The Payment of Gratuity Act, 1972

PREAMBLE

[39 OF 1972]

An Act to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments and for matters connected therewith or incidental thereto.

BE it enacted by Parliament in the Twenty-third Year of Republic of India as follows:-

1. SHORT TITLE, EXTENT, APPLICATION AND COMMENCEMENT. –

(1) This Act may be called the Payment of Gratuity Act, 1972.

(2) It extends to the whole of India: Provided that in so far as it relates to plantations or ports, it shall not extend to the State of Jammu and Kashmir.

(3) It shall apply to –

(a) every factory, mine, oilfield, plantation, port and railway company;

(b) every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or more persons are employed, or were employed, on any day of the preceding twelve months;

(c) such other establishments or class of establishments, in which ten or more employees are employed, or were employed, on any day of the preceding twelve months, as the Central Government may, by notification, specify in this behalf.

(3A) A shop or establishment to which this Act has become applicable shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time after it has become so applicable falls below ten.

(4) It shall come into force on such date as the Central Government may, by notification, appoint.

2. DEFINITIONS. –

In this Act, unless the context otherwise requires, –

(a) “appropriate Government” means, –

(i) in relation to an establishment –

(a) belonging to, or under the control of, the Central Government,

(b) having branches in more than one State,

(c) of a factory belonging to, or under the control of, the Central Government,

(d) of a major port, mine, oilfield or railway company, the Central Government, (ii) in any other case, the State Government;

(b) “completed year of service” means continuous service for one year;

(c) “continuous service” means continuous service as defined in section 2A;

(d) “controlling authority” means an authority appointed by the appropriate Government under section 3;

(e) “employee” means any person (other than an apprentice) employed on wages, in any establishment, factory, mine, oilfield, plantation, port, railway company or shop, to do any skilled, semi-skilled, or unskilled, manual, supervisory, technical or clerical work, whether the terms of such employment are express or implied, and whether or not such person is employed in a managerial or administrative capacity, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity.

Explanation : (f) “employer” means, in relation to any establishment, factory, mine, oilfield, plantation, port, railway company or shop –

(i) belonging to, or under the control of, the Central Government or a State Government, a person or authority appointed by the appropriate Government for the supervision and control of employees, or where no person or authority has been so appointed, the head of the Ministry or the Department concerned,

(ii) belonging to, or under the control of, any local authority, the person appointed by such authority for the supervision and control of employees or where no person has been so appointed, the chief executive office of the local authority,

(iii) in any other case, the person, who, or the authority which, has the ultimate control over the affairs of the establishment, factory, mine, oilfield, plantation, port, railway company or shop, and where the said affairs are entrusted to any other person, whether called a manager, managing director or by any other name, such person;

(g) “factory” has the meaning assigned to it in clause (m) of section 2 of the Factories Act, 1948 (63 of 1948);

(h) “family”, in relation to an employee, shall be deemed to consist of –

(i) in the case of a male employee, himself, his wife, his children, whether married or unmarried, his dependent parents and the dependent parents of his wife and the widow and children of his predeceased son, if any,

(ii) in the case of a female employee, herself, her husband, her children, whether married or unmarried, her dependent parents and the dependent parents of her husband and the widow and children of her predeceased son, if any :

Explanation : Where the personal law of an employee permits the adoption by him of a child, any child lawfully adopted by him shall be deemed to be included in his family, and where a child of an employee has been adopted by another person and such adoption is, under the personal law of the person making such adoption, lawful, such child shall be deemed to be excluded from the family of the employee;

(i) “major port” has the meaning assigned to it in clause (8) of section 3 of the Indian Ports Act, 1908 (15 of 1908);

(j) “mine” has the meaning assigned to it in clause (j) of sub-section (1) of section 2 of the Mines Act, 1952 (35 of 1952);

(k) “notification” means a notification published in the Official Gazette;

(l) “oilfield” has the meaning assigned to it in clause (e) of section 3 of the Oilfields (Regulation and Development) Act, 1948 (53 of 1948);

(m) “plantation” has the meaning assigned to it in clause (f) of section 2 of the Plantations Labour Act, 1951 (69 of 1951);

(n) “port” has the meaning assigned to it in clause (4) of section 3 of the Indian Ports Act, 1908 (15 of 1908);

(o) “prescribed” means prescribed by rules made under this Act;

(p) “railway company” has the meaning assigned to it in clause (5) of section 3 of the Indian Railways Act, 1890 (9 of 1890);

(q) “retirement” means termination of the service of an employee otherwise than on superannuation;

(r) “superannuation”, in relation to an employee, means the attainment by the employee of such age as is fixed in the contract or conditions of service at the age on the attainment of which the employee shall vacate the employment;

(s) “wages” means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.

2A. CONTINUOUS SERVICE. –

For the purposes of this Act, – (1) an employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order treating the absence as break in service has been passed in accordance with the standing order, rules or regulations governing the employees of the establishment), lay off, strike or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act.

(2) where an employee (not being an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer –

(a) for the said period of one year, if the employee during the period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than – (i) one hundred and ninety days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and (ii) two hundred and forty days, in any other case;

(b) for the said period of six months, if the employee during the period of six calendar months preceding the date with reference to which the calculation is to be made, has actually worked under the employer for not less than –

(i) ninety-five days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and

(ii) one hundred and twenty days, in any other case;

Explanation : For the purpose of clause (2), the number of days on which an employee has actually worked under an employer shall include the days on which –

(i) he has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Order’s) Act, 1946 (20 of 1946), or under the Industrial Disputes Act, 1947 (14 of 1947), or under any other law applicable to the establishment;

(ii) he has been on leave with full wages, earned in the previous year;

(iii) he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and

(iv) in the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave does not exceed twelve weeks.

(3) where an employee employed in a seasonal establishment, is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer for such period if he has actually worked for not less than seventy-five per cent of the number of days on which the establishment was in operation during such period.

3. CONTROLLING AUTHORITY. –

The appropriate Government may, by notification, appoint any officer to be a controlling authority, who shall be responsible for the administration of this Act and different controlling authorities may be appointed for different areas.

4. PAYMENT OF GRATUITY.-

(1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years, – (a) on his superannuation, or

(b) on his retirement or resignation, or

(c) on his death or disablement due to accident or disease : Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement :

Provided further that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs is a minor, the share of such minor, shall be deposited with the controlling authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority.

Explanation : For the purposes of this section, disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disablement.

(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days’ wages based on the rate of wages last drawn by the employee concerned : Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account :

Provided further that in the case of an employee who is employed in a seasonal establishment and who is not so employed throughout the year, the employer shall pay the gratuity at the rate of seven days’ wages for each season.

