REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. 6 of 2021
(arising out of SLP (Crl.) No.3893/2020)
SREI EQUIPMENT FINANCE LTD. ...APPELLANT(S)
VERSUS
RAMJAN ALI & ORS. ...RESPONDENT(S)
J U D G M E N T
ASHOK BHUSHAN,J.
Leave granted.
2. This appeal has been filed challenging the
judgment dated 28.01.2020 of High Court of Judicature
at Allahabad, Lucknow Bench allowing the application
under Section 482 Cr.P.C. filed by respondent No.1.
By impugned judgment, High Court has directed for
release of vehicle JCB No.UP 51 AT 5709 in favour of
the respondent No.1. The appellant, who was
respondent No.3 before the High court aggrieved by
the judgment has come up in this appeal.
3. Brief facts of the case and events necessary to
be noted for deciding this appeal are:-
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3.1 One Amarnath Yadav purchased the JCB machine
and entered into a finance agreement dated
22.10.2016 with the appellant under which
agreement the appellant financed an amount of
Rs.19,83,360/-. Under the agreement, Shri
Amarnath Yadav (hereinafter referred to as
“original owner”) agreed to repay the loan in
46 monthly instalments @ Rs.56,300/- for each
month from 15.12.2016 to 15.09.2020.
3.2 The original owner being resident of District
Basti, State of Uttar Pradesh applied for
registration of the vehicle to the Regional
Transport Officer, Basti. The vehicle was
registered by Regional Transport Officer,
Basti, Shri Amarnath Yadav as owner of JCB
machine bearing Registration No. UP 51 AT
5709 and there being agreement of finance
with appellant, in the registration
certificate the entry was made of the
appellant as person in whose favour the
vehicle was hypothecated as required by
Section 51 of the Motor Vehicles Act, 1988.
The original owner failed to pay any
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instalment of loan. The appellant as per
terms of the finance agreement dated
22.10.2016 referred the dispute to an
arbitrator. The arbitrator proceeded to
decide the reference as per Arbitration and
Conciliation Act, 1996. Notices were issued
by Arbitrator to original owner. Original
owner failed to appear before the arbitrator.
The arbitrator gave an award dated 26.03.2018
in favour of the appellant namely M/s. Srei
Equipment Finance Private Limited for an
amount of Rs.25,97,053/- with interest @ 10%
p.a. from the date of notice of termination
(07.03.2017).
3.3 The original owner made an application with
the Regional Transport Officer, Basti praying
for seeking cancellation of entry of the
appellant as person with whom the vehicle was
hypothecated. Regional Transport Officer,
Basti issued an order on 16.08.2018
cancelling the entry of appellant as
financer. The Regional Transport Officer,
Basti without any information to the
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appellant cancelled the entry of the
appellant from the registration certificate
and issued a fresh registration certificate
in the name of original owner. On
16.08.2018, the Regional Transport Officer,
Basti issued a clearance certificate in
favour of original owner noticing the fact
that vehicle has been sold to Ramjan Ali, the
respondent No.1 in the jurisdiction of other
registration authority, i.e., Sitapur.
3.4 On the basis of clearance certificate issued
by Regional Transport Officer, Basti, the
respondent No.1, Ramjan Ali submitted an
application for certificate of registration
to Transport Department, Sitapur and a
registration certificate dated 27.08.2018 was
issued in the name of Ramjan Ali as owner.
The registration certificate dated 27.08.2018
also noted the entry of hypothecation in
favour of Magma Fincorp Limited. The
respondent No.1 after obtaining transfer from
original owner has been using the vehicle.
4
3.5 On 09.01.2019, the vehicle was taken
possession by four persons, with regard to
which an FIR Case Crime No.08 of 2019 under
Sections 364 and 392 was lodged by respondent
No.1, Ramjan Ali in Police Station Sidhauli
District Sitapur. The vehicle was seized on
27.01.2019 by the police. Ramjan Ali filed
an application before the Chief Judicial
Magistrate, Sitapur for release of the
vehicle No. UP 51 AT 5709. Police submitted
a report before the Chief Judicial
Magistrate, Sitapur on the application of
respondent No.1. The appellant also appeared
before Chief Judicial Magistrate, Sitapur and
filed an objection claiming to be the
financer of the vehicle. The appellant’s
objection stated that the registration
certificate, which was in the name of
Amarnath Yadav, the original owner, there was
entry in favour of appellant as the person
with whom the vehicle was hypothecated. The
original owner had not paid any amount and an
award dated 26.03.2018 was passed in favour
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of the appellant against the original owner.
