Research Question 1 – Whether gold can be classified as “goods” under Section 2(7) of the

Sale of Goods Act, 1930.

I could not locate any particular judgment holding that gold is goods within the meaning of
Act, however the following judgments have elaborated on the general provisions of law.

Vikas Sales Corporation and Ors. v. Commissioner of Commercial Taxes and Ors

Facts – The primary question involved in the case was whether the transfer of an Import
Licence called REP Licence/Exim Scrip by the holder thereof to another person constitutes a
sale of goods within the meaning of and for the purposes of the sales-tax enactments of Tamil
Nadu, Karnataka and Kerala.

For the purpose of answering this, the court dealt with the general provisions of law detailing
as to what would amount as “goods” under Sale of Goods Act.

Decision

“12. Clause (12) in Art. 366 of the Constitution defines the expression "goods" in the
following words "goods includes all materials, commodities and articles".

“13. Clause (7) in s. 2 of the Sale of Goods Act, 1930 defines the expression "goods" thus :
"goods means every kind of movable property other than actionable claims and money; and
includes stock and shares, growing crops, grass, and things attached to or forming part of the
land which are agreed to be served before sale or under the contract of sale" …Since the said
definition defines the "goods" to mean, "every kind of movable property other than actionable
claims and money", it would be appropriate to notice the definition of "property" in cl. (11).
It reads : "property means the general property in goods, and not merely a special property".
It is noteworthy that both these definitions seek to spread the net as wide as possible. While
the definition of goods includes every kind of movable property within its ambit, the
definition of property says that it includes not merely special property, but general property
in goods as well.

The General Clauses Act, 1897 defines "movable property" to mean "property of every
description except immovable property". The expression "immovable property" is defined
to "include land, benefits to arise out of land and things attached to the earth or permanently
fastened to anything attached to the earth".”
“19. In Blacks Law Dictionary the expression "property" has been given the following
meanings: "Property : That which is peculiar or proper to any person; that which belongs
exclusively to one. In the strict legal sense, an aggregate of rights which are guaranteed and
protected by the Government. Fulton Light, Heat & Power Co. vs. State65 Misc. 263, 121 N.
Y. S. 536. The term is said to extend to every species of valuable right and interest. More
specifically, ownership; the unrestricted and exclusive right to a thing; the right to dispose of
a thing in every legal way, to possess it, to use it, and to exclude every one else from
interfering with it. That dominion or indefinite right of use or disposition which one may
lawfully exercise over particular things or subjects. The exclusive right of possessing,
enjoying, and disposing of a thing. The highest right of man can have to anything; being used
to refer to that right which one has to lands or tenements, goods or chattels, which no way
depends on another mans courtesy. The word is also commonly used to denote everything
which is the subject of ownership, corporeal or incorporeal, tangible or intangible, visible or
invisible, real or personal; everything that has an exchangeable value or which goes to make
up wealth or estate. It extends to every species of valuable right and interest, and includes real
and personal property, easements, franchises, and incorporeal hereditaments, and includes
every invasion of ones property rights by actionable wrong.

Property embraces everything which is or may be the subject of ownership, whether a legal
ownership, or whether beneficial, or a private ownership…Term includes not only ownership
and possession but also the right of use and enjoyment of lawful purposes. Hoffman vs.
Kinealy, Mo., 389 S. W. 745. Property, within constitutional protection, denotes group of
rights inhering in citizens relation to physical thing, as right to possess, use and dispose of it.

The Dictionary further says "property is either: real or immovable; or personal or movable".
It then proceeds to give the meaning of the expression "absolute property", "common
property", "intangible property", "movable property", "personal property", "private property"
and "public property" among others. The above definition shows the wide meaning attached
to the expression. It is said to extend to every species of valuable right and interest. It denotes
everything which is the subject of ownership, corporeal or incorporeal, tangible or intangible,
visible or invisible, real or personal. It includes "everything that has an extendable value". It
extends to every species of valuable right and interest.”

Tata Consultancy Services v. State of Andhra Pradesh, 20041

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 AIR 2005 SC 371
Facts – The question involved in the case was whether the canned software sold by the
Appellants can be termed to be "goods" and as such assessable to sales tax under the said
Act?

The court observed as follows:

“The definition of 'goods' in Sales of Goods Act is also of wide import which means every
kind of movable property. Property has been defined therein to mean the general property in
goods and not merely a special property. It is not much in dispute that 'goods' would
comprehend tangible and intangible properties, materials, commodities and articles and also
corporeal an incorporeal materials, articles and commodities. If a distinction is sought to be
made between tangible and intangible properties, materials, commodities and articles and
also corporeal and incorporeal materials, the definition of goods will have to be rewritten of
comprising tangible goods only which is impermissible. This Court, therefore, will have to
confine itself to the question as to whether the concerned software would come within the
purview of "goods". In the Constitution, goods as such is not defined. An expansive definition
with the said expression has been given which is indicated by the expression "includes". Such
an expression is also of wide amplitude.”

