Skip to content


The Mercantile Bank of India Ltd. Vs. the Official Assignee of Madras - Court Judgment

LegalCrystal Citation
SubjectBanking
CourtChennai
Decided On
Reported inAIR1933Mad207; (1933)64MLJ320
AppellantThe Mercantile Bank of India Ltd.
RespondentThe Official Assignee of Madras
Cases ReferredC. Simeons & Co. v. Durand
Excerpt:
- - 4. the railway receipt is by the bank stamped with the bank stamp and endorsed on behalf of the bank by the manager. ..order for delivery, or any other document of title to goods, may make a valid pledge of such goods or documents :provided that the pawnee acts in good faith, and under circumstances which are not such as to raise a reasonable presumption that the pawnor is acting improperly,: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. 17. next what is meant by 'person' ? 18. this term can hardly be restricted to 'mercantile agent'.can it in view of the words underlined in the proviso be restricted to mean 'a person other than the owner' ? 19. in construing.....stone, j.1. the facts in this case are simple and can be stated as follows:the appellants whom i shall hereafter refer to as the bank lent one c.k.n., now an insolvent, money by various loans. these loans were arranged in order to finance the purchase by c. k. n. of groundnuts.c. k. n. was a large buyer of groundnuts. he purchased on credit. sometimes he received delivery in the various centres in the mofussil; sometimes he received delivery in madras. in the former case he was the consignor and the consignee; in the latter case he was the consignee mentioned in the various railway receipts relating to these various consignments during their transit by rail. transit was by a carrier hereafter referred to as the port trust. the immediate destination in all cases was the port trust godowns.....
Judgment:

Stone, J.

1. The facts in this case are simple and can be stated as follows:

The appellants whom I shall hereafter refer to as the Bank lent one C.K.N., now an insolvent, money by various loans. These loans were arranged in order to finance the purchase by C. K. N. of groundnuts.

C. K. N. was a large buyer of groundnuts. He purchased on credit. Sometimes he received delivery in the various centres in the mofussil; sometimes he received delivery in Madras. In the former case he was the consignor and the consignee; in the latter case he was the consignee mentioned in the various railway receipts relating to these various consignments during their transit by rail. Transit was by a carrier hereafter referred to as the Port Trust. The immediate destination in all cases was the Port Trust godowns at Madras. The goods were first placed in Port Trust godowns to await orders. The goods in question were there or en route at the time of the act of bankruptcy.

2. That was the course of business pursued by C. K. N., his sellers and his carriers in relation to the purchase, transport and delivery of these goods.

3. As regards C. K. N. and the Bank the following are the material acts done: C. K. N., having obtained railway receipts in respect of these goods bought on credit, took or sent the railway receipt in respect of any particular consignment to the Bank to arrange a loan. Before a loan was granted the borrower was required: (1) to endorse and assign the railway receipt; (2) to sign and give a letter of lien (see documents, page 49) ; (3) make and deliver a promissory note. The letter of lien is a document whereby the borrower 'acknowledges to have deposited with the Bank the property hereunder mentioned as a collateral security for the due payment of' the promissory note. There are many other terms, the general purpose of which is to enable the Bank to make up the security if there appear to be a deficiency, to hold in respect of charges or expenses, to sell and appropriate, or if necessary, to obtain such further documents as may be found necessary to vest in the Bank the property to enable the Bank to sell and to prevent the borrower from doing anything to revoke or avoid any authority given or to be given to enable the Bank to sell. The hereunder-mentioned property is shown in the schedule. The schedule mentions bags of groundnuts and refers to the number of the loan, particulars of which appear in the loan register. The precise bags of groundnuts can be identified from the information given in the schedule or the loan registers through the railway receipt.

4. The railway receipt is by the Bank stamped with the Bank stamp and endorsed on behalf of the Bank by the manager. It is handed to the Bank's head godown-keeper and by him entered with particulars in a book. In the past many of these railway receipts had been handed by him to the godown-keeper employed by the Bank who worked at the Port Trust outside godowns (i.e., the godowns bearing the Bank's board) and by him handed to C.K.N.'s representative to enable him to obtain, on paying freight, the goods which, up to then, were in the Port Trust's inside godowns. It is unnecessary to complicate this narrative with a reference to various frauds which were thereby committed, the goods, title to which is in dispute in this case, being at all material times (i.e., up to the date when the act of bankruptcy occurred, viz., 7th February, 1929) either in course of transit by rail, or in the Port Trust's inside godown awaiting orders as to delivery.

