Introduction

This research paper primarily investigates the dilemma regarding the scope of definition of “goods” for the purposes of Sale of
Goods Act, 1930 (hereinafter referred to as the ‘Act’). I have differentiated the position of law in England and India. However,
due to the vastness of the definition I have limited the scope of my paper to three of the major commodities which have been
subject of controversies, namely:

(1) Electricity,

(2) Lottery tickets, and

(3) Software programs.

Definition of “goods”
‘Goods’ is defined as per Section 2 (7) of the ‘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.”

Definition of “Movable Property”

As per section 3(36) of the General Clauses Act 1897, “movable property” is defined as “property of every description except
immovable property.” Section 3(26) of the same Act reads as, “Immovable property shall include land, benefits to arise out of
land, and things attached to the earth, or permanently fastened to anything attached to the earth.”
Hence, a conjoint reading of the two sections gives us a clear definition that anything that is attached to the land maybe termed
as “movable property”, provided that there is an element of severability involved.[1] The element of severability is important
while deciding on the nature of the property, and this element can be established by ascertaining the nature of the property,
intention of the parties and the terms of the contract between them.[2] For instance, timber[3] falls under the ambit of “goods” as
per S.2(7)[4] because timber trees are severed from the land for the purpose of sale and hence they become a commercial
commodity.[5]

In the case of Tata Consultancy Services v. State of Andhra Pradesh[6] it was held that property as per Sale of Goods Act
means general property over the goods and not merely a specific property.[7] The usage of the word ‘includes’ further expands
the definition, as it includes in the definition not only goods of the prescribed nature but it also imports those things that are
specifically provided by the interpretation clause.[8]
Difference between the English law and the Indian law
In English law as per S. 61(1) of the Sale of Goods Act 1979, “goods” include personal chattels[9] which can be further divided
into “choses in possession” and “choses in action”.[10] As per the English law only the former is included in the definition of
“goods” whereas the latter which include commodities like shares, debentures, bills of exchange, and other negotiable
instruments are excluded from the definition as they all are actionable claims.[11] On the other hand in India, the definition as
elucidated in S.2(7)[12] is much wider in scope than the English definition as it includes stocks and shares as within the scope of
“goods”.
The following discussion primarily focuses on the point that whether certain types of commodities can be included within the
definition of “goods” or not.

 Electricity as “goods”: Inclusion of intangible energy within the definition of goods

Electricity does not come under the definition of “goods” as per English law.[13] There have been judicial decisions in England
where electricity has been referred to as ‘thing’ and an ‘article’[14] and also as ‘tangible personal property’[15], but there has
been no judicial decision which includes electricity within the definition of ‘goods’ for the purpose of Sale of Goods
Act.[16] Moreover, the legal possession of electrical energy is a challenging proposition as “it is capable of being kept or stored
only by changing the physical or chemical state of other property which is itself the subject of possession.”[17]
In India however, the situation is quite different. In the Calcutta High Court case of Associated Power Co. v. R.T. Roy [18] it was
held that electricity comes under the ambit of ‘goods’ under the article 366 (12) of the Constitution[19] as well as S. 2 (7) of the
‘Act’. This proposition was affirmed in a Madras High Court case where the learned judge held that electricity was under the
definition of ‘goods’ since it is capable of delivery, and it does not matter whether it is a tangible or intangible form of
energy.[20] The Law Commission of India in its 8th report proposed that electricity and water should be included in the definition
of ‘goods’ under S. 2(7) of the ‘Act’.[21] Meanwhile, the Supreme Court while discussing about the definition of ‘goods’ as
mentioned in the Madhya Pradesh Sales Tax Act (2 of 1959), found that the definition included all kinds of movable
property.[22] The court further held that:
“The term “movable property” when considered with reference to “goods” as defined for the purposes of sales tax cannot be
taken in a narrow sense and merely because electric energy is not tangible or cannot be moved or touched like, for instance, a
piece of wood or a book it cannot cease to be movable property when it has all the attributes of such property……It can be
transmitted, transferred, delivered, stored, possessed etc., in the same way as any other movable property.”[23]
However, Pollock & Mulla, in their commentaries, have expressed their concerns over the applicability of the ‘Act’ for electricity
because, there is no contractual obligation on part of the public authority to supply ‘electricity’, rather it is a statutory obligation
on part of the authority providing these ‘goods’.[24] The supply of such commodities would not amount to a ‘sale’ for the
purposes of the ‘Act’.[25] As a result, any breach or failure on part of the public body to supply electricity would be dependent
upon the terms of the statute governing the public body.[26]
Thus, on one hand it can be said that ‘electricity’ comes under the definition of ‘goods’ however the applicability of the ‘Act’ in
case of sale of electricity is a dubious proposition.

