Report No. 168
2.16. Section 11.-
Several objections have been made with respect to section 11. Section 11 which has remained untouched by the 1989 (Amendment) Bill provides for a right in the hirer to appropriate payments in respect of two or more agreements. The section entitles the hirer to specify the agreements to which the payment made by him should be appropriated and also provides for the situation where he does not indicate such preference. The Federation wants that section 11 should be deleted altogether.
By deleting this section, the said Federation wants to have an unregulated discretion in the owner/financier to appropriate the payments made by the hirer in such manner as the owner thinks fit. It is pointed out by the Federation that if the right to indicate appropriation is given to the hirer, it may lead to serious prejudice to the owner in certain situations. It submitted, "It is likely that at a particular point of time a hirer, who is having three or four Hire-Purchase Agreements with a Hire-Purchase Financier may have a large number of arrears in one or two accounts, while the other accounts may be with only a smaller, number of arrears.
In such an event, if either the Hirer is given the authority to appropriate the amount paid as he wishes or if the Financier has to appropriate it only against the accounts in the order in which they were entered into, it is likely that the accounts with lesser arrears may get closed faster, whereas those with larger arrears will remain as it is" (drawn from the first set of objections).
The Law Commission does not see much merit in this objection. Section 11 recognises and gives effect to a well-known principle of law of contract (vide sections 59 and 60 of the Indian Contract Act, 1872) and there is no good reason to make a departure therefrom. The situation contemplated by the Federation is more imaginary than real. Hence, we do not recommend any change in section 11.