5. As to the course of business between the Bank and the Port Trust, the Port Trust were aware of the Bank's board on the outside godown but were not given actual notice by the Bank, until after the adjudication, of either the lien created by the letter of lien or the pledge, created by the assignment by way of security of the railway receipts. At that stage the Bank notified the Port Trust, but the Port Trust declined delivery to the Bank pending communication with the Official Assignee. The Official Assignee claimed the goods. Subsequently under order of Court the goods were sold by the Bank for the account of whosoever may be found entitled. The question of substance is: who is entitled, the Official Assignee or the Bank? The learned Trial Judge, on the issues as framed, has held that the Official Assignee is entitled. From that decision this appeal is brought.

6. In considering the law involved in the determination of the above questions it is very desirable to make it clear that the issues and consequently the judgment appealed from do not raise directly a question as to the effect of the letter of lien.

7. It is conceded however by the Advocate-General that (apart from the order and disposition clause) if either (1) the letter of lien creates a charge on these goods, or (2) the railway receipt by endorsement transfers not merely a title to receive but constructive possession of the goods, then the Official Assignee's title is postponed to that of the Bank, the Bank having in the first case a charge for the amounts advanced against these' goods and in the second case a pledge of the goods for the amount advanced. But it is urged that (a) a railway receipt unlike a Bill of Lading, though a document of title, is a document giving title to receive but not giving constructive possession ; possession being a necessary ingredient of the transaction of pledge, there being no possession there is no perfected pledge; or (b) granted a perfected pledge, the goods have remained in the order or disposition of the insolvent so as to pass to the Official Assignee under the reputed ownership, section of the Presidency Towns Insolvency Act, Section 52(2)(c). The argument addressed to us hardly glances at the effect of the letter of lien.

8. On the other hand it is urged that the railway receipt has,. by statute, been assimilated for this purpose to a Bill of Lading,, alternatively, has been treated by the custom of merchants in Madras as equivalent to a document passing possession of the goods by delivery of the document itself. It is also urged that in the circumstances here present, granted that the Bank is to-be deemed the true owner of these goods for the purpose of Section 52, they have not so acted as to make the insolvent the reputed owner. No argument has been addressed to us dealing with the consequences flowing from the fact that these goods are the subject-matter of letters of lien.

9. As to custom: this is a question of fact and as there was; some evidence on which the learned Judge could find as he did, his finding cannot be disturbed.

10. The most difficult question is as to the consequences which; in law flow in India, from the endorsement and delivery, by way of security for a loan, of a railway receipt. If, for this purpose, a railway receipt constructively passes possession, then it is not contested the insolvent pledged his goods; if, on the other hand, the railway receipt passes the title to receive goods in futuro and on presentation of the railway receipt and a pledge of documents of title do not (save in the case of Bills of Lading) operate as a pledge of the goods, then it is conceded there was no pledge of the goods. This still leaves outstanding the question whether there was a pledge of the railway receipts and if so what effect in law that has. Issue 1, it is to be observed, relates to the transfer, the delivery and the pledging of railway receipts and mentions nothing about goods.

11. The material statutory provisions are as follows:

12. By Section 137 of the Transfer of Property Act a railway receipt is declared to be included in the expression 'mercantile document of title to goods'. That section is part of a. chapter which relates, and the section relates, to contracts, and accordingly by Section 4 of the Transfer of Property Act it is made part of the Indian Contract Act.

13. By Section 178 of the Indian Contract Act applicable (it has since been substantially amended so as to be brought in line with the English Factors Act and Sale of Goods Act) it is provided that (the words that create difficulty are italicised):

a person who is in possession of any goods, or of any bill of lading...order for delivery, or any other document of title to goods, may make a valid pledge of such goods or documents : provided that the pawnee acts in good faith, and under circumstances which are not such as to raise a reasonable presumption that the pawnor is acting improperly,: 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.

14. It is to be observed that this provision occurs in that part of the Contract Act which is headed 'Bailments of Pledges' and that by Section 172 'the bailment of goods as security for payment of a debt or performance of a promise is called 'pledge'.'

