SC sets aside NCDRC order of liability on Tata Motors for defective car

The Supreme Court has set aside a National Consumer Disputes Redressal Commission (NCDRC) order, which imposed a liability on Tata Motors for sale of a defective two-year-old car by one of its dealers to a customer.

A bench comprising Justices U.U. Lalit, Hemant Gupta and S. Ravindra Bhat said: “Special knowledge of the allegations made by the dealer, and involvement, in an overt or tacit manner, by the appellant (car manufacturer), 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.”

The top court noted that 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.

Antonio Paulo Vaz filed a case in 2011, when he bought a car after paying the agreed amount to the dealer. At the time of purchase, Vaz availed bank credit. A 2009 model car which had run 622 km was sold to him in place of a new car of the 2011 make. Vaz, therefore, requested for refund or replacement of the car with one of 2011. The price was, however, not refunded; neither was the car replaced. Vaz then refused to take delivery of the 2009 model car and moved the Goa District Consumer Redressal Forum, which noted defects in the car and held both dealer and car manufacturer jointly liable. Tata Motors appealed in the state commission, which rejected its plea stating that its relation with the dealer was on a principal-to-principal basis.

The NCDRC held that the relationship of the dealer and the car manufacturer in the facts appearing from the record, did not absolve it of liability. “It (NCDRC) therefore, issued several directions – firstly upholding the orders of the fora below it and further declaring that the appellant had indulged in unfair trade practice, for which it was imposed with costs of 2,00,000 of which 1,00,000 was to be made over to Vaz..”, noted the top court. Tata Motors challenged this decision in the top court.

The bench said it is difficult to expect that the car manufacturer was aware of the physical condition of the car, two years after its delivery to the dealer. “For all the above reasons, the findings of the National Commission and the lower forums against the appellant are set aside,” said the court.