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Jagatjit Distilling and Allied Vs. Bharat Nidhi Ltd. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtDelhi High Court
Decided On
Case NumberRegular First Appeal No. 167D of 1965
Judge
Reported inILR1978Delhi526
ActsIndian Contract Act, 1872 - Sections 56 and 148
AppellantJagatjit Distilling and Allied
RespondentBharat Nidhi Ltd.
Advocates: B.R. Tuli,; K.K. Jain,; P. Dayal,;
Cases ReferredCoggs v. Bernard (supra).
Excerpt:
(i) contract act (1872) - section 56--frustration--doctrine of, explained--applicability of, to a contract--principles governing.; in the instant case, the appellant filed a suit for the delivery of complete drum and screw cap plant lying at karachi or in the alternative for payment of rs. 3,22,166-13-0. the appellant had before partition imported the drum and screw cap plant for its brewary at hamira (punjab). the distillers had approached bharat bank ltd., darya ganj, delhi for the furnishing of a guarantee as was required by the machine tool controller, govt. of india, who had furnished the guarantee. in the return the plant was pledged by the distillers (distillers). a branch of the bank at karachi took delivery of the goods, and a part of it was stored with the clearing agents there.....avadh behari rohatgi, j. (1) jagatjit distilling and allied industries ltd. (hereinafter called 'the distillers') is a joint stock company incorporated under the indian companies act 1913. they have their registered office at hamira in kapurthala, punjab. in 1945 the distillers placed an order for a complete drum screw plant from two manufactures of england, namely. moon brothers limited and siemens-sachuckert (great britain) ltd. the machine tool controller, government of india required the distillers to furnish a guarantee. the distillers approached bharat bank limited, darya ganj, delhi (the bank). on june 18, 1945, the bank agreed to furnish guarantee to the machine tool controller for rs. 2,08,800 plus ten per cent for the purpose of the plant which the distillers had odered.(2) the.....
Judgment:

Avadh Behari Rohatgi, J.

(1) Jagatjit Distilling and Allied Industries Ltd. (hereinafter called 'the distillers') is a joint stock company incorporated under the Indian Companies Act 1913. They have their registered office at Hamira in Kapurthala, Punjab. In 1945 the distillers placed an order for a complete Drum Screw Plant from two manufactures of England, namely. Moon Brothers Limited and Siemens-Sachuckert (Great Britain) Ltd. The Machine Tool Controller, Government of India required the distillers to furnish a guarantee. The distillers approached Bharat Bank Limited, Darya Ganj, Delhi (the bank). On June 18, 1945, the bank agreed to furnish guarantee to the Machine Tool Controller for Rs. 2,08,800 plus ten per cent for the purpose of the plant which the distillers had odered.

(2) The distillers entered into an agreement with the bank. As a margin towards the guarantee of Rs. 2,08,800 the distillers gave a fixed deposit receipt of Rs. 57,429 which was in the fixed deposit account with the bank. By mutual agreement the Bank guarantee was extended to June 23, 1947. The guarantee amount was treated by the bank as a cash-credit account of the distillers in its books.

(3) The Drum and Screw Cap Plant arrived in Karachi in April and June 1947. The bank paid the following two amounts to Francis Klein of Calcutta through whom the goods were purchased from the foreign manufacturers:

1.Rs. 1,13,809/5.00 .

2.Rs. 1,01,024/6.00 .

TOTALRs. 2,14,833/11.00 .

(4) In return the plant was pledged by the distillers with the bank as security for the advance made in the cash credit account.

(5) The bank's head office was in Darya Ganj at Delhi. It had its branches in Karachi and Lahore. From England the goods arrived at Karachi port. The bank took delivery of the goods. A part of the plant was stored by the bank in its godown at Karachi. Another part was stored by the bank with a company of clearing and forwarding agents known as the Eastern Express Company Limited, Karachi (Express Company) under its lien.

(6) In March 1950 the bank sold and delivered the said plant-to one Akhtar Ali Khan of Pakistan Development Corporation, Karachi. The Express Company also delivered that part of the plant to Akhtar Ali which was stored with them. The bank represented that the sale was for a sum of Rs. 65,000. The distillers objected to the sale. They took the stand that the sale was 'engineered and manipulated by the bank staff in Pakistan .for their gain' and that it was not a genuine offer. 'The distillers said that it was a 'fraudulent transaction and was not binding on us'. In April and May 1950 letters were exchanged between the distillers and the bank : See P 14 dated May 8, 1950, P23 dated April 11, 1950 P24 dated May 5, 1950, P25 dated May Ii, 1950 and D7 dated, April 17, 1950. At a result of protest of the distillers the bank cancelled the sale to Akhtar Ali Khan and took back the plant from him. For the cancellation of sale the bank had to pay damages in the sum. of Rs. 30,000 to Akhtar Ali in May 1950. On cancellation of the sale Akhtar All returned the plant. There were in all 29 cases. This time all these were stored with the Express Company.

(7) Now the bank called upon the distillers to take delivery of the plant after adjusting the loan account. On June 16, 1950 the bank wrote to the distillers:

'P-3=D-17

Bharatbank Limited Head Office, DELHI

REF.No. HO/LA/I 11206.

DARYAGanj, Delhi

JUNE16,1950

The Secretary,

JAGATJITDistilling & Allied Industries Ltd.,

JAGATJITNagar (Kapurthala).

Dear Sir,

INcontinuation of our letter No. HO/LA/10320 of the 3rd inst, addressed to Shri L. P. Jaiswal your Managing Director, we have to advice that the proposed sale of the Drum Plant to Pakistan Development Corporation Ltd. has not come about and as instructed by you vide your letter No. 1801 dated 11th May, 1950 we have cancelled the sale of the plant on payment of damages and taken back the machinery.

THEdrum plant is now lying stored with us at Karachi and we could request you to adjust your loan account with our Darya Ganj Branch within about Rs. one Lac are due and we would instruct our Karachi office to deliver the drum plant to your authorised representative.

Yours faithfully,

SD/-

Illegible

Manager.'

