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Madras Automobiles and anr. Vs. Modern Bank Ltd. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai
Decided On
Reported inAIR1938Mad545
AppellantMadras Automobiles and anr.
RespondentModern Bank Ltd.
Excerpt:
.....defendant 2. the main point on which defendant 2 succeeded was that defendant 2 acted in good faith in taking a pledge of the car in question. provided that the pawnee acts in good faith and under circumstances which are not such as to raise a reasonable presumption that the pawnee is acting improperly. the words 'good faith' found in this section have been generally understood to bear the same meaning as is given in sub-section 20 of section 3, general clauses act, though, in terms, that sub-section may not apply to any act earlier in date than itself. that a thing should be deemed to be done in good faith if it is in fact done honestly, whether it is done negligently or not. pollock and mulla, in their commentaries on the contract act, also rely on the definition of 'good faith'..........affect the question of ownership. it may be that the possession of a certificate is prima facie evidence of ownership, but it is not the only evidence of ownership. in this particular case, the receipt, ex. 13, appears to have been regarded, and not unreasonably, as documentary evidence of a satisfactory character of the ownership of the car by defendant 1; and it was perhaps because this receipt was produced and deposited with the bank that it was not thought necessary to enquire about the certificate of registry. on the whole, we do not see sufficient reason to differ from the finding of the learned subordinate judge that defendant 2 bank was a bona fide pledge of the car and that it is entitled to the protection given by section 178, contract act. this is the only point in appeal.....
Judgment:

Pandrang Row, J.

1. The only point raised in this appeal is whether the respondent in this appeal, i.e. the Modern Bank Ltd., Coimbatore, was a bona fide pledge of a certain motor car belonging to the appellant. The appeal arises out of a suit instituted by the appellant against the bank as defendant 2 and against one Ramaswami Iyer as defendant I to recover either the car and the difference between the original price of the car and its present value or, in the alternative, the value of the car with interest. Defendant 2 was imp leaded because the car was pledged by defendant 1 with defendant 2 bank in December 1928, for a sum of Rs. 2200 odd. The suit was resisted on several grounds by defendant 1 but it is unnecessary to refer to his contentions, because there is no appeal by him from the decree passed against him. The present appeal by the plaintiff is from the decree dismissing the suit as against defendant 2. The main point on which defendant 2 succeeded was that defendant 2 acted in good faith in taking a pledge of the car in question. That contention was upheld by the learned Subordinate Judge, who tried the case and heard the witnesses and the claim as against defendant 2 bank was accordingly dismissed.

2. So far as the evidence on the point is concerned, we see no reason to take a different view of it from that taken by the trial Judge; and in fact, no serious attempt has been made to throw doubt on the veracity of the witnesses examined on behalf of defendant 2. It has however been contended that that evidence is not sufficient. It is urged that the onus of proof lies on defendant 2 and that the onus has not been discharged by the evidence adduced on behalf of defendant 2. The evidence on the point consists of that of the head clerk of defendant 2 bank D.W. 2, and that of the salesman and cashier of the U.M.S. motor firm at Coimbatore. The evidence makes it quite clear that before the pledge was taken of the car and money advanced by defendant 2 bank, sufficient enquiry was made about the ownership of the car and it was only after it was ascertained that defendant I was the owner of the car, that it was taken as a pledge and money was advanced. The car was brought to the bank by defendant 1 who also produced at the same time a receipt, Ex. 13, as evidence of his ownership. That was a receipt granted by the plaintiff firm acknowledging receipt of Rs. 3485 on account of a car and in favour of V. Ramaswamy Iyer, 116 Salivan Street, Coimbatore. The plaintiff's case is that defendant 1 was only his agent for the purpose of sale of motor cars and that he did not sell the car to defendant 1. Nevertheless, the receipt, Ex. 13, is drawn up in such a way that no one, after reading the receipt, would be led to suspect that defendant 1 was not the owner of the car but was merely an agent for sale. Enquiries were made from D.W. 3 before the pledge was taken and D.W. 3 assured the head clerk and the secretary of the bank that the loan could be given as defendant 1 was the owner of the car, and that the car was in his name with the 'floating' number M.C. 2-A, as he was a dealer in cars for the plaintiff. He also stated that according to the custom in Madras, dealers in cars would not entrust their cars to sub-dealers unless some money is advanced as security. It is clear from the evidence that every reasonable precaution was taken by defendant 2 bank to make sure that the car was the property of defendant 1 as represented by him. It is not as if the bank acted merely on his own statement or representation. They made sufficient enquiry and there can be no doubt that they acted honestly. That they acted honestly in the matter has not been seriously disputed before us. In other words, they had no intention of causing wrongful loss to any one or making any wrongful gain to themselves by taking the pledge.

