' UMAR ATA BANDIAL, J.---This appeal is filed against the decision of the learned Consumer Court dated 21-3-2009 directing the replacement of XLI Toyota Corolla Car Model 2008 purchased on 30- 4-2008 in brand new condition by the respondent ("consumer") from the appellant ("manufacturer") at a cash price of Rs,9,40,000. The impugned judgment directs the replacement of vehicle by the manufacturer to be a brand new car of the latest 2009 model, as a car in such a condition had been purchased by the consumer.
2. Admittedly, the vehicle purchased by the consumer was found to contain a defect of oil leakage from its transmission system (gearbox) which was corrected at the manufacturer's dealership by the replacement of the housing of the vehicle's gearbox.
3. Learned Counsel for the appellant manufacturer has contended that, assuming the vehicle supplied to the Consumer was defective, the impugned judgment is wrong on the relief it has granted: firstly, because the direction to replace the purchased vehicle is excessive and misconceived in the absence of any evidence on record about oil leakage or defective operation of the vehicle after change of the vehicle's gearbox housing; secondly, because the respondent consumer has continued to use the purchased vehicle and thereby lost the right of claiming its restitution; thirdly, relief of replacement by a brand new car is oppressive because the 2009 Model of the Corolla XLI has been given an improved body shape and also an advanced technology engine. As a result, the price of the new model has risen dramatically to Rs,1,300,000. Therefore the relief granted confers an unjust financial advantage/benefit upon the consumer.
4. In rebuttal to the foregoing points, the learned counsel for the consumer submits that his client has a legal right to receive the goods that he has paid for, namely, a brand new vehicle unblemished by the re-assembly of its manufacturer's sealed gearbox. He relies on section 31(b) of the Punjab Consumer Protection Act, 2005 and the law laid down by a Full Bench of this Court in Eastern Automobiles Limited v. Tasadaq Hussain (PLD 1959 Lahore 681) to claim a brand new car in replacement of the defective car supplied to the consumer. On the other objection of non- restitutability, he urges that for a vehicle sold in breach of a condition, a consumer's right to rescind remains intact notwithstanding the fact of continuous use of such vehicle by the consumer and the vendor is under an obligation to replace such vehicle with a brand new vehicle.
5. The evidence on record has been perused. Farhan Ali, Assistant Manager Services, (RW-1) has deposed for the manufacturer that the consumer's purchased vehicle was kept in the workshop at Lahore for nine days for replacing its gearbox assembly. The mechanics at the workshop opened about 16 nuts and bolts of the car's engine to remove its gearbox for which the axle was also opened. The witness admits that the oil leakage made the purchased vehicle qualitatively different from a new car. It is common ground that the transmission system or gearbox constitutes a vital functional mechanism for the satisfactory running of a vehicle. It is obvious from the written statement that to change the gearbox housing in a car, its transmission system has to be extracted after detaching it from the car engine and axle. The procedure involves the lifting of the engine so that the gearbox can be removed from the axle. Learned counsel for the consumer claims that the replacement of the gearbox housing therefore entails a major operation which fundamentally flaws the condition of a new vehicle. The order of the Court dated 18-8-2010 notes the point and directs as follows:-- "Learned counsel for the parties have argued their case at length. The point in dispute is whether replacement of gearbox housing constitutes the removal of a major defect. The transmission system of a vehicle is integral to its operation therefore the replacement pertains to fundamental functional part of the vehicle. Learned counsel for the respondent alleges that the gearbox of the vehicle is imported in sealed condition from Japan and fitted in the vehicle. To replace the housing of the gearbox involves breaking of the seal of the gearbox, removing of its components and then replacing the housing of the gearbox. Prima facie, the exercise involved in replacement of the housing of a gearbox is a major operation. However, the strength, if any, of contention lies in the claim that gearbox in sealed condition imported from Japan is fitted in the respondent's vehicle.
Learned counsel for the appellant shall confirm that fact."
6. In compliance with the direction given in the said order the appellant manufacturer filed on record a letter dated 1-9-2010 by its Regional Manager Service. The relevant portion of the letter is reproduced below:-- "It is further to clarify that only transmission (gearbox) housing with related seals were replaced and for that, as per standard procedure, only gearbox assembly was decoupled from the engine.
Rest of all the parts like engine assembly, gearbox internal parts, etc. Has not been dismantled and everything was remained in the original condition while doing repairs. Engine lifting up was temporarily carried out just to decouple the gearbox from engine assembly but nothing in the engine was dismantled. Furthermore, after conducting the standard repairs the whole vehicle was brought back to original (genuine) condition and original specs.
' The transmission system was assembled in Japan. But at the same time original spare parts such as related seals, gearbox housing etc. Are also provided by Japan for conducting standard repairs that brings back the vehicle to the original condition without devaluing the product. Gearbox housing replacement was the major procedure that was needed to fully cure the defect and bring back the vehicle to the original condition without any loss of product value". (emphasis added)
7. A perusal of aforenoted letter and also the statement by the service staff shows that the following procedure was adopted by the manufacturer for removing the oil leakage. The engine of the vehicle was opened, lifted and then the gearbox transmission system which is attached to the car engine was detached, extracted from its defective housing and then refitted/re-assembled in a new housing. Although the aforenoted letter dated 1-9-2010 states that original parts and seals imported from Japan were used in the re-assembly of the gearbox, it is admitted that Toyota Corolla models are fitted with a sealed transmission system (gearbox) and in a new car the said system is assembled and therefore sealed in Japan.
8. In his cross-examination RW-1 accepts that the gearbox and axle of the purchased vehicle were opened for repair. Clearly, the reassembly of the gearbox at the manufacturer's dealership in Lahore cannot be equated with a sealed transmission system being installed/assembled at the manufacturer's plant in Japan. That makes obvious the omission by the manufacturer to clearly answer Court's query dated 18-8-2010 whether a gearbox installed in sealed condition from Japan is fitted in a Toyota Corolla car.
9. Therefore, in the first instance it stands established on the record that the consumer was delivered a brand new car containing a serious defect of oil leakage from its gearbox. To cure this defect a vital functional mechanism of the vehicle namely its transmission system (gearbox) had to be disassembled after a serious and time consuming exercise to lift the car's engine and detaching the gearbox from the car axle. Thereafter the gearbox was unsealed and replaced into a new housing under fresh seals affixed at the workshop. Even if it is assumed that the unbolting and refitting of a car engine to be a harmless procedure, the fact of the matter is that a vital functional mechanism of the purchased vehicle has been altered from its original manufacturer's condition.
The crucial point is that the original manufacturer's seal of the gearbox was broken and replaced locally. A new gearbox supplied in sealed condition by the manufacturer was not fitted in the vehicle. To the mind of the Court the unsealing of a gearbox is as serious as unsealing of the engine of a new vehicle. Accordingly, the finding by the learned Consumer Court is correct that the consumer was supplied a defective car by the manufacturer and that its repair by the dealership so diminished its value as to deprive the consumer of the brand new car that he had purchased. It is in evidence that the consumer demanded replacement of the vehicle at the time of detection of the defect and took delivery of the repaired vehicle after signing the customer's satisfaction report under protest.
10. Based on the foregoing finding of fact, it remains to be considered as to what relief the consumer is entitled.. There is no evidence on record that consumer's vehicle has given him any further trouble in the last 30 months of use after its re-delivery. Learned counsel for the consumer states that during the said period the vehicle has travelled 85000 kms. Clearly, the consumer has used the vehicle extensively; yet his continuing grievance is that on account of the repairs done, the value of the vehicle has diminished considerably. He stands deprived of the confidence, reassurance and satisfaction of owning a manufacturer assembled brand new vehicle for which he had paid the full price.
11? Admittedly, the transmission system is a vital mechanism in a car engine. The quality of such a system affects the performance and efficiency of the engine. For that reason an expected attribute of any new car is a transmission system that is factory fitted in manufacturer's sealed condition.
The transmission system of the purchased vehicle was opened up and re-assembled by technicians at the local dealership. Such a repaired condition is vastly different from a vehicle fitted with a manufacturer sealed transmission system. The fact that the purchased car has performed satisfactorily in the last 30 months is no accolade. Cars in our economy are life long assets; moreover international name brands carry expectations from consumers that are built in decades of consistent and reliable service. The consumer is therefore justifiably disappointed with a reassembled transmission system in his purchased vehicle. He has good reason to worry and fear that the vehicle is no longer as reliable as a new car it has a reinstated engine and transmission system.
12. The facts of the case disclose liability of the manufacturer for defective construction of the gearbox housing and for breach of warranty by consequent repair that the engine installation and gearbox assembly remains in original condition. The manufacturer's liability therefore arises under the provisions of sections 6 and 8 of the Punjab Consumer Protection Act, 2005. The learned Consumer Court has by the impugned judgment dated 21-3-2009 directed replacement of the purchased vehicle bought on 30-4-2008 with a brand new one. The objection by the manufacturer that such relief confers unjust enrichment upon the consumer has weight because of the increased value of the new model. However, the diminished value of the purchased vehicle due to its continuous use by the consumer does not have the same impact and is liable to be treated differently.
13. The judgment of a learned Division Bench of this Court in Eastern Automobile Ltd. v. Tasadaq Hussain (ibid) allows rescission of contract of sale of a vehicle on a finding of fraudulent misrepresentation by its vendor. On facts therefore the case is not on all fours with the present case. However, the precedent is instructive with reference to the type of relief that may be granted for which the principles laid down in the said judgment do provide guidance. On the finding that the 'vendee was entitled to repudiate the sale, the learned Division Bench ruled that in cases where restitutio in integrum is not possible in strict terms then compensatory financial adjustments may be made. If deterioration in value of defective goods has taken place through use by a customer who has paid the price of such goods, then the vendor may be compensated for the consequent diminution in the value of the goods. Equally when restitution is granted as relief in a case where a defective product is not used by a customer, and the vendor does not provide its replacement, then the customer is entitled to rental cost of a like product for the period until a replacement is provided. Such adjustments address the object of restitutionary relief.
14. In the foregoing perspective the entitlement of a customer to receive rental cost is based on the obligation of a vendor, who has received full price of the defective product, either to pay the customer, profit on the price received or to pay the rental cost of the product for the period until a replacement is provided.
15. In the present case the purchased car is being returned after some use, therefore the customer must compensate the vendor for deterioration in its value but subject to adjusting the quantum of such liability from the rental cost that he would otherwise be entitled to claim. There is no evidence on record regarding either the amount of diminution in value by use of the purchased vehicle or the amount 'of its rental cost. Standard accounting practice treats the useful life of capital goods including vehicles to be 10 years or so. Therefore, 10% annual depreciation in the scheduled price of such goods is a fair estimate of the loss of value of the purchased vehicle. The terms of restitutionary relief in the facts of the case accordingly require: firstly, refund by the appellant of the price of the purchased vehicle to the consumer as a new replacement of the purchased vehicle would confer an undue benefit on the consumer; and secondly, setting-off the depreciation cost of the purchased vehicle, on the one hand, against the quantum of profit payable by the manufacturer on the full price received from the consumer for the period until a replacement is provided, on the other hand.
16. In current terms the profit rate of 10 percent per annum represents fair compensation to the customer. Consequently, until return of the purchased vehicle to the consumer, the restitute compensation payable by each of the parties, manufacturer and consumer, to the other' is about the same and therefore these cancel out. Therefore, the impugned judgment and decree dated 21- 3-2009 is modified and it is ordered that the respondent consumer shall return his purchased vehicle to the appellant manufacturer who shall forthwith refund the full price thereof received from the consumer. In case the respondent consumer does not return the vehicle to the appellant manufacturer within 10 days from the receipt of a certified copy of this order he shall lose his right of receiving accrued profit on the price paid, granted by this judgment. However, if the appellant manufacturer fails to pay the amount of Rs,9,40,000 to the respondent consumer within the above mentioned period then the latter shall be entitled to execute this judgment without incurring further cost for diminution in value on account of use of the vehicle.
17. with no order as to costs.