The case given in the facts is in dissonance to S. 25(1) and S.24 (1) of the Sale of Goods Act, 1930 but in consonance with the exceptions to the rule provided in the Act whose origin lies in the common law. It critically analyses the seller in possession of the goods after sale exception to the Nemo dat quod non-habet a legal rule which means no one can transfer the title of the good that he already has. Only the owner of the goods can transfer a better title to the buyer.

Facts: B buys from A, a carpenter, a table for Rs.200 and pays the amount. He informs A that he will take it after ten days. A thereafter sells the table to C who received the same in good faith and pays for the same without having any knowledge of the previous sale to B. B files a suit against A and C.

Issues:

1. Is it contrary to the general rule of the Sale of Goods Act, 1930 [S.25(1) and S.24(1)]?
2. Who is the true owner of the goods after the sale?
3. Is the first buyer justified in filing a suit against the second buyer and seller of the goods?

As per the law:
Indian Sale of Goods Act, 1930:
It is a mercantile law (benefits for merchants) enacted in 1930 mostly gained its emphasis from the Sales of Goods Act, 1893. S.4 of the Act defines the term Sale and agreement to sell. Since the act passed in 1930 the minor changes have been done till now. It has a provision of setting up a contract where the seller transfers or agrees to sell the property in goods to a buyer for a price.

Essential elements of Sale of Goods Act for a valid contract:
The essentials are two parties (at least one buyer and seller), goods (moveable property other than actionable claims), agreement (implied or express form of agreement), transfer of ownership (from the seller to buyer) and price (agreement in the form of price).

General principle:
It is based on the Latin principle and legal rule Nemo dat quod non-habet which means that no one gives what they do not have. In other words, According to S.27 of the Sale of Goods Act, 1930 that the person who does not have authority to sell a good, sells it, and if the buyer purchases that product, then there would be a passage of defective title from the seller to the buyer.

Transfer of rights under Sales of Goods Act, 1930/Transfer of title of goods: Ownership or transfer of property in the goods from seller to buyer in exchange for money. S.27 to S.30 specify these laws about the transfer of title. As written earlier in the S.27 of the Act, it deals with a person who is not the owner of goods, does not have consent from the owner to sell the goods and has not been given any authority by the owner to sell the goods on his behalf.

If these conditions satisfy the situation there would be a passage of defective title. In such cases the buyer acquires no better title to these goods than the seller had, provided the conduct of the owner makes it impossible for the sellers authority to sell. The exception does not require the seller to be a de facto possession of the goods but de jure possession is important here.

An exception to the rule as in the given facts and issue:
According to S.30(1) of the Act if a seller or a mercantile agent who has sold the goods to the buyer but the possession of the documents of the title of the goods is still with him, during that possession he sold the goods to another buyer and buyer purchased the goods in the good faith without being aware of the previous sale, then he will have a good title to the goods. But it is necessary that the seller should be in possession of goods as a seller, not as a changed capacity and the original buyer cannot sue for the tort of conversion.

Added exceptions under the Sale of Goods Act in the pledge by mercantile agents:
S.178 (Pledge by mercantile agent) in the course of business which was opened to the third party.
S.179 (where pawner has only a limited interest and it is valid to the extent of that interest).

Application of law:
Sale of Goods by the seller in possession to the second buyer even after the sale to the original or first buyer [30(1)]:
Cases and their application: As in the case of Contship Container Lines Ltd v D.K. Lall & Ors, the defendant sent a copper ship to the buyer Printscher. The buyer turned bankrupt. Consequently, the buyer sold the goods to the plaintiff. The plaintiff took possession in good faith and paid the price to the buyer with no notice of the original sale.

The defendant, after knowing about the actual transaction, stopped the copper at the transit. The plaintiff filed the suit against the defendant. The court said that the transfer of goods from the seller to the plaintiff was done with a good title and hence, the seller was not entitled to hold the goods at the transit.

A leading case on this quite similar fact was Lee v Butler which embarked on the evolution of the hire purchase agreement. That's another thing [the S.9 of the factors act opposite to the S.25(1) of the Sale of Goods Act, 1930]. In this, the defendant acted in good faith and with no notice of the plaintiffs right received them. The judgment was passed by the defendant and the appeal was dismissed.

