(a) Is it usual in this economy for suppliers of goods or services to supply those goods or services to corporations on credit?

(b) If so, what would be the average credit period of time?

(c) Is it possible and/or usual in this economy for a supplier to require security over property of the corporation for the supply of goods or services?

(d) If so, is the form of supply known as 'retention of title' practised and recognised in this economy and is it enforced?

 

It is usual in India for suppliers of goods or services to supply such goods or service to corporations on credit which may range from 90 days to 180 days (these are usual trade terms). In recessionary times as are presently witnessed the trade credit stands enhanced to 240 days as customers are feeling difficulty in paying for the goods purchased since their goods in which the goods supplied are inputs, are not being sold adequately. Under the Indian Sale of Goods Act, a Vendors lien extends over such goods as remain identifiable and are not merged with or utilized or exhausted in the customers goods. It is very rare that a supplier of goods and services gets security over goods and services or other property for the sale thereof. In exceptionally large transactions the debtor supplier may furnish a security by way of a letter of credit or a revolving guarantee of a bank or some corporate guarantee for payment.

The retention of title principle as explained above is rarely used as upon delivery, the possessory title is lost. In the case of hypothecation security or a floating charge banks normally require the embossment of their name over the hypothecated property. A negative lien is retained at times which prohibits the customer from disposing of or dealing with the property for which full payment has not been made. Restrictions are also imposed upon the creation of a charge over property delivered when payment has not been made on such property. The right to recover over such unpaid goods has to be specifically stipulated by contract. The local circumstances make it extremely difficult to recover possession of delivered goods for unpaid price and consequently most suppliers insist upon advance payments or post-dated cheques or letters of credit or other negotiable instruments. These instruments are negotiated with banks and other Lenders who then, may receive documentary title if documentary bills or letters of credit are exchanged. They will then have a right of recovery over the goods if these are charged to the bank.