SREI EQUIPMENT FINANCE LTD.versusRAMJAN ALI & ORS.

36                       [2021]
              SUPREME COURT     1 S.C.R. 36
                             REPORTS                        [2021] 1 S.C.R.


A                    SREI EQUIPMENT FINANCE LTD.
                                        v.
                            RAMJAN ALI & ORS.
                        (Criminal Appeal No. 6 of 2021)
B                             JANUARY 05, 2021
            [ASHOK BHUSHAN, R. SUBHASH REDDY AND
                       M. R. SHAH, JJ.]
            Central Motor Vehicles Rules, 1989: r.61 – Termination of
     hire purchase agreement – Hire purchase agreement entered into
C
     by appellant financier with the original owner/purchaser of vehicle
     – While registering the vehicle, an entry regarding hypothecation
     was made in the registration certificate – Failure on part of original
     owner to pay instalment of loan – Appellant referred dispute to
     arbitrator who passed award in favour of appellant for an amount
D    of Rs.25,97,053/- – Subsequently, original owner filed application
     before the Regional Transport Office (RTO), Basti for cancellation
     of entry of appellant as person with whom vehicle was hypothecated
     – Resultantly, entry of appellant’s name in the registration certificate
     of the vehicle was cancelled and fresh registration certificate in
     Form 23 was issued in the name of original owner without any
E
     entry of hypothecation – Clearance certificate was also issued by
     RTO, Basti for transfer of the vehicle to Respondent No. 1 within
     the jurisdiction of registering authority, Sitapur – On 9.1.2019, when
     vehicle was taken into possession by four persons, respondent no.1
     lodged FIR under ss.364 and 392 IPC – The vehicle was seized by
F    police – Chief Judicial Magistrate in his order while rejecting the
     application of respondent No.1 for release noticed the claim of the
     appellant, who had filed objection to the release application – The
     award was also placed before the Magistrate – The Magistrate
     noticed the case of the appellant that original owner and the second
     owner had manufactured fraudulent documents and in collusion
G
     with the officials of RTO, Basti managed to get the clearance
     certificate – Magistrate rejected the application for release –
     Meanwhile, appellant had filed an application before RTO, Basti
     claiming that cancellation of entry of hypothecation in favour of

H
                                       36
  SREI EQUIPMENT FINANCE LTD. v. RAMJAN ALI & ORS.                      37


the appellant in the registration certificate was based on forged       A
documents – RTO, Basti passed order dated 29.06.2019 setting aside
order of cancellation of finance agreement – Respondent no.1 filed
application u/s.482 Cr.P.C. challenging order rejecting his
application for release of vehicle – High Court allowed the
application and directed release of vehicle in favour of respondent
                                                                        B
no.1 – On appeal, held: Order dated 29.06.2019 was passed in
exercise of the statutory power of the registration authority under
s.55(5) of the Act, the legal consequence of the said order was that
registration certificate issued in Form 23 by RTO, Basti showing
the name of only the original owner with no entry of appellant has
been treated to be null and void – In consequence of that, all          C
subsequent acts including registration certificate issued in the name
of respondent No.1 by RTO, Sitapur became non est – Respondent
No.1 although claimed that he was a bonafide purchaser but fact
remained that he was beneficiary of fraud – High Court committed
error in directing the release of vehicle in favour of respondent
                                                                        D
No.1 – Order of the High Court, thus, is unsustainable – Order
passed for release of vehicle in favour of the appellant – Motor
Vehicles Act, 1988 – s.55(5).
      Allowing the appeal, the Court
       HELD : The High Court observed that registration                 E
certificate obtained from the office of Regional Transport Office,
Basti, was in the name of Amarnath Yadav as registered owner
with no endorsement of hypothecation, which fact was relied by
the High Court in the impugned order. The High Court failed to
notice that entry of hypothecation of the vehicle in favour of the
appellant was very much there in the original registration              F
certificate, which entry was got deleted by submitting a forged
Form 35 by original owner, which finding has been recorded in
the order of Assistant Regional Transport Officer dated
29.06.2019 cancelling the registration certificate on which reliance
has been placed by the High Court. The basis of the order of the        G
High Court was the certificate of registration in name of Amarnath
Yadav. Without considering the fact that by order dated
29.06.2019, the said certificate stood cancelled and was declared
void and non est, the High Court decided in favour of respondent
No.1. The High Court committed error in directing the release
                                                                        H
38            SUPREME COURT REPORTS                       [2021] 1 S.C.R.


