49. A offered his car for sale B agreed to buy it from him and gave a cheque. B then sold the car to C. The cheque was dishonoured and A sued C for return of the car. Decide.

1. Facts of the Case

• A, the owner of a car, offered it for sale to B.
• B agreed to buy the car and gave a cheque as payment.
• A delivered the car to B, believing the cheque would be honoured.
• Before the cheque was cleared, B sold the car to C, a third party, who purchased it in good faith and without notice of any defect in B’s title.
• The cheque issued by B was dishonoured, and A filed a suit against C seeking return of the car, claiming that B had no valid title since payment had failed.

2. Issues in the Case

1. Whether B obtained ownership/title to the car when he gave a cheque that was later dishonoured.
2. Whether C acquired a good title to the car when purchasing it from B.
3. Whether A can recover the car from C under the Sale of Goods Act, 1930.
4. What are the exceptions to the rule “Nemo dat quod non habet” (no one can give a better title than he himself has)?

3. Legal Principles Covered to Support Case Proceedings and Judgements

Relevant Provisions:

• Section 27, Sale of Goods Act, 1930 – Sale by a person not the owner:
  A buyer cannot get a better title than what the seller had, unless the true owner has by his conduct precluded himself from denying the seller’s authority to sell.
• Section 30(1), Sale of Goods Act, 1930 – Sale by a buyer in possession after sale:
  Where a person, having bought or agreed to buy goods, obtains possession of them with the consent of the seller, he can transfer a good title to a bona fide purchaser for value without notice of the seller’s lien or right of retention.

Legal Analysis:

1. Ownership and Title Transfer:
   • Ownership passes from seller to buyer only when the conditions of sale are fulfilled.
   • In this case, the cheque given by B was dishonoured, meaning payment was never completed, and hence, ownership never passed to B.
2. Possession vs. Ownership:
   • B had possession but not ownership.
   • B, therefore, could not transfer better title to C than he himself had.
3. Application of Nemo Dat Quod Non Habet:
   • The general rule is that no one can transfer a better title than he himself possesses.
   • Since B’s title was defective (due to dishonoured cheque), C does not acquire ownership even though he was a bona fide purchaser.
4. Exception under Section 30(1):
   • If B had bought or agreed to buy the goods and obtained possession with A’s consent, and C bought in good faith without notice, C could acquire a valid title.
   • However, this section applies only when ownership was intended to pass at delivery.
   • Here, the intention was that ownership passes only after cheque clearance, so Section 30(1) does not apply.

Supporting Case Laws:

1. Cundy v. Lindsay (1878) 3 App Cas 459 –
   A buyer who obtained goods by fraud cannot pass a good title to a third party.
2. Rowland v. Divall (1923) 2 KB 500 –
   A person cannot transfer better ownership than what he possesses; a buyer’s title must be lawful.
3. Phillips v. Brooks Ltd. (1919) 2 KB 243 –
   If possession is lawfully obtained under a contract, the third party may get a good title, but not if the initial payment was invalid.
4. Indian Case: Central National Bank Ltd. v. United Industrial Bank Ltd. (1954 AIR Cal 245) –
   Ownership passes only when payment conditions are fulfilled.

4. Possible Judgement

• B’s cheque was dishonoured, which means the consideration failed.
• Ownership did not pass to B, as payment was a condition precedent for the transfer of ownership.
• Hence, B had no right to sell the car to C.
• The doctrine of Nemo dat quod non habet applies — B cannot give a better title than he possessed.
• C’s purchase, even though made in good faith, does not give him ownership because B’s title was defective.

Judgement:

• A will succeed in his suit against C.
• C must return the car to A, since B had no valid title to transfer.
• The sale to C is void as against A.

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