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Appa Rao Vs. Salem Motors and Salem Radios and Electricals - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai High Court
Decided On
Case NumberO.S.A. No. 20 of 1951
Judge
Reported inAIR1955Mad505; (1955)2MLJ188
ActsContract Act, 1872 - Sections 149 and 178
AppellantAppa Rao
RespondentSalem Motors and Salem Radios and Electricals
Appellant AdvocateR. Gopalaswami Iyengar, ;T.R. Srinivasa Iyengar and ;Srinivasan, Advs.
Respondent AdvocateK. Subramaniam, ;Sundararajan and ;Sivaswami, Advs.
DispositionAppeal dismissed
Cases ReferredChanter v. Hop
Excerpt:
contract - substitution of security - sections 149 and 178 of contract act, 1872 - dispute regarding substitution of security in case of pledge - though security can be substituted either by operation of law or by contract between parties - but there cannot be any substitution by unilateral action of one party not consciously assented to be accepted by other - in present case pledgee substituted security without consent of pledgor - pledgee liable to pay damages with interest to pledgor. - - we would also like to bring to your kind attention that it is past nearly three months since we have taken the van to our place and we are unfortunate enough to have the van disposed though we were in receipt of the permit. 2699. now that records establish that your security was sold off as.....rajagopala ayyangar, j.1. this is an appeal against the judgment of mack j. directing the appellant who was the third defendant in the suit c. s. no. 387 of 1917 to pay to the plaintiffs a sum of rs. 7150 with interest as damages for the conversion of a motor van belonging to the plaintiffs.2. the plaintiffs are a firm of motor dealers carrying on business in salem. they filed the suit, c. s. no. 387 of 1947, out of which this appeal arises, against two defendants for reliefs under several heads. there has been a decree by consent against the first defendant in respect of certain claims made against him for refund of advance etc. and we arc no longer concerned with those claims. the second defendant has by consent been discharged from the case and the appeal is concerned merely with the.....
Judgment:

Rajagopala Ayyangar, J.

1. This is an appeal against the judgment of Mack J. directing the appellant who was the third defendant in the suit C. S. No. 387 of 1917 to pay to the plaintiffs a sum of Rs. 7150 with interest as damages for the conversion of a motor van belonging to the plaintiffs.

2. The plaintiffs are a firm of motor dealers carrying on business in Salem. They filed the suit, C. S. No. 387 of 1947, out of which this appeal arises, against two defendants for reliefs under several heads. There has been a decree by consent against the first defendant in respect of certain claims made against him for refund of advance etc. and we arc no longer concerned with those claims. The second defendant has by consent been discharged from the case and the appeal is concerned merely with the rights as between the plaintiffs and the third defendant against whom a decree has been passed.

3. The first defendant Alavandar Naidu was carrying on business in Madras under the name and style of 'The National Motors, Madras, and The East India Corporation' who were the distributors for certain motor vehicles including Bradford vans, an English product. The plaintiffs indented for sale through the first defendant a Bradford van. The makers of these vans were Messrs. Jowett Cars Ltd., Bedford, England. This along with other cars ordered by the first defendant was received in India in or about December 1946. The van which bore engine No. D. 7/CA. 3654 was sold to the plaintiffs on 18-2-1947 for a sum of Rs. 7125, and the vehicle was delivered over. On that date there were regulations in existence controlling the sale and acquisition of motor vehicles including motor vans and before a purchase could be effected an allotment had to be made by the Provincial Transport Controller.

This authority allotted the plaintiff's van to one V. K. Kalliappa carrying on beedi factory at Jalar-pet, North Arcot Dt. Intimation in regard to this was given by the first defendant to Kalliappa on 20-3-1947. But for reasons unnecessary to be discussed Kalliappa did not avail himself of this allotment. The result therefore was that though the plaintiffs had paid the full purchase price of the vehicle to the first defendant, the vehicle was left within their hands and they were unable to effect a sale immediately. Under the rules in force if an allottee did not purchase the vehicle, the owner could sell it without a permit to any prospective purchaser. But the plaintiffs found it difficult to find a purchaser for this van. Accordingly they wrote to the first defendant on 16-4-1947.

'We regret very much for not having the van sold though the controller has issued the permit. At present we find no offer for the van and we suggest you to find the party who is in need of the van and we will arrange to deliver the van.

All the customers who are in need of the van ordered for a van with the other companies and on freeze of the time issued by the Controller there is no offer for the same to which you have to arrange to dispose of the same.

We would also like to bring to your kind attention that it is past nearly three months since we have taken the van to our place and we are unfortunate enough to have the van disposed though we were in receipt of the permit.

As we will be much pleased to hear from you to return the van which should be disposed at your earliest convenience.'

