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Hindusthan Commercial Bank Ltd. Vs. Probodh Kumar Mitter and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata High Court
Decided On
Case NumberA.F.O.D. No. 221 of 1971
Judge
Reported inAIR1980Cal292
ActsNegotiable Instruments Act, 1881 - Section 131; ;Limitation Act, 1908 - Schedule - Article 36
AppellantHindusthan Commercial Bank Ltd.
RespondentProbodh Kumar Mitter and anr.
Advocates:Bachawat, Adv.
DispositionAppeal allowed
Cases ReferredNational Bank of Lahore Ltd. v. Sohon
Excerpt:
- ramendra mohan datta, j. 1. this is an appeal from the judgment and decree dated 19th april, 1971 passed by roy chowdhury, j. in a suit for damages for a sum of rs. 68, 598/-.2. the facts shortly are that the plaintiff respondent no. 1 (hereinafter called mitter) was a dealer in stocks and shares and was carrying on such business under the name and style of sree krishna & co. in calcutta. one r. n. ghose alias r. k. ghose, the respondent no. 2 herein, on or about 10th may, 1951 verbally agreed to sell and mitter agreed to purchase several shares in various joint stock companies. the said shares were sold through the defendant no. 1 hindusthan commercial bank ltd., the appellant herein (hereinafter called the bank). the bank made out various bills representing the price of the shares sold.....
Judgment:

Ramendra Mohan Datta, J.

1. This is an appeal from the judgment and decree dated 19th April, 1971 passed by Roy Chowdhury, J. in a suit for damages for a sum of Rs. 68, 598/-.

2. The facts shortly are that the plaintiff respondent No. 1 (hereinafter called Mitter) was a dealer in stocks and Shares and was carrying on such business under the name and style of Sree Krishna & Co. in Calcutta. One R. N. Ghose alias R. K. Ghose, the respondent No. 2 herein, on or about 10th May, 1951 verbally agreed to sell and Mitter agreed to purchase several shares in various joint stock companies. The said shares were sold through the defendant No. 1 Hindusthan Commercial Bank Ltd., the appellant herein (hereinafter called the bank). The bank made out various bills representing the price of the shares sold to Mitter and asked Mitter for payment and then to take delivery of the shares. The bank delievered the said shares to Mitter between 15th May and 7th June, 1951. Mitter paid the amount of the said bills by an account payee cheque drawn in favour of the bank and took delivery of the said shares. Thereafter, between June and July, 1951, the said shares were seized by the police and criminal proceedings were started against the said R. N. Ghose the respondent No. 2 herein on the ground that the said shares were stolen properties. On 15th April, 1954, Ghose had been convicted.

3. From a careful reading of the plaint it appears that the plaintiff Mitter's main endeavour had been to make the bank liable in respect of this transaction. The main averments in the plaint are that the bank made out the bills representing the price of the shares sold to Mitter and invited and/or requested Mitter to pay for and then to take delivery of the said shares. The bank made over the bills with intent that Mitter would act upon the said bills and pay the price mentioned therein and take delivery of the shares. Mitter acted upon the same and paid the price by an account payee cheque drawn in favour of the bank and the bank gave delivery of the said shares. The bank by its act and conduct expressly and/or impliedly warranted and/or represented to Mitter that the delivery of the said shares was good delivery; that Mitter would have and enjoy quiet possession of the said shares; that Ghose had lawful right or title to the said shares; that the bank was competent to transfer such lawful right and title to the said shares to Mitter and that Mitter would be entitled to the said shares. Mitter acted upon such representation and warranty. It is further stated by Mitter that Ghose had no lawful right or title to the said shares which were stolen properties and had no right to sell the same and the bank was not competent to transfer any lawful right or title to the said shares to Mitter and to deal with them as it had done, It is further stated that the bank obtained payment of moneys on the basis that Mitter would be entitled to the said shares and would have and enjoy quiet possession thereof. Furthermore, the bank wrongfully obtained moneys from Mitter by making over the shares which were stolen properties and which the bank was not competent to deal with.

4. The question of duty of the bank to Mitter was sought to be raised by pleading that the bank in its dealing with Mitter was under a duty to him viz., that no act or omission on its part should cause any loss and injury to Mitter. The bank was under a duty to deliver such shares to which Mitter would become entitled and of which Mitter would have and enjoy quiet possession. The bank had committed broach of its duty to Mitter. Mitter has also pleaded breach of implied agreement on the part of the bank by making an averment therein that the bank by its act and conduct or omission expressly or impliedly agreed to indemnify Mitter against all losses or damages which Mitter might suffer by acting upon the said bills and making payment at its request and taking delivery of the said shares. The respondent No. 2 Ghose had no lawful right or title to the said shares, no right to sell or part with the same and no right to ensure Mitter that he would have and enjoy quiet possession of the said shares. Lastly, it is pleaded that the receipt of the said sum was tortious, illegal, wrongful and the same was obtained fraudulently from Mitter who was deprived of the said sum by Ghosh with the help and aid of the bank. Both Ghosh and bank jointly acted in the wrong done to Mitter by causing loss and damage to him to the extent of the said sum of Rs. 68,598.00.

5. The question is how far the bank can be made liable in the facts and circumstances as stated hereinabove.

6. It is significant to note that the writ of summons was not served on Ghosh nor did Ghosh appear or file his written statement. The bank filed its written statement denying its liability. It is stated that the bank was not a party to the agreement to sell the said shares nor was there any privity of contract between the bank and the plaintiff, The bank discharged its obligation to Ghosh and acted throughout in the ordinary course of its business as a banker and in accordance with the usage. The bank acted bona fide as the banker of its constituent in the transaction and the facts were that Ghosh sent to the bank the broker's note together with the shares which the bank believed to be the shares of the said constituent, Ghosh instructed the bank to deliver the shares in terms of the contract to the persons named therein and to receive the amount mentioned in the broker's note. In terms of the broker's note the bills were prepared and sent to the parties. When the bank made the collections from the parties, the bank had deposited the same in the name of Ghosh. The main defence is that the plaintiff had direct and independent transaction in shares with Ghosh and the bank was not a party to the same but only discharged its usual duties as a banker. The plaintiff and Ghose acted as principals in the transaction and there was no warranty express or implied or any representation direct or indirect made by the bank which was acted upon by the plaintiff as alleged. The bank had no knowledge that the said shares were stolen properties and that there was any defect in the title or that the said Ghosh was not the legal owner thereoi It acted bona fide and without any knowledge of defect of title in the said shares which were dealt with by Ghosh. It is pleaded that the plaintiff had ratified and/or acquiesced in all the acts done by the bank in respect of the transaction in suit. The bank had not dealt with the said shares in any way on its own account but dealt with the same merely as banker of the said Ghosh and in course of its usual business as a banker. The representation that the plaintiff would have or enjoy quiet possession or that he had been prevented from having or enjoying quiet possession of the said shares because of wrongful act and conduct of the bank were all denied. The bank admitted that it had obtained the payment but denied that the same was on the basis or contention that the appellant would be entitled thereto or would have and enjoy quiet possession thereof. It is further stated that the bank had throughout acted bona fide and without knowledge of any defect in title, if any, of Ghose in the said shares. The bank also denied that there was any warranty or condition precedent or that it had broken the same wrongfully or otherwise. The loss, if any, was not due to any breach of duty on the part of the bank. The allegation of breach of duty by the bank was also denied. The bank had never any lawful duty or title in the said shares and verily believed that Ghose was a true owner of the said shares. The charges of fraud and conspiracy made against the bank have also been denied. Lastly, it is pleaded that the plaint did not disclose any cause of action against the bank.

7. As observed above, what was pleaded was that the bank was under a duty to see that no act or omission on its part should cause any loss or injury to Mitter and it was under a further duty to deliver such shares which would give Mitter good title and enable him to enjoy quiet possession thereof. As a matter of fact that case which had been run at the trial was on the basis that the bank was under a duty to take care in opening the account of its customer Ghosh and it having committed breach of its duty to take care in that respect, became negligent and caused loss and damages to Mitter. The learned Judge has come to his finding also on that basis and has decided the case accordingly. We have to examine carefully how far that finding is consistent with the pleading in this case. We would have to consider further, on the basis of the issues struck as to how far such finding could be arrived at. As observed herein above, although Ghosh was impleaded as a party defendant, the case was proceeded with as against the bank only and particularly on the basis of negligence alone. The obligation, as pleaded in the plaint, had been given a go-by and no finding has been arrived at in the judgment regarding the representation which ensured that the plaintiff should have and enjoy quiet possession of the shares. Furthermore, the case of express or implied warranty or the implied agreement as pleaded in the plaint had not been pursued,

8. From the evidence as adduced at the trial it transpires that on 4th May, 1951 Ghosh opened the account with the appellant bank after he was introduced by one Harimohan Seal, a long standing constituent of the bank and by another constituent named Pasupati Mallick of Bhawanipore Paper & Stationery Mart. On 9th June, 1951 criminal proceeding was instituted whereby the plaintiff's father Rajani Kanta was called to the police station for interrogation. The appellant bank was not informed about the same by the plaintiff. On 15th June, 1951, United Bank of India wrote to its solicitor Sri S. N. Sen forwarding a list of shares which were alleged to have been removed from the custody of its Russa Road branch so that the same might be submitted to the Stock Exchange and to the police. On the next day Sri S. N. Sen complied with the same. In June-July, 1951, certain shares were seized by the police and on 26th September 1951 the same were sent by the plaintiff to the appellant bank describing the shares as 'bad delivery sundry shares' and enclosing therewith those bills claiming the amount mentioned therein. On 26th September, 1951, the appellant bank's Solicitor M/s. Khaitan & Company replied denying the bank's liability. On 28th November, Sri S. C. Roy Chowdhury, Solicitor acting for Mitter reiterated his client's contention. On 4th December, 1951, Khaitan & Company wrote back reiterating the earlier stand taken by them.

9. Thereafter on 15th April, 1954, R. N. Ghosh was convicted. After waiting for all those years the plaintiff filed the suit herein on 7th May 1954. In Aug., 1954, correspondence was exchanged asking for particulars about the agreement and it was replied by saying that the agreement was between the plaintiff and R. N. Ghosh and the same Was verbally entered into.

10. At the trial several issues were raised and settled. The learned Judge, inter alia, held that there was an agreement between Mitter and Ghosh, as alleged in the plaint, for the sale of shares; that the bank acted in the transaction as the Bankers and Agent of Ghosh; the bank was grossly negligent in not enquiring as to the title of Ghosh in respect of those shares. This finding as to negligence was neither the subject matter of any pleading nor was the same raised in the issues as settled in the suit. The learned Judge further held generally that there was warranty or representation, express or implied on the part of the bank without actually deciding whether such warranty or representation was express or implied. It was also held that the shares were stolen shares; that Ghosh had no title to the said shares as the shares were obtained by fraud and wrongful acts. It is to be noted that the above finding was arrived at in respect of the allegation made in paras 8, 10 and 18, where no allegation of fraud has been made. Such allegation of fraud has been made in paragraph 20 of the plaint but no particulars thereof have been furnished thereunder in respect of any fraud. In respect of paragraph 12 of the plaint where it is pleaded that the bank obtained payment of the moneys from Mitter on the basis and condition that Mitter would be entitled to the said shares and would have and enjoy quiet possession thereof, the issue has been framed as follows :

'4 (c). Did the defendant No. 1 represent to the plaintiff that he would have or enjoy quiet possession of the shares or has the plaintiff been prevented from having or enjoying quiet possession of the shares because of any wrongful act or conduct of the defendant No. 1 as pleaded in paragraph 12 of the plaint?'