15. So in a part which, by transposition of terms, is purporting to deal with bailments of goods (whatever that may be) we have a provision which speaks of 'a valid bailment of goods, of such goods or documents'.

16. This, of course, is an impossible reading. The question is: (1) Is the expression 'may make a valid pledge of such goods or documents' to be construed without reference to Section 172; or (2) are the words 'of such goods or documents' to be deleted as redundant; or (3) should the expression be read as follows: 'may make a valid pledge by the pledging of such goods or documents'? If the last alternative be chosen, then a pledge of the described documents has the same effect as pledging goods because 'a valid pledge' means 'a valid bailment of goods'. If the second alternative be chosen, one is left in doubt how one may make the valid pledge but one would have to assume the addition of the words 'by pledging such goods or documents' and so arrive at the same meaning as in the third alternative. If the first alternative be chosen one has to consider what is the effect of pledging a document as distinct from pledging goods.

17. Next what is meant by 'person' ?

18. This term can hardly be restricted to 'mercantile agent'. Can it in view of the words underlined in the proviso be restricted to mean 'a person other than the owner' ?

19. In construing this difficult Act I think it is well to bear in mind the so-called Golden Rule for the interpretation of Statutes. It is thus stated in Maxwell, 5th Edition, at page 4:

In construing statutes the grammatical and ordinary sense of the words is to be adhered to, unless that would lead to absurdity or some repugnancy or inconsistency with the rest of the statute.

Thus Lord Wensleydale in Grey and Ors. v. Pearson (1857) 6 H.L.C. 61 : 10 E.R. 1216. Lord Ellenborough in Doe v. Jessep (1810) 12 East 288 : 104 E.R. 113 described it as 'a rule of common sense as strong as can be'. Lord Cranworth in Gundry v. Pinnigeri (1852) 1 De G.M. & G. 502 : 42 E.R. 647 called it the cardinal rule and Jervis, C.J. in Mattison v. Hart and Anr (1854) 14 C.B. 385 : 139 E.R. 147 described it as the Golden Rule. Applying that rule to Section 178, one asks first: Does the phrase 'person not in possession of goods' include (giving the words their ordinary meaning) the owner of the goods not in possession of goods The answer is: It does. Next does that result in repugnancy or inconsistency with the rest of the instrument? Looking at Section 103 where the owner is expressly mentioned as a person having power to pledge (i. e., make a bailment of goods) by pledging documents of title the answer is that it does not. Looking at Section 108 one sees a difference but neither a repugnancy nor an inconsistency. On the contrary the legislature when enacting the provisions of Section 108 expressly excludes the owner from rights X (relating to sale) ; when enacting Section 178 includes the owner in the class having rights Y (relating to pledge). That is not inconsistent or repugnant. The argument founded on a supposed carelessness must be rejected; as must that founded on the supposition that India must necessarily follow at a respectful distance England in its legislative advances. Even if the result of the construction, were absurd that is no reason to depart from clear and unequivocal language capable of only one meaning. See Maxwell at page 5. The words in the proviso assist neither construction. They are neutral. Whether 'person' includes owner or not, it clearly includes persons who are not owners and accordingly provision has to be made for them, and some classes of such persons have to be excluded. The provisos describe such excluded classes. The proviso relates, it should be observed, to pledges of goods as well as to pledges of documents.

20. The duty of a Court is not to draft laws so that they may be just or reasonable or consonant to accepted principle. Its duty is, to expound the laws as they stand giving to all words used the meaning they have either according to common usage or, if defined, according to the meaning given therein in the Act in question or in the Interpretation Act. It is of course in the last degree unfortunate that an Act should be drafted and then that definitions should be added which result in most curious results but however curious the results a Judge must give effect to them. The Legislature must use the pruning knife if it is to be used at all.

21. In deference to the argument addressed to us based upon other parts of the same Act and the state of the law as it stood when this Act in 1872 was passed, those arguments are now examined.

