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Report No. 168

The above definition can be simplified and clarified as follows:

["(d) 'Hire-purchase price' means the total sum payable by the hirer under a hire-purchase agreement in order to complete the purchase of or the acquisition of the property in the goods to which the agreement relates and includes any sum payable by the hirer under the hire-purchase agreement by way of a deposit or other initial payment (whether paid by the hirer or any other person on his behalf and whether paid in cash or in any other manner) and also includes the hire-purchase charges but does not include and sum-

(i) payable as expenses for delivering the goods to the hirer and the installation thereof, in accordance with the terms of the agreement,

(ii) payable as any fee, in respect of the goods and the agreement for the purposes of registration or otherwise under any law for the time being in force,

(iii) payable as insurance premium, and

(iv) payable as a penalty or as compensation or damages for a breach of the agreement."

The other definitions contained in clauses (e), (f), (ff) (proposed to be added in 1989 Amendment Bill) and (g) can remain as they are.

II. In section 4(1), the present clause (b) be substituted with the following:-

"(b) The cash price of the goods as defined in clause (e) of section 7(1)."

In section 4(1) the proposed clause (f) (proposed to be added by the 1989 Amendment Bill) may be renumbered as (g) and a new clause (f) may be introduced in the following terms:-

"(f) The name of the owner of the goods and his address, the name of the hirer of the goods and his address, the name and addresses of the sureties, if any, and the place where the hire-purchase agreement is executed."

After sub-section (1) in section 4, the following sub-section may be inserted in the following terms:-

"(1A) The hire-purchase agreement shall be executed in two sets, signed by both the parties, and one such set shall be handed over to the hirer immediately after the execution of the agreement."

III. Section 7 is the most material section in the Act. It is proposed to be extensively amended by the 1989 Amendment Bill. Section 7(1) contains six definitions in clauses (a) to (f). The Amendment Bill rightly proposes to omit and delete the definitions of "cash price instalment" in clause (a) and "net hire-purchase charges" in clause (b). The Amendment Bill proposes to redesignate clause (b)-which defines the expression "deposit.- as clause (a) and proposes to enact clause (b) in the following terms:

"(b) Hire-purchase charges in relation to a hire-purchase agreement for any goods means the difference between the net hire-purchase price and the net cash price of such goods."

The Amendment Bill further seeks to substitute the last words "as defined in clause (b)" in clause (c.- which defines the expression "net cash price.- with the words "as defined in clause (a)". This is merely a consequential and a formal change.

Similarly, in clause (d) which defines the expression "net hire-purchase price", the entire portion beginning with the word "less" is proposed to be deleted altogether and in its place only the following words "less any deposit as defined in clause (a)" are proposed to be substituted. Clause (f) is redesignated as clause (e) and has been substituted altogether as follows:

"(e) "Statutory hire-purchase charges" in relation to a hire-purchase agreement means the amount calculated in accordance with the provisions of sub-section (2)."

It is suggested that the definitions in section 7(1) may be recast as follows:-

(1) "(a) "Cash price of goods" means the price at which a prospective buyer may, at the date of the hire-purchase agreement, purchase the goods for cash."

(2) The definition of "deposit" in clause (a) can remain as it is, but shall be renumbered as clause (b).

(3) The definition of "hire-purchase charges" in the proposed clause (b) may be recast as follows:

"(c) "Hire-purchase charges" means the difference between the balance hire-purchase price and the balance cash price of the goods."

(4) Clause (c) which defines the expression "net cash price" may be omitted and the following definition may be inserted as clause (d):

"(d) "Balance cash price of goods" means the cash price of goods less any deposit."

(5) Instead of the proposed clause (d) which defines the expression "net hire-purchase price", the following definition may be substituted:

"(e) "Balance hire-purchase price" means the hire-purchase price less any deposit."

(6) After clause (d), a new clause (f) may be inserted as follows:

"(f) "Hire-purchase charges" means the difference between the (balance) hire-purchase price and the balance cash price of the goods."

(7) The proposed clause (e), which defines "statutory hire-purchase charges" should be redesignated as clause (g) and should read as follows:-

"(g) "Statutory hire-purchase charges" means the amount as determined by, the formula contained in sub-section (2)."

(8) Sub-section (2) can remain as it is but the following illustration may be added at the end of clause (2):

Illustration to sub-sections (1) & (2):-A (hirer) purchases a car from B (owner) on hire-purchase basis. The cash price of the car is Rs. 65,0000. A pays a deposit of Rs. 15,000 on the date of hire-purchase agreement which means that Rs. 50,000 is the balance cash price of the goods (car). The rate of interest permitted by this section is 18% per annum and the period of agreement is five years payable in 60 equal monthly intalments. Accordingly, the statutory hire-purchase charges in this case would be Rs. 45,000 arrived at in the following manner

50,000x18x5
100
= Rs.45,000

The hire-purchase charges cannot exceed the statutory hire-purchase charges. Thus in this illustration, the hire-purchase price is Rs. 65,000 plus Rs. 45,000 = Rs. 1,10,000. The balance hire-purchase charges are Rs. 1,10,000 minus Rs. 15,000 (deposit) = Rs. 95,000. This sum of Rs. 95,000 is payable in 60 monthly instalments.

