What are the Rights of Unpaid Seller?

Broadly speaking, rights of an unpaid seller may be divided under two heads:

1. Right against the goods.

2. Right against the buyer personally.

I. Rights of unpaid seller against the goods

(a) When property in the goods has passed :

1. Right of Lien (Sees. 47 to 49):

A lien is a right to retain possession of goods until the buyer pays the price. The unpaid seller can retain the goods in his possession in the following cases:

(i) The goods have not been sold on credit, or

(ii) The goods have been sold on credit but the period of credit has expired, or

(iii) The buyer has become insolvent [Sec. 47(1)].

It should be noted that an insolvent here means a person who is commercially insolvent as against a person who has been adjudged insolvent under the Insolvency law. A person is deemed insolvent who has ceased to pay his debts as they become due or if he is unable to pay his debts in the ordinary course of dealings or business, whether4je has committed an act of insolvency or not [Sec. 2(8)].

It should also be noted that in case the buyer becomes insolvent, the unpaid seller can exercise his right of lien even if the period of credit has not expired if the buyer becomes insolvent before the period of credit has expired.

1. Right of lien is a possessory right. As such, it can be exercised only when the goods are in possession.

2. If the possession is lost or gone, the right of lien is also lost or gone.

3. The right of lien can be exercised against the goods even if the goods are in possession of the seller in any other capacity such as bailee or trustee.

4. The right of lien can be exercised even if the document of title has been delivered but the goods are in the possession of the seller.

5. Right of lien cannot be exercised on the goods repossessed after sale. For example, when the buyer returns the goods for repair.

6. Right of lien can be exercised only when the price is due and not for other expenses, e.g., godown charges, dock charges, etc.

7. Right of lien cannot be exercised where the right of lien has been expressly excluded.

8. Finally, even if the seller has made part delivery, the lien may be exercised on the goods remaining in possession. However, if the part delivery has been made so as to show an intention to waive the lien, the right of lien cannot be exercised (Sec. 48).

It should be noted carefully that the seller cannot exercise right of lien on goods which he has already dispatched to purchaser [M/s. Jain Mills & Electrical Stores v. State of Orissa.