Bombay High Court
Jsw Steel Ltd vs Delta Iron And Steel Company Pvt. ... on 5 April, 2022
Bench: N. J. Jamadar
IA93-19INCARBP1558-19.DOC
Santosh
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
INTERIM APPLICATION NO. 93 OF 2019
IN
COMM ARBITRATION PETITION NO. 1558 OF 2019
Kothari Steel Syndicate ...Applicant
(Intervener)
In the matter between
JSW Steel Ltd. ...Petitioner
Versus
Delta Iron and Steel Company Pvt. Ltd. & ors. ...Respondents
Mr. Rahul Narichania, Senior Advocate, a/w Mr. Vishal
SANTOSH Muglikar and Mr. Sanket Singh, i/b Meraki Chambers,
SUBHASH
KULKARNI for the Applicant.
Digitally signed by
SANTOSH
SUBHASH
Mr. Karl Tamboly, a/w Ms. Zahra Padamsee, i/b Vashi and
Vashi, for the Petitioner.
KULKARNI
Date: 2022.04.06
14:27:08 +0530
Mr. S. K. Dhekale, OSD, Court Receiver, present.
CORAM: N. J. JAMADAR, J.
DATED : 5th APRIL, 2022
ORDER:-
1. The applicant, who is not a party to the arbitration
petition, has preferred this application seeking permission to
intervene in the petition, and also an order to vacate the ex
parte ad-interim order passed by this Court on 23 rd August,
2019, to the extent of goods of the applicant as described in
Exhibit-A annexed to the application, with a further direction to
the Court Receiver to forthwith release/de-seal the goods and
hand over the possession thereof to the applicant.
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2. The background facts leading to this application can be
stated in brief as under:
(a) The petitioner JSW Steel Limited ("JSW") preferred a
petition under Section 9 of the Arbitration and Conciliation Act,
1996, ("the Act, 1996") with the assertion that JSW is one of the
India's leading business conglomerates dealing, inter alia, in
steel and its allied products. JSW had entered into and
executed a Franchisee Agreement with respondent nos.1 to 3.
Under the terms of the said agreement, the petitioner was to
provide the respondents with material to be sold and promoted
vide "JSW SHOPPE", pursuant to the purchase orders to be
placed by the respondents. The Franchisee Agreement, inter
alia, provided that payments against each of the purchase order
was to be made by the respondents immediately upon dispatch
of the goods.
(b) The petitioner asserted, during July 2018 to July
2019, the respondents placed 17 purchase orders on the
petitioner for supply of goods worth Rs.121,35,85,585/-. The
petitioner, accordingly, sold and delivered the goods. The
petitioner claimed under the invoices, particularly, for the
period between April and June, 2019, the respondents owed the
principal amount of Rs.20,39,90,685/-. The respondents
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committed persistent default in the payment of the price of the
goods sold and delivered. The petitioner made repeated
demands. Without disputing the liability, the respondents
started to sell the said goods sans payment of the price, to the
petitioner. The contract specifically provided that the property
in the goods would pass to the franchisee only upon receipt of
the invoice amount by the franchisor. Clause 12.2 of the
Franchisee Agreement incorporated the petitioner's lien on the
goods to the extent of the unpaid purchase price with a right to
sell those goods to another dealer. Thus, as the Franchisee
Agreement contained an arbitration clause, the petitioner
moved this Court for interim measures as the sale and delivery
of the goods by the respondents would defeat the petitioner's
lien on the said goods and also deprive the petitioner of the
unpaid price.
(c) On 23rd August, 2019, the petition was moved
without notice to the respondents. This Court was persuaded
to grant ad-interim reliefs in terms of prayer clauses (k) and (l).
