The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Ashok Bhushan, Chairperson and Barun Mitra, Technical Member was recently hearing an Appeal and held that mere delivery of a Bill of Lading does not amount to transfer of ownership of the goods.
The Corporate Debtor - Jet Airways (India) Limited has been in airline operation since 1993. Due to various reasons Jet Airways (India), Limited stopped its operation on 17.04. 2019. An Application under Section 7 was filed by the State Bank of India, which Application was admitted by NCLT, Mumbai Bench vide order dated 22.06.2019. The Adjudicating Authority appointed an Interim Resolution Professional (IRP), who was confirmed as a Resolution Professional (RP) in the First Meeting of the Committee of Creditors (CoC) dated 16.07.2019.
The public announcement was made on 24.07.2019. The first advertisement for calling of ‘Expression of Interest’ from a 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.
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 Corporate Debtor paid 30% of the purchase price of the Appellant’s equipment. The Appellant wrote various e-mails and letters asking for balance payment.
Appellant’s I.A was heard but was adjourned for further arguments. Before the Appellant’s Application could be further heard or any order passed, the Adjudicating Authority vide impugned order dated 22.06.2021 approved the Resolution Plan submitted by ‘Jalan Fritsch Consortium’. Aggrieved against the order impugned, this Appeal has been filed.
NCLAT’s Analysis:
In view of the terms and conditions of the Invoice, there was a concluded contract between the ‘Corporate Debtor’ and the Appellant. The Appellant retained the ownership of the Appellant’s Equipment shall only pass on to the ‘Corporate Debtor’ upon full and final payment of the amount covered in the event the ‘Corporate Debtor’ goes into Insolvency/Liquidation and if full payment towards the purchase of the Appellant’s Equipment was not made. Invoices with interest and delay if any. It was further agreed by the parties that the Appellant have the right to claim a return of the Appellant’s Equipment.
As the ‘Corporate Debtor’ failed to make full payment of the Purchase Price and the Appellant continued to remain as owner of the Equipment in terms of the Invoice and other conditions of purchase since the total price of the Equipment was not paid. Therefore, showing the Equipment in the list is erroneous by the CIRP. 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 to the Appellant, before the Adjudicating Authority.
In the present case, 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 the unpaid seller as defined under Section 45 of the Sale of Goods Act, 1930. The unpaid seller is entitled to claim a lien when the goods are for the price while he is in possession of them. Section 46 of the Sale of Goods Act, of 1930, deals with unpaid seller’s rights.
In the present facts, the buyer i.e., the Corporate Debtor, became insolvent and CIRP was initiated against him. If Sections 46 & 50 of the Sale of Goods Act, 1930, are construed strictly and the buyer i.e., the Corporate Debtor became insolvent, the unpaid seller i.e., the Appellant herein was entitled to stop the Equipment in the transit in possession of the Corporate Debtor. Still, the unpaid seller is entitled to recover the price by filing a suit for recovery of price under Section 55 or filing a suit for specific performance under Section 58 of the Sale of Goods Act, 1930.
If the terms and conditions of the Purchase Order or Invoices as mentioned in the earlier paras if construed strictly the title to the goods remained with the Appellant and mere delivery of BoL did not amount to transfer of ownership in the goods since the delivery of goods was based on a contract of sale. As such, the intention of the parties to the contract of sale was to pass ownership in the goods only on full payment of sale consideration agreed by the parties.
In view of the foregoing discussions, the Appellate Tribunal arrived at the conclusion that the intention of the parties to the contract of sale was to pass ownership of the goods only on full payment of sale consideration agreed by the parties. Admittedly, only 30% of the sale consideration was paid and 70% is the balance. The Application filed by the Applicant M.A No. 3412 of 2019 was heard by the Adjudicating Authority but could not be decided before approval of the Resolution Plan. The Appellate Authority considered the Appeal to issue an appropriate order.
The Appellate Authority held that the Appellant still continues to be the owner of the equipment and the equipment is not an asset of the Corporate Debtor and ought not to have been included in the assets of the Corporate Debtor. As per the Resolution Plan, the assets were with the Corporate Debtor, hence, the assets as set out in paragraph 7.8 of the Appeal need to be handed over to the Appellant. The Successful Resolution Applicant as well as the Monitoring Committee which is chaired by the Respondent No.1 was directed to hand over the assets to the Appellant. The Appellate Authority noted that the Appellant was not entitled to any amount as claimed in the Application for the usage of the assets. The Successful Resolution Applicant and the Monitoring Committee shall render appropriate assistance to the Appellant or its representative to return the Applicant/ Appellant’s equipment from the Bengaluru, Chennai and New Delhi Airport. The Appellate Tribunal further directed that necessary no objection and other documents are issued by the Successful Resolution Applicant and the Monitoring Committee.
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