(8) On July 13, 1950 the bank wrote another letter to the distillers:-

'WErequested you to adjust your account with Darya Ganj Branch, Delhi, and take back the delivery of the Drum Plant lying in Karachi by sending your authorised representative there. We have not heard from you anything in reply.

ASour Branch at Karachi is already closed, we can't continue to hold the Drum Plant for long. We request you to give the matter your immediate attention.'

(9) On August 8, 1951 the distillers cleared the loan account of the bank. They remitted the balance sum 'in full and final settlement of the account' and wrote to the bank:

'KINDLYarrange to deliver the Drum and Screw Cap Plant to us, at your earliest convenience.'

(10) This is the starting point of the trouble. On September 19, 1951 the bank wrote the following letter to Express Company

'EX.12

Bharatbank LIMITED

37,Faiz Bazar, Delhi.

19THSeptember, 1951

REF.HO/RSD/6473

M/S.Eastern Express Co. Ltd.,

BUNDERRoad, Karachi.

(Pakistan).

Dear Sir,

RE: Outstanding bills for drum making plant stored with you under lien of the bank.

OURlien on the plant does not stand now. You may please recover your full amount of up to date unpaid bills for storage charges etc. from Messrs. Jagatjit Distilling and Allied Industries Ltd., with whom you may deal about it in future.

YOURSfaithfully,

SD/-Illegible

Manager.'

(11) The bank wrote another letter on September 19,1951 to Express Co.:

'P-18

Bharatbank LIMITED

37,Faiz Bazar, Delhi.

19THSeptember, 1951

REF:H.O./RSD

M/S.eastern Express Co. Ltd.,

BUNDERRoad,

KARACHI(Pakistan)

REF-OUTSTANDINGbills for drum making plant stored with you under lien of the Bank.

YOUmay please recover your full amount of up to date unpaid bills for storage charges, etc. from Messrs Jagatjit Distilling & Allied Industries Ltd., with whom you may deal about in future.

YOURSfaithfully,

SD/J.B.Jaini,

Manager.

Copy to M/s. Jagatjit Distilling and Allied Industries Ltd., Jagatjit Nagar, (Distt. Kapurthala) Pepsu in continuation of letter dated 23-8-1951 to your address of the Office on Special Duty, Punjab National Bank Ltd., H.O: Delhi.'

SD/-Illegible

Manager.'

(12) A New Development: An important development took place in March 1951. The Government of Pakistan ordered Express Company not to dispose of or transfer the plant to any one without their prior approval. They wrote this letter:

NO.DIS/CPM/Machy.

GOVERNMENTof Pakistan

DEPARTMENTof Supply and Development

(MISCELLANEOUSand Disposals Directorate)

Karachi, March 51

To

M/S.Eastern Express Co. Ltd.,

P.O.Box No. 181.

Karachi.

REF.-CORRESPONDENCEresting with your letter No. A/c. dated 22-2-1951.

THEquestion is under consideration and instructions in the matter will be issued to you when a decision is arrived at. In the meantime the stores should please be kept under your custody and should not be disposed or transferred to any authority without prior approval from this office.

PLEASEacknowledge receipt.

SD/-Salahuddin

Director, FORDirector General Supply and Development.'

(13) On, January 8, 1952, the distillers wrote to Express Company enquiring from them if they we're prepared to deliver the plant to them against payment of their dues.

(14) On January 18, 1952, the Express Company wrote back to the distillers :-

Theeastern Express Company Limited

SHIPPINGClearing and Forwarding Agents.

Karachi

BUNDERRoad

Karachi, January, 1952.

REF.No. 5172/C.493/MTC.

M/SJagatjit Distilling and Allied

INDUSTRIESLtd.

P.O.Jagatjit Nagar,

EASTPunjab State Union,

Bhagat.

'DEAR Sirs,

REF.: 29 Packages Drum Making Plant.

WEthank you for your Letter No. SEC/55 dated the 8th instant and write to confirm that we are willing to accept your instructions regarding the disposal of the above consignment provided our charges are paid up to the date of delivery and that you obtain a release order from the Department of Supply and Development, Govt. of Pakistan, as we have received instructions from them not to give delivery without their permission.

YOURSfaithfully,

FORthe Eastern Express Co. Ltd.

SD/-Illegible

Manager.'

(15) One thing we would mention at the outset that the Pakistan Government prohibited the transfer of the plant because the Lahore Branch of the bank had made the payment of Rs. 30,000.00 to Akhtar Ali on account of damages from their resources in Pakistan. The Pakistan Government considered it to be a violation of the Foreign Exchange Regulations which had come into force in the meanwhile. That Government took the view that the payment of Rs. 30,000.00 should have been made by the bank from their moneys in India and since it was not done they required the Lahore branch of the bank 'to recoup' this sum of Rs. 30,000.00 from India. The bank did not do so. The Pakistan Government did not allow the plant to be delivered to anybody.

(16) There was a stalemate. The distillers complained to the bank that in spite of full and final payment of the loan they were not getting the deivery of the plant because of the restrictions imposed by the Pakistan Government owning to the payment of Rs. 30,000.00 to Akhtar Ali from he Pakistani resources of the bank. The bank paid no heed to the complaint of the distillers. On November 6, 1951 the bank wrote to the distillers :

'D-32:

Secretary,

JAGATJITDistilling and Allied Industries,

P.O.Jagatjit Nagar,

RAILWAYStation Hamira,

KAPURTHALADistrict,

Pepsu.

Dear Sir,

REFERENCEyour letter No. SEC/I 431 dated 2nd November, 1951- Regarding the plant at Karachi.

WEhave already made it clear that as far as we are concerned, we have raised our lien on the Plant and Eastern Express Co. Ltd. Karachi, is concerned to receive their dues an,d give delivery of the plant.

We do not understand why any further action from us in the matter is necessary.

Yours faithfully,

SD/-Illegible.

Manager.'

(17) It was court reply to a customer, to say the lease.