The relevant part of the order dated 23 rd August, 2019, reads as
under:
"4. Clause-12 of the agreement deals with right of lien of
petitioner and it provides that although the risk in the
products passes to the Franchisee from the date of dispatch
of the products to the carrier and delivery being taken by the
Franchisee, the title to the products shall pass to the
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Franchisee only upon receipt of invoice amount by the
Franchisor. Clause-12 also provides that Franchis or shall
have lien on the products so delivered to the extent of unpaid
purchase price of products and the Franchisor shall be
entitled to exercise the lien to recover the unpaid purchase
price by taking back the products and shall be entitled to
sell the same to some other dealer and adjust the sum so
realized against the unpaid purchase price.
5. Petitioner has been supplying products from time to
time and according to petitioner as on 14.8.2019 there is an
outstanding of about Rs.19 crores. Petitioner gave a notice
demanding payment on 14.8.2019 and respondents replied
admitting about Rs.9 crores. Mr. Khambata states that set
off of claim by respondents is incorrect but at the same time,
admittedly over Rs.9 crores is payable.
6. In view of what is stated in paragraph-22 read with
paragraph-25 of the petition and in view of the admission of
respondents to the tune of at least Rs.9 crores, I am
satisfied that there is a prima facie case for ex-parte ad-
interim injunction made out.
7. Therefore, ad-interim order in terms of prayer clauses-
(k)and (l) is granted and the same read as under :-
"(k) Order and direct that pending the hearing
and final disposal of the Arbitral proceedings
and for a period of 12 weeks thereafter, the
Respondents be restrained themselves and
though its officers and/or its directors and/or
its subordinates and/or its servants and/or
agents from in any manner whatsoever taking
any steps to dispose of the said Materials
belonging to the Petitioner and in the possession
of the Respondent at least to the extent of the
amounts due and payable to the petitioner,
including the Principal Amounts and Interest
thereon as set out in the Particulars of Claim at
Exhibit H hereto ;
(l) Order and direct that the Court Receiver
be appointed and/or such other fit and proper
person be appointed as Receiver with all the
powers under Order XL, Rule 1 of the Code of
Civil Procedure, 1908to inter alia take stock and
custody of the said Materials belonging to the
Petitioner and in the Respondents' possession,
whether stored at the latter's warehouses or
otherwise wherever situate."
8. The Court Receiver High Court, Bombay shall keep the
impugned goods under his seal in the safe custody of
respondents. Court Receiver is authorized to seek police
assistance if required and police authorities of concerned
police station shall render all possible help to the Court
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Receiver including deployment of such number of police
personnel as required on production of an authenticated
copy of this order. The Court Receiver to do the needful and
submit a report to this court by 7.9.2019.
.....
12. This order will operate till 16.9.2019. Liberty to
respondents for variation of this order with 24 hours prior
notice to petitioner is granted."
(d) The applicant has approached the Court with a case
that the applicant also deals in the business of steel. In it's
normal course of business the applicant had purchased Hot
Roll Coils ("HR Coils") from respondent nos.1 and 3. The
applicant had paid the price of the goods purchased from
respondent nos.1 and 3 through banking channels. As per the
trade practice, respondent nos.1 and 3 had delivered the HR
Coils directly to the cutters/warehouses. Respondent nos.1 and
3 would also inform the cutters/warehouses the details of the
goods i.e., HR Coils, to be transferred to the applicant, who, in
turn, would address its own letters to the cutters/warehouses
about the transfer of particular coils in its name. Respondent
nos.1 and 3 would thereafter raise the tax invoices including
applicable CGST and SGST. The applicant claimed to have
submitted its CGST and SGST returns with the tax authorities
in the prescribed form. In addition, the applicant has annexed
the copies of the statements of account which, according to the
applicant, evidence the payment of entire price of the goods,
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purchased by the applicant, to respondent nos.1 and 3 and the
ledger statements of respondent nos.1 and 3 maintained by the
applicant.
