Has the Concept of Goods been widened through Judicial Interpretations?

Introduction

The most widely accepted definition of ‘goods’ is found in Section 2(7) of the Sale of Goods Act 1930.[1] It defines goods as every kind of movable property (defined in the General Clauses Act, 1897)[2], excluding money and actionable claims. The definition explicitly includes shares, crops, grass and things which form a part of the land but agreed to be severed before being sold.

The concept of goods has supposedly undergone a change over the last century, both through statutory amendments and judicial interpretations. As a result, things which strictly do not satisfy the requirements under the definition may be considered as ‘goods’ under the Act. The definition has become more fluid today. In addition, modern technological advancements have made the definition more complex. There are questions over things like software or data and whether they can be considered as ‘goods’ for the purposes of this Act.

In this paper, the author focuses on a brief history of the definition until it acquired its present form. Then it looks as various judgements and analyses the same to argue that the concept of goods has not been widened. Finally, the paper ends with an attempt to justify the proposition that the concept of goods has remained the same, it is only due to liberal judicial interpretation of the existing definition that a wide variety of commodities has been included within the concept.

History of Goods

‘Goods’ was initially defined in Section 76 of the Indian Contract Act. The definition was wide enough to include ‘actionable claims’ as well. In Fazal v. Mangal Das[3], the court held that the definition of ‘goods’ was wider than English Law. The definition included not only shares but share-certificates as well. When the Sale of Goods Act 1930 was formulated, the definition was narrowed down to exclude actionable claims and money, but otherwise include all other forms of movable property.

As mentioned above, ‘goods’ includes only movable property. Property, as defined by the Black’s Law Dictionary, is anything of which there can be ownership.[4] Movable property, on the other hand, is defined by the General Clauses Act to mean anything which is not immovable.[5] Hence, it is defined in a negative sense. Effectively, this means that any property which can move, regardless of whether they a part of the land or not, tangible or intangible, comes under the wide definition. However, when a property is attached to the land, there has to be an element of severability involved in it, before it can be sold. Only then it is included within ‘goods’.[6]

The definition specifically excludes money and actionable claims. Money constitutes ‘price’[7] under the Act, which is distinct from ‘goods’. In fact, an agreement is an agreement to sell only when goods are exchanged for ‘money’ consideration alone. It cannot be a ‘good’ by itself. Money, being a form of currency, is governed by a wholly different set of rules.  However, when coins are sold for curiosity, they are considered to be ‘goods’ under the Act.[8] In this case, money can be given a restrictive meaning.

Similarly, ‘actionable claims’ is defined by the Transfer of Property Act[9] to mean any debt (other than a secured debt), or an interest in moveable property which is not in possession of the claimant. Lottery tickets are an example of ‘actionable claims’, and hence they are not goods as per the Act. In Sunrise Associates v. Government of NCT of Delhi[10], the judge held that lottery tickets are actionable claims. The reasoning was that no lottery player bought a ticket to merely participate, he bought it to win the lottery. The case overruled H Anraj v. Government of TN[11] to that extent, which had held that lottery tickets also confer a right to participate in the draw, which made its sale a transfer of a beneficial interest in movable property and hence ‘goods’ under the Act.

Judicial Pronouncements

Over the years, there have been a wide variety of cases which have dealt with the question of whether a particular thing is a ‘good’ or not. The issue of lottery tickets has been discussed above. In this section, the author discusses things like electricity, gas, software, animals, human organs and severable fixtures.

In Rash Behari Shaw v. Emperor[12], the court held that electricity was not a ‘good’ for the purposes of the Act. They relied upon a commentary of Pollock and Mulla, which had expressed reservations about the status of gas, water and electricity as ‘goods’.[13] However, this view did not prevail for long. In 1958, the 8th Law Commission report recommended an amendment of the Sale of Goods Act to explicitly include gas, water and electricity under the definition.[14] Focussing mainly on electricity, they argued that it is capable of being personal property and of being stolen under the Indian Electricity Act.[15] They also opined that the reservations in Pollock and Mulla were inspired by English Law, but the definition under the Act was much wider. They cited cases from the United States, wherein electricity was held to be a good which could be possessed and sold.[16] According to the report, therefore, all these three must be included within the definition.

The Calcutta High Court in Associated Power Co. Ltd. vs Ram Taran Roy[17] reasoned the same. According to them, there was no doubt that electricity was a movable property. They also held that electricity was matter and hence not intangible, although tangibility is not a qualification for being classified as a ‘good’. In another case, the Allahabad High Court[18] held that there could be no doubt about electricity being a ‘property’, as it was capable of being bought and sold.

Thus, through various cases, the definition of ‘goods’ was interpreted to be wide enough to include ‘electricity’.

The question of steam was extensively discussed in Nizam Sugar Factory ltd. v. Commissioner of Sales Tax[19] by the Andhra High Court. They were dealing with the Hyderabad General Sales Tax Act. The definition of goods, however, was similar to the Sale of Goods Act. They opined that ‘goods’ in law was generally used to refer to tangible property which was visible. They agreed with this interpretation and held that because steam was visible, it was ‘goods’ for purposes of the Act.

The reasoning of the court, however, with respect to the tangible nature of ‘goods’ was wrong in my opinion. The Supreme Court of India in 2004 held that it would be impermissible to allow only the tangible property to fall under ‘goods’.[20] It was not much in dispute that ‘goods’ included both tangible and intangible property.

Extending this view, not only steam, but other kinds of gases can also be included under the definition of ‘goods’.

Similar reasoning can be extended to water also, especially at a time when it has become a saleable commodity in the market.

The definition of goods also includes animals which can be domesticated, but not wild animals.[21] The reason being wild animals are not capable of being owned completely. Thus, the concept of ‘property’ becomes very important. A thing cannot be considered as a ‘good’ if it cannot be owned by a person completely.