(18) The Pakistan Government had forbidden, the disposal of the plant on March 7, 1951. The bank took no interest in the matter. They did not bother to enquire why the plant was not being delivered to the distillers. Unaided the distillers continued their efforts to get the plant. To them it was a valuable property. They approached the Indian High Commission. The Indian High Commission wrote to the Government of Pakistan. The Pakistan Government ultimately agreed to release the plant for export to ln,dia on condition that the bank transfers an amount of Rs. 30,000 from their head office in India to their Karachi branch through the State Bank of Pakistan. On May 22, 1954, the Government of Pakistan wrote to the Indian High Commission the following letter :--

'EX.L/2-Ex. 20.

NO.335/515/51.

GOVERNMENTof Pakistan

MINISTRYof Commerce

Karachi, 22nd May, 1954.

Dear Mr. Vaidyanathan,

PLEASErefer to the correspondence resting with Mr. Sinha's D.O. letter No. S. 9/IGTC/51/35-J dated the 19th June, 1953 to Mr. S. M. Ali regarding release of certain machine tools imported before partition for M/s. Jagatjit Distilling and Allied Industries, Kapurthala. The information supplied with the D.O. letter of Mr. Mukherji, No. 28-Pak(70)/51, dated the 21st January, 1953 referred to in Mr. Sinha's D.O. letter of the 5th May, 1953, has enabled us to reconsider the case and it has now been decided to release the machine tools in question, for export to India, subject to the condition stated in para 2 below :-

2.The State Bank of Pakistan has reported that M/s. Bharat Bank Ltd., Karachi, sold certain items of the consignment in question to M/s. Pakistan Development Corporation Ltd., Karachi, but later redeemed them by refunding the price together with a sum of Rs. 30,000 as damages. As the bank has paid this sum of Rs 30,000 from its resources in Pakistan, it is necessary that the amount should be recouped by them from India through the State Bank of Pakistan. The release of the machine tools is, thereforee, subject to the condition that an amount of Rs. 30,000 is transferred by the head office of M/s. 'Bharat Bank Ltd., in India to their Karachi Branch through the State Bank of Pakistan,

3.You are requested to arrange for this transfer, after which,the necessary permit will be issued for the export of the machinery.

YOURSSincerely,

SD/-M. L. Rahman.'

P.Vaidyanathan,

ESQR.First Secretary (Commercial)

INDIANHigh Commission,

Karachi.

(19) On the receipt of the conditional 'permission, from Pakistan Government the Indian High Commission wrote to the Government of India the following letter on May 24, 1954.

'EX.L-I.

Firstsecretary (COMMERCIAL)

Indianhigh Commission,

'VALIKAMAHAL', KARACHI-5.

Dated the 22nd/24th May, 1954. No. S. 9/IGTC/51/J-35,

DEARMr. Kapur,

This is in continuation to the endorsement of my letter of even number dated 15th May, 1954 to Mr. Aslam, the Deputy Chief Controller of Imports and Exports of the Government of Pakistan regarding the release of the Drum and Screw Cap -Making Plant to Messrs Jagatjit Distilling and Allied Industries, Kapurthala. I enclose copy of a letter which I have received , Pakistan, Ministry of Commerce deciding to release the machine tools for export to India subject to one condition.

2.Mr. L. P. Jaiswal, Managing Director to Jagatjit Distilling and Allied Industries, has been here to negotiate with the Pakistan Government for the release of the Plant. It appears sometime' in 1950 the bankers of the Indian firm (messrs Bharat Bank Ltd.) without the permission of Jagatjit Distilling sold certain items of machinery to Messrs. Pakistan Development Corporation Ltd., Karachi as they were under impression that no import license would be given, by the Pakistan Government for the export of the machinery to India. The Indian firm protested to Bharat Bank, Karachi against the sale. Consequently Bharat Bank, Karachi redeemed these items by refunding the price together with a sum of Rs. 30,000 as damages. It appears the Bank paid this sum of Rs. 30,000 from its resources in Pakistan. The State Bank of Pakistan has now ruled that the export permit for the export of the machine tools should be given only after the Bharat Bank transferred to its Karachi Bank Rs. 30,000. This would mean crediting to Pakistan that amount of foreign exchange in Indian currency. The Karachi Branch of Bharat Bank is closed down but I understand they have a branch in Lahore. It is now necessary to get the permission of the Reserve Bank of India to credit this foreign exchange to Pakistan through the State Bank of Pakistan by transferring the amount from the headquarters of Bharat Bank Ltd., to its branch at Lahore. As the machinery involved is worth more than Rs. 2 lakhs, I think every effort should be made to facilitate the export of the machinery to India. I shall be grateful if you would kindly take up this matter with the Ministry of Finance urgently.

YOURS sincerely,

SD/-(P. Vaidyanathan)

COMMERCIALAttache-

R.N. Kapur, Esqr,

UNDERSecretary to the Government of India,

MINISTRYof Commerce and Industry.

New Delhi.

COPYto Messrs. Jagatjit Distilling and Allied Industries, Kapurthala (Mr. L. P. Jaiswal Camp Karachi.)

SD/-(P. Vaidyanathan)

COMMERCIALAttache.'

(20) The Indian High Commission on August 30, 1954 wrote' to the Government of Pakistan as follows :-

'EX.21.

FIRSTSecretary (Commercial),

INDIANHigh Commission.

VALIKAMahal, Karachi-1.

DATED27th/30th- August, 1954.

NO.S. 9/ITGC/51/J-35,

DEARMr. Rahman,

Please refer to your D.O. letter No. 335/515/51 dated the 22nd May, 1954 to Vaidyanathan regarding release of certain machine tools imported before partition for Messrs Jagatjit Distilling and Allied Industries, Kapurthala.

2.The Government of India have allowed, as special case, the remittance of a sum of Rs. 30,0000 by Messrs Bharat Bank (now known as Bharat Nidhi Ltd. Delhi) to their Lahore Branch through the State Bank of Pakistan. Necessary instructions to this effect have been issued by the Ministry of Finance to the Reserve Bank of India.

3.I request you to issue the necessary permit turn the export of the machinery, as early as possible.