The plaintiffs reminder! the first defendant again by a letter dated 13-5-1947 requesting him to make arrangements for the disposal of the vehicle. As no reply was received, a further letter dated 29-5-1947 was written reminding him of the necessity for an early sale and suggesting that he would prefer the first defendant taking back the van at cost price and arranging to pay this amount, without waiting for a sale to a third party. The first defendant however was not willing to take back the van and refund the purchase price. He therefore replied on 31-5-1947 disclaiming all responsibility for the vehicle being on the plaintiffs' hand without a sale thereof being effected and blaming the plaintiffs for not sending the vehicle on to his show room for attracting prospective buyers. Subsequently, on 5-6-1947, the plaintiffs brought this van to Madras and left it with the first defendant taking a receipt in these terms

'This is to inform you that we have this day received a Bradford van bearing engine No. D7/ CA 3654 sent by you.'

It will be convenient to complete the narrative of the manner in which this venicle was dealt with before adverting to the case of the plaintiffs as regards the terms on which this vehicle was left with the first defendant and the legal consequences arising out of that version if accepted.

4. On 7-6-1947 this van belonging to the plaintiffs was sent by the first defendant to the third defendant in these following circumstances. As early as 19-3-1947, the first defendant had borrowed from the third defendant a sum of Rs. 50,000, on a pledge of six Bradford chassis and three Bradford vans. In the letter of pledge executed by trio first -defendant on that date the engine numbers of the six chassis were detailed and similarly the numbers of, two of the vans but not the third but as the suit van was not with the first defendant at the time, the van without the number could not obviously be the plaintiffs'. Out of these the first defendant retained one van and one chassis with himself for demonstration purposes stipulating expressly in a letter of even date that the property in the vah and chassis continued with the lender and that he was having merely the custody of the vehicles for the specific purpose of display.

On the maturity of this loan, only a small portion was repaid a considerable amount of the debt still remaining undischarged. There was a fresh pledge on 5-5-1947 in favour of the third defendant for a sum of Rs. 41,000, being the amount outstanding on the original loan of March 1947 with interest. As security for the due discharge of this indebtedness, the first defendant pledged with the third defendant four chassis and three Bradford vans, no engine numbers being specified to enable the chattels to be identified. Just as on the previous occasion, the first defendant retained one chassis and one van with himself for demonstration purposes executing a letter disclaiming all proprietary interests in the vehicles left with him. Hundies were executed for the outstanding loan and these fell due on 4-6-1947.

As the first defendant did not honour the hundies on the due date the third defendant insisted by letter dated 4-6-1947 that the chassis and the van left with him for demonstration purposes should be returned to him within 24 hours. The first defendant, however, was not in a position to return the van which had been left with him by the third defendant. As stated early it is clear from the evidence that the suit van bearing engine No. 3654 could not have been pledged with the third defendant in March 1947 since the vehicle had been delivered to the plaintiffs as early as 18-2-1947 and had been removed by them to Salem immediately. On 19-3-1947 however the first 'defendant had in his possession a van bearing engine No. 3651 and this must obviously have been the van which was pledged with the third defendant and retained with the first defendant for demonstration purposes in his showroom. This van however the first defendant sold to one V. K. S. Mani on 17-4-47 and the transfer was registered by the Motor Vehicles authorities on 5-5-1947 so that after this date he never had in his possession any Bradford van.

The sale of this van was effected without the knowledge and consent of the third defendant. The result of this sale was that when the pledge was effected in favour of the third defendant on 5-5-1947 though it was mentioned in the document of pledge that four chassis and three vans had been delivered to the pledgee as security for the repayment of Rs. 41,000 and that one van and one chassis had been retained with himself for demonstration purposes the pledger could not have had in his hands a third van in respect of which he could effect a pledge. The third defendant was obviously not aware of the fraud of the first defendant and proceeded under the impression that there was still a third van in the possession of the first defendant which he was in a position to deliver when called upon.

5. The amount due to the pledgee became payable in the first week of June 1947. As the hundi was not met on the due date the third defendant wrote a letter to the first defendant on 4-6-1947 in these terms:

'Ref: One Bradford chassis and one delivery van taken for demonstration purposes and return.

You have taken the above two vehicles from us for demonstration purposes and return. This is to call upon you to return to us at our godown, Appa Rao Gardens, No. 84, Sydenhams Garden, Vepery, Madras, within 24 hours from the receipt of this letter failing which necessary steps will be taken to recover the same.'

Just at this moment, as luck would have it, the plaintiffs brought their van from Salem and left it with the first defendant as mentioned earlier. The first defendant found the presence of this vehicle very handy and proceeded immediately to utilise it for the purpose- of effecting the 'redelivery'. On 6-6-1947 the first defendant wrote to the third defendant a letter in which after referring to the purpose for which the vehicles were left with him he stated.

'Since you are asking us to return the same, we have no objection to do so and we wish to inform that we have one or two prospective buyers corning up for demonstration today and tomorrow. Hence we shall be pleased to send the van tomorrow after 2 p. m.'

