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Lohia Trading Co. Vs. Central Bank of India and anr. - Court Judgment

LegalCrystal Citation
SubjectBanking;Contract
CourtKolkata High Court
Decided On
Case NumberSuit No. 1937 of 1956
Judge
Reported inAIR1978Cal468
ActsContract Act, 1872 - Section 72
AppellantLohia Trading Co.
RespondentCentral Bank of India and anr.
Appellant AdvocateBagchi, Adv.
Respondent AdvocateH.M. Dutt, Adv.
DispositionSuit dismissed
Cases ReferredSurendra Nath Sud v. Standard Vacuum Oil Co.
Excerpt:
- .....defendant no. 2, but in breach of the agreement and the instructions of the defendant no. 2 the bank issued defective delivery orders making the plaintiff liable to pay a sum of rs. 86/14/- as warehouse charges. by a letter dated april 11, 1955, it is alleged the bank accepted its mistake and agreed to grant the plaintiff a deduction of the sum of rs. 86/14/- and further promised to issue proper delivery orders in respect of the remaining stock yet to be delivered. the plaintiff thereupon after deducting the said sum of rs. 86/14/- paid to the bank a sum of rs. 7,381/12/-. the bank on april 18, 1955, it is alleged issued four defective delivery orders making the plaintiff liable for warehouse charges and without a correct description of the lots resulting in the bengal bonded.....
Judgment:
ORDER

Monjula Bose, J.

1. The claim in his suit is one for refund of a sum of Rs. 7,381/12/-. The case in the plaint is that, the plaintiff had purchased several lots of paper from the defendant No. 2 which remained deposited with the defendant No. 1 hereinafter referred to as the Bank. It was agreed by and between the parties that the plaintiff would take delivery of the said paper from the Bank, upon payment of its value against instructions of the defendant No. 2. The Bank in turn, agreed to issue delivery orders in favour of the plaintiff to the warehouse, where the paper is stored, free from warehouse and other charges. Pursuant to this agreement, it is alleged that the plaintiff paid the Bank a sum of Rs. 1,581/12/- in accordance with the first delivery instructions issued by the defendant No. 2, but in breach of the agreement and the instructions of the defendant No. 2 the Bank issued defective delivery orders making the plaintiff liable to pay a sum of Rs. 86/14/- as warehouse charges. By a letter dated April 11, 1955, it is alleged the Bank accepted its mistake and agreed to grant the plaintiff a deduction of the sum of Rs. 86/14/- and further promised to issue proper delivery orders in respect of the remaining stock yet to be delivered. The plaintiff thereupon after deducting the said sum of Rs. 86/14/- paid to the Bank a sum of Rs. 7,381/12/-. The Bank on April 18, 1955, it is alleged issued four defective delivery orders making the plaintiff liable for warehouse charges and without a correct description of the lots resulting in the Bengal Bonded Warehouse refusing to accept and/or to act upon the same. In spite of demands the Bank neither rectified nor issued fresh delivery orders to enable the plaintiff to take delivery of the said paper. Alternatively, it is pleaded that the Bank by its acts and/or conduct ratified the contract. The plaintiff in these circumstances has claimed a refund of the sum paid as also loss and damages against the Bank. At the trial however, only the claim for refund of a sum of Rs. 7,381/12/- was pressed. No relief was claimed against the defendant No. 2.

2. Only the defendant No. 1 has entered appearance and has filed a written statement. It is inter alia denied that there was any agreement between the Bank and the plaintiff, and it is contended that there was no privity of contract between the plaintiff and the Bank. It is further denied that Rs. 7,381/12/- was paid by the plaintiff to the Bank in consideration of any agreement as alleged. It is also denied that the Bank ratified the contract between the plaintiff and the defendant No. 2 in any way or that there was any obligation on the part of the Bank to issue a full and clear delivery order in favour of the plaintiff as alleged.

3. By consent of the parties, the Judge's briefs of Correspondence and Documents were tendered as Ext. 'A' and formal proof of the documents therein was dispensed with.

4. The other relevant Exhibits being (a) letter dated December 19, 1956 from the plaintiff's Solicitors to the Solicitors for the Bank furnishing particulars of the agreement pleaded, (b) letter dated March 30, 1955 from the plaintiff to the Bank enclosing the first delivery instructions received from the defendant No. 2, (c) letter of June 10, 1965 from the Bengal Bonded Warehouse, (d) Four Delivery Orders all dated April 14, 1955 issued by the Bank and (e) the original statement of Account of the defendant No. 2 with the Bank, tendered as Exts. '1', '2', '3', '4', '5' respectively.