4.I shall appreciate an early action.

YOURSfaithfully,

(S.Than)

M.L. Rahman, Esqr,

UNDERSecretary to the Government,

Of Pakistan,

MINISTRYof Commerce,

Karachi.'

(21) These three letters are of crucial importance in this case. Much turns on them as we shall see. But the net result' remained the same. The distillers were not able to get the delivery of the plant as the bank did not transfer Rs. 30,000 from India to Pakistan.

(22) The Action : On August 6, 1954 the distillers brought an action in the court of the Commercial Judge, Delhi for the delivery of the plant and in the alternative for the payment of Rs. 3,22,166-13-0. Originally to the suit only Bharat Nidhi Ltd. was the sole defendant. Bharat Nidhi was the successor of Bharat Bank. Later on. the Punjab National Bank was added as a party defendant No. 2.

(23) Both Bharat Nidhi (defendant No. 1) as well as Punjab National Bank (defendant No. 2) raised various defense. They disputed their liability and denied the claim. The trial was a prolonged affair lasting Ii years. Witnesses were examined on commission in Pakistan. But as we see it the case rests essentially on documentary evidence. The story of both the parties is told in letters exchanged between them. It is to these letters that we shall principally address ourselves in the decision of this appeal.

(24) By judgment dated June Ii, 1965, the Commercial Sub-Judge held that the distillers were not entitled to any relief again,st the bank, now replaced by Bharat Nidhi except that if the distillers 'take the delivery of the Drum Plant at Karachi after payment of Rs. 30,000 to the State Bank of Pakistan from its own sources in India, the plaintiff (distillers) would be entitled to recover that amount from defendant No. 1 (Bharat Nidhi)'. Against the Punjab National Bank, defedant No. 2, the suit was dismissed leaving the parties to bear their own costs. Against the decree of the trial court the distillers appeal to this court.

(25) The findings of the trial court : Before we proceed further it will beconvenient at this stage to summarise the findings of the trial judge. He held :

(1)The Drum Plant was a security with the bank against moneys advanced in cash credit account.-

(2)That the bank did not sell the machinery to Akhtar All with the knowledge and consent of the distillers and the said sale was, thereforee, illegal.

(3)The distillers we're not liable to pay Rs. 30,000.00 to the bank which the bank had to pay to Akhtar Ali for the cancellation of sale.

(4)THEBank was in possession of the machinery on August 9 1951(the date of full and final settlement of the loan account) on behalf of the distillers.

(5)THEtransaction was one of bailment and not pledge

(6) THEcontract between the bank and the distiilers and not pledge.

(7)The State Bank of Pakistan required the bank to replenish the Sum of Rs. 30,000.00 from its funds in India trough its branch in Pakistan.

(8)The Bank was liable to remit Rs. 30,000 to Pakistan.

(9)The distillers- should themselves arrange to Pay Rs. 30,000 to Pakistan Government and obtain delivery of the plant.

(10)The distillers can realise Rs. 30.000 from the bank 'because the loss was caused by the action of defendant No. 1'. (Bharat Nidhi).

(26) The Central Question: Bailee's obligations: The conclusions of the trial judge, if we may say so with respect, are a strange medley of contradictory findings. It is a mixture of findings of an incongrous character Nearly all the issues were decided in favor of distillers and still the distillers did not get any relief at the hands of the court. The judgment was substantially in distillers' favor yet their suit was dismissed. They were directed to pay Rs. 30,000 themselves and get the plant by their own efforts. That they were held entitled to claim reimbursement of Rs. 30,000 from the bank was a cold comfort to them. The distillers plainly had a right to the return of the plant on payment of loan. But this right was encumbered by the bank's fault. thereforee, what the trial court has done is to pass on an encumbered, a burden, to the distillers rather than enforce the bailor's right to the return of the identical res.

(27) In our opinion it is impossible to reach the conclusion the trial court did on the material on the record. In his letter dated May 22, 1954 (L-2) Mr. Rahman Under Secretary to the Government of Pakistan, Ministry of Commerce made it quite clear that the machinery would be released.

'SUBJECTto the condition that an amount of Rs. 30,000 is transferred by the head office of M/s. Bharat Bank Ltd., in India to their Karachi Branch through the State Bank of Pakistan.'

(28) Only bank could perform this condition. The distillers could not. It further appears that the Government of India had issued instructions to the Reserve Bank of India to allow transfer of Rs. 30,000 in Indian currency from India to Pakistan as the Government were convinced that the machine was 'worth more than Rs. 2. lakhs and, thereforee, every effort should be made to facilitate the export of the machinery to India'. (L-l).

(29) The bank's defense is that they were never apprised of the conditional permission granted by the Government of Pakistan on May 22, 1954 and they never knew that the Pakistan Government had allowed the export of the machinery to India subject to the condition of repatriation of Rs. 30,000 from India to Pakistan. It is true that the bank was not informed about the conditional permission granted by the Pakistan Government. To that the distillers reply that at least after the institution of the suiton August 6, 1954, it had come to the knowledge of the bank that the Sate Bank of Pakistan required them lo replenish the amount of Rs.. 30,000 from India and that the release of the plant was subject to the condition that the amount of Rs. 30,000 is transferred by the head office of the bank in India to their Karachi branch in Pakistan through the State Bank of Pakistan. This averment was clearly made in paragraph 14 of the plaint. The copy of the letter dated May 22, 1954 by Mr. Rehman to the Indian High Commission was annexed to the plaint. thereforee, the bank could not have denied knowledge of the conditional permission after August 6, 1954. It was open to them to comply with the requirement of the State Bank of Pakistan on the receipt of the information and secure to the distillers the plant by fulfillling the said condition.