A    of the vehicle in favour of respondent No.1 in whose name the
     vehicle was registered at Regional Transport Office, Sitapur, but
     in view of order dated 29.06.2019, the registration in favour of
     Amarnath Yadav and of certificate of clearance dated 16.08.2018
     having been set aside, there was no right in respondent No.1 to
     claim the release of the vehicle. The order of the High Court,
B
     thus, is unsustainable. The vehicle is directed to be released in
     favour of the appellant. [Paras 22, 23][50-A-G]
           Manoj and Ors. v. Shriram Tpt. Finance Co. Ltd. and
           Ors. JT 2002 (1) SC 293 – held inapplicable.
C                           Case Law Reference
     JT 2002 (1) SC 293              held inapplicable       Para 18
           CRIMINAL APPELLATE JURISDICTION : Criminal Appeal
     No. 6 of 2021.

D          From the Judgment and Order dated 28.01.2020 of the High Court
     of Judicature at Allahabad, Lucknow Bench, Lucknow in U/s 482/378/
     407 No. 4335 of 2019.
           Braj Kishore Mishra, Abhishek Yadav, Vinod Kumar, Robin
     Khokhar, Ms. Ritu Reniwal, Kumar Gaurav, B. N. Dubey, Suyesh
     Pradhan, Adarsh Upadhyay, Amit Singh, Amol Chitravanshi, Advs. for
E
     the appearing parties.
           The Judgment of the Court was delivered by
           ASHOK BHUSHAN, J. 1. Leave granted.
            2. This appeal has been filed challenging the judgment dated
F    28.01.2020 of High Court of Judicature at Allahabad, Lucknow Bench
     allowing the application under Section 482 Cr.P.C. filed by respondent
     No.1. By impugned judgment, High Court has directed for release of
     vehicle JCB No.UP 51 AT 5709in favour of the respondent No.1. The
     appellant, who was respondent No.3 before the High court aggrieved by
G    the judgment has come up in this appeal.
           3. Brief facts of the case and events necessary to be noted for
     deciding this appeal are:-
             3.1     One Amarnath Yadav purchased the JCB machine and
                     entered into a finance agreement dated 22.10.2016 with
H
SREI EQUIPMENT FINANCE LTD. v. RAMJAN ALI & ORS.                         39
             [ASHOK BHUSHAN, J.]

          the appellant under which agreement the appellant              A
          financed an amount of Rs.19,83,360/-. Under the
          agreement, Shri Amarnath Yadav (hereinafter referred
          to as “original owner”) agreed to repay the loan in 46
          monthly instalments @ Rs.56,300/- for each month from
          15.12.2016 to 15.09.2020.
                                                                         B
    3.2   The original owner being resident of District Basti, State
          of Uttar Pradesh applied for registration of the vehicle
          to the Regional Transport Officer, Basti. The vehicle
          was registered by Regional Transport Officer, Basti, Shri
          Amarnath Yadav as owner of JCB machine bearing
          Registration No. UP 51 AT 5709 and there being                 C
          agreement of finance with appellant, in the registration
          certificate the entry was made of the appellant as person
          in whose favour the vehicle was hypothecated as
          required by Section 51 of the Motor Vehicles Act, 1988.
          The original owner failed to pay any instalment of loan.       D
          The appellant as per terms of the finance agreement
          dated 22.10.2016 referred the dispute to an arbitrator.
          The arbitrator proceeded to decide the reference as per
          Arbitration and Conciliation Act, 1996. Notices were
          issued by Arbitrator to original owner. Original owner
          failed to appear before the arbitrator. The arbitrator         E
          gave an award dated 26.03.2018 in favour of the
          appellant namely M/s. Srei Equipment Finance Private
          Limited for an amount of Rs.25,97,053/- with interest
          @ 10% p.a. from the date of notice of termination
          (07.03.2017).                                                  F
    3.3   The original owner made an application with the Regional
          Transport Officer, Basti praying for seeking cancellation
          of entry of the appellant as person with whom the vehicle
          was hypothecated. Regional Transport Officer, Basti
          issued an order on 16.08.2018 cancelling the entry of          G
          appellant as financer. The Regional Transport Officer,
          Basti without any information to the appellant cancelled
          the entry of the appellant from the registration certificate
          and issued a fresh registration certificate in the name
          of original owner. On 16.08.2018, the Regional
                                                                         H
40    SUPREME COURT REPORTS                         [2021] 1 S.C.R.