Furthermore, there are authorities which conclusively lay down that software is also a ‘good’ under the Sale of Goods Act. In Tata Consultancy Services v. State of Andhra Pradesh[22], the court held that a software program being sold in a floppy or a hard-disk was a good. A landmark case on this question is St Albans City and District Council v. International Computers Ltd[23], wherein Sir Iain Glidewell held that a software program and a hardware device went hand in hand. If a software program had to be sold, it had to be uploaded on a hardware device. If the program did not work, there would be a liability against the manufacturer.

In the TCS case, the court observed that an intangible intellectual property like a software program ceased to be so when uploaded on a hardware device, since it then became a commodity which could be marketed. Thus, ‘marketability’ of a commodity became the conclusive factor for deciding upon the question of a software program.[24]

The court, in TCS, while giving its judgement noted that any thing which had utility, was capable of being bought and sold, and capable of being transferred, delivered, stored and possessed, was ‘goods’. It could be tangible or intangible, corporeal or incorporeal.

Then there is the element of severability involved for anything attached to the land to be classified as a ‘good’. In CIT v. Bhurangya Coal Co[25], it was held that fixtures could be considered ‘goods’ only if the parties to a sale agreement intended to sever the fixture before selling it. Thus, when minerals are sold as part of the land itself, it is not an agreement of sale. However, the same minerals are ‘goods’ if they are severed and then sold separately.

Finally, technological advancement and the rise of commodification has brought various objects under the ambit of this definition. A prominent example is human organs.[26] Modern medical sciences have made it possible to use most of the human organs in a very effective manner. It is legally possible to get transplants. Also, storage of human organs has become a possibility today.

For instance, medical students procure skeletons for a price today. There is already authority to prove that blood supplied by a blood bank is a ‘good’.[27] Presently, it is possible for a human organ to satisfy the requirements of a ‘good’. It is movable, capable of being stored, transferred and sold in the market.

Has the concept of ‘goods’ been widened?

Through the course of the paper, the author has focussed on specific commodities, namely electricity, steam, animals, software and things attached to the land. Through analysis, it has been observed that any ‘good’ has certain characteristics. It has to be movable, capable of being completely owned and used, capable of being marketed or sold and has to be severable under an agreement of sale before the agreement is executed. Also, it has to possess some utility in itself.  Something like a lottery ticket, which has no utility in itself, is not a ‘good’, but merely an actionable claim. Also, the author has focussed on how technological advancement has made it possible for certain commodities to be included within the definition of goods.

Looking at all these characteristics, we now have to compare it with the definition of goods under the Sale of Goods Act. In doing so, we realise that the definition is already wide enough to incorporate the aforementioned characteristics, either explicitly or impliedly. Through various cases in the past century, it is clear that the courts have tried to construe the definition in a wide sense, and tried to include commodities which do not seem to otherwise fall under the concept. However, in doing so, they have not changed or widened the concept itself. The defining characteristics of a ‘good’ is still the same. Even a product such as human organs had to fulfil the conditions under the definition to fall within its ambit. While technological advancements may transform certain products into commodities, they will fall under the definition only when they fulfil the criteria.

Thus, the concept of goods has not been widened.

[1] The Sale of Goods Act, 1930, § 2(7).

[2] The General Clauses Act, 1897, § 36.

[3] Fazal v. Mangal Das, ILR B 489.

[4] Black’s Law Dictionary 1382 (4th ed., 1968).

[5] The General Clauses Act, § 36.

[6] A. Ramaiya, Sale of Goods Act 59 (1995).

[7] The Sale of Goods Act, 1930, § 2(10).

[8] Ramaiya, supra note 6, 58.

[9] The Transfer of Property Act, 1882, § 3(6).

[10] Sunrise Associates v. Government of NCT of Delhi, (2006) 5 SCC 603.

[11] H. Anraj v. Government of T.N., (1986) 1 SCC 414.

[12] Rash Behari Shaw v. Emperor, AIR 1936 C 753 (766).

[13] R.K. Abhichandani, Pollock and Mulla on The Sale of Goods Act 29 (1997).

[14] Law Commission of India, Sale of Goods Act, 1930, Report No. 8 (March, 1958), available at file:///C:/Users/Vishal%20Choudhury/Desktop/Report8.pdf (Last visited on March 2, 2020).

[15] The Indian Electricity Act, 2003, § 135.

[16] Supra note 14.

[17] Associated Power Co. Ltd. v. Ram Taran Roy, AIR 1970 Cal 75.

[18] Naini Tal Hotel v. Naini Tal Municipality.

[19] Nizam Sugar Factory v. Commissioner of Sales Tax, AIR 1956 Hyd 194.

[20] TCS v. State of Andhra Pradesh, (2005) 1 SCC 308.

[21] Abhichandani, supra note 13, 26.

[22] TCS v. State of Andhra Pradesh, (2005) 1 SCC 308.

[23] St Albans City and District Council v. International Computers Ltd, [1995] FSR 686.

[24] Academike, “Goods” under the Sale of Goods Act, 1930, March 27, 2015, available at https://www.lawctopus.com/academike/goods-under-the-sale-of-goods-act-1930/#_ftn37 (Last visited on March 2, 2020).

[25] Commissioner of Income-Tax v. Bhurangya Coal Co., AIR 1959 SC 254.

[26] Abhichandani, supra note 13, 25.

[27] Belle Bonfils Memorial Blood Bank v. Hansen, 579 P.2d 1158 (1978); ABHICHANDANI, supra note 13, 25.


ABOUT THE AUTHOR

Vishal Choudhury

FB_IMG_1596370828910

Vishal is currently a second-year student at NUJS, Kolkata.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s