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Introduction
In a recent recent judgment, the state Commission of the National Consumer Disputes Redressal Commission (NCDRC), the State Consumer Disputes Redressal Commission (SCDRC) in Delhi given a verdict in a case involving Hyundai Motors Limited, in which the SCDRC held that the car manufacturer does not become liable for the failure of a Hyundai local dealer to deliver the Santro model car to a customer. This judgment portrays the complex relationship between manufacturers and their dealers and shows why principles of legal responsibility are not sufficient to address these relations.
Background
The issue of the case relates to a consumer complaint originating in December 2008. Hyundai Motors India had placed an advertisement for Hyundai Santro car in the Times of India which included a sale promotion for the car at the new price of INR 2.99 lakhs including other perks. Thus, an impressed customer accepted this offer and visited Suhrit Hyundai, which is a dealership situated in Mayapuri, Delhi. The customer paid INR 3.32 lakhs in two installments to reserve the car and got the assurance from the dealer that it will be delivered before January 31, 2009.
Despite this, the delivery did not happen as scheduled. They promised to deliver it on February 10, 2009, but on the same date, the customer went to the dealership only to realize it was closed without any prior notice. The customer then reported the matter to the police then wrote an email to Hyundai Motors head office and the customer relations, but they never got a response or any refund. Due to this the customer took the matter to the District Consumer Commission.
The Concept
The case mainly concentrates on the contractual relationship that exists between a car manufacturer and dealer. In consumer law, it is very important to know whether a dealer is an agent of the manufacturer or not because this aspect defines responsibilities. A principal-agent form of relationship would mean that the manufacturer would be able to hold the dealer liable for a specific action, while on the other hand a principal to principal relation does not imply the same.
The Present Case
Suhrit Hyundai was taken to the District Consumer Commission as the non delivery of the car was found to be its fault, it was ordered to refund INR 3.32 lakhs with an interest of 9 per cent. However, the Commission exculpated Hyundai Motors Limited (the head office and customer relations office) and stated that without a direct business address between the customer and Hyundai Motors, no contract law liability could be claimed.
The customer, being dissatisfied with this judgment, took the matter further to the State Consumer Commission. He contended that Hyundai Motors should be blamed on the findings that Suhrit Hyundai had shut down and was not traceable. He also argued that Hyundai Motors has not pulled out its business dealings with Suhrit Hyundai; they should therefore be charged with the responsibility to either deliver the car or refund the amount paid.
Facts
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Customer’s Booking: He Paid INR 3.32 lakhs to Suhrit Hyundai for the purpose of booking the Hyundai Santro car.
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Delivery Delay: The car was not delivered as agreed to be delivered; the showroom was later found to be closed.
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Complaint Filed: The customer reported the issue to the police and wrote to Hyundai Motors but to no avail.
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District Commission Ruling: They found Suhrit Hyundai liable but not Hyundai Motors.
Major Issues
The primary issues in this case were:
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If the dealer did not deliver the vehicle as agreed, Hyundai Motors could be made to suffer the consequences for the dealer’s action.
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Whether the observed relationship between Hyundai Motors and Suhrit Hyundai was principal-agent or, in fact, a principal-to-principal one.
Judgment
The SCDRC, constituted by its President Justice Sangita Dhingra Sehgal & Member JP Agarwal passed in favour of Hyundai Motors. The Commission opined that Hyundai Motors could not be responsible for the dealer’s wrongdoing since no contract existed between the customer and Hyundai Motors. The judgment also pointed out that; the relationship between Hyundai Motors and Suhrit Hyundai was not a principal-agent relationship but rather a principal-to-principal relationship.
Reasoning
To support this decision, the Commission joined the concern of the customer with Hyundai Motors to hold the manufacturer not guilty in the actions done by the dealer. The lack of an agreement between the manufacturer and the dealer emphasized this notion even more due to the fact that Hyundai Motors was not responsible for Suhrit Hyundai not delivering the car. The SCDRC upheld its stand on the fact that contractual liability cannot be imposed on parties which have not been contracted.