A          Transport Officer, Basti issued a clearance certificate
           in favour of original owner noticing the fact that vehicle
           has been sold to Ramjan Ali, the respondent No.1 in the
           jurisdiction of other registration authority, i.e., Sitapur.
     3.4   On the basis of clearance certificate issued by Regional
B          Transport Officer, Basti, the respondent No.1, Ramjan
           Ali submitted an application for certificate of registration
           to Transport Department, Sitapur and a registration
           certificate dated 27.08.2018 was issued in the name of
           Ramjan Ali as owner. The registration certificate dated
           27.08.2018 also noted the entry of hypothecation in
C          favour of Magma Fincorp Limited. The respondent No.1
           after obtaining transfer from original owner has been
           using the vehicle.
     3.5   On 09.01.2019, the vehicle was taken possession by
           four persons, with regard to which an FIR Case Crime
D          No.08 of 2019 under Sections 364 and 392 was lodged
           by respondent No.1, Ramjan Ali in Police Station Sidhauli
           District Sitapur. The vehicle was seized on 27.01.2019
           by the police. Ramjan Ali filed an application before
           the Chief Judicial Magistrate, Sitapur for release of the
E          vehicle No. UP 51 AT 5709. Police submitted a report
           before the Chief Judicial Magistrate, Sitapur on the
           application of respondent No.1. The appellant also
           appeared before Chief Judicial Magistrate, Sitapur and
           filed an objection claiming to be the financer of the
           vehicle. The appellant’s objection stated that the
F          registration certificate, which was in the name of
           Amarnath Yadav, the original owner, there was entry in
           favour of appellant as the person with whom the vehicle
           was hypothecated. The original owner had not paid
           any amount and an award dated 26.03.2018 was passed
G          in favour of the appellant against the original owner.
           Objection further stated that original owner and
           respondent No.1 had manufactured fraudulent
           documents and in collusion with officials of Regional
           Transport Office, Basti had managed to obtain clearance
           certificate dated 16.08.2018. The Regional Transport
H
SREI EQUIPMENT FINANCE LTD. v. RAMJAN ALI & ORS.                        41
             [ASHOK BHUSHAN, J.]

          officer, Sitapur had transferred the vehicle and              A
          registration of the vehicle in the name of respondent
          No.1 which is illegal. The Chief Judicial Magistrate
          after noticing the case of the respondent No.1 as well
          as the appellant, who had filed a detailed objections
          observed that there is a dispute over ownership of
                                                                        B
          vehicle between respondent No.1 and appellant and
          hence there is no justifiable ground to release the vehicle
          in favour of any of the parties. The application filed by
          respondent No.1 for release as well as the objection of
          the appellant were rejected by order dated 04.05.2019.
          Before the aforesaid order dated 04.05.2019 was               C
          passed, the appellant filed an application before the
          Regional Transport Officer, Basti on 30.04.2019 claiming
          that the appellant was person with whom the vehicle
          was hypothecated and entry of hypothecation in favour
          of the appellant in the registration certificate was got
                                                                        D
          cancelled on the basis of forged Form-35 and the
          clearance certificate was wrongly issued in favour of
          original owner for transfer of the vehicle.
    3.6   The Regional Transport Officer after receipt of the
          application by the appellant dated 30.04.2019 issued
          notices to original owner on 30.04.2019, 08.05.2019,          E
          15.05.2019 and 01.06.2019, the original owner did not
          appear before the Regional Transport Officer nor gave
          any reply. The Assistant Regional Transport Officer
          after considering the materials produced by the appellant
          by application dated 30.04.2019 and other materials           F
          passed an order on 29.06.2019 setting aside the order
          of cancellation of finance agreement as well as the no
          objection certificate earlier issued by Regional Transport
          Officer, Basti. The Regional Transport Officer held
          that registration certificate issued by Regional Transport
          Officer, Basti in Form-23 in respect of vehicle(JCB           G
          Machine) bearing No. UP 51 AT 5709 and no objection
          certificate shall be treated as null and void. The
          Assistant Regional Transport Officer also wrote to the
          Superintendent of Police, Basti to register a case under
                                                                        H
42            SUPREME COURT REPORTS                           [2021] 1 S.C.R.