In accordance with the terms of this letter the plaintiffs' vehicle was sent on 7-6-1947 in lieu of the vehicle supposed to have been left by third defendant and it was taken possession of by him. The debt due to the third defendant not having been discharged, the former' had the vehicles in his possession including the Bradford van belonging to the plaintiffs sold through Messrs. Chari and Co., Auctioneers, Madras, on 27-7-1947. These vehicles were purchased at this auction by one Khemchand Nandlal who has been impleaded as the second defendant in this suit.

6. The first defendant however contested the validity of the sale by auction as not 'bona fide' or proper and filed a suit C. S. No. 309 of 1947 in this Court against, among others, the second and third defendants and the auctioneers for a declaration that the sale of the van etc., was invalid and for a decree for the redemption of the properties pledged as security. The fact that the Bradford van sold or purported to be sold by or on account of the pledgee belonged to the plaintiffs was not mentioned in the plaint; nor were the plaintiffs made a party to that suit. While this suit was pending, the plaintiffs finding their vehicle missing brought the present action. Originally the defendants were only two, the third defendant not being impleaded in the suit as originally framed.

The case nut forward in the plaint was that the plaintiffs had left the suit van with the first defendant only for demonstration purposes with (sic) the first defendant had no authority to effect any sale or pledge of the vehicle and that consequently its pledge by the first defendant in favour of the third defendant was invalid and that the second defendant who had purchased the van in auction could not obtain a valid title thereto and was hound jointly and severally with the first defendant to return the vehicle or its value.

The plaint was filed on 11-9-1947. Along with the plaint, the plaintiffs also filed an application for the appointment of a Commissioner to inspect and report whether the Bradford delivery van which was lying in the premises of the third defendant did or did not bear the engine No. 3654 so that the identification of this with the plaintiffs' vehicle might be established. They also prayed for an injunction restraining the second defendant from dealing with or in any way disposing of the delivery van bearing engme No. 3654 belonging to the plaintiffs. This application for a Commissioner and for an injunction was ordered in the terms prayed for and the Commissioner. Mr. Narasinga Rao, an advocate of this Court, submitted a report stating that the delivery van bearing the engine number of the plaintiffs' van was in a shed in the third defendant's compound.

7. The plaintiffs in order to prove that the van which was the subject of the original pledge was not the van belonging to themselves took out a subpoena to the third defendant for producing the records and accounts relating to the pledge. In the letter addressed by the plaintiffs' advocate to the thin! defendant dated 14-11-1947, it was stilted,

'............I have to inform you that the van taken from you for demonstration by B. C. A. Naidu was sold on 5th May 1947 to K. V. S. Mani, son of V. K. Kaliappa, Beedi factory, No. 72 Thayar Sahib 'Street, Madras, and registered at the office of the Deputy Commissioner of Police, Traffic and Licence, Madras, on the same day as M. S. P. No. 2699. Now that records establish that your security was sold off as aforesaid and that the van substituted therefor is my client's van obtained from them for the specific purpose of display on 5th June 1947, which you were pressing the debtor for the redelivery of your van oh his failure to meet his dues to you on 4th June 1947, you cannot delay any longer instituting proceedings for the recovery of your van by instituting a prosecution against your debtor or by proceedings against him and his purchaser. I hope you will not thereafter delay such proceedings.'

In reply to this, counsel on behalf of the third defendant wrote on 19-11-1947 as follows:

'My client states that whatever records are available will be produced by his clerk on the date of the hearing, namely, 20-11-1947, which you state is the adjourned date. My client states that he had already set out the defence to your client's action in the written statement filed by him in the suit and for the reasons stated in the said written statement my client does not feel called upon to institute any of the proceedings suggested in your letter under reply.'

8. It might be noticed that the third defendant had not been yet impleaded and the written statement referred to was that of the second defendant.

9. The next event that happened to which it is necessary to refer was the compromise of the suit, C. S. No. 309 of 1947. This was effected on 4-12-1947 and a consent decree was passed. Under the compromise the original sale by auction was annulled, the security was revived and the amount due to the pledgee was determined as Rs. 40,700. It was also agreed that if the amount due to the third defendant was not paid before a named date the original sale should stand confirmed. There was failure on the part of the pledgor to avail himself of the right of redemption afforded to him by this consent decree with the result that the equity of redemption was extinguished and the title of the pledgee stood confirmed.

The expression 'the title of the pledgee' has been used designedly because it was one of the terms of the compromise between second and third defendants that the former should be repaid the amount for which he had originally purchased at the auction in July 1947 by the pledgee and that the pledgee should thereafter become the full owner of the property in the event of the first defendant not paying up the amount due and redeeming the pledge. The application for the temporary injunction in this suit came on for final orders on 5-2-1948. The arrangements embodied in the compromise in C. S. No. 309 of 1947 were not however brought to the notice of the Court and the injunction against the second defendant was dissolved, he agreeing to keep the sale proceeds with himself pending the result of the suit.

