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Report No. 168

1.2. The Genesis of the report.-

During the past few decades there has been a mushroom growth of hire-purchase transactions in India. The growth of hire-purchase transactions and the complexities surrounding such transactions perhaps prompted the Law Commission to undertake a study of the subject. The Commission made an in-depth study of the subject and submitted its 20th Report on "The Law of Hire-Purchase" in May, 1961. The Commission also appended a Bill to its report on the Hire-Purchase. The Indian Parliament enacted the Hire-Purchase Act, 1972 following the recommendations of the Law Commission.

1.2.1. The Government of India by G.S.R. 228 (E), dated 13-4-1973 notified that the Act will come into force with effect from 1-6-1973. A number of companies which were carrying on hire-purchase business or financing of hire-purchase transactions made representations to the Government pointing out certain deficiencies in the Act and requested for postponement of decision of the enforcement of the Hire-Purchase Act.

This resulted in the issuance of notification G.S.R. No. 288(E), dated 31-5-1973 rescinding the earlier notification and appointing 1-9-1973 as the date on which the Act would come into force. Meanwhile Shri R.T. Parthasarathy, M.P. who was the Chairman of the Joint Committee which examined and reported upon the Hire-Purchase Bill wrote a letter dated 10-9-1973 to the Minister in the Ministry of Law and Justice pointing out certain anomalies in the Act. As a result G.S.R. No. 402(E), dated 30-8-1973 was issued rescinding the operation of the Act from 1-9-1973 as notified earlier. The matter rested there.

1.2.2. The Report dated April 24, 1987 of the Committee on Petitions, Rajya Sabha relating to the question of bringing. into force the Hire-Purchase Act, 1972 noted the said state of affairs resulting from the non-enforcement of the Act and recommended that immediate steps be taken to notify and implement the Hire-Purchase Act, 1972 without any further delay.

1.2.3. In due course, the Ministry of Law & Justice prepared a comprehensive Amendment Bill for the amendment of the Hire-Purchase Act which was introduced in the Rajya Sabha on the 5th May, 1989. A copy of the Bill is annexed hereto as Annexure C for ready reference. In pursuance of the rules relating to the Department related Parliamentary Standing Committee, the Chairman of Rajya Sabha referred the Bill to the Committee on Home Affairs for examination and report. The Committee considered the Bill and heard the representative of Ministry of Law, Justice & Company Affairs, and made the following recommendations /observations1:-

"(i) The Hire-Purchase Act, since its passage in 1972 has remained in operative till now. In between great many socio-economic changes, particularly during the last couple of years, have taken place. As the legislation intends to govern the rights and duties of both the business and consumer communities, it becomes imperative to have these changes reflected in the legislation, otherwise the entire exercise in this regard may prove to be futile.

(ii) The Bill which seeks to amend comprehensively nearly half of the provisions of the Hire-Purchase Act, 1972, in some cases substituting the entire provisions of the Act, has been brought forward pending enforcement of the Principal Act. It, therefore, necessitates the desirability of enacting a fresh legislation of the subject instead of doing complicated patch-work here and there in the Act.

(iii) Some of the provisions of the Bill are too technical and intricate to be comprehended by a common man, who is concerned with the subject-matter of the Bill. Those provisions, therefore, needs to be simplified.

In view of the above, the Committee is of the considered view that the present Bill may not suffice in achieving the desired objectives. The Committee, therefore, recommends that Government may consider referring the whole issue of hire-purchase to the Law Commission for an in-depth examination, keeping in view the above observations and thereafter bring in a fresh comprehensive legislation on the subject before Parliament, as expeditiously as possible."

1. See Parliament of India, Rajya Sabha Committee on Home Affairs, Twenty-First Report, The Hire-Purchase (Amendment) Bill, 1989, (Rajya Sabha Secretariat, New Delhi, July, 1995), p. 2.

1.2.4. Reference made by the Government.-

The Committee recommended that Government may consider referring the whole issue of hire-purchase to the Law Commission for an in-depth examination, keeping in view the observations of the Committee and thereafter bring in a fresh comprehensive legislation on the subject before Parliament, as expeditiously as possible. Accordingly, the subject of hire-purchase was referred by the Government to the Law Commission for an in-depth examination.

1.2.5. Questionnaire circulated by the Commission.-

The Commission circulated a questionnaire on Law of Hire-purchase (Annexure D) to Bar Associations, State Governments, Advocates, eminent Jurists and others concerned to solicit their views on the subject. Before embarking upon analysis of views received, it is pertinent to tread through the historical concept of the term 'hire-purchases' and growth of the subject in our courts.

The Hire-Purchase Act, 1972 Back

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