Explanation : In the case of a monthly rated employee, the fifteen days’ wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen.

(3) The amount of gratuity payable to an employee shall not exceed three lakhs and fifty thousand rupees.

(4) For the purpose of computing the gratuity payable to an employee who is employed, after his disablement, on reduced wages, his wages for the period preceding his disablement shall be taken to be the wages received by him during that period, and his wages for the period subsequent to his disablement shall be taken to be the wages as so reduced.

(5) Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer.

(6) Notwithstanding anything contained in sub-section (1), –

(a) the gratuity of an employee, whose services have been terminated for any act, willful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer, shall be forfeited to the extent of the damage or loss so caused.

(b) the gratuity payable to an employee may be wholly or partially forfeited –

(i) if the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or

(ii) if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment.

4A. COMPULSORY INSURANCE. –

(1) With effect from such date as may be notified by the appropriate Government in this behalf, every employer, other than an employer or an establishment belonging to, or under the control of, the Central Government or a State Government, shall, subject to the provisions of sub-section (2), obtain an insurance in the manner prescribed, for his liability for payment towards the gratuity under this Act, from the Life Insurance Corporation of India established under the Life Insurance Corporation of India Act, 1956 (31 of 1956) or any other prescribed insurer : Provided that different dates may be appointed for different establishments or class of establishments or for different areas.

(2) The appropriate Government may, subject to such conditions as may be prescribed, exempt every employer who had already established an approved gratuity fund in respect of his employees and who desires to continue such arrangement, and every employer employing five hundred or more persons who establishes an approved gratuity fund in the manner prescribed from the provisions of sub-section (1).

(3) For the purpose of effectively implementing the provisions of this section, every employer shall within such time as may be prescribed get his establishment registered with the controlling authority in the prescribed manner and no employer shall be registered under the provisions of this section unless he has taken an insurance referred to in sub-section (1) or has established an approved gratuity fund referred to in sub-section (2).

(4) The appropriate Government may, by notification, make rules to give effect to the provisions of this section and such rules may provide for the composition of the Board of Trustees of the approved gratuity fund and for the recovery by the controlling authority of the amount of the gratuity payable to an employee from the Life Insurance Corporation of India or any other insurer with whom an insurance has been taken under sub-section (1), or as the case may be, the Board of Trustees of the approved gratuity fund.

(5) Where an employer fails to make any payment by way of premium to the insurance referred to in sub-section (1) or by way of contribution to an approved gratuity fund referred to in sub-section (2), he shall be liable to pay the amount of gratuity due under this Act (including interest, if any, for delayed payments) forthwith to the controlling authority.

(6) Whoever contravenes the provisions of sub-section (5) shall be punishable with fine which may extend to ten thousand rupees and in the case of a continuing offence with a further fine which may extend to one thousand rupees for each day during which the offence continues.

Explanation : In this section “approved gratuity fund” shall have the same meaning as in clause (5) of section 2 of the Income-tax Act, 1961 (43 of 1961).

5. POWER TO EXEMPT. –

(1) The appropriate Government may, by notification, and subject to such conditions as may be specified in the notification, exempt any establishment, factory, mine, oilfield, plantation, port, railway company or shop to which this Act applies from the operation of the provisions of this Act if, in the opinion of the appropriate Government, the employees in such establishment, factory, mine, oilfield, plantation, port, railway company or shop are in receipt of gratuity or pensionary benefits not less favourable than the benefits conferred under this Act.

(2) The appropriate Government may, by notification and subject to such conditions as may be specified in the notification, exempt any employee or class of employees employed in any establishment, factory, mine, oilfield, plantation, port, railway company or shop to which this Act applies from the operation of the provisions of this Act, if, in the opinion of the appropriate Government, such employee or class of employees are in receipt of gratuity or pensionary benefits not less favourable than the benefits conferred under this Act.

(3) A notification issued under sub-section (1) or sub-section (2) may be issued retrospectively a date not earlier than the date of commencement of this Act, but no such notification shall be issued so as to prejudicially affect the interests of any person.

6. NOMINATION. –

(1) Each employee, who has completed one year of service, shall make, within such time, in such form and in such manner, as may be prescribed, nomination for the purpose of the second proviso to sub-section (1) of section 4.

(2) An employee may in his nomination, distribute the amount of gratuity payable to him, under this Act amongst more than one nominee.

(3) If an employee has a family at the time of making a nomination, the nomination shall be made in favour of one or more members of his family, and any nomination made by such employee in favour of a person who is not a member of his family, shall be void.

(4) If at the time of making a nomination the employee has no family, the nomination may be made in favour of any person or persons but if the employee subsequently acquires a family, such nomination shall forthwith become invalid and the employee shall make, within such time as may be prescribed, a fresh nomination in favour of one or more members of his family.

(5) A nomination may, subject to the provisions of sub-sections (3) and (4), be modified by an employee at any time, after giving to his employer a written notice in such form and in such manner as may be prescribed, of his intention to do so.

(6) If a nominee predeceases the employee, the interest of the nominee shall revert to the employee who shall make a fresh nomination, in the prescribed form, in respect of such interest.

(7) Every nomination, fresh nomination or alteration of nomination, as the case may be, shall be sent by the employee to his employer, who shall keep the same in his safe custody.

7. DETERMINATION OF THE AMOUNT OF GRATUITY. –

(1) A person who is eligible for payment of gratuity under this Act or any person authorised, in writing, to act on his behalf shall send a written application to the employer, within such time and in such form, as may be prescribed, for payment of such gratuity.

(2) As soon as gratuity becomes payable, the employer shall, whether an application referred to in sub-section (1) has been made or not, determine the amount of gratuity and give notice in writing to the person to whom the gratuity is payable and also to the controlling authority specifying the amount of gratuity so determined.

(3) The employer shall arrange to pay the amount of gratuity within thirty days from the date it becomes payable to the person to whom the gratuity is payable.

(3A) If the amount of gratuity payable under sub-section (3) is not paid by the employer within the period specified in sub-section (3), the employer shall pay, from the date on which the gratuity becomes payable to the date on which it is paid, simple interest at such rate, not exceeding the rate notified by the Central Government from time to time for repayment of long-term deposits, as that Government may, by notification specify : Provided that no such interest shall be payable if the delay in the payment is due to the fault of the employee and the employer has obtained permission in writing from the controlling authority for the delayed payment on this ground.

(4) (a) If there is any dispute as to the amount of gratuity payable to an employee under this Act or as to the admissibility of any claim of, or in relation to, an employee for payment of gratuity, or as to the person entitled to receive the gratuity, the employer shall deposit with the controlling authority such amount as he admits to be payable by him as gratuity.