(e) The applicant thus asserts that the applicant is a
bona fide purchaser for value of the goods. The property in the
goods had already been transferred to the applicant. The
applicant was intimated on 23rd August, 2019, that the Court
Receiver has seized the goods belonging to the applicant, i.e., 21
HR Coils, in addition to the goods belonging to other traders,
lying at cutters/warehouses. The applicant has no concern
whatsoever with the transaction between the petitioner and the
respondents. The applicant is, however, made to suffer huge
losses running into crores of rupees, mental trauma and loss of
reputation in the market. Moreover, third party rights are
created in the goods, which have been unjustifiably seized
pursuant to the ex parte ad-interim order passed by this Court.
Hence, this application to vacate the said order dated 23 rd
August, 2019, to the extent of 21 HR Coils, described in Exhibit-
A to the application and the consequential direction to the
Court Receiver to release/de-seal the goods and hand over
possession thereof to the applicant.
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3. The petitioner resisted the application by filing an
affidavit-in-reply. After enumerating the circumstance in
justification of the ad-interim order, which is sought to be
varied by the applicant qua the goods described in Exhibit-A,
the petitioner has raised two principal grounds to resist the
prayer in the instant application. First, the applicant, being
neither a party to the arbitration agreement nor to the
commercial arbitration petition, is not entitled to claim any
relief against the petitioner in the arbitration petition. If the
applicant has any remedies to work out, the applicant ought to
institute a separate proceeding against the respondents for the
recovery of the goods allegedly purchased by the applicant or
the price thereof. The petitioner contends that the application
has been preferred with malafide intent to defeat the legitimate
rights of the petitioner, secured by the ad-interim order passed
by this Court.
Second, according to the petitioner, there is a stark
discrepancy in the goods which have been seized, as recorded in
the inspection report submitted by the Court Receiver dated 5 th
October, 2021 and the goods claimed by the applicant to have
been purchased from the respondents. The petitioner has made
a grievance that the inspection was not carried out by the
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officials of the Court Receiver in a proper manner and, thus,
there is no basis for release of the HR Coils described in
Exhibit-A to the application.
4. As a dispute was raised about the identity of the goods
and the payments, including the taxes, allegedly made by the
applicant, the parties were called upon to have inspection. The
applicant has thereafter filed two additional affidavits. In the
first additional affidavit dated 25th February, 2022, the
applicant has placed on record the copies of GSTR 2A Tax
Returns of the applicant for the months of May, June, July and
August 2019, as available on the GST Portal, in support of its
claim that it had made full payment of the invoices (Exhibits-C1
to C11) including the applicable GST.
5. In the second additional affidavit dated 4 th March, 2022,
the applicant sought to explain the discrepancy in the weight of
the HR Coils noted in the Court Receiver's Report and Exhibit-
A. It is averred that the difference in the weight of coils is due to
the fact that those coils are DOWN COIL, which means coils
partially cut, and sold to the customer by the applicant as per
the customers requirement prior to the ad-interim prder. The
applicant has also annexed the copies of Tax Invoices, Ledger
Account Statement and relevant entries from the applicant's
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bank account statement to substantiate the applicant's claim
that the applicant had, in turn, sold the six out of eight DOWN
COILS to its customers, prior to the ad-interim order dated 23 rd
August, 2019.
6. In the wake of the aforesaid facts and the pleadings, I
have heard Mr. Narichania, the learned Senior Counsel for the
applicant and Mr. Tamboly, the learned Counsel for the
petitioner. With the assistance of the learned Counsels for the
parties, I have perused the material on record including the
documents, which evidence the purported sale and delivery of
the goods, in question, by respondent nos.1 and 3 to the
applicant and by the applicant, in turn, to its customers.
7. Mr. Narichania, the learned Senior Counsel for the
applicant, would urge that in commercial Notice of Motion (L)
No.2044 of 2019 instituted by a party, who was similarly
circumstanced like the applicant, this Court after an elaborate
consideration allowed the prayer to release/de-seal the goods of
the applicant therein, which were unjustifiably attached
pursuant to the ad-interim order dated 23 rd August, 2019. The
reasons recorded by this Court in the said order apply with
equal force to the facts of the case at hand. Moreover, in the
case of other two third party-applicants, the petitioner gave
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consent to vary the order. In the case at hand also, despite
overwhelming material in support of the applicant's claim, the
petitioner is unjustifiably resisting the prayers in the instant
application.
