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2019 Supreme(Bom) 1452
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
G.S. Kulkarni, J.
Vanit Gupta – Appellant
Versus
Delta Iron & Steel Company P. Ltd., Mumbai – Respondent
Commercial Notice of Motion (L) No. 2044 of 2019; Commercial Arbitration Petition (L) No. 948 of 2019
Decided On : 22-10-2019
Dinyar Madon, Adv., Jamshed Master, Adv., Kausar Banatwala, Adv., Gauri Sakhardande, Adv., Chirag Sarawagi, Adv., Tushar Goradia, Adv., S.U. Kamdar, Adv., Karl Tamboly, Adv., Parinaz Vakil, Adv., Aishwarya Singh, Adv., Krishna Jethani, Adv., M.M. Vashi, Adv., Manisha Desai, Adv., M.P. Vashi, Adv., D.N. Kher, Adv., P.K. Nardele, Adv.
A bona fide purchaser for value without notice can acquire good title to goods despite a prior lien held by the seller, especially when the seller has parted with possession.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 9 - Franchise Agreement - The applicant sought the release of goods from the custody of Court Receiver, claiming ownership as a bona fide purchaser following the sale from the respondents - It was established that the applicant paid for the goods and had an independent title to them. (Paras 1, 7, 31, 40, 54)
(B) Right of Lien - The right of lien of the petitioner was rendered ineffective after possession of the goods was transferred to the respondents, as per the provisions of the Sale of Goods Act, 1930. (Paras 47, 49)
(C) Bona Fide Purchaser - The applicant was recognized as a bona fide purchaser without notice, and the court concluded that the lien over the goods by the petitioner could not be enforced. (Paras 41, 52)
Facts of the case:
The applicant, a non-party to the arbitration petition, claimed that the goods sealed by the Court Receiver belonged to him, as they were sold to him by the respondents for valuable consideration. The respondents had defaulted in payments to the petitioner, leading to the sealing of goods.
Findings of Court:
The court affirmed that the applicant was the bonafide owner of the goods and ordered their release from custody.
Issues: The principal issue was whether the applicant had valid ownership rights over the sealed goods, independent of the lien claimed by the petitioner based on the Franchise Agreement.
Ratio Decidendi: The court held that once the goods were delivered to the respondents, the petitioner's right of lien was extinguished and could not affect the rights of a bona fide purchaser who had no notice of any lien.
Result: Notice of Motion allowed, directing release of goods to the applicant.
| Table of Content |
|---|
| 1. overview of arbitration petition and background facts. (Para 1 , 2 , 3 , 4 , 5) |
| 2. applicant's claims regarding ownership and payments. (Para 6 , 9 , 10 , 12) |
| 3. court's analysis of the franchise agreement and purchaser's rights. (Para 7 , 28 , 29 , 30 , 41) |
| 4. application of lien law and buyer's rights as per sale of goods act. (Para 38 , 47 , 53) |
| 5. granting of relief to the applicant and court's directive. (Para 54 , 56 , 58) |
JUDGMENT :
G S Kulkarni, J.
The applicant Shri Vanit Gupta, who is not a party to the above arbitration petition, has filed this Notice of Motion. The Arbitration Petition is filed under section 9 of the Arbitration and Conciliation Act, 1996 (for short "the Act") by the petitioner - JSW Steel Ltd. (referred as Petitioner), against the original respondent no. 1 - Delta Iron & Steel Co. Pvt. Ltd., respondent no. 2 - Yatin Steels India Pvt. Ltd. and respondent no. 3 - ARK Industries Pvt. Ltd. (referred as Respondents). The applicant is a third party to the transactions which have taken place between the petitioner and the respondents pertaining to sale of iron coils (for short 'the goods') to the respondents.
2. The petitioner approached this Court in the above Petition filed under section 9 of the Act, principally on the ground that there is a Franchise Agreement dated 1 July 2018 entered between the petitioner and the respondents. The contention of the petitioner is that as clear from the various clauses of the Franchise Agreement, the respondents were under an obligation to make payments within 7 days from the date of invoice, in cases where the material was dispatched from the Vijaynagar plant and within 7 days from the date of invoice date in cases where the said material was dispatched from the Dolvi plant. The petitioner has contended that between April and June, 2019, the respondents placed 17 purchase orders with the petitioner for a supply of 23516 MT (mega tons) of these goods, for total principal amount of Rs.121,35,85,585/-. The petitioner contended that on the date of filing of the petition, under the invoices for the said period between April and June 2019, amounts remained outstanding and payable by the respondents to the petitioner and particularly since July 2019 a total principal amount of Rs.20,39,90,685/- was due and payable by the respondents to the petitioner. Exhibit B to the petition is a tabular representation of the payments to be made by the respondents against the invoices raised by the petitioner, including the dates on which the same fell due. It is on the above premise, the present Section 9 petition was filed and moved for urgent ad-interim orders.
3. The petitioner had moved the Arbitration Petition for ex-parte reliefs against the respondents. On 23 August 2019 this Court (K.R. Shriram, J.) passed an order inter-alia granting the petitioner ad-interim relief in terms of prayer clauses (k) and (l) of the petition. The said order reads as under:
"1. At the outset, Mr.Khambata, senior Advocate for petitioner tenders draft amendment to the petition which is taken on record and marked 'X' for identification. Leave to amend as per the draft granted. Amendment to be carried out forthwith.
2. Heard Mr.Khambata. The reason for moving without notice is given in paragraph-22 of the petition.
3. Petitioner is a company manufacturing steel and its allied products and claims to be one of the largest in the business of manufacturing steel and its allied products in India. Respondent nos.1, 2 & 3 are sister concerns of each other engaged in the business of dealing in iron and steel products in all districts in the State of Maharashtra. Petitioner appointed respondents as franchise to set up and operate a JSW SHOPPEE for promoting and selling exclusively certain products of petitioner. Petitioner entered into franchise agreement on 1.7.2018 with respondent no.1 as also its sister concerns respondent nos.2 & 3. Clause 7.2.1 of the agreement is the arbitration clause.
4. Clause-12