(b) Where there is a dispute with regard to any matter or matters specified in clause (a), the employer or employee or any other person raising the dispute may make an application to the controlling authority for deciding the dispute.

(c) The controlling authority shall, after due inquiry and after giving the parties to the dispute a reasonable opportunity of being heard, determine the matter or matters in dispute and if, as a result of such inquiry any amount is found to be payable to the employee, the controlling authority shall direct the employer to pay such amount or, as the case may be, such amount as reduced by the amount already deposited by the employer.

(d) The controlling authority shall pay the amount deposited, including the excess amount, if any, deposited by the employer, to the person entitled thereto.

(e) As soon as may be after a deposit is made under clause (a), the controlling authority shall pay the amount of the deposit –

(i) to the applicant where he is the employee; or

(ii) where the applicant is not the employee, to the nominee or, as the case may be, the guardian of such nominee or heir of the employee if the controlling authority is satisfied that there is no dispute as to the right of the applicant to receive the amount of gratuity.

(5) For the purpose of conducting an inquiry under sub-section (4), the controlling authority shall have the same powers as are vested in a court, while trying a suit, under the Code of Civil Procedure, 1908 (5 of 1908), in respect of the following matters, namely :-

(a) enforcing the attendance of any person or examining him on oath;

(b) requiring the discovery and production of documents;

(c) receiving evidence on affidavits;

(d) issuing commissions for the examination of witnesses.

(6) Any inquiry under this section shall be a judicial proceeding within the meaning of sections 193 and 228, and for the purpose of section 196, of the Indian Penal Code, 1860 (45 of 1860).

(7) Any person aggrieved by an order under sub-section (4) may, within sixty days from the date of the receipt of the order, prefer an appeal to the appropriate Government or such other authority as may be specified by the appropriate Government in this behalf : Provided that the appropriate Government or the appellate authority, as the case may be, may, if it is satisfied that the appellant was prevented by sufficient cause from preferring the appeal within the said period of sixty days, extend the said period by a further period of sixty days.

Provided further that no appeal by an employer shall be admitted unless at the time of preferring the appeal, the appellant either produces a certificate of the controlling authority to the effect that the appellant has deposited with him an amount equal to the amount of gratuity required to be deposited under sub-section (4), or deposits with the appellate authority such amount.

(8) The appropriate Government or the appellate authority, as the case may be, may, after giving the parties to the appeal a reasonable opportunity of being heard, confirm, modify or reverse the decision of the controlling authority.

7A. INSPECTORS. –

(1) The appropriate Government may, by notification, appoint as many Inspectors, as it deems fit, for the purposes of this Act.

(2) The appropriate Government may, by general or special order, define the area to which the authority of an Inspector so appointed shall extend and where two or more Inspectors are appointed for the same area, also provide, by such order, for the distribution or allocation of work to be performed by them under this Act.

(3) Every Inspector shall be deemed to be a public servant within the meaning of section 21 of the Indian Penal Code, 1860 (45 of 1860).

7B. POWERS OF INSPECTORS. –

(1) Subject to any rules made by the appropriate Government in this behalf, an Inspector may, for the purpose of ascertaining whether any of the provisions of this Act or the conditions, if any, of any exemption granted thereunder, have been complied with, exercise all or any of the following powers, namely :-

(a) require an employer to furnish such information as he may consider necessary;

(b) enter and inspect, at all reasonable hours, with such assistants (if any),

being persons in the service of the Government or local or any public authority, as he thinks fit, any premises of or place in any factory, mine, oilfield, plantation, port, railway company, shop or other establishment to which this Act applies, for the purpose of examining any register, record or notice or other document required to be kept or exhibited under this Act or the rules made thereunder, or otherwise kept or exhibited in relation to the employment of any person or the payment of gratuity to the employees, and require the production thereof for inspection;

(c) examine with respect to any matter relevant to any of the purposes aforesaid, the employer or any person whom he finds in such premises or place and who, he has reasonable cause to believe, is an employee employed therein;

(d) make copies of, or take extracts from, any register, record, notice or other document, as he may consider relevant, and where he has reason to believe that any offence under this Act has been committed by an employer, search and seize with such assistance as he may think fit, such register, record, notice or other document as he may consider relevant in respect of that offence;

(e) exercise such other powers as may be prescribed.

(2) Any person required to produce any register, record, notice or other document or to give any information by an Inspector under sub-section (1) shall be deemed to be legally bound to do so within the meaning of sections 175 and 176 of the Indian Penal Code 1860 (45 of 1860).

(3) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974) shall so far as may be, apply to any search or seizure under this section as they apply to any search or seizure made under the authority of a warrant issued under section 94 of that Code.

8. RECOVERY OF GRATUITY. –

If the amount of gratuity payable under this Act is not paid by the employer, within the prescribed time, to the person entitled thereto, the controlling authority shall, on an application made to it in this behalf by the aggrieved person, issue a certificate for that amount to the Collector, who shall recover the same, together with compound interest thereon at such rate as the Central Government may, by notification, specify, from the date of expiry of the prescribed time, as arrears of land revenue and pay the same to the person entitled thereto :

Provided that the controlling authority shall, before issuing a certificate under this section, give the employer a reasonable opportunity of showing cause against the issue of such certificate :

Provided further that the amount of interest payable under this section shall, in no case exceed the amount of gratuity payable under this Act.

9. PENALTIES. –

(1) Whoever, for the purpose of avoiding any payment to be made by himself under this Act or of enabling any other person to avoid such payment, knowingly makes or causes to be made any false statement or false representation shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to ten thousand rupees or with both.

(2) An employer who contravenes, or makes default in complying with, any of the provisions of this Act or any rule or order made thereunder shall be punishable with imprisonment for a term which shall not be less than three months but which may extend to one year, or with fine which shall not be less than ten thousand rupees but which may extend to twenty thousand rupees, or with both :

Provided that where the offence relates to non-payment of any gratuity payable under this Act, the employer shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to two years unless the court trying the offence, for reasons to be recorded by it in writing, is of opinion that a lesser term of imprisonment or the imposition of a fine would meet the ends of justice.