22. If Exception I of Section 108 is referred to it will be seen that, when dealing with the contract of sale, persons in possession of these documents of title may give a better title than they have. Here the Act says 'when any person is, by consent of the owner, in possession, etc.' It is urged that as in Section 108 the inclusion of the words 'by the consent of the owner' excludes the owner from the class covered by the word 'person,' so in Section 178 it was the intention of the legislature to exclude 'owner' from the term 'person'. I know, however, of no such rule of construction. It pre-supposes carelessness on the part of the legislature. The fact that owner is thus excluded from person in Section 108 suggests that it was not intended to exclude him in Section 178; otherwise, what could be easier than to use the same language in both cases? Where one finds words included in one section and excluded in another, one must assume either carelessness or intention and unless the latter results in an impossible position (and who is to say this position is impossible?) the legislature must be assumed to be using its language intentionally.

23. Then there is Section 103. This speaks of the assigning of a 'bill of lading or other instrument of title to any goods by the buyer by way of pledge '. In such a case, the unpaid vendor cannot stop except on satisfying the pledgee.

24. Unless one is to use the word 'pledge 'here in one sense and in Section 172 in another, this section means that one may make a bailment of goods by pledging instruments of title. In Ramdas Vithaldas v. S. Amerchand & Co. (1916)L.R. 43 IndAp 164 : I.L.R. 40 B. 630 : 31 M.L.J. 541(P.C) the Judicial Committee treated the effect of this section read with Section 102 as enabling a pledge of the goods to be effected by pledging not only Bills of Lading (which in English Law operate, unlike all other documents of title, to pass constructive possession of goods) but also 'instruments of title'. Their Lordships also held that instruments of title and documents of title are terms having, for the purpose of this Act, similar meanings. For similar reasons, it may be concluded that the 'mercantile documents of title' referred to in Section 137 of the Transfer of Property Act are documents which are included in the wider expression 'documents of title' and that 'documents of title or instruments of title' include railway receipts.

25. Now if under the provisions of Section 103 the pledging of a railway receipt effects a pledging of the goods, is it not desirable so to construe Section 178, if the rules of construction so permit, as to enable that section to be so read as to provide also for the pledging of goods by the pledging of documents of title? Otherwise, of course, very curious results flow. In this case, this results: If here the unpaid vendor of the goods had exercised his power to stop, a power which arises on insolvency by Section 99, he could have defeated the Official Assignee but he would have had to pay off the Bank: but if he does not exercise this power then (because Section 178 and not 103 applies, and we are for the sake of the analysis assuming a different effect of pledging documents under 178 from that which flows as from 103) the pledge is only of the document, the goods are not pledged, the possession of the goods as distinct from the documents does not pass and the Official Assignee can claim as against the Bank. This appears to result in the impossible position that the Bank's position is entirely altered according to whether an independent third party does or does not exercise a power against the Official Assignee; improving if he does exercise the power and declining if he does not.

26. This difficulty immediately disappears if one choose the third alternative reading of Section 178 above referred to. As no other reading appears necessarily to follow from the language used, this reading appears to be the one most consonant to the other provisions of the Act.

27. There remains the difficulty caused by the use of the word 'person'. This difficulty may be expressed thus:

At Common Law a pledge of goods could only be effected by parting with the possession actually or constructively of the goods. By the Law Merchant, Bills of Lading but no other documents of title were treated as equivalent for this purpose to goods. The transfer of a delivery order operated only as a token of authority to take possession and not as a transfer of possession. See M'Ewan v. Smith (1849) 2 H.L.C. 309. This position was altered by the Factors Act which eventually enabled a restricted class of agents (but not the principal) to pledge goods by pledging documents of title to goods. This entirely changed the effect of a document of title when, but only when the pledgor was a mercantile agent. The law in England did not reach even this stage until the Factors Act of 1877. The Indian Contract Act, on the other hand, was passed in 1872 and the law previously applicable was that enacted by the Indian Factors Act of 1844, the provisions of which are textually the same as the English Factors Act of 1842. This gave to the owner no such power to pledge goods by pledging, documents. Therefore an owner cannot pledge goods by pledging documents unless delivery of the documents operates as constructive possession of the goods and this is so only in the case of Bills of Lading. That appears to be the argument based on the history of this legislation.