Objection further stated that original owner
and respondent No.1 had manufactured
fraudulent documents and in collusion with
officials of Regional Transport Office, Basti
had managed to obtain clearance certificate
dated 16.08.2018. The Regional Transport
officer, Sitapur had transferred the vehicle
and registration of the vehicle in the name
of respondent No.1 which is illegal. The
Chief Judicial Magistrate after noticing the
case of the respondent No.1 as well as the
appellant, who had filed a detailed
objections observed that there is a dispute
over ownership of vehicle between respondent
No.1 and appellant and hence there is no
justifiable ground to release the vehicle in
favour of any of the parties. The
application filed by respondent No.1 for
release as well as the objection of the
appellant were rejected by order dated
04.05.2019. Before the aforesaid order dated
04.05.2019 was passed, the appellant filed an
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application before the Regional Transport
Officer, Basti on 30.04.2019 claiming that
the appellant was person with whom the
vehicle was hypothecated and entry of
hypothecation in favour of the appellant in
the registration certificate was got
cancelled on the basis of forged Form-35 and
the clearance certificate was wrongly issued
in favour of original owner for transfer of
the vehicle.
3.6 The Regional Transport Officer after receipt
of the application by the appellant dated
30.04.2019 issued notices to original owner
on 30.04.2019, 08.05.2019, 15.05.2019 and
01.06.2019, the original owner did not appear
before the Regional Transport Officer nor
gave any reply. The Assistant Regional
Transport Officer after considering the
materials produced by the appellant by
application dated 30.04.2019 and other
materials passed an order on 29.06.2019
setting aside the order of cancellation of
finance agreement as well as the no objection
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certificate earlier issued by Regional
Transport Officer, Basti. The Regional
Transport Officer held that registration
certificate issued by Regional Transport
Officer, Basti in Form-23 in respect of
vehicle(JCB Machine) bearing No. UP 51 AT
5709 and no objection certificate shall be
treated as null and void. The Assistant
Regional Transport Officer also wrote to the
Superintendent of Police, Basti to register a
case under appropriate section of the Indian
Penal Code against the original owner.
3.7 The respondent No.1 filed an application
under Section 482 Cr.P.C. before the High
Court challenging the order dated 04.05.2019
passed by the Chief Judicial Magistrate
rejecting his application for release of the
vehicle. The appellant was subsequently
impleaded as respondent No.3 in the
application under Section 482 Cr.P.C.
3.8 The High Court vide its impugned judgment
dated 28.01.2020 allowed the application
under Section 482 Cr.P.C., set aside the
8
order of Chief Judicial Magistrate dated
04.05.2019 and directed the release of the
vehicle in favour of respondent No.1 Ramjan
Ali. The appellant aggrieved by the said
order dated 28.01.2020 has come up in this
appeal.
4. On 27.10.2020 while issuing the notice following
order was passed:-
“Issue notice, returnable in four
weeks.
We further direct that the vehicle
bearing No.UP51AT-5709 in question shall
not be further transferred by the
respondent no.1.”
5. The counter affidavits have been filed by
respondent Nos.2 and 3 as well as respondent No.1.
6. We have heard learned counsel for the appellant,
learned counsel appearing for respondent No.1 as well
as learned counsel appearing for the State.
