Sri Lanka Law Reports
Viking Tours Ltd.v.
The Finance Co. Ltd. and Another
SAMARAKOON, C. J„ WEERARATNE, J. AND SHARVANANOA, J.
S.C. 76/80-C.A. APPLICATION 986/79-M.C. COLOMBO (PORT) 29688OCTOBER 16.1961.
Administration of Justice Law. No. 44 of 1973, section 102-Disposal of propertysailed by police officer—Scope of inquiry to be held by Magistrate—Hire-purchaseagreement—Seizure of vehicle by Finance Company for default—Whether validity ofsuch agreement can be adjudicated upon in these proceedings—Code of CriminalProcedure Act, No. IS of 1979, section 431.
On application being made by the Police for the disposal of an omnibus alleged to havebeen stolen from the appellant-company, the vehicle was claimed by the 1st respondentcompany as well, on the basis that they had seized it under a hire purchase agreemententered into with the appellant. After the said vehicle had been seized on termination ofthe hire-purchase agreement, the Police had taken custody of it on a complaint ofrobbery made by the appellant and produced it in the Magistrate's Court. At theinquiry into the application made by the Police, the appellant-company whileadmitting the hire-purchase agreement contended that it was merely a "cover" for amoney lending transaction between the parties and not a valid hire-purchase agreement.The Magistrate accepted this position and taking the view that the Court was entitledto look into the true nature of the transaction between the parties held that theappellant was entitled to the vehicle.
On an application in revision made to the Court of Appeal, this order was set aside andthe vehicle directed to be handed over to the 1st respondent. The appellant preferred anappeal to the Supreme Court from this order.
The Magistrate exceeded his Jurisdiction under section 102 of the Administration ofJustice Law (which corresponds to section 431 of the Code of Criminal Procedure Act,No. 16 of 1979) in embarking on an inquiry into the validity or genuineness of thehire-purchase agreement. A Magistrate does not exercise a civil jurisdiction under section102 and cannot go behind the hire-purchase agreement and re-open the transaction andgrant relief in law or equity, once it is admitted that the parties entered into ahire-purchase agreement. Accordingly the judgment of the Court of Appeal must beaffirmed.
APPEAL from a judgment of the Court of Appeal.
E. O. Wickremanayeke, with M. Hussain, for the 2nd claimant-petitioner-respondent.
V. S. A. PuUenayagam. with D. S. de Silva and Miss C. Abeysekera. for the 1stclaimant-petitioner-respondent.
Cur. adv. vult.
Viking Tours Ltd. v. The Finance Co. Ltd. (Sharvananda, J.i
November 20, 1981
The scope of an inquiry under section 102 of the Administrationof Justice Law (which correspondents to section 431 of the Codeof Criminal Procedure Act, No. 15 of 1979) arises in this case.Section 102 (1) provides that:
"The seizure by any Police officer of property alleged orsuspected to have been stolen or found under circumstanceswhich create suspicion of the commission of any offence shallbe forthwith reported to a Magistrate who shall make suchorder as he thinks fit in respect of the delivery of such propertyto the person entitled to possession thereof, or if such personcannot be ascertained in respect of the custody and productionof such property."
An application was made by the Police under the above sectionfor the disposal of an omnibus bearing No. 23 Sri 7698 alleged orsuspected to have been stolen from Viking Tours Ltd. On 5thOctober, 1978, the vehicle in question was removed from thepossession of Viking Tours Ltd. by The Finance Co. Ltd. TheFinance Co. Ltd. claimed that they seized the vehicle under ahire-purchase agreement dated 21st December, 1976, entered intobetween them and the 2nd Claimant. Paragraph 13(1) of theagreement provided that:
"If during the continuance of the hiring, the hirer (VikingTours Ltd.) make default in punctually paying any monthlyhiring rental (whether demanded or not) as and when it fallsdue, the owners (The Finance Co. Ltd.) should be entitled,should they think fit, to terminate the hiring either by givingthe hirer notice in writing of such termination or by recoveryof the vehicle without giving any such notice".
By the said agreement, Viking Tours Ltd. agreed and undertookto pay a monthly hiring rental of Rs. 6,536.70, payable on orbefore the 21st day of each month, commencing in the month ofJanuary 1977. The hirer paid only a sum of Rs. 5,000 against themonthly rental and defaulted in the payment of the other rentals.The Finance Co. Ltd., as it lawfully might, terminated the saidhire-purchase agreement on 26th July, 1977, and demanded fromthe hirer the return of the said vehicle. Viking Tours Ltd. havingfailed to return the said vehicle, The Finance Co. Ltd., in terms ofthe said agreement, seized the said vehicle No. 23.Sri 7698 on 5th
Sri Lanka Law Reports
October, 1978, from the custody of the appellant. Thereafter, ona complaint of robbery being made by Viking Tours Ltd., thePolice took over the custody of the said vehicle from thepossession of The Finance Co. Ltd. and produced same in theMagistrate's Court of Colombo and made application to the saidCourt for the disposal of the said vehicle in terms of section102 (1) of the Administration of Justice Law.
