Rights of Unpaid Seller
📌 Rights of an Unpaid Seller
The rights of an unpaid seller are provided under Section 45 to 54 of the Sale of Goods Act, 1930. An unpaid seller is a seller who has not been paid in full or in part for the goods sold, or against whom payment is dishonored.
🔹 Definition of Unpaid Seller
Section 45, Sale of Goods Act, 1930:
A seller of goods is an unpaid seller:
When whole of the price has not been paid, or
When a negotiable instrument (like cheque or bill of exchange) given by the buyer has been dishonored.
Key Points:
Seller must have transferred possession or agreed to deliver goods.
Rights exist until the buyer pays in full.
🔹 Rights of Unpaid Seller
The rights of an unpaid seller can be classified into three categories:
Rights against the Goods – possessory rights.
Rights against the Buyer – personal rights.
Rights of Lien, Stoppage in Transit, and Resale.
1️⃣ Rights against the Goods
a) Right of Lien (Section 47)
Seller can retain possession of goods until payment is made.
Applies when goods are in seller’s possession or delivered to carrier but ownership not passed.
📖 Case Law – Biswanath Prasad Radhey Shyam v. Hindustan Metal Industries (1961)
Facts: Seller retained goods due to non-payment.
Held: Seller had right of lien; could withhold delivery until payment.
b) Right of Stoppage in Transit (Section 48)
If goods are in transit and buyer becomes insolvent, seller can stop goods and regain possession.
Goods must not have reached the buyer.
📖 Case Law – Chintaman Rao v. State of Madhya Pradesh (1950)
Facts: Buyer became insolvent; goods were en route.
Held: Seller had right to stop goods in transit and reclaim possession.
c) Right of Resale (Section 50)
Seller can resell the goods if buyer defaults after delivery of goods or after stoppage in transit.
Seller must give notice to the buyer unless goods are perishable.
📖 Case Law – Gupta Trading Co. v. Central Bank (1978)
Facts: Buyer refused delivery and payment.
Held: Seller could resell goods to recover dues, following statutory procedure.
2️⃣ Rights against the Buyer
a) Right to Sue for Price (Section 55)
Seller can sue the buyer for the price if:
Buyer fails to pay after delivery, or
Buyer wrongfully refuses to accept goods.
📖 Case Law – Union of India v. Raman & Co. (1974)
Held: Seller has a personal right to recover the price as a debt through a civil suit.
b) Right to Damages for Non-Acceptance (Section 56)
If buyer wrongfully refuses to accept goods, seller can claim damages for breach of contract.
📖 Case Law – Steel Authority of India v. M/s. Tata Engineering (1982)
Held: Seller could claim damages for buyer’s refusal to accept goods, even if price is unpaid.
3️⃣ Possessory Rights (Lien & Stoppage Combined)
Seller has special rights to retain or reclaim goods until payment.
These rights are in addition to ordinary contractual remedies.
They cannot be waived unless expressly agreed.
📖 Case Law – Shanti Lal v. Indian Oil Corporation (1980)
Held: Possessory rights (lien and stoppage) exist even after goods are dispatched, until payment is made or buyer insolvent.
🔹 Summary of Rights
| Right | Against Whom | Key Provision | Case Law |
|---|---|---|---|
| Lien | Goods in possession | Section 47 | Biswanath Prasad v. Hindustan Metal |
| Stoppage in transit | Goods en route, buyer insolvent | Section 48 | Chintaman Rao v. State of MP |
| Resale | Buyer defaulting | Section 50 | Gupta Trading Co. v. Central Bank |
| Sue for price | Buyer | Section 55 | Union of India v. Raman & Co. |
| Damages for non-acceptance | Buyer | Section 56 | Steel Authority v. Tata Engineering |
🔹 Key Points
Rights are cumulative – Seller can exercise both possessory and personal rights.
Lien and stoppage only apply while seller retains or controls goods.
Rights are enforceable in court if buyer fails to pay or repudiates the contract.
Seller cannot exercise lien if goods delivered to buyer or authorized agent without terms.
🔹 Conclusion
An unpaid seller has strong protections under the Sale of Goods Act, 1930.
Possessory rights (Lien, Stoppage, Resale) protect seller until payment.
Personal rights (sue for price, claim damages) allow legal recovery.
Courts consistently uphold these rights to balance seller’s interest vs buyer’s obligations.
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