TMI Blog2019 (12) TMI 1579X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the Financier under Rule 18(3) read with Form E-I of the Act, 1997, as quoted earlier, on his address, meaning thereby, the Financier can avoid such further liability by taking suitable action either for possession of the vehicle treating it to be a breach of agreement, if there is any such condition in the agreement or, they can avoid such liability by ensuring such conditions being incorporated in the agreements with the borrower. The fact that the name of the Financier, after taking possession of such vehicle, is not entered in the Certificate of Registration as the registered owner, is of no consequence in this regard, as, the provisions contained in Sub-section (3) of Section 9, Sub-section (3) of Section 20 and Section 2(g) and 2(h) do not contemplate any such requirement in the case of a vehicle, covered under the relevant agreements, already discussed hereinabove, which is in possession of the Financier under such agreement. All that is necessary is the possession of the motor vehicle. If it has been taken by the Financier under such agreement, he would be liable, of course, alongwith the operator, if any, jointly, and severally. Neither the provisions of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sc. Writ Petition (M/B) No. 4529 of 2018 - - - Dated:- 16-12-2019 - D.K. Upadhyaya, Rajan Roy And Rajesh Singh Chauhan, JJ. For Appellant: Amol Kumar For Respondents: C.S.C. JUDGMENT Rajan Roy, J. 1. The following questions have been referred for our consideration by a Division Bench of this Court vide reference order dated 24.5.2018 passed in Writ Petition No. 4529(M/B) of 2018; Mahindra Mahindra Financial Services Ltd. v. State of U.P. through Principal Secretary, Transport and others: 1. Whether in view of Sections 2(g), 2(h), 4, 9, 10, 12, 13, 14 and 20 of the Act, 1997 read with Sections 39, 50 and 51 of the Act, 1988 and other relevant provisions of the said enactments and the Rules of 1998 and 1989, a Financier of a motor vehicle/transport vehicle in respect of which a hire-purchase, lease or hypothecation agreement has been entered, is liable to tax from the date of taking possession of the said vehicle under the said agreements, even if its name is not entered in the Certificate of Registration or not? If not, who is liable in this regard? 2. Whether the judgments rendered in the case of Lakhimpur Finvest Company Ltd. (supra), Manish Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide judgment dated 22.5.2017 observing therein that it is not disputed by the learned counsel for the parties that controversy involved in the said writ petition is similar to the one decided in the case of Daya Shanker Yadav v. State of U.P. and another, 2008 (1) AWC 801 and is squarely covered by it and, accordingly, it disposed of the petition of opposite party No. 4 in terms of judgment in Daya Shanker Yadav' case (supra) by permitting the petitioner to submit a fresh representation before the Taxation Officer who was directed to take a decision thereon in terms of Para 28(1) of the judgment in Daya Shanker Yadav (supra). Petitioner, who is the Financier, was not heard in the said writ petition. Consequent to the above, a notice dated 6.1.2018 was issued to the petitioner-Financier under Rule 18(2) of the U.P. Motor Vehicles Taxation Rules, 1998 holding him liable to pay the tax due and it is this notice which is under challenge in the writ petition filed by the Financier out of which the instant reference has arisen for our consideration. 5. The vehicle in question is a public service vehicle as per Section 2(o) of the U.P. Motor Vehicles Taxation Act, 1997 read with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsible to pay tax. 7. On the other hand Shri Amitabh Kumar Rai, learned Additional Chief Standing Counsel appearing for the State also took us through various provision of the Act, 1997 as referred hereinabove, especially Section 9(2), 9(3), 13 and 20. He contended that Section 9(2) was not attracted in the present case as it did not involve transfer of vehicle. He relied upon decision of the Supreme Court in the case of Purnya Kala Devi (supra), wherein, definition of 'Owner' contained in Section 2(30) of the Act, 1998, similar to the definition in Section 2(h) of the Act, 1997, was considered and it was held that person in possession and control of the vehicle under an agreement of lease, hypothecation or hire-purchase would be the owner. Based on it he contended that finance company having taken possession of the vehicle on 9.12.2014 was liable to tax from date of such possession, it being the owner, as, after such possession the registered owner was neither in possession nor in control of the vehicle and the fact that he was the registered owner or had a permit in his name, was irrelevant. In this regard he also relied upon definition of 'Operator' in Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of taxes which are due as per the declaration to be filed in pursuance to the notice in Form 'E'. 