The Buyer Is Gone, The Goods Are Gone, And The Price Unpaid: Legal Remedies For The Unpaid Seller Under Indian Law
- IJLLR Journal
- Aug 4
- 2 min read
Aditi Singh, OP Jindal Global University
I. Introduction
In business transactions regulated by sale of goods contracts, the seller often conveys possession or ownership of the products prior to receiving complete payment. This disparity where delivery occurs prior to payment establishes a significant legal risk. If the customer defaults on payment, the seller not only incurs a financial loss but may also cede complete ownership over the items. In this case, the law acknowledges the unpaid seller and confers particular rights to safeguard their business interests even after the products have departed from their control.
According to the Sale of Goods Act, 1930, an unpaid seller can be defined as an individual to whom the full payment has not been rendered or provided. Moreover, the definition includes a seller who has accepted a payment instrument, such as a cheque or bill of exchange, that has been dishonoured. Additionally, a seller who has received only a portion of the payment, with the remaining balance unpaid, is same as an unpaid seller under the act. The Act further provides protection to individuals occupying the role of the seller, such as an agent representing the seller.
For instance, X consents to sell a laptop to Y for ₹50,000. Y compensates him via a post-dated cheque. When X hands over the laptop, he is merely a seller. However, if the cheque is subsequently dishonoured by the bank, X will be classified as an unpaid seller in accordance with Section 45
The Sale Of Goods Act provides remedies for the seller against the goods and against the buyer personally. The statutory provisions aim to protect business equity by allowing sellers to secure
payment even after delivering goods. However, practical challenges remain. The growing use of third-party logistics, documentation of title transfers like bills of lading, and complex supply chains have weakened possession-based remedies under the Act. Additionally, under the Bankruptcy Code, 2016, an unpaid seller is treated as an unsecured creditor during insolvency, significantly limiting recovery prospects.
