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Lalit Mohun Nundy Vs. Haridas Mukherjee - Court Judgment

LegalCrystal Citation
Decided On
Reported in37Ind.Cas.707
AppellantLalit Mohun Nundy
RespondentHaridas Mukherjee
Cases ReferredR. D. v. National Bank of India
contract act (ix of 1872), sections 76, 178 - certificates of shares, whether 'goods' or 'documents of title' to goods--pleadings--fraud, allegations of--proof. - .....khetry to the plaintiff, that that debt was secured by a pledge of the shares in question, that by fraud nikkamull khetry got back the shares without paying the debt and that he subsequently made them over to the defendant lalit mohun nundy. now, if, as the plaintiff alleges, lalit mohun nundy was a party to the fraud set up, then the plaintiff would succeed. the learned judge has not found this; and the fraud which is by no means clearly set forth has not been made out.11. we must proceed then on the assumption that the fraud is not proved, and we have to determine who is entitled to these shares as between the plaintiff and defendant nundy who, on the hypothesis i have stated, is assumed to be an honest holder of them.12. the first question which is raised is whether section 178 of the.....

Sanderson, C.J.

1. In this case the action was brought by the plaintiff claiming the sum of Rs. 2,500 and interest, and also for a declaration that the shares, which have been called in this case the Equitable' shares, should be charged with the repayment of the said sum of Its. 2,500 and also for the recovery of the said shares. The action was brought against Nikkamull Khetry the 1st defendant who did not appear, and, therefore, the case proceeded, so far as he was concerned, ex parte. The other defendant was Lalit Mohun Nundy, and he is the defendant who has appealed against the decision of the learned Judge.

2. The learned Judge has directed that as far as this 4efendant (the 2nd defendant) is concerned, the shares in question are charged with the repayment of Rs. 2,500.

3. It is to be noticed in the first instance that the claim put forward by the plaintiff was that he had but advanced the said sum of Rs. 2,500 to Nikkamull Khetry on the 27th of March 1913. It turns out upon the evidence being given that he had not lent or advanced Rs. 2,500 in the ordinary sense of the words, but had sold 200 Baraboni shares to Nikkamull at Rs. 15 per share amounting to Rs. 3,000, and Nikkamull had given him a cheque for Rs. 500 which had been cashed, and, therefore, there remained a balance of the purchase-money, Rs. 2,500 owing by Nikkamull to the plaintiff. In respect of that Nikkamull deposited with, the plaintiff this certificate in respect of the 100 Equitable shares. The certificate is in the ordinary form, whereby it is certified that Mr. L. Rogers is 'the registered proprietor of 100 of the above-mentioned ordinary shares' and so on. The certificate was signed by somebody, whose name I cannot read, on behalf of Macneill & Co., who are the managing agents, and then apparently it was transferred in the name of a man called Mr. Macnaghten, and then it was transferred in blank and signed by the Attorney of Mr. Macnaghten. This certificate and blank transfer were deposited by Nikkamull with the plaintiff on the 27th of March 1913 as security for the payment of the Rs. 2,500.

4. Now, it appears that the shares which were represented by this certificate had been deposited by the defendant Nundy with Nikkamull early in March. The learned Counsel for the respondent argued that there was nothing to show that the shares, the certificate for which the plaintiff held, were the same shares as those which had been deposited with Nikkamull by the defendant Nundy. I do not think that point was raised in the trial, and I think there was evidence given that they were the identical shares. As I have said, these shares were deposited with Nikkamull early in March as margin in respect of certain speculations which were going on between Nikkamull and Nundy; and, the letter of the 3rd of March shows the terms under which Nikkamull held these particular shares. They are: 'In consideration that you (Nikkamull) hold in trust the undermentioned coal shares, with you on my (Lalit Mohun Nundy's) account, at the rates affixed thereto, I gave you and you received from me, some other coal shares as margin thereof at the rate of Rs. 25 per cent, of the value of those shares which are expressly stated below as such. You shall not be able to dispose of, to sell or to deliver to any one else except me any of these shares of mine, without my written instruction for the same.' Then there is a provision in the end of the letter with reference to the margin being short, to which the learned Counsel has referred.

