• Effect of part delivery

o A delivery of part of the goods, in progress of the delivery of the whole has the same effect
for the purpose of passing the property in such goods, as a delivery of the whole. But where
part delivery is made with the intention of severing it from the whole lot, then it does not
operate as a delivery of the whole of the goods.
A sold certain goods to B lying at a wharf. The seller directed the wharfingers to
deliver the goods to B. B weighed all the goods and took away a part of them. It was held
that the delivery amounted to a delivery of whole of the goods.

• Modes of delivery of goods

o Delivery in the Sale of Goods Act, 1930 is defined as a voluntary transfer of possession from
one person to another [Section 2 (2)]. Thus, to affect a valid delivery, goods from one
person to another must be transferred voluntarily i.e., willingly and not by means of fraud,
theft, or force etc. Mere possession of goods does not amount to delivery of goods.
Modes of Delivery
o Delivery of goods sold may be made by doing anything, which the parties agree shall be
treated as delivery or which has the effect of putting the goods in the possession of the
buyer or of any person authorized to hold them on his/her behalf.
o Delivery of goods may be made in any of the following three ways:
▪ Actual delivery: Also known as ‘physical delivery’, actual delivery takes place when
the goods are physically handed over by the seller or his/her authorized agent to the
buyer or his/her agent authorized to take possession of the goods. A, the seller of a
car hands it over to B, the buyer; it amounts to actual delivery of the goods
▪ Symbolic delivery: Where the goods are bulky and heavy and it is not possible to
physically hand them over to the buyer, delivery thereof may be made by indicating or
giving a symbol. Here the goods itself are not delivered, but the ‘means of obtaining
possession’ of goods is delivered. For example, delivering the keys of the warehouse
where the goods are stored, or the keys of a purchased car to its buyer, or bill of lading
which will entitle the holder to receive the goods on arrival of the ship.
▪ Constructive delivery: In this case neither physical nor symbolic delivery is made. In
constructive delivery the person in possession of the goods acknowledges that he
holds the goods on behalf of, and at the disposal of the buyer. Constructive delivery is
also called a delivery by attornment. For example, where the seller, after having sold
the goods, agrees to hold them as Bailee for the buyer, there is constructive delivery.
• Sale by finder of goods
o A finder of lost goods has the power to sell the goods under certain circumstances and the
buyer will acquire an absolute title. Accordingly, a finder of goods can sell such goods under
the following conditions:
o The real owner cannot be found with search and diligence;
o If found, s/he refuses to reimburse the lawful charges incurred by the finder in
respect of the goods found;
o If the goods are highly perishable or losing the substantial part of its mercantile
value; or
o If the lawful charges of the finder, in respect of the thing found, amount to two
thirds of its value.

• Rights of a Unpaid seller

The rights of an unpaid seller may broadly be classified as:
• Rights against the goods
• Rights against the buyer
Rights Against the Goods
The Sale of Goods Act confers the following four rights to an unpaid seller against the goods:
1. Right of lien or retention
2. Right of stoppage of goods in transit
3. Right of resale
4. Right to withhold delivery
Rights Against the Buyer
1. Suit for price
2. Suit for damages for non-acceptance
3. Suit for damages for repudiating contract before due date
4. Suit for interest and special damages
(For More Refer Chapter 17)

• Sale by an unpaid seller

o Sale by an unpaid seller. As per Section 54 (3), Where an unpaid seller has exercised his
right of lien or stoppage in transit and is in possession of the goods, he may resell them and
the second buyer will get a good title to the goods as against the original buyer even if no
notice of the resale has been given to the original buyer.
 • Concept of an agreement to sale
o In the case of sale, the title (ownership) in the goods passes to the buyer immediately at
the time of making the contract but in the case of an agreement to sell, the title passes
at a future time subject to the conditions to be fulfilled thereafter. Therefore, in a sale
the buyer becomes the proprietor of the goods as soon as the contract is made whereas
in an agreement to sell, the seller continues to be the proprietor of the goods agreed
to be sold until it becomes a sale.