 Exclusion of Lottery tickets from the definition of “goods”

As per Black’s Law Dictionary, ‘lottery’ is defined as ‘a chance for a prize for a price’.[27] For the purposes of the ‘Act’ lottery
tickets are clearly a movable property, however it has been a matter of debate that whether they are an actionable claim as
defined under S.3[28] of Transfer of Property Act, 1882.
In the Supreme Court case of H. Anraj v. Government of T.N.[29] it was held that a lottery ticket primarily involved two rights:
(1) the right to participate in the draw and (2) the right to win the prize, depending on chance. In that case it was held that the
former right was a “transfer of a beneficial interest in movable goods” and hence was a sale within the meaning of Art 366 (29-
A)(d) of the Constitution whereas the latter right was a chose in action and thus not “goods” for the purpose of levy of sales
tax.[30]
However, the ruling of this decision was challenged in a later Supreme Court verdict of Sunrise Associates v. Government of
NCT of Delhi.[31] It was held that sale of a lottery ticket amount to a sale of an actionable claim. The conclusion of the Court
was based on the reasoning that there was no difference between right to win and right to participate in a lottery draw, as no
purchaser pays the consideration for a right to participate in the draw, instead he pays it for the right to win.[32]
Thus, the classification by H. Anraj case (supra) of the right to participate as right in praesenti and the right to win as a right in
futuro, was incorrect as both these rights are in futuro.[33] As a result the earlier judgment was overruled to that extent and
“lottery tickets” were excluded from the definition of “goods”.
 Conundrum surrounding Software programs
In the case of TCS v. State of Andhra Pradesh[34] the Supreme Court held that a software program on a CD or a
floppy drive would be a “good” for the purposes of levy of sales tax.[35] A software program is a collection of
instructions or commands that are given to a computer to perform a given task.[36] The main area of debate is that “Do
software programs – being intellectual creations of human mind – be treated as “goods” for the purposes of the ‘Act’ or
not?”
One of the landmark cases in this regard was the case of St Albans City and District Council v. International
Computers Ltd[37] where Sir Iain Glidewell observed that a hardware device has no use of its own unless it is
supplemented with a software and it was only because of necessity that software was contained in a physical medium
like a disk or a floppy furthermore, in case the disk is sold and there is a defect with the program, then there would be
a prima facie liability against the disk manufacturer as well. Thus, he held that the tangible disk and the software
program both will be included within the definition of “goods”.
In the TCS case (supra) a special mention was given to ‘canned software’[38], where it was held by the learned judge
that once a software is uploaded on a medium like a CD or a floppy drive, it ceases to be a work of intellectual creation.
This is primarily because each of these mediums becomes a marketable commodity in itself.[39] “Marketability” of a
commodity was the determining factor whether it is a “good” or not. It has also been held that “operational software”
which was uploaded on a hard-disk does not lose its character as a tangible good.[40]
It has also been a matter of debate as to inclusion of computer software within the definition of “goods” as defined in
section 2[41] of the Uniform Commercial Code, 1952. It is argued that since “custom designed” computer software is a
product of a labor intensive process and it must be considered as a service rather than a good. However, sale of most of
the software programs resemble sales of any other consumer product available for consumption, and it is usually sold
through separate pre-existing packages.[42] On the other hand contracts for providing data processing services have
been held to be contracts for services rather than contracts for “goods”.[43]
With the help of the above discussion it is clear that despite of being an intangible commodity, “computer software”
can be included in the definition of “goods” for the purposes of the ‘Act’.

 Exclusion of ‘Money’ from the definition

 Money is specifically excluded from the definition of “goods” under S.2(7) of the ‘Act’, because it is the medium of
exchange used at the time of sale of goods.[44] Hence, money is not regarded as a “chattel but as something ‘sui
generis’”.[45] However, a coin which was intended to be sold as an item of curiosity will be said to be a “good”, as it
was passed on as a commodity and not as a currency.[46]
Conclusion
Through the course of this research paper I have tried to identify some of the major controversies surrounding certain
commodities and their inclusion in the definition of “goods” as per S.2(7) of the ‘Act’. The discussion helped to prove that
“electricity” (even being an intangible good) comes under the ambit of goods, while on the same hand lottery tickets (being
movable goods per se) are excluded because they are “actionable claims”. This helps us to show that being a movable property in
itself is not a conclusive proof of being a “good”. Also, the debate on software programs elucidated the importance on
“marketability” aspect of “goods”.

Hence, it evident that due to rapid developments in science and technology, the definition of goods cannot be compartmentalized
into straight jacket distinctions and the scope of this section will expand over time.