10. EXEMPTION OF EMPLOYER FROM LIABILITY IN CERTAIN CASES. –

Where an employer is charged with an offence punishable under this Act, he shall be entitled, upon complaint duly made by him and on giving to the complainant not less than three clear days’ notice in writing of his intention to do so, to have any other person whom he charges as the actual offender brought before the court at the time appointed for hearing the charge; and if, after the commission of the offence has been proved, the employer proves to the satisfaction of the court – (a) that he has used due diligence to enforce the execution of this Act, and

(b) that the said other person committed the offence in question without his knowledge, consent or connivance, that other person shall be convicted of the offence and shall be liable to the like punishment as if he were the employer and the employer shall be discharged from any liability under this Act in respect of such offence :

Provided that in seeking to prove as aforesaid, the employer may be examined on oath and his evidence and that of any witness whom he calls in his support shall be subject to cross-examination on behalf of the person he charges as the actual offender and by the prosecutor :

Provided further that, if the person charged as the actual offender by the employer cannot be brought before the court at the time appointed for hearing the charge, the court shall adjourn the hearing from time to time for a period not exceeding three months and if by the end of the said period the person charged as the actual offender cannot still be brought before the court, the court shall proceed to hear the charge against the employer and shall, if the offence be proved, convict the employer.

11. COGNIZANCE OF OFFENCES. –

(1) No court shall take cognizance of any offence punishable under this Act save on a complaint made by or under the authority of the appropriate Government : Provided that where the amount of gratuity has not been paid, or recovered, within six months from the expiry of the prescribed time, the appropriate Government shall authorise the controlling authority to make a complaint against the employer, whereupon the controlling authority shall, within fifteen days from the date of such authorisation, make such complaint to a Magistrate having jurisdiction to try the offence.

(2) No court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under this Act.

12. PROTECTION OF ACTION TAKEN IN GOOD FAITH. –

No suit or other legal proceeding shall lie against the controlling authority or any other person in respect of anything which is in good faith done or intended to be done under this Act or any rule or order made thereunder.

13. PROTECTION OF GRATUITY. –

No gratuity payable under this Act and no gratuity payable to an employee employed in any establishment, factory, mine, oilfield, plantation, port, railway company or shop exempted under section 5 shall be liable to attachment in execution of any decree or order of any civil, revenue or criminal court.

14. ACT TO OVERRIDE OTHER ENACTMENTS, ETC. –

The provisions of this Act or any rule made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act or in any instrument or contract having effect by virtue of any enactment other than this Act.

15. POWER TO MAKE RULES.

(1) The appropriate Government may, by notification make rules for the purpose of carrying out the provisions of this Act. (2) Every rule made by the Central Government under this Act shall be laid, as soon as may be after it is made, before each House of Parliament while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall, thereafter, have effect only in such modified form or be of no effect as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.

The Hire-Purchase Act, 1972

Chapter I – Preliminary

1. Short title, extent and commencement. –

ACT NO. 26 OF 1972

AN ACT TO DEFINE AND REGULATE THE RIGHTS AND DUTIES OF PAR TIES TOHIRE-PURCHAS [8th June, 1972.]

BE it enacted by Parliament in the Twenty-third Year of the Republic of India as follows:-

(1) This Act may be called the Hire-Purchase Act, 1972.

(2) It extends to the whole of India except the State of Jammu and Kashmir¹

(3) It shall come into force on such date² as the Central Government may, by notification in the Official Gazette, appoint.

————————————-

1. The Act has not been extended to the State of Sikkim.

2. This Act was to come into force on 1st June, 1973, vide GSR 222 (E), dated 30th April, 1973, but this notification was rescinded by GSR 288 (E) dated 31st May, 1973 and the Act was made effective from 1-9-1973 but this notification was also rescinded by GSR 402 (E) dated 30th August, 1973. This Act has not come into force as yet

2. Definitions. –

In this Act, unless the context otherwise requires. –

(a) “contract of guarantee” in relation to any hire-purchase agreement, means a contract whereby a person ( in this Act referred to as the surety) guarantees the performance of all or any of the hirer’s obligations under the hire-purchase agreement.

(b) “hire” means the sum payable periodically by the hirer under a hire-purchase agreement.

(c) “hire-purhase agreement” means an agreement under which goods are let on hire and under which the hirer has an option to purchase them in accordance with the terms of the agreement and includes an agreement under which-

(i) possession of goods is delivered by the owner thereof to a person on condition that such persons pays the agreed amount in periodical installments, and

(ii) the property in the goods is to pass to such person on the payment of the last of such installments, and

(iii) such person has a right to terminate the agreement at any time before the property so passes.

(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 property in, the goods to which the agreement relates and includes any sum so payable by the hirer under hire-purchase agreement by way of a deposit other initial payment, or credited or to be credited to him under such agreement on account of any such deposit or payment, whether that sum is to be a or has been paid to the owner or to any other person or is to be or has been discharged by payment or money or by transfer or delivery of goods or by any other means but does not include any sum payable as a penalty or as compensation or damages for a breach of the agreement.

(e) “hirer” means the person who obtains or has obtained possession of goods from an owner under a hire-purchase agreement, and includes a person to whom the hirer’s rights or liabilities under the agreement have passed by assignment or by operation of law.

(f) “owner” means the person who lets or has let, delivers or has delivered possession of goods, to a hirer under a hire-purchase agreement and includes a person to whom the owners property in the goods or any of the owners rights or liabilities under the agreement has passed by assignment or by operation of law.

(g) each of the words and expressions used and not defined in this Act but defined in the Indian Contract Act, 1872 ( 9 of 1872) or the Sale of Goods Act, 1930 (3 of 1930) shall have the meaning assigned to it in that Act.

Chapter II – Form and Contents of Hire-Purchase Agreements

3. Hire –Purchase agreements to be in writing and signed by parties thereto.-

(1) Every hire-purchase agreement shall be –

(a) in writing, and

(b) signed by all the parties thereto

(2) A hire-purchase agreement shall be void if in respect thereof any of the requirements specified in sub-section (1) has not been complied with

(3) Where there is a contract of guarantee, the hire-purchase agreement shall be signed by the surety also, and if the hire-purchase agreement is not so signed, the hire-purchase agreement shall be voidable at the option of the owner.

Comments

Every hire-purchase agreement is to be in writing and signed by all the parties of the agreement, where there is contract of guarantee, the agreement is to be signed by the surety also.

4. Contents of hire purchase agreement.-

(1) Every hire-purchase agreement shall state-

(a) The hire-purchase price of the goods to which the agreement relates,

(b) The cash price of the goods, that is to say, the price at which the goods may be purchased by the hirer for cash,

(c) The date on which the agreement shall be deemed to have commenced.

(d) the number of installments by which the hire-purchase price is to be paid, the amount of each of those installments, and the date, or the mode of determining the date, upon which it is payable, and the person to whom and the place where it is payable and

(e) the goods to which the agreement relates, in a manner sufficient to identity them.

(2) Where any part of the hire-purchase price is, or is to be, paid otherwise than in cash or by cheque, the hire-purchase agreement shall contain a description of the part of the hire-purchase price.

