1977 (10) TMI 124 - HC - Companies Law

Issues Involved:
1. Nature of the transaction (Pledge vs. Bailment)
2. Bank's liability for the non-delivery of the plant
3. Frustration of contract
4. Necessary parties to the suit
5. Delivery of possession
6. Knowledge of conditional permission by the Pakistan Government
7. Proof of the order by the Pakistan Government

Issue-wise Detailed Analysis:

1. Nature of the Transaction (Pledge vs. Bailment):
The court disagreed with the trial court's finding that the transaction was merely a bailment. It held that the transaction was a pledge, emphasizing that a pledge involves the delivery of goods as security for a debt, which includes the right to sell the goods on default. The bank had control and possession of the goods, which were stored with the Express Company, thus establishing it as a pledge rather than a lien or simple bailment.

2. Bank's Liability for Non-Delivery of the Plant:
The court found that the bank was responsible for the non-delivery of the plant. The sale to Akhtar Ali without the distillers' consent was deemed illegal, and the bank's failure to transfer Rs. 30,000 from India to Pakistan was a breach of its obligation. The bank's duty was to clear the obstacle imposed by the Pakistan Government, which required the repatriation of Rs. 30,000 for the plant's release.

3. Frustration of Contract:
The court rejected the bank's argument of frustration, holding that the condition imposed by the Pakistan Government (repatriation of Rs. 30,000) was not impossible to fulfill. The court noted that the Reserve Bank of India and the Ministry of Finance were agreeable to the transfer, and the bank's failure to act on this condition was a breach of contract. The doctrine of frustration does not apply when the frustrating event is caused by the party's own fault.

4. Necessary Parties to the Suit:
The court found no merit in the argument that the Punjab National Bank was a necessary party. The distillers had initially brought the suit against Bharat Nidhi (successor of Bharat Bank) and later added Punjab National Bank. However, the distillers gave up their claim against Punjab National Bank based on the banks' admission that there was no assignment of the claim in favor of Punjab National Bank. The court held that the suit against Bharat Nidhi was maintainable.

5. Delivery of Possession:
The court held that the bank did not deliver possession to the distillers by merely writing to the Express Company. The bank was obligated to ensure the actual delivery of the goods, which it failed to do. The court emphasized that the pledgee (bank) must be in a position to redeliver the goods upon payment of the debt, and failure to do so incurs liability.

6. Knowledge of Conditional Permission by the Pakistan Government:
The court found that the bank was aware of the condition imposed by the Pakistan Government (repatriation of Rs. 30,000) at least after the institution of the suit. The bank's defense that it was not informed was rejected, as the distillers had clearly stated this condition in the plaint, and the relevant correspondence was annexed.

7. Proof of the Order by the Pakistan Government:
The court accepted the evidence presented by the distillers, including the letter from the Department of Supply and Development, Government of Pakistan, which forbade the disposal of the machinery without prior permission. The evidence from the Express Company and the correspondence between the Indian High Commission and the Government of Pakistan supported the distillers' claim of the imposed restrictions.

Conclusion:
The court allowed the appeal, holding the bank liable for the non-delivery of the plant and passing a decree for Rs. 2,59,166/12 in favor of the distillers, with interest at 6% from the date of the suit until payment. The distillers were also entitled to costs throughout. The cross-objections filed by the bank were dismissed.

← Previous Next →