Supreme Court: Manufacturer not liable for dealer's deficiency

Supreme Court: Manufacturer not liable for dealer's deficiency

Tata Motors' plea that it cannot be held guilty if the dealer sold an old car to a customer as new was held by the Apex Court

The Supreme Court has absolved Tata Motors Limited of any wrongdoing arising due to the fault of its dealer in Goa for selling an old vehicle to an unsuspecting customer for which it was held guilty along with the dealer by various forums.

The Court held that unless it is proved that the manufacturer was aware of the deficiency of the dealer, the manufacturer cannot be held guilty for any wrongdoing on the part of the dealer.

A three-judge bench of the Apex Court, comprising Justices UU Lalit, Hemant Gupta and Ravindra Bhat accepted an appeal filed by Tata Motors Limited and absolved it of the liability arising out of an unfair trade practice by one of its Goa-based dealers, Vistar Goa(P) Ltd.

One customer Antonio Paulo Vaz had filed a consumer complaint in the District Forum seeking a refund of the money or replacement of the car with a 2011 model vehicle.

Vistar Goa had sold a 2009 model car to Vaz under the pretext that it was a 2011 model car. Tata Motors was also made an opposite party, along with the dealer In the complaint.

The District Forum allowed the reliefs sought in the complaint, holding both the manufacturer and dealer liable for it. Tata Motors' appeal that it cannot be held liable for the dealer's fault was dismissed by the State Commission. The National Consumer Disputes Redressal Commission also failed to give relief to Tata Motors and affirmed the findings of the State Commission and the District Forum leading to Tata Motors approaching the Supreme Court.

"The record establishes the absolute 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, in the opinion of this court, was fatal to the complaint. No doubt, the absence of the dealer or any explanation on its part, resulted in a finding of deficiency on its part, because the car was in its possession, was a 2009 model and sold in 2011.

"The findings against the dealer were in that sense, justified on demurrer. However, the findings against the appellant, the manufacturer, which had not sold the car to Vaz and was not shown to have made the representations in question, were not justified," the bench ruled.

The Court examined the terms of the dealership agreement and noted that the relationship was on a "principle-to-principle" basis. It further noted that there were no pleadings by the complainant (Vaz) that Tata Motors had special knowledge of the deficiencies of the dealer.

In the judgment authored by Justice Ravindra Bhat, the Court observed, "Special knowledge of the allegations made by the dealer, and involvement, in an overt or tacit manner, by the appellant, had to be proved to lay the charge of deficiency of service at its door. In these circumstances, 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 appellant's liability."

Allowing the appeal, the Supreme Court set aside the findings of the Consumer Fora as against Tata Motors.

The judgment referred to the precedents in Indian Oil Corporation v. Consumer Protection Council, Kerala (1994) 1 SCC 397 and General Motors (I) (P) Ltd. v. Ashok Ramnik Lal Tolat (2015) 1 SCC 429.

M/s Karanjawala & Co. represented Tata Motors by its Senior Advocate Siddharth Bhatnagar, Partner Debmalya Banerjee, Principal Associate Kartik Bhatnagar and Ujjwal Singh, Associate, in the Court.