8. Mr. Narichania would urge that the claim of the applicant
as regards the sale and delivery of the goods by respondent
nos.1 and 3, in the normal course of business, has gone totally
uncontroverted. No endeavour has been made by the petitioner
in the affidavit-in-reply to contest the claim of the applicant
that it is a bona fide purchaser for value without notice of the
fact that the petitioner had not been paid the price of the goods,
as alleged. Instead, the petitioner is making an effort to cling to
minor issues like discrepancies in the weight of the goods sold
and delivered and absence of evidence to show exact payment,
which corresponds with the invoice amount. This endeavour of
the petitioner, in the totality of the circumstances of the case,
according to Mr. Narichania, does not deserve countenance.
9. Mr. Narichania further urged that since the goods were
both ascertained and in a deliverable state, the property in the
goods passed at the time of the contract for sale. In any event,
the petitioner's right of lien over the goods cannot operate
against the applicant in view of the provisions contained in
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Section 30(2) of the Sale of Goods Act, 1930 ("the Act, 1930")
and it did not survive with the delivery of possession of those
goods by the petitioner to the respondents which operated as a
termination of lien under Section 49(1) of the Act, 1930.
10. In opposition to this, Mr. Tamboly, the learned Counsel for
the petitioner, banked upon the discrepancy in the dates of
invoices (Exhibits-C1 to C11) and the GST payment receipts
(Exhibit-F7). Laying emphasis on the fact that the GST
payment receipts were for the period anterior in point of sale
and delivery of the goods, the learned Counsel for the petitioner
would urge that the entire edifice of the claim of the applicant is
dismantled on account of the irreconcilable discrepancy. It was
further submitted that respondent nos.1 and 3, the sellers of
the applicant, chose not to appear before the Court and lend
support to the claim of the applicant. Thus, in the absence of
any reliable material to demonstrate that the property in the
goods at Exhibit-A to the application had passed to the
applicant, there is no reason to vary ad-interim order passed by
this Court, urged Mr. Tamboly.
11. Mr. Narichania joined the issue by canvassing a
submission that the invoices raised by respondent nos.1 and 3
are inclusive of taxes. Even otherwise, the passing of title in
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the property was not dependent on payment of tax. The said
discrepancy has already been explained by placing on record
the GSTR 2A Tax Returns, by way of second additional affidavit,
to which there is no rejoinder. Thus, the petitioner cannot be
permitted to draw mileage from an inadvertent discrepancy,
submitted Mr. Narichania.
12. To start with, it may be apposite to note the terms of the
contract, incorporated in JSW SHOPPE Agreement dated 1 st
July, 2018, executed by and between the applicant and
respondent no.1 - Delta. For the purpose of determination of
the controversy at hand, it would be suffice to refer to Clauses
(3) and (12), which read as under:
"3. PRICING, INVOICE AND PAYMENT TERM
3.1 The Franchisee shall sell all the Franchisor's product
range provided in the JSW SHOPPE at the maximum retail
price as and when fixed and communicated by the Franchisor
to the Franchisee.
3.2 At the time of dispatch, the Franchisor shall raise its
invoice for supply of products of the Franchisee, which shall be
dispatched along with other related documents at the time of
delivery of the products to the Franchisee. IN case of any
discrepancy in the invoice or quality or quantity, then the
Franchisee shall within three (3) working days intimate in
writing to the Franchisor, failing which, the amount due under
the invoices shall be deemed to have been accepted for
payment.
