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TMI Blog1968 (11) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... ss under the name and style of M/s. Luxmi Narayan Arjundas (defendant 1) in village Banmankhi in the district of Purnea. They opened a cash credit account in the year 1948 with the Imperial Bank of India, which undertaking has been taken by the State Bank of India under the State Bank of India Act, 1955 (Act 23 of 1955) with all its assets, liabilities, etc. As the relevant transactions and facts took place and occurred when the bank was known as the Imperial Bank of India, for the sake of brevity, hereinafter in this judgment , the reference to the plaintiff will be by the word 'Bank' only, which term, unless otherwise indicated in the context, will ordinarily and generally mean Imperial Bank and may mean the State Bank, as the suit has been instituted by the latter Bank. Since the argument in the appeal has been confined to two points only to be stated hereafter, I shall state the relevant facts of this case only so far as they are necessary for the decision of the two points aforesaid. 3. After the opening of the cash credit account, there were several transactions between the defendants and the Bank in pursuance of eight written agreements executed by and on behalf o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /10/- per maund. The said Mills agreed to take delivery on full payment after actual weighment of the goods. 5. The plaintiffs' case further is that the entire stock of pledged jute was in packed bales, some in 31 maunds and some in 1 1/2 maunds per bale. R. B. H. M. Jute Mills after their purchase paid to the Bank ₹ 1,14,192/6/- subject to adjustment by actual weighment. They were to start taking delivery of the goods from 24-1-54. A portion of the goods was delivered to the purchaser after actual weighment after keeping its record. 448 bales of jute weighing 1506 maunds 28 seers were taken delivery of by R. E. H. M. Jute Mills but they refused to take further delivery on the ground that many of the bales contained non-jute, that is, worthless materials described by them as gudri. So the purchaser wanted to pick out good bales for delivery, but the Bank refused to allow the purchaser to pick and choose, as the entire stock was sold and purchased by the purchaser irrespective of quality as also because, as the case of the plaintiff in paragraph 14 of the plaint is, the Bank officers were under the impression that the bales contained jute and not worthless materials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old on 24-1-1954, but owing to the fraud practised by the defendant, the purchasers refused to take delivery, instituted the money suit, and so the remaining stock left after the part delivery to the first purchaser remained lying in the godowns at Banmankhi which had earthen floor and tatti wall for full one year and the entire stock got deteriorated and became short in weight thereby by 903 maunds 31 seers. The Bank states that the loss on account of the shortage was also to fall on the shoulders of the defendants. As per accounts given in Schedule A appended to the plaint, the total claim of the plaintiff of the amount of ₹ 65,555/3/9 consists of the principal Bs. 46,516/4/9, insurance charges ₹ 4515/10/-, interest ₹ 10,574/12/- and cost of the money suit ₹ 3,948/9/-. 7. Several pleas were taken up in the written statement to defeat the entire suit of the plaintiff Bank. Both the sales, one held in January, 1954 and the other in December, 1954 were attacked on several grounds. The transaction of equitable mortgage was denied. It was asserted that the title deeds were not deposited by defendant 2 at the Calcutta head office of the Bank on 14-1-1953 or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk on account of any loss said to have been sustained by it for the failure of R. B. H. M. Jute Mills to take delivery of the entire stock of jute purchased by them on 21-1-54, either on account of the shortage in weight, insurance charges or costs of the suit nor are the defendants liable to pay any interest on the excess of the amount said to have remained due after the first sale as a result of the deficit caused by the second sale. 10. At the outset, I may make it clear that learned counsel for the appellants conceded, and in my opinion rightly, that if an equitable mortgage in respect of the properties or any portion of them is held to have been created on 14-1-1953, the suit will not be barred by limitation. The first question, therefore, which falls for our decision is whether an equitable mortgage was created on 14-1-1953 if so, in respect of what properties? (In paragraphs 11 to 14 the judgment discusses the oral and documentary evidence in the case regarding the creation of an equitable mortgage in respect of all the 5 sets of properties and comes to the following conclusion. The judgment then proceeds:) I, therefore, hold that an equitable