9. Section 20(3) of the Act, 1997 read with rule 18(2) and (3) envisages a situation when despite service of notice under rule 18(1) or in case of default of owner operator in payment of taxes despite making declaration under Section 13, the Taxation Officer is required to raise demand in the prescribed Form E-1. Form E-1 requires the Taxation Officer to raise a specific demand with respect to tax/additional tax and penalty and hence, while issuing notice under Section 20(3) and raising a demand in 'Form E-1', the Taxation Officer has to determine the liability to tax and penalty. 10. It was further submitted that in a case where a declaration is filed under Section 13, the Taxation Officer under Section 20(3) is in a position to raise demand for each year, otherwise, in a case where no such declaration is filed, the demand can be raised on receiving information as provided under rule 18(1) of the Rules, 1998. Section 20(3) of the Act, 1997, thus, provides for raising of a demand from the 'Owner' or 'Operator, determining their liability, as the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lely liable for payment of tax from the date of taking possession of the vehicle. He submitted that none of the decisions relied upon by learned counsel for the petitioner supported the petitioner-Financier's case. Section 9(2) of the Act, 1997 is not attracted in a case where the vehicle after possession by the Financier is not transferred. It is attracted only when the vehicle is transferred by the registered owner or by the Finance Company after possession. In Amar Nath Chaubey's case (supra) Section 9(3) of the Act, 1997 was not taken into consideration. In Kamil Hussain's case (supra) Section 51(5) of the Act, 1988 as well as Section 9(3) of the Act, 1997 were not taken into consideration. He relied upon the decisions rendered in the case of Purnya Kala Devi (supra), Manish Mukhriya (supra), Lakhimpur Finvest Company Ltd. v. State of U.P. and others, 2011 (29) LCD 2601, Lakhimpur Finvest Company Ltd. (supra), Shriram Transport Finance Company Ltd. (supra), Khenyei v. New India Assurance Company Ltd. and others, 2015 (9) SCC 273 and J. Jeyasingh v. Deputy Commercial Tax Officer, 1993 Legal Eagle 837. Discussion on Question No. 1 13. U.P. Motor Vehicles Taxation A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities in terms of Section 41 of the Act, 1988 read with Rule 48 of the Rules, 1989, the Registering Authority is required to issue to the owner of the motor vehicle a Certificate of Registration in Form-23 which contains name of the registered owner and at the bottom there is a 'Note' with regard to the motor vehicle being subject to hire-purchase/lease/hypothecation agreement and the Financier with whom such agreement has been entered, if it is so. Below these details, the specimen signature of the Financier has to be affixed. This is in keeping with the requirement of Section 51(1) and (2). Similar provision exists in Section 43(3) for temporary certificate of registration. 19. Thus, the name of the Financier is not entered in the Certificate of Registration as the registered owner. It is the name of the hirer, lessee or hypothecator which is mentioned as registered owner where the vehicle is subject to such agreement. 20. Section 50 deals with action to be taken by the transferor and transferee consequent to transfer of ownership of a motor vehicle for recording transfer of ownership in the Certificate of Registration by the registering authority. This is required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possession of the vehicle or, as the case may be, who has purchased or acquired the motor vehicle, shall make an application for the purpose of transferring the ownership of the vehicle in his name, to the registering authority in whose jurisdiction he has the residence or place of business where the vehicle is normally kept, as the case may be, in such manner, accompanied with such fee, and within such period as may be prescribed by the Central Government. (3) If the transferor or the transferee fails to report to the registering authority the fact of transfer within the period specified in clause (a) or clause (b) of sub-section (1), as the case may be, or if the person who is required to make an application under sub-section (2) (hereafter in this section referred to as the other person) fails to make such application within the period prescribed, the registering authority may, having regard to the circumstances of the case, require the transferor or the transferee, or the other person, as the case may be, to pay, in lieu of any action that may be taken against him under Section 177 such amount not exceeding one hundred rupees as may be prescribed under sub-section (5): Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the transferor that he has not received any such communication together with-- (i) the receipt obtained from the registering authority under sub-section (2) of Section 48; or (ii) the postal acknowledgement received from the registering authority where the application for no objection certificate has been sent by post. 22. Transfer of ownership under Section 50(a)(i) and (ii) read with Rule 55 also covers a transfer of ownership of a vehicle by the borrower with consent of the Financier to a third person free from encumbrances as is evident from Form 29 and 30. 