10. Upto this stage the plaintiffs were not aware that the third defendant had stepped into the shoes of the second defendant by reason of the settlement effected in December they not being parties to C. S. No. 309 of 1947. The plaintiffs came to know of this only on receiving a letter from the first defendant's advocate on 31-3-1948 that under the compromise the second defendant had ceased to have any interest in the van and the only person in possession of and responsible for it was the third defendant. The letter suggested the impleading of the third defendant as a party to this suit.

On being apprised of this situation the plaintiffs took the necessary steps for impleading the third defendant and the plaint was amended so as to claim as against the third defendant the relief originally prayed for against the second. The third defendant filed a written statement in which the position taken up was that he stood in the same situation as the second defendant, the other defences being identical with those originally put forward by his predecessor-in-title. The second defendant having ceased to have any interest in the vehicle he dropped out of the scene and the plaintiffs were content practically to withdraw the Suit as against him. As the first defendant consented to a decree being passed against him in respect of this van, the only contest in the case was as regards the claim of the plaintiffs against the third defendant.

11. The ground upon which the learned Judge upheld the plaintiffs' claim was that the third defendant purchased the suit van from the second defendant under the compromise decree in C. S. No. 309 of 1947 in spite of an order of injunction passed in the present action. He held that the third defendant could not he treated as a 'bona fide' purchaser for value because he had knowledge of the injunction notwithstanding he was not a party to the suit and concluded by saying that the third defendant

'cannot he permitted to base title in the van on the material he has placed before the Court as having been lawfully acquired in good faith from Khemchand who was an innocent purchaser for value in an open auction.'

The learned Judge did not give any finding regarding the case of the plaintiffs that when they left the vehicle with the first defendant on 5-6-1947, it was not for the purpose of sale but merely for the purpose of demonstration so that the first defendant would not have any authority under the law to effect a pledge or sale of this vehicle so as to be binding upon the real owner. On the reasoning above set out, the learned Judge gave the plaintiffs a decree against the third defendant as prayed for. It is from this decree that the third defendant has filed the present appeal.

12. There was not any serious controversy about the facts as we have narrated above and the main steps on which the appellants' learned counsel rested his case were these:

(1) There was an effective pledge of a Bradford van in March 1947 when the third defendant advanced a sum of Rs. 50,000 on the pledge of the vehicles and the pledge continued notwithstanding that two of the vehicles were left in the possession of the pledgor for a special purpose. (2) There was again a valid pledge of the vehicles on 5-5-1947 including three delivery vans, though it might be that one of the vans was ultimately sold and delivered to V. K. S. Mani. The pledge right over the van continued, though it was left with the first defendant for display. (3) The first defendant was a mercantile agent and when the plaintiffs left the suit vehicle with him for the purpose of sale in June 1947 be had authority in law to pledge or sell the vehicle so as to pass a valid title, the appellant's case in this regard being that the story put forward in the plaint that the vehicle was left on 5-6-1947 for demonstration purposes is false. A valid pledge was therefore effected in respect of the suit vehicle when this van was sent up to the third defendant on 7-6-1947.

(4) In the present plaint there is no attack upon tile sale by Messrs. Chad and Co., on 27-7-1947 and therefore a valid title in the van passed to the second defendant by his purchase at this auction. By reason of the compromise decree in C. S. No. 309 of 1947, the third defendant has stepped into the shoes of the second defendant and the learned Judge is wrong in considering that the third defendants title or bona fides are affected by reason of the injunction in the present action. On the pleadings in this suit, read in the light of the affidavits and orders in interlocutory proceedings therein, it is clear that no challenge was made regarding the bona fides of the third defendant and he stands or falls by the title, which the second defendant obtained at the sale in the auction at the instance of the pledgee. As the second defendant has obtained a valid and unimpeachable title as against the true owner and therefore he is not guilty of any conversion the third defendant standing in his shoes cannot be made liable as the learned Judge has done by the decree against him.

13. This in short is the argument of the learned counsel for the appellant. Before dealing with the legal points that arise for, consideration we might mention at the outset that we see considerable force in the arguments of the learned counsel for in so far as it is directed to the reasoning of the learned Judge in deciding the suit. But that cannot by itself be sufficient to dispose of the appeal.

