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TMI Blog2022 (10) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... ate 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons Jet Airways (India) Limited stopped its operation on 17.04. 2019. An Application under Section 7 was filed by State Bank of India being CP (IB) No.2205/MB/2019, which Application was admitted by NCLT, Mumbai Bench vide order dated 22.06.2019. The Adjudicating Authority appointed Mr. Ashish Chhawachharia, as an Interim Resolution Professional (IRP), who was confirmed as Resolution Professional (RP) in the First Meeting of Committee of Creditors (CoC) dated 16.07.2019. 3. Public announcement was made on 24.07.2019. The first advertisement for calling of Expression of Interest from prospective Resolution Applicant was issued on 20.07.2019. Expression of Interest was issued in four rounds and last on 13.07.2020. The Resolution Plan submitted by Jalan Fritesch Consortium was approved in the 17th CoC Meeting held on 03.10.2020. 4. A Contractual Agreement between the Appellant and the Corporate Debtor was entered into under which the Appellant had agreed to sell certain assets viz. Ground Power Units and Conventional Pushback Tractor belonging to the Appellant. The details pertaining to correspondences and the contract between the parties shall be noticed hereinafter. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve the Appellant s Equipment as set out in paragraph 7.8 of the present Appeal from the list of assets of the Corporate Debtor and / or the Resolution Plan; (c) retrain the Respondent No. 1 from alienating or creating any third party rights over the Appellant s Equipment as set out in paragraph 7.8 of the present Appeal in favour of Respondent No. 2 or any other person; (d) direct the Respondent No. 1 to forthwith release the Appellant s Equipment as set out in paragraph 7.8 of the present Appeal to the Appellant; (e) pass such further and other orders and directions as the nature and circumstances of the case may require as this Hon ble Tribunal may deem fit and proper. 6. We may now notice certain details regarding Appellant and transactions/correspondences between the Appellant and the Corporate Debtor in the following paragraphs. 7. The Appellant is carrying on business of manufacturing and sale of ground support Equipment to Airlines, Airports, Cargo Airlines, Ground Handlers and Military Organization. In the month of February 2017, the Corporate Debtor approached the Appellant for purchase of Equipment i.e., Ground Power Units ( Power Units ) and C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 002329 dated 25 June 2018 for supply of one Ground Power Unit GPU-414E-CUP to be delivered at Chennai Airport for an amount of USD 48,100/-; (c) Invoice dated CLY10002330 dated 25 June 2018 for supply of one Ground Power Unit GPU-409E-CUP - 28 to be delivered at Bengaluru Airport for an amount of USD 48,350/-; (d) Invoice dated CLY10002331 dated 25 June 2018 for supply of one Ground Power Unit GPU-414E-CUP to be delivered at Bengaluru Airport for an amount of USD 48,350/-; and (e) Invoice dated CLY100023-45 dated 09 July 2018 for supply of one Conventional Pushback Tractor TMX- 150-12 to be delivered at New Delhi Airport for an amount of USD 92,455/-. 11. As per the terms and conditions of Invoices are specified once again as mentioned hereunder: 1. The seller expressly reserves ownership of the Equipment until full and final payment of the principal and interest; 2. The buyer shall refrain from selling the Equipment or mortgaging it to a third party until it has been fully paid for. The buyer authorizes the seller to pledge the Equipment purchased up to the amount of the sales price, the pledge lifted as soon as the price has been fully paid; an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chennai) CLY10002328 96,200 67,340 b. Ground Power Unit GPU-414E- CUP. (Location: Chennai) CLY10002329 48,100 33,670 3. 4200006833 Dated 14/03/2018 Conventional Pushback Tractor TMX- 150-12. (Location: Delhi) CLY10002345 92,455 64,718.5 Total 233,418.5 14. As the Corporate Debtor fail to pay the Balance Purchase Price as agreed, the Appellant addressed several emails dated 30.07.2018, 02.08.2018, 20.08.2018, 27.08.2018, 04.09.2018, 12.09.2018, 24.09.2018, 02.10.2018, 16.10.2018, 09.12.2018, 03.01.2019, 14.01.2019, 24.01.2019 and 28.01.2019 within four days and 29.01.2019 to the Corporate Debtor calling upon the Corporate Debtor to pay the Balance Purchase Price but the Corporate Debtor failed to pay the Balance Purchase Price by email dated 29.01.2019 indicated that the Appellant is on their list of priorities and will make payment at the first opportunity. Later the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss to service and maintain the Appellant's Equipment; (e) provide no objection and necessary assistance to return the Appellant's Equipment to the Appellant from the Bengaluru, Chennai and New Delhi airports. 16. An email is also sent to the first Respondent by its email dated 03.09.2019, and rejected the Appellant s Claim assigning reasons. 17. The Appellant filed an Application in MA No. 3412 of 2019 seeking a direction against the Respondent No. 1 to remove the asset from the list of assets of the Corporate Debtor and to return the assets of to the Appellant, before the Adjudicating Authority. The Respondent No. 1 filed Reply dated 12.02.2020 alleging that the Appellant s Equipment form part of the fixed assets of the Corporate Debtor therefore they cannot be removed from the list of fixed assets of the Corporate Debtor . After approving of the Resolution Plan by the CoC an Application is filed before the Adjudicating Authority in I.A. No. 2081/2020 under Section 31 of the IBC which was allowed on contest. Without disposing MA No. 3412/2019 filed by the Appellant herein. Aggrieved by the Order, the Respondent filed this Appeal raising several contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lized as an adjustment for use of such Equipment. The Appellant did not explain as to how a sum of USD 178,946 has been arrived for usage charge are under what contract the Appellant is entitled to claim such charges for so-called use of Equipment. 