Author: Hardik Bansal, Student at National Law University, Lucknow.
INTRODUCTION
Latin maxims are an important and a very integral part of the legal system throughout and in all parts of the world. They have been developed after years of observation and different developments both ideologically as well as theoretically. They are utilised in the ambit of every kind of law be it local, state level, national level or even at the international level. In this context the principle of nemo dat quod non habet holds very significant role in determining the various rights with regards to the various facets related to ownership and possession which may sound similar but are actually quite different along with property as well as commercial goods that are overseen in the wide ambit of the contract law with particular emphasis on the transfer of title.
This particular principle or legal maxim ‘Nemo dat quod non habet’ can best be translated to mean ‘no one gives what he doesn’t have’. The rule is basically and simply related with the transfer of a particular possession of a property in law. The Sale of Goods Act, 1930[1] often used in the context of abbreviation as SOGA and the Indian Contract Act, 1872[2] or ICA often abbreviated in this manner are two main acts that are related with various different facets of this principle.
A lot of addition and value is held by this principle in terms of the jurisprudential aspect that it holds to determine the ownership and possession. Thus this particular principle in its entirety relies on a visibility of a chain of exchanges or transfers. The present owner possessing the property or the good or the title must be able to find their ownership or authority in the past through a chain of legitimate or genuine transfers to an act of initial accession.
In the case of Greenwood v. Bennett[3] (2003), the defendant had the actual ownership of an automobile and the defendant gave a man called Searle the automobile so that he could carry out the repairs on the same. Searle used the car for self-purposes, incidentally resulting in collision of the automobile and significant damages to it. Thus , seeing no value in the damaged car he sold it to a garage owner known as Harper for £75. Harper being unaware easily bought it. Considering the situation of the car Harper spent a significant amount of £226 for getting the automobile in tune and further sold it to a company. The Court opined and was of the opinion that the plaintiff had the actual ownership of the automobile and since Searle was never actually legitimately transferred the title, he could not give the same to Harper. Going by the same logic as Harper did not have the title he could not transfer it rightfully to the finance company. Thus, the plaintiff got his car with the repairs done back, but he had to reimburse Harper for the repairs that he had made thinking the car to be legitimately his.
NEMO DAT QUOD NON HABET RULE IN INDIAN CONTEXT
Section 27[4] as a general rule, keeps in mind and tries to safeguard the interest of the true and actual owner of the title when the provisions effectively mention that if the good are disposed by someone who is not the owner the title so acquired by the buyer cannot be better that the seller had. That is to say if a particular title is defective that same defect would apply to the buyer regardless. However it is important to note that this does not mean that the title will always be a bad one. What it very simply means is that the buyer cannot acquire a superior title to that of the seller. For instance if a thief sells the goods the buyer has the same title as that of the Thief.
The principle can best be seen by the case of Greenwood against Bennett[5] which is given above where Harpers could not acquire the title of the car as Searle never had the ownership of the car only the possession at the time.
It is worth noting here that this rule is not always fair as a buyer acting in good faith can get a faulty title through this rule such as was the case with Harper.
In the Indian context Life Insurance Corporation vs United Bank Of India Ltd. And Anr[6] is a landmark case in which the court held that Under the Indian Law, an actionable claim or a claim to any debt whatsoever can no doubt be transferred but it can only be transferred by the individual who actually has the title to the property in question or in respect of which the so called claim lies. This particular position of the court is the same by and large in English law.
EXCEPTIONS
It is essential to keep in mind that the Nemo Dat principle is not the be all and end all and hence some major exceptions exist for the same. These include:
- Transfer of Title by estoppel as mentioned in Section 27 of the Sales of Goods Act.
This particular principle of estoppel signifies the reliance of one person over the conduct of another into believing a particular thing .It particularly means that if the original owner of the goods by their act or in particular some sort of omission makes the seller believe that he has the authority he can go ahead with the sale . Section 27 of the SOGA[7] also legally safeguards the same by explicitly stating and making it clear that no one besides the actual owner has the full authority to transfer the title of goods except when the owner himself by his conduct in essence meaning an act or omission fails to deny to the seller’s incapability to sell the goods.
- Sale by a Mercantile Agent (Section 27)
Section 27 of SOGA states that a mercantile agent acting on behalf of the original owner can effectively transfer the title of the goods however it is important that the buyer should have acted in good faith so that the title remains intact. For instance in the particular case of Folkes v. King[8] the plaintiff had given his car to a mercantile agent to sell at a particular cost. The agent sold it at a lesser amount to a buyer acting in good faith. The buyer was given the ownership.
- Sale by joint owner (Section 28)
Section 28 of the SOGA[9] talks about joint ownership and how a particular joint owner can sell the goods if he had the authority to own and the buyer acting in good faith takes the ownership
- Sale by a person in possession under a voidable Contract- (Section 29)
This particular exception is something that needs examination. In essence Sections 19[10] and 19A[11] of the Indian Contract Act state that a contract entered into by the use of coercion, fraud, misrepresentation or undue influence would be regarded as voidable at the option of the innocent party, whose consent was not granted. Section 29 of the SOGA[12] further states keeping the sections of the Indian Contracts Act in mind that if a contract belongs to any of the categories highlighted above and the goods in question were delivered to the buyer who was acting in good intent without interruption or the knowledge of the aggrieved party the buyer would have the title.
