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Car maker not responsible for dealer selling faulty car without manufacturer’s knowledge: Supreme Court

Supreme Court has ruled that the relationship between a car manufacturer and a dealer is on a principal-to-principal basis and the former cannot be blamed for the actions of the dealer that led to the sale of a defective car unless its knowledge about such defects can be proved. The ruling was passed on the Tata Motors Limited Vs Antonio Paulo Vaz. The court said unless the manufacturer’s knowledge is proved, a decision fastening liability upon the manufacturer would be untenable.

The court has also absolved Tata Motors of the liability imposed upon it by the National Dispute Redressal Commission (NCDRC) for the sale of a defective two-year-old car by the dealer. The NCDRC had upheld a claim of the owner Antonio Paulo Vaz regarding the sale of a defective car. NCDRC also ordered the replacement of the defective car besides payment of Rs 2 lakh as costs born by the customer.

What exactly happened?

The incident came to light in 2011 when Vas bought a car paying the agreed-upon total for a car. Vaz availed a loan to buy the 2009 car which already had 622 km on the odometer when it was sold to him. Vaz, after realising that it is an old car requested for refund of the price paid or replacement of the car. The dealer did not refund the money or replaced the car. Vaz refused to take the delivery of the 2009 car and filed a complaint before Goa District Consumer Redressal Forum (District Forum).

The district forum order said that there are a few defects in the car including the undercarriage of the vehicle that was fully corrugated and had scratch marks on the body. The alloy wheels were also corrugated inside and car also had 622 km on the odometer before the delivery. Other parts like the music system were not provided as promised. The forum held the manufacturer and the dealer jointly and severally liable to replace the car with interest at 10 per cent from the date of delivery. Both manufacturer and the dealer were severally directed to pay Rs 20,000 towards mental stress and agony, in addition to Rs 5,000 for the costs.

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 was unsubstantiated by any material or documentary evidence. That’s why it also rejected the plea that no direct sale was undertaken by the appellant. The forum ruled that since the appellant sold the defective car which was manufactured by them, the dealer and the appellant were liable for the sale of the defective car.

Bar and Bench quote Supreme Court judgement,

“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. All these are real possibilities,” the judgment states.