21. The contract between the Appellant and the Corporate Debtor for the purchase of Equipment. The Appellant s claim was in a nature of rental charges for the use of Equipment, which was a fundamental deviation from the original Agreement. None of the documentation provided for an amendment to the contract between the Corporate Debtor and Appellant. The Corporate Debtor continued to bear costs of risks of loss, theft, or destruction of the Equipment. The Equipment also appeared on the fixed assets register of the Corporate Debtor as on March 31, 2018, 2019 and June 20, 2019. The Respondent No. 1, was in his capacity as the Resolution Professional, obligated in law to preserve the value of the Corporate Debtor's assets. He was therefore unable to return the Equipment, owing to his obligations under law. Returning the Equipment and paying rental charges for its usage would defeat an essential purpose of IBC i.e., to balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipment and other Vehicles The Corporate Debtor has ground support Equipment located at various locations (list of which is provided by the Resolution Professional in the data roomhttps://dataroom.ethosdata.com/and is included herein by reference and not specifically enclosed to avoid repetition. The Resolution Applicant has not come across information in relation to the maintenance status of such Equipment, majority of which are vehicles and we have assumed that their condition would have largely depleted or would deplete by the time the Resolution Plan is approved. The Resolution Applicant proposes to take delivery of all such Ground Support Equipment on as-in-where-iswhatever- is-left. Subsequent, to the approval of the Resolution Plan, the Applicant will decide on the manner of utilizing such Equipment (if possible) or replacing it with new Equipment to support its operation. The amounts proposed to be paid by the Resolution Applicant in terms of this Resolution Plan includes the cost of acquisition of all the assets owned by the Corporate Debtor which will be acquired by the Resolution Applicant on an as is-where-is-whatever-is basis and there will be no separate amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncement of its CIRP, the Successful RA is investing a lot of time in re-building trust with the suppliers and vendors to do business with the Successful RA, as the new management of the Corporate Debtor. It may be noted that aviation is a very close business community with limited manufacturers (Boeing/ Airbus) and aircraft lessors. Over the last 90 days, the Successful RA has been in discussions with both the manufacturers and majority of the aircraft lessors to work with it and is currently at the stage of closing agreements for taking on lease aircrafts from them. In terms of the Impugned Order, the Successful RA filed an application before the Hon'ble Adjudicating Authority, seeking extension of time by another 90 days for completion of Conditions Precedent and by way of an order dated 29 September 2021, the time period for completion of Conditions Precedent was extended by another 90 days. It is humbly submitted that any interference with the Impugned Order at this critical stage will hamper the timely implementation of the Resolution Plan and jeopardise the successful resolution and revival of the Corporate Debtor. On the basis of above pleadings, the Respondent No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 95 , State Bank of India Vs. ARGL Limited (IB) 531(PB)/2019 , Chairman Board of Trustees, Cochin Port Trust Vs. Arebee Star Maritime Agencies Private Limited Ors. (2021) 11 SCC 641 and Gujarat Urja Vikas Nigam Limited Vs. Amit Gupta Ors. (2021) 7 SCC 209 . On the strength of the law laid down in the above Judgements, the Counsel for the Appellant requested to dismiss the Petition while submitting that the Petitioner being an unpaid vendor of Equipment is Operational Creditor are entitled to Claim the amount as per the procedure. Point : 27. Considering revival contention, perusing the material the points need to be answered are as follows: (i) Whether delivery of BoL to the Corporate Debtor be construed as transfer of title to goods? (ii) Whether the 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? (iii) Whether the Appellant claiming to be an Operational Creditor entitle to make a request to remove the Equipment from the list of fixed asset of Corporate Debtor in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to insure the Car and assign the policy to the seller; that in default of observance by the buyer of any other conditions aforesaid the seller had the right to determine the contract and seize and take the possession of the car until payment is made in full, the ownership of the car in the facts of the above Judgement has not deemed to have been transferred. But that is the case of instalment purchase till the payment of last instalments, the ownership remains with the seller. 