Francis W. Maclen, C.J.
1. The facts in this case are scarcely disputed. By a contract dated the 28th of November 1905, the plaintiffs sold to the defendants, E.A. Smith & Co., 1,000 bale's of jute of a particular mark; the goods were to be placed alongside the exporting vessel during the month of November and to be paid for in cash against the mate's receipts. The goods were placed alongside the steam-ship Uganda under instructions from the defendants' firm and were subsequently shipped on board the vessel and two mate's receipts, dated the 3rd and 4th of December, for 875 and 125 bales respectively, made out in the names of Smith & Co., were obtained by the plaintiffs. These mate's receipts together with the plaintiff's bill against Smith & Co. for Rs. 46,000 and the usual measurement and weighment certificates were on the 5th of December made over to Smith & Co. for examination, and Smith & Co. gave the plaintiffs on the same day the usual receipt containing the statement that the documents were accepted for examination. Smith & Co. then presented the mate's receipts to Messrs. Mackinnon, Mackenzie & Co., the agents of the steam-ship Uganda, and obtained bills of lading in respect of goods mentioned in the mate's receipts, and subsequently pledged those bills of lading with the defendant Bank. We may say at once that there is no evidence to show that the Bank did not act in good faith or that there was anything in the transaction, so far as they were concerned, to raise any reasonable presumption that Smith & Co. were acting improperly: when that pledge was made, the Bank had no notice of the plaintiffs' present claim, and Smith. & Co. were given credit in their account with the Bank for the full amount of the bills of exchange drawn against the goods represented by the bills of lading. The pledge was effected on or before the 7th of December, and, it is, perhaps unnecessary for present purposes to further follow the dealings with the bills of lading. The plaintiffs now claim to recover from Smith & Co. and from the Bank either the goods or their value. Smith & Co., who became insolvent very shortly after the 7th of December, have not defended the suit, but the Bank has, and they claim that they have a better title to the goods than the plaintiffs. Mr. Justice Sale dismissed the suit with costs, and the plaintiffs have appealed.
2. The first question, which appears to arise, is whether, in the circumstances, the property in the goods passed to Smith & Co. The law on this subject has been codified by Sections 77 and 83 of the Indian Contract Act. Those sections are as follows: Section 77. 'Sale is the exchange of property for a price. It involves the transfer of the ownership of the thing sold from the seller to the buyer.' Section 83. 'Where the goods are not ascertained at the time of making the agreement for sale, but goods answering the description in the agreement are subsequently appropriated by one party for the purpose of the agreement and that appropriation is assented to by the other, the goods have been asceratined and the sale is complete.' In the present case the goods were not ascertained at the time of the contract. The question, therefore, arises whether goods answering the description were subsequently appropriated by the sellers for the purposes of the agreement, and whether that appropriation was assented to by Smith & Co. The Judge in the Court of first instance has found that there was such appropriation, and in that finding we entirely concur. 1,000 bales of jute bearing the contract mark were attributed to the contract by the plantiffs; they were put alongside the Uganda, shipped in due course at the request of the defendants, Smith & Co., and the mate's receipts given in respect of the goods show that the goods so shipped wore marked. with the private mark of the defendant firm in red ink as required by their shipping instructions. Subsequently, Smith & Co., having obtained the bills of lading in respect of those goods as shippers of the goods, contracted for the despatch, and it must be taken that the goods were delivered in due course in accordance with the bills of lading. These, in substance, are the findings of the Court of first instance and in those findings we concur; and we think that in these circumstances there was an appropriation by the sellers assented to by the buyers. The case seems to be consistent with the illustration to Section 83 of the Indian Contract Act, which is based presumably upon the view expressed by Holroyd J. in the case of Rohde v. Thwaites (1827) 6 B.L.C. 388 where that learned Judge says: 'The selection of the goods by one party and the adoption of that act by the other converts that which before was a mere agreement to sell into an actual sale and the property there by passes.' The goods therefore must be taken to have been ascertained and under the conjoint operation of the sections of the Indian Contract Act, to which I have referred, the sale must be taken to have been complete, and that involved the transfer of the ownership of the goods from the seller to the buyer. If then the property passed to Smith & Co., the latter, having the mate's receipts, were entitled to the bills of lading and they could sell the goods or pledge them. We think that the pledge by Smith & Co., of the bills of lading to the Bank, who acted bond fide in the matter and without any notice of the contract between the plaintiffs and Smith & Co., was a perfectly valid pledge.