A                    appropriate section of the Indian Penal Code against
                     the original owner.
             3.7     The respondent No.1 filed an application under Section
                     482 Cr.P.C. before the High Court challenging the order
                     dated 04.05.2019 passed by the Chief Judicial Magistrate
B                    rejecting his application for release of the vehicle. The
                     appellant was subsequently impleaded as respondent
                     No.3 in the application under Section 482 Cr.P.C.
             3.8     The High Court vide its impugned judgment dated
                     28.01.2020 allowed the application under Section 482
C                    Cr.P.C., set aside the order of Chief Judicial Magistrate
                     dated 04.05.2019 and directed the release of the vehicle
                     in favour of respondent No.1 Ramjan Ali. The appellant
                     aggrieved by the said order dated 28.01.2020 has come
                     up in this appeal.

D          4. On 27.10.2020 while issuing the notice following order was
     passed:-
              “Issue notice, returnable in four weeks.
               We further direct that the vehicle bearing No.UP51AT-5709
           in question shall not be further transferred by the respondent no.1.”
E
           5. The counter affidavits have been filed by respondent Nos.2
     and 3 as well as respondent No.1.
           6. We have heard learned counsel for the appellant, learned
     counsel appearing for respondent No.1 as well as learned counsel
     appearing for the State.
F
            7. Learned counsel for the appellant submits that the vehicle was
     registered with Regional Transport Office, Basti in October, 2016 in the
     name of Amarnath Yadav, the original owner, with entry of appellant as
     a person with whom the vehicle was hypothecated. The original owner
     failed to pay the loan EMI and on a reference made to the arbitrator an
G    arbitration award dated 26.08.2018 was passed and after the arbitration
     award having been passed against the original owner, he hatched a plan
     to cheat the appellant. The original owner by submitting the forged
     documents including forged Form-35, got cancelled the entry of appellant
     in the registration certificate and a clearance certificate was issued on
H    16.08.2018 by Regional Transport Office, Basti. On the basis of clearance
  SREI EQUIPMENT FINANCE LTD. v. RAMJAN ALI & ORS.                           43
               [ASHOK BHUSHAN, J.]

certificate vehicle was got registered in the name of respondent No.1 at     A
Regional Transport Office, Sitapur. The transfer by original owner was
wholly illegal and without jurisdiction. The vehicle having been
hypothecated to appellant, it could not have been transferred without
clearing the loan and without consent of the appellant. The respondent
No.1, who is beneficiary of fraud was not entitled to the release of the
                                                                             B
vehicle and the High Court committed an error in releasing the vehicle in
favour of respondent No.1. It is further submitted that Regional Transport
Office, Basti having passed an order on 29.06.2019 cancelling the
registration certificate issued in the Form 23 as well as the No Objection
Certificate, High Court committed error in directing the release of the
vehicle in favour of respondent No.1. The vehicle being hypothecated to      C
appellant and there being award against original owner, the vehicle can
neither be transferred to respondent No.1 nor there is any right in
respondent No.1 to claim the vehicle.
       8. Learned counsel appearing for the respondent No.1 submits
that respondent No.1 is bonafide purchaser, who had paid amount of           D
Rs.7,50,000/- to original owner and has obtained finance of Rs.10 lakhs
from M/s. Magma Fincorp Limited, the vehicle was rightly released by
the High Court in his favour. It is submitted that in the registration
certificate, which was produced by original owner, there was no entry
of the hypothecation in favour of the appellant. The respondent No.1
has diligently obtained the transfer and got the vehicle registered in his   E
name with Regional Transport Office, Sitapur. The JCB machine, which
was purchased by respondent No.1 was not under any hire purchase
agreement, there is no error in purchase of the vehicle by respondent
No.1. The respondent No.1 after purchase of the vehicle has obtained
insurance cover and is paying the tax for the use of JCB to registering      F
authority, Sitapur. The vehicle having been forcibly taken possession on
09.01.2019, the same has rightly been released to the respondent No.1.
       9. Learned counsel appearing for the State submits that after
register of the FIR investigation was initiated by the Sub-Inspector and
it was found that Amarnath Yadav, the original owner died of cancer on       G
08.07.2019. In the counter affidavit filed by the State, necessary facts
of the case have been mentioned.
       10. We have considered the submissions of the learned counsel
for the parties and have perused the records.
                                                                             H
44            SUPREME COURT REPORTS                            [2021] 1 S.C.R.