14. It is therefore necessary to analyse the legal position in order to examine the effect of the several transactions on the rights of the parties. There can be no doubt that the transaction on 19-3-1947 did constitute a valid pledge in favour of the second defendant of six Bradford chassis and the three Bradford vans which were listed in the document of pledge though the engine number of one van was not set out. A pledge is a species of bailment and bailment is constituted by 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 (Vide Sections 148 and 172, Contract Act). There was here a delivery of nine vehicles. Of course the plaintiffs' vehicle was not among those which could have been delivered to the third defendant at this time because it had been removed to Salem almost a month previously and still continued to be there. The van therefore of which no engine number was given in this document of pledge must obviously have been the van bearing engine No. 3651 which was ultimately sold to V. K. S. Mani and registered in his name on 5-5-1947. Therefore on 19-3-1947 there was a valid pledge inter alia of the van bearing engine No. 3651 and this must have been left, with the pledgor for demonstration under a letter specifically setting out this purpose. The pledgee did not lose his security over the van 3651 by reason of parting with the possession of the vehicle pledged for

'a redelivery of the pledge to the pledgor by the pledge for a limited and defined purpose does not constitute a renunciation of the security sufficient to take out of the latter the, pledgee's qualified property in the chattel for there can be no doubt that the pledgee might hand back to the pledgor, as his agent for the purpose of sale the goods he had pledged without in the slightest degree diminishing the full force and effect of his security.' See -- 'Northwestern Bank Ltd. v. Poynter', 1895 AC 56 (A).

15. The next event that had happened was the sale of the van No. 3651 left for demonstration purposes by the first defendant to V. K. S. Mani on 17-4-1947 though registration in favour of the purchaser was effected only on 5-5-1947 (Ex. P. 7). It is clear that as the first defendant had possession of the vehicle only for the purpose of demonstration under the specific instructions of the third defendant the sale to V. K. S. Mani without the knowledge and consent of the pledgee was a tortious act which did not have any effect upon the security in favour of pledgee, so that the position was that notwithstanding this sale the third defendant continued to have a pledge over this vehicle also along with those in his possession.

16. The next stage of the case is the pledge effected by the first defendant on 5-5-1947. At this time also the pledge note recited in its schedule four Bradford chassis and three Bradford vans as being the subject of the pledge and by letter of even date the pledgor represented that he was retaining one van and one chassis for demonstration purposes, the same to be delivered whenever the pledgee required them. It is not clear whether at this date the pledger was in possession of the van sold as delivered to V. K. S. Muni. If he had not the statement in the document of pledge regarding the delivery of the three vans must obviously be a mistake or misrepresentation and similarly the statement in the other letter that the first defendant had retained one van for demonstration purposes could not also be true. In any event, the suit van was certainly not with him at this stage for the purpose of being delivered over to the third defendant as part of the security. At the same time, it has to be remembered that the security which the third defendant had over the van which was the subject matter of sale and delivery to V. K. S. Mani bearing engine No. 3651 was not extinguished but continued in full force notwithstanding the sale.

17. Then we have the delivery of the plaintiffs' vehicle to the first defendant on 5-6-1947. In connection with this there is an allegation which has been put forward by the plaintiffs as to the circumstances in and the purpose for which this delivery was made on which was founded the case as to Detinue and Trover as against the second defendant. The allegation is that the plaintiffs brought the vehicle to Madras and entrusted it to the first defendant merely for the purpose of displaying in the latter's show-room the understanding being that the first defendant was not to have any authority to effect the sale but had merely to communicate to the plaintiffs any offers received from prospective buyers so that they might make up their mind whether to effect a sale or not. If this were made out, there can be no doubt that the pledge to the third defendant and the auction sale by the latter would all be wrongful and the plaintiffs rights in relation to the vehicle would not be affected.

On the facts of the present case as disclosed by the correspondence the plaint allegations are not made out. The previous correspondence ending with letters almost upto the end of May 1947 establish beyond doubt that the purpose for which the vehicle was being brought to Madras was for the first defendant effecting a sale on behalf of the plaintiffs. There is absolutely no documentary evidence to support the case of the plaintiffs as regards any change being made regarding the original intention. The receipt dated 5-6-1947 issued by the first defendant acknowledging the vehicle does not indicate the purpose of the bailment. The whole case of the plaintiffs is rested upon the oral evidence which is directly contrary to the previous correspondence in which there is nothing to indicate that there was at any time any departure from the intention of the plaintiff to entrust the vehicle with the first defendant for the purpose of effecting a sale. In these circumstances we have no hesitation in rejecting this part of the plaintiffs' case.

18. We have therefore to proceed upon the footing that the suit vehicle was with first defendant at the instance of the plaintiffs for the purpose of sale. Jt is not disputed that the first defendant fulfils the definition of a mercantile agent within the meaning of Section 178, Contract Act. If therefore he was left in possession of this vehicle for the purpose of sale, it would follow that any pledge effected by the 1st defendant to a person who took the pledge bona fide would be binding upon the plaintiffs. The case of the appellant is rested on this statutory provision; and the title of the pledgee and the validity of the sale effected at his instance are grounded upon his being a bona fide pledgee of this vehicle from the first defendant.

19. Is this contention made out is the next question to be considered. This might be viewed from two aspects. (1) Was there a pledge of this vehicle in favour of the third defendant? (2) Is he a bona fide pledgee without notice of the plaintiff's title?

