Judgement

SUBBA RAO, J. (Dissenting judgment) : I regret my inability to agree. The facts of the case and the arguments of learned counsel have been fully stated by my learned brother, Shah, J., and I need not recapitulate them here.

2. The short question is whether the hire-purchase agreements entered into by the appellant with its customers are transactions of sale of goods or are only documents securing the return of the loans advanced by it to its customers.

3. It is common case that the said documents ex facie purported to be hire-purchase agreements and if that was their real character, in terms of the judgment of this Court in K. L. Johar and Co. v. Deputy Commercial Tax Officer, Coimbatore III, AIR 1965 SC 1082, when all the terms of the agreements were satisfied and the option was exercised, sales take place in the goods which till then had been hired. The contention, therefore, was that in executing the documents the common intention of the parties was that they should be documents securing the loans and that the form of hire-purchase agreement was adopted to achieve that purpose.

4. At the outset the nature of hire-purchase agreements may be briefly noticed. Hire-purchase agreements have come to stay as part of the social service in the commercial world. It enables persons of ordinary means to buy the necessities of life which the modern scientific advancement offers. Under that system one can buy a car, a refrigerator, furniture, cooking apparatus, and as a matter for that any article of utility. It enables the hirer to own the article of his choice by paying on easy instalments, and the dealer to provide it for him for profit without any risk to himself. It has become a common and familiar instrument of mercantile social service. Simonds, J., in Transport and General Credit Corporation Ltd. v. Morgan, (1939) 2 All ER 17 at p. 28 said:

"It must be remembered that hire-purchase agreements now play a very large part in the commercial and social life of the community, and the financing of those hire-purchase agreements is an enormous business, both in the city of London and elsewhere. It appears to me that the financiers and the dealers co-operate in the common venture of making feasible the whole business of hire-purchase agreements, which is now for good or for evil, a necessary part of our social life. To regard one party to that common venture, which is now a recognized mercantile service, as carrying on the business of a money-lender is, as I have said before, an abuse of language."

What is true of England is, to a lesser degree, true of India, particularly in the big cities of India.

5. Now, let us see how this system was evolved. At first the said transaction took place directly between a dealer and his customer: the dealer wanted to sell his goods and the buyer was not in a position to pay the entire sale price of the goods in one lump sum. The parties, therefore, entered into hire-purchase agreement whereunder the dealer continued to be the owner till the entire consideration was paid by the customer in terms of the agreement and till he had exercised his option to buy the goods covered by the said agreement. But the dealer was not always financially sound enough to wait till such time as all the instalments would be paid. The second stage in the evolution in the hire-purchase system was when a financier intervened between the dealer and the customer. The financier used to purchase goods from the dealer and then to enter into an agreement with the customer. At that stage the financier became the owner and the customer became the hirer till such time as he carried out the terms of the agreement. A further variation of the transaction was that the customer purchased the goods by paying the entire consideration to the dealer with the help of the financier; he then sold the goods to the financier and entered into an agreement of hire-purchase with him. In this type of transaction, the dealer went out of the picture alto