11. This issue has been answered only by saying 'yes' but no reason in respect thereto has been indicated in the judgment itself. The learned Judge further held that the bank had sought to transfer the title to the said shares although it was not competent to do so; that the bank obtained payment of money from Mitter on the basis or condition as alleged in paragraphs 12, 13, 14, 15 and 16 of the plaint. It is further to be noted that there is no discussion whatsoever in the judgment regarding this finding. In paragraph 17 of the plaint an express or implied agreement has been pleaded and an issue was raised enquiring whether there was any express or implied agreement between Mitter and the bank and to that without deciding whether it was express or implied the learned Judge has simply answered the same by saying 'yes'. Regarding paragraph 20 of the plaint similarly in dealing with the various allegations which required separate and distinct findings and which read as follows 'wrongful or fraudulent or illegal or tortious action jointly or otherwise as between the defendants', the learned Judge has answered the same simply by saying 'yes'. Moreover in respect of issue No. 9 as to whether there was ratification or acquiescence in all the acts of the bank by Mitter, the learned Judge in answering the same has simply said 'No', without discussing or giving reasons for his coming to his said finding. The learned Judge ultimately has found that a sum of Rs. 60,231-10p only has been suffered as loss and damages by the plaintiff and has passed a decree to that extent. There is no reason given as to why the amount was reduced from Rs. 68,598 to Rs, 60,231.10 p. It should be noted that there is no indication in the Judgment as to how the amount was reduced.

12. It appears that the learned Judge arrived at his conclusions by accepting all the arguments advanced by the the learned counsel Mr. Dipankar Gupta appearing in the trial court on behalf of the plaintiff respondent. So, let us consider what arguments had been made by Mr. Gupta as recorded in the Judgment. His first submission was that the suit was on the basis of tortious liability and both the bank and Ghosh were joint tort-feasors and they were jointly liable to Mitter and Mitter was entitled to proceed against any one of them and his claim was maintainable even in the absence of Ghosh. The next contention was that the bank was not merely entrusted with the ministerial duty of physically delivering the said shares and collecting the same to and from the plaintiff as contended on behalf of the bank, the nature of the account and dealings therein would show that R. N. Ghosh was maintaining an overdraft account against the pledge of G. P. Notes and securities. R. N, Ghosh handed over the contract notes in respect of the sale of shares and the bank retained the same and made entries thereof in its security register (vide Mukherji's questions 466 to 473, 486 to 500 and 506 to 525 and para 3 of written statement herein and paras 4, 6 and 11 of the Alipore suit Ext. VV and questions 601 to 606 and 612 to 623 of Mukherji), Relying on such evidence the learned Judge accepted the contention of Mr. Gupta that the Bank was making scrutiny of the blank transfer deeds and was taking independent decisions itself as to how many shares were to be delivered. Such decisions were quite different from the instructions which were received from Ghose and on the basis of such decisions it was delivering the shares and making its own bills. That the bank's bills did not indicate the source from which the bank obtained the shares although it was clear that the same were being delivered on account of R. N. Ghosh (vide Mukherji's questions 561 to 583). Even though the bank was acting as an agent yet it took upon itself the responsibility of giving delivery of shares under the contract of sale entered into by and between Mitter and Ghosh. To quote the language of the learned Judge, 'the ownership in the said shares together with the blank transfer deed was intended to be transferred by the bank in favour of the plaintiff in the ordinary course of its banking business'.

13. The learned Judge has also accepted the contention made on behalf of Mitter that the said shares being stolen shares need not have been strictly proved. All that was contended was that neither the bank nor Ghosh had any authority to deal with the shares and Mitter had been deprived of quiet possession thereof after payment of the price to bank. From the evidence on record the learned Judge has accepted the argument that the shares were stolen shares and relying on the decisions in Ram Ran-jan Chakerbati v. Ram Narain Singh, reported in (1895) ILR 22 Cal 533 (542) (PC) and in Hemchandra Bhaduri v. Puma Chandra Sarkar., reported in AIR 1934 Cal 788 and in Krishna Nath Chakra-vorty v. Md. Wafiz, reported in (1917) 21 Cal WN 93 (95); (AIR 1916 Cal 598) that the conviction of Ghosh in the criminal proceedings for theft of the said shares was a strong prima facie evidence that the said shares were stolen shares. The learned Judge also relied on the evidence of Sukumar Dutta and of Basak to come to his finding that the shares were stolen by R, N. Ghosh from United Bank of India at Russa Road Branch. The shares being stolen properties neither Ghosh nor the Bank could transfer the title thereof to Mitter and, accordingly, the question of protection under Section 29 of the Sale of Goods Act did not arise. If the agent dealt with goods in which the principal had no title then the agent was liable in conversion. The learned Judge accepted that contention that the true owner waa normally the person who would suffer damages as a result of the act of conversion; but then the learned Judge proceeded further to find that where the third party, such as the plaintiff in this case, suffers damages as a result of the act of conversion then he is the person who is injured and could bring an action for damages. In support of that contention the decisions in the case of Consolidated Co. v. Curtis & Sons, reported in LR (1892) 1 QBD 495; in the case of Fine Art Society Ltd. v. Union Bank of London, Ltd., reported in LR (1886) 17 QBD 705 and the passages from Clerk & Lindsell on Tort 13th Edition para 1136; Bowstead on Agency 13 Edition 431 and Halsbury 3rd Edition Volume 1 pages 233, 235 were relied on The learned Judge has also accepted the contention of Mr. Gupta that the bank was guilty of breach of duty of care owed by the bank to Mitter. He held that there was a duty situation and that duty was owed by the bank to Mitter. The learned Judge has also applied the principle laid down in Donoghue v. Stevenson reported in LR 1932 AC 562 and in Hedley v. Heller LR 1964 AC 465 and the other English decisions on the questions of negligence. It is to be considered how far the case of conversion and negligence were pleaded in the plaint or were raised in the issues before the learned Judge.

14. The next argument of Mr. Gupta which was accepted by the learned Judge was that the bank invited Mitter to take delivery of the shares against their bills by payment and thereby warranted and represented that the shares were good for delivery. Mitter was induced to part with his money on the basis of such representation as evidenced by the said bills (Ext. H). There had been a clear breach of the warranty of title as a result whereof the bank should indemnify Mitter for loss of the shares by paying values thereof which had been received by the Bank. No doubt the bank acted as an agent but in the facts and circumstances of this case there was a clear warranty on the part of the agent that he was authorised by the owner of the shares (sic) over the same for the delivery and to receive payment. Since Ghosh had no authority the bank as liable to indemnify Mitter in respect of loss suffered by Mitter. This principle has been laid down in the case ol Collen v. Wright (1857) 8 E & B 647 (657) and approved by the House of Lords in the case of Starkey v. Bank of England, 1903 AC 114 and also in the passage in Halsbury 3rd Edition Volume 26 page 827 article 1532.

15. After accepting the above contentions of Mr. Gupta the learned Judge observed that he was,

'accepting the evidence tendered OB behalf of the plaintiff's witness as prima facie proofs of the facts that the said shares were stolen shares and R. N. Ghosh had no title to the said shares sold and delivered to the plaintiff through the defendant bank'.

16. The learned Judge next arrived at the finding that Mitter had not enjoyed quiet possession of the said shares which were taken delivery of from the bank against payment of the relative bills because Mitter had to refund the sals proceeds of shares which were subsequently seized by the police as the delivery became bad.

17. The learned Judge next came to his finding that the

'Bank was grossly negligent in opening the account of R. N. Ghosh without proper scrutiny, enquiry and investigation and accepting a large number of shares with bank transfer deeds without scrutiny with proper care and skill as is to be expected from banker in the ordinary course of its business. I find as a fact that the defendant bank is grossly negligent in the facts and circumstances of this case in opening, maintaining and operating the account of R. N. Ghosh in the manner they have done in this instant case'.

18. This finding has to be scrutinised and considered as to how far the same was relevant in the facts and circumstances of this case.

19. The learned Judge thereafter discussed the various authorities touching the point of negligence and ultimately came to his finding that the bank failed in their elementary duty to check up the reference of R. N. Ghosh when the account was opened with initial- cash sum of Rs. 501 on the 4th May 1951, The learned Judge observed --

'the transaction through the scheduled bank gives a stamp of genuineness and honest transaction and public are entitled to rely on the bankers, as in the present case the plaintiff relied, and paid for the bills presented by the defendant bank in discharge of its duty as banker on behalf of the customer. The banker, as in the present case, the defendant bank failed in their ordinary duty, owed to the general public to take proper care and satisfy themselves as to the integrity, honesty and antecedents of a customer and it must be held responsible for the loss caused to anyone (here plaintiff) by such gross negligence and dereliction of ordinary duties as a banker'.

20. The learned Judge then observed:

'that the whole question for decision in this suit depends as to the duly to take care on the part of the defendant bank while opening the account of a complete stranger being, R. K. Ghosh alias R. N. Ghosh'.

21. The learned Judge relied on Section 131 of the Negotiable Instruments Act which corresponds to Section 4 of the Cheques Act, 1957 in England dealing with the liability of collecting banker and the decided cases on that point.

22. The learned Judge next came to his finding that the bank became liable for breach of warranty and title as by presentation of the bill to the plaintiff there was an express representation by the bank that the said shares together with the blank transfer deeds were good for delivery and that R. N. Ghosh had good title thereto about which the bank, in their ordinary course of business as a banker, got themselves satisfied and the plaintiff, as an ordinary prudent man of business, was justified in not (sic) relying on the said representation and making payment for the same. Lastly, the learned Judge went so for as to apply the 'last opportunity, principle and to make the bank liable to the plaintiff for the damages he had suffered due to the invalid and void sale of the said shares. According to the learned Judge if the bank had enquired into the source of the shares the bank could have avoided the loss, had it been a little careful in the discharge of the ordinary duty as a banker in opening the account of R. N. Ghosh and in enquiring into the title to the shares pledged with the bank against overdraft allowed in the account.

23. Ultimately, the learned Judge has summed up the whole case by coming to his three findings. First, the bank was grossly negligent in not enquiring into the identity and integrity of Ghosh at the time of opening the account and as to the title to the shares delivered to the plaintiff under cover of its bills. Secondly, the bank was liable for warranty of title and conversion for delivering shares, to the plaintiff, in which its customer Ghosh had no title and lastly, the bank must be held liable as a banker and as agent of its customer for conversion inasmuch as the said shares were stolen shares and Ghosh had no title to the same. The bank was bound to indemnify the plaintiff for the loss, he had suffered, which loss, according to the learned Judge, had been duly proved.

24. The question to be considered is how far the learned Judge appreciated the evidence adduced before him and whether he was right in his dealing with the various aspects of the matter and in arriving at his conclusions. In doing so, the oral evidence adduced herein by the parties would first require to be considered.

25. On the question of loss of shares Sukumar Dutta said that in 1951 he was holding the post of Superintendent of the Inspection Department of the United Bank of India. The letter dated June 15, 1951 encolsing the list of shares scrips was signed by him and sent to S. N. Sen Solicitor stating which shares ware lost from the custody of the Bank's Russa Road Branch. The witness was not in a position to say how they were actually lost. In course of inspection the loss was detected. Ramkinkar Ghosh, one of the employees of the United Bank of India at its said Russa Road branch was convicted for stealing the shares. The said Ghosh was a ledger keeper. In course Of his duties while carrying on inspection work the witness enquired about the securities held by this branch. The inspecting officers under him were instructed to inspect and report to him. He did not but inspect himself he derived his information from the report submitted to him. The report was not forthcoming. The witness did not know where the report was nor did he know in whose name the shares were registered in the books of the respective companies. Such shares were to be kept in the custody of the accountant or the agent of the Branch. Although the witness was examined as a witness in the criminal case but he did not remember in respect of which particular shares Ghosh was convicted. He was not in a position to contradict if it was suggested to him that Ghosh was not convicted in respect of the shares which are the subject matter of the proceedings herein. The witness was also not in a position to say who prepared the list of shares annexed to the said letter dated June 15, 1951, nor could he enlighten the Court on anything more about the said list.