23. Transfer of ownership of a motor vehicle is not dependent upon compliance of Section 50. It is complete when ingredients of transfer as prescribed in law are satisfied. In case of Sale such transaction is regulated by the Sale of Goods Act. Non compliance of Section 50 merely makes the transferor or transferee, as the case may be, liable to penal action under the Act, 1988 but it does not avoid liability to tax etc. nor does it make the transfer invalid or void. Section 50 (Old Section 31 of the Act, 1939) is attracted only as a consequence of such transfer of ownership of motor vehicle. 24. A separat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement and that the registered owner refuses to deliver the certificate of registration or has absconded, such authority may, after giving the registered owner an opportunity to make such representation as he may wish to make (by sending to him a notice by registered post acknowledgment due at his address entered in the certificate of registration) and notwithstanding that the certificate of registration is not produced before it, cancel the certificate and issue a fresh certificate of registration in the name of the person with whom the registered owner has entered into the said agreement: Provided that a fresh certificate of registration shall not be issued in respect of a motor vehicle, unless such person pays the prescribed fee: Provided further that a fresh certificate of registration issued in respect of a motor vehicle, other than a transport vehicle, shall be valid only for the remaining period for which the certificate cancelled under this sub-section would have been in force. (6) The registered owner shall, before applying to the appropriate authority, for the renewal of a permit under Section 81 or for the issue of duplicate certificate of registration under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of a vehicle which is held under the said agreement, the appropriate authority may, subject to the other provisions of this Act,-- (a) in a case where the financier has refused to issue the certificate applied for, after giving the applicant an opportunity of being heard, either-- (i) renew or refuse to renew the permit, or (ii) issue or refuse to issue the duplicate certificate of registration, or (iii) assign or refuse to assign a new registration mark; (b) in any other case,-- (i) renew the permit, or (ii) issue duplicate certificate of registration, or (iii) assign a new registration mark. (10) A registering authority making an entry in the certificate of registration regarding-- (a) hire-purchase, lease or hypothecation agreement of a motor vehicle, or (b) the cancellation under sub-section (3) of an entry, or (c) recording transfer of ownership of motor vehicle, or (d) any alteration in a motor vehicle, or (e) suspension or cancellation of registration of a motor vehicle, or (f) change of address, shall communicate by registered post acknowledgment due to the financier that such entry has been made. (11) A register ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1988 is transferred and the transferee enters into a hire-purchase, lease or hypothecation agreement with any person subsequent to such registration and in such an eventuality the application as mentioned in Rule 60 of the Rules, 1989 is required to be made in Form-34 which should be duly signed by the registered owner of the vehicle and the Financier. Sub-section 3 of Section 51 relates to cancellation of entry made under Sub-section (1) and (2) on proof of termination of such agreement obviously on satisfaction of the conditions of such agreement. The result is striking off the 'Note' in the Certificate of Registration regarding the vehicle being the subject of such agreement on an application being filed in terms of Rule 61(1) in Form-35 which is as under: FORM-35 [See Rule 51(1)] Notice of termination of an agreement of Hire-Purchase/Lease/Hypothecation (To be made in duplicate and in triplicate where the original Registering Authority is different, the duplicate copy and the triplicate copy with the endorsement of the Registering Authority to be returned to the Financier and Registering Authority simultaneously on making the termination entry in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n used as such in Sub-section (5), description of the person referred therein is of the 'Financier' as defined in Rule 2(d) of the Rules, 1998. Corresponding Rule in this regard is Rule 61(2), which has already been quoted earlier. The relevant Forms in this regard are Form 36 and 37 which are as under: FORM-36 [See Rule 61(2)] Application for issue of a fresh Certificate of Registration in the name of the Financier To The Registering Authority................... I/We................... (financier) have taken possession of motor vehicle No. ........ make............ model............ owing to the default of the Registered owner.......... (name) ............ (full address) under the provisions of the agreement of hire-purchase/lease/hypothecation: *(1) The certificate of registration of the said vehicle is surrendered herewith. *(2) The registered owner has refused to deliver the certificate of registration to me/us. *(3) The registered owner is absconding. I/We request you to cancel the certificate and issue a fresh certificate of registration in my/our name. I/We enclose a fee of Rs................. Date................ Signature of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , inheritance or purchase in public auction. 