Court directs authorities to process cancellation of hypothecation entries without considering challans issued before October 1, 2020
In a significant judgment delivered on October 6, 2026, the Kerala High Court ruled that Rule 167(7) of the Central Motor Vehicles Rules, 1989, as amended by the Central Motor Vehicles (Eleventh Amendment) Rules, 2020, cannot be applied retrospectively to bar processing of applications related to motor vehicles on the basis of pending challans issued before the rule came into effect.
The case arose when petitioner T. N Arun Kumar, the registered owner of a vehicle purchased in 2015 under hypothecation to Bank of Baroda, sought the cancellation of the hypothecation entry in the vehicle's certificate of registration after repaying the loan. The Regional Transport Officer (RTO) refused to process his application, citing that the vehicle was blacklisted as "NOT TO BE TRANSACTED" due to unpaid traffic challans pending for more than 90 days.
The petitioner argued that some of these challans were issued prior to October 1, 2020, the date when Rule 167(7), imposing restrictions on processing license or registration applications where challans remain unpaid, came into force. He contended that this rule should not apply retrospectively to punish alleged violations committed before its enactment, as no prosecution or court proceedings were pending for those earlier challans.
The court examined the definition and scope of Rule 167, which empowers authorities to withhold processing of license and vehicle registration applications if related challans remain unpaid beyond 90 days, except for permits, fitness certificates, and tax payments. However, the court emphasized the principle that substantive statutory provisions imposing new restrictions must be prospective unless the legislature explicitly or by clear implication intended retrospective application.
Citing precedents from the Supreme Court, including Panchi Devi v. State of Rajasthan and Commissioner of Income Tax v. Vatika Township Pvt. Ltd., the court reiterated the presumption against retrospectivity in subordinate legislation. It observed that the amendment rules were published on September 25, 2020, with an explicit commencement date of October 1, 2020, indicating a clear legislative intent for prospective operation only.
Consequently, the Kerala High Court held that the RTO could not rely on unpaid challans issued before October 1, 2020, to blacklist the petitioner's vehicle or refuse cancellation of the hypothecation entry. The court directed the authorities to process the petitioner's application in accordance with law, disregarding the pre-amendment pending challans, and complete the exercise within one month from the judgment date.
This ruling safeguards vehicle owners from being penalized retrospectively under new regulatory provisions and underlines the judiciary's adherence to the principle of fairness and legal certainty in administrative actions.
Bottom Line:
Motor Vehicles - Rule 167(7) of the Central Motor Vehicles Rules, 1989, inserted with effect from 01.10.2020, is prospective - Pending challans issued prior to 01.10.2020 cannot be relied on to flag vehicle as "NOT TO BE TRANSACTED" or to refuse processing of application for cancellation of hypothecation entry.
Statutory provision(s):
Central Motor Vehicles Rules, 1989 Rule 167(7), Motor Vehicles Act, 1988 Section 51(3)
T. N Arun Kumar v. Ministry of Road Transport and Highways, (Kerala) : Law Finder Doc Id # 3014578
