It is common for automobile manufacturers to enter into dealership agreements with dealers or showroom operators on a principal-to-principal basis. A principal-to-principal arrangement proves advantageous since it makes the dealer solely liable for his transactions with the buyers. The Hon'ble Supreme Court in a recent decision in Tata Motors Ltd. v. Antonio Paulo Vaz and Ors.1, held that the liability of the deficiency of service of a dealer could not be fastened onto a car manufacturer when the contract was on a principal-to-principal basis, and no knowledge of the dealer's wrongful acts was attributable to the car manufacturer. The present article briefly summarises the findings of the Hon'ble Supreme Court.
In 2011, the first respondent bought a car after paying the entire consideration price from the second respondent, a dealership of the appellant corporation. A 2009 model car, having already clocked a considerable number of kilometres, was sold to the first respondent instead of a new car. The first respondent refusing to take delivery preferred a complaint before the Goa District Consumer Forum (District Forum). Despite the service of notice, the second respondent failed to appear and remained unrepresented. The District Forum heard the appellant and held that both the appellant and the second respondent were jointly and severally liable for 'deficiency in service'. The District Forum noted that the car was fully corrugated and had scratch marks on the body. Therefore, the District Forum held that the appellant and the second respondent were required to replace the car with interest from the delivery date and further pay INR 20,000 towards mental stress and INR 10,000 towards costs.
Aggrieved by the District Forum's order, the first respondent preferred an appeal which was then rejected by the State Consumer Disputes Redressal Commission (State Commission). Before the National Consumer Disputes Redressal Commission (National Commission), the appellant contended that the first respondent was not a consumer since he did not accept the car's delivery from the second respondent. Moreover, the appellant argued that no liability could be fastened on the appellant, given the principal-to-principal relation between the appellant and the second respondent. The National Commission refused to accept the appellant's contentions and upheld the District Forum's decision. The National Commission further passed an order requiring the appellant to pay additional costs to the tune of INR 2,00,000 (INR 1,00,000 towards the first respondent and INR 1,00,000 towards the Consumer Legal Aid Account of the District Forum). Hence, the present matter.
Arguments of the parties
The appellant contested the National Commission's findings that besides impleading the appellant and seeking relief, no allegations against it were made in the first respondent's complaint before the District Forum. The appellant submitted that the complainant never alleged or proved that the appellant or one of its employees was privy to the transaction in question or led the first respondent to purchase the car from the second respondent. The appellant relied upon the decision in Maruti Udyog Ltd. v. Susheel Kumar Gabgotra2 to contend that unless the appellant could establish that there was a defect in the car, the manufacturer could not be fastened with the liability.
On the other hand, the first respondent contended that the appellant deliberately misrepresented by selling an old car without the promised accessories. Therefore, the first respondent submitted that the appellant's acts amounted to unfair trade practice and deficiency in service within the meaning of the expression. The first respondent relied upon the case Jos Phillip Mampilil v. Premier Automobiles Ltd. and Anr.3 wherein it was observed that: "it is shameful that a defective car was sought to be sold as a brand-new car and instead of acknowledging the defects, the manufacturer chose to deny its liability." The first respondent further relied upon the case in Vivek Automobiles Ltd. v. Indian Inc.4 to argue that a car dealer always acts as the agent of the manufacturer.
Findings of the Hon'ble Supreme Court
The Hon'ble Supreme Court took note that no role or wrong-doing was attributed to the appellant before the District Forum in the instant matter. Further, commenting on the principal-to-principal relation between the appellant and the second respondent, the Hon'ble Supreme Court relied upon the decision in Indian Oil Corporation v. Consumer Protection Council, Kerala.5 In Indian Oil Corporation, it was held that in a principal-to-principal contract, Indian Oil could not be held liable for its distributor's unauthorised acts. Since there was no privity of contract between Indian Oil and the consumer, no 'deficiency' as defined under Section 2(g) arose against Indian Oil. The Hon'ble Supreme Court further relied upon the decision in General Motors (I) (P) Ltd. v. Ashok Ramnik Lal Tolat6 to hold that a claim had to be specifically pleaded before the court for it to be adjudicated upon. In General Motors, it was held that where the party did not plead for a relief, the National Commission was wrong in awarding the same.
On the facts of the instant case, the Hon'ble Supreme Court observed that the record established an absolute dearth of pleadings from the first respondent concerning the appellant's role or special knowledge about the alleged misrepresentation. The lack of any pleadings on the appellant's involvement was held to be fatal to the complaint of the first respondent. The findings of the National Commission on the appellant were held to be unjustified. It was observed that the first respondent's failure to plead or prove the appellant's liability could not be improved upon through inferential findings as it were in case of the decisions of the District Forum, State Commission and National Commission. Hence, the Hon'ble Supreme Court concluded that unless the appellant's knowledge was proven, a decision fastening the liability upon it would be untenable, primarily when the appellant and the first respondent were operating on a principal-to-principal basis.
The decision in the instant case is one of the many instances where a consumer case was contested against an entity up till the National Commission without proper pleadings and a claim being made at the court of the first instance. Cases like the present one and the one in General Motors (I) (P) Ltd. narrate a cautionary tale on how not making a proper case against a party can cause considerable loss of time and resources of the litigants and the courts. In our view, it is of utmost important for the consumers to be aware of the legal intricacies when presenting a complaint before the consumer courts in India. This would ensure an efficient adjudicatory process and save the precious time and resources of the litigants and the courts.
1 Tata Motors Ltd. v. Antonio Paulo Vaz and Ors. 2021 SCC OnLine SC 125.
2 Maruti Udyog Ltd. v. Susheel Kumar Gabgotra (2006) 4 SCC 644.
3 Jos Phillip Mampilil v. Premier Automobiles Ltd. and Anr. (2004) 2 SCC 278.
4 Vivek Automobiles Ltd. v. Indian Inc. (2009) 17 SCC 657.
5 Indian Oil Corporation v. Consumer Protection Council, Kerala. (1994) 1 SCC 397.
6 General Motors (I) (P) Ltd. v. Ashok Ramnik Lal Tolat (2015) 1 SCC 429.
The authors wish to acknowledge the research and assistance rendered by Harshvardhan Korada, a student of Amity Law School, Delhi.
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