28. Thus if the word 'person' includes 'owner,' and if the section is read as above construed, it results in this : that in 1872 the Indian Legislature went far beyond the position arrived at in England even to-day, for it made pledges of documents the same as pledges of goods not only when the document was pledged by a mercantile agent but where it was pledged by anybody (subject to the provisos) including the owner. Although this may seem improbable, it is not impossible, and. whether 'person' does or does not include owner it certainly includes a wider class than the class of mercantile agents so that some extension of the English position on any reading must be involved. This being so, no reason is seen for giving to a word which appears to be unambiguous a meaning other than its ordinary meaning. That 'person' in such a collocation includes 'owner' prima facie appears to be clear.

29. But there is in my opinion a conclusive consideration to be derived from section 103. This section, as the Judicial Committee in the above cited case have held, enables goods to be pledged by pledging documents of title. But the pledgor there referred to is left in no doubt. It is the buyer of the goods. That is to say, the owner may under Section 103 pledge goods by pledging documents. Why then is it necessary to do violence to the use of words by excluding him from the class of persons who may pledge goods by pledging documents when one is considering Section 178 ?

30. If, as is urged by the Advocate-General, Section 178 relates to (a) the pledging of goods, and (b) the pledging of documents, then as also urged by him, no provision such as is contained in Section 3 of the English Factors Act is contained in the Indian Contract Act and so a pledge of a document of title has no other effect than pledging the document. For the reasons above assigned, Section 178 should be so construed, i.e., it should not be construed so as to distinguish between a pledge of goods and a pledge of documents. It is purporting to deal with pledges and pledges are defined as bailments of goods.

31. I am therefore of the opinion that here there was a pledge of railway receipts and such pledge had the effect of pledging the goods. Alternatively if I am wrong in regarding a pledge of a railway receipt as a pledge of the goods there was in my opinion a good pledge of a railway receipt as a document and the effect of that was to give to the pledgee as against either the insolvent or the Official Assignee the right to receive from the carrier those goods. There being no notice, assuming the alternative opinion is the correct one, had the Port Trust parted with actual possession to a third party, or had a third party lawfully seized the goods as in the Scotch case of Inglis v. Robertson (1898) A.C. 616 it might well be that owing to the Bank's failure to notify the person having custody of the existence of the pledge the Bank would have no remedy either against the carrier or the person obtaining possession. No such question however here arises in my opinion.

32. It is necessary before parting with this branch of the case to advert to the practice of the Port Trust of delivering against indemnity bonds to persons without production of the railway receipts. This power is said to be derived from Section 57 of the Railways Act. It is said that such a power shows that a railway receipt is not a document of title capable of passing possession when pledged. I do not think so. The effect of so delivering is that the Port Trust if held liable have their remedy over against the person giving the indemnity. That is to say, they have a right, derived from the indemnity bond, to claim to be indemnified. Indemnity only arises where the person to be indemnified suffers a loss. The loss arises because such person is made liable. Having been made liable and having suffered loss, the carrier proceeds on the indemnity bond. If the person giving it is insolvent, that is the carrier's misfortune.

33. Further the fact that it was considered necessary to give this statutory right to the carrier to refuse delivery suggests that apart from such statutory power he would have been bound to deliver and this appears to be so whether one regards a railway receipt as a document of title passing constructive possession (as a Bill of Lading) or a document of title giving the right to receive (as a delivery order).

34. The next question that arises is : Assuming that there was a pledge of the goods and that accordingly constructive possession had passed to the Bank, were the goods in the order and disposition of the bankrupt ?

35. The material dates and facts are as follows:--The goods in question were despatched in various parcels from various places between 13th January and 4th February: the act of bankruptcy occurred on the 7th February. At that date some of the goods were on rail, some were in the Port Trust's inside godown, i.e., freight charges had not been paid and the carrier was either carrying them or holding them in warehouse pending delivery. Such warehouse was the railway goods shed or godown. The dates on which the various parcels arrived at the Port Trust godowns are shown at page 41 of the documents, the case of items Nos. 7, 10, 12, 13, 14, 16, 17, 18, 23, 24 and 25 the goods had arrived on or before the 7th February. In all the other cases, the goods arrived on or after 7th February, i.e., were in transit at the time of the act of bankruptcy.

36. The learned Trial Judge has expressed the opinion that in the circumstances here present the goods were in the order and disposition of the insolvents with the Bank's consent. He adds:

It has always been held that the absence of notice by the true owner of his title to the bailee is evidence of such consent.