• How sale is differentiated from agreement to sale

• Nature
• Transfer of ownership
• Conveyance of
property
• Type of goods
• Risk of loss
• Rights of seller
• Right of Buyer
• Insolvency of Buyer
• Insolvent of Seller
Sale Agreement to sell
1. Executed Contract. 1. Executory Contract.
2. Immediately transferred. 2. Transferred on future time on
fulfillment of condition.
3. Right in rem – Right against the 3. Right in personam – Right against
whole world. the seller.
4. Existing and Specific goods. 4. Future, Contingent and
Unascertained goods.
5. Risk of buyer. 5. Risk of seller
6. Unpaid seller can sue buyer for 6. If buyer makes the breach of
price and right to lien or contract the seller can sue the
stoppage in transit or resale. buyer for damages.
7. Buyer can sue for damages if 7. Buyer can sue the seller for
seller sells the goods. damages on breach.
8. Seller cannot claim full price, but 8. The seller is not bound to deliver
will recover ratable dividend. goods.
9. Buyer can reclaim the goods
from official assignee and the 9. The sale of contract will be void.
official assignee will claim full
amount

• Hire-Purchase scheme
• Transfer of ownership
• Position of buyer
• Right to terminate the
contract
• Mode of contract
Sale
1. Immediately at the time of
contract
2. Buyer is that of the owner of 2. The position of a hire-purchaser is
the goods
3. Buyer cannot terminate the
contract and is bound to pay
the agreed price of the goods.
4. Orally or in writing
Hire-Purchase
1. Transferred to the buyer upon
payment of all the installments
including the last and final one
that of a bailee till the last of the
agreed installments is paid
3. The hirer may, if he deems fit,
terminate the contract at any
stage and return the goods to its
owner.
4. The hire-purchase agreement is
always done in writing.
• Possession of the goods 5. Immediate possession 5. Immediate Possession Without
transfer of ownership

6. Hire Purchase Act

• Act applicable 6. Governed by the Sale of
Goods Act
7. A hirer cannot claim the benefits
• Benefit of implied 7. These conditions and
of implied conditions and
conditions and warranties are implied in case
warranties
warranties of sale

8. If the buyer becomes insolvent or

• Insolvency of the buyer
8. Seller cannot claim full price,
fails to pay an installment; the
but will recover ratable
owner has the right to take back
dividend
the goods.

• Resale 9. Buyer can pass a goods title to 9. The hirer cannot transfer any title
a bona fide purchaser or even to a bona fide purchaser
pledgee from him because the position of the hirer is
that of a Bailee only
10. Lies with the buyer
• Risk of loss 10 Lies with the Owner, and the hirer
will be absolved of any
responsibility therefore, if he has
exercised reasonable care and skill
to protect the same as a Bailee.
• Sales-tax /VAT. Sales tax/VAT is payable on the goods sold. But sales tax/VAT is not levied on a
hire purchase until it becomes a sale.
• Effect of payments. In a sale, if the price is paid in installments, each installment is regarded as
part payment of the price. In a hire-purchase agreement each installment is regarded as the
hire charges for the use of the goods. But if the hire-purchaser exercises the option to purchase
the goods, then each installment is regarded as part payment of the price of the goods.

• Passing of title of goods

o The general rule as to transfer of property is that only the owner of goods can validly
transfer the ownership in the goods to the buyer. That is, a non-owner cannot sell the
goods and transfer the ownership therein to the buyer even if the buyer has purchased
them bonafide and for value. This general rule is expressed by the maxim ‘Nemo dat guod
non-habet’, which means that ‘no one can pass a better title than what he himself has’.
Thus, even a bonafide buyer who buys stolen goods from a thief or from a transferee from
such a thief can get no valid title to them for the thief has no title, nor could he give one to
any transferee.
(More on Chapter 16)
• What is Nemo-dat-quod-non-habet
o ‘Nemo dat guod non-habet’, which means that ‘no one can pass a better title than what he
himself has’. Thus, even a bonafide buyer who buys stolen goods from a thief or from a
transferee from such a thief can get no valid title to them for the thief has no title, nor
could he give one to any transferee.