(30) Whether the distillers would have ultimately obtained delivery of the plant from Express Company is not the question before us in the appeal. The question is : Did the bank clear the obstacle placed in the way of the delivery of the plant to the distillers by paying 'a sum of Rs. 30,000 from its head office in India to their branch in Pakistan through the State Bank of Pakistan From the evidence it clearly appears that the Pakistan Government on March 7, 1951 forbade the Express Compapy to dispose of the machinery without its prior approval. , On May 22, 1954 the Government of Pakistan decided to release the plant subject to the condition or repatriation of Rs. 30,000 from India to Pakistan. If the bank had fulfillled this condition and has transferred Rs. 30,000 from India to Pakistan it would have remedied the harm it had done to the distillers by selling the plant to Akhtar Ali and paying him Rs. 30,000 from their funds in Pakistan. It was the bank's duty to repair the wrong. It had the opportunity when the Pak Government gave permission to export the plant to India on payment of Rs. 30,000 in foreign exchange. But the bank let the opportunity go. '-We must take the current when it serves, or lose our venutres' (Shakespeare, Julius Caesar iv, iii 222).

(31) The trial court held that the sale to Akhtar Ali without the knowledge and consent of the distillers. The letters of the dis- tillers (P23, P24, P25, P14 and D7) of April and May 1950 clearly, prove it. The trial court found that the sale was not binding on the distillers. It was an illegal sale. The trial court further ruled that it was none of the responsibilities of the distillers to pay Rs. 30,000 to the bank which they, the bank had to pay to Akhtar Ali. On these findings the inevitable conclusion is that the requirement of the State Bank of Pakistan that Rs. 30,000 should be recouped from the bank's resources in India was clearly the responsibility of the bank and its successor Bharat Nidhi. The bank after the institution of the suit should have seen to it that a sum of Rs. 30,000 was repa- triated from India to Pakistan to remove the hurdle in the way of the delivery of the plant to the distillers. Moreover the Reserve Bank of India had agreed to the repatriation of the money to Pakistan.

(32) The efforts of the distillers bore fruit in the grant of conditional permission by the Pakistan Government. The condition was imposed by the Pakistan Government because of the illegal sale made by the bank to Akhtar Ali and payment of damages to him out of its funds in Pakistan. The State Bank of Pakistan objected. It was, thereforee, for the bank to overcome the difficulty and to clear the way for the delivery of the plant. The bank cannot stand outside the dispute and remain indifferent. It cannot be allowed to disclaim . the responsibility which was exclusively its own. Nor can it be allowed to shift its responsibility to distillers' shoulders. That will be passing the buck, to use a colloquial phrase.

(33) The Express Company informed the distillers that they had to do three things before delivery of the goods could be made to them. These are :

1.The instructions of the Bharat Bank Delhi to deliver the goods should be confirmed by the Lahore branch.

2.That the distillers should pay their charges.

3.That the distillers should obtain release orders from the Ministry of Supply, Government of Pakistan which had forbidden the disposal of the goods on March 7, 1951.

(34) This being the situation of the distillers wrote to the bank on November 2, 1951 an important letter in these words :---

'D-31.

Jagatjitdistilling And Allied Industries LTD.

REF.: No. SEC/I 431

2ND Nov., 1951.

M/S.Bharat Bank Ltd.

37,Faiz Bazar,

Delhi.

DEARSir,

'WE have since received a copy of the letter No. 5172/493/ Mtc dated the 24th October, 1951, addressed by M/s.

THEEastern Express Co. Ltd. Karachi to your address in response to your letter foresaid. From this, it is clear that it is necessary for you to obtain release orders from the Directorate of Supply and Development, Government of Pakistan, Karachi before you can effect the delivery to us and also your Pakistan branch has to endorse your disposal instructions, as desired by M/s. Eastern Express Co. Ltd. Karachi.

KINDLYarrange to deliver the Drum and Screw Cap Plant at your earliest convenience. We would like to take its actual open delivery.

YOURS faithfully,

FORJagatjit Distillery and Allied Industries Ltd.'

(35) In reply the bank wrote to the distillers on November 6, 1951 (D-32') that since the bank had raised its lien on the plant it was for the Express Company to receive their dues and give delivery plant.

(36) It appears to us that after having raised its lien the bank was not absolved of its liability as a bailee. As the distillers put it tersely in their letter to Express Company dated February 18, 1952 :--

'IT is clear that you are unable to deliver the Drum and Screw Cap Plant to us because of the restrictions imposed by the Pakistan Govt. as the result of a dispute between them and Bharat Bank Ltd. This dispute is no concern to ours. The mere fact that Bharat Bank Ltd., has withdrawn its lien on the plant is not sufficient. This does not enable you to deliver the plant to us. It is for the Bank to settle the matter with the Pakistan Government and to have them withdrawn the restrictions imposed. For so long as the restrictions remain, you cannot deliver the plant to us even if the Bank's lien is not there.' (Ex. 10)

(37) This sums up the whole situation neatly. It was for the bank to see that the restrictions imposed by reason of its own fault are withdrawn and there is no such barrier to the delivery of the plant as can be attributed directly, to the default of the bank.

(38) Counsel for Bharat Nidhi argued five points in the appeal before us. We shall deal with them one by one.

(39) 1. Frustration: Counsel argued that the contract was frustrated and, thereforee, the bank was unable to perform the contract.

(40) From the pleadings it does not appear to us that any such plea as impossibility of performance or frustration was taken in the written statement. Nor is there any specific issue. It is true that the trial court has discussed this aspect. But all that was said in the written statement was that 'even if it be proved that there was an agreement by this defendant to deliver the said machinery to the plaintiff at Karachi the said agreement became incapable of performance because of the restrictions of the Pakistan Government mentioned in the plaint and as such the present suit is not admitted to be maintainable.'

(41) This paragraph refers to the allegations made in the plaint. But when we turn to the plaint we find it clearly said that the Pakistan Government had forbidden the disposal of the machinery on March 7, 1951, but on May 22, 1954 the Government of Pakistan had decided to release the plant subject to the condition of repatriation of Rs. 30,000 from India to Pakistan.

