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Judgment
R. Balasubramanian, J.—The applicant claims to be the seller of the goods concerned in this case to the company in liquidation. He is before
this Court for a direction to the official liquidator for permission to remove/lift the pulp wood to an extent of 16,000 metric tons lying in the
premises of the company in liquidation after giving an appropriate direction in that regard to the official liquidator. There is no dispute that the
applicant supplied a large volume of pulp wood to the company in liquidation and stating that whatever quantity of pulp wood is now left in the
company premises belongs to him, he wants to take it back. The point involved in this case is whether the property in the goods passed to the
buyer or not ? If it had passed to the buyer, then the property belongs to the company in liquidation and everyone, including the applicant, should
stand in the queue and make a claim. On the other hand, if the property in the goods had not passed to the buyer, then the title to the same
continues to vest with the applicant/seller and therefore he is entitled to take it back.
When does the property in the goods pass between a seller and a buyer, can be gathered from the terms of the sale itself. If the terms of the sale
is not clear, then the intention of the parties would play a large role. Since the transaction in question is covered by the provisions of the Sale of
Goods Act, the Court has to look into Chapter III of the said Act. Here is a case of sale of specific/ascertained goods. u/s 19(1) of the Sale of
Goods Act, the property in the goods passes to the buyer at such time as the parties to the contract intend it to be transferred. Under Sub-section
(2) of Section 19 of the Act, the terms of the contract, the conduct of the parties and the circumstances of the case may be referred to in
ascertaining the intention of the parties. Sub-section (3) of Section 19 states that unless a different intention appears, Sections 20-24 would govern
the situation in ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer.
Let me now find out from the materials placed by the learned counsel for the applicant as to whether the property in the goods had already
passed to the company or not. The company in question placed an order dated 24.1.2001 on the seller namely, the applicant. It has an enclosure
giving specifications and terms and conditions. There is a letter dated 20.1,2002 written by the seller to the buyer. In that letter; the seller had
informed the buyer that they have already written letters dated 1.6.2001, 25.10.2001 and 7.12.2001 expressing their intention to take back the
pulp wood; there was no response at all and any further delay in removing the pulp wood would cause them irreparable injury and therefore they
may be permitted to take back the pulp wood atleast immediately. This is followed by the seller''s letter dated 15.2.2002 reiterating the stand
taken by them in their earlier letter. These two letters were replied to by the company by their letter dated 21.2.2002 wherein it, remains admitted
that 16,000 metric tons of pulp wood supplied is lying in their factory and the company is taking all steps for clearing the dues.
Mr. P.L. Narayanan, learned counsel appearing for the seller would argue that on the facts of this case as could be seen from the order dated
24.1.2001 and the subsequent correspondence referred to above, the property in the goods had not passed to the buyer and at all times the seller
had always expressed his intention to take back the goods. Therefore the learned counsel would submit that once the property in the goods did not
pass to the buyer, then the title to the same continues to vest with the seller and therefore he can legally remove the said goods. Mr. K.
Harishankar, learned counsel, whom this Court wanted to assist in this case, would submit that the property in the goods had already passed to the
buyer and therefore the applicant cannot claim the return of the goods. Learned counsel would also state that going by the company''s letter dated
21.2.2002, it is clear that the property in the goods had passed to them and they only wanted to make the payment. It is his further submission that
from the terms of the contract dated 24.1.2001, it is clear that the property in the goods has passed to the buyer. Learned counsel brought to my
notice judgment of the Hon''ble Supreme Court of India in the case Agricultural Market Committee Vs. Shalimar Chemical Works Ltd., . He
would then contend that the contract between the parties is an unconditional contract in respect of specific goods in a deliverable state and once
the goods are delivered to the buyer, there is an unconditional appropriation of the same by the buyer. Learned official liquidator advanced
arguments on the same lines as submitted by Mr. Harishankar.