26. It appears that the learned Judge failed to appreciate that save and except that the said letter dated June 15, 1951 was signed by this witness he had no direct knowledge about the theft, nor could he connect the shares, which are the subject matter of this suit, with the conviction of Ghosh. In other words, what he proved by his evidence was that in connection with the theft of certain shares the said Ghosh was convicted, The best evidence had been withheld from Court and in their absence his evidence can hardly be of any use. It should have been appreciated that the inspection report was the most vital document as also the share register. None of the inspectors were called to give direct evidence about their investigation. In my opinion, the loss of the said shares was not proved through this witness.

27. Manindra Gopal Basak was called in connection with the said letter dated June 15, 1951 (Ext. 'A'). The witness reported the matter to the Superintendent of Inspection who was the said Sukumar Dutta. He said that certain list was prepared for the missing shares by one of the officers of the Inspection Department by the name of Hrishikesh Mukherjee. That list was not produced nor was Hrishikesh Mukherjee called as a witness. The witness was the agent of the said Branch in May 1951 and remained as such agent of that Branch till May/June, 1951. The witness said that the shares remained with the agent and the accountant in their joint custody. The procedure was such that both of them would have to come together and open the safe to take them out. Ramkinkar Ghosh was the security clerk when the witness was the agent of that Branch, He came to know of the missing shares when certain enquiry came from certain companies to the effect that the shares had come to them for registration and they wanted to have the confirmation thereof. The witness then consulted the security book and found that delivery had not been given of those shares. According to the witness, he then inspected and checked the book with the list of shares (Ext. 'A'). The list contained shares which were missing from the Bank's custody. Hrishikesh Mukherjee prepared that list in his presence. The securities in his hand were checked with the security register and whatever securities were missing a list thereof was prepared. The security register did not indicate that the shares were delivered to the parties. They should have been with the bank. The witness identified the shares mentioned in the copy list with the shares mentioned in the security register. The witness also indicated the names of the parties in whose account such shares were pledged in the security register. When he did not find the shares in the respective folders he enquired of the security clerk who in the meantime had left the bank. That made him suspicious and he reported the matter to the head office immediately in the same after-noon. Both Ramkinkar Ghosh and the witness were arrested and prosecuted in the Alipore Court. The witness filed a petition and got himself acquitted because no charge was framed against him. The witness admitted that both the agent and the accountant would have to be satisfied whenever any number of securities would be either taken out or put in. The witness suggested that it might be that sometimes the witness or the accountant would be busy and the security clerk would take the folders out to check up or for writing in the register and so on and in that process the same might be left with him, say, for about 10 minutes or so, but that would have to be done before the witness in his chamber. The procedure is such that when the securities would go out the witness would make entries in the security register in the withdrawal column and put his initial against the same. There was also provision for physical check up of the securities at the interval of every six months by the Inspection Department According to the witness the securities could not be taken out nor could the securities be put in without his consent because he was ultimately responsible. The security register showed that there was no endorsement either in January 1950, or in June 1951, to suggest or to show that any of the folders had been taken out or any of the shares were sent for registration. The witness said that he never saw Ramkinkar Ghosh taking out the securities nor could he know anybody of the bank seeing him to take them away. The witness reported the matter to the head office and also lodged first information report with the police the very same day.

28. It is surprising that such a vital document viz., the first information report had not been produced in Court. The other persons who were arrested, besides the witnesses, were Ramkinkar Ghosh, Harimohan Seal and one S. K. Dutta, son of K. L. Dutta. There was another accused in the criminal proceedings and his name was Khagen Dutta. He was also a son of K. L. Dutta. The witness did not know anybody by the name of Khagen Banerjee. It is true that this witness has stated from his own knowledge as to how he came to report the head office after personally examining the records of the bank but the original list prepared should have been forthcoming as also the first information report lodged by him with the police. Besides, the learned Judge should have considered that the evidence of this witness was to be accepted with utmost caution since he was a co-accused in the criminal proceeding for sometime. He was the person who was responsible for the safe custody of the shares and securities and as such he was very much interested in foisting the liability on somebody or other, the fact remained that he was removed from that post since then.

29. Probodh Mitter, the plaintiff respondent did not give evidence but his father Rajani Kanta Mitra was the main witness on behalf of the plaintiff. His son Probodh was the proprietor of the business of Sree Krishna & Co. which dealt in shares of joint stock companies. The membership card of the Calcutta Stock Exchange Association was held in the name of Probodh. That business was started in 1949, and was carried on till the middle of 1953. Rajani was employed since 1921, with the then Imperial Bank of India and had retired in June 1951. He was an officer in the security department in the head office of the said bank. It was he who supervised and looked after his son's business of Sree Krishna & Co. According to him the transaction was entered into between his son and one R. N. Ghosh also known as Ramkinkar Ghosh. Ghosh wanted to sell certain shares belonging to different companies through one Khagen Banerjee, Rajani did not know this R. N. Ghosh whom he saw for the first time in the police court. He would be consulted by his son whenever any new business would be transacted. According to his version one Khagen Banerjee told him that a person by the name of R. N. Ghosh wanted to sell some shares but he also said that R. N. Ghosh was not personally known to him. To that the witness did not agree. Then Khagen Banerjee said that the business would come through a scheduled bank. His son thereupon said that in such event they could accept the transaction. It was then agreed that the business would be put through. It appears that the witness relied on the said underbroker's note that the delivery of the shares would be given through a scheduled bank and as such the witness need not consider it necessary to know the identity of R. N. Ghosh. On the question of delivery of shares the witness said that the agreement was that the bank would prepare bills and the plaintiff would make the payment to the bank and thereupon delivery would be given by the bank. It was to be a scheduled bank. The witness did not think it necessary to know the name of the scheduled bank. The witness even did not know the number of shares which would be purchased by him. The underbroker said that many shares were to be sold but no particulars were furnished. The witness never enquired as to whether R. N. Ghosh had the right or authority to sell the shares. According to the witness the definite case was that the principal contracting parties were the said R. N. Ghosh and his son Probodh. The witness never knew when, from whom and wherefrom the bank got those shares. The bank gave the share scrips along with all blank transfer deeds. Not a single share was registered in the name of R. N. Ghosh. In the transaction book the name of the party mentioned therein was R. N. Ghosh. According to the witness it showed that the shares were purchased from R. N. Ghosh. The cheque was issued in favour of R. N. Ghosh. He said that the reason why the police seized the shares was because the shares were stolen shares. The witness had to refund the price to the customer because of bad deliveries. The witness admitted that all the shares were delivered through Hindusthan Commercial Bank Ltd., the appellant herein describing it as 'in the account of R. N. Ghosh'. The witness admitted that R. N. Ghosh had no authority to deal with the said shares.

30. In cross-examination the witness admitted that there was no agreement with the appellant bank. The persons to the agreement were Khagen Banerjee and the witness. His son was also present there. This was the second occasion when Khagen Banerjee acted as the underbroker in dealing with Sree Krishna & Co. Khagen Banerjee was an employee of NASCO LTD. He was not an underbroker by profession. The witness then realised that he did not give his answers correctly and said that the agreement was between the witness representing Probodh and R. N. Ghosh. He clarified himself again by saying that R. N. Ghosh did not come personally but he was represented by the said Khagen Banerjee. To appreciate his answer it will be convenient to quote his own language. In answer to question 685 he said :

'The terms were as follows : That the bank would deliver the shares and then submit their own bill, we will make payment to the bank in the terms of the agreement. It was agreed that R. N. Ghosh would deliver good shares and the shares would be so that he will be entitled for the peaceful and quiet enjoyment'.

Questions 689 to 691 read as follows :--

'689 Q. Who was the seller in this transaction -- R. N. Ghosh or Khagen Banerjee or the Bank or semebody else?

A. I made a contract with R. N. Ghosh for sale of the shares he will sell and we will buy.

690. Q. Therefore the seller was R. N. Ghosh and the purchaser was the plaintiff -- have you got any doubt that the defendant No. 2 was not the seller?

A. I made a contract with the defendant No. 2.

691. Q. Therefore, he was the seller?

A. Yes'.

In answer to question 714 he categorically stated that there was also a talk with the defendant No. 2 (R. N. Ghosh). According to the witness it was not necessary to send any intimation to the bank that those shares were bad delivery shares or were stolen shares until the bills were made out on 22nd September 1951. He admitted that he came to know that the shares were stolen shares as far back as on 17th/18th June, 1951. By way of explanation the witness said that he was busy with the police case and that was why he could not send the bills for bad delivery to the bank earlier. The witness also admitted that he did not write to R. N. Ghosh or to Khagen Banerjee nor did he claim money back from them although, according to him, the bank was not the seller of those shares and the agreement was entered into with the said R. N. Ghosh. All throughout he admitted that the said shares were sent to them describing the same 'on account of R. N. Ghosh' (Q. 786). The bills in respect thereto were also made out in the account of R. N. Ghosh and that the payment too was made to the bank describing the same as 'on account of R. N. Ghosh'. (Q. 802). The witness also admitted that he understood that the bank was dealing in this respect ' on account of R. N, Ghosh' -- (Q. 801 to 804). The witness also admitted that the bank had no other interest in the transaction except to earn commission (Q. 861). The witness further admitted that while acting in the Imperial Bank he knew that it was not their usual practice that whenever the witness would take delivery of shares from a person such delivery would be taken through the bank (Q 874). The special reason which prompted him to ask for delivery through the bank was because he did not know R. N. Ghosh personally. By following that principle he wanted Ghosh's identity to be established and to ensure that he could get good delivery of shares. For that purpose he requested the seller to arrange for delivery through the Bank and he also agreed that he would make the payment through the bank. In answar to question 1205, however, he said that the reason why he did not make any enquiry about Ghosh or about his credit or standing was because Khagen Banerjee came and told him about this business. By way of precaution the witness asked his son Probodh to go along with Khagen Banerjee to the office of NASCO Ltd., where they actually went. There his son met one Kanai Dutta who assured that R. N. Ghosh was a collliery proprietor and was known to them. He further assured that Mitter could do business with him. After he found that the shares were stolen shares he along with his son went to Khagen Banerjee's house and accompanied by him went to NASCO's Office. The witness said that when Khagen Banerjee told him that the transaction would be made through a scheduled bank he was satisfied about the credibility of R. N. Ghosh. The witness further admitted that he never enquired from the bank as to what was the relationship of the bank with R. N, Ghosh. The witness even did not care to know the name of the scheduled bank through which the delivery would be given. He admitted that he had no agreement with the bank for delivery of the shares but his agreement was with R. N. Ghosh. He made payment to the bank 'on account of R. N. Ghosh' between 15th May and 7th June, 1951. He further admitted that he did not make any enquiry from the United Bank of India as to when and in what circumstances the shares went out from its office. He never made any enquiry even from the solicitor of the said United Bank of India as to who were the persons who were interested in those shares as actual owners thereof or who were the registered shareholders thereof. His idea was that those shares were being held by R. N. Ghosh in his overdraft account. He admitted also that Khagen Banerjee who brought this business was known to him from before and he did not doubt his honesty and it was because of him that he entered into this business.

31. The above in short is the oral testimony of the father of Probodh. In the plaint, however, and in the particulars furnished thereunder, it had been pleaded that the definite case made out was that the contract was made directly between the plaintiff and R. N. Ghosh. Nothing was said about Khagen Banerjee in the pleading. It transpired from the witness box that Khagen Banerjee was boyhood friend of Rajani, father of plaintiff. In the evidence also Rajani, was not consistent in his answers regarding the parties to the contract. From the evidence it is clear that the plaintiff and/ or his father had relied strongly on Khagen Banerjee and it was at his instance that the contract was entered into, He did not care to know, who this R. N. Ghosh was; how he got those shares; who were the registered owners thereof; and whether those shares were being held by the United Commercial Bank by way of security and so on. He solely relied on the assurance of Khagen Banerjee that since the shares would be delivered by a scheduled bank he need not have enquired into the identity of the said R. N. Ghosh or his solvency. His most curious behaviour was that even when he was told by the police that the shares were stolen shares he did not care to go to the United Commercial Bank to make enquiries about such shares. He did not dispute the proposition that the bank was not the seller of the shares but it only delivered the shares against the contract with R. N. Ghosh. The witness further said that he thought that it was not necessary to enquire into the relationship between the bank and R. N. Ghosh. He never asked the bank to scrutinise the title to the shares vis-avis R. N. Ghosh. Most of the counterparts of the cheques issued by the plaintiff in favour of the bank showed 'A/c. R. N. Ghosh'. That would clearly suggest that in respect of those acts and conduct the bank was carrying on a ministerial work in delivering the shares and realising the money as directed by the said constituent R. N. Ghosh.