20. The contention that is raised on behalf of the appellant is that the pledge was effected by the delivery of the suit vehicle by the first defendant sending it on 7-6-1947 to the third defendant as part of the original pledge. In order that there might be a valid pledge there must be (a) a contract in relation to an identified chattel whereby this object is to be delivered to the pledgee as security, (2) actual delivery of possession of the identified chattel in pursuance of the contract. It will be seen that in me present case the so-called pledge on 7-6-1947 docs not satisfy either of the two conditions. When the third defendant demanded the return of the vehicle which had been left with the first defendant for display by his letter dated 4-6-1947, he was obviously wanting the return of the Bradford van which, without his knowledge had been improperly sold and delivered over to V. K. S. Mani in April-May 1947 but over which his pledge rights still continued notwithstanding the transfer.

As if in compliance with this demand, the first defendant sent to him the van belonging to the plaintiffs. The delivery was not therefore in fulfilment of the previous contract which alone effected the pledge, for the mere delivery of a chattel unaccompanied by any contract does not constitute a pledge and would not suffice to create a security over the chattel. Moreover so long as the security over the vehicle sold to V. K. S. Mani continued there was no intention on the part of the pledgee to demand additional security and the subsistence of this pledge in June 1947 is fatal to any contention which posits a contract to effect a pledge over the suit vehicle by the delivery on 7-6-1947.

21. Apart altogether from this there is one other aspect of the matter which deserves to be examined. Let us assume that there was an intention tin the part of the first defendant to effect a pledge of the suit vehicle with the third defendant on 7-0-1947 and that in pursuance of this intention he sent up the plaintiffs van as part of the security. At that time the third defendant was under the impression that the vehicle being delivered to him was one which in March 1947 he had left with the pledger there thus being a mistake in the identity of the article delivered to the pledgee. The question that immediately arises for consideration is the effect of this mistake in delivery on the operative character of the pledge, assuming that the sending up of the vehicle on 7-6-1947 was intended to effect a pledge.

22. Numerous cases are to be found in the reports as to the effect of a mistake on the part of the bailor on the identity of the thing which is the subject of the bailment. No case however appears to have arisen of a converse case of a mistake on the part of the bailee when so far as the bailor is concerned there is no mistake, but the principle cannot be different. In the cases which will be referred to the matter has been discussed as to how far delivery under a mistake enables possession to pass to the bailee. The first case to be referred to is the decision in -- 'R. v. Ashwell', (1886) 16 QBD 190 (B), where there is an interesting discussion as to what constitutes delivery of possession. The facts of the case were simple but it raised legal problems giving rise to an acute difference of opinion among the Judges. 14 Judges participated in the case and they were equally divided with the result that the conviction was confirmed.

The facts were that the prisoner asked the complainant for the loan of a shilling. He was given asovereign, the complainant believing it to be a shilling and the prisoner taking the coin under the same belief put it in his pocket. When however the latter looked at the coin he found it was a sovereign and immediately appropriated to his own use by obtaining change for it and utilised the money himself. The question was whether the accused was guilty of larceny at common law which involved a Felonious taking 'animo furandi'. The main point of difference of opinion among the Judges related to the question whether there was any point of time during which the accused was lawfully in possession of the coin before the appropriation. The Judges who upheld the conviction held that there was such point of time while the others thought there had been an interval during which period the accused was innocently in legal possession of the coin and that the subsequent fraudulent appropriation would not convert it into the common law offence of larceny.

The point however relevant to the present discussion is whether possession is legally transferred when there has been a delivery under a mistake. In regard to this, a passage in the judgment of Coleridge C. J. is very illuminating. The learned Chief Justice said at page 224 of the report:

'But then it seems to me very plain that delivery and receipt arc acts into which mental intention enters, and that there is not in law any more than in sense a delivery and receipt, unless the giver and receiver intend to give and to receive respectively what is respectively given and received. It is intelligent delivery............... .not a mere physical act (of delivery) from which intelligence and even consciousness arc absent. I hope it is not laying down anything too broad or loose. If I say that all acts, to carry legal consequences must be acts of the mind; and to hold the contrary, to hold that a man did what in sense am! reason he certainly did not, that a man did in law what he did not know he was doing & did not intend to do--to hold this is to expose the law to very just but wholly unnecessary ridicule and scorn. I agree............. that fictions are objectionable but it seems to me, with diffidence, that he creates the fiction who holds that a man does what ho does not know he does and docs not mean to do, not he who says that an act done by an intelligent being for which he is to be responsible is not an act of that being unless it is an act of his intelligence.'