(3) Where any of the requirements specified in sub-section (1) or sub-section 92) has not been complied with, the hirer may institute a suit for getting the hire-purchase agreement rescinded, and the court may, if it is satisfied that the failure to comply with any such requirement has prejudiced the hirer, rescind the agreement on such term as it thinks just, or pas such other order as it thinks fit in the circumstances of the case.

Comments

In every hire-purchase agreement (i) the hire-purchase price of the goods, (ii) the cash price of the goods, (iii) the date on which the agreement is deemed to have commenced, (iv) the number of instalments by which the hire-purchase price is to be paid, (v) the amount of each instalments and the date on which it is payable, (vi) the person to whom and the place where it is payable, (vii) the goods to which the agreement relates, are to be stated. If any part of the hire-purchase price is, or is to be, paid otherwise than in cash or by cheque than the description of that part of the hire-purchase price is also to be stated. If any of the above said requirements have not been complied with, the hirer can institute a suit for getting the hire-purchase agreement rescinded.

5. Two or more agreements when treated as a single hire-purchase agreement.-

Where by virtue of two or more agreements in writing, none of which by itself constitutes a hire-purchase agreement, there is a bailment of goods and the bailee has an option to purchase the goods and the requirements of section 3 and section 4 are satisfied in relation to such agreements, the agreements shall be treated for the purposes of this Act as a single hire-purchase agreement made at the time when the last of the agreements was made.

Chapter III – Warranties and Conditions, Limitation on Hire-Purchase Charges and Passing of Property

6. Warranties and conditions to be implied in hire-purchase agreements.-

(1) Notwithstanding anything contained in any contract, in every hire-purchase agreement there shall be an implied warranty.

(a) That the hirer shall have and enjoy quiet possession of the goods, and

(b) That the goods shall be free from any charge or encumbrance in favour of any third party at the time when the property is to pass.

(2) Notwithstanding anything contained in any contract, in every hire-purchase agreement there shall be –

(a) An implied condition on the part of the owner that he has a right to sell the goods at the time when the property is to pass.

(b) An implied condition that the goods shall be of merchantable quality, but no such condition shall be implied by virtue of this clause-

(i) As regards defects of which the owner could not reasonably have been aware at the time when the agreement was made, or

(ii) As regards defects specified in the agreement (whether referred to in the agreement as defects or by any other description to the like effect), or

(iii) Where the hirer has examined the goods, or a sample thereof, as regard defects which the examination ought to have revealed, or

(iv) If the goods are second-hand goods and the agreement contains a statement to the effect.

(3) Where the hirer, whether expressly or by implication-

(a) has made known to the owner the particular purpose for which the goods are required, or

(b) in the course of any antecedent negotiation, has made that purpose known to any other person by whom those negotiations were conducted, there shall be an implied condition that the goods shall be reasonably fit for such purpose.

(4) Where the goods are let under a hire-purchase agreement by reference to a sample there shall be-

(a) an implied condition on the part of the owner that the bulk will correspond with the sample in quality, and

(b) an implied condition on the part of the owner that the hirer will have a reasonable opportunity of comparing the bulk with the sample.

(5) Where the goods are let under a hire-purchase agreement by description there shall be an implied condition that the goods will correspond with the description, and if the goods are let under the agreement by reference to a sample as well as by description, it shall not be sufficient that the bulk of the goods correspond with the sample if the goods do not also correspond with the description.

(6) An owner shall not be entitled to rely on any provision in a hire-purchase agreement excluding or modifying the condition set out in sub-section (3) unless he proves that before the agreement was made the provisions was brought to the notice of the hirer and its effect made clear to him.

(7) Nothing in this section shall prejudice the operation of any other enactment or rule of law whereby any condition or warranty is to be implied in any hire-purchase agreement.

Comments

In every hire-purchase agreement there is an implied warranty that the hirer shall have and enjoy quiet possession of the goods and that the goods shall be free from any charge or encumbrance.

In every hire-purchase agreement there are implied conditions that the owner has a right to sell the goods and the goods are of the merchantable quality, where the hirer has made known to the owner the particular purpose for which the goods are required, there shall be implied condition that the goods are reasonably fit for such purpose.

7. Limitation of hire-purchase charges.-

(1) In this section:-

(a) “Cash price installment”, in relation to a hirer-purchase installment, means an amount which bears to the net cash price the same proportion as the amount of the hire-purchase installment bears to the total amount of hire-purchase price.

(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 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) “Net cash price” in relation to goods comprised in a hire-purchase agreement, means the cash price of such goods as required to be specified in the hire-purchase agreement under clause (b) of sub-section (1) of section 4, less any deposit as defined in the clause (b).

(d) “Net-hire-purchase charges” in relation to a hire-purchase agreement for any goods, means the different between the net hire-purchase price and the net cash price of such goods.

(e) “Net hire-purchase price” in relation to goods comprised in a hire-purchase agreement, means the total amount of hire-purchase price of such goods as required to be specified in the hire-purchase agreement under clause (a) of sub-section (1) of section 4 less.

(i) any amount which in payable to cover the express of delivering the goods or any of the them to or the order of the hirer and which is specified in the agreement as included in the hire-purchase price.

(ii) any amount which is payable to cover registration or other fees under any law in respect of the goods or the agreement or both and which is specified in the agreements as included in the hire-purchase price, and

(iii) any amount which is payable for insurance (other than third party insurance) in respect of the goods and which is specified in the agreement as included in the hire-purchase price.

(f) “statutory charges” in relation to hire-purchase agreement, means the aggregate of the amounts calculated in accordance with the provisions of sub-section (2) as statutory charges in respect of each of the cash price installments corresponding to each of the hire-purchase installments under the agreement.

(2) The statutory charges, in respect of a cash price installment, shall be an amount calculated at the rate of thirty per centum per annum or, if a lower rate is specified under sub-section (3) as such lower rate, in accordance with the following formula :-

Where SC.- represents the statutory charges,

C!,- represents the amount of cash price installment expressed in rupees fractions of rupees

R.- represents that rate, and

T,- repress the time, expressed in years and fractions of years, that elapses between the date of the agreement and the date on which the hire-purchase installment corresponding to the cash price installment is payable under the agreement.

(3) The Central Government may, by notification in the Official Gazette, and after consultation with Reserve Bank of India, specify the rate per centum per annum, being a rate which shall not be less than ten per centum per annum, at which statutory 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-classes of goods.

Where the net hire-purchase charges in relation to a hire-purchase agreement exceed the statutory charges in relation to such agreement calculated in accordance with the provisions of sub-section (2), the hirer may notice in writing to the owner, either elect to treat the agreement as void or to have his liability reduced by the amount by which the net hire-purchase charges exceed the statuary charges aforesaid.