32. If that was the position how could the case oi' the warranty as to title or quiet enjoyment as against the bank be sustained? There was no representation by the bank and as such, the plaintiff did not or could not act on that. Rajani Kanta Mitter said that Khagen Dutta introduced R. N. Ghosh as the owner of a colliery. If that was the factual position then how could it be said, in any event, that the bank did not perform its duty as a banker. This was not a case of fraud or collusion or conspiracy by and between R. N. Ghosh and the bank. It was essentially a case based on contract and on the basis of alleged express or implied representation or warranty. The duty of the bank under such circumstances as pleaded in paragraphs 15 and 16 of the plaint related to delivery of shares which, according to the plaintiff, the bank was obliged to perform by delivering only such shares which had good title, and since the same ultimately were found to be stolen shares the bank committed breach at their duty.

33. In my opinion, the facts disclosed herein did not cast any such duty on the bank to find out the nature and character of the shares delivered and collected on account of R. N. Ghosh, a constituent of the bank. Here is a case of the Bank's acting clearly as an agent and under the direction of R. N. Ghosh and, as such, the liability, if any, would primarily and essentially foist on R. N. Ghosh and not on the bank. The fact that the shares were being delivered through a bank would not cast any special duty on the bank to ensure the nature and character of the genuineness of the shares. The facts as disclosed herein would suggest that there was nothing unusual which could be detected and remedied by the bank if due care and caution had been exercised by the bank. The parties to the contract decided that the shares were to be delivered through the bank and that had been done. The bank, not being a party thereto, had acted only as a conduit pipe in delivering the shares under the instructions of R. N. Ghosh and in collecting the money from Mitter.

34. The learned trial Judge has decided this case mainly by going into the question of negligence on the part of the bank in allowing R. N. Ghosh to open the account without proper introduction, This was neither in the plaint nor in the evidence on record. It seems that the learned Judge had completely misdirect-ed himself by going into that question and by enlarging the scope of the duty by holding that the bank had the duty to take care of the public at large in the matter of the opening of the account by R. N. Ghosh. The learned Judge had gone so far as to find in favour of the plaintiff the case of fraud as pleaded in paragraph 20 of the plaint although no particulars thereof were furnished nor evidence was led nor anything discussed in his judgment in respect thereto. In my opinion, such a finding on the question of fraud as decided by the learned Judge cannot be supported or upheld because there was no evidence to support the same. Even on the question of negligence in opening the account the learned Judge ought to have concluded that at the time when the account was opened there was nothing wrong in the banker's conduct. In any event, the evidence clearly showed that the bank relied on the introduction by one Bhowanipur Paper and Stationery Stores on the basis of whose written introduction the account was allowed to be opened. The oral evidence that the bank also relied on the introduction of one of its constituents by the name of Hari Mohan Seal could not disclose any negligence on the part of the bank in allowing R. N. Ghosh to open the account. The learned Judge failed to appreciate that the evidence of the plaintiff's father disclosed that the bank did not do anything except to make out bills, to present the shares and to collect the money -- all on behalf of R. N. Ghosh as his agent; and in doing so it was not possible for the bank to appreciate whether they were good shares or stolen shares. In my opinion, the principles decided in Marfani & Co. Ltd., v. Midland Bank Ltd., (1968), 2 All ER 573 and in Commr. of Taxation v. English, Scottish and Australin Bank Ltd., AIR 1920 P. C. 88 concerning the question of negligence of the bank are not applicable to the facts of this case.

35. On the question of the bank's liability for presentation of the bill of exchange reliance has been placed on the case of Leather v. Simpson, reported in, LR (1870-71) 11 Equity Cases, 398. The facts were that the bill of exchange was drawn upon the plaintiff by his correspondent abroad against a bill of lading. The said bill of exchange was sent through the defendants who were the bankers for presentation and collection. The bank presented the bill to the plaintiff with this memorandum : 'The bank holds bill of lading and policy for 251 bales of cotton per William Cunnings', The plaintiff accepted the bill without asking to see the bill of lading, and afterwards retired it before it was due, paid the money and received the bill of lading which was ultimately found and proved to be a forgery. The suit was filed against the bank to recover back the money so paid upon the bill of exchange. It was held that the memorandum did not amount to a guarantee by the bank that the so-called bill of lading was genuine and that the plaintiff had no equity to recover back the money, Sir R. Malins, V. C. held that there was no representation of genuineness; there was no guarantee. The bank did not undertake to say whether the bill of lading was good or not; they only said 'we have a bill of lading' the fair meaning of which might possibly be 'WE have a document which on the face of it is a bill of lading. It was observed that the question that arose was whether by that representation the position of the plaintiff's had been in any way altered. The Court observed at page 404;

'Was there, then, a guarantee by the Union Bank? It would be a very dangerous thing for a bank if, where they say they have a document of that kind, they were to be held to guarantee its genuineness. My opinion is they do nothing of the kind'.

The learned Judge also observed at page 406:

'Therefore, I think, to say that there was any misleading by the Union Bank is attempting to carry the case far beyond anything that the facts warrant'.

It was further observed that the rules of the English Court were settled, that when a representation in a matter of business was made by one man to another calculated to induce him to adapt his conduct to it, it was perfectly immaterial whether the representation was made knowing it to be untrue, or whether it was made believing it to be true, if, in fact, it was untrue; because every man making a representation inducing another to act on the faith of that representation must make it good if he took upon himself to represent that which he did not know to be true, and he would equally be bound if he made it without knowing it to be untrue, Therefore, if the memorandum relied upon had amounted to a representation that the document was a genuine one of was a guarantee, the consequence would be plain that the plaintiffs must have been indemnified by the Union Bank of London, and the money they had and received must have been returned, because it was obtained upon a representation which turned out to be untrue. On these grounds, the learned Judge dismissed the action.

36. The question before us is whether any representation as to the genuineness was made by the appellant bank when it presented the shares for delivery and collected the money. Admittedly, there was no contract by and between the plaintiff and the bank. A question, therefore, arises whether there was representation by Conduct or implied representation on the part of the bank. The said question was also considered in the case of Guaranty Trust Co. of New York v. Hannay & Co. reported in L. R. (1918) 2 KB 623, where it was held that the plaintiff did not, by presenting the bill of exchange for acceptance, warrant or represent the bill of lading to be genuine, and that the defendants were not entitled to recover back the money paid to the plaintiffs. In any event, the facts involved herein clearly suggested that whatever was being done by the bank was on account of R. N. Ghosh and that would appear from most of the counter-parts of the cheques made over to the bank as the price thereof. In such a bill or in such counterparts when the account of 'R N. Ghosh' had been mentioned, those clearly suggested that the shares were being presented through the agency of the bank. In other words, through the mediation of an agent, and, the same when it appeared in the counter-parts of the cheque book, would mean that the plaintiff had been making the payment to R. N. Ghosh through the agency of the bank.

37. In my opinion, the case of representation or implied warranty had not been substantiated in any manner by or on behalf of the plaintiff respondent and the learned Judge has totally misdirected himself by answering the issues in a general manner without going into or examining the points involved therein. It would seem that the learned Judge has not discussed in his judgment anything relating to representation or implied warranty which was pleaded in the plaint. The learned Judge appears to have merely answered the issues by saying that there was both express and implied representation and warranty. That would undoubtedly lead to absurd conclusion. The learned Judge has observed that he has accepted all the contentions of Mr. Dipankar Gupta appearing on behalf of the plaintiff. I have already observed that in examining the plaintiff's witnesses Mr, Gupta did not make out any case of negligence nor even suggested the same to any of the witnesses. It was only when the bank's witness Mukherjee came to the box that the learned counsel, thought of establishing a case of pledge of shares by R. N. Ghosh in favour of the bank, in cross examination. But the case of negligence by the bank had neither been pleaded in the plaint nor suggested to the witnesses on behalf of the plaintiff. In paragraph 20 of the plaint there are some averments on the basis of tort but there the case pleaded is about the joint liability. The main wrong-doer is R. N. Ghosh and the bank has been pleaded as abetting the said wrong-doer and making itself directly liable in the wrong. Such a case has not been proved in evidence.

38. The Court of Appeal in England in the said Guaranty Trust Co. of New York v. Hannay & Co. at page 631 of the report (1918) 2 KB 623, under similar circumstances, observed :

'I doubt if the presentation of the draft for acceptance was a request by the plaintiffs to the bank at all; it may well be only an inquiry as to whether they were going to perform the contract of their principals with Knight, Yancey & Co. by accepting the draft'.

At page 632 it was observed :--

'By presentment for payment he does not assert, expressly or by implication, that the bill is his or that it is genuine. He, in effect, says: 'Here is a bill, which has come to me, calling by its tenor for payment by you, I, accordingly, present it to you for payment that I may either get the money, or protest it for non-payment. Mr. Justice Chamber's statement in Smith v. Mercer (1815) 6 Taunt. 76, 83, 84 that the holder warrants the genuineness of the bill by presenting it, was expressly repudiated by Littledale and Bayley JJ. in East India Co. v. Tritton, (1824) 3 B & C 280, 289, 291. He is no doubt in that passage speaking of the question of whether there is a representation as to the genuineness of the Bill of the Exchange, but I think the statement as to the position of the holder in such a case applies equally to the question whether there is a representation as to the bill of lading. But if it were a request, it was only a request to them to perform that contract and such a request did not impose any liability upon the plaintiffs. It was not in any way such a request as those in the cases of Sheffield Corporation v. Barclay, 1905 AC 392 and Bank of England v. Cutler, (1908) 2 KB 208 : See Moel Tryvan Ship Co. v. Kruger & Co., (1907) 1 KB 809, (825). I can see nothing in these circumstances to afford evidence of warranty or representation or undertaking to indemnify, and it is admitted that there was no express agreement by the plaintiffs on any of the points, and that it must arise, if at all, by a necessary implication from the circumstances. I think that the cases which negatived such an implication were rightly decided, and that the defendants' case on those heads fails'.

Then again at page 664 it was observed by Scrutton L. J. :

'I am inclined to think, though I do not find it necessary to decide it, that unless there are undisputed facts which can only admit of one implication the question of implied contract in such a case should be left to the jury. If so, a city of London special jury have found there was no such implied contract, and there was certainly evidence on which they could so find. But if, there being no dispute as to the facts, the implication is for the Court, I am clearly of opinion, as was Bailhache, J., that there was no such promise or representation.'

39. In my opinion, the principles in the above English decision as laid down should be applied in deciding this case before us and it must be held on the facts and in law that there was no implied warranty or representaion so far as the bank was concerned and the facts are clear that the bank performed a ministerial function in the matter of presenting the bills, delivering the shares and collecting the money as the price thereof on behalf of R. N. Ghose.

40. Arguments were advanced and the learned Judge accepted them to the effect that the fact that the said shares were stolen need not have been strictly proved. In my opinion, this is a very vital factor. The learned Judge observed that the fact that the shares were stolen was not disputed on behalf of the bank. I find that in paragraph 16 of the written statement it has been disputed. If the fact of the shares being stolen shares would not be strictly proved and established then there would be no defect in the shares and the plaintiffs should not have refunded the money because under such circumstances the plaintiff would have become the bona fide purchaser for value and would have acquired a good title over the shares, The plaintiff should have pursued the matter as such bona fide purchaser for value and should have asserted title thereon. See Edelstein v. Schuler & Co. reported in LR (1902) 2 KB 144, a case of bonds which were negotiable instruments. See also Maneck-ji Pestonji Bharucha v. Wadilal Sarabhai & Co. reported in AIR 1926 PC 38 a case where shares were delivered when blank transfer deeds passed title. See also the case of Sm. Sumjtra Debi Jalan v. Satya Narayan Prohladka reported in : AIR1965Cal355 where it was held that the shares were negotiable instruments and title passed on delivery.

