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Report No. 168

Questionnaire

1(a). The Hire-Purchase (Amendment) Bill, 1989 proposes to delete the following words in the definition of "hire-purchase price" in clause (d) of section of the Hire-Purchase Act, 1972:-

"but does not include any sum payable as a penalty or a compensation or damages for a breach of the agreement", and, in their place, substitute the following matter:-

"but does not include any 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."

Have you any suggestions, objections or comments to offer on the proposed amendment?

1(b). The Law Commission proposes, in the interest of clarity and simplicity, to define the expression "Hire-purchase Price" in the following words:

"(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 in eludes the hire-purchase charges but does not include any 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 the penalty or as compensation or damages for a breach of the agreement".

Have you any suggestions, objections or comments to offer on the proposed change?

2(a). The Law Commission proposes that the existing Clause (b) of sub-section (1) of section 4 in the Act be substituted by the following clause:-

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

What are your suggestions, comments and objections to the above proposal?

3(a). The Amendment Bill proposes to introduce clause (f) in sub-section (1) of section 4 to the following effect:-

"(f) Such additional particulars as may be prescribed."

The Law Commission proposes to recommend that the proposed Clause (f) be re-lettered as "Clause (g)" and the following Clause (f) be inserted therein.

"(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."

Have you any objections or suggestions to the above proposal?

3(b). The Law Commission proposes to recommend that after sub-section (i) of section 4, the following sub-section (1A) be inserted:-

"(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."

Have you any suggestions or objections to this proposal?

4. The Amendment bill proposes to substitute sub-section (2) of the Act, as proposed in section 4(ii) of the Amendment Bill.

Have you any objections or suggestions to offer in this behalf?

5. The 1989 amendment Bill proposes extensive changes in section 7. So far as sub-section (1) is concerned, the following are the changes proposed by the Amendment Bill:-

(i) clause (a) to be omitted;

(ii) clause (b) to be re-lettered as clause (a), and after such Clause (a) the following clause (b) is to be inserted:-

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

(iii) consequential changes in clause (c);

(iv) omission of clause (d);

(v) . re-lettering clause (e) in the Act as 'clause (d)' and substitution of the entire matter beginning with the word "less", and in its place substitution of the words "less any deposit as defined in clause (a)";

(vi) in the place of the existing clause (f) in the Act, substitution of the following clause (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)".

Have you any suggestions, objections or comments to offer with respect to the above changes?

6. The Law Commission proposes to recommend that the definitions in sub-section (1) of section 7 be substituted altogether with the following definitions:-

(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;

(b) "deposit" means any sum payable by the hirer under the hire-purchase agreement by way of deposit or other initial payment or credited or to be credited to his under the agreement on account of any such deposit or payment, whether that sum is to be or has been discharged by payment of money or by transfer or delivery of goods or by any other means;

[No Change]

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

(d) "balance cash price of goods" means the cash price of goods less any deposit;

(e) "balance hire-purchase price" means the hire-purchase price less any deposit;

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

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

The above changes are proposed to be recommended to bring in simplicity and clarity in the definitions.

Have you any suggestions, objections or comments to offer on the aforesaid proposed changes?

7(a). The amendment Bill proposes to substitute sub-section (2) altogether as mentioned in the Bill. The Law Commission is of the opinion that it is a very welcome amendment/substitution.

Have you any suggestions and objections to the said substitution?

7(b). With a view to explain the formula contained in sub-section (2) of section 7, and to make it easily understood by all concerned, the Law Commission proposes to recommend to add the following illustration at the end of sub-section (2):-

"Illustrations 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. 65,000. A pays a deposit; of Rs. 15,000 on the date of hire-purchase to 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 agreed between the parties is five years, payable in 60 equal monthly instalments. 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.

It may be mentioned that in the above illustration, various expressions which are defined in sub-section (1) of section 7 (as recommended by Law Commission) have been duly underlined (italicized).

Have you any suggestions/objections or comments to offer to the proposed insertion of illustration to sub-sections (1) and (2).

7(c). Alternatively, is it advisable to omit sub-section (2) of section 7 altogether (together with the proposed illustration) and provide simply, since the provisions of the Bill seek to apply a flat rate formula,-that the owner shall not charge, stipulate or collect hire-purchase charges in excess of the amount calculated at the rate of 18% per annum [or if a lower rate is specified under sub-section (3),
at such lower rate] on the balance cash price, payable during the period, expressed in years and fractions of years, as the case may be, that elapses between the date of agreement and the date on which the last hire-purchase instalment is payable under the agreement. Provided that such amount calculated shall be payable in equated periodic instalments. Then there will be consequential modification in clause (g) by deleting words "by the formula contained in sub-section (2)" and substituting by "by sub-section (2)".

8. In sub-section (3) of section 7, the Amendment Bill proposes to delete the following words: "being a rate which shall not be less than 10% per annum".

Have you any suggestions or objections to offer in this behalf.

9. The Law Commission proposes to recommend that sub-section (1) of after section 7, a new sub-section "1 A" be inserted in the following terms:-

"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 the statutory hire-purchase charges shall refund the excess amount collected, with interest @ 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 with interest."

The Law Commission further proposes to recommend that in view of the said insertion of sub-section 1A to the existing sub-sections (4), (5) and (6) of section 7 in the Act may be deleted.

Have you any suggestions, objections or comments to offer to the proposed recommendations?

10(a). The amendment Bill proposes to delete the existing sub-section (2) and the Explanation appended thereto in section 9 of the Act and in its place substitute a new sub-section (2) as contained in section 6 of the Amendment Bill. Law Commission agrees with the said amendment/substitution.

Have you any suggestions, objections and comments to offer on the proposed amendment?

10(b). With a view to make the formula contained in new sub-section (2) of section 9 easily understandable, the Law Commission proposes to recommend the addition of the following illusteration in sub-section (2) in the following terms:-

"Illustration.- For the purpose of this illustration, the very same facts as are mentioned in the illustration proposed to be added to sub-sections (1) and (2) of section 7 are being adopted. The object of sub-section (2) of section 9 is to ascertain the amount of rebate in a given case. In the aforesaid illustration, 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 and at the end of a period of three years. The rebate he is entitled to in such a situation is the following:

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."

Have you any suggestions or objections to the proposed recommendation?

11. The amendments proposed by the Amendment Bill in sections 10 and 12 are merely formal. Similarly, the amendments proposed in sub-section (1) and sub-section (2) of section 17 are also formal. The Amendment Bill, however, proposes to insert sub-section (5) in section 17 as set out in section 9(c) of the Bill.

Have you any suggestions, objections or comments to offer to the above amendment?

12. While, the amendments proposed by the Amendment Bill in sections 18, 19, 20 and 21 are formal, the amendments, proposed in section 23 are material. Even here the amendments proposed in sub-section (1) again are formal but the addition of sub-section (1A) in section 23 may call for your comments. The proposed amendments are set out in section 14 of the Amendment Bill.

Have you any objections, suggestions or comments to offer?

13. The Law Commission proposes to recommend that in view of the new sub-section (1A) recommended by it to be added in section 4, the existing clause (a) in sub-section (1) of section 23 of the Act may be deleted, in which case sub-section (1) of section 23 shall read as follows:-

"(1) It shall be the 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."

Have you any suggestions or objections to offer to the proposed recommendations?

14. The Amendment Bill proposes to add section 32 in the Act to confer upon the Central Government the power to make the Rules. Similarly, it proposes to add section 33 to confer upon the Central Government the power to remove difficulties. The proposed sections 32 and 33 are set out in section 16 of the Amendment Bill.

Have you any suggestions, objections and comments to offer on the above additions?



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