32. He has also drawn the attention of this Tribunal in Pawan Hans Helicopters Ltd. (referred Supra), in paras 16-22, the Court discussed about the scope of Agreement to sell as defined under Section 4 of the Sale of Goods Act, 1930, and rights of the unpaid vendor under Section 45 and 51. The Hon ble Delhi High Court based on the facts and circumstances of the case has held as follows: Section 19 of the Sale of Goods Act, 1930 specifically provides that the property passes when it is intended to pass. Section 19(1) stipulates that where there is a contract for the sale of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such time as the parties to the contract intend it to be transferred. In terms of the agreement between Pawan Hans and AES property was to pass only upon payment of the sale consideration. Since only a sum of Rs. 4,50,000 has been paid, the property in goods has not passed on to AES and continues to vest in Pawan Hans. 7. Perusal of the agreement clearly shows that transporter was to be appointed and nominated by AES and the goods were to be transported by the 'appointed transporter' so nominated. In the instant case, FF had been nominated and appointed by the AES. Accordingly, FIF could only be the agent of AES and not that of Pawan Hans. There was no privity of contract between Pawan Hans and FJF or SWC. There is no merit in the contention of appellant-FJF that it dealt with Pawan Hans on a principal to principal basis or appointment of FJF was under the agreement by Pawan Hans. FJF had been appointed by the AES as the approved transporter. Correspondence exchanged also reveals that the liability for charges of FF or that of SWC was to be borne by AES, even if payment was contemplated to be made through Pawan Hans upon bills being presented. In the instant case, pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct to some condition thereafter to be fulfilled, the contract is called an agreement to sell. By sub-section (4) of that section an agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred. Section 18 of the Act clearly indicates that in the case of sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods, are ascertained. In the present case, the contracts were always for sale of unascertained goods. Skipping over Sections 19 to 22 which deal with contract of sale of specific goods we come to section 23 which lays down that where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. It is suggested that as soon as the assessee company placed the goods on board the steamer named by the buyer at the Madras Port the goods became ascertained and the property i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the passing of property in the goods from him to the buyer. The facts found in this case are that the assessee company shipped the goods under bill of lading issued in its own name. Under the contract it was not obliged to part with the bill of lading which is the document of title to the goods until the bill of exchange drawn by it on the buyers' Bank where the irrevocable letter of credit was opened was honoured. It is urged that under the provision in the contract for weighment and assay, which was ultimately to fix the price unless the buyer rightly rejected the goods as not being in terms of the contract, the passing of property in the goods could not take place until the buyer accepted the goods and the price was fully ascertained after weighment and assay. It is submitted that being the position, the property in the goods passed and the sales were concluded outside British India, for the weighment, sampling, assay and the final fixation of the price could only take place under all these contracts outside British India. Itis not necessary for us to express any opinion on this extreme contention. Suffice it to say, for the purposes of this case, that in any event upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purchasers till they had paid for the same. It is however contended that they merely intended to retain a lien on the goods, but there is no good evidence of this. The present case is somewhat like Bal Kishan Basheshar Nath v. S.M. Fazal Ilahila, in which, under almost similar circumstances it was held by a Division Bench of this Court that the property in the goods did not pass to the purchasers. It may be mentioned that in that case the parties had entered into a C.I.F. contract. This view receives support from the observations of Mulla, J. in A.I.R. 1923 Bom. 92 and A.I.R. 1923 Bom. 125. Having regard to all these circumstances in my opinion the property in the goods was retained by the sellers and did not pass to the purchasers, and consequently the suit in the present form was not competent. I would therefore dismiss this appeal. 36. Learned Counsel also relied on the Judgement of the National Company Law Tribunal, Chandigarh Bench in Weather Makers Pvt. Ltd. (referred Supra) wherein in paras 9-11 it is observed as hereunder: 9. Heard the rival submission and perused the records of the case. One of the facts is not in dispute that the Applicant had supplied ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that for the purpose of this section i.e. section 18(1)(f) the followings shall not constitute an Asset and therefore, an Asset owned by a third party, however, in possession of the Corporate Debtor, held under trust or under contractual arrangement. In short, an Asset belonging to an Operational Creditor, however, in possession of a Corporate Debtor shall not be treated as an Asset, therefore, the RP shall not be allowed to take control and custody over the said Asset. In the light of this provision if we examine the facts of this case, it is not in dispute that the Operational Creditor M/s. Sun Pharmaceutical Ltd. has supplied the raw material which is in possession of the Corporate Debtor i.e. Parabolic Drugs Ltd. should be released without delay being perishable in nature, following section 18(1)(f) r/w Explanation. 