41. The learned Judge also agreed with the submissions made on behalf of the plaintiff respondent herein that the bank's witness had admitted in questions 703 to 705 that the shares were stolen shares. In my opinion the learned Judge should have more carefully examined the answers and should have come to the finding that all that the witness Mukherjee had said was that the shares might have been stolen and he did not admit that they were stolen. The learned Judge next held that the fact of conviction of R. N. Ghosh was primary evidence when the facts were that the shares were stolen. It is to be noted that the criminal court judgment had not even been tendered in evidence and the learned Judge ought to have considered that even if the said judgment had been tendered it could not be relevant evidence on the question of the theft of the shares. It would have been relevant only to show that there was a trial resulting in conviction for the period mentioned therein as observed by Supreme Court in the case of Anil Behari Ghosh v. Sm. Latika Bala Dassi reported in : [1955]2SCR270 . It is to be noted that in the instant case there is no material before this Court from which it could be ascertained as to what were the charges on R. N. Ghosh on which he had been convicted. Even the first information report was not produced. The judgment also was not available to the court. Nobody has given any evidence that R. N. Ghosh was convicted for stealing the shares which were the subject matter of this suit. The witness from United Bank of India, S. Dutta could not say for which shares R. N. Ghosh was convicted. See Dutt's questions 75, 76. The plaintiff failed to lead any evidence to connect the shares in suit with the theft, if any, in respect of any shares from the United Bank of India. The other witness from the United Bank of India who was the agent of tht: branch at the relevant time has said that he discovered the theft when certain enquiries were made by certain companies about certain shares. According to him since about December, 1950 till 7th June, 1951 the shares had not been taken out from the folders.

42. It appears that the best evidence in this case to prove that the shares were stolen had not been adduced. Such evidence is enumerated as follows :--First, the report of Basak which was sent to the head office about these shares. Secondly, the report by the inspecting officer H. Mukherjee, thirdly, the first information report. In the next place, H. Mukherjee should have been called but there is no explanation as to why he was not. Then again, the safe register, the proceedings in the criminal court, the daily security register and so on, were not produced. Furthermore, Basak's evidence was there that there was a procedure to deal with such shares and actually they were under the joint control of the agent and the accountant of the bank and as such there was no possibility of R. N. Ghosh's stealing the shares. If that was so, the accountant should have been called and in the absence of all the material evidence it must be held that the evidence of theft as made out in the case was improbable and the theft of those shares had not been proved.

43. In the next place, the learned Judge has found that the bank is guilty of an act of conversion even though there was no pleading of conversion, no issue as to the said act of tort nor any evidence in support thereof. It appears that it was argued and the learned Judge had accepted the same and held that the bank was guilty of conversion. Similarly, even though there was no pleading relating to negligence the learned Judge had found negligence against the bank in the matter of opening the account. We do not think we would be justified in allowing the question of conversion and negligence to be agitated here in the absence of any pleading or issue or evidence in respect thereof.

44. In Dugdale and others v. Lover-ing, reported in (1875) LR 10 CP 196 the facts were that the plaintiffs were in possession of certain trucks, which were claimed by K. P. Colliery. Thereupon in consideration that the plaintiffs would refuse to deliver the trucks to K. P. Colliery and would deliver them to the defendant, the defendant promised to indemnify the plaintiffs for so doing. The plaintiffs refused to deliver the trucks to K. P. Colliery and actually delivered them to the defendant. Thereupon K. P. Colliery filed a suit against the plaintiffs. The plaintiffs were obliged to pay a large sum of money to prevent further proceedings and for costs. The defendant did not indemnify the plaintiffs in respect of the said sum of money.

45. Brett, J. observed that the court was not entitled to enter a non suit if there was reasonable evidence for the jury of a contract to indemnify. It was further observed that it was clear from the correspondence that the plaintiffs delivered trucks to the defendant upon the request of the defendant and it was also clear that the trucks belonged in truth to K. P. Colliery who had made the plaintiff's answerable for such delivery. The court considered whether under such circumstances there arose an implied promise by the defendant to indemnify the plaintiff's. The Court referred to the case of Adamson v, Jarvis, (1827) 4 Bing 66 in which the facts were as follows:-- The plaintiff was an auctioneer, and the defendant had directed him to sell certain cattle which the plaintiff did. It ultimately transpired that the cattle did not belong to the defendant, but to another person. The owner having made tbe plaintiff, responsible, the plaintiff sued the defendant in case for an indemnity. It was held in that case that there was evidence on those facts from which the jury might say that the plaintiff having acted on the request of the defendant, was entitled to assume that if what he did, turned out to be wrongful as against a third party, he would be indemnified by the defendant.

46. At the time of committing the tortious act the plaintiff did not know of any claim by any third party nor was any such fact relied on in the judgment. The implication was not made to rest on the fact of the plaintiff's being an agent, or on notice of the third party's claim, but merely on the fact of the plaintiff having done an act at the request of the defendant which was not manifestly illegal or tortious to his knowledge, but which exposed him to an action. Brett, J. followed the principle laid down in Toplis v. Grane, (1839) 5 Bing NC 636 in which Tindal, C. J. laid down the proposition on the subject as follows :--

'We think this evidence brings the case before us within the principle laid down in Betts v. Gibbins, (1834) 2 Ad & E 57, that when an act has been done by the plaintiff under the express directions of the defendant which occasions an injury to the rights of third person, yet if such an act is not apparently illegal in itself, but is done honestly and bona fide in compliance with the defendant's directions, he shall be bound to indemnify the plaintiff against the consequences thereof.'

Grove, J. while agreeing with Brett, J, observed :--

'I should hesitate to say that in cases of this sort it can be an absolute proposition of law that the party making the request is bound to indemnify. Whether there is such an obligation must greatly depend on the circumstances of each individual case, the effect of which seems to be for the jury to determine. All I wish to be considered as deciding is that in the present case there was reasonable evidence for the jury of an implied contract of indemnity.'

Brett, J, also held that there was ample evidence to support the evidence of the jury. The defendant having ordered the goods to be sent to him with notice that they were claimed by another, acted with knowledge of the risk that the plaintiffs incurred. And this may perhaps be said to make it more reasonable to infer a promise to indemnify against him.

47. In the case of Lord Mayor & Co. of Sheffield Corporation v, Barclay reported in LR 1905 AC 392, the principle laid down in Dugdale v. Lovering, (1875) LR 10 CP 196, as set out above, was approved. In the above House of Lords case two persons were joint owners of corporation stock. One of them in fraud of another forged a transfer of the stock, and borrowed money on the security of the stock. The bank which lent the money sent the transfer to the proper officer of the corporation, and demanded that they should be registered as holders of the stock. The corporation acted accordingly; the transfer was made in favour of the bank and the bank in its turn transferred it to holders for value. The corporation registered such holders for value in respect of the said stock and issued certificates in their favour. The forgery was discovered later on after the death of the forger and the corporation was compelled to restore the stock in favour of the person who was the surviving joint owner. Then the corporation sued the bank who caused them to act upon a forged transfer. The House of Lords on these facts held that the bank was clearly liable. It was observed that the bank had a private bargain with a customer. Upon the customer's assurance, the bank took a document from the customer as a security for a loan. The bank assumed that the stock was genuine. There was no question of any negligence on the part of the bank. In the said transaction the corporation was simply acting in its ministerial capacity in registering a valid transfer and issuing fresh certificates. They could not refuse to register. At the same time they could not register and issue certificates to a person who was not really the holder of the stock. They could not have inquired into the transaction out of which the transfer arose. Under those circumstances, the House of Lords considered the position of the bank vis-a-vis the corporation. The bank was at liberty to lend their money or not. They could make any amount of inquiries they liked. A simple question to the co-trustee would have prevented the fraud, It was considered that the bank took the risk of the transaction and lent the money. The bank in asking for the registration of the stock in their favour was in effect representing to the corporation that the stock were genuine and they could be validly registered in their name and the bank was also entitled to have fresh certificates issued to themselves or their nominees. The corporation acted on the said request and incurred a considerable loss. Lord Davey in his speech at page 399 observed :

'I am further of opinion that where a person invested with a statutory or common law duty of a ministerial character is called upon to exercise that duty on the request, direction, or demand of another (it does not seem to me to matter which word you use), and without any default on his own part acts in a manner which is apparently legal but is, in fact, illegal and a breach of the duty, and thereby incurs liability to third parties, there is implied by law a contract by the person making the request to keep indemnified the person having the duty against any liability which may result from such exercise of the supposed duty. And it makes no difference that the person making the request is not aware of the invalidity in his title to make the request or could not with reasonable diligence have discovered it'.'

Lord Davey in his speech at page 401 observed :--

'* * * * but in cases like the one now before your Lordships, when a person is requested to exercise a statutory duty for the benefit of the person making the request, I think that the contract ought to be implied. It matters not to the corporation whether A or B, is the holder of stock, but to the purchaser who has paid his purchase-money or the banker who has lent money on the security of the stock it is of vital interest.'

48. In the case before the House of Lords the circumstances were such as to raise by implication a contract for indemnity. The considerations for their Lordships were that the bank requested the Corporation to exercise its statutory duty for the benefit of the bank by registering the name of the bank in the name (place?) of the original registered holder. The bank in doing so, owed a duty to inquire into the genuineness of the transfer of the stock. The bank failed in its duty in discovering the fraud, which they could, with a little effort on their part. The result was that the corporation acted on the basis of the request or demand by the bank to have the stock registered in their name as if the stocks brought by the bank were genuine and thereby the bank caused considerable loss to the corporation. But is that the case before us? Is not the case here distinguishable on vital points from the House of Lords case? Was the bank in our case, requesting the plaintiff to perform its statutory duty for the benefit of the bank? Did the plaintiff ever know which bank would present the shares for delivery? Was there any relationship, contractual or otherwise, by and between the bank and the plaintiff at the time the shares were offered for delivery and paid for? Was not it agreed by and between the plaintiff and R. N. Ghosh that the shares would be delivered by R. N. Ghosh through the bank? Were not the shares tendered 'on account of R. N. Ghosh' as expressly mentioned in the respective bills? Did the plaintiff act on the basis of any independent representation of the bank or did he act on the basis of the contract between the plaintiff and R. N. Ghosh? Was not the transaction in effect done like this; viz., the plaintiff agreed to purchase and R. N. Ghosh agreed to sell and the plaintiff said; 'I shall not pay for the shares nor take delivery if R. N. Ghosh did not send them through the bank' and to which R. N. Ghosh agreed to send the shares through a bank and, accordingly, instructed Hindusthan Commercial Bank to send the shares, to deliver the same to the plaintiff and to collect from him the price therefor and the bank did so, in the ordinary course of its banking business? If this was the nature of the transaction how could it be said that the bank was making any representation as to the genuineness of the shares? Where was the scope for the bank for owing any duty to any person, not to speak of to the plaintiff, to inquire into the genuineness of the shares and the title therein before delivering the same to the plaintiff? The evidence herein might reveal that the shares were credited into the account of R. N. Ghosh and thereafter, at a later point of time, were sent to the plaintiff. Were we concerned with such facts? Should we not consider as relevant the fact that whatever was being done was pursuant to the contract entered into by and between the plaintiff and R. N. Ghosh in respect of the performance of such contract? Did it matter in the least as to how R. N. Ghosh was having his dealings with the bank? Was it relevant to enquire as to how the shares were deposited by R. N. Ghosh with the bank for effecting delivery to the plaintiff or whether the bank ought to have been more careful or should not have been negligent in the matter of opening such account? I fail to see what obligation could there be on the part of the bank in the matter of delivering the shares and collecting the money in respect thereto when such delivery and collection were made on the basis of and pursuant to the agreement entered into by and between the plaintiff and R. N. Ghosh? Under those circumstances, to my mind, the liability is that of R. N. Ghosh and not of its agent vis-a-vis the plaintiff. The plaintiff cannot make the bank liable in the facts and circumstances of this case. In my opinion, the principles laid down in Dugdale v. Lovering, (1875) LR 10 CP 196 and in Sheffield Corporation v. Barclay, 1905 AC 392 are not applicable to the facts and circumstances of this case and the same are distinguishable on facts.