3.3 All payments under each of the invoice shall be made
within the period determined by the policy of the Franchisor to
be announced from time to time from the date of the invoices,
by way of cheques payable at par or by demand draft drawn in
favour of the Franchisor. In the event of delay in payments
beyond the stipulated period, then the Franchisee shall pay
simple interest at the rate of eighteen per cent (18%) per
annum from the date of when the payment was due until the
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actual payment and/or realization on the outstanding
payments to the Franchisor
3.4 All payments to the Franchisor under the Agreement
shall be exclusive of sales, value added, service, consumption
tax or taxes of similar nature, which shall be paid for or
reimbursed by the Franchisee at the applicable rates.
12. RIGHT OF LIEN
12.1 Although the risk in the products passes to the
Franchisee from the date of dispatch of the products to the
carrier and delivery being taken by the Franchisee, the title to
the products shall pass to the Franchisee only upon receipt of
invoice amount by the Franchisor.
12.2 The Franchisor shall have lien on the products so
delivered to the extent of unpaid purchase price of products
and the Franchisor shall be entitled to exercise the lien to
recover the unpaid purchase price by taking back the products
and shall be entitled to sell the same to some other dealer and
adjust the sum so realized against the unpaid purchase price.
This right is without prejudice to the Franchisor's other rights
and remedies to recover the outstanding dues and/or other
dues and/or the differential price of the product."
13. The agreement thus provided that the franchisee shall pay
the price of the goods as claimed in the invoice raised by the
petitioner. The time for payment was to be stipulated by the
petitioner. In the event of delay, the respondents agreed to pay
simple interest at the rate of 18% p.a from the date the payment
fell due. All payments were to be exclusive of sales, value added
service, consumption tax or other taxes of similar nature: which
were to be paid by the respondents. Under Clause 12.1, it was
specifically provided that the title to the products shall pass to
respondent no.1 only upon receipt of invoice amount by the
petitioner, although the risk in the products would pass to the
respondent no.1 from the date of dispatch of the goods.
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14. The aforesaid stipulations in the contract between the
petitioner and respondent no.1 are required to be construed
through the prism of the provisions contained in Sections 19
and 20 of the Act, 1930. Sections 19 and 20 read as under:
"Section 19. (1) Where there is a contract for the sale of
specific or ascertained goods the property in them is
transferred to the buyer at such time as the parties to the
contract intend it to be transferred.
(2) For the purpose of ascertaining the intention of the
parties regard shall be had to the terms of the contract, the
conduct of the parties and the circumstances of the case.
(3) Unless a different intention appears, the rules
contained in sections 20 to 24 are rules for ascertaining the
intention of the parties as to the time at which the property
in the goods is to pass to the buyer.
Section 20. Where there is an unconditional contract for
the sale of specific goods in a deliverable state, the property
in the goods passes to the buyer when the contract is made,
and it is immaterial whether the time of payment of the price
or the time of delivery of the goods, or both, is postponed."
15. Section 19 incorporates a general principle that in a
contract for the sale of specific or ascertained goods, the
property in the goods passes to the buyer at such time as the
parties to the contract intend it to be transferred and for the
purpose of ascertainment of the intention of the parties regard
shall be had to the terms of the contract, the conduct of the
parties and the circumstances of the case. Sub-section (3) of
Section 19 further provides that, unless a different intention
appears, the rules contained in Sections 20 to 24 are to govern
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the ascertainment of the intention of the parties as to the time
at which the property in the goods is to pass to the buyer.
16. Section 20, in turn, provides that in case of unconditional
contract for sale of specific goods in a deliverable state, the
property in the goods passes to the buyer when the contract is
made, and it is immaterial whether the time of payment of the
price or the time of delivery of the goods, or both, is postponed.
For applicability of Section 20, there are two prerequisites: (i)
The contract must be for sale of specific goods which are in a
deliverable state; and, (ii) the contract is an unconditional
contract.