11. A question is to be answered that what are the areas of operation of Sec. 14 vis-a-vis Sec. 18 of IBC. A fine distinction is available between these two enactments. The area of operation of Sec. 14 is in respect of property which is occupied or in possession of the Corporate Debtor. The property as defined U/s 3(27) of the Code includes money, goods, land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be read in isolation, but has to be read in conjunction with Section 18(1)(f)(vi) of the IBC, 2016 together with the Explanation thereunder. Section 18(1)(f)(vi) reads as follows: 18. Duties of interim resolution professional. (1) The interim resolution professional shall perform the following duties, namely- (a)-(e) * * * * (f) take control and custody of any asset over which the corporate debtor has ownership rights as recorded in the balance sheet of the corporate debtor. or with information utility or the depository of securities or any other registry that records the ownership of assets including- (i)-(v) * * * (iv) assets subject to the determination of ownership by a court or authority: (g) * * * Explanation.-For the purposes of this section, the term assets shall not include the following, namely- (a) assets owned by a third party in possession of the corporate debtor held under trust or under contractual arrangements including bailment; (b) assets of any Indian or foreign subsidiary of the corporate debtor: and (c) such other assets as may be notified by the Central Government in consultation with any financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debtor has to exercise a right that falls outside the purview of the IBC, 2016 especially in the realm of the public law, they cannot, through the resolution professional, take a bypass and go before NCLT for the enforcement of such a right. 38. He also relied in para 33 of the Judgement in MCGM (referred Supra) wherein it is stated as under: 33. The show-cause notice in this case preceded admission of the insolvency resolution process. In view of the clear conditions stipulated in the contract, MCGM reserved all its rights and its properties could not have therefore, in any manner, been affected by the resolution plan. Equally in the opinion of this Court, the adjudicating authority could not have approved the plan which implicates the assets of MCGM especially when SevenHills had not fulfilled its obligations under the contract. 39. Based on the principle laid down in the above Judgements, it is clear 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, 193 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in the goods has passed to the buyer. If, on the other hand, the seller delivers the shipping documents against payment, and thereafter if he does not deliver the goods at the port, the buyer may have other name IDs for the recovery of damages, etc. But that right is not covered by either clause 9 or clause 11 of the contract. A scrutiny of all the terms of the contract does not indicate the intention that the property in the goods shall not pass to the buyer, notwithstanding delivery of shipping documents against payment. 40. In Chairman, Board of Trustees, Cochin Port Trust (referred Supra), in para 72, the Apex Court relied on the earlier Judgement in J.V. Gokal Co. (referred Supra), held that it is important to understand the legal effect of a bill of lading. This has been set out by a five-Judge Bench of this Court in J. V. Gokal Co. (P) Ltd. (referred Supra), as ... A bill of lading is a writing, signed on behalf of the owner of the ship in which goods are embarked, acknowledging the receipt of the goods, and undertaking to deliver them at the end of the voyage subject to such conditions as may be mentioned in the bill of lading'. It is well-settled in comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st Judgement of England Court s in Lickbarrow Vs. Manson 1775-1802 ALL England Report 1 (Kings Bench), held that in mercantile custom BoL has been considered as the document of title. This custom was recognized by the common law in Lickbarrow (referred Supra), where it was held that the document of BoL enhance the property to the goods to be transferred to the transferee of BoL. This approach makes that the BoL is a document of title. A contrary view is taken by the Kings Bench in another Judgement. Moreover, all the transfer of goods may not be intended to be transfer the ownership. For example, shipment may amount to no more than an in house movement of goods between two branches of the same firm located in different countries. In such a case, there is no delivery of goods themselves to the assignee after the ship is arrived. Again the Court in RM Goode, Proprietary Rights and Insolvency in Sales Transactions (2nd Edition Sweet Maxwell 1989) 60 observed that in fact the reality is neither the document nor the document with the intention is capable to transfer ownership to its holder. BoL has no relationship with the passing of ownership or with the intention of trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the seller to whom the bill of lading has been endorsed, or a consignor or agent who has himself paid, or is directly responsible for, the price. 45. 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. Section 46 of Sale of Goods Act, 1930, deals with unpaid seller s right and they are enumerated as under: 46. Unpaid seller s sights.-(1) Subject to the provisions of this Act and of any law for the time being in force, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law- (a) a lien on the goods for the price while he is in possession of them; (b) in case of the insolvency of the buyer a right of stopping the goods in transit after he has parted with the possession of them; (c) a right of re-sale as limited by this Act. (2) Where the property in goods has not pass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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