Where a hirer elects, in accordance with the provision of sub-section (4), to treat the hire –purchase agreement as void, the agreement shall be void and the amount paid or provided whether by cash, cheque or other consideration by or on behalf of the hirer in relation to the agreement shall be recoverable by the hirer as a debt due to him by the owner.

Where the hirer elects have his liability reduced by the amount referred to in sub-section (4), his liability shall be reduced by that amount and that amount may be set off by the hirer against the amount that would otherwise be due under the agreement and, to the extent to which it is not so set off, may be recovered by the hirer as a debt due to him by the owner.

8. Passing of property.-

Subject the provision of this Act, property in the goods to which a hire-purchase agreement relates shall pass to the hirer only on the completion of the purchase in the manner provided in the agreement.

Comments

The property of goods to which a hire-purchase agreement relates shall pass to the hirer on the completion of the purchase in the manner provided in the agreement.

Chapter IV – Rights and Obligations of the Hirer

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 of the hire-purchase price or the balance thereof as reduced by the rebate calculated in the manner provided in sub-section (2).

The rebate for the purposes of sub-section (1) shall be equal to two-thirds of an amount which bears to the hire-purchase charges the same proportion as the balance of the hire-purchase price not yet due bears to the hire-purchase price.

Explanation.- In the sub-section “hire-purchase” means the difference between the hire-purchase price and the cash price as stated in the hire-purchase agreement.

The provisions of this section shall have effect notwithstanding anything to the contrary contained in the hire-purchase agreement, but where the terms of the agreement entitled to hirer to a rebate higher than that allowed by this section, the hirer shall be entitled to the rebate provided by the agreement.

10. Right to hirer to terminate agreement at any time.-

(1) The hirer may, at any time before the final payment under the hirer-purchase agreement falls due, and after giving the owner not less than fourteen days, notice in writing of his intentions so to do and re-delivering or tendering the goods to the owner, terminate the hire-purchase agreement by payment or tender to the owner of the amounts which have accrued due towards the hire-purchase price and not been paid by him, including the sum, if any, which he is liable to pay under sub-section (2).

Where the hirer terminates the agreement under sub-section (1), and the agreement provides for the payment of a sum named on account of such termination, the liability of the hirer to pay that sum shall be subject to the following conditions, namely:-

Where the sum total of the amounts paid and the amounts due in respect of the hire-purchase price immediately before the termination exceeds one-half of the hire-purchase price, the hirer shall be liable to pay the difference between the said sum total and the said one-half, or the sum named in the agreement whichever, is less.

Nothing in sub-section (2) shall relieve the hirer from any liability for any hire which might have accrued due before the termination.

Any provision in any agreement, whereby the right conferred on a hirer by this section to terminate the hire-purchase agreement by him under this section, shall be void.

Nothing in the section shall prejudice any right of a hirer to terminate a hire-purchase agreement otherwise than by virtue of this section.

Comments

The hire-purchase agreement can be terminated by the hirer before the final payment falls due and after giving the owner 14 days notice in writing of his intention so to do and re-delivering or tendering the goods to the owner.

11. Right to hirer to appropriate payments in respect of two or more agreements.-

A hirer who is liable to make payments in respect of two or more hire-purchase agreements to the same owners hall, notwithstanding any agreement to the contrary, be entitled , on making any payment in respect of the agreements to appropriate the sum so paid by him in or towards the satisfaction of the sum due under any two or more the agreements, or in or towards the satisfaction of the sums due under any two or more of the agreements in such proportions as he thinks fit, and, if he fails to make any such appropriation as aforesaid, the sum so paid shall, by virtue of this section stand appropriated towards the satisfaction of the sums due under the respective hire-purchase agreements in the order in which the agreements were entered into.

12. Assignment and transmission of hirer’s right or interest under hire- purchase agreement.-

(1) The hirer may assign his right, title and interest under the hire-purchase agreement with the consent of the owner, or if his consent is unreasonably withheld, without his consent.

Except as otherwise provided in this section, no payment or other consideration shall be required by an owner for his consent to an assignment under sub-section (1), and where an owner requires any such payment or other consideration for his consent, that consent shall be deemed to be unreasonably withheld.

Where on a request being made by a hirer in this behalf the owner fails or refuses to give his consent to an assignment under sub-section (1) the hirer may apply to the court for an order declaring that the consent of the owner to the assignment has been unreasonably withheld, and where such an order is made the consent shall be deemed to be unreasonably withheld.

Explanation.- In this sub-section, “court” means a court which would have jurisdiction to entertain a suit for the relief claimed in the application.

(4) As a condition of granting such consent, the owner may stipulate that all defaults under the hire-purchase agreement shall be made good and may require the hirer and the assignee to execute and deliver to the owner an assignment agreement, in a form approved by the owner, whereby, without affecting the continuing personal liability of the hirer in such respects, the assignee agrees with the owner to be personally liable to pay the installments of hire remaining unpaid and to perform and observe all other stipulations and conditions of the hire-purchase agreement during the residue of the term thereof and whereby the assignee indemnifies the hirer in respect of such liabilities.

(5)The right, title and interest of a hirer under a hire-purchase agreement shall be capable of passing by operation of law to the legal representative of he hirer but nothing in this sub-section shall relieve the legal representative from compliance with the provisions of the hire-purchase agreement.

Explanation.- In this sub-section, the expression, “legal representative” has the same meaning as in clause (11) of section 2 of the Code of Civil Procedure, 1908 (5 of 1908).

The provision of this section shall apply notwithstanding anything to the contrary contained in the hire-purchase agreement.

13. Obligations of hirer to comply with agreement.-

Subject to the provisions of this Act, a hirer shall be bound.- to pay the hirer in accordance with the agreement, and otherwise to comply with the terms of the agreement.

COMMENTS

The hirer is bound to pay the hire in accordance with the agreement and to comply with the terms of the agreement.

14. Obligation of hirer in respect of care to be taken of goods.-

(1) A hirer in the absence of a contract to the contrary.-

shall be bound to take as much care of the goods to which the hire-purchase agreement relates as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quality and value

shall not be responsible for the loss, destruction or deterioration of the goods, if he has taken the amount of care thereof described in clause (a).

(2) The hirer shall be liable to make compensation to the owner for any damage caused by failure to take care of the goods in accordance with the provisions of sub-section (1).

COMMENTS

The hirer is bound to take as much care of the goods as a man of ordinary prudence would under similar circumstances, take of his own goods and he is responsible for the loss, destruction or deterioration of the goods. The hirer is liable to make compensation to the owner for any damage caused by failure to take care of the goods.

15. Obligation of hirer in respect of use of goods.-

If the hirer makes any use of the goods to which the hire-purchase agreement relates which is not according to the conditions of the agreement, the hirer shall be liable to make compensation to the owner for any damage arising to the goods from or during such use.

