The Gauhati High Court dismissed an appeal filed by a woman challenging a decree that directed her to refund an amount of ₹4,90,000 received as earnest money in connection with a proposed sale of a truck. The Court upheld the concurrent findings of the trial court and the first appellate court, which had concluded that the appellant had no legal authority to sell or transfer the vehicle as she was not its owner at the relevant time. The High Court held that the decree directing refund of the amount, along with interest, was legally sound and did not warrant interference.
The case arose from a transaction involving a Tata truck that had been purchased by the appellant under a hire-purchase agreement with a finance company. After acquiring the vehicle, the appellant defaulted on the instalment payments after a particular point, leaving substantial dues unpaid to the financier. During this period of default, she entered into an agreement with the respondent, under which the respondent paid earnest money and agreed to continue paying monthly instalments towards the outstanding loan amount. The understanding between the parties was that once the loan was cleared, the truck would be transferred to the respondent.
According to the respondent, he later discovered that the appellant had not cleared the loan instalments as represented and that significant dues remained outstanding with the finance company. He also alleged that certain recitals in the agreement, including one relating to payment of an additional sum of ₹1 lakh, were false. The respondent claimed that the agreement was executed while the loan was still subsisting and that the appellant had concealed material facts regarding her default and lack of ownership over the vehicle. On these grounds, he filed a money suit seeking refund of the amount paid to the appellant.
The appellant denied the allegations and contended that the respondent himself had failed to fulfill the obligations under the agreement. She asserted that the agreement provided for forfeiture of the earnest money in case the respondent failed to make the additional payment mentioned in the document. However, evidence placed before the courts showed that the appellant had defaulted on her loan obligations and that ownership of the vehicle remained with the finance company at the time the agreement of sale was executed.
The trial court, after examining the evidence, held that the appellant could not have legally agreed to sell the vehicle since she did not have ownership rights under the hire-purchase arrangement. The court found that the agreement was vitiated by suppression of material facts and that the respondent was entitled to recover the amount paid. The first appellate court affirmed these findings, noting that the appellant could not transfer any title in the vehicle when the financier continued to hold ownership rights.
When the matter reached the Gauhati High Court, the Single Judge observed that the appeal lacked merit and that the appellant had failed to dislodge the well-reasoned conclusions of the lower courts. The High Court noted that under the Motor Vehicles Act and the terms of the hire-purchase agreement, ownership of the vehicle could not be claimed by the appellant until the loan was fully discharged. Consequently, any agreement to sell the vehicle during the subsistence of the loan was legally untenable.
The High Court also took note of the fact that the vehicle had at one point been seized in connection with a criminal case and was later returned to the appellant’s possession. It observed that the appellant did not dispute that the vehicle was eventually returned, and this circumstance did not alter the fundamental issue regarding ownership and validity of the agreement. The Court found that directing refund of the entire amount received by the appellant was justified in the facts of the case.
Referring to principles under the Indian Contract Act, the High Court held that an agreement with a fraudulent object or one executed by suppressing material facts is void. The Court observed that the appellant’s failure to disclose the subsisting loan and her default in instalment payments amounted to suppression of material information. On this basis, the respondent was entitled to seek restitution of the money paid, and compensation under the relevant provisions of law was warranted.
The High Court emphasized that the findings of fact recorded by the trial court and affirmed by the appellate court were based on evidence and admissions made during the proceedings. It held that there was no perversity or legal infirmity in those findings. Since the respondent had established his claim on the balance of probabilities, the decree directing refund of ₹4,90,000 along with interest at the rate of seven percent per annum was upheld.
Accordingly, the Gauhati High Court dismissed the appeal and affirmed the decree passed by the lower courts. The judgment reiterated that a person who lacks ownership over a property cannot lawfully transfer or agree to sell it, and if money is received under such an invalid agreement, it must be refunded to the party who paid it.
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