Report No. 20

Clause 18

General.-This is intended to prevent oppressive exercise by the owner of the power to seize the goods where there is a default in the payment of instalments.

Section 11 of the English Act provides that where instalments amounting to one-third of the hire-purchase price have been paid by the hirer, the owner cannot himself seize the goods and must file a suit to enforce his right. The English Act, however, is limited to hire-purchase agreements upto a certain value only, and there is no such restriction there for hire-purchase agreements where the hire-purchase price exceeds £ 300 (or £ 1000 in the case of livestock).

The comments received and the opinions expressed in the course of oral evidence recorded on this clause reveal a sharp difference of opinion as to the expediency of this provision. In the draft which was circulated by the Commission to the State Governments, High Courts, interested bodies and persons, the provision suggestee was that where one-third of the hire-purchase price has been paid, the extra-judicial recovery of the goods should be barred. In the comments received on this clause, at one extreme stood the view that the proportion given in the draft was fair, and at the other extreme stood the view that the hire-purchase business in India was in its infancy and any restriction on the seizure of the goods by the owner would hamper the recovery of the goods and would discourage owners from giving out goods on hire-purchase.

The point made was, that while the owners did, not actually in practice use this right of seizure, the apprehension that it may be used constituted a very valuable sanction for the punctual payment of instalments. As between these two extremes, a number of intermediate proportions were suggested, for example, one-half, two-thirds, three-fourths, etc. of the hire-purchase price. The Commission appreciated that the right to seize goods constituted a useful safeguard for the owner's interest; at the same time, it must be noted that the goods given out on hire-purchase very often constitute the main source of livelihood of the hirer, and to leave the owner free to deprive the hirer of the possession of such goods without going to Court would cause serious hardship to the hirer.

Having regard to the fact that the main opposition to the proportion of one-third came from business interests concerned with motor-vehicles, particularly trucks and lorries, in respect of which the hire-purchase price would usually exceed Rs. 15,000, it appeared that the best solution was to fix the proportion at one-half for goods below Rs. 15,000 and three-fourths in other cases.1

Sub-clause (1).-This does not need any further comments than those made under 'general' above.

Sub-clause (2).-In the opening portion, the article "the" seems to be more appropriate than the article "an" used in the English Act, and has been preferred.

Sub-clause (3).-Proceedings by way of suit for recovery of goods take a long time. As the clause under discussion imposes a restriction on extra-judicial seizure, it is considered that the proceedings should be by way of petition, so that the matter may be disposed of quickly and without much expense to the parties. Proceedings by way of suit take time and that must necessarily result in prejudice both to the owner and to the hirer. The owner suffers, because he does not get the goods, which may deteriorate in the meantime by the hirer's carelessness and indifference, while the hirer's interests are prejudiced because if the owner obtains from the court an order for the appointment of receiver or similar order, he loses the benefit of enjoyment of the goods, which may be his only source of livelihood.

1. See also the body of the Report, para. 6.