Comments

It the hirer makes use of the goods not in accordance with the conditions of the agreement, the hirer is liable to make compensation for any damage arising from or during such use.

16. Obligation of the hirer to give information as to whereabouts of goods.-

(1) Where by virtue of a hire-purchase agreement a hirer is under a duty to keep in his possession or control the goods to which the agreement relates, the hirer shall, on receipt of a request in writing from the owner, inform the owner where the goods are at the time of a request in writing from the owner, inform the owner where the goods are at the time when the information is given or, if it is sent by post, at the time of posting.

If the hirer fails without reasonable cause to give said information within fourteen days of the receipt of the notice, he shall be punishable with fine which may extend to two hundred rupees.

17. Rights of hirer in case of seizure of goods by owner.-

(1) Where the owner seizes under clause (c) of section 19 the goods let under a hire-purchase agreement, the hirer may recover from the owner the amount, if any, by which the hirer-purchase price falls short of the aggregate of the following amount, namely :- the amounts paid in respect of the hire-purchase price up to the date of seizure.

The value of the goods on the date of seizure.

For purposes of this section, the value of any goods on the date of seizure is the best price that can be reasonably contained for the goods by the owner on that date less the aggregate of the following amounts, namely :- The reasonable expenses incurred by the owner for seizing the goods, any amount reasonably expended by the owner on the storage, repairs or maintenance of the goods.

(whether or not the goods have subsequently been sold or otherwise disposed of by the owner) the reasonable expenses of selling or otherwise disposing of the goods, and the amounts spent by the owner for payment of arrears of taxes and other dues which are payable in relation to the goods under any law for the time being in force and which the hirer was liable to pay.

If the owner fails to pay the amount due form him under the provisions of this section or any portion of such amount, to the hirer within a period of thirty days form the date of notice for the payment of the said amounts is served on him by the hirer the owner shall be liable to pay interest on such amount at the rate of twelve per cent, per annum from the date of expiry of the said period of thirty days.

Where the owner has sold the goods seized by him the onus of proving that the price obtaining by him for the goods was the best price that could be reasonably obtained by him on the date of seizure shall lie upon him.

Chapter V – Rights and Obligations of the Owner

18. Rights of owner to terminate hire-purchase agreement for default in payment of hire or unauthorised act or breach of express conditions.-

(1) Where a hirer makes more than one default in the payment of hire as provided in the hire-purchase agreement then, subject to the provisions of section 21 and after giving the hirer notice in writing of not less than – one week, in a case where the hire is payable at weekly or lesser intervals, andtwo weeks, in any other case, the owner shall be entitled to terminate the agreement by giving the hirer notice of termination in writing.

Provided that if the hirer pays or tenders to the owner the hire in arrears together with such interest thereon as may be payable under the terms of the agreement before the expiry of the said period of one week or, as the case may be, two weeks, the owner shall not be entitled to terminate the agreement.

The owner shall subject to the provisions of sections 22, be entitled to terminate the agreement by giving the hirer notice of termination in writing.

Comments

If the hirer makes more than one default in the payment of hire or if he does any act with regard to goods which is inconsistent with any of the terms of the agreement or breaks an express condition that the owner can terminate the agreement by giving the hirer notice of termination in writing.

19. Rights of owner of termination.-

Where a hire-purchase agreement is terminated under this Act, then the owner shall be entitled to.- to retain the hire which has already been paid and to recover the arrears of hire due.

Provided that when such goods are seized by the owner, the retention of hire and recovery of the arrears of hire due shall be subject to the provisions of section 17.

Subject to the conditions specified in clauses (a) and (b) of sub-section (2) of section 10, to forfeit the initial deposit, if so provided in the agreements.

Subject to the provisions of section 17 and section 20 and subject to any contract the contrary, to enter the premises of the hirer and seize the goods.

Subject to the provisions of section 21 and section 22, to recover possession of the goods by application under section 20 or by suit.

Without prejudice to the provisions of sub-section (2) of section 14 and of section 15, to damages for non-delivery of the goods, from the date on which termination is effective, to the date on which the goods are delivered to or seized by the owner.

Comments

If a hire-purchase agreement is terminated by the hirer then the owner is entitled to (i) retain the hire which has already been paid and recover the arrears of hire due (ii) forfeit the initial deposit, if so provided in the agreement, (iii) enter the premises of the hirer and seize the goods, (iv) recover possession of the goods by application under section 20 or by suit, and (v) damages for non-delivery of the goods, from the date on which termination is effective, to the date on which the goods are delivered to or seized by the owner.

20. Restriction on owner’s right to recover possession of goods otherwise than through court.-

(1) Where goods have been let under a hire-purchase agreement and the statutory proportion of the hire-purchase price has been paid, whether in pursuance of the judgement of court or otherwise, or tendered by or on behalf of the hirer or any surety, the owner shall not enforce any right to recover possession of the goods from the hirer otherwise than in accordance with sub-section (3) or by suit.

Explanation.- In this section, “statutory proportion” means.- one-half, where the hire-purchase price is less than fifteen thousand rupees and, three-fourths, where the hire-purchase price is not less than fifteen thousand rupees.

Provided that in the case of motor vehicles as defined in the Motor Vehicles Act, 1939 (4 of 193(0, “:statutory proportion” shall mean.- one-half where the hire-purchase price is less than five thousand rupees.

Three-fourths, where the hire-purchase price is not less than five thousand rupees but less than fifteen thousand rupees.

Three-fourths or such higher proportion not exceeding nine-tenths as the Central Government may, by notification in the Official Gazette, specify, where the hire-purchase price is not less than fifteen thousand rupees.

If the owner recovers possession of goods in contravention of the provisions of sub-section (1), the hire-purchase agreement, if not previously terminated, shall terminate, and – the hirer shall be released from all liability under the agreement and shall be entitled to recover from the owner all sums paid by the hirer under the agreement or under any security given by him in respect thereof, and

The surety shall be entitled to recover from the owner all sums paid by him under the contract of guarantee or under any security given by him in respect thereof.

Where, by virtue of the provisions of sub-section (1), the owner is precluded from enforcing a right to recover possession of goods, he may make an application for recovery of possession of the goods to any court having jurisdiction to entertain a suit for the same relief.

The provisions of this section shall not apply in any case in which the hirer has terminated the agreement by virtue of any right vested in him.

