2022 (10) TMI 890 - AT - Insolvency and Bankruptcy

Court orders return of equipment to Appellant, denying claimed amount and directing costs.

TLD MEAI FZE Versus Ashish Chhawchharia, Resolution Professional of Jet Airways (India) Limited., Jalan Fritsch Consortium

The court upheld the impugned order but directed the Successful Resolution Applicant and the Monitoring Committee to return the equipment to the ... Transfer of title of goods or not - Unpaid seller - delivery of BoL to the Corporate Debtor - Appellant TLD MEAI FZE continued to be the owner in view of the terms and conditions of Purchase Orders and Invoices on account of alleged failure of the Respondent to pay the balance of price of Equipment or not? - appellant entitle to make a request to remove the Equipment from the list of fixed asset of ‘Corporate Debtor’ in the CIRP and claim return of those Equipment under the provisions of IBC. HELD THAT:- The intention of the parties to the Agreement to sell goods is the basis to determine whether the property of goods passes to the buyer or not. More particularly when the sale is under Agreement to sell as defined under Section 4 of the Sale of Goods Act, 1930 - All the conditions in the Purchase Order and Invoices would show that till payment of the price of Equipment by the buyer, the ownership will remain with the seller. In the instant case, the ‘Corporate Debtor’ paid only 30% on the date of contract of sale and later the balance of 70% of sale consideration was not paid. Therefore, strictly in terms of the Purchase Order and the conditions of Invoices the ownership will remain if the Appellant herein is seller of the Equipment to the buyer i.e., ‘Corporate Debtor’. If the intention of the parties is gathered from the terms and conditions incorporated both in Purchase Orders and Invoices, the title to the goods to the transferred only of sale consideration of the Equipment and therefore the delivery of BoL is only transfer of possession of the goods not ownership or title to the goods. Though, BoL is treated as document of title to goods under Section 2(4) of the Sale of Goods Act, 1930. In the present case, the 70% of the sale price of Equipment was not paid by the ‘Corporate Debtor’ to the Appellant/Seller and the seller would fall within the definition of unpaid seller as defined under Section 45 of the Sale of Goods Act, 1930. The unpaid seller is entitle to claim lien when the goods for the price while he is in possession of them. In the present facts, the buyer i.e., the ‘Corporate Debtor’, became insolvent and CIRP is initiated against him. If Sections 46 & 50 of the Sale of Goods Act, 1930, are construed strictly and the buyer i.e., the ‘Corporate Debtor’ became insolvent, the unpaid seller i.e., the Appellant herein is entitled to stop the Equipment in the transit in possession of the ‘Corporate Debtor’. Still the unpaid seller is entitled to recover the price by filing a suit for recovery of price under Section 55 or file a suit for specific performance under Section 58 of Sale of Goods Act, 1930 - If the terms and conditions of the Purchase Order or Invoices as mentioned in the earlier paras if construed strictly the title to the goods remained with the Appellant and mere delivery of BoL does not amount to transfer of ownership in the goods since the delivery of goods is based on contract of sale. As such, the intention of the parties to the contract of sale is to pass ownership in the goods only on full payment of sale consideration agreed by the parties. Thus, the intention of the parties to the contract of sale was to pass ownership of the goods only on full payment of sale consideration agreed by the parties. Admittedly, only 30% of the sale consideration was paid and 70% is balance - the Appellant still continues to be owner of the equipment and the equipment being not assets of the Corporate Debtor ought not to have been included in the assets of the Corporate Debtor. Appeal disposed off. Issues Involved:1. Whether delivery of Bill of Lading (BoL) to the Corporate Debtor constitutes a transfer of title to goods.2. Whether the Appellant continued to be the owner of the equipment due to the terms and conditions of the Purchase Orders and Invoices.3. Whether the Appellant, as an Operational Creditor, is entitled to request the removal of the equipment from the list of fixed assets of the Corporate Debtor in the Corporate Insolvency Resolution Process (CIRP) and claim return of those equipment under the provisions of the Insolvency and Bankruptcy Code (IBC).Issue-wise Detailed Analysis:1. Whether delivery of Bill of Lading (BoL) to the Corporate Debtor constitutes a transfer of title to goods:The judgment discusses the definition of 'document of title to goods' under Section 2(4) of the Sale of Goods Act, 1930, which includes a bill of lading. The delivery of such a document generally amounts to a transfer of title to goods. However, the court notes that the intention of the parties and the specific terms of the contract are crucial in determining whether the property in the goods has passed to the buyer. The court references various judgments, including the Supreme Court's decision in 'J.V. Gokal & Co. Pvt. Ltd.' and the principle that a bill of lading represents the goods and its transfer operates as a transfer of the goods. Despite this, the court concludes that the delivery of the BoL in this case did not constitute a transfer of ownership due to the specific terms and conditions in the Purchase Orders and Invoices, which stipulated that ownership would remain with the seller until full payment was made.2. Whether the Appellant continued to be the owner of the equipment due to the terms and conditions of the Purchase Orders and Invoices:The court examines the terms and conditions of the Purchase Orders and Invoices, which included clauses reserving ownership of the equipment until full payment was made. It is noted that the Corporate Debtor paid only 30% of the purchase price, and the balance 70% remained unpaid. The court refers to the definition of an 'unpaid seller' under Section 45 of the Sale of Goods Act, 1930, and the rights of an unpaid seller under Sections 46 and 50, which include a lien on the goods and the right to stop goods in transit. The court concludes that the Appellant, as an unpaid seller, retained ownership of the equipment and that the inclusion of the equipment in the list of assets of the Corporate Debtor was erroneous.3. Whether the Appellant, as an Operational Creditor, is entitled to request the removal of the equipment from the list of fixed assets of the Corporate Debtor in the CIRP and claim return of those equipment under the provisions of the IBC:The court discusses the duties of the Resolution Professional under Section 18(1)(f) of the IBC, which include taking control and custody of any asset over which the Corporate Debtor has ownership rights. The court also references the Explanation to Section 18, which excludes assets owned by a third party and in possession of the Corporate Debtor under contractual arrangements from being considered as assets of the Corporate Debtor. The court concludes that the Appellant, as an unpaid seller and owner of the equipment, is entitled to have the equipment removed from the list of fixed assets of the Corporate Debtor and returned to the Appellant. The court directs the Successful Resolution Applicant and the Monitoring Committee to assist in the return of the equipment to the Appellant, with all expenses for the return to be borne by the Appellant.Conclusion:The court upholds the impugned order dated 22.06.2021 but directs the Successful Resolution Applicant and the Monitoring Committee to hand over the equipment to the Appellant. The Appellant is not entitled to any amount claimed for the usage of the equipment. The court emphasizes that all expenses for the return of the equipment shall be borne by the Appellant.