mortgage was in fact a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Ext. 6), reference to which will be made later on. 16. Exhibit 1 dated 12-1-1954 is a public notice notifying that baled jute weighing 6479 maunds will be sold by auction at the premises of Luxmi Narayan Arjundas, Banmankhi, at 12 noon on 21-1-1954. It was further notified that the stocks were held at the above place and could be inspected at any time before the auction. Exhibit 19 is the proceeding at the auction sale held on 21-1-1954. This, in short, contains the broad terms which were agreed upon between the Bank and R. B. H. M. Jute Mills, the purchaser at the said auction. It clearly recites that 2042 bales (1708 bales of 3 and half maunds each and 334 bales of 1 and half maunds each, total being 6479 maunds) pledged by Luxmi Narayan Arjundas, were sold to the highest bidder, R. B. H. M. Jute Mills at the highest bid rate of ₹ 17/10/- per maund. It was further stated that the weight given was as per the Bank's books, and the final amount of money will be calculated and adjusted after the actual weighment of the stock. The purchaser agreed and deposited a sum of ₹ 25.000 by cheque on the Central Bank of India Ltd., Katihar and undertook to pay the differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made out a case that there were transactions between the plaintiff and the defendant Bank from a long time and it was known to the defendants that the plaintiff required jute which was of merchantable quality and fit for manufacturing jute products. Hence, they stated that in the circumstances there was an implied condition and warranty that the jute should be in terms of the details given out by the Bank's Agent at the time of auction. Their further case was that after delivery of 1506 maunds of jute the goods which were offered for delivery were only gudri which did not come within the category of jute. In spite of repeated demands, the Bank which was defendant No. 1 or its Agent. A. N. Gangoli (who is P. W. 16 in the case and defendant 2 in the money suit) did not deliver the balance of the goods. Hence, they claimed a decree for refund of the sum of ₹ 87,636/12/6 as also for decree for damages and interest, me total claim being to the tune of ₹ 1,00,106/10/6. In the said money suit, two written statements were filed on identical lines-- one filed on 16-9-1954. Ext. H (1) was on behalf of the Bank and the other. Ext. H was filed on 24-9-1954 on behalf of defend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ituation, it is difficult to follow the contradictory case made out by the Bank in the 17th paragraph of the plaint of this suit that the non-delivered bales of jute contained gudri and the fraud practised by the defendant firm on the Bank was detected at the time when the purchaser of the first sale R. B. H. M. Jute Mills, was taking delivery. If that was so, how is it that such a case was not made out in Money Suit 75 of 1954? Apart from the other reasons which I shall be giving hereinafter in my judgment, I have no difficulty in rejecting the case of fraud set up in the plaint of the present suit on this ground alone. 21. The entire stock of jute lying in the godown of the defendants which was kept in charge of the Bank had been sold to R. B. H. M. Jute Mills on 21-1-1954. They had paid the full price also. In such a situation, there is no difficulty in coming to the conclusion that the property in the goods under the Sale of Goods Act, 1930, had passed to the purchaser, viz.. R. B. H. M. Jute Mills. This finds further support from the pleadings in Money Suit 75 of 1954, as in the plaint there was no case made out by the purchaser that the properly had not passed and from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the evidence in this suit, it is definitely clear that the Bank had a very good case for trial by way of defence against R. B. H. M. Jute Mills. At no point of time they gave any information to the defendants about the refusal of the delivery of the jute by R. B. H. M. Jute Mills or institution of their suit. At no point of time they sought any instruction from the defendants what the Bank was to do in the case of the dispute raised by the purchaser of the Goods at the auction held on 21-1-1954. They did not ask the defendants as to what steps were to be taken in respect of the undelivered quantity of jute. All what was done in the money suit on behalf of the Bank was on its own. It may well be, as found by the learned Additional Subordinate Judge, that the defendants had knowledge of the facts. In all probability, they must have knowledge. When the delivery was not accented by R. B. H. M. Jute Mills, the defendants must have known about the dispute raised by them. Nonetheless, the fact to he emphasised is that at no point of time the Bank thought it obligatory or proper to consult the defendants in regard to the dispute raised by R. B. H. M. Jute Mills. The funniest thing whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in India or in England, could be cited before us. nor could we find any. The point fell for our decision on appreciation of the well-established principles which should govern the rights and liabilities of pawner and pawnee. 