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National Bank of Lahore Ltd. Vs. Sohanlal Sehgal and ors. - Court Judgment

LegalCrystal Citation
CourtSupreme Court of India
Decided On
Reported inAIR1965SC1663; [1965]35CompCas604(SC); (1965)67PLR127; [1965]3SCR293
ActsIndian Companies Act; Limitation Act - Schedule - Articles 36, 95, 115 and 120; Indian Penal Code (IPC), 1860 - Sections 380 and 409
AppellantNational Bank of Lahore Ltd.
RespondentSohanlal Sehgal and ors.
Cases ReferredJarvis v. Moy
.....limitation act and sections 380 and 409 of indian penal code, 1860 - respondent hired locker from bank - lockers were tampered with and valuables removed by manager - manager was prosecuted and convicted - respondent filed suit against bank for recovery - bank denied its liability - contended that suits were barred by limitation - subordinate judge decided that bank liable to bear loss - suit were not barred by limitation - on appeal high court accepted findings of learned subordinate judge - supreme court observed fraud of manager committed in course of his employment deemed to be fraud of principal - bank deemed to have permitted its manager to commit theft - apex court upheld decision of high court. - section 5 & calcutta thika tenancy (acquisition and regulation) rules, 1981, rule..........raise a question of limitation. 2. the national bank of lahore limited, hereinafter called the bank, is abanking concern registered under the indian companies act and having itsregistered office in delhi and branches at different places in india. thoughits main business is banking, it carries on the incidental business of hiringout lockers out of cabinets in safe deposit vaults to constituents for safecustody of their jewels and other valuables. it has one such safe deposit vaultat its branch in jullundur. the respondents herein hired lockers on rentalbasis from the bank of jullundur through its manager under different agreementson different dates during the year 1950. in april 1951 the said lockers weretampered with and the valuables of the respondents kept therein were removed.....

Subba Rao, J.

1. These appeals by special leave raise a question of limitation.

2. The National Bank of Lahore Limited, hereinafter called the Bank, is abanking concern registered under the Indian Companies Act and having itsregistered office in Delhi and branches at different places in India. Thoughits main business is banking, it carries on the incidental business of hiringout lockers out of cabinets in safe deposit vaults to constituents for safecustody of their jewels and other valuables. It has one such safe deposit vaultat its branch in Jullundur. The respondents herein hired lockers on rentalbasis from the bank of Jullundur through its Manager under different agreementson different dates during the year 1950. In April 1951 the said lockers weretampered with and the valuables of the respondents kept therein were removed bythe Manager of the Jullundur branch of the Bank. In due course the said managerwas prosecuted before the Additional District Magistrate, Jullundur, and wasconvicted under Sections 380 and 409 of the Indian Penal Code. The respondents filed3 suits in the Court of the Subordinate Judge, Jullundur, against the Bank forthe recovery of different sums on account of the loss of the valuable contentsof the lockers hired by them. The Bank denied its liability on various groundsand also contended that the suits were barred by limitation.

3. The learned Subordinate Judge held that the Bank was liable to bear theloss incurred by the plaintiffs and that the suits were not barred bylimitation. On appeal, the High Court of Punjab accepted the findings of thelearned Subordinate Judge on both the questions and dismissed the appeals. Thepresent appeals arise out of the said judgment of the High Court.

4. The only question raised in these appeals is one of limitation. Beforeconsidering the question of limitation it is necessary to notice briefly thefindings of fact arrived at by the High Court. The High Court summarized itsfindings thus :

(1) The whole object of a safedeposit vault in which customers of a Bank can rent lockers for placing theirvaluables is to ensure their safe custody. The appellant-Bank had issuedinstructions and laid down a detailed procedure for ensuring that safety but inactual practice the Manager alone had been made the custodian with full controlover the keys of the strong room and a great deal of laxity had been observedin having no check whatsoever on him.

(2) The lockers had been rentedout to the plaintiffs by the Manager Baldev Chand, who was entrusted with theduty of doing so. It was he who had intentionally rented out such lockers tothe plaintiffs which had been tampered with by him. This constituted a fraud onhis part there being an implied representation to the plaintiffs that thelockers were in a good and sound condition.

(3) Although the Bank authoritieswere not aware of what Baldev Chand was doing, but the fraud, which heperpetrated, was facilitated and was the result of the gross laxity andnegligence on the part of the Bank authorities.