Additional exceptions to the facts:
S.178:
In the case of Staffs Motor Guarantee Ltd v. British Wagon Co Ltd, the possession of the mercantile agent, for the purpose of S.2 of the factors Act, 1889 had to be possessed by himself as a mercantile agent but where the goods were entrusted in a different capacity, it is not open to a third party who takes a pledge from him to say that they were in his possession, and therefore they had the power to create a pledge which was contrary to the S.24 of the Sale of Goods Act, 1930.

S. 179:
In addition to these exceptions, under this section, a pledge where pawnor has only a limited interest. Rationale was that the pledge by a seller remaining in possession after the sale and by a buyer receiving possession before the sale was held valid as in the case of City Fur Mfg Co Ltd v Fureenbond (Brokers) London Ltd.

Interpretation of law as per facts:
According to the given facts the following conditions to be fulfilled to be a valid contract as per the written exceptions:

• The buyer must be in possession of the goods.
• The second buyer must purchase the goods in good faith and the transfer was done with a good title.
• The goods have been delivered to the second buyer.

As per the given facts with exceptions to the general rule, the court decision should be that the defendant wont be liable in which a non-owner purchaser can pass a better title to the goods, who purchases in good faith.

Conclusion:
There has been some criticism of S.25(1) and S.24(1) of the Act. In the general rule, it can be most favored to the owner of the goods and might be harsh to the buyer purchasing in a good faith without any notice of the original sale. In concluding the case as per the law, their application, and interpretation of the facts, it is important to bring the balance between protecting the interest of the seller and the buyer, and with the exceptions provided to the rule has done the same.

End Notes:

1. Isaack v Clark, (1615) 2 Bulstr 306
2. Lallan Prasad v Rahmat Ali AIR 1967 SC 1322: (1967) 2 SCR 233.
3. Nemo dat quod non habet, ICLR (2019), https://www.iclr.co.uk/knowledge/glossary/nemo-dat-quod-not-habet/ (last visited May 10, 2021).
4. In a legal term it means that you own a right to something. It can be used as a purpose of transfer or portion from person to person for the interest you can gain from them.
5. Mercantile law or commercial law is a body of law that deals with all commercial transactions of traders within the local, country, or international and related to the rights of individuals, partners, or other parties such as joint stockings involved in commercial transactions.
6. It is an intangible property and mainly refers to the claims that afford the relief and are actionable in courts of law, such as secured debts and tortuous suits like defamation or nuisance.
7. It is defined in S.2(e) as every promise and every set of promises forming the consideration for each other.
8. It is a legally binding agreement by which the parties agree to bound either orally or in writing or both at the time of its formation.
9. It is an obligation made between the two or more parties in the absence of written or oral agreement and is based on the interest of fairness by conduct or circumstance.
10. Indiankanoon.org. 2021. The Sale of Goods Act, 1930. [online] Available at: [Accessed 10 May 2021].
11. Rai, D., 2021. Transfer of property under the Sale of Goods Act, 1930 - iPleaders. [online] iPleaders. Available at: [Accessed 10 May 2021].
12. Possession in fact or in reality but is not legally recognized.
13. Possession in law or legitimate or in a matter of law or in the eyes of law that are legally recognized regardless of whether it exists in reality or not.
14. Slideshare.net. 2021. Sales Of Goods Act 1930. [online] Available at: [Accessed 10 May 2021].
15. It is an intentional tory in which one person takes away the others property by using it or altering the property in such a way that is inconsistent with the right of the owner.
16. As S.172 of the Act states that it is a form of bailment which secures or assures for repayment of some debt or obligation in which goods are bailed from one party (the debtor) to another (the creditor).
17. Pawner is one being liable to an engagement gives to a person to whom he liable a thing to be held as security for payment of his debt or the fulfillment of his liability.
18. Indiankanoon.org. 2021. Section 30(1) in The Sale of Goods Act, 1930. [online] Available at: [Accessed 10 May 2021].
19. AIR 2010 SC 1704.
20. Advocatekhoj.com. 2021. Seller or buyer in possession after sale | Sale of Goods Act, 1930 | Bare Acts | Law Library | AdvocateKhoj. [online] Available at: https://bit.ly/3uEDkZa[Accessed 10 May 2021].
21. [1893] 2 QB 318.
22. [1934] 2 KB 305.
23. (1937) 1 All ER 799
    
    
    Award Winning Article Is Written By: Mr.Pragyanshu Gautam
    

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