7. Learned counsel for the appellant submits that
the vehicle was registered with Regional Transport
9
Office, Basti in October, 2016 in the name of
Amarnath Yadav, the original owner, with entry of
appellant as a person with whom the vehicle was
hypothecated. The original owner failed to pay the
loan EMI and on a reference made to the arbitrator an
arbitration award dated 26.08.2018 was passed and
after the arbitration award having been passed
against the original owner, he hatched a plan to
cheat the appellant. The original owner by
submitting the forged documents including forged
Form-35, got cancelled the entry of appellant in the
registration certificate and a clearance certificate
was issued on 16.08.2018 by Regional Transport
Office, Basti. On the basis of clearance certificate
vehicle was got registered in the name of respondent
No.1 at Regional Transport Office, Sitapur. The
transfer by original owner was wholly illegal and
without jurisdiction. The vehicle having been
hypothecated to appellant, it could not have been
transferred without clearing the loan and without
consent of the appellant. The respondent No.1, who is
beneficiary of fraud was not entitled to the release
of the vehicle and the High Court committed an error
10
in releasing the vehicle in favour of respondent
No.1. It is further submitted that Regional
Transport Office, Basti having passed an order on
29.06.2019 cancelling the registration certificate
issued in the Form 23 as well as the No Objection
Certificate, High Court committed error in directing
the release of the vehicle in favour of respondent
No.1. The vehicle being hypothecated to appellant
and there being award against original owner, the
vehicle can neither be transferred to respondent No.1
nor there is any right in respondent No.1 to claim
the vehicle.
8. Learned counsel appearing for the respondent No.1
submits that respondent No.1 is bonafide purchaser,
who had paid amount of Rs.7,50,000/- to original
owner and has obtained finance of Rs.10 lakhs from
M/s. Magma Fincorp Limited, the vehicle was rightly
released by the High Court in his favour. It is
submitted that in the registration certificate, which
was produced by original owner, there was no entry of
the hypothecation in favour of the appellant. The
respondent No.1 has diligently obtained the transfer
11
and got the vehicle registered in his name with
Regional Transport Office, Sitapur. The JCB machine,
which was purchased by respondent No.1 was not under
any hire purchase agreement, there is no error in
purchase of the vehicle by respondent No.1. The
respondent No.1 after purchase of the vehicle has
obtained insurance cover and is paying the tax for
the use of JCB to registering authority, Sitapur.
The vehicle having been forcibly taken possession on
09.01.2019, the same has rightly been released to the
respondent No.1.
9. Learned counsel appearing for the State submits
that after register of the FIR investigation was
initiated by the Sub-Inspector and it was found that
Amarnath Yadav, the original owner died of cancer on
08.07.2019. In the counter affidavit filed by the
State, necessary facts of the case have been
mentioned.
10. We have considered the submissions of the learned
counsel for the parties and have perused the records.
12
11. The Motor Vehicles Act, 1988 contains detail
provisions regarding registration of vehicle,
transfer of ownership and special provisions
regarding motor vehicle subject to hire purchase
agreement. The present is a case where the appellant
had entered into hire purchase agreement with
original owner Amarnath Yadav on 22.10.2016. An
entry regarding hypothecation was made in the
registration certificate while registering the
vehicle No. UP 51 AT 5709. Section 51(1), (3) and
(4) which are relevant for the present case are as
follows:-
“51. Special provisions regarding motor
vehicle subject to hire-purchase
agreement, etc.—(1) Where an application
for registration of a motor vehicle which
is held under a hire-purchase, lease or
hypothecation agreement (hereafter in this
section referred to as the said agreement)
is made, the registering authority shall
make an entry in the certificate of
registration regarding the existence of
the said agreement.
XXXXXXXXXXXXX
(3) Any entry made under sub-section (1)
or sub-section (2), may be cancelled by
the last registering authority on proof of
the termination of the said agreement by
the parties concerned on an application
being made in such form as the Central
Government may prescribe and an intimation
13
in this behalf shall be sent to the
original registering authority if the last
registering authority is not the original
registering authority.
(4) No entry regarding the transfer of
ownership of any motor vehicle which is
held under the said agreement shall be
made in the certificate of registration
except with the written consent of the
person whose name has been specified in
the certificate of registration as the
person with whom the registered owner has
entered into the said agreement.
XXXXXXXXXXXXXX”
12. From the facts, which have been brought on the
record, it is clear that when the vehicle was
initially registered at Regional Transport Office,
Basti, the name of original owner was Amarnath Yadav
and entry in the name of appellant as the person with
whom the vehicle was hypothecated was there in the
registration certificate. Rule 61 of The Central
Motor Vehicle Rules, 1989 deals with termination of
hire purchase agreement etc. Rule 61, which is
relevant is as follows:-
“61. Termination of hire-purchase
agreements, etc.—(1) An application for
making an entry of termination of
agreement of hire purchase, lease or
hypothecation referred to in sub-section
(3) of section 51 shall be made in Form 35
duly signed by the registered owner of the
vehicle and the financier, and shall be
14
accompanied by the certificate of
registration and the appropriate fee as
specified in rule 81.