• Exceptions of Nemo dat quod non habet

o The general rule as to title aims at protecting the interests of the true owner in particular,
and is deemed necessary to safeguard the larger interest of society in general. However, this
rule is subject to certain exceptions, wherein the seller may confer a better title than what
he himself possess, listed as follows:
1. Sale by a mercantile agent
2. Transfer of title by estoppel
3. Sale by one of the joint-owners
4. Sale by a person in possession under a voidable contract
5. Sale by seller in possession after sale
6. Sale by a buyer in possession after ‘agreement to buy’
7. Sale by an unpaid seller
8. Sale by a finder of goods
9. Sale by Pledgee
10. Sale by Official Assignee or Official Receiver
(More on Chapter 16)

• Concept of delivery on “approval” or on “sale or return” basis

o When good are delivered to the buyer on approval or ‘on sale or return’, or other similar
terms, the property therein passes to the buyer:
– When he signifies his approval or acceptance to the seller or does any other act
adopting the transaction;
– If he does not signify his approval or acceptance to the seller but retains the goods
without giving notice of rejection, then, if no time has been fixed for the return of
the goods, on the expiration of a reasonable time.
Ex: E delivered a horse to B on the terms of ‘sale or return’ within eight days. The horse
died on the third day from the date of delivery for no fault of B. It was held that E (i.e.,
seller) was to bear the loss as the ownership of horse was still with him when it expired.
• What is ascertainment and appropriation
o Ascertainment is the process of identifying and earmarking the goods to be delivered. It
consists separating, measuring, weighing, counting etc., in relation to the goods with an
intention to identify and determine the specific goods to be delivered under the contract of
sale. But mere appropriation is not enough. After the goods have been ascertained, the next
step is their unconditional appropriation to the contract.
o Appropriation refers to the selection of the goods with the exclusive intention of using
them in performance of the contract and involves the element of mutual consent of the
seller and the buyer. The distinction between ‘ascertainment’ and ‘appropriation’ is that
ascertainment is a unilateral act and is usually done by the seller alone, whereas
appropriation involves common intention or mutual consent.
(For More Refer Chapter 16)

• What is attornment
o Constructive delivery. In this case neither physical nor symbolic delivery is made. In
constructive delivery the person in possession of the goods acknowledges that he holds the
goods on behalf of, and at the disposal of the buyer. Constructive delivery is also called a
delivery by attornment. For example, where the seller, after having sold the goods, agrees
to hold them as Bailee for the buyer, there is constructive delivery.

• Parties to a Bill of Exchange

A bill of exchange may involve the following parties:
1. Drawer This is the person who writes and signs the bill.
2. Drawee This is the person on whom the bill is drawn
3. Acceptor This is the person who accepts the bill. In practice, the drawee is the
acceptor but a third person may accept a bill on behalf of the drawee.
4. Payee This is the person to whom the money stated in the bill is payable. He may be
the drawer or any other person to whom the bill has been endorsed.
5. Holder This is the person who has the possession of the bill. After being drawn s/he
may be the original payee, endorsee and bearer in case of a bearer bill.
6. Endorser The person, either the drawer or holder, who endorses the bill to any one
by signing on the back of it is called an endorser.
7. Endorsee is the person in whose favor the bill is endorsed.
8. Drawee in case of need This is a person who is introduced at the option of the
drawer. Any endorser may insert the name of such person, and the effect of it is that
a resort may be had to him in case the bill is dishonored for non-acceptance or non-
payment or in any other need.
 9. Acceptor for honor The person who may become a party to a bill as acceptor
voluntarily in the event of the refusal by original drawee to accept the bill if
demanded by the notary. The acceptor for honor offers to accept the bill supra
protest with a view to safeguard the honor or prestige of the original drawer or any
other endorser, as the case may be.