A           11. The Motor Vehicles Act, 1988 contains detail provisions
     regarding registration of vehicle, transfer of ownership and special
     provisions regarding motor vehicle subject to hire purchase agreement.
     The present is a case where the appellant had entered into hire purchase
     agreement with original owner Amarnath Yadav on 22.10.2016. An
     entry regarding hypothecation was made in the registration certificate
B
     while registering the vehicle No. UP 51 AT 5709. Section 51(1), (3) and
     (4) which are relevant for the present case are as follows:-
           “51. Special provisions regarding motor vehicle subject to
           hire-purchase agreement, etc.—(1) Where an application for
           registration of a motor vehicle which is held under a hire-purchase,
C          lease or hypothecation agreement (hereafter in this section referred
           to as the said agreement) is made, the registering authority shall
           make an entry in the certificate of registration regarding the
           existence of the said agreement.
                                  XXXXXXXXXXXXX
D
           (3) Any entry made under sub-section (1) or sub-section (2), may
           be cancelled by the last registering authority on proof of the
           termination of the said agreement by the parties concerned on an
           application being made in such form as the Central Government
           may prescribe and an intimation in this behalf shall be sent to the
E          original registering authority if the last registering authority is not
           the original registering authority.
           (4) No entry regarding the transfer of ownership of any motor
           vehicle which is held under the said agreement shall be made in
           the certificate of registration except with the written consent of
F          the person whose name has been specified in the certificate of
           registration as the person with whom the registered owner has
           entered into the said agreement.
                                XXXXXXXXXXXXXX”
            12. From the facts, which have been brought on the record, it is
G
     clear that when the vehicle was initially registered at Regional Transport
     Office, Basti, the name of original owner was Amarnath Yadav and
     entry in the name of appellant as the person with whom the vehicle was
     hypothecated was there in the registration certificate. Rule 61 of The
     Central Motor Vehicle Rules, 1989 deals with termination of hire purchase
H    agreement etc. Rule 61, which is relevant is as follows:-
  SREI EQUIPMENT FINANCE LTD. v. RAMJAN ALI & ORS.                             45
               [ASHOK BHUSHAN, J.]