5. The following issues were raised and settled at the trial:--

ISSUES,

1 (a) Was there any agreement between the plaintiff, tihe defendant No. 1 and the defendant No. 2 as alleged in para. 5 of the plaint

(b) If not, was there any ratification by the defendant No. 1 of the Contract between the plaintiff and the defendant No. 2 as alleged in para. 15 of the plaint

2 (a) Was the defendant No. 1 obliged to issue a full and clear delivery order for 778 reams free of all charges against payment of Rs. 7,381/12/- If so, did the 4 delivery orders issued by the defendant No. 1 meet the said requirements

2 ((b) Did the defendant No. 1 receive payment of Rs. 7,381/12/- from the plaintiff on account of or for the plaintiff

3. Was there no privity of contract between the plaintiff and the defendant No. 1 as alleged in para. 7 of the written statement

4. Is the plaintiff entitled to a refund of Rs. 7,381/12/- from the defendant No. 1

5. To what reliefs, if any, is the plaintiff entitled?

6. One Banarasi Lal Lohia an erstwhile partner of the plaintiff gave evidence for the plaintiff. He stated that after receiving a cheque from the plaintiff the Bank issued four delivery orders, ell of which were defective and contrary to the instructions of the defendant No. 2. He further stated that the delivery orders also contained mistakes in the description of the goods. Upon presentment of the delivery orders to the Bengal Bonded Warehouse, delivery was refused. In spite of several requests the Bank never took steps to correct the mistakes appearing on the delivery orders and as a result thereof, the plaintiff could not obtain delivery of the papers. He stated that although tine papers were purchased from the defendant No. 2, Mr. N. Mukherjee of A. Mukherjee & Co., the purchase price thereof was paid directly to the defendant Bank by a cheque in its name.

7. The Bank called two witnesses. The first Bholanath Mitra is an Officer of the Bank since 1955-56. He stated that the defendant No. 2 had overdraft facilities with the Bank and pledged with it certain stock of paper which goods were stored with the Bengal Bonded Warehouse in the name of the Bank A/c. N. Mukherjee the defendant No. 2. There was never any agreement between the Bank and the plaintiff. On instructions received from the defendant No. 2, a sum of Rs. 7,381/12/- was credited to his account on April 1'3, 1955. He admitted, instructions received were to deliver goods free of warehouse charges and by mistake the words 'against payment of all charges' had not been scored through in the printed delivery orders. He admits further that the delivery orders were not issued in accordance with instructions of defendant No. 2.

8. The only other witness of the Bank was one Pasupati Nath Roy an employee of the Bengal Bonded Warehouse Association. His evidence is of little relevance.

9. Mr. H. M. Dutt, learned counsel for the Bank contended that the papers in question were admittedly purchased by the plaintiff from the defendant No. 2, The Bank was merely holding the same against a cash credit overdraft account of its constituent, and there was no agreement whatsoever between the plaintiff and the Bank. This was borne out by the letters of the plaintiff and the particulars furnished in para. 5 of the plaint.

10. There was also no oral evidence on behalf of the plaintiff that there is any agreement between the plaintiff and the Bank. He contended that the defendant No. 2 being the principal, there was no question of any ratification by the Bank and Ss. 196 and 198 of the Indian Contract Act did not assist the plaintiff. In this context he cited Raja Rai Bhagwat Dayal Singh v. Debi Dayal Sahu reported in (1908) 12 Cal WN 393. Citing the decisions in Shanti Prasad Jain v. Director of Enforcement reported in : [1963]2SCR297 and Jammu Kashmir Bank Ltd. v. Attar-ul-Nisa reported in : [1967]1SCR792 he argues that the relationship between the Bank and its customer is one of debtor and creditor, and money having been credited to the account of its constituent, is not refundable without his consent. He further relies on Section 230 of the Indian Contract Act and contends that an agent cannot personally enforce nor be bound by contracts on behalf of the principal. Mr. Dutt finally argues that the plaint discloses no cause of action against the Bank and cites Messrs. Trojan & Co. v. Nagappa Chettiar reported in : [1953]4SCR789 and Sheodhari Rai v. Suraj Prasad Singh reported in : AIR1954SC758 .