(2) The application for the issue of a
fresh certificate of registration under
sub-section (5) of section 51 shall be
made in Form 36 and shall be accompanied
by a fee as specified in rule 81.
(3) Where the registered owner has
refused to deliver the certificate of
registration to the financier or has
absconded then the registering authority
shall issue a notice to the registered
owner of the vehicle in Form 37.”
13. The entry of the appellant’s name in the
registration certificate of the vehicle was got
cancelled by submission of Form 35 by original owner
and thereafter fresh registration certificate in Form
23 dated 14.08.2018 was issued in the name of
Amarnath Yadav as original owner without any entry of
hypothecation. The clearance certificate dated
16.08.2018 was also issued by Regional Transport
Office, Basti for transfer of the vehicle to Ramjan
Ali within the jurisdiction of registering authority,
Sitapur. In the FIR No.08/2019 under Sections 364
and 392, the vehicle was seized on 27.01.2019. Chief
Judicial Magistrate in his order dated 04.05.2019
rejecting the application of respondent No.1 for
15
release has noticed the claim of the appellant, who
had filed objection to the release application. The
award dated 26.03.2018 was also placed before the
Chief Judicial Magistrate where it was noted that
outstanding amount in favour of the appellant is
Rs.25,97,053/-. Chief Judicial Magistrate noticed
the case of the appellant that original owner and the
second owner had manufactured fraudulent documents
and in collusion with the officials of the Regional
Transport Office, Basti managed to get the clearance
certificate dated 16.08.2018 whereas No Objection
Certificate could not have been issued. The Chief
Judicial Magistrate has rejected the application for
release.
14. The Regional Transport Office, Basti had passed
an order dated 29.06.2019 in exercise of power under
Section 55(5) of the Motor Vehicles Act. Section
55(5) under which the order dated 29.06.2019 was
passed is to the following effect:-
“55. Cancellation of registration.—
XXXXXXXXXXXXXX
(5) If a registering authority is
satisfied that the registration of a motor
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vehicle has been obtained on the basis of
documents which were, or by representation
of facts which was, false in any material
particular, or the engine number or the
chassis number embossed thereon are
different from such number entered in the
certificate of registration, the
registering authority shall after giving
the owner an opportunity to make such
representation as he may wish to make (by
sending to the owner a notice by
registered post acknowledgement due at his
address entered in the certificate of
registration), and for reasons to be
recorded in writing cancel the
registration.
XXXXXXXXXXXXXX”
15. The order dated 29.06.2019 was filed before the
High Court, which order has been looked into and
commented by the High Court. The last paragraph of
the order of the Assistant Divisional Transport
Officer, Basti, which is relevant is as follows:-
“Under the aforementioned facts and
circumstances, I have arrived at the
conclusion that Sh. Amarnath Yadav with
the intention to cheat in a dishonest
manner had fraudulently manufactured the
Form 35 and on the basis of such fake
document had managed to get the financial
contract of the aforementioned vehicle
cancelled. It is a settled position of the
law and that of the Motor Vehicle Act that
an act which is void ab initio can never
hold good with the efflux of time. (Quad
initio vitionism est non protest tractu
temporis convales cere). Keeping in mind
the aforementioned maxim, I have arrived
at the bonefide conclusion that Sh.
