Section 45 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 45 opens Chapter V of the Act, "Rights of unpaid seller against the goods". It does not give the rights; it says who counts as an unpaid seller. A seller is an unpaid seller in two situations: the whole price has not been paid or tendered, or a bill of exchange or other negotiable instrument was received as conditional payment and the condition has not been fulfilled. Sub-section (2) then says who else can be a "seller" for the Chapter. This article follows the text of the Act consulted (latest amendment shown: Act 28 of 1993); amendments after that should be checked in the official text.
A seller is an unpaid seller when the whole of the price has not been paid or tendered, or when a bill of exchange or other negotiable instrument was received as conditional payment and the condition has not been fulfilled by reason of the dishonour of the instrument or otherwise. In Chapter V, "seller" also includes any person in the position of a seller, such as an agent to whom the bill of lading has been endorsed, or a consignor or agent who has himself paid, or is directly responsible for, the price. The section only defines the status; the rights follow in sections 46 to 54.
Section 45(1)(a): the whole of the price has not been paid or tendered
"(a) when the whole of the price has not been paid or tendered". Three points on the words:
- "The whole of the price". Part payment does not end the status. If anything of the price remains unpaid and untendered, the seller is deemed an unpaid seller.
- "Paid or tendered". Either actual payment or a tender of the price takes the seller out of the definition. The section does not define "tender" for this purpose.
- "Price" has its own meaning in section 2(10): "the money consideration for a sale of goods". See our article on section 2 definitions.
The clause says nothing about whether the property has passed, whether the goods have been delivered, or whether the credit period has run. Those points come into the later sections, where the unpaid seller's rights depend on them.
Example (our own, not from the Act): Naidu Timber sells timber to Ghosh Furniture for Rs. 10 lakh and receives Rs. 6 lakh. The remaining Rs. 4 lakh is neither paid nor tendered. Under clause (a), Naidu Timber is an unpaid seller, because the whole of the price has not been paid or tendered. A recovery notice in such a case should set out the price, the part received and the balance.
Section 45(1)(b): a negotiable instrument received as conditional payment
"(b) when a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise."
The pieces are:
- a bill of exchange or other negotiable instrument has been received;
- it was received "as conditional payment", that is, subject to a condition;
- the condition "has not been fulfilled"; and
- this has happened "by reason of the dishonour of the instrument or otherwise".
The words "or otherwise" widen the clause: dishonour is the example given, but any other failure of the condition also counts. The Act does not define dishonour here, and does not say when an instrument is received as conditional rather than absolute payment. That is left to the facts. For how dishonour of a bill is treated under the law of negotiable instruments, our site has a post on dishonour by non-acceptance and non-payment under the Negotiable Instruments Act, 1881 and one on the meaning of a bill of exchange; those are separate Acts, and this article takes nothing from them.
Example (our own): Sethi Agro delivers a consignment to Banerjee Traders and receives a post-dated cheque as conditional payment. The cheque is returned unpaid. The condition on which it was received has not been fulfilled by reason of dishonour, so under clause (b) Sethi Agro is an unpaid seller even though it holds an instrument.
Section 45(2): who is a "seller" in this Chapter
"In this Chapter, the term 'seller' includes any person who is in the position of a seller, as, for instance, an agent of the seller to whom the bill of lading has been endorsed, or a consignor or agent who has himself paid, or is directly responsible for, the price."
Three things to note:
- The extension is limited to "this Chapter", that is Chapter V (sections 45 to 54).
- The words "as, for instance" show the two persons named are illustrations, not a closed list.
- The two named are an agent of the seller "to whom the bill of lading has been endorsed", and "a consignor or agent who has himself paid, or is directly responsible for, the price".
The Act does not explain how an agent comes to be in the position of a seller beyond these words. On the bill of lading as a document, our site has a post on the bill of lading as a document of title; section 2(4) of this Act lists the documents of title it recognises, and our article on section 2 definitions of delivery and documents of title explains them. For the agency idea, see our article on section 182 of the Indian Contract Act, 1872.
The two limbs in a table
| Limb | Trigger | Key words | What ends it |
|---|---|---|---|
| 45(1)(a) | Price not wholly paid or tendered | "the whole of the price" | Payment or tender of the whole price |
| 45(1)(b) | Instrument received as conditional payment | "conditional payment"; "dishonour of the instrument or otherwise" | The condition being fulfilled |
| 45(2) | Person in the position of a seller | "as, for instance" an agent with an endorsed bill of lading; consignor or agent who paid or is directly responsible for the price | Applies only "in this Chapter" |
Why the status matters
Section 45 does not give the unpaid seller anything by itself. Section 46 lists the rights an unpaid seller has "by implication of law": lien, stopping the goods in transit on the buyer's insolvency, and re-sale as limited by the Act; sections 47 to 54 then deal with each. See our article on rights of an unpaid seller. A seller who wants to claim any of them must first fit within section 45, so the first question in any recovery dispute is whether the case is under clause (a), clause (b) or sub-section (2).
For the practical side of chasing a price, a clear written demand that states the price, the part paid, the date and the dishonoured instrument, if any, lets the buyer see exactly why the seller says he is unpaid.
Practical points for sellers
- Keep a statement of price against payments (clause (a)).
- Record why an instrument was taken, and keep the dishonour memo (clause (b)).
- Agents should keep the documents showing endorsement or payment (sub-section (2)).
Need help recovering the price of goods sold?
If a buyer has paid only part of the price or an instrument has bounced, we can put the position in writing. A recovery notice prepared on the facts of your supply is usually the step before any suit.
Key takeaways
- A seller is an unpaid seller if the whole price has not been paid or tendered.
- He is also an unpaid seller if an instrument was taken as conditional payment and the condition failed by dishonour or otherwise.
- For Chapter V, "seller" includes a person in the position of a seller, such as an agent with an endorsed bill of lading or a consignor or agent who has paid, or is directly responsible for, the price.
- Section 45 defines the status; the rights follow in sections 46 to 54.
Read next
- Section 46 of the Sale of Goods Act, 1930: rights of an unpaid seller
- Sections 47-49 of the Sale of Goods Act, 1930: unpaid seller's lien
- Section 55 of the Sale of Goods Act, 1930: suit for the price
- Section 8-10 of the Negotiable Instruments Act, 1881: holder, holder in due course and payment in due course
Disclaimer: Based on the consolidated text of the Sale of Goods Act, 1930 consulted on 2 October 2026, whose latest amendment shown is Act 28 of 1993. It explains the words of the statute only; later amendments and the way courts apply these sections should be checked. This article is general information, not legal advice; check the official text before acting.