(4) The lockers were indisputablybeing let out by the Manager to secure rent for the Bank.

5. Having found the said facts, the High Court held that the fraud wascommitted by the Manager acting within the scope of his authority and,therefore, the Bank was liable for the loss incurred by the respondents. Thenit proceeded to consider the question of limitation from three aspects, namely(i) the loss was caused to the respondents, as the Manager of the Bankcommitted fraud in the course of his employment; (ii) there was a breach of theimplied condition of the contract, namely, that only such lockers would berented out which were safe and sound and which were capable of being operatedin the manner set out in the contract; and (iii) there was a relationship ofbailor and bailee between the respondents and the Bank, and, therefore, theBank would be liable on the basis of the contract of bailment. It held thatfrom whatever aspect the question was approached, Art. 36 of the First Scheduleto the Limitation Act would be out of place and the respondents' claims wouldbe governed by either Art. 95 or some other article of the Limitation Act.

6. Learned counsel for the appellant accepted there findings of fact, butcontended that on the facts found the suits were barred by limitation.Elaborating the argument the learned counsel pointed out that the theft of thevaluable by the Manager was a tort committed by him dehors the contractsentered into by the appellant with the respondents and, therefore, Art. 36 ofthe First Schedule to the Limitation Act was immediately attracted to therespondents' claims.

7. The scope of Art. 36 of the First Schedule to the Limitation Act isfairly well settled. The said article says that the period of limitation'for compensation for any malfeasance, misfeasance or nonfeasanceindependent of contract and not herein specifically provided for' is twoyears from the time when the malfeasance, misfeasance or nonfeasance takesplace. If this article applied, the suits having been filed more than 2 yearsafter the loss of the articles deposited with the Bank, they would be clearlyout to time. Article 36 applied to acts or omissions commonly known as torts byEnglish lawyers. They are wrongs independent of contract. Article 36 applies toactions 'ex delicto' whereas Art. 115 applies to actions 'excontractu'. 'These torts are often considered as of three kinds, viz.non-feasance or the omission of some act which a man is by law bound to do,misfeasance, being the improper performance of some lawful act, or malfeasance,being the commissioner of some act which is in itself unlawful'. But toattract Art. 36 these wrongs shall be independent of contract. The meaning ofthe words 'independent of contract' has been felicitously brought outby Greer L.J., in Jarvis v. Moy, Davies, Smith, Vanderveil and Co. 1936. 1 K.B. 399, thus :

'The distinction in the modern view, for thispurpose, between contract and tort may be put thus. Where the breach of dutyalleged arises out of a liability independently of the personal obligationundertaken by contract it is tort and it may be tort even though there mayhappen to be a contract between the parties, if the duty in fact arisesindependently of that contract. Breach of contract occurs where that which iscomplained of is a breach of duty arising out of the obligations undertaken bythe contract.'

8. If the suit claims are for compensation for breach of the terms of thecontracts, this article has no application and the appropriate article is Art.115, which provides a period of 3 year for compensation for the breach of anycontract, express or implied, from the date when the contract is broken. If thesuit claims are based on a wrong committed by the Bank or its agent dehors thecontract, Art. 36 will be attracted.

9. Let us now apply this legal position to the claims in question. One ofthe contracts that was entered into between the plaintiffs and the Banks isdated February 5, 1951. It is not disputed that the other two contracts, withwhich we are concerned, also are of the same pattern. Under that contract theBank, the appellant herein, and Sohanlal Sehgal, one of the respondents herein,agreed 'to hire, subject to the conditions endorsed, the company's safeNo. 1651/2203 Class lower for one year from this day at a rent of Rs. 40'.The relevant conditions read as follows :

14. It is agreed that theconnection of the renter of the safe and the Bank (and it has no connection) isthat of a lessor and lessee for the within mentioned safe and not that of abanker and customer.

15. The liability of the companyin respect of property deposited in the said safe is limited to ordinary carein the performance by employees and officers of company of their duties andshall consist only of (a) keeping the safe in vault where located when thisrental contract is entered into or in one of equal specifications, the door towhich safe shall be locked at all time except when an officer or an employee ispresent, (b) allowing no person access to said safe, except hirer or authoriseddeputy, or attorney in fact having special power to act identification bysignature being sufficient or his/her legal representative in the case ofdeath, insolvency or other disability of Hirer, except as herein expresslystipulated. An unauthorised opening shall be presumed or interred from proof ofpartial or total loss of contents.