37. Now of course the reputed ownership clause is generally resorted - to where the possession is in the insolvent and the ; ownership in a third person. Here the custody is in a carrier, the constructive possession is in the Bank, and the ownership in the insolvent. 'True owner' for the purpose of Section 52 can have a very special meaning and can include a person having a lien or an equitable charge, as well as a person having the legal title. But is the section applicable where, as here, not only are the documents of title transferred but the insolvent has given a letter declaring that the goods are deposited with the Bank by way of security and where the goods are not in any place or warehouse over which the insolvent has control but in a carrier's railway waggon or goods shed?

38. A case which in my opinion is similar to this came before the Courts in England in 1905. In that case (In re Hamilton Young & Co., Ex parte Carter (1905) 2 K.B. 381, on appeal p. 772) the Bank advanced moneys to traders for the purchase, preparation and shipment of goods to the East. The course of business was for the traders to send the goods to bleachers who bleached them and sent them to packers to be packed for shipment. The Bank was handled bleachers' receipts. Prior to the act of bankruptcy the Bank gave notice to the bleachers and to traders claiming the goods. Here no notice was given to the Port Trust. Whether that makes all the difference on this point I shall consider.

39. The first question was whether the letter of lien amounted to a bill of sale. No such question arises here.

40. The next question was, assuming the letter of lien was not void, were the goods in the actual possession of the bleachers in the order and disposition of the bankrupt as being held by their bailees (the bleachers) with the consent of the 'true owner' (the bank as persons having a charge created by the letter of lien) Bigham, J., at pages 389 and 390 observes:

It was said that the goods were in the order and disposition of the bankrupts at the commencement of the bankruptcy. That is a question of , fact, and there can be no doubt as to the answer to be given to it. The goods were no, doubt the goods of the bank in the sense that they had a charge on them; but the Bank never consented to the goods being in the order and disposition of the bankrupts in their trade or business, and certainly did not do so under such circumstances that the bankrupts became the reputed owners of the goods.

41. In re William Watson & Co., Ex parte Atkin Borthers (1904) 2 K.B. 753 was followed. That case decided, what I believe has never since been doubted, that whether the clause applies depends upon the circumstances of the case and whether those circumstances necessarily lead to the inference of ownership. The inference of ownership must, not might, arise. See at pages 756 and 757.

42. On appeal in Hamilton Young's case at page 758 Vaughan Williams, L. J., does not put the matter on the ground of notice at all, and with respect, I think for a very good reason. He considers the documents, the letter of lien and the bleachers' receipts. He points out that the goods as from the moment of the giving of the letters of lien (not from the date of the notice) were subject to a good lien on the part of the Bank. Coupled with the receipts he came to the conclusion (though I find page 788 somewhat difficult to follow unless there is a misprint) that the Bank had possession and control. See as to this Cozens-Hardy, L. J., at page 790. The test there applied at page 785 and at page 790 was,

Would the Bank have been entitled to an injunction restraining the traders if the traders had attempted to take the goods out of the control of the Bank by dealing with them for a purpose other than that contemplated, viz., preparing, packing and shipping.