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Amarnath Yadav while concealing the actual
facts had submitted fraudulently
manufactured documents and thereby had
managed to get the order dated 19.6.2018
for cancellation of the financial
agreement in respect of the Vehicle No. UP
51 AT 5709 JCB and the order dated
16.8.2018 for issuance of the no-objection
certificate of the vehicle. As such, I,
while exercising the powers vested on me
U/s 55 (5) of the Central Motor Vehicle
Act 1988, do hereby set aside the
previously Issued order of cancellation of
finance agreement and the no-objection
certificate. From today i.e. from
29.6.2019, the registration certificate
issued by this office in the Form 23 in
respect of the aforementioned vehicle and
the no-objection certificate shall be
treated null and void. Sending a request
letter to the Registration Officer,
Sitapur, with the expectation that he
shall cancel the orders passed by his
office on the basis of the forms issued by
this office earlier and remit back the noobjection certificate of the vehicle to
this office. That apart, let
correspondence be made with the
Superintendent of Police, Basti to lodge
case under the appropriate sections of the
IPC for the act done by Sh. Amarnath
Yadav. Accordingly, the application dated
30.4.2019 of the Financier Srei Equipment
Finance Limited made in connection with
the Vehicle No. UP 51 AT 5709 JCB is being
finally disposed of in the light of the
aforementioned conclusion and provision of
the Law.
Sd// Registration Officer
Motor Vehicle Department, Basti”
18
16. The registering authority has come to the
conclusion that Form 35 on the basis of which the
entry in the name of the appellant as person with
whom the vehicle was hypothecated was fraudulently
removed. The Assistant Divisional Transport Officer
has cancelled the order dated 16.08.2016 as well as
the No Objection Certificate of the vehicle and,
thus, the registration certificate given by office of
Regional Transport Office, Basti in Form 23, which
has been filed as Annexure CA-2 to the counter
affidavit of respondent No.1 has been held to be null
and void. All subsequent proceedings including
certificate of registration obtained by respondent
No.1 on 27.08.2018 on the basis of certificate of
clearance dated 16.08.2018 shall also automatically
be treated non est. The order of the Assistant
Divisional Transport Officer, Basti dated 29.06.2019
has not been shown to have been either set aside or
stayed by any competent court. The High Court in
paragraph 10 of the judgment has noted about the
order of the Assistant Divisional Transport Officer.
The High Court has observed that the contents of the
order dated 29.01.2019 are baseless and the action of
19
the Assistant Regional Transport Office, Basti is
also derogatory. We fail to see that on what basis,
the High Court proceeded to make the following
observations:-
“10. ……………the contents of the order dated
29.01.2019 are baseless and the action of
ARTO, Basti is also derogatory,…………..”
17. Although High Court was right in its observation
that the record of office of Assistant Regional
Transport Office, Basti was provided by the officials
to the owner of vehicles, but there were ample
materials before Assistant Regional Transport
Officer, which were submitted by application dated
30.04.2019 of the appellant and other records
available with the Assistant Regional Transport
Officer including four notices issued to original
owner which has been noticed by Assistant Regional
Transport Officer in his order. More so, when order
of the Assistant Regional Transport Officer dated
29.06.2019 has neither been set aside nor stayed,
High Court could not have ignored the effect and
consequences of the order. The order dated
29.06.2019 having been passed in exercise of the
statutory power of the registration authority under
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Section 55(5), the legal consequence of the said
order is that registration certificate issued in Form
23 by Regional Transport Office, Basti showing the
name of only Amarnath Yadav with no entry of
appellant has been treated to be null and void.
18. The High Court in its order has relied on
judgment of this Court in Manoj and Ors. Vs. Shriram
Tpt. Finance Co. Ltd. and Ors., JT 2002(1) SC 293,
where this Court has observed that vehicle having
been released in favour of the registered owner
though it was open for the financier to approach in
the civil court for proper relief. In the above
case, the motor vehicle was registered in the name of
the appellant Manoj Sharma. On his application, the
Magistrate has directed for release of the vehicle in
favour of Manoj Sharma. The said order was reversed
by the High Court in revisional jurisdiction. The
argument which was made before this Court was that
there was a civil suit pending where an order of
status quo was passed due to which the High Court was
not justified in releasing the vehicle to Manoj
21
Sharma. In the above case, this Court in paragraph 4
of the judgment has made following observations:-
“4. Mr. Rao appearing for the financier
vehemently contended that in view of the
pendency of the civil suits, and the order
of the status quo passed therein, the
magistrate was not justified in passing
the order granting the vehicle in
possession of Shri Manoj Sharma. We do not
find any substance in the aforesaid
contention inasmuch as the magistrate has
categorically held in the order that the
order delivering possession of the
property to Shri Manoj Sharma is subject
to any variation to be made by the civil
court. If the financier was aggrieved by
the order directing release of the vehicle
in favour of Shri Manoj Sharma, who
continues to be the registered owner of
the vehicle, it was open for the financier
to approach the civil court in the pending
civil suit for interference. In this view
of the matter, we set aside the impugned
order of the High Court and direct that
the order of the magistrate dated 3.4.2000
be complied with, and in case Shri Manoj
Sharma furnishes a necessary bond to the
extent of Rs. 5 lacs, then the vehicle
could be given to Shri Manoj Sharma, which
would be subject to any variation of the
order by the civil court.”
