 from the house of the respondent they could and did claim to have done so in exercise of their bona fide right seizing the truck on the respondent's failure to play the third monthly instalment in time. It was, therefore, a bona fide civil dispute which led to the seizure of the truck".



In K.A. Mathai & Anr. vs. Kora Dibbikutty & Anr. , the bus was obtained by the complainant on a hire purchase agreement. The complainant paid only part of the consideration and defaulted in paying the instalments and the vehicle was taken possession of by the financial and at that time, both the first accused who had derived away the bus from the possession of the complainant and the second accused were present in the bus. They were prosecuted for the offence punishable under Section 379 read with Section 114 IPC. This Court holding that the bus was taken away at the instance of the financier and the accused had not committed any offence observed as under:


"Though we do not have the advantage of reading the hire-purchase agreement, but as normally drawn it would have contained the clause that in the event of the failure to make payment of instalments the financier had the right to resume possession of the vehicle. Since the financier's agreement with A-2 contained that clause of resumption of possession, that has to be read, if not specifically provided in the agreement, as part of the sale agreement between A-2 and the complainant. It is in these circumstances, the financier took possession of the bus from the complainant with the aid of the appellants. It cannot thus be said that the appellants, in any way, had committed the offence of theft and that too, with the requisite mens rea and requisite dishonest intention."


Supreme Court of India

Charanjit Singh Chadha And Ors. vs Sudhir Mehra on 31 August, 2001


The hire-purchase agreement in law is an executory contract of sale and confers no right in rem on hire until the conditions for transfer of the property to him have been fulfilled. Therefore, the re-possession of goods as per the term of the agreement may not amount to any criminal offence. The agreement specifically gave authority to the appellants to re-possess the vehicle and their agents have been given the right to enter any property or building wherein the motor vehicle was likely to be kept. Under the hire purchase agreement, the appellants have continued to be the owner of the vehicle and even if the entire allegations against them are taken as true, no offence was made out against them. The learned Single Judge seriously flawed in his decision and failed to exercise jurisdiction vested in him by not quashing the proceedings initiated against the appellants. We, therefore, allow this appeal and set aside the impugned judgment. The complaint and any other proceedings initiated pursuant to such complaint are quashed.


MAGMA FINANCE CORPORATION V. JUGAL KISHORE

If hirer does not pay dues in and defendant in lawful exercise of power under agreement seizes the goods . It cannot be said that , defandant acted with dishonest intention , or he is guilty of theft , cheating or criminal conspiracy. Dishonest intention cannot be attributed to a person who exercises his rights under the agreement . In a hire purchase agreement financer is the real owner and person who takes the vehicle acts as a bailee , and taking possession of vehicle on non payment of dues is the legal right of the financer under agreement.



A PURELY CIVIL POINT :-

Can Owner's Risk Clause Exempt Hotel From Liability For Theft Of A Vehicle Given For Valet Parking ?


Taj Mahal Hotel vs. United India Insurance Company Ltd. - CIVIL APPEAL NO. 8611 OF 2019


(i) the hotel-owner cannot contract out of liability for its negligence or that of its servants in respect of a vehicle of its guest in any circumstance. Once possession of the vehicle is handed to the hotel staff or valet, there is an implied contractual obligation to return the vehicle in a safe condition upon the direction of the owner.

(ii) Even where there is a general or specific exemption clause, there remains a prima facie burden of proof on the hotel to explain that any loss or damage caused to the vehicles parked was not on account of its negligence or want of care per Sections 151 and 152 of the Contract Act. It is only after this burden of proof is discharged that the exemption clause can come into force. The burden of proving that such loss or damage was covered by the exemption clause will also be on the hotel. Applying the rule of prima facie negligence, the court said that the hotel has not explained why its failure to return the vehicle to complainant was not on account of fault or negligence on its part. Thus, liability should be affixed on the hotel due to want of the requisite care towards the car bailed to it, held the court while dismissing the appeal.



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