This passage was no doubt intended by the learned Judge to apply to a case where there was a mistake on the part of the bailor not shared by the taker. But in our opinion this would equally apply to a case where there is no mistake on the part of the bailor but the bailee purports to receive delivery of something which he never intended to receive and did not know he was receiving. There can in such cases be no real delivery of possession at all. Cave J. who was also among the Judges who upheld the conviction put the matter this way. He said at page 203:

'The acceptance by the receiver of a pure benefit unmixed with responsibility may fairly be, and is in fact presumed in law until the contrary is shown; but the acceptance of something which is of doubtful benefit should not be said and is not presumed. Possession unaccompanied by ownership is of doubtful benefit for although certain rights are attached to the possession as a chattel they are accompanied also by liabilities towards the absolute owner which may make the possession more of a burden than a benefit. In my judgment a man cannot be presumed to assent to the possession of a chattel; actual consent must be shown. Now a man does not consent to that of which he is wholly ignorant. Moreover in order that there may be aconsent, a man must be under no mistake as to that to which he consents; and I think therefore Ashwell did not consent to the possession of the sovereign until he knew that it was a sovereign.'

A similar view as to the effect of delivery in such circumstances is taken by Messrs. Pollock and Wright in their essay on 'Possession in the common law.' They say at page 103 dealing with a case of mistake:

'There is equally no real delivery for want of a concurrent intention of the giver to hand over and of the receiver to accept the same thing.'

Their view of (1886) 16 QBD 190 (B), is that in that case the accused did not get possession but only a bare custody (page 110). It is no doubt true that at page 114 the learned authors say:

'There are various dicta as to the effect of ignorance upon possession; it has been said and argued that a man cannot acquire legal possession without intention or knowledge; but it is impossible to reconcile these dicta, as general propositions of law, with the judgment of Parke B. in -- 'R. v. Riley', (1853) 22 LJMC 48 (C), which has now been accepted as authoritative, though not always without reluctance for more than thirty years.'

(1853) 22 LJMC 48 (C) however and the observations of the learned authors do not relly touch the present point. The accused in -- 'Riley's case (C)', (R v. Riley) had penned a flock of sheep, 29 in number, in a field and there were other sheep in a neighbouring field. Early one misty morning, the prisoner, drove out his flock but instead of taking his 29 sheep, he drove away, without knowing it, 30 including one belonging to his neighbour. The sheep were taken to the market where they were sold. The buyer after the sale, counted the sheep and found 30 and not 29. The prisoner then demanded the price of the 30th lamb and was paid the same. The question was whether the accused was not guilty of larceny at common law by reason of the appropriation of 'the price of the lamb after he had discovered the mistake. The learned Judges upheld the conviction, Parke B. resting it on the ground that the original driving of the lamb of the neighbour was wrongful and a trespass notwithstanding that at that moment there was no 'animo furandi. He laid down the rule in these terms:

'As the original taking was not lawful it was a trespass, the prisoner being a trespasser the moment he took the lamb with a felonious intent he became a thief.'

Though this decision has been severely criticised, by J. W. C. Turner in a very learned article in 58 Law Quarterly Review, 340, it has been as we have seen, accepted as laying down the correct law by Pollock and Wright, and was approved by Humphrey J. in -- 'Ruse v. Reed', 1949 1 All ER 398 (D). The correctness of otherwise of (1853) 22 LJMC 48 (C) does not affect the present question. It will be seen that (1853) 22 LJMC 48 (C) does not raise for consideration the elements necessary, to constitute delivery of possession in a bailment but deals rather with the law relating to a finder and the problems connected with that species of what might be termed quasi bailment in which there is no giver, only a taker and no question of any possession under a contract.

We are here concerned with the sole question as to whether in cases of mistake, there is really any legal transference of property without a conscious acceptance of it by the bailee. The reasoning of Coleridge C. J. and of Cave J. extracted already establishes in our opinion that no title could pass to the bailee and there could be no delivery of possession in the legal sense without a conscious act on the part of the bailee. The following passage from the judgment of Bovil C. I. in -- 'Queen v. Middleston, (1873) 2 CC 38 (E), also expounds the point now under consideration. Dealing with the delivery in that case, where there was a mistake on the part of the giver but none in the taker the learned Chief Justice said;

'It was simply a handing it over by a pure mistake and no property passed. But let us suppose that a purchaser of beans goes to the warehouse of a merchant with a genuine order for so many bushels of beans, to be selected from the bulk and so become the property of the vendee, and that by some strange blunder the merchant delivers to him an equal bulk of coffee. If that coffee was sold (not in market overt) by the recipient to a third person, could he retain it against the merchant, on the ground that he had bought it from one who had the property in the coffee though subject to be divested? We do not remember any case in which such a point has arisen, but surely there can be no doubt he could not; and that on the principle enunciated by Lord Abingcr in -- 'Chanter v. Hop-kins', (1838) 4 M&W; 399 (F), when he says 'If a man offers to buy peas of another and he sends him beans, he does not perform his contract, but that is not a warranty; there is no warranty that he should sell him peas; the contract is to sell peas, and if he sends him anything else in their stead, it is a non-performance of it.'

23. In our view, these observations apply with force to the present case and deprive the delivery on 7-6-1947 of the plaintiffs' vehicle of the character of a pledge.