11. Mr. Bagohi, learned Advocate for the plaintiff submits that the gist of the contract between the plaintiff and the defendant No. 2 being communicated to the Bank as would be borne out by Exhibit 'A', there was by implication a tri-partite agreement, which was accepted by the Bank. When the Bank accepted the instructions of the defendant No. 2 to deliver on terms directed by the latter and asked the plaintiff to make payment to the Bank, by implication thereby the Bank accepted the agreement. He contends that the delivery orders issued by the Bank were not as Agent of the defendant No. 2 inasmuch as it is the evidence of the Bank's witness that the defendant No. 2 could not have taken delivery of the goods independently direct from the Warehouse, otherwise than under orders from the Bank. He argues further the Bank having agreed to refund Rs. 86/14/- which the plaintiff was not liable to pay, it became a party to the said transaction. Mr. Bagchi however conceded, no tripartite agreement has been proved and argues by subsequent conduct the Bank ratified the agreement between the plaintiff and the defendant No. 2. Relying on Section 72 of the Indian Contract Act Mr. Bagchi further contends that in any event a person to whom money has been paid by mis-lake must repav or return it. He argues that the plaintiff in the mistaken belief that he would obtain delivery of the paper, paid on the basis of the letter written by N. Mukherjee at page 3 of Ext. 'A' and also on the mistaken belief that the Bank would issue proper delivery instructions upon receipt of the money. He contends that for doing justice even if the pleadings are defective, relying on Exhibits the Court can pass a decree for refund. He cited in support the decision in Surendra Nath Sud v. Standard Vacuum Oil Co. reported in : AIR1977SC1454 .

12. After giving a careful consideration to the submissions made by the parties I am unable to accept the submissions of the advocate for the plaintiff. Neither from the oral evidence and/or documentary evidence on record, can this Court infer that there was an agreement between the plaintiff, the defendant No. 1 and the defendant Bank as alleged in para. 5 of the plaint. I am constrained to hold therefore that there was no privity of contract between the plaintiff and the defendant No. 1. It has been the consistent case of the plaintiff in the correspondence tendered as Ext. 'A' that the agreement was between the plaintiff and the defendant No. 2, a constituent of the defendant Bank and that the Bank was merely acting on his instructions as an Agent of the Constituent. As such the case of ratification by the Bank has no basis whatsoever. Section 72 of the Indian Contract Act does not appear to be applicable to the facts and circumstances of this case at all. Section 72, envisages only those cases where money is paid under a belief that it is legally due and this belief is mistaken. It is either under a mistake of law or fact that money is paid, whereas there was no liability to pay. In the instant case no such question arises, as money was not paid under any mistake. The plaintiff paid the money to the Bank as price of goods, with its eyes wide open on the basis of an arrangement with the defendant No. 2, the owner of the goods. Therefore, on the facts of the case, there is no question of mistake. The plaintiff's grievance in this instant case has been that proper delivery orders were not issued by the defendant Bank resulting in it not being able to obtain delivery of the paper which it had purchased from the defendant No. 2, and in para. 25 of the plaint, the basis for claiming refund is alleged to be breach of contract by not issuing delivery orders free of warehouse charges. In these circumstances and on the basis of the decisions cited, I am unable to accept the contentions on behalf of the plaintiff. The issues are accordingly answered as follows :--1 (a) No.

1 (b) No.

2 (a) Yes, the defendant No. 1 as per instructions of its constituent was obliged to issue a full and clear delivery order free of warehouse charges against payment of Rs. 7,381/12/-. The delivery orders issued by the defendant No. 1 did not meet the requirements inasmuch as the same were not free of charges nor were the delivery orders clear and unambiguous.

2 (b) The defendant No. 1 received the payment of Rs. 7,381/12/- from the plaintiff as per the instructions of its constituent, the defendant No. 2 on his account and not on account of or for the plaintiff.

3. There was no privity of contract between the plaintiff and the defendant No. 1.

4. In view of the answer to issues Nos. 1 (a), 2 (b), 3 and also inasmuch as I have held that Section 72 of the Indian Contract Act is not applicable to the facts of the case, the plaintiff is not entitled to a refund from the defendant No. 1.

5. None.

13. The suit is accordingly dismissed.

14. In view of the admitted facts that the delivery orders were defective and the plaintiff did not obtain delivery thereon, each party will pay and bear its own costs.

15. Although I have dismissed the suit as against the Bank, I would like to comment that the conduct of the Bank in the matter has been far from commendable. The Bank was in complete control over the goods in question namely the paper stored in the Bengal Bonded Warehouse. It is not the case of the Bank that it has any doubts or any misconception about the transaction as between the plaintiff and the defendant No. 2. In that background the Bank carelessly and/or negligently issued detective delivery orders which it stubbornly refused to amend and/or to issue fresh instructions causing the plaintiff undue harassment as also loss. The Bank which is now a Nationalised Institution, is expected to have greater consideration towards its constituents and towards the public in general. Abiding by the rules of a technical formula may absolve the Bank from a legal liability but at the same time may invite comments as to its bona fides and commercial honesty.


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