          “61. Termination of hire-purchase agreements, etc.—(1)               A
      An application for making an entry of termination of agreement
      of hire purchase, lease or hypothecation referred to in sub-section
      (3) of section 51 shall be made in Form 35 duly signed by the
      registered owner of the vehicle and the financier, and shall be
      accompanied by the certificate of registration and the appropriate
                                                                               B
      fee as specified in rule 81.
          (2) The application for the issue of a fresh certificate of
      registration under sub-section (5) of section 51 shall be made in
      Form 36 and shall be accompanied by a fee as specified in rule
      81.
                                                                               C
          (3) Where the registered owner has refused to deliver the
      certificate of registration to the financier or has absconded then
      the registering authority shall issue a notice to the registered owner
      of the vehicle in Form 37.”
       13. The entry of the appellant’s name in the registration certificate   D
of the vehicle was got cancelled by submission of Form 35 by original
owner and thereafter fresh registration certificate in Form 23 dated
14.08.2018 was issued in the name of Amarnath Yadav as original owner
without any entry of hypothecation. The clearance certificate dated
16.08.2018 was also issued by Regional Transport Office, Basti for
transfer of the vehicle to Ramjan Ali within the jurisdiction of registering   E
authority, Sitapur. In the FIR No.08/2019 under Sections 364 and 392,
the vehicle was seized on 27.01.2019. Chief Judicial Magistrate in his
order dated 04.05.2019 rejecting the application of respondent No.1 for
release has noticed the claim of the appellant, who had filed objection to
the release application. The award dated 26.03.2018 was also placed            F
before the Chief Judicial Magistrate where it was noted that outstanding
amount in favour of the appellant is Rs.25,97,053/-. Chief Judicial
Magistrate noticed the case of the appellant that original owner and the
second owner had manufactured fraudulent documents and in collusion
with the officials of the Regional Transport Office, Basti managed to get
the clearance certificate dated 16.08.2018 whereas No Objection                G
Certificate could not have been issued. The Chief Judicial Magistrate
has rejected the application for release.
      14. The Regional Transport Office, Basti had passed an order
dated 29.06.2019 in exercise of power under Section 55(5) of the Motor
                                                                               H
46            SUPREME COURT REPORTS                            [2021] 1 S.C.R.


A    Vehicles Act. Section 55(5) under which the order dated 29.06.2019
     was passed is to the following effect:-
                        “55. Cancellation of registration.—
                                 XXXXXXXXXXXXXX
B          (5) If a registering authority is satisfied that the registration of a
           motor vehicle has been obtained on the basis of documents which
           were, or by representation of facts which was, false in any material
           particular, or the engine number or the chassis number embossed
           thereon are different from such number entered in the certificate
           of registration, the registering authority shall after giving the owner
C          an opportunity to make such representation as he may wish to
           make (by sending to the owner a notice by registered post
           acknowledgement due at his address entered in the certificate of
           registration), and for reasons to be recorded in writing cancel the
           registration.
D                               XXXXXXXXXXXXXX”
           15. The order dated 29.06.2019 was filed before the High Court,
     which order has been looked into and commented by the High Court.
     The last paragraph of the order of the Assistant Divisional Transport
     Officer, Basti, which is relevant is as follows:-
E
           “Under the aforementioned facts and circumstances, I have
           arrived at the conclusion that Sh. Amarnath Yadav with the intention
           to cheat in a dishonest manner had fraudulently manufactured the
           Form 35 and on the basis of such fake document had managed to
           get the financial contract of the aforementioned vehicle cancelled.
F          It is a settled position of the law and that of the Motor Vehicle Act
           that an act which is void ab initio can never hold good with the
           efflux of time. (Quad initio vitionism est non protest tractu temporis
           convales cere). Keeping in mind the aforementioned maxim, I
           have arrived at the bonefide conclusion that Sh. Amarnath Yadav
           while concealing the actual facts had submitted fraudulently
G
           manufactured documents and thereby had managed to get the
           order dated 19.6.2018 for cancellation of the financial agreement
           in respect of the Vehicle No. UP 51 AT 5709 JCB and the order
           dated 16.8.2018 for issuance of the no-objection certificate of the
           vehicle. As such, I, while exercising the powers vested on me U/
H
  SREI EQUIPMENT FINANCE LTD. v. RAMJAN ALI & ORS.                              47
               [ASHOK BHUSHAN, J.]