27. Section 176 of the Contract Act reads as follows: If the pawnor makes default in payment of the debt, or performance, at the stipulated time of the promise, in respect of which the goods were pledged, the pawnee may bring a suit against the pawnor upon the debt or promise, and retain the goods pledged as a collateral security; or he may sell the thing pledged, on giving the pawnor reasonable notice of the sale. If the proceeds of such sale are less than the amount due in respect of the debt or promise, the pawnor is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the pawnee shall pay over the surplus to the pawnor. In Volume II of Chitty on Contracts, 22nd Edition, at page 107 in paragraph 218, 'pledge' is defined thus: A pledge or pawn is 'a bailment of goods by a debtor to his creditor to be kept by him till the debt be discharged'; the bailment is intended to be a securit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter to the pawner? It is to be remembered that at no point of time the entire property in the goods in the sense of ownership passes from the pawner to the pawnee. Before the sale, the property is of the pawner in the custody of the pawnee, and after the sale, if it is a completed sale, in the sense of the passing of the property it is of the purchaser. The right to sell may and must include a right to enter into an agreement to sell which will be a completed sale on the passing of the property to the purchaser, In that situation, let us take an instance to explain the view point. If the pawnee agrees to sell the goods to a person who agrees to purchase them, but the property does not pass, the ownership in the goods remains with the pawner. If the goods are destroyed by fire or otherwise for no fault of the pawner, the pawnee or the person who has agreed to purchase, it is manifest, the loss will fall on the head of the pawner. If, however, the goods are so destroyed after the property in them had passed to the person who had agreed to purchase them, it goes without saying on the well-established principles of law, that the loss will have to be borne by the purchaser. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtaining the consent of the defendants and acquainting them with all material circumstances which came to its knowledge on the subject. In such a situation, the defendants are justified in contending that the dealings of the Bank had been disadvantageous to them and they are entitled to repudiate them and refuse to reimburse the Bank for the losses incurred by it as a result of such dealings, in accordance with Section 215 of the Contract Act. 30. Even assuming for argument's sake that seeking of such instructions was not essential or obligatory if the money suit would have proceeded to trial and disposal by a judgment of the court and that on the strength of that judgment with the aid of some more evidence the Bank would have been entitled to ask the defendants to reimburse it for the losses caused to the Bank as a result of the judgment, even though it had failed to seek instructions from the defendants, but I am definitely of the view that the Bank had no right to enter into a compromise with R. B. H. M. Jute Mills, treating the sale held on 21-1-1954, as annulled and repudiated, after the part delivery, and retain the balance of the price which undoubtedly in law was th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner's report, some bales of jute contained gudri. No one has come forward on behalf of the Bank to say that the defendants at the time of pledging those bales had represented that the bales said to contain gudri contained jute. Nobody has come forward to say that even in ordinary course of business some bales of jute cannot contain any quantity of eudri. I have also referred to the fact that there is paucity of evidence in this case as to what was the gudri content in 227 bales which formed part of the undelivered goods. If I may express the view, on the basis of the terms of sale held on 21-1-1954, the only right of the purchaser was to an adjustment of the total price on reweighment of the goods. Even assuming that they were entitled to reject a portion of the goods which were found to be gudri and not pure jute, at best their right was not to take delivery of eudri and pay the price of the jute portion of the goods which was quite a considerable and major portion. I see no justification, nor could any be pointed out to us from the records of this case, which led the Bank to refund the entire sum of ₹ 87,636/12/6 to the purchaser and thus bring about an annulment of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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