5. Now, those being the conditions under which Nikkamull held the shares, it is urged that even though he had no authority to deal with those shares, still the plaintiff obtained a good title to them, because he did not know anything about the limit of Nikkamull's authority; and, inasmuch as he took them without notice and bona fide he is protected by Section 178 of the Indian Contract Act, and it has been urged that this certificate comes within the meaning of that Section. Section 178 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 pawner 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.' Reading those words without reference to any authorities, I have no doubt in my mind that the word 'goods' does not include such a certificate as that now before us: nor does it include, speaking more generally, shares. I think it is obvious from the phraseology of the Section that it was intended to refer to goods' in the ordinary meaning of the word. We know perfectly well what a bill of lading is,---it is a document of title to goods shipped on board of a vessel, what a dock-warrant is,---which is ,a document of title relating to goods which are lying in a dock, and so the other documents which are referred to in the Section, such as a warehouse-keeper's certificate, wharfinger's certificate, warrant or order for delivery of goods---all documents of title to goods, which, are perfectly well known not Only in the legal world but also in the commercial world, and they cannot be extended by any stretch of language to such a document that is now before us. I, therefore, do not think that this certificate comes within the meaning of the word 'goods.' I am confirmed in that opinion by reference to the Section (Section 76) which defines the word 'goods.' In that Section it means 'Every kind of moveable property.' But it is expressly provided in that Section that that meaning shall only be applied to the word goods' as far as that chapter is concerned, namely Chapter VII. If it had been intended that that extended meaning should be given to the word 'goods' in Chapter IX in which Section 178 occurs, I think that the Statute would have said so. Therefore, in my opinion, Section 178 does not apply to this case. What then is the position We have the letter of the 3rd of March before us, in which it is distinctly stated that Nikkamull was not entitled to part with these shares with-out the express authority in writing of the other defendant Nundy. There was no evidence given to show that he had such authority. Therefore, the matter stands thus, that Nikkamull was holding these shares with no power to dispose of them and with no power to pledge them without express authority in writing. He did pledge them to the plaintiff, but he could not pass to the plaintiff any better title than he had himself.

6. At the time of the trial the shares had got back into the possession of the defendant Nundy. I do not understand how the plaintiff can make out any case against the defendant Nundy, unless he can prove a case of fraud against him. If he could have satisfied the Court that Nundy had been, a party to a subterfuge or any fraudulent transaction by means of which either by himself or together with Nikkamull he had deprived the plaintiff of the special property which he had in the certificate as pledge, then two things would have resulted: It would have been right to infer, first of all, that Nundy had authorized Nikkamull to pledge the certificate, or, at all events, that he knew of the pledging of the certificate, and secondly, that he had been a party to the fraud by means of which the plaintiff was deprived of the pledge. But, in toy opinion, the plaintiff has not succeeded in proving that there was any fraud on the part of Nundy by means of which the plaintiff was deprived of the possession of the certificate---I am not going into the evidence, which was referred to in detail in the course of the argument, because the matter was discussed fully, while the learned Counsel was arguing. But I should like to point out first of all that the plaint does not make any such charge of fraud as is now attempted to be made against Nundy, viz, that he, Nundy, fraudulently represented that he had undertaken to purchase the shares from Nikkamull and that he would provide the money in the evening. It is quite true that in the pleadings the plaintiff alleged that Nundy and Nikkamull have acted in collusion with regard to certain Police proceedings for the purpose of getting the shares out of the custody of the Police Court, and it is quite true that he also stated that the defendant Nundy was aware of the fraud which the plaintiff alleged Nikkamull had perpetrated upon him, but he did not suggest in his pleadings that it was by reason of fraudulent representation on the part of Nandy that the plaintiff was induced to part with those shares. In my opinion, it is necessary, when the plaintiff is going to set up a charge of fraud against the defendant, to state in the plaint, clearly and specifically what the fraud consists of, the nature of the fraud, and the particulars thereof, which he says has been committed, and, when he has pleaded that, it should be shown by Strict proof that Such fraud has in fact been committed. In this case not only did he not set up the fraud which is now alleged, but no sufficient evidence was given at the trial to support the allegation now made.

7. For this reason I think the learned Judge's judgment cannot be supported. He has not found a charge of fraud against the defendant Nundy, but has dealt with this matter, looking at the case from the point of view of title, and his judgment cannot be upheld.

