Under the Sale of Goods Act, an unpaid seller's right of stoppage in transitu is defeated if the buyer lawfully transfers the document of title to a third party who accepts it in good faith and for valuable consideration.
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The statement is true because the transfer of a document of title to a bona fide third party for value defeats the unpaid seller's right of stoppage in transitu.
The statement accurately reflects the statutory proviso under the Sale of Goods Act. If an insolvent buyer transfers a document of title to a sub-buyer who takes it in good faith and for valuable consideration, the unpaid seller loses the right of stoppage in transitu against that third party.
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Exceptions to Unpaid Seller's Right of Stoppage in Transitu