30. We may also refer to definition of 'Owner' contained in Section 2(30) of the Act, 1988, which is as under: (30) owner means a person in whose name a motor vehicle stands registered, and where such person is a minor, the guardian of such minor, and in relation to a motor vehicle which is the subject of a hire-purchase, agreement, or an agreement of lease or an agreement of hypothecation, the person in possession of the vehicle under that agreement; The term 'Financier' is defined in Rule 2(d) of the Central Motor Vehicle Rules, 1989 as under: 2. Definitions.--In these rules, unless the context otherwise requires,- (a) ............................... (b) .............................. (c) ............................. (d) 'financier' means a person with whom the registered owner of a motor vehicle has entered into an agreement of hire-purchase, lease or hypothecation in respect of such vehicle and whose name is entered in the certification of registration as referred to in Form 34; 31. This discussion of the provisions of the Act, 1988 would be relevant when we consider the liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by notification in the Gazette, has been paid in respect thereof: Provided that in respect of a motor vehicle under this sub-section in lieu of yearly tax such amount of one time tax may be payable as specified by the State Government by notification in the Gazette. (2) Save as otherwise provided by or under this Act no goods carriage other than those specified in sub-section (1-A), construction equipment vehicles, specially designed vehicles, motor cab (other than three wheeler motor cab), maxi cab and public service vehicles owned or controlled by the State Transport Undertaking, shall be used in any public place in Uttar Pradesh unless a quarterly tax at the rate applicable to such motor vehicle as may be specified by the State Government by notification in the Gazette, has been paid in respect thereof. Provided that in respect of a motor vehicle under this sub-section instead of quarterly tax, an yearly tax at such rate as may be specified by the State Government may be payable. (2-A) Save as otherwise provided by or under this Act no public service vehicle other than those referred in sub-section (1-A) and sub-section (2) shall be used in any public place in Uttar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h payment of tax and penalty. It reads as under: 9. Payment of tax and penalty.--(1) Subject to the provisions of Section 11: (i) the tax payable under sub-section (1) of Section 4 shall be paid at the time of the registration of the vehicle under the Motor Vehicles Act, 1988: Provided that in respect of an old motor vehicle, the tax shall be payable in advance on or before the fifteenth day of January in each year; (ii) the tax payable under sub-section (1-A) of Section 4, shall be payable in advance for one year at the time of the registration of the vehicle under the Motor Vehicles Act, 1988 and thereafter on or before the fifteenth day of the first calendar month of each year next following; (iii) the tax payable under sub-section (2) Section 4 shall be payable in advance for one quarter at the time of registration of the vehicle under the Motor Vehicles Act, 1988 and thereafter on or before the fifteenth day of the first calendar month of each quarter next following. (iv)(a) the tax payable under sub-section (2-A) of Section 4 shall be payable in advance for one year calendar month at the time of the registration of the vehicle under the Motor Vehicles Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) of Section 4 is accordingly payable for one calendar month at the time of registration and thereafter, on or before the 15th day of each calendar month next following. Special tax under Section 4-A is to be paid at the time of issuance of temporary permits. 40. Section 9(2) deals with liability to pay tax, additional tax and penalty due on or before the date of transfer of a motor vehicle which is transferred by the registered owner to any other person i.e. it deals with arrears of such tax and penalty pertaining to the period prior to such transfer. It does not deal with liability to tax due after the date of such transfer. 41. This provision makes the transferee liable to arrears of tax and penalty due on or before the date of transfer of a motor vehicle deeming him to be owner of the said motor vehicle for the period relating to which such tax and penalty is due, although, he was not actually the owner of it during such period. A legal fiction has thus been created treating the transferee to be the owner for the said period. This, however, is without prejudice to the liability of transferor in this regard. 42. In cases covered by transfers referred in Section 9(2) bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 and 18) wherein the Full Bench of Andhra Pradesh High Court in the case of Madineni Kondaiah (supra) has been approved. All these decisions relate to the Old Act, 1939 and Section 31 thereof but the observations and principles expounded apply to the New Act of 1988 also, as the provision is similar to Section 51 thereof. 