49. The main point and, indeed, the only point, the decision whereof would tilt the case one way or the other is whether there is or there is no representation of genuineness. The plaintiff's case is that by making out the bill and inviting the plaintiff to accept delivery of the shares and to pay for them by an 'account payee cheque' in favour of the bank, the bank represented the genuineness of the shares and hence there must be an implied warranty on the part of the bank that they would make good the loss in case the shares were found to be not genuine. On behalf of the bank, on the other hand, the contention is that the bank did not undertake to represent whether the shares were good or bad, genuine or forged; the same were presented for delivery and were paid under the instructions of R. N. Ghosh and that was the admitted case of all the parties; the bank mentioned it in the bill itself and the plaintiff in the oral evidence categorically stated through his father that it was agreed with R. N. Ghosh that the shares would be sent through a scheduled bank, The question, therefore, is, did the bank's conduct amount to a representation that the shares were genuine? In the House of Lords case in Lord Mayor & Co. of Sheffield Corpn. v. Barclay, (supra) the bank acted on its own behalf and asked the corporation to have the shares registered in its name. The corporation was duty bound to do so. It could not have said 'no' to the bank. The bank with a little effort could know whether the stocks were forged or genuine and, accordingly, as between the two innocent parties the bank was made to suffer. There was no question of agency involved in that case. The question arises : are the facts herein applicable to that principle? Is the bank making a representation of genuineness? Has not the bank represented, 'We have received the shares from R. N. Ghosh with instructions to deliver the same to you and to collect the money on account of R. N. Ghosh in respect of a contract entered into by and between you and R. N. Ghosh'? The plaintiff's own case is that he agreed with R. N. Ghosh that the shares were to be delivered through a scheduled bank and R. N. Ghosh chose this bank for the purpose of this delivery. How could that stipulation in the agreement make the bank in any way liable to the plaintiff? Where is the causal connection as between the plaintiff and the bank? How could there be any representation on the part of the bank to the plaintiff? Could it matter, in what manner the bank conducted in dealing with R. N. Ghosh? In the absence of any word of caution or stipulation from the plaintiff to the bank would the bank be in any way liable to the plaintiff? Undoubtedly, in the contract between the plaintiff and R. N. Ghosh the bank is coming into the picture in respect of the performance part of the contract and expressly as the agent of R. N. Ghosh. If that be the position has the bank, as the agent of the principal, any liability in the absence of any contract to the contrary? For all these reasons, in my opinion, our case comes directly within the principle enunciated in Leather v. Simpson, LR (1871) 11 Equity Cases 398 where Vice-Chancellor Sir R. Mallins observed at page 404 :

'It would be a very dangerous thing for a bank if, where they say they have a document of that kind, (there it was bill of lading) they were to be held to guarantee its genuineness. My opinion is, they do nothing of the kind'.

50. In my opinion, in a case like this it would matter little that a scheduled bank was delivering the shares. Had it been the case that the bank on its own account was trying to negotiate the shares the position of the bank could have been different. In such event, it would matter little that the bank did not know about its genuineness and the bank would have been liable to make good the loss because on the basis of its representation as to genuineness the plaintiff would have acted and suffered loss.

51. Under those circumstances, can it be argued on behalf of the plaintiff that the matter has to be looked into only on the basis of the conduct of the bank commencing from the invitation to the plaintiff to pay for and take delivery of the shares and the plaintiff acting on such invitation and suffering loss thereby? As observed above, the bank's conduct became such because of the plaintiff's agreeing with R. N. Ghosh for the delivery of the shares through a scheduled bank. Accordingly, the conduct of the bank could not be indepedent of tha plaintiff's contract with R. N. Ghosh. That is the main distinguishing feature Of this case which prevents the principle of Dugdale v. Lovering, (1875) LR 10 CP 196 (supra) and Lord Mayor of Sheffield Corpn. v. Barclay (1905) AC 392 (supra) being applicable to this case. It is true that the plaintiff paid by an account payee cheque drawn in favour of the bank but such payment was made with the full understanding that the plaintiff was making payment on account of R. N. Ghosh. In answer to the Court's question Rajani Kanta Mitra, the father of the plaintiff, said :

'Q. 801. You have worked for a long time in the Imperial Bank of India, When you receive a bill from a bank written on account of a particular person you understand that the bank is dealing on the account of that particular person?

A. Yes.

Q. 802. You had no difficulty in understanding that the banks were delivering those shares in the account of R. N. Ghosh?

A. Yes, the bank was dealing on account of R. N. Ghosh.

Q. 803. When you made payment by cheque drawn in favour of the bank you understood it was made in the account of R. N. Ghosh?

A. Yes.'

Thereafter in cross-examination the witness said :

'Q. 804. And the payments also you made by cheques drawn in favour of Hindusthan Commercial Bank Ltd. on account of R. N. Ghosh?

A. Yes.'

The facts herein reveal that not only the plaintiff did not know through which bank the shares were coming to him for delivery but before the shares were presented for delivery he did not know of the defendant bank or what was the relationship the bank had with R. N. Ghosh. In fact, he did not think it necessary to know all these facts. His father's answers to questions 894 to 903 which are set out below would clearly show the circumstances under which the shares were delivered.

'Q. 894. Such constituent will send the shares to the bank for being delivered to you with necessary instructions and the bank will deliver the shares and you will take delivery?

A. yes.

Q. 895. That is what you mean by the identity of the seller?

A. Yes.

Q. 896. In such a case the bank acts as the banker of the constituent or agent of the constituent for the limited purpose of receiving the shares from the constituent and delivering the same to you?

A. I do not know in what capacity or authority he is acting on that account. We received delivery but what were the relations or what was the arrangement I do not know.

Q. 897. In this particular case in respect of the shares which are the subject matter of the suit did you ever enquire from the bank as to what is the relationship of the bank with R. N. Ghosh or in what circumstances?

A. No.

Q. 898. Why you did not do that?

Q. 899. Is it because you had an agreement with R. N. Ghosh, you knew the shares are coming from R, N, Ghosh?

A. No.

Q. 900. Then what was the reason?

A. I did not think it necessary. As long as the bank is delivering the shares to me I did not think it necessary to enquire about all these things.

To Court :

Q. 901. That is you had no agreement with the bank for delivery of the shares, but you had agreement with R, N. Ghosh to sell the shares to you?

A. Yes, my lord.

Q. 902. You had made payments to the bank?

A. Yes.

Q. 903. On account of R. N. Ghosh

A. Yes.'

52. Mr. Bachawat appearing on behalf of the plaintiff refers to the Privy Council decision in the case of Secretary of State for India in Council v. Bank of India Ltd. reported in LR 65 Ind App 286: 67 Cal LJ 456 : AIR 1938 PC 191. This case was relied on by the learned trial Judge for the purpose of showing that the principles decided in Dugdale v. Lovering and Lord Mayor of Sheffield Corporation v. Barclay Bank were applied in India. In that case under the provisions of Section 21 of the Indian Securities Act, 1920, the prescribed officer while renewing the Government Promissory Note at the request of the holder gave an express indemnity against the claims of all persons claiming under the original security but actually did not do so. Subsequently, it transpired that, unknown to the holder of the note and to the Government, it bore a forged indorsement which involved an injury to the rights of a third party who recovered damages from the Government. On these facts it was held that the Government had an implied common law right to be indemnified by the renewer of the note against the loss sustained. In that case it was argued that the common law indemnity could not be implied under the Indian Securities Act, 1920 because of Section 21 thereof which excluded an implied indemnity because it gave a right to demand an express indemnity and to refuse to give renewed note unless an express indemnity was given. In other words, the express provision of Section 21 of the said Act provided a statutory right and that was inconsistent with the existence of an implied right if the section was not acted upon. This was negatived by their Lordships of the Judicial Committee. The Judicial Committee was of the opinion that under such circumstances there was every reason why the Court should imply an indemnity in such a case and there was no sufficient reason why they should treat Section 21 as excluding that implication.

53. Mr. Bachawat then cited the case of Starkey v. Bank of England, reported in LR 1903 AC 114 where a broker applied to the Bank of England for a power of attorney for the sale of consols believing himself to be instructed by the stock holder and bona fide induced the bank to transfer the consols to a purchaser upon a power of attorney to which the stock holder's signature was forged. It was held that the broker must be taken to have given an implied warranty that he had authority and that he was, therefore, liable to indemnify the bank against the claim of the stock holder for restitution. The House of Lords observed at page 117 that on the face of the formal document the same purported to be a representation of authority by the persons whose signatures purported to be appended thereto. That was a representation of authority on the part of those two persons whose signatures purported to be appended to it, and the persons who presented the authority and demanded to act upon it and asserted that he had authority to do the thing he was doing. It was found that he had no such authority. The result was that the bank had transferred a quantity of consols standing in the names of the two persons when only one person gave the authority.

54. In my opinion, this House of Lords decision is not applicable to the facts of the case before us because the principles decided therein are quite different from those which are involved in the case before us.

55. Mr. Bachawat contended that the principles decided in that case would be applicable to the facts of the case before us because according to the learned counsel the bank had asserted that it had authority to deliver the shares to the plaintiff; it gave a warranty to that effect and hence the liability implied a promise by the bank that there would be good delivery of shares and since it transpired that the delivery was not good delivery and the plaintiff suffered damages thereby, the bank was obliged to make good the loss. I fail to see how the bank made such assertion that it had authority to deliver the shares to the plaintiff or that it gave a warranty to that effect. In fact, the bank did not get any opportunity to do that. The bank did nothing of the sort. It made it absolutely clear that it was acting as the agent of R. N. Ghosh in the matter of delivering such shares. In fact, the plaintiff's witness R. K. Mitra said that he never cared to know how and under what authority the bank was acting. (See answer to question 896 as set out above).

56. Mr. Bachawat contended that Starkey's case (1903 AC 114) (supra) was followed in (1938) 66 Cal LJ 592 : (AIR 1938 Cal 151), in which case it would appear that the principle of Collen v. Wright, ((1857) 8 E & B 647) was applied. That was a case under Section 235 of the Indian Contract Act where the agent represented that he had authority to enter into the contract. That principle is certainly not applicable to the facts of our case.

57. In that case there was a demand for the opening of a telegraphic office at a certain place. But the Government was not willing to open it unless the local merchants guaranteed the loss. On that basis some local merchants executed an indemnity to make good the loss if the Accountant General of the telegraphs certified for the loss and on the condition that if he certified then that would be treated as final. The Accountant General certified such a loss and an action was taken on that basis and a suit was filed on the strength of the said indemnity bond. It was held that the Government was entitled to recover the amount on the basis of the contract and the same was not opposed to public policy. It was also held therein that the person signing the bond as agent was liable not on the contract but on the implied warranty. When a person represented that he had authority to act as agent of some other person but in fact he had none, he could not thereby become the principal nor could he be regarded as principal and in deciding that point the principle of Collen v. Wright was referred to. In that case the son signed on behalf of his father but the father afterwards repudiated the bond whereupon the son had been made liable under Section 235 of the Contract Act.

58. Mr. Bachawat then referred to a passage in Halsbury 3rd edition, vol. 26 paragraph 1532 which runs as follows:--

'In cases of contracts of sale, or delivery of property pursuant to a contractual or other obligation, the following implications of a representation from acts and conduct may be made. On the one hand the purchaser of goods by the mere act of purchasing them is deemed to represent that he had the present intention of paying for them. On the other hand, he who assumes to sell property impliedly represents thereby that it exists and has some value; he who delivers or hands over or produces documents in certain circumstances may be held impliedly to represent thereby that they are genuine'.