3. The question therefore is whether the honesty of the bank in this transaction is not a sufficient answer to the claim of the plaintiff against the bank. The question has to be decided with reference to Section 178, Contract Act as it stood before it was amended by the Act of 1930. The material portion of the section runs as follows:

A person who is in possession of any goods. may make a valid pledge of such goods; provided that the pawnee acts in good faith and under circumstances which are not such as to raise a reasonable presumption that the pawnee is acting improperly.

4. The further proviso need not be quoted here because it is conceded that it does not apply to the present case. The words 'good faith' found in this section have been generally Understood to bear the same meaning as is given in Sub-section 20 of Section 3, General Clauses Act, though, in terms, that sub-section may not apply to any act earlier in date than itself. The general rule of English law is also to the same effect, viz. that a thing should be deemed to be done in good faith if it is in fact done honestly, whether it is done negligently or not. Pollock and Mulla, in their Commentaries on the Contract Act, also rely on the definition of 'good faith' found in Section 3, Sub-section 20, General Clauses Act of 1897. It is however argued that even assuming that whatever was clone, was done honestly and therefore in good faith, nevertheless Section 178, Contract Act, as it stood before it was amended, required that the circumstances surrounding the transaction must be such as would not raise a reasonable presumption that the pawnor was acting improperly and that, in this connexion, any negligence of the pawnee may have to be taken into consideration. The negligence that is attributed to defendant 2 bank is entirely confined to the fact that the car in question bore a trade number and that the bank did not insist upon the production of the C certificate relating to the car which would have shown in whose name the car was registered. We do not think that, in the circumstances and especially in view of the fact that enquiry had shown that defendant 1 himself was a sub-dealer in ears, the fact that the car bore a trade number would have put any reasonable pledge on his guard. The omission to ask for the C certificate is not, in our opinion, such a serious omission as to warrant an inference that it must have been deliberate or that it must have been due to recklessness.

5. So far as the conduct of defendant 1 is concerned, there was nothing suspicious about it so as to make any reasonable man suspect that he had no authority to pledge the car, or, in other words, that he was not the owner of the car. It must be remembered in this connexion that, though the rules under the Motor Vehicles Act, require that the owner of the car must obtain a C certificate in respect of the car, and that after every transaction of sale the seller must communicate the fact of sale to the licensing authorities and the buyer should take out a certificate in his own name, nevertheless these provisions of law do not really affect the question of ownership. It may be that the possession of a certificate is prima facie evidence of ownership, but it is not the only evidence of ownership. In this particular case, the receipt, Ex. 13, appears to have been regarded, and not unreasonably, as documentary evidence of a satisfactory character of the ownership of the car by defendant 1; and it was perhaps because this receipt was produced and deposited with the bank that it was not thought necessary to enquire about the certificate of registry. On the whole, we do not see sufficient reason to differ from the finding of the learned Subordinate Judge that defendant 2 bank was a bona fide pledge of the car and that it is entitled to the protection given by Section 178, Contract Act. This is the only point in appeal and this has been found against the appellant. The appeal must therefore fail and it is accordingly dismissed with costs.


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