43. The answer being yes, it followed that the Bank had control.

44. The question there was, of course, whether the letter of lien coupled with the bleachers' certificate were documents 'used in the ordinary course of business as proof of the possession or control of goods' within the meaning of the Bills of Sales Act. But if that is so how can it be said that in the circumstances here present with a pledge, and a letter of lien, with the goods on rail or in a carrier's warehouse, how can it be said that the goods were in either the possession, order or disposition of the insolvent? And even if that were so, what is the evidence that it was with the consent of the true owner unless consent is to be assumed necessarily to follow from absence of notice to the carrier of the assignment of railway receipts or of the granting of letter of lien? In my opinion the appellants here are in the same case as the plaintiffs in C. Simeons & Co. v. Durand's Trustee (1928) 2 K.B. 66. They did not by their conduct in any way induce a belief that these goods were in the possession, order or disposition of the bankrupt under such circumstances that he was the reputed owner thereof. I do not apprehend that the learned Trial Judge made a finding of fact to the contrary but rather that he arrived at his conclusion because the Bank had not notified the Port Trust that the Bank held the railway receipts and that 'it had always been held' that absence of notice proved consent to the goods being in the order or disposition of the bankrupt as reputed owner. This appears to be a finding of law and with great respect I think it goes too far. Absence of notice is one circumstance. It is a circumstance that might make all the difference if, apart from notice, the possession remains in the insolvent but here whether one regards the pledge or the lien, possession had constructively passed to the Bank. It might make a difference if the order or disposition remained in the insolvent but without the railway receipts he could not demand delivery of those goods. Section 57 of the Railways Act gives a right to the carrier; it gives no right to the consignee. Without those railway receipts had the carrier so chosen the consignee was powerless to touch the goods. Whether or not delivery under general indemnity bonds is authorised by Section 57 there is no evidence that the Bank either knew of such practice in general or that C. K. N. was on the general indemnity list. The Bank had no reason to imagine that delivery would be made to any one in the absence of the railway receipts. The previous course of business had been, so far as the Bank knew, that delivery was made on railway receipt to any outside godown bearing the Bank's name. If a bona fide person had demanded these goods from the Port Trust, and the Port Trust, not having notice of any other claims, had delivered without production of the railway receipt, then the absence of notice would probably be a matter of great importance when considering the liability of the Port Trust or the title as against the Bank of the person to whom delivery had been made but I cannot think it concludes the question as to whether the goods are' in the possession, order or disposition of the insolvent by the consent of the true owner under such circumstances that he is the reputed owner thereof.

45. Again the absence of notice might be a critical matter in a contest between a pledgee or a lienee and the Official Assignee where the pledge or lien to be made effective required a third party in custody of the goods to alter his position from that of a bailee possessing on behalf of the insolvent to that of a bailee possessing on behalf of the pledgee or lienee, because until that change in possession had occurred the pledge or lien might be deemed imperfect. Where, however, as here the pledges of the documents are as though they were pledges of goods the pledge is perfect and there is constructive transfer of possession from the pledgor to the pledgee apart from notice. And even though I may be wrong in attributing this effect to the pledging of a document of title and such a pledge of a document of title does not operate as constructive possession of the goods, yet in this case one cannot ignore in this connection the letter of lien. In my view, as between the insolvent and the Bank, as from the moment any good letter of lien was completed and handed to the Bank, from that moment the Bank is to be deemed in any contest .between the Bank and C.K.N. or C.K.N.'s representative-in-title as having possession of the goods, the subject-matter of the letter of lien. Were it otherwise, one would not be giving effect to the plain words of the letter which are to the effect that the goods in question are deposited with the Bank by way of security. It is true that they are not deposited actually upon the Bank's premises but I think the clear intention of the parties is that as from that moment those particular goods are to be deemed to be held by either the insolvent or any bailee from the insolvent not for the insolvent but for the Bank and the insolvent's possession or the possession of a bailee from the insolvent is to be deemed in any contest between the Bank and the insolvent or his representative-in-interest as the possession of the Bank. It might well be that the absence of notice of this arrangement come to between the Bank and the insolvent would enable a third party who has in the absence of such notice altered his position for the worse to raise a plea of estoppel based on the absence of such notice. It might well be that a bailee who in the eye of the law would be deemed a bailee for the insolvent would be able to defend himself against a claim founded in a wrongful delivery to a person other than the Bank on the ground that the Bank had not notified him of that lien. In all such contests as these absence of notice might be critical but I do not think that absence of notice to the carrier in itself renders the conclusion inevitable that the goods were in the order or disposition of the insolvent as reputed owner with the consent of the true owner. I think any member of the public finding that the documents of title to receive these goods were not with the insolvent would arrive at the conclusion that the goods were not in his order and disposition. I am clearly of the opinion that they would not be compelled to come to the conclusion that they were in the insolvent's order and disposition simply because, on enquiry of the carrier, the carrier informed them that no notice of any assignment or other dealing with the railway receipts had been received. Very different considerations would arise if the circumstances were that the goods had been delivered to outside godowns whence the insolvent could remove them without the railway receipt. In such a case notice to the warehouse keeper might in some circumstances I think be necessary to prevent the goods being in the order and disposition. That however is a question to be decided when it arises. It does not in my opinion arise in this case.

46. In my view accordingly the appeal succeeds with costs here and below.

Horace Owen Compton Beasley, C.J.

47. I agree.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //