Manufacturer cannot be fastened with liability for dealer’s deficiency in service

A manufacturer cannot be fastened with liability for dealer’s default unless the manufacturer’s knowledge is proved regarding deficiency in service of the dealer in a case where the relationship between them is on a principal to principal basis.

As per the dealership agreement, the dealer is under an obligation to advertise, display or demonstrate at its own expense the products, spare parts and service facilities within the territory granted to it. Upon termination of the agreement, the dealer has to immediately turn over to it its works, or original spare parts, warehouse or spare parts centre or bonafide retail parts that he may have in hand for execution which remains unfulfilled together with deposits made by the buyers and also records and complete lists of owners.

In the case before Court, the car had been made over to the dealer on 28.02.2009 and the dealer did not acknowledge any deficiency in it. Therefore, 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, several eventualities could have occurred; the dealer may have allowed people to use the car for the distance it is alleged to have covered. 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, was on a principal-to-principal basis.