Usually there are three parties to a bill of exchange – drawer, drawee and payee. It is
also not necessary that three separate persons should answer to the description of
drawer, drawee and payee. Depending upon the situation one person may fill any two of
three positions. When a bill is drawn as ‘pay to me or my order’, drawer and drawee
may be the same person. Similarly, when a principal draws a bill on his agent or upon
himself, drawee and payee may be the same person.

• Essentials of a valid Promissory Note

A promissory note is an instrument in writing (not being a bank note or currency note) containing
an unconditional undertaking, signed by the maker to pay a certain sum of money only to, or the
order of a certain person, or only to bearer of the instrument. Section 4]
The person making the promise to pay is called the ‘maker’ and the person who is to receive
the money stated in the note is called the ‘payee.’
Essentials:
o Must be in writing
o Must contain an express undertaking to pay
o The promise or undertaking to pay must be unconditional
o The promise must be for paying certain sum of money
o Must be signed by the maker
o The maker must be a certain person
o The payee must be certain
o Payment must be in legal tender money of India
o Must be properly stamped
o Must contain number, place and date of signature

• Essentials of valid Bill of Exchange

A bill of exchange is an instrument in writing containing an unconditional order, signed by the
maker, directing a certain person to pay a sum of money only to, or to the order of a certain
person, or to the bearer of the instrument. It is known as a draft in the US. If the bill of exchange is
drawn on a bank, it is called a bank draft.
 Essentials:
o It must be in writing
o It must contain an express order directing a certain person to pay
o The order to pay must be unconditional
o There are parties to a bill of exchange viz., drawer, drawee, and payee
o It must be signed by the drawer
o The drawer must be a certain person
o The drawee must be certain
o The payee must be certain
o The sum payable must be certain
o The order must be pay money only
o A bill of exchange can be drawn payable to bearer but cannot originally be drawn payable to
bearer on demand
o It must be duly stamped according to the Indian Stamp Act
o Other formalities like, date, place and the words ‘For value received’ etc. Are usually found
in a bill of exchange though they are not necessary in law.

• Essentials of valid cheque

o It must be in writing A cheque must be in writing. An oral order to pay does not constitute a
cheque.
o It should be drawn on banker It is always drawn on a specified banker. A cheque can be
drawn on a bank where the drawer has an account.
o It contains an unconditional order to pay A cheque cannot be drawn so as to be payable
conditionally. The drawer’s order to the drawee bank must be unconditional and should not
make the cheque payable dependent on a contingency. A conditional cheque shall be
invalid.
o The check must have an order to pay a certain sum The cheque should contain an order to
pay a certain sum of money only. If a cheque is drawn to do something in addition to, or
other than to pay money, it cannot be a cheque. For example, if a cheque contains ‘Pay Rs
5,000 and a T.V. worth Rs to A’, It is not a cheque.
o It should be signed by the drawer and should be dated A cheque does not carry any validity
unless signed by the original drawer. It should be dated as well.
o It is payable on demand A cheque is always payable on demand.
 o Validity A cheque is normally valid for six months from the date it bears. Thereafter it is
termed as stale cheque. A post-dated or antedated cheque will not be invalid. In both cases
the validity of the cheque is presumed to commence from the date mentioned on it.
o It may be payable to the drawer himself Cheques may be payable to the drawer himself. It
may be drawn payable to bearer on demand unlike a bill or a pro-note.
o Banker is liable only to the drawer The banker on whom the cheque is drawn shall be liable
only to the drawer. A holder or bearer has no remedy against the banker if a cheque is
dishonored.
o It does not require acceptance and stamp Unlike a bill of exchange a cheque does not
require acceptance on part of the drawee. There is, however, a custom among banks to
mark cheques as good for the purpose of clearance. But this marking is not an acceptance.
Similarly, no revenue stamp is required to be affixed on cheques.

