Report No. 168
2.17. Section 12.-
Section 12 of the Act has untouched by the 1989 Amendment Bill except for addition of the words "together with such incidental charges and expenses as may be payable under the terms of the agreement" after the words "under the Hire-Purchase Agreement" in sub-section (4). The Federation, however, hire-issued several objections to section 12, which are to the following effect:-
(a) The words "or if his consent is unreasonably withheld, without his consent" at the end of sub-section (1) should be deleted.
(b) Sub-section (2) should be deleted altogether. Similarly, sub-section (3) and the explanation thereto should also be deleted.
2.17.1. The Federation's objections are based upon the following reasoning:
"A hire-purchase agreement is basically like a contract of bailment where the asset of hire-purchase financier is entrusted to a hirer in good faith with very limited rights of using the vehicle for his own purpose with strict condition that he should not part with it to any one till property in the vehicle passes to him. Before selecting the hirer, the financier makes elaborate enquiry about his credentials and repayment capacity and only thereafter the vehicle is bought and hired to him.
It may so happen that an unacceptable person who has been refused finance by a financier may stealthily take possession of a vehicle by offering a more than reasonable price to an existing hirer. Once the vehicle is in his custody, he can deal with it as he likes and even dismantle it and thus cheat the financier. If the financier refuses to assign the Contract. The hirer has been permitted to refer the matter to a court of law which in effect will only mean that the matter will be dragging for a number of years and in the meantime no payment will be forthcoming. "
(drawn from the first set of suggestions which is substantially similar to the objections/suggestions in the revised set).
2.17.2. There appears to be some substance in this objection. Keeping in view the objections and apprehensions expressed by the Federation and with a view to protecting the interests of both the hirers and the owners (financiers), sub-section (2) has been recast herewith, while no change is recommended in any other sub-sections of this section. Sub-section (2) is recast as follows:
"(2) (a) Every request for according consent for such assignment shall be in writing and the owner shall reply to the same in writing within one week of the receipt of such request.
(b) If the owner withholds his consent to the assignment by the hirer of his right, title and interest under the Hire-Purchase Agreement on the ground that this demand for an amount of consideration of which there is no mention in the Hire-Purchase Agreement, is not satisfied or agreed to, the consent shall be deemed to be unreasonably withheld."
2.17.3. The above substitution of sub-section (2) takes care of the apprehensions of the owners/financiers. The scheme of the section is that where the owner unreasonably withholds his consent to assignment of hirer's right, title and interest under the Hire-Purchase Agreement, it shall be permissible for the hirer to go ahead and assign his right, title and interest without the consent of the owner. For this purpose, the section defines what is an unreasonable withholding of consent by the owner.
If the withholding of consent is not unreasonable within the meaning of the section, the hirer cannot assign his right, title and interest without obtaining the consent of the owner. Now sub-section (2), as re-cast by the Law Commission clarifies that only where consent is refused on the ground that the owner's demand for a higher amount which does not form part of the agreement is not satisfied, the withholding of consent shall be deemed to be unreasonable within the meaning of sub-section (i) entitling the hirer to assign his right, title and interest under the Agreement without obtaining the consent of the owner.