Research Question 2 – Whether gold can be subject of bailment contract?

State Bank of India v. Radheshyam Spinning Mill Pvt. Ltd, 2019

Facts - The petitioners had taken a loan from the State Bank of India (SBI), on being
dissatisfied with the services rendered by the bank, they deal with the Cooperative Bank of
Rajkot which agreed to provide them loan facilities. Pursuant to the fulfilment of formalities
by all the parties, SBI issued a no dues certificate to the petitioner on the request of Bank of
Rajkot, however it declined to release the title deeds held by as security and claimed that it
posses the right to lien under Section 171 of the Indian Contracts Act, 1872 as liabilities of
another company were not liquidated. The primary question was whether Bank is rightly
directed to release title deeds and NOC if favour of respondent.

“26. A close reading of Section 171 makes it amply clear that the Bank would be entitled to
retain as a security any goods bailed to it for a general balance of account. Now this
general balance of account has to be with respect to the person who had bailed any goods to
it. The word 'goods' is not defined in the 1872 Act, however, it is defined in Section 2(7) of
the 1930 Act… A plain reading of Section 2(7) of the 1930 Act makes it very clear that the
reference to the word 'goods' is only and only in regard to movable properties or assets and
not anything immovable. The word 'goods' otherwise also as defined in various dictionaries
does not cover immovable properties.

Oxford Advanced Learner's Dictionary defines 'goods' as under:

"things that are produced to be sold."

Cambridge Academic Content Dictionary defines 'goods' as under:

"items for sale, or possessions that can be moved."

Chambers 21st Century Dictionary defines 'goods' as under:

"articles for sale, merchandise."

Black's Law Dictionary, 9th Edition, defines 'goods' as follows:

"Tangible or movable personal property other than money esp., articles of trade or items of
merchandise.”

“27. …What is noticed is that 'goods' as also 'bailment' both are in context of only movable
articles and not anything immovable.”

“28. Section 171 of 1872 Act gives the right to a Bank of general lien only with respect to
goods bailed to it and that too for a general balance of account…”

“33. In the case of R.D. Saxena Vs. Balaram Prasad Sharma, the Supreme Court in
paragraph 8 clearly holds that the word 'goods' mentioned in Section 171 is to be understood
in the sense in which that word is defined in the 1930 Act.

The word "bailment" is defined in Section 148 of the Contract Act as the delivery of goods
by one person to another for some purpose, upon a contract that they shall be returned or
otherwise disposed of according to the directions of the person delivering them, when the
purpose is accomplished. In the case of litigation papers in the hands of the advocate there is
neither delivery of goods nor any contract that they shall be returned or otherwise disposed
of. That apart, the word "goods" mentioned in Section 171 is to be understood in the sense in
which that word is defined in the Sale of Goods Act. It must be remembered that Chapter-VII
of the Contract Act, comprising sections 76 to 123, had been wholly replaced by the Sales of
Goods Act, 1930. The word "goods" is defined in Section 2(7) of the Sales of Goods Act as
"every kind of movable property other than actionable claims and money; and includes stock
and shares, growing crops, grass, and things attached, to or forming part of the land which are
agreed to be severed before sale or under the contract of sale."

Reference to 'goods' in Section 171 of the Contract Act cannot, by any imagination, be
stretched to mean the case papers, entitling their retention by the lawyer as his lien for the
purposes of realising his fee. Besides the meaning attached to the 'goods' under Section 2(7)
of the Sales of Goods Act, under the General Law the 'goods' have been defined in Bailey's
Large Dictionary of 1732 as 'merchandise' and by Johnson, who followed as the next
lexicographer, it is defined to be movables in a house; personal or immovable estates; wares,
freight, merchandise. Webster defines the word 'goods' thus: Goods, noun, plural; (1)
movables; household furniture; (2) Personal or movable estate, as horses, cattle, utensils, etc.
(3) wares; merchandise; commodities bought and sold by merchants and traders.

This Court in Union of India and Anr. v. Delhi Cloth and General Mills Co. Ltd.:
1973ECR56(SC) held that to become 'goods' an article must be something which can
ordinarily come to the markets to be bought and sold. In Collector of Central Excise,
Calcutta-I v. Eastend Paper Industries Ltd.: 1989(43) ELT201(SC) it was stated that goods
are understood to mean as identifiable articles known in the markets as goods and marketed
and marketable in the market as such. Where the Act does not define 'goods', the Legislature
should be presumed to have used that word in its ordinary dictionary meaning i.e. to become
goods it must be something which can ordinarily come to the market to be bought and sold
and is known to the market as such."