• Distinction between Promisory Note and Bill of Exchange

Promissory Note
Number of Parties 1. A promissory note is a two-party
instrument with a maker and the
payee, both being distinct and
different persons
Promise and Order 2. Contains an unconditional
undertaking to pay the drawee
Maker as a Payee 3. Promissory note the maker cannot 3. Exchange the drawee and the
be the payee
Nature of Liability 4. The liability of the maker of a pro-
note is primary and absolute since
the maker himself promises to pay
Acceptance 5. A pro-note does not require any
acceptance before it is presented
for payments as it is payable by a
person who makes it
Bill of Exchange
1. Bill of exchange there are three
parties- drawer, drawee and payee
and two out of three positions may
be filled up by the same person
2. A bill contains an unconditional
order to pay.
payee may be one
4. Liability of the drawer of a bill is
secondary and conditional. He
becomes liable to pay only when
the drawee or acceptor refuses to
honor the bill or fails to pay.
5. A bill of exchange on the other
hand generally requires
acceptance of the drawee before it
is presented for payment
Maker’s Position 6. In a pro-note, the maker stands in 6. Drawer of a bill stands in
immediate relationship with the immediate relation with the
payee acceptor and not the payee
Notice of Dishonor 7. No notice (of dishonor) needs to 7. Due notice must be given by the
be given to maker holder to all the parties who are
liable under the bill, particularly
the drawer and the immediate
endorsee.
o Protest No protest is necessary in case of a promissory note. But foreign bills must be
protested for dishonor if the law of the land where they are drawn so requires. The term
‘protest’ refers to a formal certificate of dishonor issued by the Notary Public to the holder
of a bill in question.
o Exemption The provisions related to presentment for acceptance, acceptance supra protest,
drawing of bills-in-sets, especially foreign bills do not apply in case of promissory notes. All
these provisions are applicable to a bill of exchange.

• Distinction of Bill of Exchange and Cheque

S.No. Point of Difference Bill of Exchange Cheque

A bill can be drawn on any

A cheque is always drawn on a
1 Drawee person (i.e., upon an individual
banker.
as well as a banker)

It may be drawn payable on It can only be drawn payable on

demand, or on the expiry of a demand, and within six months of
2 Payable
certain period or days after the date mentioned on the
sight or date. cheque.

No grace is given in case of a

A grace of 3 days is allowed in
cheque for payment for the sole
3 Grace period the case of payment of bill
reason that a cheque is payable
payable after sight or date.
on demand.

Acceptance by the drawee is It does not require any

4 Acceptance must before payment can be acceptance and is intended for
demanded in respect of a bill. immediate payment.

A bill cannot be made payable A cheque can be made payable to

5 Payable to bearer
to bearer on demand the bearer on demand.
 The drawer cannot stop
payment of a bill. In other
6 Estoppel of payment
words, a bill of exchange
cannot be countermanded.
Banker or the drawee is
empowered to stop payment of a
cheque if all the related
formalities are not adhered to.

The drawer of a cheque is

The drawer of a bill is discharged only if he suffers any
Presentment for discharged (i.e., not liable to loss or damage due to delay in its
7
payment pay), if it is not presented for presentment for payment and he
payment shall be discharged to the extent
of such damage.

If a cheque gets dishonored,

Notice of dishonor of a bill is insufficiency of funds in the
8 Notice of dishonor necessary in order to charge its drawer’s account is sufficient and
drawer. appropriate evidence to charge
him.

The Act contains no provision

9 Crossing for ‘crossing’ of a bill of A cheque may be crossed.
exchange.

• Different mode of Crossing of a cheque

o General crossing Where a cheque bears across its face an addition of the words ‘and
company’ or any abbreviation thereof, between two parallel transverse lines, or of two
parallel transverse lines only, either with or without the words ‘not negotiable’ that addition
shall be deemed to be a crossing and cheque shall be deemed to be crossed generally.
o Special crossing When the name of a banker is written across the face of a cheque with or
without the words ‘not negotiable’, it is a special crossing. The transverse parallel lines may
or may not be used in this kind of crossing. Thus, where the cheque is crossed specially, the
paying banker will pay only to the banker whose name appears across the cheque, or to his
collecting agent. Thus, in case of special crossing, the paying banker is to honour the cheque
only when it is presented through bank mentioned in the crossing, or an agent of such bank,
i.e., another banker acting as agent.
A cheque crossed specially or generally bearing the words ‘not negotiable’, lacks
negotiability and therefore is not a negotiable instrument in the true sense. This means in
case of transfer; the transferee will not get a better title than that of a transferor. It does
not restrict transferability but restricts negotiability only.
• Types of winding up of a company
o Compulsory winding up or winding up by the order of NCLT
o Voluntary winding up or by the passing of a special resolution by members themselves. This
can be either members’ voluntary winding up or creditors’ winding up.