47. This, however, does not take away the obligation under Section 40 of the Act, 1988 upon the owner to get the Vehicle registered nor does it avoid other consequences including penal consequences which may follow under the Act, 1988 or the Act, 1997 for failure to do so. 48. What it means is that if a motor vehicle has been validly transferred, liability under Section 9(2) will get attracted irrespective of non compliance of Section 50 and Rule 55 referred above. Section 50 and Rule 55 are only a consequence of such transfer which is also evident from the language used therein. 49. Section 9(3) deals with non payment of tax or additional tax within the period specified under Section 1 of Section 9 and the liability in this regard. In such an eventuality it provides that in addition to the tax or the additional tax due, a penalty, as may be prescribed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Taxation Officer and shall pay to him the difference in tax or additional tax payable under Section 14. Rule 7 of the Rules, 1998 as substituted by the notification dated 28.4.1999 reads as under: 7. Presentation of declaration.--(1) Every person who either on the commencement of the Act or thereafter, on becoming possessed of a motor vehicle which becomes liable to tax shall within fifteen days of such vehicle becoming so liable, complete, sign and deliver to the Taxation Officer the declaration in Form A. (2) A separate declaration shall be made in respect of every motor vehicle. 52. Rule 7 as substituted vide Notification dated 28.4.1999 requires every person who either on the commencement of the Act or thereafter, on 'becoming possessed' of a motor vehicle which becomes liable to tax, to complete, sign and deliver to the Taxation Officer the declaration in Form 'A' within 15 days of such vehicle becoming so liable. Form-A referred in Rule 7 of the Rules, 1998 is as under: FORMA [See Rule 7] Declaration by Owner of a Motor Vehicle under Section 13 Part 1 (To be completed by the owner of the motor vehicle) I, ....... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the period ending ........... and that, subject to the correctness of the above declaration, tax certificate has been issued to the applicant on date........... Date............ Signature of Taxation Officer Region/Sub-region................ Part III (To be completed by the Registering Authority) Certified also that motor vehicle herein described has been registered under the Uttar Pradesh Motor Vehicles Rules, 1998 arid that a Registration Certificate valid until............. Has been issued and that the registration number of the vehicle has been entered in the Certificate of Tax. Registration number of vehicle................. Date...... Signature of Registering Authority Region/sub-region.................... 53. Thus, as per Section 13, the 'Owner' or 'Operator' of every motor vehicle is required to make a declaration in respect of it in Form A, deliver it within the prescribed time (as per Rule 7) to the Taxation Officer and pay to him Tax which he appears by such declaration to be liable to pay in respect of such vehicle as required by or under the Act, 1997. 54. Provisions of Section 13 and Rule 7 apply when any person c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having been served. Form-E is as under: Form - E [See Rule 18] Notice to Owner of a Motor Vehicle To, ........................ Address........................ Take notice that you are hereby required to fill up, sign and deliver to the undersigned the form of declaration enclosed in respect of every motor vehicle kept by you for use, and to pay the tax due on every such vehicle before the expiration of 15 days from the date of service of this notice. Failure to deliver the declaration or to pay the constitutes an offence under Section 10 of the Uttar Pradesh Motor Vehicles Taxation Act. Date..........20........ Signature of Taxation Officer 59. Reference may also be made in this regard to Rule 9(3) of the Rules, 1998 which in the context of method of payment of tax mentions that every person who is required to make a declaration under Rule 7 or additional declaration under Rule 8 shall pay the tax due on the motor vehicle at the time of presenting the declaration in respect thereof. Rule 9(3) is as under: 9. Method of payment of tax.-- (1) ......... (2) Every person who is required to make a declaration under Rule 7 or additional declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anner prescribed and sale proceeds of such vehicle shall be adjusted towards the tax etc. which is due as per Section 22(3). Section 22 is as under: 22. Detention of a motor vehicle in case of non-payment of tax.--(1) Where an officer authorized by the State Government in this behalf, has reason to believe that a motor vehicle has been or is being used by a person without payment of tax, additional tax or penalty if any, he may seize and detain the a motor vehicle and for the purpose take, or cause to be taken, such steps as may be considered, by him necessary, for the safe-custody of the motor vehicle and, in particular, require the driver of such vehicle to convey it to the nearest police station or any other place specified by him: Provided that the officer seizing the vehicle, shall, within forty-eight hours of such seizure, send a report of such seizure to the concerned Taxation Officer. (2) A motor vehicle seized or detained under this section shall be released by the Taxation Officer immediately on payment of the tax, additional tax, penalty or other amount due for the non-payment whereof the vehicle was so seized or detained. (3) Where the tax, additional tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein also the Taxation Officer is required to send a notice under Sub-section (3) of Section 20 in Form E-1 to the owner or operator, as the case may be, of the vehicle. Rule 18(3) records as under: 18. Notice to owners or operators of Motor Vehicles.