3. It is said, however, that the appropriation was conditional, having regard to Clause 13 of the contract.
4. Clause 13 runs as follows: 'Terms of payment: Cash on delivery of mate's or dock receipts or as provided for in Clauses 8, 9 and 11. Should the said receipts or warrants be retained by the buyers for examination; they shall remain the property of the sellers and be held by the buyers in trust for and at the absolute disposal of the sellers, until payment has been made in cash in terms of this contract, and if payment be made by cheque, until such cheque has been cashed.' In the circumstances incidental to the actual fact of the appropriation there is nothing to show that it was conditional, and the question is whether there is anything in Clause 13 coupled with the fact that Smith & Co. did not pay for the goods to render it such. In point of time, Clause 13 would not come into operation, until after the appropriation in fact had been effected, and that clause is only effective conditionally upon the mate's receipts being retained by the buyers for examination. The plaintiffs might easily have shown their intention to make the appropriation conditional by either taking the mate's receipts or the bills of lading in their own names. But the weighment, measurement and shipping were apparently effected by the buyers, and we do not think that this clause, of which the Bank had no notice, reserved to the sellers the right of disposing of the goods. It is clear from the evidence of Gangaram Augurwallah, one of the plaintiff's witnesses, that there was no fraud on the part of Smith & Co., in obtaining the mate's receipts, because he tells us that it was the practice to leave mate's receipts with the buyers for examination, and that is why he did not ask for their return. He seems to have left them in the usual course of business, and as at that time the sellers did not obtain the price of the goods, they could have made themselves safe by giving notice to the shippers not to hand over the bills of lading to Smith & Co., without previous notice to them, the plaintiffs. In these circumstances, we do not think it can be successfully contended that the appropriation was conditional. We think it was an out and out appropriation, and that the property in the goods passed to Smith & Co. It must be borne in mind that it was the plaintiffs, who by their conduct enabled Smith & Co. to obtain the bills of lading and pledge them with the Bank a course which, if they were so minded, they could have easily prevented; and it must also be borne in mind in this connection that the property in the goods had passed from the sellers to the buyers.
5. Apart, however, from this consideration, the defendant Bank claims the protection of Section 178 of the Indian Contract Act, which runs as follows: 'A person, who is in possession of any goods, or of any bill of lading, dock-warrant, warehouse-keeper's certificate, wharfinger's certificate or warrant or order for delivery, or any other document of title to goods, may make a valid pledge of such goods, or documents: provided that the pawnee acts in good faith, and under circumstances, which are not such as to raise a reasonable presumption that the pawnor is acting improperly: provided also that such goods or documents have not been obtained from their lawful owner or from any person in lawful custody of them, by means of an offence or fraud.'
6. Now, there is no doubt that Smith & Co. were in possession of the bills of lading, and that the Bank acted in good faith, and there was nothing to raise a reasonable presumption that Smith & Co. were acting improperly. Prima facie then Smith & Co. could have made a valid pledge of the bills of lading. The plaintiffs, however, rely upon the last proviso to that section. But in the circumstances it is difficult to say that Smith & Co. obtained the bills of lading by means of any offence or fraud. According to the evidence to which we have adverted the mate's receipts were left with Smith & Co. in the ordinary course of business, and we have pointed out how the plaintiffs might easily have protected themselves, if they had been sufficiently cautious. Assuming for a moment in favor of the plaintiffs that the mate's receipts are to be treated as identical with the bills of lading, we do not think it can be fairly said that they had been obtained from their lawful owner by means of any offence or fraud. The mate's receipts being in the name of Smith & Co. the latter became entitled to the bills of lading: and, even if those bills of lading became impressed with the trust mentioned in Clause 13, we think it would be difficult to say that the plaintiffs were their lawful owners, or that the bills had been obtained from them by means of any offence or fraud. The Bank knew nothing whatever of the separate secret arrangement as to the mate's receipts between the plaintiffs and Smith & Co. and which in terms only applies to the mate's receipts and not to the bills of lading. In these circumstances the perils of mercantile transactions such as the present would be gravely increased if it were held that the present case came within the proviso, and priority were given to the plaintiffs claim over that of the defendant Bank.
7. For these reasons the appeal fails and must be dismissed with costs.
8. I agree.
9. I agree with the judgment delivered by the learned Chief Justice and desire to make only one observation with regard to Clause 13 of the agreement, the clause on which Mr. Sinha founded his argument that the appropriation of bales by the plaintiffs was conditional on payment by the buyers. Under that clause the mate's receipts, if retained by the buyers for examination, were to 'remain the property of the sellers and be held by the buyers in trust for and at the absolute disposal of the sellers, until payment has been made in cash, & c.' It appears to me that the object of that clause was to secure the lien, which under Section 95 of the Contract Act the seller has on sold goods as long as they remain in his possession. The person, who holds the receipts, is the person in possession of the goods covered by the receipts. By stipulating therefore that the mate's receipts were to remain their property, the sellers sought to retain that possession of the jute, which would enable them to enforce their lien, even though the property in the goods had passed to the buyers.
10. That this is the proper construction to be placed on the 13th clause seems to me clear from other terms of the agreement, for instance the 4th clause, by which it is provided that 'no bales marked by buyers with their own distinguishing marks subsequent to examination can be rejected by them,' and the lust sentence of the 6th clause, which declares that 'after the jute has been examined and passed by buyers, the responsibility would cease on delivery of mate's receipts.' The goods were appropriated, when they were placed alongside the exporting vessel, and the clauses, which I have recited, clearly indicate that the property in the jute by that appropriation passed to the buyers. I am, therefore, of opinion that Clause 13 of the agreement lends no support to Mr. Sinha's contention that the appropriation of the goods was conditional on payment of the price by the buyers.