17. A profitable reference in this context can be made to the
judgment of the Supreme Court in the case of Agricultural
Market Committee vs. Shalimar Chemical Works Ltd. 1 wherein
the concept of passing of the property in the goods was
instructively postulated in paragraphs 36 to 40, which read as
under:
"36. We may, before analysing the provisions of Sections 19
and 20, observe that the Indian Sale of Goods Act is based
largely upon the English and American Acts. Under these
Acts, namely, the English Sale of Goods Act, the American
Uniform Sales Act and the Indian Sale of Goods Act, the
relevant factor for determining where the sale takes place, is
the intention of parties. A contract of sale, like any other
contract, is a consensual act inasmuch as parties are at
liberty to settle, amongst them-selves, any terms they may
choose.
1(1997) 5 Supreme Court Cases 516.
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37. Section 19 attempts to give effect to the elementary
principle of the law of Contract that the parties may fix the
time when the property in the goods shall be treated to have
passed. It may be the time of delivery, or the time of payment
of price or even the time of the making of contract. It all
depends upon the intention of the parties. It is, therefore, the
duty of the Court to ascertain the intention of the parties
and in doing so, they have to be guided by the principles laid
down in Section 19(2) which provides that for ascertaining
the intention of the parties, regard shall be had to the terms
of the contract, the conduct of the parties and the
circumstances of the case.
38. Section 19 indicates that in case of unconditional
contract to sale in respect of specified goods in a deliverable
state, the property in the goods passes to the buyer at such
time as the parties intend it to be transferred . Section 19(3)
provides that Section 20 to 24 contain the rules for
ascertaining the intention of the parties as to the time at
which the property in the goods shall be treated to have
passed to the buyer. Both Sections 19 and 20 apply to the
sale of "specific" or "ascertained" goods.
39. Section 20, which contains the first rule for
ascertaining the intention of the parties, provides that where
there is an unconditional contract for the sale of "specific
goods" in a "deliverable state", the property in the goods
passes to the buyer when the contract is made. This
indicates that as soon as a contract is made in respect of
specific goods which are in a deliverable state, the title in the
goods passes to the purchaser. The passing of the title is not
dependent upon the payment of price or the time of delivery
of the goods. If the time for payment of price or the time for
delivery of goods, or both, is postponed, it would not affect
the passing of the title in the goods so purchased.
40. In order that Section 20 is attracted, two conditions
have to be fulfilled : (i) the contract of sale is for specific
goods which are in a deliverable state; and (ii) the contract is
an unconditional contract. If these two conditions are
satisfied, section 20 becomes applicable immediately and it is
at this stage that it has to be seen whether there is anything
either in the terms of the contract or in the conduct of the
parties or in the circumstances of the case which indicates a
contrary intention. This exercise has to be done to give effect
to the opening words, namely, "Unless a different intention
appears" occurring the Section 19(3). In Hoe Kim Seing v.
Maung Ba Chit, AIR (1935) PC 182, it was held that intention
of the parties was the decisive factor as to when the property
in goods passes to the purchaser. If the contract is silent,
intention has to be gathered from the conduct and
circumstances of the case."
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18. In the case at hand, having regard to the nature of the
goods, the provisions contained in Section 20 of the Act may
govern the situation as the contract was for specific goods in a
deliverable state and also unconditional one. The intendment,
on the contrary is, however, to be found in Clause 12.1
extracted above, which specifically provided that the title to the
products shall pass to the franchisee (respondent no.1) only
upon receipt of invoice amount by the applicant. It could be
thus urged that there was an intention to the contrary so far as
as the applicability of the provisions contained in Section 20 of
the Act. However, the issue does not rest at that.
19. The questions that wrench to the fore are: Whether the
transaction entered into by the applicant with respondent nos.1
and 3 was of such a nature that it passed the property in the
goods to the applicant, despite non-payment of the price of the
goods by the respondents to the petitioner? And, whether in the
circumstances of the case, the petitioner could exercise the
right of lien?