--(1) ............... (2) .................. (3) The Taxation Officer, for arrears of tax or additional tax or penalty, shall send a notice under sub-section (3) of Section 20 in Form-1 to the owner or operator, as the case may be, of the vehicle. The notice shall be served in the manner prescribed under sub-rule (1). Form E-1 is as under: FORM E-1 Notice in case of dues on Motor Vehicles [See Rule 18(2)] 1. Name of the Registered Owner.......... 2. Full Address................................. The due tax/additional tax of vehicle No. ............ has not been paid after......... an amount of Rs. ............... as tax/additional tax is due under Section 4/Section 6 of the Uttar Pradesh Motor Vehicles Taxation Act, 1997 and an amount of Rs. ............ as penalty is due under sub-section (3) of Section 9 of the aforesaid Act read with Rule 24 of the Uttar Pradesh Motor Vehicles Taxation Rules, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the case may be, the owner.......' have been used and the rationale behind it has already been explained earlier in the context of discussing Section 9(3) and 20(3). Corresponding Rule 22 of the Rules, 1998 however refers to the term 'owner' only. The rule however cannot be read in conflict with the substantive provision contained in Section 12 and has to be read, understood and applied in consonance with it and not otherwise. 70. Under Section 9(3) it is the 'Owner' and the 'Operator', if any, of the motor vehicle who shall be jointly and severally liable. Likewise under Section 20(3) it is the 'Owner' or 'Operator', as the case may be, who can be proceeded for recovery of arrears of tax etc. Section 13 also refers to liability of 'Owner' or 'Operator' in this regard. Rule 7 and Rule 9(3) have also to be understood and applied accordingly. It is therefore imperative to consider the terms 'owner' and 'operator' as defined in the Act, 1997. 71. The term 'owner' has been defined in Section 2(h) of the Act, 1997 as under: (h) owner in respect of motor vehicle means the person whose name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the vehicle should be construed as the owner and not alone the registered owner. The High Court further failed to appreciate the legislative intention that the registered owner of the vehicle should not be held liable if the vehicle was not in his possession and control. 75. Thus, the Supreme Court while considering the provision of Section 2(30) took note of the underlying legislative intention in including in the definition of 'Owner' a person in possession of a vehicle under the agreements referred therein to the effect that a person in control and possession of the vehicle should be construed as the 'Owner' and not alone the registered owner. Thus, both were to be the owners but in the facts of the said case which related to a motor accident claim the person in possession and control of the vehicle was held liable. 76. As per Section 2(h) 'Owner' in respect of a motor vehicle is its registered owner and if such vehicle is the subject of an agreement of hire-purchase or lease or hypothecation, the person in possession thereof under that agreement is also its owner. Thus, the registered owner alone is not the owner. It depends upon the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is referred in the second part of Section 2(h) does not mean only the possession of the 'Financier' consequent to a breach of agreement by the borrower based on the existence of a clause permitting such possession. It also covers possession of the vehicle by the borrower (registered owner) himself, if it is also under such agreement, which is possible, as, normally, such agreements are entered prior to purchase (except when they are entered subsequently as per Section 51(2) of the Act, 1988) and a reference to such agreement is made in the Sale Certificate in Form-21 referred in Rule 47(1)(a). Reference may be made in this regard to Form-21 as it indicates that it is to be issued by the Manufacturer/Dealer who delivers the vehicle to the purchaser with an endorsement thereon that the vehicle is held under an agreement of hire-purchase/lease/hypothecation, therefore, the possession referred in the second part of Section 2(h) includes the possession of the borrower in the normal course under such agreement (who may also be the registered owner) and also the possession taken by the Financier consequent to breach of such agreements, as the case may be. 81. At this stage, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possession of the vehicle under such agreement, who could be the borrower (registered owner) or the Financier, is the owner, otherwise it is the permit holder or authorization certificate holder and in its absence the registered owner who is the owner. 