8. Therefore, this appeal is allowed with costs and the suit as against the appellant defendant Lalit Mohun Nundy dismissed with costs.

Woodrofee, J.

9. The learned Judge has not, I think, dealt with this case from the right point of view.

10. For the purpose of this judgment I will assume that there was n debt owing by Nikkamull Khetry to the plaintiff, that that debt was secured by a pledge of the shares in question, that by fraud Nikkamull Khetry got back the shares without paying the debt and that he subsequently made them over to the defendant Lalit Mohun Nundy. Now, if, as the plaintiff alleges, Lalit Mohun Nundy was a party to the fraud set up, then the plaintiff would succeed. The learned Judge has not found this; and the fraud which is by no means clearly set forth has not been made out.

11. We must proceed then on the assumption that the fraud is not proved, and we have to determine who is entitled to these shares as between the plaintiff and defendant Nundy who, on the hypothesis I have stated, is assumed to be an honest holder of them.

12. The first question which is raised is whether Section 178 of the Contract Act applies to the case. I am not prepared without further consideration to say that it does. The learned Judge who expressed his opinion in Sethna, R. D. v. National Bank of India 8 Ind. Cas. 183 : 12 Bom. L.R. 870. did not himself do so without doubt. But it is unnecessary for me to determine this question, because assuming for the sake of argument that Section 178 does apply, that Section makes no difference to the findings at Which I have arrived; for, if that Section be applied to the plaintiff, it must equally be applicable to the case of Nandy defendant. We have then this case. The shares clearly belonged originally to the defendant Nundy and were made over by him to Nikkamull Khetry as security for margin of shares carried by him on the express terms that he, Nikkamull Khetry, would not make them over to a third person. Notwith standing, and I will assume in fraud of Nundy, Khetry pledged them on his own account to the plaintiff. Let me assume that the plaintiff having no knowledge of the true facts took a valid pledge of the shares. Then Nikkamull Khetry, we will assume, in tool of the plaintiff got back the shares without paying his debts and made them over to their lawful owner. Defendant Nundy took them without notice of anything which had previously happened. It is conceded that if Nandy had got them back on payment of cash his title would have prevailed against the plaintiff. But it is said that it does not because Nundy, it is alleged, did not pay cash, but took them in payment of an antecedent debt due by Khetry to him on general account. It is not clear what the transaction was, but it is certain, whatever it was, that Nundy was getting back his own property. He was not, as the learned Judge has found, accepting property of a third person.

13. Mr. Sen says that Nundy was not entitled to get the property back except in terms of the letter Exhibit (1A). But assuming that he did not receive it in accordance with such terms, that is no affair of the plaintiff, but a matter between the defendants. It was open to Nikkamull to release the shares to their owner in any way he liked provided that the transaction was not, as I assume, fraudulent. The result is that whether the plaintiff had a valid pledge or not, the shares are now in the possession of their original rightful owner unaffected by notice of any fraud and he is entitled to retain the shares against the plaintiff. The relief, to which the plaintiff is in such circumstances entitled, is against the defendant Nikkamull Khetry who is said to have defrauded him. He had got this relief in the decree which the learned Judge has made. The suit against the second defendant should, in my opinion, be dismissed.

14. As for the argument that the evidence discloses a guarantee by the second defendant that the cheque would be honoured, that case was not made in the plaint or in the issues. There was no necessity in such a case to plead fraud. The case would have been a simple one of the receipt of a cheque in payment of a debt on the guarantee of a third party that he would be responsible if the cheque was not honoured.

15. Moreover as Mr. Sircar argued this story is quite inconsistent with what happened in the Police Court proceedings in which a charge of fraud was made against defendant Nikkamull, in which no such charge was preferred against defendant Lalit Mohun Nundy. If, as Mr. Sircar pointed out, the evidence given by the plaintiff be true then it would go to exculpate the first defendant who said, what shall I do, Lalit Mohun Nundy did not pay me any money', when the plaintiff made a complaint to him that his cheque has been dishonoured. On the contrary ft the evidence is true that Nundy was present, then a case might have been put forward (with what success I need not consider) against him.

16. The appeal, in my opinion, succeeds and should be decreed with costs. The suit as against the appealing defendant should be dismissed with costs.

Mookerjee, J.

17. I agree that this appeal must be allowed, notwithstanding the earnest endeavour made by Mr. Sen to support the decree which has been made in favour of the respondent by Mr. Justice Imam.