(42) Now the condition of transfer of Rs, 30,000 was not impossible of performance. This meant 'crediting to Pakistan that amount of foreign exchange in Indian currency' as the Indian High Commission put it in their letter dated 22nd/24th May, 1954 (L-l). There is evidence that the Reserve Bank was ready to give permission to the bank to remit Rs. 30,000 from India to Pakistan. The Ministry of Finance, Government of India was also agreeable. There was no hitch or hurdle. The combined efforts of the distillers and Indian High Commission made it possible to obtain the release order subject to this condition. From the evidence of Ram Sahai it appears that the bank was well aware of this impediment. In his evidence he said :-

'THEdrum plant was taken as security for advances made by Darya Ganj branch of Bharat Bank to the plaintiff company. The drum plant was sold by the Karachi branch of Bharat Bank without authority of the head office, and thereforee, the sale was cancelled ultimately, after paying some damages to the purchaser. I do not remember the damages paid to that purchaser. The dram plant could not come to India, due to partition of the Country. The amount of damages of Rs. 30,000 was paid by the Karachi Branch of Bharat Bank from its own funds, but later on the Pakistan Govt. wanted the funds to come from Indian Funds, before the plant could be delivered to anybody and because that was not done by the Bank, as far as my knowledge goes, thereforee, the plant remains in Karachi.'

(43) In our opinion the doctrine of frustration embodied in section 56 of the Contract Act has no application. Under the doctrine of frustration a contract may be discharged if after its formation events occur making its performance illegal, impossible or commercially sterile. The doctrine of frustration is relevant when it is alleged that a change of circumstances after the formation of the contract renders it physically or commercially impossible to fulfill the contract. 'Special importance is necessarily attached to the occurrence of any unexpected event that, as it were, changes the face of things.' But not every uncontemplated turn of events 'changes the face of things'.

(44) It has to be remembered that the doctrine of frustration does not protect a party whose own breach of contract actually is the frustrating event. A party cannot rely on 'self-induced frustration, that is, on frustration due to his own conduct or to the conduct of those for whom he is responsible.' The principle of frustration assumes that the frustrating event was not caused 'by the fault of either party to the contract. 'The essence of frustration is that it should not be due to the act or election of the party' : 'Reliance cannot be placed on a 'self-induced frustration' :

(45) On the facts of this case it appears that the frustrating event, if frustration ever there was, was caused by the bank's own fault. There was a default by the bank in selling the plant to Akhtar Ali which caused the allegedly frustrating event. As Lord Russell said in.

'POSSIBLEvarieties (of fault) are infinite.'

GIVINGan illustration he said: 'Thoughtlessness of the prima donaa who sits in a draught and loses her voice' caanot be said to be a frustration of the contract as the resultant frustration is 'self-induced'.

(46) The rule that frustration must not be self-induced applies to all deliberate or negligent acts, whether they are actually breaches of contract or not. For it is in all these cases unjust to make the other party to bear the loss.

(47) It appears to us that the bank is responsible for the no delivery of the plant and it cannot plead frustration. It is in evidence of Shri Ravi Tandon, First Secretary of Indian High Commission in Karachi, that the plant was never declared as an evacuee property and that Foreign Exchange Control Restrictions had come into force in Pakistan on the 19th of September, 1949. It would, thereforee, appear that the sale d delivery of the plant on March 11, 1950 to Akhtar Ali by the bank's Karachi branch without the consent and knowledge of the distillers and without the permission of their own bead office was not proper and legal. In March 1950 the sale had to be cancelled on payment of damages and the machinery was taken back. The payment of damages in April 1950 from the bank's resources in Pakistan was a breach of the exchange regulations. The State Bank of Pakistan, thereforee, insisted that the bank must 'recoup' them with am equivalent amount of money from the Indian resources of the bank. This condition was capable of performance by the bank. The bank cannot plead self-induced frustration, if at all frustration there was any. Can a prima donna who loses her voice by negligently catching a cold plead frustration

(48) The evidence on record shows that the Government of India had agreed to the transfer of money. The Government of Pakistan was willing to release the plant if this one condition was fulfillled. The bank in its written statement pleaded that 'this defendant's head office at Delhi had remitted even bigger sums in its Lahore office' (para 14). The question may well thereforee be asked : Why did the bank not transfer Rs. 30,000 from India to Pakistan through the State Bank of Pakistan No good reason has been shown for failure to transfer the sum. This is the central point in this case. On this question depends the right decision of the suit.

(49) With the imposition of the condition by the State Bank of Pakistan the basis of the contract was not overthrown. It was not the destruction of the whole foundation of the contract. It is another thing that the bank's job became more onerous by reason of the condition but it never became a job of a different kind from the contemplated in the contract. Under the contract it was the bank's obligation to return the plant. In truth the distillers' suit is to enforce that bligation.

(50) It is true that the partition of India brought in its train gigantic problems. At one stage the distillers considered the plant to be a 'dead loss' and pleaded with the bank 'to share the loss with us' and 'give us some relief' as the Pakistan Government had declined to grant a permit and all hopes had been 'dashed to the ground'. See D-14 dated March 2, 1950, D-15 dated February 17, 1950 and D-18 dated August 5, 1950. True it is that the whirlpool of political events of August 1947 caught people in their swirl and cast them hither and thither.' In the surging waters of the great divide there was no ark of safety. But with every year of peace the landscape brightened. In 1954 the distillers were able to sort out things with the Pakistan Government. As a, result of the untiring efforts of the distillers and the good offices of the Indian High Commission permission was ultimately obtained on May 22, 1954 when the Government of Pakistan agreed to release the plant on the condition of repatriation of Rs. 30,000. thereforee, it will not be correct to say that the agreement, factually or legally, became impossible of performance so as to attract Section 56 of the Contract Act. We can see no justification for a conclusion, of law that the contract was frustrated. Frustation is not to be lightly invoked as the dissolvent of a contract. 'No court has an absolving power'.

(51) It appears to us that the instant case is not a case of frustration but one of abuse of possession. Winfield says, it is possible for you to commit conversion of my goods by wrongfully abusing possession of them when you have already got it.