In the case of Alekha Sahoo Vs. Puri Urban Co-operative Bank Ltd. And Ors. (supra),
the Orissa High Court interpreting Section 171 of the 1872 Act states that only 'goods'
bailed could be retained by the bank and a right of general lien could be traced.

The court in Alekha case noted that “whether the Bank could in exercise of its right of
general lien under Section 171 of the Indian Contract Act retain the gold ornaments of the
petitioner as additional security for the loans granted to Manmohan Sahoo, Proprietor M/s.
Bimala Bhandar for whom the petitioner was a guarantor…. The aforesaid Section states that
bankers may, in the absence of a contract to the contrary, retain as a security for a general
balance of account, any goods bailed to them. The said Section 171 does not extensively deal
with the cases in which a banker can retain as security for a general balance of account any
goods bailed to it. Section 171 of the Contract Act, however, is a recognition of the right of
general lien of bankers under English Mercantile Law and therefore the decision of Court in
England as to in which cases such lien can be exercised by bankers and in which cases such
lien cannot be exercised by bankers will, equally apply to exercise of lien under Section 171
of the Contract Act.”

Sree Vadivambigai Ginning Industries Pvt. Ltd v. Tamil Nadu Mercantile Bank
Limited, 20152

Facts – The issue involved in this case was similar to the above as to whether the bank as a
right to lien in regards to the security bailed for the purpose of loan.

“21. Section 171 of the Contract Act confers the statutory right to a banker to retain, as a
Security for a general balance of account, any goods bailed to them. The said statutory right
is only for recovery of their legitimate dues. When Section 171 of the Contract Act
contemplates only retention of “goods”, it has to be seen whether the Title Deeds of the
Plaintiffs can be deemed as “goods” as defined under the Sale of goods Act. The term
“goods” contemplated in Section 171 of the Contract Act is to be understood in the sense that
it should be converted in terms of money or in other words, the  goods should have
marketability.”

Sri Narasimhaswami, Namagiri Amman and Sri Ranganathaswami Temple v.

Muthukrishna Iyengar, 1961

Facts – Certain gold ornaments entrusted to the defendant for the purpose of adorning the
goddess of the temple were lost. A suit was filed against him for misappropriation of the
jewels or in the alternative having failed to exercise due diligence and reasonable care in
keeping the jewels safe. The court classified the handing over of jewels to defendant as a
contract of bailment as observed as following:

“On these admitted facts there was a contract of bailment between the temple and the
defendant and the defendant was the bailee in respect of the entrusted jewels. S. 148 of the
Indian Contract Act defines “bailment” as follows… On the morning of 10th October 1951 it
was discovered that the gold ornaments belonging to the deity which were in existence on 9th
October 1951 and which adorned the deity on that date were missing.

The position of the defendant as a bailee within the definition of the term under S. 148 of the
Contract Act cannot be and has not been disputed. It is unnecessary to discuss the question
whether the defendant was a gratuitous bailee or a bailee for reward or hire as the provisions

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of the Indian Contract Act do not make a distinction between the two kinds of bailees in
regard to their duty to take care of the goods bailed. The English law draws a distinction
between a gratuitous bailee and a bailee for reward or hire in the matter of the degree of care
to be taken by the bailee to avoid liability for loss or damages. A bailee for reward is bound
to use ordinary care of a reasonable man and his failure to use such care is deemed to be
negligence. But an involuntary or gratuitous bailee who is said to have a naked bailment of
goods entrusted is liable for loss arising only out of gross neglect, fraud or breach of
directions. Even in cases of gratuitous bailee, a distinction was made between mandate and
deposit, the former requiring the duty to use reasonable care and the latter casting a liability
only for gross neglect. 

Once the contract of bailment is proved and there is the entrustment of the goods with the
bailee the loss of the subject matter of the bailment is itself prima facie evidence of the
negligence of the bailee. In order to escape liability for the loss occurred the onus of proof
will be upon the bailee to show that he had taken the necessary standard of care as imposed
upon him by the Statute. In Halsbury's Laws of England. Vol. 2, 3rd Edn. page 117, the rule
of law relating to onus of proof is thus enunciated:

“When a chattel entrusted to a custodian is lost, injured, or destroyed, the onus of proof is on
the custodian to show that the injury did not happen in consequence of his neglect to use such
care and diligence as a prudent or careful man would exercise in relation to his own property.
If he succeeds in showing this he is not bound to show how or when the loss or damage
occurred. If a custodian declines either to produce the chattel entrusted to him, when required
to do so by the owner, or to explain how it has disappeared, the refusal amounts prima
facie to evidence of breach of duty on his part, and thrown on him the onus of showing that
he exercised due care in the custody of the chattel and in the selection of the servants
employed by him in the warehousing.”