85. Although, under Section 66 of the Act, 1988 a permit is mandatory for using the vehicle as a transport vehicle, Section 2(g) covers a situation where there is no such permit, such as, in the case of illegal plying of a vehicle as a transport vehicle. Moreover, the registered owner and the permit holder may be two different persons, as such, this possibility has also been taken into account. 86. Noticeably, the third part of Section 2(g) is confined to a transport vehicle which is the subject of a hire-purchase agreement and does not extend to a transport vehicle which may be the subject of other two types of agreements referred in the definition of 'Owner' in Section 2(h) i.e. a lease or hypothecation. 87. The definition of operator in Section 2(4) of the Bombay Motor Vehicles (Taxation of Passengers) Act, 1958 which was considered by the Supreme Court in the case of State of Maharashtra and others v. Sundaram Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Law wherein the term 'Joint and Several' has been explained as under: Joint and several. An obligation entered into by two or more persons is joint and several when each is liable severally and all are liable jointly. A liability may be imposed, whether by statute, contract or otherwise, on two or more persons jointly and severally; in which case, again, each is liable severally and all are liable jointly. For judicial and statutory constructions and definitions in different contexts see Stroud's Judicial Dictionary. Same term has been explained in Black Law Dictionary as under: joint and several, (Of liability, responsibility, etc.) apportionable at an adversary's discretion either among two or more parties or to only one or a few select members of the group; together and in separation. The term Joint and Several liability has been explained in Advanced Law Lexicon as under: Joint and several liability. A liability is said to be joint and several when the creditor may sue one or more of the parties to such liability separately or all of them together at his option 92. When the liability is joint and several it is open to the claimant to clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is choice, especially as, the contents of Form E-1 will not supersede or override the substantive provision contained in Section 9(3) and 20(3) nor the provision of Rule 18(3). 95. As regards contention of Shri Amitabh Kumar Rai, learned Additional Chief Standing Counsel for the State in this regard that the Taxation Officer can determine their proportionate liability, well, if both the parties are available and there is material which enables him to do so, he can do it, especially where indisputably the liability is of arrears of tax and/or penalty for the period prior to the date of possession of the vehicle by the Financier, when the vehicle was in possession of the registered owner, as, there is no bar in the Act, 1997 in this regard. However, in the event he is unable to do so, he has the option to proceed against either of them i.e. the owner or operator where both exit, as in the case of a transport vehicle, for the entire liability as per his choice, leaving it open to them to settle their inter se claim separately as per law. 96. Thus, the concept of joint and several liability for the reasons already mentioned, will not have any application in respect of 'motor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is still its owner under Section 2(h) who is in possession under the other two types of agreement, and, thus, would be liable alongwith the permit holder/authorization certificate holder or the registered owner, as the case may be, who, in this case, would be the 'Operator', jointly and severally, in terms of Section 9(3), as discussed earlier. Their liability would be in keeping with the concept of joint and several liability as elucidated in the earlier part of this judgment. 103. The fact that the Financier's name is not yet entered in the Certificate of Registration would be of no consonance as it is not a prerequisite for being the 'Owner' or 'Operator' in such a scenario under Section 2(h) and 2(g). In fact 'Ownership' and 'Operatorship' based on possession of a vehicle which is subject to the aforesaid agreements and that with reference to entry in the name of Certificate of Registration have been defined separately and distinctly in Section 2(g) and Section 2(h). 104. The Financier is thus liable to pay tax etc. as aforesaid. In this context, the Financier can very well say that the Certificate of Registration or perm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 7, 9(3) and 18 of the Rules, 1998 as discussed hereinabove. As stated earlier Form-A referred in Section 13 read with Rule 7 is also indicative of the requirement of the Financier, in such a situation, to get its name entered in the Certificate of Registration in respect of the vehicle in question and submit a declaration in Form-A. This is also the requirement under the Act, 1988. 