Home  /  Indian Contract Act  /  Section 97

Section 97: Sections 76 to 123 [Repealed by the Indian Sale of Goods Act, 1930]

Indian Contract Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1872
Section 96 All 266 Sections of Indian Contract Act Section 98

Legal Commentary & Landmark Judgments: Section 97

Historical Section 97 of the Indian Contract Act, 1872 provided that where goods were sold and the price was stipulated to be paid on a specified future date, the seller possessed no lien until that future date arrived, but if the buyer became insolvent prior to that date, the seller could retain the goods until payment was made. Codified into Section 47(1)(c) of the Sale of Goods Act, 1930, this provision prevented buyers from demanding delivery during insolvency while payment remained deferred.

  • Deferred-Payment Contingency: Addressed deferred-payment agreements where delivery was not strictly coterminous with payment, enacting that the absence of a lien was valid only during the buyer's continuing commercial solvency.
  • Insolvency as an Accelerating Statutory Default: The occurrence of buyer insolvency prior to the maturity of the deferred payment date accelerated the seller's protective remedies, converting a deferred debt into an immediate condition precedent to delivery.
  • Enforceability Against Assignees and Receivers: The right of possessory retention was assertable not only against the insolvent buyer personally, but equally against official assignees, liquidators, and execution creditors seeking to attach the undelivered goods.
Key Landmark Precedents:
  • Gunn v. Bolckow, Vaughan & Co. (1875) LR 10 Ch App 491: Held that the vendor's possessory lien revives upon the purchaser becoming insolvent before actual delivery, even though deferred acceptance notes or bills of exchange were given for the price and have not yet matured.
  • CIT v. Motor & General Finance Ltd. (1998) 3 SCC 419: The Supreme Court observed that statutory provisions governing hire-purchase and deferred-payment sales preserve the fundamental distinction between passing of property and possessory retention upon financial default.
Courtroom Practice & Strategic Litigation Guidance:

In drafting deferred-payment supply contracts, include explicit retention-of-title clauses (Romalpa clauses) to reinforce the statutory lien. In litigation, produce banker dishonor memos or insolvency notices to substantiate the right of retention before the deferred maturity date, repelling claims of premature breach.

Section 96 All 266 Sections of Indian Contract Act Section 98