Having regard to the points brought to my notice by the learned counsel on either side, I went through the records. As provided in the Sale of
Goods Act itself (i.e.) Section 19(2), the terms of the contract, the conduct of the parties and the circumstances of the case must be borne in mind
before venturing to find out whether the property in the goods passed to the buyer or not. There is no dispute that the goods sold by the seller to
the buyer are specific/ascertained goods in a deliverable state. Therefore Sections 19 and 20 of the Sale of Goods Act alone are attracted to the
case on hand. I perused the contract. From the contract it is clear that the buyer has a right of inspection at his end. Clause 8 of the specification
describes that the moisture content in the pulp wood should not exceed 45% at the point of delivery and that the moisture test would be conducted
lorry-wise at the buyers'' factory, it also enables the buyer to make deductions in the manner prescribed therein, if excess moisture is found. Under
the contract, the buyer has 60-75 days from the date of receipt of supply for making payment. Under Clause 11(b) of the enclosure, the buyer has
to make payment subject to submission of the bill by the seller within the time. Therefore the sale is on a credit basis. It is further seen that under
Clause 11(b), payment would be worked out in terms of actual weight of the consignment with reference to the moisture percentage. Therefore it is
clear that the seller has nothing to do in effecting the sale in this case except despatching the goods which are in a deliverable state to the buyer and
the property in the goods immediately passes on to the buyer. The seller had not retained any right at all in himself, which may go to show that the
title in the goods would not pass to the buyer until the seller''s right is accomplished. Clause 16 of the enclosure gives the buyer a right of rejection
and that the seller has to take back the rejected goods at his risk and cost. Clause 16 makes it abundantly clear that once the goods are rejected,
the buyer shall not be responsible for any damage or deterioration in quality. The buyer is also given (see Clause 18) a right to cancel the order at
any time. As noted earlier, under Clause 11(b) of the enclosure, the buyer is under a legal obligation to furnish intimation to the seller about the
moisture percentage of each consignment within two days on day-to-day basis. Therefore if the buyer wants to reject the goods exercising his
power under Clause 16 of the specification on the ground of excess moisture content, then unless he had sent intimation about the moisture content
as referred to above within the time prescribed, he cannot rely that as a ground. Therefore under the terms of the contract, it is clear that it is an
unconditional contract for the sale of specific goods in a deliverable state and therefore the property in, the goods had passed to the buyer
immediately on the contract made. It is no doubt true that there are letters as referred to earlier, in which the seller had expressed his desire to take
back the goods. The buyer in his reply referred to above had made it very clear that he would soon settle the dues due to the seller. To ascertain
when the property in the goods passed to the buyer, the intention between the parties and their conduct in existence either prior to the sale of the
goods or at the time when the contract was finalised alone, should be borne in mind.
The Hon''ble Supreme Court of India, in the judgment brought to my notice by Mr. K. Harishankar, had emphasised, on the facts available in
that case, that the conduct of the parties at the time when the seller in the State of Kerala on receipt of the order loaded the goods in a lorry for it''s
onward journey to Hyderabad becomes extremely relevant. On the intention and attendant circumstances available on the day when the contract in
this case was entered into; delivery effected and in the context of the terms of the contract the property in the goods had passed to the buyer and
therefore I have no doubt at all that it cannot be reversed by any unilateral act on the part of the seller, therefore the seller''s letter dated 20.2.2002
and 15.2.2002 are only unilateral declaration made by the seller and the buyer had not agreed at all for that course. But on the other hand, the
buyer had affirmed that he had already appropriated the goods for himself and that he would make the payment due to the seller very soon. The
Hon''ble Supreme Court of India in the judgment referred to above had held as follows:
A contract of sale, like any other contract, is a consensual act inasmuch as parties are at liberty to settle, amongst themselves, any terms they may
choose. Section 19 of the Sale of Goods Act 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. Both Sections 19 and 20
apply to the sale of ""specific"" or ""ascertained"" goods.
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 sate, 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. 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 in Section 19(3).
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.
For all the reasons stated above, I have no difficulty at all in holding that the property in the goods had passed to the buyer; therefore it becomes
the property of the company in liquidation and the applicant cannot legally lay his claim to take back the goods. Therefore the application stands
dismissed.