107. Section 51(5), it appears, applies, even in cases where, on possession being taken by the Financier, as aforesaid, Certificate of Registration is handed over by the registered owner to it, as is evident from the contents of Form-36, as already quoted, which is referred in Rule 61(2) of the Rules, 1989 read with Section 51(5) of the Act, 1988. Liability to pay arrears of tax, additional tax and penalty from the date of possession by the Financier 108. The words 'from the date of taking possession of the said vehicle' occurring in Question No. 1 cannot only be understood as a reference to current liability to pay tax etc. arising from the date of such possession which has already been dealt with by us, but, it can also be understood as a reference to liability to pay tax etc. as e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not possible to recover it from such a person, may be on account of the fact that he is absconding or is untraceable or his whereabouts are not known or he has become insolvent or there are similar other reasons jeopardizing the interest of revenue, Taxation Officer can proceed to recover such arrears from the Financier who has taken possession of the vehicle, in respect of which such arrears are due. 113. It could be asked why should the Financier be made liable for recovery of arrears of tax and penalty for a period prior to such possession merely because he had taken possession of the vehicle on account of breach of agreement, that too, subsequently? Would it not be unfair and equitable? Would it not put a premium on default by the registered owner (borrower), by making the Financier unfairly liable? This is where Section 20(2) becomes relevant. According to this provision, such tax, additional tax and penalty payable under Act, 1997, which has not been paid i.e. the arrears thereof, as is mentioned in Section 20(1), shall be the 'first charge' on the motor vehicle including its accessory under Section 20(2). Thus, the 'first charge' regarding arrears ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 9(3) and 20(3) and not Section 9(2) as it is not a voluntary act of transfer of ownership by the registered owner, assuming that it is covered under the term 'transfer' under Section 9(2), the financier, as transferee/deemed owner, would still be liable to pay tax etc. due on or before the date of such transfer i.e. arrears of tax as already discussed. The rationale behind the provision has already been mentioned. Here again this would be without prejudice to liability of the transferor in this regard. Thus the taxation officer can proceed against both of them on almost the same analogy as discussed in the context of Section 9(3). 117. The distinction if any between Section 9(2) and 9(3) in this regard is on account of existence of a deeming clause in Section 9(2) and the transfer referred therein being a voluntary act as already discussed earlier, whereas, taking of possession based on breach of agreement is more of a compulsion to avoid loss and secure the loan and there is no deeming clause applicable in this regard nor does the concept of joint and several liability come into play when the Financier was neither owner nor operator during the period of such arrears. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to us. It only considers the requirement of issuance of notice prior to recovery of tax, therefore, the said decision is not relevant to the questions which we have considered. 122. As regards decision in the case of Shri Prakash (supra) the petition in the said case was dismissed only on the failure of the petitioner to show to the Court the relevant provision under which a registered owner ceased to be liable to tax because possession of the vehicle had been taken over by the Financier. The decision does not consider relevant provisions of the Act and the Rules nor the law on the subject, as has been done by us, therefore, it does not contain any 'ratio decidendi' which may constitute a binding precedent on the subject nor is it relevant in the context of the questions under consideration. 123. The Division Bench in Amar Nath Chaubey's case (supra) incorrectly introduced the concept de jure and de facto possession to the second part of the definition of owner in Section 2(h) of the Act, 1997 requiring the person in possession to be its registered owner also. The Division Bench also erred in applying Section 9(2) the way it did ignoring the stipulation in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in the event a Financier takes possession of the vehicle but does not get a fresh Certificate of Registration issued in his name in terms of Section 51(5), then, the Taxation Officer would not be able to know of the said transaction so as to impose and enforce liability to tax upon the Financier but then in such an eventuality he would make the registered owner liable as per the Act, 1997 and the Rules, 1998 as already discussed in the context of question No. 1 whereupon, the registered owner would obviously come forward and inform him about the transaction, unless he disputes it. In the latter case he would be liable and in the former, the Taxation Officer, on getting knowledge of the possession by the Financier, will issue notice to him under Rule 18 of the Rules, 1998 for the tax payable from the date of such possession as the details of the Financier are also mentioned in the Certificate of Registration and registration records maintained by the Registering Authority. Moreover, intimation of arrears of tax is also sent to the Financier under Rule 18(3) read with Form-E-1 of the Act, 1997 on his address. 124. The fact that the name of the Financier, after taking possessio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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