At the inquiry into the application of the Police, The FinanceCo. Ltd (the 1st claimant) and Viking Tours Ltd. (the 2ndclaimant) made claims to the said vehicle. At the inquiry, Mr. A.S. Gunatilleka, a Director of the 2nd claimant-company, gaveevidence and stated that Viking Tours Ltd. imported the saidvechicle and that the Company needed R$. 1% lakhs for thepayment of debts incurred in connexion with the importation ofthe said vehicle, which was valued at about Rs. 7 lakhs, and inconnexion with the obtaining of this money, the Companyentered into the hire-purchase agreement P2. He further statedthat The Finance Co. Ltd. was willing to give them Rs. 1 'A lakhs"if we sign a certain agreement". He further stated that at ameeting of share-holders in December 1976, it was decided toenter into a hire-purchase agreement with The Finance Co. Ltd.He admitted that he signed on behalf of the 2nd claimant the saidhire-purchase agreement P2. The 2nd claimant howevercontended that the agreement P2 was not a valid hire-purchaseagreement, but was a 'cover' for a money-lending transaction,whereby the said vehicle was given as security for the loan ofRs. 150,000.
By his order, the Magistrate accepted the submission of the 2ndclaimant and held that "there was no genuine hire-purchaseagreement and that the transaction was a money-lendingtransaction where Viking Tours Ltd. borrowed Rs. VA lakhs onthe security of the vehicle which was worth about Rs. 6 or Rs. 7lakhs". His view was that in an inquiry under section 102, theCourt was entitled to probe into the true nature of the transactionbetween the claimants and was not hamstrung by the documentwhich purports to set out the agreement between the parties. Onthe view taken by him of the circumstances of the transaction, heheld that the 2nd claimant, Viking Tours Ltd., was entitled to thevehicle.
By his order, the Magistrate accepted the submission of the 2ndclaimant and held that "there was no genuine hire-purchase
Viking Tours Ltd. v. The Finance Co. Ltd. (Sharvananda,JJ
agreement and that the transaction was a money-lending transactionwhere Viking Tours Ltd. borrowed Rs. 1 % lakhs on the security .of the vehicle which was worth about Rs. 6 or Rs. 7 lakhs". Hisview was that in an inquiry under section 102, the court wasentitled to probe into the true nature of the transaction betweenthe claimants and was not hamstrung by the document whichpurports to set out the agreement between the parties. On theview taken by him of the circumstances of the transaction, heheld that the 2nd claimant, Viking Tours Ltd., was entitled to thevehicle.
The Finance Co. Ltd. thereupon moved the Court of Appealto revise the said order, and the Court of Appeal by its order dated29th September, 1980, set aside the order of the Magistrate anddirected the vehicle to be handed over to The Finance Co. Ltd.(the 1st claimant). Viking Tours Ltd. (the 2nd claimant) haspreferred this appeal from the said order.
At the hearing before us, counsel for the 2nd claimantappellant submitted that the transaction between the appellantand The F inance Co. Ltd. was a money- lending transaction and thatthe said hire-purchase agreement P2 entered into by both theclaimants was a 'sham' to get over the provisions of the MoneyLending Ordinance. He contended that it was competent for theMagistrate at an inquiry under section 102 of the Administrationof Justice Law to go into the question whether there was agenuine hire-purchase agreement and that he could go behind theagreement to ascertain the rights of parties to the said vehicle.
The above contention of counsel cannot be accepted. In myview, the Magistrate exceeded his jurisdiction under section 102 ofthe Administration of Justice Law in embarking on an inquiry intothe validity or genuineness of the hire-purchase agreement andinto questions whether the said agreement reflected the truenature of the transaction between the parties. The jurisdiction thatthe Magistrate exercises under section 102 is not a civil jurisdiction.The Magistrate is not endowed with the civil jurisdiction of aDistrict Judge. He is not entitled, in an inquiry under section 102,to go behind the hire-purchase agreement and re-open thetransaction and grant relief in law or equity. The 2nd defendant-claimant-appellant admitted being a party to the hire-purchasetranscation. It is not a case of the Company denying being a party,and hence the parties are bound by the agreement until it is set
Sri Lanka Law Raports
<1981)1 S.L ft.
aside by a competent Court of civil jurisdiction. The question ofavoidance or annulment of the hire-purchase agreement is outsidethe ambit of the inquiry under section 102 of the Administrationof Justice Law. Different considerations, however, will apply if aclaimant denies being a party to the agreement or if the agreementis illegal. In this case the Magistrate has misdirected himself whenhe proceeded to hold that the agreement between the parties wasnot a hire-purchase agreement but was a cloak for a money-lending transaction. It was not open to the 2nd claimant to agitatebefore the Magistrate issues relating to reliefs which only a civilCourt is competent to grant.
The order of the Court of Appeal is affirmed and the appeal ofthe 2nd claimant-appellant is dismissed.
SAMARAKOON, C.J. — I agree.
WEERARATNE, J.-l agree.
Viking Tours Ltd v. The Finance Co. Ltd and Another