Open Access Research Article
STATUS OF AN UNPAID SELLER IN SALES OF GOODS ACT, 1930 – BY VISHNU WARDHAN SINGH
Published Paper
Article Details
STATUS OF AN UNPAID SELLER IN SALES OF GOODS ACT, 1930
Submitted by: Vishnu Wardhan
Singh
NMIMS
KIRIT P MEHTA SCHOOL OF LAW
MUMBAI
TABLE OF CONTENT
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TITLE
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1.
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INTRODUCTION
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2.
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RESEARCH OBJECTIVES
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3.
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UNPAID SELLER
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4.
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RIGHTS OF AN UNPAID
SELLER AGAINST THE BUYER
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5.
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RIGHT AGAINST THE GOODS
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6.
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JUDICIAL REVIEW
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7.
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SUGGESTIONS
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8.
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CONCLUSION
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BIBLOGRAPHY
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INTRODUCTION
When a
seller is not paid the full price of
a product, he or she is considered an unpaid seller. Section
45 of the Sales of Goods Act of 1930 defines an unpaid seller.
The seller then has two options for
recovering his money: one is to sue the buyer, and the other is to sue against the goods. Using these two options, the seller can recover the value
of his goods.
The unpaid seller's rights will be the emphasis of this research paper
Unpaid seller is defined as
"when the whole of the price has not been paid or tendered and when a bill of
exchange or other negotiable instrument has been received as conditional payment, and the condition
on which it was received has not
been fulfilled because of the dishonor of the instrument or otherwise" by section 45 of the Sale of Goods Act of 19301. The
rights of an unpaid seller
are as follow::
Unpaid seller's
rights against the goods
Unpaid seller's
rights against the buyer individually
Research Questions
·
What is an unpaid seller and what are his rights?
·
What is the Rights of unpaid sellers
against the goods?
UNPAID SELLER
An unpaid seller as defined by the Sale of Goods
Act,1930 is a seller who hasn’t been paid the full price of the goods that are sold or who has received a
bill of exchange or other negotiable
instrument as conditional payment and has not been fulfilled the condition on which
the bill of exchange was received.2 Every contract of sale
must contain a seller who is required
to provide the products that he/she offered, and a buyer who is quid pro quo). This according to section
2(f) of the Indian Contract Act is known as a reciprocal promise. If a buyer denies to either pay or is unable
to pay the agreed upon amount then the unpaid
seller has certain rights which can be used by him.3 These rights are referred to
as
the seller's remedies.
In some
cases, the seller's agent's position is similar to that of the seller when it
comes to exercising the rights of an underpaid seller. Unpaid sellers include,
for example, a sell er's agent who has been endorsed on the bill of
lading, has paid the price of the goods, or is
personally accountable to the seller for the price
of the products.4
The following
are the rights of an unpaid seller:
1.
Unpaid seller's rights against the buyer
2.
Unpaid seller's claims against goods
According to
Section 45(1) of the Sales of Goods Act 1930, “the seller is considered an unpaid seller when
a.
The entire price has either not been paid or is tendered;
b.
A bill of exchange or other any other negotiable
instrument has been received by the seller as a conditional payment
and that condition
on which the goods were received has not been fulfilled due to the instrument's dishonor or other reasons that may arise.”5
1 Raj Singh, Lien as a Remedy of Unpaid Seller, RESEARCHGATE, (May 2020).
RIGHTS OF AN UNPAID SELLER AGAINST
THE BUYER
1.
Sue for the Price
Under section 55
of Sales of Goods Act, 1930, if the consumer doesn’t pay the price of the
goods he has purchased, the seller can sue
the buyer for improper rejection of goods for the price of the goods.
2.
Sue for Damages
"Where the
buyer wrongfully neglects or refuses to accept
and pay for the goods, the seller may sue him for damages for
non-acceptance," says Section 56 of the Sales of Goods Act 1930. The damages are assessed according to the
standards set forth by the Section 73
of the Indian Contract Act; the measure of damages is the expected loss that has been resulted from directly
and naturally from the buyer's
breach of the contract.6
3.