The same passage has been reproduced in Turner's Book on Actionable Misrepresentation (1974) 3rd Edition page 72 where it is provided as follows :--

'.....he who delivers or sues to another instruments of title, or securities, or business documents, impliedly represents that they are genuine'.

The decided cases on the basis whereof the cryptic statement has been made in Halsbury and in Turner's said Book do not deal with the point at issue before us in this appeal.

59. In my opinion, that statement although made in a very general form, cannot apply to the facts involved in this appeal.

60. The next point urged by Mr. Bachawat requires very careful consideration. In fact, in this case, the plaintiff can hope to succeed only if the bank acted as the pledgee of the shares in its own account independently of R. N. Ghosh. There is hardly any pleading of pledge of the shares in favour of the bank by R. N. Ghosh in the plaint. No issue had been raised also in respect of the Court's coming to the finding that thy shares were delivered to the plaintiff on the bank's own behalf as pledgee even at the time the plaintiff's witness R. K. Mitra was examined. Such a case was not in the contemplation of the parties. It was only when the defendant's branch agent Karali Charan Mu-kherjee was in the witness box that he was cross-examined on this point at length. Mr. Bachawat has pointed out that the point was argued at the trial and it is submitted by the learned counsel that both the parties proceeded at the trial on the basis that it was a pledge account and the trial Court accepted the position. It is submitted by the learned counsel that the parties went before the trial court with this common case and the court accepted the position. Mr. Bachawat first refers to the written statement in this suit as also the plaint in the Ali-pore suit (Ext. VV). In paragraph 3 of the written statement the bank in substance has pleaded.

'.....the said R. N. Ghosh sent to this defendant Broker's Notes together with shares.....and later instructed this defendant to deliver the shares in terms of the contract to ......the plaintiff and receive the amount mentioned in the said Broker's Notes. In terms of the Broker's Notes Bills were prepared and sent to parties as for instance the plaintiff, being the nominees of the said R. N. Ghosh and the collections made from the parties, for instance the plaintiff were deposited with this defendant in the name of the defendant R. N. Ghosh'.

'The plaintiff had direct and independent transactions in shares with the defendant R. N. Ghosh and this defendant was not a party to the same, but only discharged its usual duty as a banker'.

61. From the above pleading it is suggested that R. N. Ghosh first deposited the shares in his account and at a later point of time sent his instructions to the Bank to deliver the shares to the plaintiff in terms of the contract.

62. The only issue I can think of in respect of that paragraph is issue No. 2 (a) which runs as follows :--

Did the first defendant act in the alleged transactions as the bankers and agents of the second defendant as alleged in the written statement?

63. The learned trial Judge has answered the said issue by saying 'yes'. The only observations relating thereto by the learned trial Judge were as follows :--

'But the whole question for me to decide is whether in the facts of the case as pleaded and proved before me in this suit there is any cause of action against the defendant bank. Mr. Tebriwalla also referred me to the definition of 'goods' under the Sale of Goods Act and also the definition of 'mercantile agent' under the Sale of Goods Act and contended that in the circumstances ot this case the defendant bank is a mercantile agent and protected under Section 27 of the Sale of Goods Act. He also referred to Sections 176 and 178 of the Indian Contract Act and contended that the defendant bank was also in this position of a pledgee of the said shares and had the right to deal with the same as a mercantile agent of R. N. Ghosh'.

Then again at Page 461 while noting the argument of Mr. Gupta appearing on behalf of the plaintiff the learned trial Judge observed:

'Next, he contended that the bank was not a mere conduit, pipe or a carrier to perform a ministerial duty of physical delivery of said shares on behalf of R. N. Ghosh to the plaintiff as it is clear from the account of the customer of the bank i. e. R. N. Ghosh that it was an overdraft account against pledge of Government Promissory Notes and Securities and the said R. N. Ghosh handed over the contract notes in respect of sale of shares and the bank retained the said contract notes and made entries of the securities in Security Register of the defendant bank. He referred to Mukherjee's questions 466-473, 486-500 and 506-525. He also referred to para '3' of the written statement of the defendant bank in this suit and paras 4, 6 and 11 of the Alipore Suit being Ext. VV. and questions 601, 606 and 612-623 of Mukherjee and submitted that it is an admitted position that the said account was an overdraft account of R. N. Ghosh against pledge of securities being Government Promissory Notes and Joint Stock Company's shares together with blank transfer deeds. He also referred to the instruction letters from R. N. Ghosh for delivery of the said shares being Ext. 7. Exts. 9-13 in this suit which only indicate that contract notes were enclosed but no shares were sent along with the letters. He also rightly pointed out that it was significant act on the part of the defendant bank that although R. N. Ghosh gave instructions for delivery 200 BIC shares the defendant bank only delivered 100 shares because there was something wrong with the blank transfer deeds (Mukherjee questions 538-540, 550-553) and contended that ii the bank was merely a delivery agent or a conduit pipe there was no scope for scrutiny of blank transfer deeds. He further contended that the bills made out by the defendant bank in the account of R. N. Ghosh and submitted to the plaintiff as debtor do not indicate the source from which bank obtained the shares although it was clear that the said shares were being delivered on account of R. N. Ghosh (Mukherjee. Questions 565-583).

He, therefore, contended that by presentation of the said bills being Ext. 'H' series to the plaintiff by the defendant bank, the plaintiff was invited to take delivery of various shares against payment. Although the bank acted as the agent, according to him it is clear the bank took upon itself the responsibility of giving delivery under the contract of sale entered between the plaintiff and R. N. Ghosh. The defendant bank did not purport to act as mere carriers of the said shares from R. N. Ghosh to the plaintiff. The ownership in the said shares together with blank transfer deeds was intended to be transferred by the bank in favour of the plaintiff in the ordinary course of Us banking business'.

64. As observed hereinabove, the learned trial Judge accepted all the arguments of Mr. Gupta including the aforesaid as set out hereinabove.

65. Mr. Bachawat next refers to Ext. VV, being the plaint in the Alipore Suit where the bank stated in paragraph 4 as follows :--

'The defendant No. 2 (R. N. Ghosh) subsequently began to deposit shares and securities with the customary blank transfer deeds of diverse companies on different dates in different lots to be held in this account with the plaintiff bank and advised the plaintiff bank to deliver the shares to such brokers whose contract notes used to be forwarded to the plaintiff by the defendant No, 2'.

66. Mr. Bachawat has also referred to paragraph 6 of the said plaint to show the bank's own case as to how the account was overdrawn :

'6. On 7th June, 1951 the defendant No. 2 (R. N. Ghosh) had opening credit balance of Rs. 353-12-0 in his account and asked for a temporary overdraft accommodation for Rs. 17000/- by his letter dated 7th May, 1951 against the following securities namely; 300 India Steamship, 200 B. I. Corporation and 600 India, Copper totally valued at Rs. 6490-10-0 and 300 Reliance Jute, 100 Martin Bum, 200 Kuardicoal, 100 Fc. Osier and Rupees 6000/- 3% G. P. Notes 1946 totally valued at Rs. 19,800/-.....'.

67. Mr. Bachawat then referred to paragraph 11 of the said Alipore Suit where the bank pleaded, inter alia, as follows :

'After this incident the brokers demanded return of money alleging bad delivery of shares and the plaintiff (bank) had to fulfil the contract by purchase of shares from the market to reimburse the brokers.....'

68. The above paragraph 11 was referred to for the purpose of showing that the bank in its turn also fulfilled its own commitment towards the purchase of the shares from it after the said deliveries of shares became bad deliveries, It is conlended that even assuming that these were separate securities not connected with the securities in suit yet it showed the conduct of the bank in dealing with R. N. Ghosh's other shares and securities. Undoubtedly those shares and securities were deposited with the bank and the same were held in the account of R. N. Ghosh and from the very same account R. N. Ghosh was allowed to overdraw large sums and thereby the said shares and securities were pledged with the bank and the bank had advanced such money against pledge of such shares and securities.

69. Mr. Bachawat next referred to the oral evidence of the witnesses referred to in the trial court judgment as set out above whereby the bank's witnesses gave evidence on this point. These questions of Mukherjee need very careful consideration in order to decide whether or not the learned trial Judge rightly held that it was 'an admitted position that the said account was an overdraft account of R. N. Ghosh against pledge of securities being Government Promissory Notes and joint stock company's shares together with blank transfer deeds'.

70. It is to be noted that when the plaintiffs father R. K. Mitter was examined he admitted in evidence that the plaintiff made an agreement with R. N, Ghosh and those shares were being sent by the bank to the plaintiff on account of R. N, Ghosh. He further said that there was no contract between the plaintiff and the bank. He came to know that those shares were delivered pursuant to the contract with R. N. Ghosh, In answer to Court's question the witness admitted that he had no difficulty in understanding that the bank was dealing with those shares on account of R. N. Ghosh. He further admitted that the payment was made in the account of R. N. Ghosh although the cheques were drawn in favour of the Hindusthan Commercial Bank Ltd., (R. K. Mitter's questions 794 to 804). In the background of this evidence led on the part of the plaintiff in cross-examination of the plaintiff's witness R. K. Mitter, a case of pledge was sought to be established through the bank's witness Karali Charan Muk-herjee, the then accountant of Hindus-than Commercial Bank Ltd., at its Bho-wanipur Branch. According to Mukher-jee on or about 7th June, 1951, E. N, Ghosh wanted an overdraft to the extent of Rs. 15,000/- to Rs, 20,000/-. He wanted to get an advance for a few days only. On that date he simply said that as against the shares which he produced he wanted some facility for 3 or 4 days. He said that he had already sold the shares and he would give the bank the broker's note and on that he asked for overdraft. He applied in writting and the said letter was exhibited in the criminal court. Thereafter the same wan taken out of that proceeding and produced in the case against United Bank of India. The witness admitted that on 7th June, 1951 at the time when the cheque for Rs. 23,000/- was passed the balance amount was Rs. 354/12/0 lying in credit of the said account of R. N. Ghosh. At that time he had an over-draft sanction of Rs. 15,000/-. At that time the cheque for Rs. 6784/- received from the plaintiff by way of sale proceeds of the shares delivered to Sree Krishna & Co. was under clearance. The witness was asked whether the entry regarding the cheque received from Sree Krishna & Co. was after the entry of Rs. 23,000/- and the witness answered that it did not matter. The cheque had gone for clearance. It was on the same date. This entry was made later and after the entry of Rs. 23,000/- but it was on the same day. The witness explained that usually the bank did not allow withdrawal against cheque cleared on that very day but so far as the stock exchange brokers were concerned they were regarded as good parties. In answer to question 503 the witness said that the shares were always accompanied by the instructions. The witness put the two categories of shares differently by saving that the shares in suit were for the purpose of delivery only and the shares received on 7th June, 1951, were against the account of R. N. Ghosh (Questions 524, 525). The witness referred to five instructions letters from R. N. Ghosh to the bank commencing from 17th May, 1951, upto 7th June 1951 being exhibits 9 to 13 whereby R- N. Ghosh instructed to say that the shares mentioned in the instructions letters be delivered on that day to Messrs. Sree Krishna & Co. at the rates mentioned therein as per the contract enclosed and to credit the proceeds to his account, In respect of Ext. 13 the witness said that out of 200 B. I. Corporation shares the bank delivered 100 shares and could not deliver the other 100 shares. He explained that there was something wrong with the blank transfer deed. It was not properly signed. That was why the bank could not deliver (Q. 540). The shares used to be checked up by the witness to see whether they were in order or not. If anything was found wrong the same would not be delivered to the brokers without making it in order otherwise the whole thing would be returned by the brokers. The witness said that the bank had been collecting hundreds of bills from its clients but the bank would never ask from where they got those. No suspicion arose about the integrity of R. N. Ghosh. The shares were deposited by R. N. Ghosh with the bank, in the sense, that the same were so done for the purpose of delivery thereof to Sree Krishna & Co. In answer to question 565 the witness said that the bills indicated that the shares were received by the bank in the account of R. N. Ghosh. The witness said that the head of the bill indicated that Sree Krishna & Co., was the debtor to the Hindust-han Commercial Bank Ltd. 'account R. N. Ghosh'. The bill indicated that Sree Krishna & Co., was the debtor (Q. 572). The bill suggested that the same was received from R. N. Ghosh, When it was mentioned 'A/c. R. N. Ghosh' it meant 'from R. N. Ghosh', In answer to question 600 the witness said that the bank took R. N. Ghosh to be the owner of the shares because he sold the shares to the brokers. The witness said that the word 'later' in paragraph 3 of the written statement was a mistake because both in the police court and in the Alipore court the witness said that he had received both the instructions and the shares all at a time. Regarding the said paragraph in the Alipore suit the witness ex-plained that the shares were got to be deposited, because according to him, unless the same would be deposited how could they be delivered? It must first be deposited and then only it could be delivered. (Q. 621). The witness denied the suggestion that the advice to deliver the shares came later on and said that the contract notes used to be forwarded along with the advice to deliver. The witness said that the bank acted merely as the delivery agent.