19. In the above case, there was no dispute that
Manoj Sharma was registered owner of the vehicle. The
present is a case where registration certificate
which was issued by Regional Transport Office, Basti
in Form 23 stood cancelled including the setting
aside of the clearance certificate dated 16.08.2018.
22
The subsequent registration obtained from Regional
Transport Office, Sitapur on the strength of
clearance certificate dated 16.08.2018 shall also be
of no avail to the respondent No.1 in view of
registration certificate having been set aside on
29.06.2019. The above case, thus, has been wrongly
relied by the High Court in support of the claim of
the respondent No.1.
20. The statutory authority while cancelling the
registration certificate of the vehicle issued by
Regional Transport Office, Basti in Form 23 has
recorded his conclusion that entry of the appellant
as a person in whose favour the vehicle was
hypothecated, which was there in the original
registration certificate has been fraudulently
deleted. In consequence of above, all subsequent
acts including the registration certificate issued in
the name of respondent No.1 by Regional Transport
Office, Sitapur became non est. The respondent No.1
although claimed that he is a bonafide purchaser but
fact remains that he is beneficiary of fraud.
23
21. The High Court unduly influenced by the fact that
application for release of vehicle was filed by
respondent No.1, the High Court lost sight of the
fact that the appellant has also filed objection to
the application of release filed by respondent No.1
objecting the release and claiming itself to be
entitled to the vehicle as being person with whom the
vehicle was hypothecated, whose hypothecation entry
was fraudulently removed to facilitate the transfer
in favour of respondent No.1, which was illegal and
void.
22. The High Court in paragraph 9 has observed that
registration certificate obtained from the office of
Regional Transport Office, Basti, was in the name of
Amarnath Yadav as registered owner with no
endorsement of hypothecation, which fact was relied
by the High Court in the impugned order. The High
Court failed to notice that entry of hypothecation of
the vehicle in favour of the appellant was very much
there in the original registration certificate, which
entry was got deleted by submitting a forged Form 35
by original owner, which finding has been recorded in
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the order of Assistant Regional Transport Officer
dated 29.06.2019 cancelling the registration
certificate on which reliance has been placed by the
High Court in paragraph 9. The basis of the order of
the High Court was the certificate of registration in
name of Amarnath Yadav, which has been filed before
us as Annexure CA-2. Without considering the fact
that by order dated 29.06.2019, the said certificate
stood cancelled and was declared void and non est,
the High Court decided in favour of respondent No.1.
23. In view of the foregoing discussions, we are of
the considered opinion that the High Court committed
error in directing the release of the vehicle in
favour of respondent No.1 in whose name the vehicle
was registered at Regional Transport Office, Sitapur,
but in view of order dated 29.06.2019, the
registration in favour of Amarnath Yadav (CA-2) and
of certificate of clearance dated 16.08.2018 having
been set aside, there was no right in respondent No.1
to claim the release of the vehicle. The order of
the High Court, thus, is unsustainable and is hereby
set aside. We further order that vehicle No. UP 51
25
AT 5709 be released in favour of the appellant.
Chief Judicial Magistrate, Sitapur shall ensure that
vehicle is received back from respondent No.1 and
released in favour of appellant on such terms and
conditions as may be deemed fit and proper, which
exercise shall be completed within a period of four
weeks from today. The appeal is allowed accordingly.
......................J.
( ASHOK BHUSHAN )
......................J.
( R. SUBHASH REDDY )
......................J.
( M.R. SHAH )
New Delhi,
January 05, 2021.
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