Sue for Interest
According to the
section 61 of the Sales of Goods Act, 1930 if there has been an agreement between the seller of the goods
and the buyer of the goods in regards to the
interest on the price of the commodity, the seller may collect the
interest from the day payment is due
as mentioned in section 61 of the sales of goods act, 1930. If no agreement
like this exists then as well the seller has the right to charge
interest from the day it is notified to the seller.
4.
Repudiation of the Contract
before the due date
If any of the
said parties in the contract repudiates before the date which is due, the other party has two courses of action,
according to Section 60 of the Goods and Sales
Act of 1930. Either acknowledge the breach right away and file for a
damage action right away, in which case the
contract will be terminated and damages shall be awarded, or
the suffering party can wait until the
delivery date.7 In the latter part the contract may lead to risk or the benefit for both the parties.
RIGHT AGAINST
THE GOODS
The Act's rights
for an underpaid seller are conditional on whether or not the buyer has acquired
t h e ownership of the items.
Following are the rights of an unpaid seller whose property has been passed to
the buyer:
a)
Right of lien on the goods for the price while the buyer is in possession of them;
b)
Right to stop the goods in transit after the seller has parted with the possession of the goods
(in the event the buyer becomes insolvent); and
c)
Right to resell
the goods
2 G. Pahwa & P. Dhankar, India: Unpaid Seller’s Lien,
MONDAQ (August, 2016), https://www.mondaq.com/india/contracts-and-commercial-law/519392/unpaid-seller39s-lien. 3 RAJ, supra note 1.
4 GUNITA & PRIYA, supra note
2.
5 RAJ, supra note
3.
1.
Right of Lien
One of the rights against goods
that an unpaid
seller may utilize
is the right of lien. Lien means that the seller keeps possession of
the items or refuses to transfer them to the
buyer until the buyer pays the agreed-upon quantity of money or
compensation. When a buyer fails to pay the agreed-upon
consideration or price for goods, the seller may exercise the power of lien and retain ownership of the goods as
the master or bailee for the buyer.8
The Hon'ble
Supreme Court of India has in the judgment titled as "Suchetan Exports Pvt.
Ltd. vs. Gupta Coal Ltd. and Ors.9" held that wherein “the
contract for sale provided that the seller would retain its lien
over the goods and title would pass to the buyer on payment of the full price
of the goods, then the unpaid seller of
the goods is entitled to exercise
lien over the goods, notwithstanding that the possession of the goods may not be with the unpaidseller.”
Section 47- Seller’s Lien
According
to Section 47, the
unpaid seller can only keep the items if three requirements are met:
·
When items are sold without
any financial terms attached;
·
When products are traded on credit, but the credit has an expiration date;
·
When the buyer becomes bankrupt.
Section 48 – Part Delivery
If an
underpaid vendor only delivers half of the things, he can utilize his claim on
the remaining products, according to
Section 48. But if part delivery has been made to showcase sellers willingness to part with his right of lien then
this right cannot be accessed .10
Section 49 – Termination of a Lien
An unpaid seller loses his right of lien if he sends the products to a carrier
or other bailee
for transmission to the buyer without reserving
the right to dispose of the items, accordingto Section 49(1) of SOGA, 1930, or; When the buyer or his agent legitimately acquires possession of the items,
or; The products are being waived.11
An unpaid seller
with a lien does not lose his lien only because he has secured a decree for the price of the goods, reads Section 49(2).
2.
Right of Stoppage in Transit
Section 50
of the act states that in case the buyer of the goods become insolvent, the unpaid seller who has given away the
goods, has the right to stop them in transmission and reclaim
their ownership until the payment
is complete or tender of the price is done.
6 Ibid.
7 Ibid
8 G. Singh, Rights of Unpaid
Seller against the goods, JUS CORPUS, (Aug 2021), https://www.j uscorpus.com/ri ghts -of-unpaid-seller-agai nst-the- goods .
9 Suchetan Exports
(P) Ltd. v. Gupta Coal India Ltd., 2011 SCC OnLine Bom 628.
10 Ibid.
Section 51 – Duration
of Transit
The right of
stopping in transit can be used as long as
the goods are in transit. As a result,
the pausing of commodities between the start
and finish of the travel time becomes crucial. Section 51 of SOGA contains the norms and procedures for this. From the
time the goods are delivered to the carrier or any other bailee for the purpose
of securely delivering the goods to
the buyer, they are regarded to be in transit under section 51(1). Until the
buyer or his/her representative gets custody from the carrier or bailee,
the
buyer or his/her agent receives delivery from the carrier or bailee.