- Sale by the seller in Possession (Section 30) (1)[13]
It basically implies that a seller in possession of the goods after the transfer of title of ownership can supply the goods to the buyer through himself or the mercantile agent and the contract formed would be valid in essence.
- Sale by the buyer in Possession – sec 30(2)[14]
This section is an extension to the above section and further states that this particular buyer who has ownership but not possession can further transfer the title and the contract thus formed would be valid.
- Resale by an unpaid seller – Sec 54(3)
According to Section 54(3)[15] an unpaid seller can sell the goods provided a reasonable amount of time has passed and a notice about the same has been served to the buyer.
- Sale by finder of goods- (sec 169, Indian Contract Act)
According to sec 71[16] , Indian Contract Act, the finder of goods is subject to the same responsibility as the bailee. In such a case the finder of the goods has to return the goods if the original owner is found. According to Sec 169[17] of ICA , however, it is worth noting that if a reasonable time has passed and the owner in question cannot be found or he is not willing to pay back the finder for his costs the finder can dispose of the goods in question provided,-
- The thing so in question is in danger of perishing or of losing the greater part of its value, or
- When the legal and legitimate charges of the finder, in respect of the thing in question, amount to at least 2/3 of its value(The good in question ).
- Sale by Pawnee- sec 176 of Indian contract act
According to this particular section[18], the Pawnee can sell the goods in possession provided a reasonable time has passed and the amount due has not been repaid.
IMPORTANT CASE LAWS
- In V.Chandrasekaran & Anr vs Administrative Officer & Ors[19] , the Supreme Court upheld that the general rule of Nemo Dat principle holds true and indeed no one can transfer a title that he originally did not possess. The court further said and emphasized that all transactions should necessarily be made in good faith.
- Morvi Mercantile Bank Ltd. And vs. Union of India[20] , the Supreme Court again held that the general Nemo Dat principle does hold true, however some exceptions related to in particular the mercantile business are necessary for effective transactions and to safeguard the buyers acting in good faith without any mala fide or bad intentions thinking that this is an ordinary course of transaction.
- In Nitin Gupta vs. State of Meghalaya and others[21] , Supreme Court has set aside the release of the stolen vehicle to the buyer on the principle of Nemo dat quod non-habet.
PROBLEMS
When we look at the exceptions closely all of the exception seem justified and to a large extent valid playing on the importance of law and its primary function that is to serve the society at large. However a particular exception according to section 29 seems to favour the guilty party at large. It is important to note that things like fraud and misrepresentation are often realized at later stages and because of this propensity the person who has committed the fraud can easily dispose of the goods and favour himself or herself. This becomes to a large extent problematic when we think about the aggrieved party. Hence a particular statement to the tune of taking the permission of the party who was the sufferer of the misrepresentation or fraud as to the fact that they won’t like to rescind the contract before disposing of the goods can to a large extent be a favorable change. Otherwise another change can be that the said exception is completely removed or a time limit is put forth . For instance A through fraud got the ownership of a good from B. At least 30 days must have passed before A can sell the good to another individual.
CONCLUSION
It is important to note that any principle such as the Nemo dat principle is made for the society at large and to benefit the society at large. Although it is incorporated and is in essence the important part of the legal system of many different and diverse countries it can be improved further. In the Indian context the Indian Contract Act[22] and the Sale of Goods Act[23] cover it . After years and years it has become synonymous to a fact and thus has been upheld time and time again by various judicial decisions as well as legislations in effect that someone cannot transfer a greater title than he or she possesses, for a simplistic reason that such an individual is not authorized to do so nor he has the power to do so. However, it is also important to note that in certain cases it is important to transfer the title so that bona fide buyer does not suffer because of the mala fide intent and commercial transactions which are the backbone of any economy continue to take place. Keeping this in mind the various exceptions talked under this principle are diverse yet necessary. Lastly and in conclusion it is important to understand that the Jurisprudence attached to any principle is every changing. The Nemo Dat principle is no exception. It will continue to evolve and enhance itself with time through more decisions which are hopefully in favour of the general society at large.
REFERENCES
[1] The Sale of Goods Act 1930.
[4] Sales of Goods Act 1930 s 27.
[5] (1973) 1 QB 195.
[6] AIR 1970 Cal 513.
[7] Sales of Goods Act 1930 s 27.
[8] (1923) 1 KB 282.
[9] Sales of Goods Act 1930 s 28.
[10] Indian Contract Act 1872 s 19.
[11] Indian Contract Act 1872 s 19 (A).
[12] Sales of Goods Act 1930 s 29.
[13] The Sales of Goods Act 1930 s 30 (1).
[14] The Sales of Goods Act 1930 s 30 (2).
[15] Sales of Goods Act 1930 s 54 (3).
[16] The Indian Contract Act 1872 s 71.
[17] Indian Contract Act 1872 s 169.
[18] Indian Contract Act 1872 s 176.
[19] (2012) 12 SCC 133.
[20] 1965 SCR (3) 254.
[21] (2005) CA (SC) 1001-02.
[22] Indian Contract Act 1872.
[23] Sales of Good Act 1930.