• Types of meetings of a company

Company meetings can broadly be categorized into the following types:
I. Board Meetings
II. Meetings of Members
(1) General Meetings:
(a) Annual general meetings, and
(b) Extraordinary general meetings.
(2) Class Meetings
III. Other Meetings
(1) Meeting of debenture holders
(2) Meeting of creditors

• Proxy
A member may appoint another person to attend and vote at a meeting on his behalf. Such
other person is known as ‘Proxy’. The term is also applied to the instrument by which the
appointment to act on his behalf is made by the member. In case of a company having a share
capital and in the case of any other company, if the articles so authorize, any member of a company
entitled to attend and vote at a meeting of the company shall be entitled to appoint another person
(whether a member or not) as his proxy to attend and vote instead of himself.
[Section 105]
The member appointing a proxy must deposit with the company a proxy form at the time of
the meeting or prior to it giving details of the proxy appointed. However, any provision in the
articles which requires a period longer than forty-eight hours before the meeting for depositing
with the company any proxy form appointing a proxy, shall have the effect as if a period of 48 hours
had been specified in such provision.
A proxy is not entitled to vote except on a poll. Therefore, a proxy cannot vote on show of
hands. He cannot participate in discussion in the meeting. The proxy is automatically revoked by
the death or insolvency of the member.
• Disqualifications of a Director
o The law is very clear on persons who are specifically disqualified from being appointed as
directors. According to it persons declared by courts to be either of unsound mind, insolvent
or awaiting declaration to that effect, convicted for moral depravity and having served a
prison term of six months or more not less than five years ago, are debarred from being
appointed as directors.
Accordingly, a person shall not be capable of being appointed director of a company
under the following circumstances:
(a) If he has been found to be of unsound mind by a court of competent jurisdiction and the
finding is in force;
(b) If he is an un-discharged insolvent;
(c) If he has applied to be adjudicated as an insolvent and the application is pending;
(d) If he has been convicted by a court for any offence whether involving moral turpitude
and sentenced in respect thereof to imprisonment for not less than six months, and a period
of five years has not elapsed from the date of expiry of the sentence.
If any person is sentenced for a period of seven years or more, he shall not be
eligible to be appointed as Director in any company
(e) If an order disqualifying him for appointment as director has been passed by a court or
Tribunal and is in force, unless the leave of the court has been obtained for his appointment
in pursuance of that section
(f) If he has not paid any call in respect of shares of the company held by him, whether alone
or jointly with others, and six months have elapsed from the last day fixed for the payment
of the call; or
G. He has been convicted of the offence dealing with related Party transactions u/s 188 at
any time during the last preceding Five years
H. He has not got the DIN
I. He is a director of a public company that (i) has not filed its annual accounts for any three
consecutive financial years commencing on or after 1 April, 1999, or (ii) has failed to repay
its deposit or interest on due date, or redeem its debentures on due date or pay dividend,
and such failure continues for one year or more. Such a person is disqualified to act as
director of any other public company for a period of five years from the date on which the
public company in which he is a director makes default as specified in (i) or (ii) above Sec-
164 (2)
 Moreover, Section 164(3) allows a private company to lay its own grounds for
disqualifying a director by stating so in its Articles of Association in addition to those stated
in Section 164sec-179(3) & (2).
However, these disqualifications as in (d) (e) (g) shall not be effective for 30 days of
occurrence or the person has appealed within30 days or 7 days has elapsed after the
judgment, or a further appeal is preferred and after 7 days of such appeals against sentence
is disposed of.