Repeal and Savings under Sections 65 and 66 of the Sale of Goods Act, 1930: Accrued Rights, Pending Proceedings, Other Enactments and Rules of Law, Insolvency, and Transactions Intended as Security

The last two sections of the Act tidy up its relationship with everything around it. Section 65, which contained the repeal of the sale chapter of the Contract Act, has itself been repealed as spent, the repeal having taken effect long ago. Section 66 is a savings provision and remains important. It protects rights and proceedings that existed before the Act came into force, preserves other enactments and rules of law not inconsistent with it, keeps the insolvency rules in play, and, most significantly in practice, provides that the Act does not apply to a transaction in the form of a sale that is really a security.

1. Section 65: Repealed

Section 65 effected the repeal of Sections 76 to 123 of the Indian Contract Act, 1872, the chapter that had governed sale of goods until 1930. Once a repeal has operated it has nothing further to do, and the section was removed from the statute book as spent by repealing legislation. Its effect survives in Section 66(1), which protects anything already done under the repealed provisions.

2. Section 66: Savings

Section 66, Sale of Goods Act, 1930, in substance

(1) Nothing in this Act or in any repeal effected thereby shall affect: (a) any right, title, interest, obligation or liability already acquired, accrued or incurred before the commencement of this Act; (b) any legal proceeding or remedy in respect of any such right or liability, or anything done or suffered before the commencement; (c) anything done before the commencement of this Act; (d) any enactment relating to the sale of goods which is not expressly repealed by this Act; (e) any rule of law not inconsistent with this Act.

(2) The rules of insolvency relating to contracts for the sale of goods shall continue to apply thereto, notwithstanding anything contained in this Act.

(3) The provisions of this Act relating to contracts of sale do not apply to any transaction in the form of a contract of sale which is intended to operate by way of mortgage, pledge, charge or other security.

What Section 66 preserves, and the line between a real sale and a security

3. Transitional Savings

Accrued rights and liabilities under the old law were not disturbed. A contract made in June 1930 remained governed by Sections 76 to 123 of the Contract Act.
Proceedings and remedies in respect of such rights continued as before.
Acts done before commencement kept their legal effect.
These savings are now of historical interest only, since no contract of 1930 is likely to be in issue, but they explain why the older case law under the Contract Act remains relevant to understanding the Act's provisions.

4. Other Enactments and Rules of Law

Other enactments on the sale of goods continue to apply. Examples include the Indian Bills of Lading Act, 1856, the Multimodal Transportation of Goods Act, 1993, the Essential Commodities Act, 1955, food, drug and weights legislation, and the Consumer Protection Act, 2019.
Rules of law not inconsistent with the Act survive, including the principles of equity, estoppel, agency and restitution, and the general law of contract preserved by Section 3.
Where a special statute regulates particular goods, the Act applies subject to it. A sale prohibited or regulated by another law is governed by that law, and the contract may be void under Section 23 of the Contract Act if it contravenes it.

5. Insolvency

Section 66(2) keeps the rules of insolvency applicable to contracts of sale. This matters because several of the Act's provisions operate precisely when a party fails: the unpaid seller's lien and right of stoppage in transit, the doctrine of reputed ownership under earlier insolvency law, and the question whether goods form part of the insolvent's estate. Insolvency law, now principally the Insolvency and Bankruptcy Code, 2016 for corporate debtors, decides how those rights are worked out in a collective proceeding, and the position under the Code should be checked in any current case.

6. Transactions Intended as Security

Section 66(3) is the provision most often invoked today. Parties sometimes cast a financing arrangement in the form of a sale, so that a lender appears as a buyer and the borrower as a seller who will buy the goods back. The subsection directs the court to the substance: if the transaction is intended to operate as a mortgage, pledge, charge or other security, the Act's provisions on contracts of sale do not apply to it.

📖 Sundaram Finance Ltd. v. State of Kerala, AIR 1966 SC 1178

Facts: A finance company advanced money to customers buying vehicles. The documents were drawn so that the customer appeared to sell the vehicle to the financier, who then let it back to him on hire-purchase terms. The State sought to tax the arrangement as a sale of goods to the financier.

Held: The Supreme Court held that there was no sale. Looking at the substance of the transaction, the customer was the owner throughout; the financier had advanced money and taken the documents as security for repayment. The hire-purchase form was a device to secure the loan, not a genuine sale and letting.

Ratio: Where a transaction in the form of a sale is in substance a loan secured on the goods, it is not a sale, and the Sale of Goods Act does not govern it.

What the court looks for: who had possession and use of the goods before and after, whether the price bore any relation to the value, whether the sum advanced was repayable with interest, and whether the transferor had a right to get the goods back on repayment.
The consequence is that the rights of the parties are those of mortgagor and mortgagee, or pawnor and pawnee, including the right to redeem.
Contrast a genuine sale, where ownership passes for a price and the seller has no right to recover the goods on repaying anything.

7. The Position Stated Shortly

Section 65, which repealed Sections 76 to 123 of the Contract Act, has itself been repealed as spent.
Section 66(1) saves rights, proceedings and acts predating the Act, and preserves other enactments and rules of law not inconsistent with it.
Section 66(2) keeps the rules of insolvency applicable to contracts of sale.
Section 66(3): the Act does not apply to a transaction in the form of a sale that is intended as a mortgage, pledge, charge or security.
Sundaram Finance: a hire-purchase form masking a loan on security was not a sale.
The court looks at the substance of the transaction, not its form.