'ABUSEof possession which the defendant already had may take many forms, such as sale accompanied by delivery of the plaintiff's goods or their documents of title to another, pawning them, or otherwise disposing of them. Even the use of a borrowed car for the transporting of uncustomed watches in a conversion of the car, for such conduct if discovered leads to the forfeiture of the car under the Customs and Excise Act 1952 and its consequent loss to the owner' (Winfield on tort eighth edition page 493, 497).

(52) We have dwelt on this point in some detail, not becuse it has any intrinsic merit but because it has acquired from the course of the proceedings a specious validity.

(53) 2. Punjab National Bank: Is it a necessary party: Counsel argued that the Punjab National Bank was a necessary party and the distillers must fail because they gave up their claim against the Punjab National Bank at the time of the arguments in the trial court. He relies on

(54) There is no substance in this contention. The suit as originally brought was instituted only against Bharat Nidhi, the successor of Bharat Bank. The plaint was then amended. By order dated April 8, 1963, Punjab National Bank was added as a party-defendant No. 2 to the suit. The distillers alleged that there was assignment of the claim in suit by the bank in favor of the Punjab National Bank, that there was a devolution of rights and liabilities and lastly that the bank had amalgamated with the Punjab National Bank. These pleas, one and all, were denied by the Bank. Assignment, devolution and amalgamation were disputed. In fact it was contended that the suit against the Punjab National Bank was not maintainable. That was the stand of Bharat Bank. Similar was the stand of Punjab National Bank. defendant No. 2, in its written statement. The Punjab National Bank clarified that Bharat Bank Ltd. had transferred certain assets and liabilities to it which did not contain the claim in suit and that there was no privity of contract between the Punjab National Bank and the distillers. Additional issues were framed on September 19, 1963 raising the question whether the interest and liability of defendant No. 1 devolved on defendant No. 2. The distillers at the time of arguments in the trial court gave up their claim against the Punjab National Bank in view of the admitted position by the two banks that there was no assignment by Bharat Bank in favor of the Punjab National Bank. In view of the positive stand taken by the bank in the pleadings it cannot now be contended with justice that the Punjab National Bank was a necessary party to the suit and failure to prosecute the claim - against it is fatal to the suit of the distillers.

(55) 3. Delivery of Possession : Counsel submitted that possession was delivered by the bank to the distillers by writing to Express Company on September 19, 1951 (Ex. 12) that they had raised their lien on the goods stored with it and that on payment of their charts they may deliver the goods to the distillers. We cannot accept this position.

(56) This argument raises a fundamental question for decision : What is the nature of the transaction Was it a pledge or a lien The trial court found that it was a case of bailment and not pledge. We do not agree. To us it seems a clear case of pledge.

(57) The position in Indian Law is the same as in English law. Section 172 of the Contract Act which defines a 'pledge' affirms the English Common law. Section 172 states that 'the bailment of goods as security for payment of a debt or performance of a promise' is called a 'pledge'. The bailor is in this case called the 'pawnor' and the bailee is called the 'pawnee'. According to section 148 of the Contract Act 'a bailment is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called the 'bailor'. The person to whom they are delivered is called the 'bailee' '. Section 149 states that the delivery to the bailee may be made by doing anything which has the effect of putting the goods in the possession of the intended bailee or of any person authorised to hold them on his behalf.

(58) The salient feature of bailment is the clement of possession. It is said that the bailee has a special property in the goods. The term 'special property' in modern law means only that the bailee has possessor rights. The two main features of bailment, thereforee, are

(1)delivery of possession or in some cases transfer of possession, of personal property;

(2)a specific mandate which requires the identical rest either to be returned to the bailor or to be dealt with in a particular way.

(59) It was said that the bank only had a lien. We do not think su. It is true that it was described as a lien' in the letters by the bank. But we do not accept that it was a mere lien. The test is not the term which is used by the parties in phrasing the agreement, but the real nature of the transaction. Statutory rules cannot be evaded by the parties using the term lien' when the transaction is really one of 'pledge'. A lien' is merely a personal right. A pledge is a much more valuable right than a mere lien. The classical definition of 'pledge' or 'pawn' is that of Lord Holt in the celebrated case of as delivery to another of goods or chatties to be a security to him for money borrowed of him by the bailor.

(60) Emphasised the difference between a lien and a pledge-in the former, there is no power of sale or disposition of the goods, whereas in the latter case there is power to sell on default. A lien is merely a personal right of retention. One who has a lien has only a right of detaming the rest until the money owning is paid : a lien disappears if possession is lost, and there is no right of sale. Sale on default is an incident of pledge. A pledge is assignable. A lien cannot be taken in execution, as the lien is merely a personal right :

(61) 29 cases of the plant were stored with the Express Company by the bank. The possession of the goods remained with the bank throughout. To begin with some goods were stored by the bank in its godown, some were stored with Express Company. After the cancellation of the sale in favor of Akhtar Ali all the 29 cases were stared with Express Company. Without the permission of the pledgee the pledger could not obtain the goods. From the letters it is quite clear that the possession was of the bank. thereforee, in law the bank was bound to deliver possession at least in Karachi if not in India. There was (1) the advancing of loan, (2) the endorsement of the documents in favor of the bank enabling it to take delivery and to store goods with it, and (3) after taking delivery the bank stored the goods with Express Company (See A-9 dated May 22, 1950). Their combined effect was that the bank was in control of the goods till the debt was discharged. Such a transaction is pledge. This is a well-known practice followed by the bankers :

(62) The pledge should be in a position to redeliver the goods on payment of the debt. If he has put himself in a position where he is not able to redeliver the goods he cannot obtain a decree against.the pledger. If it were otherwise, the result would be thathe would recover the debt and also retain the goods pledged and the pledger in such a case would be placed in a position where he loses both the money and the goods pledged as security :

(63) A bailor in the event of non-delivery of the goods by the bailee, on a demand made by him in that behalf is entitled at his election to sue the bailee either for wrongful conversion of the goods or the wrongful detention thereof. It is open to him to pursue either remedy against the bailee just as it suits him having regard to all the circumstances of the case. The measure of damages is the value of the goods as at the time of the verdict or the judgment : See Dhian Singh v. Union of India, : [1958]1SCR781 .