Important Consideration by SCDRC
Another factor that was of importance to the SCDRC was the relationship between Hyundai Motors, a big car manufacturing company and Suhrit Hyundai which is a local company. This view of the relationship as principal-to-principal instead of principal-agent was critical to the Commission’s decision that Hyundai Motors could not be held legally responsible for the dealer’s shortcomings.
Critical Analysis
The ruling by the SCDRC in favour of Hyundai Motors Limited and dismissing the complaint against the manufacturer for not supplying the car through Suhrit Hyundai shows complex legal structure that regulates the relationship between the manufacturers and the dealers. Fundamental to this decision is the distinction between a contract between independent parties or ‘principal to principal’ and a contract between an independent party and an agent on behalf of a principal ‘principal to agent’.
The SCDRC adopted this approach in classifying the relationship as principal-to-principal; this means that Hyundai Motors and Suhrit Hyundai were different commercial entities with no mutual contractual obligation other than the simple seller-buyer partnership. This distinction successfully keeps Hyundai Motors from assuming any responsibility for the dealer’s inability to satisfy the order because the manufacturer was not legally required to supervise or ensure the dealer’s performance. This outcome supports the general proposition that responsibility for business losses tends to lie where the party most directly involved in the transaction with the consumer is found to have acted unless otherwise provided by contract.
This decision also exposes a major flaw in consumer protection law. This raises the question of lack of accountability of manufacturers to dealers’ operations while the latter benefit from the former’s operations. Those buyers who interact with the third-party dealers who do not have contractual relations with a manufacturer may be left with limited legal means to protect their rights in the event of the dealer’s breach of contract. It implies that current legal and regulatory structures that protect consumers might require modification to fill such voids, which may require placing more burden on manufacturers to ensure their dealers operate within certain parameters. The judgment also invites a more general analysis of how consumers’ rights can be protected in situations where manufacturers are served by dealer networks, but cannot be sued for the dealer’s wrongs, thus possibly pointing to potential reforms of consumer protection that will be fairer for manufacturers.
Impact on Subsequent Cases
In cases which are between manufacturers and dealers, the judgment provides a guide on issues of vicarious liability under the circumstances where the manufacturer deals with many dealers, but they are not directly contracted with the manufacturer. This reinforces the importance of consumers being aware of the specifics of their contractual arrangements and the parties with which they are engaging to ensure that they seek adequate legal remedies.
Conclusion
The foregoing case of Hyundai Motors Limited on a consumer dispute is typical of the SCDRC portrays the fact that these complaints, in most instances, are complex. It also discusses the role of direct contractual relations in creating legal responsibility and the role of legal responsibility in contractual relations. From manufacturers and dealers, the consumers are encouraged to establish clear understanding on any matters pertaining to their protection.
If you are a consumer and stuck in such a situation, it is advisable to consult a consumer protection lawyer to address your issues. Also a legal professional specialized in the consumer protection laws can help you know your rights as a consumer.
FAQs
In case a dealership has neglected to deliver the stated product, what should a consumer do?
The consumers first approach the dealership to seek a solution to the problem. If they fail, then they can take the matter to the consumer forum or regulatory authority and seek legal redress.
In case a manufacturer’s dealer does not deliver a product how can a consumer determine the liability?
The consumers need to look for direct contractual relationships or clauses in writing that states contract with the manufacturer. Where none is present, the risk generally shifts to the dealer.
What measures does a consumer need to put in place to ensure his/her safety when going for a booking of products through a dealer?
Consumers must demand a written contract, check if the dealer is legitimate, and ensure any promotions or deals made are in writing to protect consumers' interests.
What is the involvement of Consumer forums when consumers are in dispute with the dealers?
Consumer forums help to resolve grievances and have a certain jurisdiction whereby they make recommendations and come up with decisions on compensations to be made or actions that are to be taken.
Is it possible to sue a manufacturer for misleading or defrauding a dealer?
In general, manufacturers cannot be held responsible for a dealer’s deceptive practices unless there is a direct contractual relationship between them or unless the manufacturer has endorsed or participated in the deceptive practices of the dealer.
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