20. Before adverting to deal with the aforesaid questions, it is
necessary to note that the claim of the applicant that the
applicant had purchased the goods in the normal course of
business without notice of the claim of the petitioner finds
requisite support in the documents annexed with the
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application. The sale of the goods by respondent nos.1 and 3 is
evidenced by the tax invoices (Exhibit-C1 to C11), raised during
the period 27th May, 2019 to 1st August, 2019. In addition to the
price of the HR Coils sold under the respective invoices, CGST
and SGST, at the rate of 9% each, were also included in each of
those invoices. There is contemporaneous material to indicate
that the applicant had, in turn, indicated the cutters about the
transfer of the coils by the sellers. These transfer intimations to
the cutters are further supported by the intimations issued by
respondent nos.1 and 3 to the respective cutters to transfer the
coils. The petitioner has also placed on record the copies of the
bank statements evidencing the payment of the price of the
goods sold and delivered under the invoices to the sellers. The
Ledger Accounts (Exhibit-E1) maintained by the applicant of
respondent nos.1 and 3, lend further support to the claim of
the applicant as regards the payment of the price of the goods
to respondent nos.1 and 3.
21. The material on record thus establishes with sufficient
clarity that the applicant had placed orders with respondent
nos.1 and 3, the latter issued instructions to the cutters and
the payment of the price of the goods is evidenced by the
statements of account and the ledger statements. Viewed in
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this backdrop, the submission on behalf of the petitioner that
there is no material to demonstrate that the applicant had
made exact payment against each of the invoices, does not
merit countenance as there is overwhelming material to show
that in the regular course of business, the applicant had made
"on account" payment.
22. This propels me to the pivotal question as to whether the
property in the goods can be said to have passed to the
applicant despite the non-payment of price thereof by
respondent nos.1 and 3 to the petitioner. The second question
of exercise and extent of unpaid sellers lien is also
interconnected with this question. Thus, it may be appropriate
to note the provisions contained in Sections 27, 30 and 49, at
this juncture, which read as under:
"Section 27. Subject to provisions of this Act and of any
other law for the time being in force, where goods are sold
by a person who is not the owner thereof and who does not
sell them under the authority or with the consent of the
owner, the buyer acquires no better title to the goods than
the seller had, unless the owner of the goods is by his
conduct precluded from denying the seller's authority to
sell:
Provided that, where a mercantile agent is, with the
consent of the owner, in possession of the goods or of a
document of title to the goods, any sale made by him, when
acting in the ordinary course of business of a mercantile
agent, shall be as valid as if he were expressly authorised by
the owner of the goods to make the same; provided that the
buyer acts in goods faith and has not at all the time of the
contract of sale notice that the seller has no authority to
sell.
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Section 30. (1) Where a person, having sold goods,
continues or is in possession of the goods or of the
documents of title to the goods or of the documents of title
to the goods, the delivery or transfer by that person or by a
mercantile agent acting for him, of the goods or documents
of title under any sale, pledge or other disposition thereof to
any person receiving the same in good faith and without
notice of the previous sale shall have the same effect as if
the person making the delivery or transfer were expressly
authorised by the owner of the goods to make the same.
(2) Where a person, having bought or agreed to buy goods,
obtains, with the consent of the seller, possession of the
goods or the documents of title to the goods, the delivery or
transfer by that person or by a mercantile agent acting for
him, of the goods or documents of title under any sale,
pledge or other disposition thereof to any person receiving
the same in good faith and without notice of any lien or
other right of the original seller in respect of the goods shall
have effect as if such lien or right did not exist.
Section 49. (1) The unpaid seller of goods loses his lien
thereon-
(a) when he delivers the goods to a carrier or other
bailee for the purpose of transmission to the buyer
without reserving the right of disposal of the
goods;
(b) when the buyer or his agent lawfully obtains
possession of goods;
(c) by waiver thereof.
(2) The unpaid seller of goods, having a lien thereon, does
not lose his lien by reason only that he has obtained a
decree for the price of the goods."