24. There is one other aspect from which the position can be viewed. Stripped of non-essentials, the intention of the bailor was that the bailee should accept the plaintiffs' vehicle in substitution for the vehicle originally pledged but which had been sold and delivered to V. K. S. Mani. The idea however of the bailee was to receive the vehicle in the belief that it was the self-same vehicle as had been left with the pledgor in March 1947, assuming that he saw and identified that vehicle at the time of the original pledge though some doubt is thrown upon this by reason of the engine number of the van being omitted to be mentioned in the document of pledge. It will be noticed that the idea of the pledgee when he received the plaintiffs' vehicle was not to abandon or extinguish his rights of security quod the vehicle sold to V. K. S. Maninor had he any intention of receiving the plaintiffs' vehicle as additional security the original van also being considered as remaining under pledge.

What we desire to point out is that as the, third defendant had no intention or cannot be presumed to have any intention to give up his rights to the van originally pledged, he cannot in law be presumed or treated as having an intention to receive the plaintiffs' van as part of the pledged security. In other words, though there can be substitution of security either by operation of law or by contract between the parties, there cannot be any substitution by the unilateral action of one party not consciously assented to or accepted by the other. For this reason also there was never any valid pledge of the plaintiffs' vehicle created in favour of the third defendant as a result of the suit van being delivered to him on 7-6-1947.

25. Learned counsel for the appellant appreciating the legal difficulty in contending that a pledge right was created in favour of his client at the moment of the delivery of the suit vehicle argued that the title must be deemed to have passed to him when the innocently sold the vehicle at the end of July 1947. In other words, though the pledge in regard to the suit vehicle was not operative on the date of the delivery the appellant obtained rights and the second defendant an indefeasible title by reason of the auction sale held at a time when the pledgee had no notice of the plaintiffs' title. We are of the opinion that for the reasons already discussed this contention is unsound in law and that the true position is that no title of the pledgor could accrue to the pledgee until he consciously gave up his rights as against the vehicle originally pledged and accepted the suit vehicle as a substitute not having knowledge at the time of such acceptance of the plaintiffs' ownership of the vehicle.

But even if there is any substance in this contention, on the facts of the present case there are other legal difficulties in the way of the appellant. The auction sale at which the second defendant purchased the suit vehicle was challenged as mala fide and invalid by the pledgor and C. S. No. 309 of 1947 was filed to obtain a decision on this matter. During the pendency of tills action the third defendant had clear notice by the letter dated 14-11-1947 from the plaintiff's advocate that the vehicle originally pledged with the appellant had been improperly sold away by the pledgor and that the plaintiffs were the owners of the vehicle bearing engine No. 3654 which remained at that time in the premises of the third defendant who had full knowledge of the real situation. It was subsequent to this that C. S. No. 309 of 1947 was settled out of Court and the terms of the settlement were to annul the sale held by public auction under which the second defendant became the purchaser, revive the pledge and security and finally in default of redemption within a time limit vesting the vehicle in the third defendant.

The title of the 2nd defendant therefore was displaced by the compromise and he was never to have any rights thereafter except to a claim for the purchase price from the third defendant. This sale having been annulled and the pledge revived the third defendant was relegated to the position which he would have occupied at the moment of the original pledge and as at the time when he is said to have become a pledgee once again under the compromise he had full notice of the plaintiffs' title by reason of the contents of the letter dated 14-11-1947 already referred to, he cannot invoke the provisions contained in Section 178, Contract Act for sustaining the pledge over the plaintiffs' vehicle. It follows that the appellant derives no benefit even if the theory of the appellant's counsel pushing back the date of his accrual of rights to the auction sale were accepted. We are of the opinion that Section 173, Contract Act on which reliance has been placed to sustain the plea of the appellant is not available to him and that he was guilty of conversion of the plaintiffs' Bradford van by unlawfully effecting sale of it and appropriating the proceeds thereof.

26. In the foregoing discussion we have proceeded on the assumption that the first defendant had in his possession the van bearing engine No, 3651 on 5-5-1947 so that he could create a valid pledge over the vehicle in favour of the third defendant on that date. On the evidence that this van was sold as early as 17th April to V. K. S. Mani it is more than probable that it had been delivered to the buyer long before 5-5-1947. If so, there was no pledge of a third van on that date and there could be no foundation for the theory of substituted security on which learned counsel for the appellant rested his case. Nor is there basis for any contention that the despatch of the plaintiffs' vehicle to the appellant on 7-6-1947 itself constituted a pledge of it for securing the earlier loan, for there was no intention even on the part of the pledger to do so as is clear from the letter by the first defendant dated 6-6-1949 in pursuance of which the van was sent up. On this state of facts therefore the case of the appellant is weaker than if there had been a valid pledge of a third van on 5-5-1949.

27. There is no dispute as regards the amountof the decree. The original side appeal fails and isdismissed with costs.


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