16. The company shall not beliable for any delay caused by the failure of the value doors or locks tooperate.

17. The company shall not beliable for any loss etc.

10. The only purpose of the contract was to ensure the safety of thearticles deposited in the safe deposit vault. It was implicit in the contractthat the lockers supplied must necessarily be in a good condition to achievethat purpose and, therefore, that they should be in a reasonably perfectcondition. It was an implied term of such contract. Condition 15 imposedanother obligation on the bank to achieve the same purpose, namely, that theBank should not allow access to any person to the safe except the hirer or hisauthorised agent or attorney. If the articles deposited were lost because oneor other of these two conditions was broken by the Bank, the render wouldcertainly be entitled to recover damages for the said breach. Such a claimwould be ex contractu and not ex delicto and for such a claim Art. 115 of theFirst Schedule to the Limitation Act applied and not Art. 36 thereof.

11. Learned counsel for the appellant contended that the suits were notbased upon the breach of a contract committed by the Bank but only the theftcommitted by its agent dehors the terms of the contract. This leads us to theconsideration of the scope of the plaints presented by the respondents. Itwould be enough if we take one of the plaints as an example, for others alsorun on the same lines. Let us take the plaint in Civil Suit No. 141 of 1954,i.e., the suit filed by Sohanlal Sehgal and others against the Bank for therecovery of a sum of Rs. 26,500. We have carefully gone through the plaint,particularly paragraphs 8, 9 and 10 thereof. It will be seen from the plaintthat though it was not artistically drafted the relief was claimed mainly ontwo grounds, namely, (i) that it was an implied term of the contract that thelocker rented was in a good condition, and (ii) the valuables were lost becausethe Manager, on account of the negligence of the Bank in not taking all thenecessary precautions, committed theft of the articles in the course of hisemployment. In the written-statement the defendant denied its liability bothunder the terms of the contract and also on the basis that it was not liablefor the agent's fraud. The High Court found that at the time when the lockerswere rented out they were in a defective condition and that the Bank, in actualpractice, made the Manager the sole custodian with full control over the keysof the strong room and permitted a great deal of laxity in not having any checkwhatsoever on him. In this state of the pleadings and the findings it is notpossible to accept the contention of the learned counsel for the appellant thatthe plaintiffs did not base their claims on the branch of the conditions of thecontracts. This argument is in the teeth of the allegation made in the plaint,evidence adduced and the arguments advanced in the Courts below and thefindings arrived at by them. While we concede that the plaint could have beenbetter drafted and couched in a clearer language, we cannot accede to thecontention that the plaints were solely based upon the fraud of the Manager inthe course of his employment. We therefore, hold that there were clearallegations in the plaints that the defendant committed breach of the contractsin not complying with some of the conditions thereof and that the defendantunderstood those allegations in that light and traversed them. The suit claims,being ex contractu, were clearly governed by Art. 115 of the First Schedule tothe Limitation Act and not by Art. 36 thereof.

12. If Art. 115 applied, it is not disputed that the suits were within time.

13. Even if the claim was solely based on the fraud committed by the Managerduring the course of his employment, we do not see how such a claim fell underArt. 36 of the First Schedule to the Limitation Act. To attract Art. 36, themisfeasance shall be independent of contract. The fraud of the Managercommitted in the course of his employment is deemed to be a fraud of theprincipal, that is to say the Bank must be deemed to have permitted its managerto committee theft in violation of the terms of the contracts. While under the contractsthe Bank was under an obligation to give to the respondents good lockersensuring safety and protection against theft, it gave defective onesfacilitating theft; while under the contracts it should not permit access tothe safe to persons other than those mentioned in the contracts, in violationof the terms thereof it gave access to its Manger and enabled him to committheft. In either case the wrong committed was not independent of the contract,but it directly arose out of the breach of the contract. In such circumstancesArt. 36 is out of place. The competition between Arts. 115 and 120 to take itsplace need not be considered, for neither of those Articles hits the claim, asthe suits are within 3 years, which is the shorter of the two periods oflimitation prescribed under the said two Articles.

14. In this view it is not necessary to express our view on the questionwhether the contracts in question were of bailment.

15. In the result, the appeals fail and are dismissed with costs one hearingfee.

16. Appeals dismissed.

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