Sale of defective car due to dealer’s fault will not make car manufacturer liable unless knowledge can be proved: Supreme Court

When the relationship between a car manufacturer and a dealer is on a principal-to-principal basis, the former cannot be saddled with liability arising from the actions of the latter that led to sale of a defective car, unless its knowledge about such defects can be proved, the Supreme Court has ruled (Tata Motors Limited v. Antonio Paulo Vaz). .Unless the manufacturer’s knowledge is proved, a decision fastening liability upon the manufacturer would be untenable, given that its relationship with the dealer, in the facts of this case, were on principal-to-principal basis, the Court held..“Special knowledge of the allegations and involvement, in an overt or tacit manner, by the manufacturer has to be proved to lay the charge of deficiency of service at its door. In the absence of the same, having regard to the nature of the dealer’s relationship with the appellant, the latter’s omissions and acts could not have resulted in the manufacturer’s liability,” the Court said..The Court, therefore, absolved Tata Motors of the liability imposed upon it by the National Dispute Redressal Commission (NCDRC) for sale of a defective two-year-old car by the dealer. .The judgment was rendered by a three-judge Bench of Justices UU Lalit, Hemant Gupta and S Ravindra Bhat in an appeal filed by Tata Motors Limited (appellant) challenging an order of the NCDRC.The NCDRC had upheld the claim of one Antonio Paulo Vaz regarding sale of a defective car and ordered replacement of the defective car besides payment of Rs 2 lakh as costs..The case arose in 2011 when Vaz bought a car after paying the agreed total consideration price.At the time of purchase, Vaz availed bank credit. A 2009 model car which had run 622 kilometres was sold to him in place of a new car. Vaz, therefore, requested for refund of the price paid or replacement of the car. The price was, however, not refunded and neither was the car replaced. Vaz refused to take delivery of the 2009 model car.He preferred a complaint before the Goa District Consumer Redressal Forum (District Forum)..The District Forum's order noted that the car had some defects - the undercarriage of the car was “fully corrugated (sic) and had scratch marks on the body. The alloy wheels were also corrugated (sic) inside and the car also travelled almost 622 km. Also some parts such as music system was not provided although agreed.”.It, therefore, held that there was deficiency in the service committed by the dealer and the manufacturer, and held them jointly and severally liable to replace the car with a new one of the same model or to refund the entire amount of the car with interest at 10 per cent from the date of delivery. Both were also jointly and severally directed to pay Rs. 20,000 to Vaz towards mental stress and agony, in addition to costs of Rs. 5,000..On appeal, the State Commission rejected the appellant’s plea that its relation with the dealer was on a principal-to-principal basis. The claim, it said, was unsubstantiated by any material or documentary evidence. Thus, it rejected the plea that no direct sale was undertaken by the appellant. The Commission concluded that the appellant sold to Vaz the defective car manufactured by it, and the dealer and the appellant were liable for sale of the defective car..The NCDRC upheld the findings of the State Commission, leading to the appeal before the Supreme Court..The Supreme Court noted that from the records, it was clear that there was a dearth of pleadings by the complainant with regard to the appellant’s role, or special knowledge about the two disputed issues, i.e. that the dealer had represented that the car was new, and in fact sold an old, used one, or that the undercarriage appeared to be worn out..This, the Court said, was fatal to the complaint.Therefore, while the findings against the dealer were justified, the findings against the manufacturer which had not sold the car to Vaz were not justified, the Court said.."It is difficult to expect the appellant, a manufacturer, to be aware of the physical condition of the car, two years after its delivery to the dealer. During that period, a number of eventualities could have occurred; the dealer may have allowed people to use the car for the distance it is alleged to have covered. Also, the use of the car and prolonged idleness without proper upkeep could have resulted in the undercarriage being corrugated (sic). All these are real possibilities,” the judgment states..The Court, therefore, set aside the orders of NCDRC and lower forums as against the manufacturer, Tata Motors..It made it clear that Vaz can execute an order for alternative relief (of refund, with interest granted to him, by the district forum, as affirmed by the State and National Commissions) through the district forum concerned..[Read Judgment]