Section 12 of WDR Act : Section 12: Negotiability Of Warehouse Receipts

Explanation using Example

Imagine a scenario where a farmer, Mr. Sharma, stores his harvested wheat in a licensed warehouse. The warehouse issues him a receipt for the storage of wheat.

Example 1: The receipt issued is intended to be non-negotiable, meaning it cannot be transferred to another party. According to Section 12(2) of The Warehousing (Development and Regulation) Act, 2007, the warehouse must clearly mark the receipt with "non-negotiable" or "not negotiable." If they fail to do so, and Mr. Sharma sells the receipt to Mr. Gupta, who buys it believing it is negotiable, Section 12(3) allows Mr. Gupta to treat the receipt as if it were negotiable, thereby having the same rights as if it were a negotiable receipt.

Example 2: If Mr. Sharma receives a negotiable warehouse receipt, he has the flexibility to sell or transfer the receipt to another party, say Mr. Iyer, who can then claim the wheat from the warehouse. According to Section 12(4), Mr. Iyer must do so before the expiry of the wheat's shelf-life as stated on the receipt, to ensure the validity of the delivery.