23. Section 27 incorporates a general rule that no man can
transfer a better title than the one he possess. The proviso to
Section 27 is founded on the principle that where a person has
entrusted goods or the documents of title to the goods to an
agent, who in the course of such agency, sells or pledges the
goods, he ought, as regards innocent third parties, to be treated
as the owner of the goods. Sub-section (2) of Section 30,
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addresses the situation of disposal of goods by the buyer after
obtaining possession. It provides that if the buyer obtains
possession of the goods, before the property in them has passed
to him, with the consent of the seller, he may sell, pledge or
otherwise dispose of the goods to a third person, and if such
person obtains delivery of the goods in good faith and without
notice of any lien or other right of the original seller in respect
of the goods, he will obtain a good title to those goods.
24. Applying the aforesaid principles to the facts of the case,
the trade practices and usages assume critical significance.
Respondent nos.1 and 3 were appointed as the franchisees to
promote and sale the goods of the applicant. Indubitably,
respondent nos.1 and 3 were put in possession of the goods. It
is not the case of the petitioner that respondent nos.1 and 3
were restrained from selling the goods, until the price thereof
was paid. In the circumstances, the necessary conditions to
insulate the applicant as a bona fide purchaser for value
without notice, seem to have been fulfilled.
25. This leads me to the aspect of continuation of unpaid
sellers lien over the goods. Under Clause 12 of the Franchisee
Agreement, the petitioner was to have lien over the goods for the
unpaid price. However, indisputably, the petitioner had parted
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with possession of the goods. Clause (b) of Section 49(1),
extracted above, seems to clearly govern the situation at hand.
Respondent nos.1 and 3 had lawfully obtained the possession of
the goods. It does not appear that the petitioner had reserved
the right of the disposal of the goods. In the circumstances, the
petitioner could not continue to exercise the unpaid sellers lien.
26. The conspectus of aforesaid consideration is that, in the
peculiar facts and circumstances of the case, it appears that
the property in the goods had passed to the applicant as bona
fide purchaser for value without notice of the non-payment of
the price of the goods by its sellers to the petitioner and the
rights with emanated therefrom. The submission on behalf of
the petitioner that the claim of the applicant, be discarded as
the applicant had pressed into service tax payment receipts,
which pertain to the period prior to the raising of invoices, is
not worthy of acceptance. The applicant, by filing an additional
affidavit, has placed on record, GSTR 2A Tax Returns for the
months May to August, 2019, as available in the GST Portal,
which substantiate the claim of the applicant. Moreover, the
fact remains that the invoices were inclusive of the tax amount.
27. The second objection on behalf of the petitioner about the
discrepancy in the weight of the HR Coils as reflected in the
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invoices and in the Court Receiver's Inspection Report, is also
adequately explained by the petitioner by filing the second
additional affidavit dated 7th March, 2022. The discrepancy in
weight was stated to be on account of the cutting of the coils
(DOWN COILS), so as to facilitate further sale of the HR Coils
by the applicant to its customers. The applicant has placed on
record documents in support of such further sale and delivery
of the DOWN COILS. This claim of the applicant has gone
uncontroverted.
28. Lastly, the objection to the locus of the applicant, raised
in the affidavit-in-reply, though not forcefully canvassed during
the course of the submissions, is required to be stated to be
repelled as under Rule 4 of Order XXXIX, any party dissatisfied
with an order of injunction may approach the Court to
discharge, vary or set aside such order.
29. For the foregoing reasons, I am impelled to hold that the
applicant has succeeded in making out a strong case that the
order passed by this Court on 23 rd August, 2019 qua its goods
enumerated in Exhibit-A, is required to be set aside. Hence, the
application deserves to be allowed.
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30. Thus, the following order:
:ORDER:
(i) Application stands allowed in terms of prayer
clauses (a) and (b).
(ii) The Court Receiver is directed to take necessary
steps to release/de-seal the goods of the applicant
and deliver possession thereof to the applicant.
(iii) No costs.
[N. J. JAMADAR, J.]