(64) Applying these principles to the facts of this case it appears to us that the distillers became entitled to the possession of the goods on August 9, 1951 when they had fully paid the loan advanced to them by the bank. The bank was bound in law to deliver the plant. The pledge at no time becomes the owner of the goods pledged. He has only a right to retain the goods until his claim for money advanced thereon Is satisfied. He has a special interest in the property or a 'special property' in the goods pledged, as it is sometimes called. The general property therein remains with the pledger and wholly reverts to him on payment of the debt. Even it be taken to be a case of lien' as it has been Styled in the correspondence it was a case of possessory rights. At all events the distillers were entitled to the actual delivery of the goods. If the bank did something and had thereby put itself in a position where it was not able to deliver the goods it must pay the value of the goods at the date of the verdict or the judgment. Counsel for the distillers however confined his claim before us only to Rs. 2,59,166/12 which he said was the value of the plaint: See A1 A6. The claim for damages was not pressed. Nor is there any evidence on this part of the claim worth considering.

(65) We, thereforee, hold that the distillers are entitled to a decree for the said amount.

(66) 4. Knowledge : Counsel argued that the distillers at no time informed the bank that the Pakistan Government had agreed to release the plant on condition of repatriation of Rs. 30,000. From the record it appears to us to be so. But there are two simple answers to this argument. First, it was the duty of the bank to get the restriction' removed and deliver the goods. Section 160 casts a duty on the bailee :

'160.Return of goods bailed on expiration of time or accomplishment of purpose-It is the duty of the bailee to return, or deliver according to the bailor's directions, the goods bailed, without demand, as soon as the time for which they were bailed has expired or the purpose for which they were bailed has been accomplished.'

(67) The bank cannot escape from this liability simply by writing to Express Company. It bad to see to it that the goods are delivered to the distillers after they had brought the impediment to its -notice by means of its letters. (See D/31 supra). The complaint of the distillers that they were unable to get the delivery by reason of the hank's default in making payment of damages from its resources in Pakistan fell completely on deaf ears. They distillers' protestations remained unheeded :

(68) Secondly, knowledge was certainly imported to the bank in the plaint after the institution of the suit. That the bank knew about the obstacle before the institution of the suit is also clear from the evidence of Ram Sahai who was at the time the manager of the head office at Delhi.

(69) 5. Proof of Order : Counsel argued that there was no order of the Pakistan Government or Pakistan State Bank imposing any such restriction as has been alleged by the distillers and that no such order was proved in evidence. We are unable to agree. The letter dated March 7, 1951 of the Department of Supply and Development, Government of Pakistan to Express Company not to deliver the machinery without prior permission is the very order which gave rise to difficulties in the way of the distillers in obtaining the plant. The evidence of Mr. Rolt of Express Company makes it abundantly clear that the Pakistan Government had forbidden the disposal of the machinery. The correspondence between the Government of Pakistan and the High Commission of India proved on commission by Mr. Ali Ahmad Rasheed of the Ministry of Commerce, Government of Pakistan, amply proves the restrictions imposed and the condition on which the Pak Government was prepared to release the plant. See Ex. 20 and 21. As we have said, in March 1951 the Director General Supply and Development, Government of Pakistan, forbade the Express Company to dispose of the plant (Ex. 7-Ex. 16). This order is proved by the uncontradicted evidence of witnesses on commission What more is needed ?

(70) Cross Objections The bank has filed cross-objections challenging the findings of the trial court on issues I and 2. We are of the view that cross- objections are not maintainable as the decree was substantially in favor of the bank and it was open to it to support the decree of the trial court on any ground (0.41 rule 22, Code of Civil Procedure as it stood before the Amendment Act, 1976).

(71) We, thereforee, dismiss the cross-objections.

(72) The trial judge completely misunderstood the nature of the transaction when he said that it was a case of bailment and not pledge. Pledge is a bailment for valuable consideration. The essential test of a bailment is that possession should pass to the bailee. The receipt of possession by the bailee is an, essential factor. But the bailor also has the 'right' to possess. Since he has a right to immediate possession the bailor has an interest worth protecting. The' 'right' to possess is treated as being possession itself. Law has adopted a fairly good working scheme of possession to confer on the bailor the right to get back that possession of which he parted with in favor of the bailee. This is how the concept of possession is used as a tool of legal thought to invest the bailor with possessory remedies. Nothing could be clearer than the words of

'UNDEREnglish law, where there is a simple contract of bailment at will the possession of the goods bailed passes to the bailee. The bailor has in such a case the right to immediate possession, and by reason of this right can exercise those possessory remedies which are available to the possessor. The person having the right to immediate possession is, however, frequently referred to in English law as being the 'possessor'-in truth English law has never worked out a completely logical and exhaustive definition of 'possession'.'

(73) The same is the law in India

(74) To summarise :

(1)Pledge is abailment of goods to a creditor as a security for some debt or engagement. A bailment or delivery of goods by a debtor to his creditor to be kept till the debt is discharged is called a pledge. Pledge is a kind or class of bailment as was said by Lord Holt in the leading authority of Coggs v. Bernard (supra).

(2)The bailee or the pledgee agrees to restore the thing to the bailor or pledger in the same condition substantially as he received it.

(3)If the bailee did an act entirely inconsistent with the terms of the bailment he incurs a liability.

(4)Loss caused by an act not authorised by the terms of the bail- ment will fall on the bailee.

(5)It is a tort for the pledgee to retain the goods after paymant of the Debt.

So we hold that it was the bank's duty, obligation and responsi- bility to re-deliver the identical rest (the plant) to the distillers. As the bank failed to do this the bank must pay the price of the res.

(75) For the foregoing reasons we allow the appeal and pass a decree for Rs. 2,59,166/12.00 in favor of the plaintiff-appellant Jagatjit Distilling and Allied Industries Ltd. against the defendant- respondent Bharat Nidhi with interest at the rate of 6 per cent from the date of the suit till payment. The appellant shall be entitled to costs throughout.


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