      s 55 (5) of the Central Motor Vehicle Act 1988, do hereby set             A
      aside the previously Issued order of cancellation of finance
      agreement and the no-objection certificate. From today i.e. from
      29.6.2019, the registration certificate issued by this office in the
      Form 23 in respect of the aforementioned vehicle and the no-
      objection certificate shall be treated null and void. Sending a request
                                                                                B
      letter to the Registration Officer, Sitapur, with the expectation
      that he shall cancel the orders passed by his office on the basis of
      the forms issued by this office earlier and remit back the no-
      objection certificate of the vehicle to this office. That apart, let
      correspondence be made with the Superintendent of Police, Basti
      to lodge case under the appropriate sections of the IPC for the           C
      act done by Sh. Amarnath Yadav. Accordingly, the application
      dated 30.4.2019 of the Financier Srei Equipment Finance Limited
      made in connection with the Vehicle No. UP 51 AT 5709 JCB is
      being finally disposed of in the light of the aforementioned
      conclusion and provision of the Law.
                                                                                D
                                                 Sd// Registration Officer
                                       Motor Vehicle Department, Basti”
       16. The registering authority has come to the conclusion that Form
35 on the basis of which the entry in the name of the appellant as person
with whom the vehicle was hypothecated was fraudulently removed.                E
The Assistant Divisional Transport Officer has cancelled the order dated
16.08.2016 as well as the No Objection Certificate of the vehicle and,
thus, the registration certificate given by office of Regional Transport
Office, Basti in Form 23, which has been filed as Annexure CA-2 to the
counter affidavit of respondent No.1 has been held to be null and void.         F
All subsequent proceedings including certificate of registration obtained
by respondent No.1 on 27.08.2018 on the basis of certificate of clearance
dated 16.08.2018 shall also automatically be treated non est. The order
of the Assistant Divisional Transport Officer, Basti dated 29.06.2019
has not been shown to have been either set aside or stayed by any
competent court. The High Court in paragraph 10 of the judgment has             G
noted about the order of the Assistant Divisional Transport Officer. The
High Court has observed that the contents of the order dated 29.01.2019
are baseless and the action of the Assistant Regional Transport Office,
Basti is also derogatory. We fail to see that on what basis, the High
Court proceeded to make the following observations:-                            H
48            SUPREME COURT REPORTS                           [2021] 1 S.C.R.


A          “10. ……………the contents of the order dated 29.01.2019 are
           baseless and the action of ARTO, Basti is also
           derogatory,…………..”
            17. Although High Court was right in its observation that the record
     of office of Assistant Regional Transport Office, Basti was provided by
B    the officials to the owner of vehicles, but there were ample materials
     before Assistant Regional Transport Officer, which were submitted by
     application dated 30.04.2019 of the appellant and other records available
     with the Assistant Regional Transport Officer including four notices issued
     to original owner which has been noticed by Assistant Regional Transport
     Officer in his order. More so, when order of the Assistant Regional
C    Transport Officer dated 29.06.2019 has neither been set aside nor stayed,
     High Court could not have ignored the effect and consequences of the
     order. The order dated 29.06.2019 having been passed in exercise of
     the statutory power of the registration authority under Section 55(5), the
     legal consequence of the said order is that registration certificate issued
D    in Form 23 by Regional Transport Office, Basti showing the name of
     only Amarnath Yadav with no entry of appellant has been treated to be
     null and void.
            18. The High Court in its order has relied on judgment of this
     Court in Manoj and Ors. Vs. Shriram Tpt. Finance Co. Ltd. and
E    Ors., JT 2002(1) SC 293, where this Court has observed that vehicle
     having been released in favour of the registered owner though it was
     open for the financier to approach in the civil court for proper relief. In
     the above case, the motor vehicle was registered in the name of the
     appellant Manoj Sharma. On his application, the Magistrate has directed
     for release of the vehicle in favour of Manoj Sharma. The said order
F    was reversed by the High Court in revisional jurisdiction. The argument
     which was made before this Court was that there was a civil suit pending
     where an order of status quo was passed due to which the High Court
     was not justified in releasing the vehicle to Manoj Sharma. In the above
     case, this Court in paragraph 4 of the judgment has made following
G    observations:-
           “4. Mr. Rao appearing for the financier vehemently contended
           that in view of the pendency of the civil suits, and the order of the
           status quo passed therein, the magistrate was not justified in
           passing the order granting the vehicle in possession of Shri Manoj
H          Sharma. We do not find any substance in the aforesaid contention
  SREI EQUIPMENT FINANCE LTD. v. RAMJAN ALI & ORS.                                 49
               [ASHOK BHUSHAN, J.]