Situations for Terminating the Transit
Ø The things are delivered to
the buyer or his representative before they arrive at the agreed- upon location. The transit period
expires when the delivery is finished when this happens.
Ø When
the goods reach at +their destination and the bailee or the carrier
conveys to the
purchaser or his representative that he is in possession of the commodities, then the transit is complete.
Ø The transit period does not stop when the buyer discards
the items and the vendor
trashes them to receive
them back.
Ø Goods are sometimes delivered to a buyer-chartered ship. It is established
if
the master is acting as an agent
or a carrier of commodities, depending on the circumstances.
If the carrier or other bailee
incorrectly refuses to deliver the products to the buyer or his representative, the transit stops.
Ø If the
things have been delivered in part and the unpaid seller has halted the
remaining goods in transit, the
transit for those commodities has terminated. This assumes that no agreement has been made to release
possession of all goods.
Ø
3.
Right to Resale
This is a highly
valuable privilege provided to an underpaid seller after invoking the power of lien or delay in transportation.
As long as the asked consideration is not paid
to the to the seller, he or she can reserve the ownership of the good
to himself or herself. The seller
can further resell the goods,
but only under certain circumstances.
JUDICIAL REVIEW
This petition
was filed under Section 9
of
the Arbitration and
Conciliation Act, 1996 seeking
interim measures of protection, including restraining the respondent or
its agents from alienating,
encumbering, disposing of, selling, destroying, or otherwise disposing of the goods
in question, as well as allowing the petitioner to remove the goods from M/s Sagar Warehousing Corporation's warehouse and transport
them to its premises in Mumbai.
11 Aditya Mehrotra, Unpaid Seller, LAW TIMES JOURNAL, (May, 2021),
https://lawtimesjournal.in/unpaid-seller.
The petitioner
entered into an agreement on 16.06.1999 for the sale
of 19 Westland Helicopters and spares for a total of UK
Pound Sterling 9,00,000, which was followed by
two additional addenda dated 24.09.1999 and 31.05.2000, in which it was
agreed that the packages would be
lifted in no more than two consignments and that the total amount of UK Pound Sterling 9,00,000 would be
bifurcated into two payments corresponding to the approximate value of the con The current issue involved a disagreement over the second cargo, which was picked up from Delhi by the authorized transporter.
Judgement
Concerning the
issue of a lien on the products in question, it is clear that an unpaid seller has a
lien on the commodities for the price while he
is in possession of them. A reading of Section 46 (1)
of the Sale of Goods Act,
1930, reveals this. It is a well-established principle that an unpaid seller cannot claim a lien on items if
he does not have custody of them. It's also worth noting that, under the conditions and circumstances of this case, no
sale has taken place, therefore the petitioner retains ownership
of the commodities in question
even if they aren't in its possession. A person cannot
hold a lien on his or her own goods.
The
honorable judge said that, Section 46(1)(b) gives an underpaid seller the
authority to have goods in transit
stopped. This authority to halt the goods in transit, like the lien
on the
commodities, is conditional on the
buyer acquiring ownership of the items. The property in the commodities in question has not
yet transferred to the respondent. As a result, under Section 46(1)(b)
of the Sale of Goods Act, 1930, the petitioner would not have the authority to
halt goods in transit, but that does
not imply the petitioner would not have the right to the goods. This is because, where the
property in goods has not passed to the buyer, under Section 46(2) of the Sale of
Goods Act, 1930, the unpaid seller
has a right of withholding delivery that is similar to and co-extensive with
his rights of lien and stoppage in transit where the propertyhas passed to the buyer.
Section 46(1) deals with an unpaid seller's rights when
the property in the products has transferred to the buyer, whereas Section
46(2) deals with an unpaid seller's rights if the property in the goods
has not gone to the buyer. As previously stated, the petitioner is
an
unpaid seller under the Sale
of Goods Act of 1930.
