Financier Entitled To Fresh Registration Certificate When Registered Owner Defaults On Loan Repayments Under MV Act: Allahabad HC

The Allahabad High Court dismissed the Petition under the Motor Vehicles Act while holding that if the registered owner defaults on loan repayments, the financier is entitled to acquire a fresh registration certificate in their own name.

The Division Bench of  Justice Manoj Kumar Gupta and Justice Manish Kumar Nigam observed, “The aforesaid provisions clearly reveal the scheme of the Act and the Rules to the effect that when there is default on part of the registered owner in repaying the loan to the financier in terms of the agreement and on account of which the financier takes possession of the vehicle, the finance becomes entitled to a fresh certificate of registration in his name”.

In this case, the petitioner had taken a loan from the financier to purchase the truck. The petitioner defaulted on the loan repayments, and the financier took possession of the truck. The financier then filed Form-36 with the RTO to request a new registration certificate (RC) in its name. However, the RTO did not transfer the vehicle to the financier, so the financier filed a writ petition in Court. The Court ordered the RTO to take a final decision on the matter within six weeks. Thereafter, the RTO passed the impugned order directing the grant of a fresh registration certificate in favour of the financier under Section 51(5) of the Motor Vehicle Act, 1988 (MV Act).

Advocate Virendra Jaiswal appeared for the petitioner while CSC appeared for the Respondent before the Court.

The Court emphasized that the key requirement for exercising power under sub-section (5) of Section 51 is proving that the registered owner acquired the vehicle through financing and subsequently defaulted on repayment as per the agreement. Additionally, it is necessary to establish that the financier has taken possession of the vehicle from the registered owner.

The Court noted, “The main ingredient for exercise of power under sub section (5) of Section 51 is the establishment of the fact that the registered owner had purchased vehicle by taking finance and had defaulted in repayment of the amount in terms of the said agreement. The other necessary ingredient is that the financier has taken possession of the vehicle from the registered owner. All these ingredients are fully established in the instant case". 

Additionally, the Court asserted, "The registered owner is, therefore, required to surrender the certificate of registration so that it is cancelled and a fresh certificate of registration is issued in the name of the financier. Where the registered owner does not surrender the certificate of registration or absconds, he is put to notice and when even thereafter the certificate of registration is not produced, the Registering Authority has been conferred with power to issue new registration certificate to the financier notwithstanding the fact that the original registration certificate had been withheld by the registered owner or had absconded”.

Accordingly, the Court dismissed the petition.

Cause Title: Shahrukh Saleem v. State of U.P. and Ors

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