       inasmuch as the magistrate has categorically held in the order              A
       that the order delivering possession of the property to Shri Manoj
       Sharma is subject to any variation to be made by the civil court. If
       the financier was aggrieved by the order directing release of the
       vehicle in favour of Shri Manoj Sharma, who continues to be the
       registered owner of the vehicle, it was open for the financier to
                                                                                   B
       approach the civil court in the pending civil suit for interference.
       In this view of the matter, we set aside the impugned order of the
       High Court and direct that the order of the magistrate dated
       3.4.2000 be complied with, and in case Shri Manoj Sharma furnishes
       a necessary bond to the extent of Rs. 5 lacs, then the vehicle
       could be given to Shri Manoj Sharma, which would be subject to              C
       any variation of the order by the civil court.”
       19. In the above case, there was no dispute that Manoj Sharma
was registered owner of the vehicle. The present is a case where
registration certificate which was issued by Regional Transport Office,
Basti in Form 23 stood cancelled including the setting aside of the                D
clearance certificate dated 16.08.2018. The subsequent registration
obtained from Regional Transport Office, Sitapur on the strength of
clearance certificate dated 16.08.2018 shall also be of no avail to the
respondent No.1 in view of registration certificate having been set aside
on 29.06.2019. The above case, thus, has been wrongly relied by the
High Court in support of the claim of the respondent No.1.                         E

       20. The statutory authority while cancelling the registration
certificate of the vehicle issued by Regional Transport Office, Basti in
Form 23 has recorded his conclusion that entry of the appellant as a
person in whose favour the vehicle was hypothecated, which was there
in the original registration certificate has been fraudulently deleted. In         F
consequence of above, all subsequent acts including the registration
certificate issued in the name of respondent No.1 by Regional Transport
Office, Sitapur became non est. The respondent No.1 although claimed
that he is a bonafide purchaser but fact remains that he is beneficiary of
fraud.                                                                             G
        21. The High Court unduly influenced by the fact that application
for release of vehiclewas filedby respondent No.1, the High Court lost
sight of the fact that the appellant has also filed objection to the application
of release filed by respondent No.1 objecting the release and claiming
itself to be entitled to the vehicle as being person with whom the vehicle         H
50              SUPREME COURT REPORTS                         [2021] 1 S.C.R.


A    was hypothecated, whose hypothecation entry was fraudulently removed
     to facilitate the transfer in favour of respondent No.1, which was illegal
     and void.
            22. The High Court in paragraph 9 has observed that registration
     certificate obtained from the office of Regional Transport Office, Basti,
B    was in the name of Amarnath Yadav as registered owner with no
     endorsement of hypothecation, which fact was relied by the High Court
     in the impugned order. The High Court failed to notice that entry of
     hypothecation of the vehicle in favour of the appellant was very much
     there in the original registration certificate, which entry was got deleted
     by submitting a forged Form 35 by original owner, which finding has
C    been recorded in the order of Assistant Regional Transport Officer dated
     29.06.2019 cancelling the registration certificate on which reliance has
     been placed by the High Court in paragraph 9. The basis of the order of
     the High Court was the certificate of registration in name of Amarnath
     Yadav, which has been filed before us as Annexure CA-2. Without
D    considering the fact that by order dated 29.06.2019, the said certificate
     stood cancelled and was declared void and non est, the High Court
     decided in favour of respondent No.1.
            23. In view of the foregoing discussions, we are of the considered
     opinion that the High Court committed error in directing the release of
E    the vehicle in favour of respondent No.1 in whose name the vehicle was
     registered at Regional Transport Office, Sitapur, but in view of order
     dated 29.06.2019, the registration in favour of Amarnath Yadav (CA-2)
     and of certificate of clearance dated 16.08.2018 having been set aside,
     there was no right in respondent No.1 to claim the release of the vehicle.
     The order of the High Court, thus, is unsustainable and is hereby set
F    aside. We further order that vehicle No. UP 51 AT 5709 be released in
     favour of the appellant. Chief Judicial Magistrate, Sitapur shall ensure
     that vehicle is received back from respondent No.1 and released in favour
     of appellant on such terms and conditions as may be deemed fit and
     proper, which exercise shall be completed within a period of four weeks
G    from today. The appeal is allowed accordingly.

     Devika Gujral                                                Appeal allowed.




H