Section 46 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 46 lists what an unpaid seller can do against the goods themselves: hold them back (lien), stop them in transit if the buyer becomes insolvent, and re-sell them within the limits of the Act. Sub-section (2) adds a right to withhold delivery where the property has not yet passed. 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.
Subject to the Act and to any law for the time being in force, and even though the property in the goods may have passed to the buyer, an unpaid seller has by implication of law (a) a lien on the goods for the price while in possession of them; (b) on the buyer's insolvency, a right of stopping the goods in transit after parting with possession; and (c) a right of re-sale as limited by the Act. Where the property has not passed, he has in addition a right of withholding delivery similar to and co-extensive with lien and stoppage in transit.
What "unpaid seller" means here
These rights belong to an "unpaid seller" as defined in section 45: a seller whose price has not been wholly paid or tendered, or who took a negotiable instrument as conditional payment that failed. See our article on the unpaid seller defined. Section 46 itself uses the words "the unpaid seller of goods, as such", which means the rights come from that status. A seller who relies on them usually begins with a recovery notice that records the unpaid price and where the goods are.
Section 46(1): three rights "by implication of law"
The opening words are: "Subject to the provisions of this Act and of any law for the time being in force, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law". Each part matters:
- "Subject to the provisions of this Act and of any law for the time being in force". The rights are limited by the later sections, and by other laws in force. This article names no other law; where another law applies, it must be checked separately.
- "Notwithstanding that the property in the goods may have passed". The rights exist even though ownership has gone to the buyer. A seller does not lose them merely because the property has passed.
- "By implication of law". They arise without being written into the contract. Section 62 says that a right that arises by implication of law may be negatived or varied by express agreement, course of dealing or binding usage; see our article on exclusion of implied terms.
(a) A lien on the goods for the price while he is in possession of them. Lien is the right to retain possession. The conditions are in section 47; see our article on the unpaid seller's lien. The words "while he is in possession of them" fix the point: the right is one to hold goods the seller still has.
(b) A right of stopping the goods in transit in case of the insolvency of the buyer. This is available "after he has parted with the possession of them". Two conditions appear: the buyer is insolvent, and the seller has parted with possession. Sections 50 to 52 give the detail; see our article on stoppage in transit. "Insolvent" is defined in section 2(8).
(c) A right of re-sale as limited by this Act. The words "as limited by this Act" point to section 54, which sets conditions; see our article on resale by the unpaid seller.
Example (our own, not from the Act): Patel Cement has sold 500 bags to Joshi Constructions, the price is unpaid, and the property has passed to Joshi Constructions. Patel Cement still has the bags in its godown. Under sub-section (1)(a), it has a lien for the price while it is in possession, even though the property has passed. If Patel Cement had already sent the bags by a carrier and Joshi Constructions became insolvent, clause (b) would bring in stoppage in transit.
Section 46(2): where the property has not passed
"Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and co-extensive with his rights of lien and stoppage in transit where the property has passed to the buyer."
Key words:
- "In addition to his other remedies". The seller does not give up other remedies.
- "A right of withholding delivery". This is the right the sub-section names.
- "Similar to and co-extensive with". The right matches the rights of lien and stoppage in transit that he would have had if the property had passed. The Act does not spell out the match any further here, so the conditions in sections 47 to 52 are the place to look.
Example (our own): Under a contract, the property in a lot of machinery is to pass to Sandhu Engineering only on its payment of the price in full. Sandhu Engineering has not paid. Sub-section (2) gives the seller a right of withholding delivery similar to and co-extensive with lien and stoppage in transit.
The rights in one table
| Right | Section 46 clause | When available | Detailed in |
|---|---|---|---|
| Lien | (1)(a) | While the seller is in possession | Sections 47 to 49 |
| Stoppage in transit | (1)(b) | Buyer insolvent; seller has parted with possession | Sections 50 to 52 |
| Re-sale | (1)(c) | "As limited by this Act" | Section 54 |
| Withholding delivery | (2) | Property has not passed | Similar to and co-extensive with lien and stoppage |
Where the sub-sale rule fits
Sections 53 and 54 deal with what happens when the buyer sells or pledges the goods on, and with re-sale by the unpaid seller; see our article on sub-sale or pledge by the buyer. Section 46 itself is only the list. For the connected idea of lien in the general law of bailment, our site has an article on bailee's particular lien under section 170 of the Indian Contract Act, 1872; that is a different Act.
Practical points for sellers
- Hold the goods until the price is dealt with, if you are still in possession. The lien is a right while in possession; see section 49 for how it is lost.
- Know where the goods are. Stoppage in transit depends on the goods being in the course of transit.
- Do not assume a re-sale right is unlimited. Section 46(1)(c) says "as limited by this Act".
- Send a written demand before acting. A written demand that records the unpaid price and the goods held keeps the record clear if the position is later disputed.
- Read your contract. Section 62 allows these implied rights to be varied by agreement.
Need help recovering the price while the goods are still in play?
The right step depends on where the goods are and what the contract says. We can prepare a recovery notice that states the unpaid price and the rights you are reserving, and advise on the next stage if the buyer does not respond.
Key takeaways
- Section 46 gives the unpaid seller three rights by implication of law: lien, stoppage in transit on the buyer's insolvency, and re-sale as limited by the Act.
- They exist even though the property may have passed to the buyer.
- Where the property has not passed, the seller has a right of withholding delivery similar to and co-extensive with lien and stoppage in transit.
Read next
- Section 45 of the Sale of Goods Act, 1930: the unpaid seller defined
- Sections 47-49 of the Sale of Goods Act, 1930: unpaid seller's lien
- Section 54 of the Sale of Goods Act, 1930: resale by the unpaid seller
- Section 171 of the Indian Contract Act, 1872: general lien of bankers, factors, wharfingers, attorneys and policy brokers
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.