Basil Scott, Kt., C.J.
1. In both these appeals the appellant is an endorsee of a railway-receipt from the firm of Chhaganlal Kalidas who purchased the cotton bales mentioned in the receipts from (Ramdas Vithaldas of Bagalkote.
2. Chhaganlal Kalidas having become insolvent Ramdas Vithaldas, as unpaid vendor, stopped the cotton in the hands of the Bombay Steam Navigation Company before it had been delivered to the respective endorsees. In each case the Steamship Company has interpleaded. The first question in which case is whether the endorsee made the advance which he seeks to recover specifically upon the railway-receipt or receipts.
3. In Appeal No. 7 the fact of such advance is not disputed but in Appeal No. 4 it is contended that the advance of Rs. 15,000 was not made specifically against the two railway-receipts for 135 bales because the advance is entered in the general account of Chiaganlal and the proceeds in ordinary course would have been held as security not only for the advance of Rs. 15,000 but also for any general balance of account. But it is quite clear from the evidence that the appellant declined to advance the Rs. 15,000 until the railway-receipts were endorsed as security as a large sum was already due on the account. We cannot doubt that the endorsing of the railway-receipts as security was what induced the advance and that the advance was, therefore, made specifically upon them.
4. It is not disputed that in each case under appeal the advance was made in good faith.
5. In Appeal No. 4 it is further contended that the advance has been repaid before decree.
6. The facts are that on the 15th August 1911, i.e. simultaneously with the Steamship Company's inter pleader suit, the appellant filed a suit against the respondent Ramdas Vithaldas and also against the endorser to recover the Rs. 15,000 advanced against the railway-receipts. Some months later the entries in the general account of Chhaganlal in the appellant's books show that various sums were credited to the latter which if the rule in Clayton's case (1816) 1 Mer. 608 and the rule of Section 61 of the Contract Act were applied, would extinguish the debt of Rs. 15,000 ; but the application of the rule is always subject to the condition that the parties have indicated no intention inconsistent with its application.
7. It is clear from the appellant's suit that he intended to enforce his claim for the Rs. 15,000 against the proceeds of the 135 bales of cotton covered by the railway-receipts in question. This is sufficient indication of intention to negative the application of the rule.
8. It was further suggested that the rule in In the matter of West-zinthus (1833)5 B.& Ad. 817 should be applied by marshalling any surplus assets-in favour of the unpaid vendor, Ramdas, in the event of the question as to the applicability of Section 103 of the Contract Act being decided against him. But the simple answer is that there are no surplus assets.
9. The question common to both appeals remains to be dealt with : Are the railway-receipts instruments of title within the meaning of Section 103
10. The railway-receipts are issued by the Madras and S. M. Railway Co. in the following form :
The Madras and Southern Maratha Hallway Company Limited.
From Bagalkote to Bombay H.R. on B.S.N. Railway via M.R.H.
Sender's name, Kamdas Vithaldas. To whom consigned, Chhaganlal Kalidas.
11. Then follows a tabular statement of particulars relating to the goods, below which it is stated ' these goods are accepted for conveyance subject to the conditions printed on the back herein.'
12. Condition 3 is as follows :-
That the railway-receipt given by the Hallway Company, for the articles delivered for conveyance must be given up at damnation by the consignee to the Hallway Company or the Railway Company may refuse to deliver and that the signature of the consignee or his agent in the delivery book at destination shall be evidence of complete delivery.
If the consignee does not himself attend to take delivery he must endorse on the receipt a request for delivery to the person whom he wishes it made and if the receipt is not produced the delivery of the goods may at the discretion of the Railway Company be withheld until the person entitled in its opinion to receive them has given an idemnity to the satisfaction of the Railway Company.'
13. The 9th condition provides that the goods should be subject to the rules and conditions printed in the Railway Company's Goods Tariff and to the rules and regulations and wharfage and other charges in force on such railways and shipping lines over which the)' might be conveyed.
14. The holders of the railway-receipts in each case presented them not to the Railway Company which issued them but to the Bombay Steam Navigation Company which was the Shipping line by which the goods were conveyed during the last part of the transit, i. e. from Marmagoa to Bombay. The railway-receipt was a document under which the goods were received for a mixed transit by land and sea. There can be no doubt that in America such a document would be treated as, and probably called, a bill of lading: see St. Louis, Iron Mountain and Southern Railway Company v. Knight (1887) 122 U.S.R. 79 where the Court after stating the nature and effect of a bill of lading said: 'The doctrine is applicable to transportations made by Railway Companys and other carriers by land as well as carriers by sea.' This point was taken by Mr. Robertson in the lower Court but the Judge said : 'The document is a railway receipt and cannot become a bill of lading , because the Railway Companies employed the Bombay Steam of Navigation Company to carry the goods for part of the distance.' I understand that the learned Judge meant only that the document would not be a bill of lading within the meaning of Section 103 of the Contract Act, so that its assignment to a pledge would defeat the unpaid vendor's right of stoppage in transit. But according to Section 103 it is not only a bill of lading but any other instrument of title to goods which may be assigned with the same effect as results from the assignment of a bill of lading, and it is material to remember that the transit from Bagalkote to Bombay via Marmagoa is a transit identical in its nature for part of distance with the transit of goods shipped by a consignor in Marmagoa under a bill of lading for delivery in Bombay; and I think that for this reason, on the special facts of these cases, the railway-receipt if assignable by endorsement would be an instrument of title to the goods under 8.103 of the Contract Act. It is true that in Great Indian Peninsula Railway v. Hanmandas Ramkison I.L.R. (1889) Bom. 57, it has been held a railway-receipt transferable by endorsement by the terms of the contract was not an instrument of title within the meaning of Section 103. That was a case of conveyance by land from Bijapur to Bombay and in that respect the element of voyage by sea under a combined receipt and contract issued by the carrier was absent. It is also important to note that since the date of that decision the chapter of the Transfer of Property Act relating to the assignment of contractual claims has been recast and is now applicable to the Bombay Presidency. By Section 137 it is provided that-
Nothing in the foregoing sections of this Chapter applies to stocks, & shares or debentures, or to instruments which are for the time being, by law or custom, negotiable, or to any mercantile document of title to goods.
Explanation,-The expression 'mercantile document of title to goods' includes a bill of lading, dook-warrant, warehouse-keeper's certificate, railway-receipt, warrant or order for the delivery of goods, and any other document used in the ordinary course of business as proof of the possession or control of goods, or authorising or purporting to authorise, either by endorsement or by delivery, the possessor of the document to transfer or receive the goods thereby represented.
15. This is one of the sections of the Transfer of Property Act relating to contracts which under Section 4 is to be taken as part of the Indian Contract Act. We have, therefore, an express statement by the Legislature that railway-receipts shall be taken to be mercantile documents of title fulfilling one or other of the two specified conditions, viz., proving in the ordinary course of business the possession or control of goods, or authorising or purporting to authorise either by endorsement or by delivery the possessor of the document to transfer or receive the goods thereby represented. Under the third condition of the railway-receipts in these cases it is clear that the documents fall under the latter class. The significance of the division into two classes of mercantile documents of title mentioned in Section 137 of the Transfer of Property Act (which with the exception of its reference to railway-receipts is taken verbatim from 3.4 of the English Factors Act of 1842 and reproduced in the Factors Act of 1889, Section 1(4), and applied in the Sale of Goods Act 1893, s- 62) is explained by the following passage from Blackburn on Sale, second edition, p. 415 :-
There have been same attempts nude to give the same effect to the indorsement of dock warrants, wharfingers' receipts, delivery orders, and similar documents, as is given to the indorsement of a bill of lading.
Those documents are generally written contracts, by which the holder of the indorsed document is rendered the persan to whom the holder of the goods is to deliver them, and in so far they greatly resemble bills of lading but they differ from them in this report, that when goods are at sea the purchaser who takes the bill of lading has done all that is possible in order to take possession of the goods, as there is a physical obstacle to his seeking out the master of the ship and requiring him to attorn to his rights but when the goods are on land, there-is no reason why the person who receives a delivery order or dock warrant should not at once lodge it with the bailee, and so take actual or constructive possession of the goods. There is, therefore, a very sufficient reason why the custom of merchants should make the transfer of the bill of lading equivalent to an actual delivery of possession, ' and yet not give such an effect to the transfer of documents of title to goods on shore.'
16. It was perhaps this distinction that the Court had in mind Hamimandas v. G.I.P. Railway (1889) I.L.R. Bom. 57 when declining to apply, as Mr. Justice Farran had done, the English definition to instruments of title' in Section 103 of the Contract Act although admitting that it might be applied to the expression ' document showing title' in Section 108 on the ground that dealings by factors entrusted with documents showing title were a different subject-matter to assignments of instruments of title by the buyer of goods in transit.
17. It is clear that no distinction can be drawn from the difference of wording as in Section 102, which also relates to assignments by the buyer during transit, the expression used is ' document showing title.'
18. It seems to me that Section 137 of the Transfer of Property Act puts an end to the question. It recognises that since the passing of Section 45 of the Sale of Goods Act, 1893, in England there is no force in the distinction -drawn by Sir Charles Sargent in Great Indian Peninsula Railway Company v. Hanmandas Ramkison I.L.R.(1889) Bom. 57. It is to be noted that Sections 102 and 103 are the only sections of the Contract Act which refer to assignment of documents of title and that Section 137 of the Transfer of Property Act which must be taken as part of the Contract Act occurs in the chapter relating to the assignment of claims.
19. I am of opinion, therefore, that the appellants in each of these appeals are entitled to the benefit of Section 103 of the Contract Act against the unpaid vendor.
20. In Appeal No. 4 of 1912, the case was remanded to the lower Court for evidence upon certain issues of which issue 9 was:-
Whether by the custom of the trade railway-receipts are not treated us instruments of title to the goods covered by them within the meaning of at 103 of the Contract Act.
21. The evidence recorded as to the custom of merchants regarding railway-receipts is very much to the same effect as that recorded in Jethmal v. B.B. & C.I. Railway (1901) 8 Bom. L.R. 260, the effect of which was stated by Tyabji J. as follows ;--
There is a groat deal of evidence to show that there is a general practice prevailing amongst merchants and commission agents in Bombay to treat railway receipts as documents of title, representing the goods mentioned therein, upon which advances can be obtained to the extent of 80 or 90 per cent- of the value, that these receipts are usually endorsed in blank by the consignee and that such endorsements are recognised by the Railway Companies in Bombay and delivery is given accordingly.
22. Mr. Justice Macleod thus states the result of the evidence ' taken on remand :
The buyer's name appears in the railway receipt and as a rule he advances to the vendor 80 or 90 per cent, of the value of the cotton when he gets the railway receipt, but sorna contracts, mostly those for Bengal cotton, are made on railway terms by which it is meant that the buyer contracts to advance 90 per cent, as soon as ho gets the railway receipt. Such receipts pass from hand to hand by endorsement and the evidence shows that buyers consider that the railway receipt gives them a title to the goods though as a matter of fact they take care to see that their endorsee (endorser ?) is a respectable person.
Commission agents advance from So to <30 per cent-on railway receipts. Their constituent is either up country in which case no question of unpaid vendor arises, or a holder of a railway receipt in Bombay who endorses it over to them. None of the second defendant's witnesses lent money on railway receipts merely to earn interest. This, as far as the evidence goes, is only done by the Banks and they invariably require the cotton to be in the Banks' Jetha or godown as security for the advance. It has then been proved, as was proved in Hanumandas v. G.I.P. Railway Co., that amongst merchants and commission agents dealing in cotton in Bombay, railway receipts endorsed by one holder to another are considered as representing the goods and entitling the last endorsee to delivery. But it does not follow from that that there is a usage that the last endorsee is entitled to delivery as against an unpaid vendor who stops the goods in transit.
23. In connection with this last observation we may refer to the judgment of Ashurst J. in Lickbarrow v. Mason (1787) 2 T.R. 63 :
The assignee of a bill of lading trusts to the indorsement; the instrument is in its nature transferable; in this respect, therefore, this is similar to the case of a bill of exchange. If the consignor had intended to restrain the negotiability of it, he should have confined the delivery of the goods to the vendee only; but he has made it an indorsable instrument. So it is like a bill of exchange ; in which case, as between the drawer and the payee, the consideration may be gone into, yet it cannot between the drawer and an indorsee; and the reason is, because it would be enabling either of the original parties to assist in a fraud. The rule is founded purely on principles of law, and not on the custom of merchants. The custom of merchants only establishes that such an instrument may be indorsed but the effect of that indorsement is a question of law.
24. The learned Judge has overlooked the form of the issue remanded which is, whether by the custom of the trade railway receipts are not treated as instruments of title to the goods covered by them within the meaning of (i. e. . in the sense in which that expression is used in) Section 103 of the Contract Act. The result of the railway-receipt being such an instrument of title as against the unpaid vendor does not depend upon custom but is a matter of law which is stated in the section.
25. For all the above reasons I am of opinion that the decision of the lower Court in Appeal No. 4 should be reversed; and for the reasons based both upon the special facts of the case and on Section 137 of the Contract Act I am of opinion that the decision of the lower Court in Appeal No. 7 should also be reversed. In each case the unsuccessful respondent must pay the costs throughout, except that in Appeal No. 4 the unsuccessful respondent Ramdas will have his costs of issues I to 5 and 8 against the appellants. In each case the person, in whose hands the sale-proceeds are, must hand over the nett sale-proceeds, deducting any charges justly due, to the successful appellants.