The respondent did not have possession of the properties
of the items in dispute. Because no
sale has taken place and the respondent is not interested in completing the
sale, the petitioner can certainly
ask for the return of the goods, even though it cannot exercise any lien in respect of the said
goods or ask for the goods to be stopped
in
transit as contemplated by Section 46(1)(b).
The petitioner
would not have the right to resale the items in question as an unpaid seller would under Section 54(2) of the Sale of
Goods Act, 1930. This is because the statutory
right of resale under Section 54(2) only exists if the buyer has
acquired ownership of the goods,
subject to the unpaid seller's lien. The seller has no right of resale under
Section 54(2) if the property in the goods has not transferred to the buyer. In the case of P.S.N.S. Ambalavana Chettiar and Co.
Ltd. v. Express Newspapers Ltd., the Supreme Court came at this conclusion. The judge held that,
however, this did not rule out the possibility of the petitioner selling the products in question. The right to
resell, as anticipated by Section 54(2),
has a number of ramifications. In this instance, the seller was entitled to
recover the difference between the contract
price andthe amount realized on resale of the items, if the latter price was lower than the
contract price. The seller, on the other hand, would be allowed to keep the profit if the amount realized on the resale
of the items was significantly more than the contract price. Of course, this was
contingenton the underpaid seller notifying the buyer of his desire to resell.
12 Pawan Hans Helicopters Ltd. v. Aes Aerospace Ltd. 2008 (2) ARBLR 63 Delhi.
SUGGESTION
The seller should
not hold the goods as bailee for the buyer after the selling the goods as this creates discrepancies in delivery of
the goods. Basically, a third party gets involved as the transporter of the good needs to become bailee of the
goods and hence the delivery could
notbe done in a constructive way leading to violation of certain rights of the
seller and the buyer.
CONCLUSION
Only when the agreed amount has not been
completely paid to
the seller and the buyer has failed
to meet the criteria and terms of the bills of exchange and any other
negotiable instruments stipulated in the contract does the seller become an Unpaid
Seller. If the
vendor has exercised the
power of lien or halt in transit, the items can be resold after issuing a notification to the vendee/buyer, and the
products will be delivered to a new vendee with valid title. The seller can also take the buyer to court and sue
him for failing to pay the agreed-upon
quantity of money or any other compensation, as well as a lien. These rights safeguard the seller's interests and
provide him/her an advantage over the buyer/vendee. They also make it difficult for the buyer/vendee to abuse him/her
because most of the considerations
are paid after the products are delivered. According to the ruling of the Honorable
High Court of Delhiin Pawan Hans Helicopters Ltd. vs. Aes Aerospace Ltd,
an unpaid seller has a lien on the
goods for the price "while he is in possession of them," as stated
in the statute book. As a result, the underpaid seller cannot
obtain a lien on the items if he does not have possession of them.
BIBLIOGRAPHY
1.
Raj Singh, Lien as a Remedy of
Unpaid Seller, RESEARCHGATE, (Oct.
12, 2021, 6:26 PM), Download
citation of LIEN AS A REMEDY OF UNPAID SELLER (researchgate.net).
2.
G. Pahwa & P. Dhankar, India:
Unpaid Seller’s Lien, MONDAQ, (Oct 10, 2021, 12:08 PM), https://www.mondaq.com/india/contracts-and-commercial- law/519392/unpaid-seller39s-lien.
3.
Aditya Mehrotra, Unpaid Seller,
LAW TIMES JOURNAL, (Oct. 19, 2021, 1:37 PM),Unpaid Seller
- Law Times Journal Unpaid
Seller.
4.
Pawan Hans Helicopters Ltd. v. Aes Aerospace Ltd. 2008 (2) ARBLR 63 Delhi
5.
G. Singh, Rights of Unpaid Seller against the goods, JUS
CORPUS, (Oct 15, 2021, 4:59 PM), RIGHTS OF UNPAID
SELLER AGAINST THE GOODS -
Jus Corpus.
Article Information
STATUS OF AN UNPAID SELLER IN SALES OF GOODS ACT, 1930 – BY VISHNU WARDHAN SINGH
Authors: VISHNU WARDHAN SINGH
- Journal IJLRA
- ISSN 2582-6433
- Published 2022/11/07
- Volume 2
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
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