Further this amount of Rs. 45,000 being the statutory hire-purchase charges should be worked out by the parties on the date of entering into the hire-purchase agreement and should be mentioned in the agreement as such."

IV. After section 7, a new section 7A may be added in the following words:-

[Section 7A: Hire-Purchase Charges not to exceed statutory hire-purchase charges.-Any stipulation in the agreement of hire-purchase with the hirer to pay hire-purchase charges in excess of the statutory hire-purchase charges as specified in sub-sections (1) and (2) of section 7 shall be null and void and shall not be enforceable. Any owner collecting hire-purchase charges over and above of the statutory hire-purchase charges shall refund the amount collected with interest; at the rate of 18% to the hirer immediately after it is collected or whenever it is demanded by the hirer. If the owner fails to discharge this obligation, it shall be open to the hirer to approach the court for recovering the said excess amount."

In view of this new section, sub-sections (4), (5) and (6) of section 7 may be omitted.

V. Section 9 of the Act which is the first section in chapter IV, which sets out the rights and obligations of the hirer is sought to be amended extensively by the 1989 Amendment Bill. The Amendment Bill adds certain words in sub-section (1) and substitutes sub-section (2) altogether. It does not touch sub-section (3). As proposed to be amended by the 1989 Amendment Bill, sub-sections (1) and (2) of section 9 read as follows:-

"9. Right of hirer to purchase at any time with rebate.-(1) The hirer may, at any time during the continuance of the hire-purchase agreement and after giving the owner not less than fourteen days notice in writing of his intention so to do, complete the purchase of the goods by paying or tendering to the owner the hire-purchase price or the balance thereof together with such incidental charges and expenses as may be payable under the terms of the agreement as reduced by the rebate calculated in the manner provided in sub-section (2).

(2) The rebate for the purposes of sub-section (1) shall be calculated in accordance with the following formula-

R = CxMx(M+1)
Nx(N+1)

where .- represents rebate;

.- represents hire-purchase charges as defined in clause (c) of sub-section (1) of section 7 or statutory hire-purchase charges as defined in clause (e) of sub-section (1) of section 7, whichever is less;

.- represents the number of complete months still remaining in the period of the agreement;

.- represents total number of complete months in the period of the agreement."

In the light of the changes suggested herein, it would be appropriate to substitute (C) and the matter thereunder occurring in sub-section (2), with the following:-

"C.-represents the statutory hire-purchase charges as defined in clause (g) of sub-section (1) of section 7 or the lesser amount, if any, provided in the hire-purchase agreement."

It would be most appropriate if an illustration is also added after sub-section (2) to explain the working of the formula contained in the said sub-section. For this purpose, we take the very same illustration as has been appended to sub-sections (1) and (2) of section 7. It may be mentioned that the object of sub-section (2) of section 9 is to ascertain the amount of rebate in a given case. For the purpose of illustrating the said formula we take the case where the period of repayment is five years but the hirer wants to complete the purchase of goods by tendering to the owner the balance of the hire-purchase price after the completion of three years.

The question is, what would be the amount of rebate in such a case. The amount of statutory hire-purchase charges (or the hire-purchase charges, as they may be called since the hire-purchase charges can never exceed the statutory hire-purchase charges) is Rs. 45,000 in the aforesaid illustration. If so, the formula has to be worked in the following manner:-

45,000 x 24 months x 25
60 x 61

The working of the above formula leads: to an amount of Rs. 7377.05, which is the amount of rebate to which the hirer is entitled to.

VI. No changes are called for in the other sections of the Act as proposed to be amended by the 1989 Amendment Bill except in section 23. In view of sub-section (1A) proposed to be added in section 4 (in this report) clause (a) in sub-section (1) of section 23 becomes unnecessary and has to be deleted, in which case sub-section (1) of section 23 shall read as follows:

"(1) It shall be duty of the owner to supply, free of cost, a true copy of the hire-purchase agreement, signed by the owner, to the surety, where there is a contract of guarantee, on demand made at any time before the final payment has been made under the agreement."

Inasmuch as the 1972 Act was made on the basis of the 20th Report of the Law Commission and whereas the Law Commission has had exhaustive consultations with all concerned and interested persons, bodies and organisations before submitting the said report, the Law Commission does not think that any more consultation process is necessary so far as the Act is concerned, also because the objections put forward by the trading community to the Act have been met and satisfied through the Amendment Bill.

The Consumers Organisations have however been pressing for early implementation of the Act. This questionnaire is thus confined to the Amendment Bill of 1989 and to the changes proposed by the Law Commission.

The Law Commission seeks your co-operation, valuable views, opinions, suggestions, ideas and comments on the changes proposed by the Amendment Bill of 1989 and the changes proposed by the Law Commission. For proper examination of the subject, your views on the following questions would be of immense use for finalising our report on the subject:-



The Hire-Purchase Act, 1972 Back




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