21. Relief against termination for non-payment of hire.-

Where the owner, after he has terminated the hire-purchase agreement in accordance with the provisions of sub-section (1) of section 18, institutes a suit or makes an application against the hirer for the recovery of the goods, and at the hearing of the suit or application, the hirer pays or tenders to the owner the hire in arrears, together with such interest thereon as may be payable under the terms of the agreement and the costs of the suit or application incurred by the owner and complies with such other conditions, if any, as the court may think fit to impose, the court may, in lieu of making a decree or order for specific delivery, pass an order relieving the hirer against the termination, and thereupon the hirer shall continue in possession of the goods as if the agreement has not been terminated.

22. Relief against termination for unauthorised act or breach of express condition.-

Where a hire-purchase of clause (a) pr clause (b) of sub-section (2) of section 18, no suit or application by the owner against the hirer for the recovery of the goods shall lie unless and until the owner has served on the hirer a notice in writing.-specifying the particular breach or act complained of, and

If the breach or act is capable of remedy, requiring the hirer to remedy it, and the hirer fails, within a period of thirty days from the date of the service of the notice, to remedy the breach or act if it is capable of remedy.

23. Obligation of owner to supply copies and information.-

(1) It shall be the duty of the owner to supply, free of cost, a true copy of the hire-purchase agreement, signed by owner.-

To the hirer, immediately after execution of the agreement, and where there is a contact of guarantee to the surety, on demand made at any time before the final payment has been made under the agreement.

it shall also be the duty of the owner, at any time before the final payment has been made under the hire-purchase agreement, to supply to the hirer, within fourteen days after the owner receives a request in writing from the hirer in this behalf and the hirer tenders to the owner the sum of one rupees of expenses, statement signed by the owner or his agent showing.- the amount paid by or on behalf of the hirer, the amount which has become due under the agreement but remains unpaid, and the date upon which each unpaid installment became due and the amount of each such installment, and the amount which is to become payable under the agreement, and the date or the mode of determining the date upon which each future installment is to become payable, and the amount of each such installment.

Where there is failure without reasonable cause to carry out the duties imposed by sub-section (1), or sub-section (2), then , while the default continues,- The owner shall not be entitled to enforce the agreement against the hirer or to enforce any contract of guarantee relating to the agreement, or to enforce any right to recover the goods from the hirer, and no security given by the hirer in respect of money payable under the agreement or given by a surety in respect of money payable under such a contract of guarantee as aforesaid shall be enforceable against the hirer or the surety by the holder thereof.

And, if the default continues for a period of two months, the owner shall be punishable with fine which may extend to two hundred rupees.

Nothing in sub-section (3) shall be construed as affecting the right of a third party to enforce against the owner or hirer or against both the owner and the hirer any charge or encumbrance to which the goods covered by the hire-purchase agreement are subject.

Chapter VI – Miscellaneous

24. Discharge of price otherwise than by payment of money.-

Where an owner has agreed that any part of the hire-purchase price may be discharged otherwise than by the payment of money, and such discharge shall, for the purposes section10, section 11, section 17, section 20 and section 23, be deemed to be a payment of the part of the hire-purchase price.

25. Insolvency of hirer, etc.-

(1) Where, during the continuance of the hire-purchase agreement, the hirer is adjudged insolvent under any law with respect to insolvency for the time being in force, the Official Receiver or where the hirer is a company, then in the event of the company being wound up, the liquidator, shall have in respect of the goods which are in the possession of the hirer under the agreement, the same rights and obligations as the hirer had in relation thereof.

The Official Receiver or the liquidator, as the case may be, may, with the permission of the Insolvency Court or which the winding up proceedings are pending, assign the rights of the hirer under the agreement, to any other person, and the assignee shall have the rights and be subject to all the obligations of the hirer under the agreement.

Explanation.- In this section, “Official Receiver” means an Official Receiver appointed under the Provincial Insolvency Act, 1920 (5 of 1920), and includes any person holding a similar office under any other law with respect to insolvency for the time being in force.

Comments

If the hirer is adjudged insolvent during the continuance of the hire-purchase agreement then the Official Receiver or where the hirer is a company, then in the event of company being wound up, the liquidator, has the same rights and obligation as the hirer had in relation to the goods. The Official Receiver or the liquidator, with the permission of the court assign the rights of the hirer under the agreement to any other person and the assignee shall have all the rights and be subject to all the obligations of the hirer under the agreement.

26. Successive hire-purchase agreements between same parties.-

Where goods have been let under a hire-purchase agreement, and at any time thereafter the owner makes a subsequent hire-purchase agreement with the hirer, whether relating exclusively to other goods or to other goods together with the goods to which the first agreement relates, any such subsequent hire-purchase agreement shall not have effect is so far as it affects prejudicially any right which the hirer would have had by virtue of section 20 under the first agreement, if such subsequent hire-purchase agreement had not been made.

27. Evidence of adverse detention is suit or application to recover possession of goods.-

(1) Where, in a suit or application by an owner of goods which have been let under a hire-purchase agreement, to enforce a right to recover possession of the goods from the hirer, the owner proves that, before the commencement of the suit or application and after the right to recover possession of the goods accrued, the owner made a request in writing to the hirer to surrender the goods, the hirer’s possession of the goods shall, for the purpose of the owner’s claim to recover possession thereof, be deemed to be adverse to the owner.

Nothing in this section shall affect a claim for damages for conversion.

28. Hirer’s refusal to surrender goods not to be conversion in certain cases.-

If, during the subsistence of any restriction to which the enforcement by an owner of a right to recover possession of goods from a hirer is subject by virtue of this Act, the hirer refuses to give up possession of the goods to the owner, the hirer shall not, by reason only of such refusal, be liable to the owner for conversion of goods.

29. Service of notice.-

Any notice required or authorised to be served on or given to an owner or a hirer under this Act may be so served or given- by delivering it to him personally or by sending it by post to him to his last known place of residence or business.

COMMENTS

Any notice required or authorised to be served on or given to an owner or a hirer is to be served or given by delivering it to him personally or by sending it by post to his last known place of residence or business.

30. Power to exempt from provisions of sections, 6,9,10,12 and 17 in certain cases.-

Where the Central Government is satisfied that having regard to- the short supply of any goods or class of goods, or the use of intended use of any goods or class of goods and the person by whom such goods or class of goods are used or are intended to be used, or the restrictions imposed upon the trade or commerce in any goods or class of goods, or any other circumstances in relation to any goods or class of goods.

It is necessary or expedient in the public interest so to do. The Central Government may, by notification in the Official Gazette, direct that clause (b) of sub-section (2) of section 6, section 9, section 10, section 12 and section 17 or any of them shall not apply or shall apply with such modifications as may be specified in the notification, to hire-purchase agreements relating to such goods or class of goods.

31. Act not to apply to existing agreements.-

The act shall not apply in relation to any hire-purchase agreement made before the commencement of this Act.