Valuing Commingled Inventory Stock Asset Recovery under Restructuring Stays
Valuing commingled inventory under stays requires deducting unmingling costs and secured lender haircuts from gross landed cost before allocating pro-rata recovery
Indian Oil Doctrine
Meaning
Legal principle governing the ownership of goods that have been mixed without the consent of the original owners. Commercial lawyers cite the indian oil doctrine when two or more parties have a claim to a single mass of indistinguishable commodities. The rule establishes a fair distribution when a bailee fails to keep property separate.
Mixture Jurisprudence
Ownership is shared in proportion to the value or volume contributed by each party. The indian oil doctrine prevents a single claimant from seizing the entire mixture.
Proportional Ownership
Calculation of the split relies on the best available evidence of the initial inputs. Under the indian oil doctrine, the party who mixed the goods bears the burden of proving their share.
Innocent Party
Protection of the non-defaulting owner remains the primary goal of the rule. While the indian oil doctrine allows for shared ownership, it also permits the innocent party to claim damages for any loss in quality. This ensures that the person who did not cause the mixing is not financially harmed by the lack of segregation, and it places the risk of loss on the party responsible for the commingling.
The doctrine applies only when the identity of the individual units is truly lost.