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Poona Bank Ltd. Vs. Kachhi Dasa Oswal JaIn Temple - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtMumbai
Decided On
Reported inAIR1932Bom31
AppellantPoona Bank Ltd.
RespondentKachhi Dasa Oswal JaIn Temple
Excerpt:
.....appearing in evidence therefore it cannot be held that defendant 1 was an agent of the lawful owner for the pledge of these ornaments, that is to say, he was not in juridical possession of them as required by section 178. 19. as regards the question of good faith, there is no definition in the contract act itself. in 1872, when the act came into force, good faith' was defined both in the penal code and the limitation act as follows: nothing is said to be done or believed in good faith which is done or believed without due care and attention. 530: though the definition of an expression in a penal statute should not be literally applied to an enactment exclusively civil, it is submitted that the above definition in fact embodies the sense in which 'good faith' is generally understood..........different. no attempt has been made however to prove that this was the course of business of the bank. no evidence in this connexion has been produced on behalf of the plaintiff. neither defendant 1 nor defendant 2 has been put into the witness-box.18. the only evidence on this point which has been given is that of the bank's clerk, ex. 78, and his evidence merely shows that defendant 1 was a partner in a company of brokers which carried on a large cotton business with the bank. he has expressly stated however that the company did not act as brokers for business of any other kind. on the facts appearing in evidence therefore it cannot be held that defendant 1 was an agent of the lawful owner for the pledge of these ornaments, that is to say, he was not in juridical possession of them.....
Judgment:

Patkar, J.

1. This was a suit brought by the plaintiff, the present vahivatdar of the Mahajan of the Oawal Jain Temple, to recover Rs. 7,078 by sale of the ornaments belonging to the bank, defendant 3, and the deficit from defendants 1 and 2 personally or in the alternative, if the pledge was not valid for recovery of the amount from defendants 1 and 2.

2. It is not disputed that the ornaments in dispute were pledged with defendant. 3, the Poona Bank, which had a branch at Hubli, and had appointed defendant 2 as manager of the bank under a power-of-attorney Ex. 71. Defendant lisa partner in the firm of Hirji Jivraj & Co., who are brokers in cotton, doing business at Hubli and also on behalf of defendant Section in respect of cotton transactions. It is clear from the evidence that the ornaments were pledged with the Hubli branch of defendant 3 between July 1922 and March 1923, by Balwant Rajerao Ex. 75 for Rs. 7,000 on 29th July 1922, by Abdul Karim, Ex. 77, for Rs. 3,000 on 7th February 1923 and by Shivappa Rachappa, Ex. 76, for Rs. 3,000 on 16th March 1923. On 15th December 1923, shortly after defendant 2 left Hubli, defendant 1 pledged the ornaments with the Managers of the Oswal Jain Temple, and took Rs. 6,000 as a loan at 6 per cent interest and secured a concession of a lower rate of interest on the representation that the ornaments belonged to him. At the time when the loan was granted Mansi Malsi and Hirji Punja were the vahivatdars of the Jain Temple. On 16th December 1923, defendant 1 left for Bombay with the amount and handed it over to defendant 2. On 1st January 1924, a search was made with regard to the ornaments and the plaintiff produced them. A criminal case was started against defendants 1 and 2 and one Ramchandra Galgali under Section 409, I.P.C. On 19th November 1924, the First Class Magistrate convicted defendant 2 and Galgali. On appeal Galgali was acquitted and the conviction of defendant 2 was confirmed.

3. The case on behalf of the plaintiff in the lower Court was that the ornaments belonged to defendant 1 and therefore the pledge was valid. The learned Judge raised issue 1:

Does plaintiff prove that the ornaments belonged to defendant 1.

4. and found in the negative. But the learned Judge allowed the plaintiff's claim on the ground that defendant 1 Trikamji was entrusted with the ornaments as an agent for pledge by defendant 2, and the plaintiff being a lawful pawnee and having acted in good faith was entitled to the protection afforded by Section 178, Contract Act, and therefore the pledge was valid and passed a decree in favour of the plaintiff for recovery of Rs. 7,078 by sale of the ornaments in possession of defendant 3 and the deficit from defendants 1 and 2 personally.

5. It is urged on behalf of the appellant that the lower Court made out a new case, which the plaintiff did not make for himself in the plaint. That contention is supported by the allegations made by the plaintiff in the plaint in which the plaintiff based his cause of action on the ground that defendant 1 was the owner of the ornaments and therefore the ornaments were liable to be sold for the pledge. It appears however from the evidence that the ornaments belonged to the bank, defendant 3. There is no evidence in the case that defendant 2 as the manager of the bank gave these ornaments to defendant 1 for sale. But it may be assumed that defendant J. got these ornaments from defendant 2 who was the manager of the bank, and who was subsequently convicted in connexion with the ornaments for criminal breach of trust. It is conceded that the plaintiff is entitled to the relief claimed only if he brings his case under Section 178, Contract Act. Under Section 271, the pledgee has to prove first that the person in possession of the goods made a pledge of the goods, secondly, that the pledgee or the pawnee acted in good faith and under circumstanees which were not such as to raise a reasonable presumption that the pawnor was acting improperly and thirdly, that the goods were not obtained from the lawful owner, or from any person in lawful custody of them by means of an offence or fraud.

6. The first question therefore arising in the ease is whether defendant 1 was in possession of these ornaments. It has been held in the case of Shankar v. Lakshmibai A.I.R. 1928 Bom. 225 following the previous decisions on this point that the word 'possession' in this section is distinguished form the word 'custody' in prov. 2 to the section, and that possession connotes juridieial possession as distinguished from bare custody. In Nandlal Thakersey v. Bank of Bombay [1910] 5 I.C. 457 it was held by Batchelor, J., that the possession according to the decided cases, was the kind of possession which a factor or an agent has in other words, such possession is had by an agent entrusted as such and ordinarily having as such agent a power of sale or pledge. Though the same view was taken by Chowdhary, J., in Roopchand Jankidas v. National Bank of India Ltd. [1918] 46 Cal. 342 it was not followed by another Judge of the same Court Lort-Williams, J., in Rahimbakhsh Ashan Karim v. Central Bank of India Ltd : AIR1929Cal497 . We are bound by the decisions of this Court and must hold that the possession under Section 178 must be juridical possession or the possession of the factor or an agent entrusted as such and ordinarily having as such agent power to sell or pledge the property. The legislature has now amended Section 178, Contract Act, by Act 4 of 1930, and the possession is now restricted to that of a mercantile agent with the consent of the owner, There is no evidence in the case to show that the possession of defendant 1 was possession similar to that of a factor or an agent entitled to sell or pledge the property or was possession derived from the real owner. The case of the plaintiff that the property belonged to defendant 1 and the pledge was made by defendant 1 as owner has been disbelieved by the lower Court. There is no doubt on the evidence that the ornaments belonged to defendant 3. Defendant 1 was merely a broker dealing in cotton transactions and was not entrusted with the power of pledging or selling the ornaments by the real owner, the bank defendant 3. We are unable therefore to agree with the view of the lower Court that the possession of defendant I was juridical possession within the meaning of Section 178, Contract Act.

7. The second question is whether the plaintiff-pawnee acted in good faith and under circumstances which were not such as to raise a reasonable presumption that the pawnor was acting improperly. The words 'in good faith' have not been defined in the Contract Act, but have been defined in the Penal Code and the Limitation Act 9 of 1871, as meaning 'with due care and attention.' The definition in the General Clauses Act 10 of 1897, cannot apply to the Contract Act of 1872. Even assuming that the words 'done in good faith 'be understood in the sense of 'done honestly whether it was done negligently or not' the latter part of Proviso 1 in Section 178 shows that the pawnee must act under circumstances which are not such as to raise a reasonable presumption that the pawnor is acting improperly. The pawnee therefore must act with due care and attention in taking the pledge. The evidence shows that some of the ornaments were such as could not have been worn by Gujarat his, and when defendant 1 made a presentation to the plaintiff that the ornaments belonged to him the plaintiff ought to have been put on enquiry as to how the ornaments, which could not be worn by Gujarat is, came to be owned and possessed by defendant 1. In these circumstances it is not possible to say that the pawnee acted in good faith and under circumstances which were not such as to raise a reasonable presumption that the pawnor was acting improperly.

8. It appears that defendant 2 was convicted in respect of these ornaments, and I think that Proviso 2, Section 178, applies to the facts of the present case. It appears from the evidence that the goods have been obtained from the lawful owner, i.e., the bank, and defendant 3, by means of an offence. It is urged on behalf of the respondent that that proviso refers to the obtaining of possession of goods by the pawnor. The words 'by the pawnor or the pledgor' have not been inserted in the proviso, and the words of the proviso are wide enough to include the obtaining of possession from the lawful owner not by the pawnor but by some other person from whom the pawnor has derived possession. The contention on behalf of the respondent however derives support from the decision in the case of R.D. Sethna v. National Bank [1910] 8 I.C.183 I am unable to agree with the view that the words 'by the pawnor' should be read into the proviso. But the facts of that case are quite different from the facts of the present case. In that case the pawnor was the executor who had legal estate vested in him, whereas in the present case the legal estate in the ornaments vested in the bank, and there is no doubt from the circumstances in the present case that defendant 2 must have obtained possession from the legal owner, the bank, by means of an offence. Even if defendant 2 had not been convicted in connexion with these ornaments, the circumstances show that the possession of the ornaments was obtained by defendant 2 by means of a fraud on the real owner, the bank, and defendant 3. I think therefore that the plaintiff in the present case is not entitled to the benefit of Section 178.

9. The learned Judge in dealing with Proviso 2 observes:

Proviso 2 also does not apply as the ornaments had not been obtained from the original owner, viz., defendant 2, Mudwedkar, by means of 'an offence or fraud'.

10. The original owner was not defendant 2, but the bank, defendant 3, and the ornaments were obtained by defendant 2 from the original owner, defendant 3, by means of an offence or fraud. I think therefore that the view taken by the lower Court is wrong and cannot be accepted in appeal.

11. We must therefore vary the decree of the lower Court in so far as it orders recovery of Rs. 7,078 by sale of the ornaments in the possession of defendant 3, and dismiss the suit against defendant 3, and pass a decree against defendants 1 and 2 for the amount of Rs. 7,078 together with costs and interest on Rs. 6,000 from date of suit till payment. The appellant should get his costs throughout from the respondents. The ornaments which have been deposited in Court by the order dated 4th February 1929, should be returned to the bank, defendant 3.

Broomfield, J.

12. The admitted facts in the case are these: At the material time one Mudwedkar was the Manager of the Hubli branch of the Poona Bank, Ltd. One Trikamji Mulji was a cotton broker of Hubli who had considerable dealings with the bank. Mudwedkar for his own purposes took certain ornaments belonging to the bank which had been pledged with the bank by some of its constituents, and handed these ornaments over or caused them to be handed over to Trikamji who pawned them with the plaintiff, a certain temple institution of Hubli, whose vahivatdars carry on money lending business. The plaintiff advanced Rs. 6,000 on the pledge of the ornaments and Trikamji handed this money over to Mudwedkar. Trikamji, Mudwedkar and the Assistant Manager of the bank were prosecuted for criminal breach of trust in respect of the ornaments. In the trial Court Mudwedkar and the assistant manager were convicted, Trikamji being acquitted. On appeal the assistant manager was acquitted, but the conviction of Mudwedkar was confirmed. The criminal Court ordered that the ornaments should be restored to the possession of the Poona Bank. Subsequently the plaintiff brought the suit from which this appeal arises against Trikamji, defendant 1, Mudwedkar, defendant 2, and the Poona Bank, Ltd., defendant 3, praying that the ornaments should be sold in order to realize the money advanced upon them by the plaintiff and that a decree should be given for the deficit, if any, against defendants 1 and 2.

13. The allegations in the plaint were that the ornaments belonged to defendant 1, and in the alternative, if it were held that they did not belong to defendant 1, that the plaintiff bona fide believed that they were the property of defendant 1. Defendant 1 alleged that he bona fide believed the ornaments to be the property of defendant 2. Defendant 2 alleged that he had no knowledge of the transaction. Defendant 3 alleged that defendants 1 and 2 and another person had committed criminal breach of trust in respect of the ornaments and denied that the plaintiff had acted in a bona fide manner.

14. Of the issues framed by the trial Court, the first two are material for the purpose of this appeal:

(1) Does the plaintiff prove that the ornaments belonged to defendant 1?

(2) Is the alleged pledge proved?

15. The finding on issue 1 is that the ownership of the ornaments has not been satisfactorily proved by the plaintiff. As I have mentioned, the plaintiff's allegation was that the ornaments belonged to defendant 1. Defendant 3, the bank, produced the evidence of three witnesses, Exs. 75, 76 and 77, and the evidence of one of the clerks of the bank, Ex. 78, to prove that the ornaments had been pledged with the bank on various dates in 1922 and 1923. This evidence has not been challenged. It is admitted in the course of the appeal that the ornaments had been pledged with the bank and therefore belonged to the bank and not to defendant 1. It was therefore open to the Court to record a definite finding on issue 1 that the ornaments were not the property of defendant 1, but the property of the bank, defendant 3.

16. Issue 2, in my opinion, is not very satisfactorily framed. It should have been: 'Is the alleged pledge proved and valid ?' It does not appear that there has ever been any real dispute as to the fact that defendant 1 pawned these ornaments with the plaintiff. The. main dispute in the suit has been throughout whether the pledge of the ornament is a valid pledge having regard to the provisions of Section 178, Contract Act. It was pointed out in Shankar v. Lakshmibai A.I.R. 1928 Bom. 225 that in cases coming under Section 178 three conditions are necessary: firstly, that the pawnor must be in possession of the goods; secondly, that the pawnee acts in good faith; and, thirdly, that the goods have not been obtained by means of an offence or fraud. In a case like the present, where the plaintiff is seeking to recover from defendant 3 the ornaments, which have been handed to defendant 3. under the order of the criminal Court, it is sufficiently dear that the burden of proving the existence of these three conditions lies on the plaintiff. There have, been numerous decisions, and there is some conflict of authority as to the meaning of the word 'possession' as used in this section. Most of the cases have been discussed in Nandlal Thalcersey v. Bank of Bombay (2), and the case just, referred to, Shankar v. Lakshmibai (l), and it is clear from these two decisions that, as far as this Presidency is concerned, at any rate, the word 'possession' as used in Section 178 must be taken to mean juridical possession, that is to say, such possession as is had by a factor or an agent entrusted as such and ordinarily having as such agent the power to sell or pledge. This legal position has been accepted by the learned trial Judge and also by the learned advocate for the respondent. The trial Judge appears to have held that defendant 1 had juridical possession within the meaning of the authorities and that he was an agent with power to pledge the ornaments. It is a little difficult to gather from his judgment how he has arrived at this finding. Apparently what he means is that defendant 2 as the manager of the bank had juridical possession and defendant 1, the pawnor, was his, that is to say, defendant 2's agent for the pledge. That, at any rate, is the position taken by the learned advocate for the respondent before us.

17. In my opinion however the authorities discussed in the two oases, which I have cited, make it perfectly clear that possession cannot be regarded as juridical possession within the meaning of Section 178 unless it is derived in some way from the lawful owner of the goods. There must be such connexion between the lawful owner of the goods and the person in possession as to make the latter a factor or an agent for sale or pledge on behalf of the former. Defendant 2 in this case was not the lawful owner of the ornaments, although the learned trial Judge has so described him. The lawful owner was the bank, and it appears to me that on the evidence which has been produced in this case it would be impossible to hold that defendant 1 was an agent of the bank for the pledge of these ornaments to the plaintiff. Supposing for the sake of argument that the facts had been that it was the ordinary business of this bank to pawn ornaments with the plaintiff or other money-lenders, and supposing further that in the ordinary course of business of the bank defendant 1 was employed as the broker of the bank for the purpose of negotiating these transactions, the position would have been different. No attempt has been made however to prove that this was the course of business of the bank. No evidence in this connexion has been produced on behalf of the plaintiff. Neither defendant 1 nor defendant 2 has been put into the witness-box.

18. The only evidence on this point which has been given is that of the bank's clerk, Ex. 78, and his evidence merely shows that defendant 1 was a partner in a company of brokers which carried on a large cotton business with the bank. He has expressly stated however that the company did not act as brokers for business of any other kind. On the facts appearing in evidence therefore it cannot be held that defendant 1 was an agent of the lawful owner for the pledge of these ornaments, that is to say, he was not in juridical possession of them as required by Section 178.

19. As regards the question of good faith, there is no definition in the Contract Act itself. In 1872, when the Act came into force, 'good faith' was defined both in the Penal Code and the Limitation Act as follows:

Nothing is said to be done or believed in good faith which is done or believed without due care and attention.

According to the learned commentators in Pollock and Mulla's Indian Contract Act, at p. 530:

Though the definition of an expression in a penal statute should not be literally applied to an enactment exclusively civil, it is submitted that the above definition in fact embodies the sense in which 'good faith' is generally understood in civil law, and therefore may be taken as a practical guide in construing the present section.

20. In the General Clauses Act, 10 of 1897, 'good faith' was defined in these terms:

A thing shall be deemed to be done in 'good faith' where it is in fact done honestly, whether it is done negligently or not.

21. On behalf of the respondent it has been contended that this is the definition which should be applied in construing Section 178. But Section 3, General Clauses Act, makes it clear that the definitions in that Act apply in the Act itself and in all Acts of the Governor-General in Council made after the commencement of the Act, that is to say, after 1897, and do not apply retrospectively.

22. Further, as my learned brother has pointed out, the proviso contains other words besides the words 'in good faith,' namely

under circumstances which are not such as to raise a reasonable presumption that the pawnor is acing improperly.

23. Defendant 1 is a Gujarati. So are the vahivatdars of the plaintiff's institution. It is in evidence that some of the ornaments were ornaments of a pattern which would not be likely to belong to a Gujarati. That circumstance might reasonably have put the plaintiff on inquiry as to the ownership of the ornaments, wheras admittedly no inquiry at all was made. It would be difficult therefore to hold it satisfactorily proved even that the plaintiff acted in good faith.

24. As regards Proviso 2 to the section, ' provided also that such goods or documents have not been obtained from their lawful owner or from any person in lawful custody of them, by means of an offence or fraud, ' there has been some discussion in this appeal as to the meaning of this condition. According to the respondent's learned advocate it means:

Provided also that such goods or documents have not been obtained by the pawnor from their lawful owner, etc. ' and in support of this view he relies on the decision of Devar, J., in R.D. Sethna v. National Bank (5). Although, with respect, I see no reason to doubt that the decision in that case was correct on the peculiar facts before the Court, it seems to me that the learned Judge went too far when he said:

As I read the proviso, the fraud or offence must be committed by the pawnor against the lawful owner or custodian.

25. If that had been the intention of the legislature, it would surely have been so expressed, and moreover, if the person who obtains goods from the owner by means of an offence or fraud cannot himself make a valid pledge of them, it is difficult to see why he should be able to do so by the simple expedient of getting some third party to go through the form of making a pledge for him. I am not satisfied that the proviso must be read as if the words 'by the pawnor' were insarted after the word 'obtained.' The language used is wide enough, in my opinion, to cover a case like the present, where, on the facts proved and admitted, the ornaments had been obtained from the lawful owner, i.e., and the bank, by means of the offence of criminal breach of trust.

25. For these reasons I agree with my learned brother that the plaintiff has failed to establish that there was a valid pledge of these ornaments to him, and I also agree with the order which he proposes to make.


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