71. In the background of this evidence could it be said that the bank was the pledgee of the shares and acted independently on its own accord to deliver the shares and to receive the money in respect of the shares from the plaintiff? In my opinion, if the bank was the pledgee of these shares the bank would not have acted under the instructions of R. N. Ghosh to deliver the shares and to collect money and to credit the same in the account of R. N. Ghosh. If the bank was the pledgee then under Section 176 of the Indian Contract Act the bank would have sold the shares only if the pledger had committed default in making payment of its dues. That had not been the case here. In any event, the salient feature of this transaction was, and the same could not be disputed, that R. N. Ghosh and the plaintiff agreed that the delivery would be through the bank and the witnesses also suggested so. If that would be the correct position then how could the bank be the pledgee of the shares delivered? The contract to deliver the shares had been pre-existing as between the plaintiff and R. N. Ghosh and the shares were delivered only in pursuance thereto. In that document(?) how could the bank in its turn send the shares to the plaintiff?

72. It was argued that the bank made a representation at the time of delivering the shares and collecting the money that the shares were genuine. But as stated hereinabove, that situation could not arise at all. Here the utmost representation which the bank could have made was 'here are the shares which you agreed to buy, pay for these and take delivery in accordance with the terms of the contract with R. N. Ghosh these are the shares which had been sent by R. N. Ghosh through this bank'. There could not be any representation as to the genuineness of the shares under the circumstances. Whatever be the representation it could not be independent of the contract between R. N. Ghosh and the plaintiff with which the bank had no connection whatsoever. The presentation of the bill and the invitation to accept the delivery of shares and to pay the money was in pursuance of the said contract. In other words, the action taken on behalf of the bank in delivering the shares and collecting the money was not the starting point in the transaction but was in pursuance of a pre-existing contract. It was performed through the agency of the bank.

73. In the foot note at P. 72 of Turner's Actionable Representation (supra) the case of Edinburgh United Breweries v. Molleson, 1894, AC 96 HL has been referred to. This observation has been taken from Halsbury's Laws of England referred to hereinabove and, in my opinion, this does not apply to the facts of the case before us. As to whether the above observation has been applied or not would be dependent on the facts and circumstances of each case.

74. In my opinion, Mr, Bachawal's contention that the bank was a pledgee of the shares cannot be accepted because the delivery of the shares was in pursuance of the pre-existing contract between the buyer and the seller in which the bank was not a party. The bank had no option in the matter and if the bank had acted independently the bank could not have any occasion to approach the plaintiff who was for all practical purposes a stranger in the transaction so far as the bank was concerned, If this cardinal fact is borne in mind then it will clearly reveal that Mr. Bachawat's contentions have no substance. The mere fact that the bank applied its mind and corrected some mistakes in the share scrips could not make the bank a pledgee of the shares. The witness Karali Charan has given sufficient explanation as to why such corrections have to be made to avoid unnecessary complications. In my opinion, Mr. Bachawat's above contentions should be rejected.

75. Mr, Bachawat next submits byformulating his points thus :

If an agent obtains money from ar third party as a result of or in consequence of conversion the agent is personally liable to repay the amount. It is submitted that the bank acting on behalf of R. N. Ghosh acquired possession of the shares which were not the properties of R. N. Ghosh and the bank dealt with them wrongfully because R. N. Ghosh was not the owner. Hence, the bank was guilty of conversion. It is difficult to appreciate this proposition of law. How could the question of conversion arise when the true owner was not suing in respect of the wrongful act complained of? In the facts of the present case the bank could not be guilty of conversion as against the plaintiff because the plaintiff was never the true owner thereof.

76. Mr. Bachawat has referred to the case of Fine Art Society Ltd. v. Union Bank of London, Ltd. reported in LR (1886) 17 QBD 705 where the Court of Appeal considered the case of wrongful conversion of the Post Office Orders by the bank under the following circumstances :

In that case the secretary of the plaintiff without the knowledge of the plaintiffs kept an account with the defendant bank. He paid into the defendant's bank to his own credit certain post office orders belonging to the plaintiffs which the defendant subsequently cashed. The Post Office Regulations as regards the Post Office Orders provided that, when presented for payment by a banker, they would be payable without the signature by the payee of the receipt contained in the order, provided the name of the bank presenting the order was written or stamped upon it. The main feature of that case was that for the purpose of payment of such post office orders they were presented through banker and as such that dispensed with the signature of the payee of the receipt contained in the order,

77. Lord Esher, M. R. at page 709 while analysing the facts therein observed that the bank acting for the clerk 'presented the orders to the Post Office, received the money for them, and placed it to his credit. The clerk in acting as he did was guilty, no doubt, of gross fraud, and it is clear that he exceeded the authority given to him, for the orders were handed to him to pay into the account of his employers and not his own account. The bank received them innocently, but they received them not for the plaintiffs but for the clerk, who in so paying them into his own account was acting without authority. It seems to me that such receipt was in itself strong evidence of a conversion. 'Under those circumstances, the Master of the Rolls observed :--

'For these reasons, looking at these documents merely as post office orders, and as such not being negotiable instruments, I cannot doubt that what took place amounted to a conversion, and, therefore, in this view of the case the defendants would be liable'.

Fry, L. J. delivering the judgment of himself and of Bowen, L. J. observed at page 711 :--

'We are of opinion that, when Mug-ford handed a post office order across the counter of the bank with a direction to the defendants to take it and to receive the money for it and to carry that money to the credit of his account, and when the bank clerk so took the post office order, the bank converted it;'

78. It appears that the postal orders were not negotiable instruments and in that case the bank acted independently by presenting the post office orders to the post office. In that case the true owner sued and as against him the act of conversion succeeded. The striking feature of that case was that under the Post Office Regulation Order it was provided that the post office could pay without the payee's signature if the bank collected the money. That had been the case there and, as such, the bank was guilty of conversion,

79. In dealing with the true effect of the Regulation Fry., L. J. observed at page 713 :--

'We think its operation is only to make the signature of the banker a substitute for the signature to the receipt of the original payee'.

That being the position, the bank was made liable for conversion as against the plaintiffs who were the true owners of the said postal orders. In my opinion, this case is distinguishable from the iacts involved herein and the principles decided therein have no application to our case.

80. Mr. Bachawat next urged that where the agent has been a party to the wrongful act he has to return the money to the third party from whom he received it irrespective of whether he had returned the money to the principal or not. In support of that proposition he referred to paragraph 522 at page 233 of Halsburys Laws of England 3rd edition Vol. 1 and Bowstead on Agency, 14th edition page 413 Article 131 as also Article 123 at page 390. In my opinion, these principles have no application to the facts of the present case because neither the true owner is suing here nor can the act of the bank be said to be wrongful. As observed above, if the contract between the plaintiff and R. N. Ghosh is allowed to stand then the invitation or request to pay the money and to take delivery of the shares could not be said to be wrongful but it was done lawfully and in pursuance of the said contract. This could not be said to be an act independent of the said contract. Accordingly the question of any liability, under conversion cannot arise. In my opinion, the learned trial Judge was not right in coming to his finding that the bank was guilty of conversion.

81. In the next place, the learned trial Judge has placed strong reliance on the principle of duty to take care on the part of the bank in opening the account and according to the learned Judge as there was failure on the part of the bank to take care in opening the account of R. N. Ghosh without proper introduction he made the bank liable for negligence and on that basis passed a decree in favour of the plaintiff. In my opinion, the learned trial Judge totally misdirected himself by going into that question when there was neither any pleading of negligence nor was there any issue to that effect. It was only at the time of the cross-examination of the bank's witness that the point was pursued at some length. What has been pleaded in paras 15 and 16 of the plaint is not negligence but a duty to the plaintiff that no act or omission on the part of the bank should cause any loss or injury to the plaintiff and that there was a duty to deliver such shares which would have good title and would enable the plaintiff to have and enjoy quiet possession. That is certainly not the pleading relating to negligence. The question of negligence could arise if the bank would have taken the defence that the bank had acted bona fide and without negligence under the circumstances which would entitle the bank to avail of the statutory protection. That is not the case here. Mr. Bachawat realised the position and did not lay much emphasis in pursuing this point. In my opinion, since the bank was acting in pursuance of the agreement entered into by and between the plaintiff and R. N. Ghosh it became immaterial in what manner the account was opened and how it was dealt with as between the bank and R. N. Ghosh. In any event, I am of the opinion that [the bank took as much care as it was obliged to take under the circumstances in the matter of the opening of the account of R. N. Ghosh. In the account opening form there was an introduction of an account holder by the name of Bhawanipur Printing and Stationary Stores. The bank also led evidence that there was verbal introduction by Hari-mohan Seal one of its valued customers. It is true that the said Harimohan Seal had an overdraft account at the relevant time and was ultimately convicted by the criminal court; but that could not be of any consequence so far as the question of negligence was concerned. In my opinion, the learned trial Judge was not right in deciding this case on the basis of negligence and conversion, as he has done.

82. The last point is the point of limi-tation. This is a case which has been decided on the basis of the liability in tort of the bank and not arising out of contract. Under such circumstances, particularly the finding based on negligence must be held to be barred by limitation because Article 36 which gives the period of two years would apply. The suit was admittedly filed beyond the period of two years from the date when the wrongful act in tort took place. Mr. Bachawat referred to the case of National Bank of Lahore Ltd. v. Sohon-lal Saigal, reported in : [1965]3SCR293 but that was a case which was considered to be arising ex-contractu and hence Article 115 was applied and not Article 36.

83. Lastly, I should observe that al-though the issues have been answered but in respect of most of them no rea-sons have been set out nor any evidence discussed in respect thereto. In any event, it is difficult to support such find-ings. It is also to be noticed that the plaintiff did not pursue its claim to as-certain who was the rightful owner in respect of the said shares. The evidence suggests that the shares were taken pos-session of by the police. There was no attempt on the part of the plaintiff to ascertain what ultimately happened to the said shares. In my opinion, the plaintiff in effect abandoned his claim as against the rightful claimant. Under such circumstances, it must be held that the payment made by the plaintiff to the purchasers of those shares were voluntary payments and, as such, in any event, the plaintiff could not pursue its claim as against the bank because the, plaintiff failed to pursue its rights in re-spect of the said shares.

84. Under those circumstances, the appeal succeeds and is allowed and the judgment and decree passed by the learned trial Judge is set aside. In the facts and circumstances of this case each party will pay and bear his or its own costs both before the trial Court as also before this Court. Certified for two counsel as against the respective clients.

85. Order for stay passed herein do stand vacated. Accordingly, Messrs. Khaitan & Co., with whom the amount is lying pursuant to the order of Court would be at liberty to make payment to the Bank.

Hajra, J.

I agree.


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