Report No. 168
7. Limitation on hire-purchase charges.-
(1) In this section:-
(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 credited or to be credited to him 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;
(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) "statutory hire-purchase charges" means the amount as determined by the formula contained in sub-section (2).
(2) The statutory hire-purchase charges shall be an amount calculated (at the rate of eighteen per cent= per annum, or if a lower rate is specified under sub-section (3) at such lower rate) in accordance with the following formula:-
where S.- represents the statutory hire-purchase charges;
N.- represents the net cash price; R- represents the rate; and
.- represents the time expressed in years and fractions of years, that elapses between the date of the agreement and the date on which the last hire-purchase instalment is payable under the agreement.
Illustration to sub-sections (1) & (2).-A, a hirer purchases a car from B, the 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 agreement which means that Rs. 50,000 is the balance cash price of the car. The rate of interest permitted by this section is 18% per annum. The period of agreement between the parties is five years and the balance hire-purchase price is payable in 60 equal monthly instalments. Accordingly, applying the above formula, the statutory hire-purchase charges in this case would be Rs. 45,000 arrived at in the following manner-
The hire-purchase charges cannot exceed the statutory hire-purchase charges. Thus in this illustration, the hire-purchase price is Rs. 1,10,000 i.e., Rs. 65,000 plus Rs. 45,000. The balance hire-purchase price is Rs. 95,000, i.e., Rs. 1,10,000 minus Rs. 15,000 (deposit). 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.
(3) The Central Government may, by notification in the Official Gazette, and after consultation with the Reserve Bank of India, specify the rate per centum per annum, at which statutory hire-purchase charges may be calculated under sub-section (2) and different rates may be so specified in respect of hire-purchase agreements relating to different classes or sub-clauses of goods.
7A. Hire-purchase charges not to exceed statutory hire-purchase charges.-
Any stipulation in the hire-purchase agreement where under the hirer is obliged 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 in excess of the statutory hire-purchase charges shall refund the amount so 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.