18. The cardinal question in controversy is, whether the plaintiff-respondent has acquired a valid lien on the shares in dispute. These shares were owned by the appellant Lalit Mohun Nundy, who on the 3rd March 1912 deposited them with Nikkamull Khetry as margin in connection with certain speculative transactions. The terms of the agreement of deposit are before the Court; and Show conclusively that the bailee had no authority to deal with the shares. It is stated expressly that 'the bailee will not be able to dispose of, to sell or to deliver to any one else, except the bailor, any of these shares without any Written instruction for the same.' Notwithstanding this clear instruction, the bailee dealt with the shares and pledged them with the plaintiff as security for a loan. Prima facie, the plaintiff did not acquire a valid title to the shares on the basis of this transaction, for the pledger Could not confer on the plaintiff a title better than what he himself possessed. The plaintiff is consequently driven to rely on Section 178 of the Indian Contract Act, which deals with cases of pledge by possessors r f goods or documentary titles to goods, and lays down that a person who is in possession of any goods or documents 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 pawner is acting improperly. This Section cannot avail the respond**************pnt, unless he is able to establish that the apcuments, which are certificates of shares, were either goods or documents of title to Jjbods. It has not been and cannot be contended that they were documents of title to goods; but, on the authority of the decision >f the Bombay High Court in ' Sethna, R. D. V. National Bank of India (1), the argument has been advanced that these certificates were goods within the meaning of Section 178 of the Indian Contract Act. I atn not prepared to accept this contention as well founded. Reference was made to tW very comprehensive definition of the term 'goods' given in Section 76 of the Indian Contract Act, which lays down that in Chapter VII the word goods' means and includes evey kind of moveable property. As Section 17S is in Chapter IX, it would plainly be not right to extend the definition given in Section 76 to the term goods' as used in Sections not comprised in Chapter VII. If the Legislature had intended that llje definition given in Section 76 should have a Slider application, we would have expected to Jpnd it in Section 2, which is the interpretation tpjause of the Statute. Our attention has also been drawn to Section 103, the provisions whereof are similar to those of Section 178. -But this is of no assistance to the respondent, because, Section 108 finds a place in Chapter VII whereas Section 178 finds a glace in Chapter IX. Notwithstanding the decision of the Bombay High Court, 1 jnust consequently hold that the documents now before us are not goods' within the peaning of Section 178.J If then Section 178 does not apply, as I Bold it does not, what is the position of the plaintiff? The defendant, at the time of the institution of the suit, was in possession of the disputed shares. What had happened was that Nikkamull had obtained the shares from the plaintiff i;i retarn for a cheque which was later on dishonoured. The shares were subsequently made over by Nikkamull to the defendant Nundy, the rightful owner, who is thus now in possession of the shares. Can the shares be pursued in his hand by the plaintiff? The answer must be in the negative. The plaintiff might have a remedy against the appellant if he could establish that the .Jatter obtaiued possession of the shares bymeans of fraud. But no fraud was specifically charged as against him in the plaint; though fraud was charged against Nikkamull Khetry. In these circumstances, the' elementary Rule applies that fraud must be-specifically alleged in the plaint in order that the plaintiff may succeed on the strength thereof against the defendant and the fraud so specifically alleged must be established beyond doubt. The appellant cannof properly be charged with fraud at this stage of the proceedings. But even if we concede for a moment that the plaintiff-respondent is entitled to succeed on the. ground of fraud now brought against the appellant, what is the position? What is1 the fraud now charged? As I read his1 deposition, the allegation is that on the' 2nd April the appellant made a false' representation to the respondent that he had agreed to purchase shares for cash' and would pay in the evening, fraudulently implying thereby that if, in the circumstances, the plaintiff accepted a cheque from Nikkamull Khetry, that cheque would be honoured. The statement made by the plaintiff, however, in his deposition does hot bear out this allegation of fraud, and it must be considerably amplified and Supplemented in order that this case may be supported. But the respondent is' in a position of further embarrassment, if we remember that this specific case of fraud was not put to the appellant when he went into the witness-box. The substance of the matter then is that there was no specific charge of fraud against the appellant in the plaint, the fraud which is now alleged is not established by the deposition of the plaintiff, and was never put to the defendant when he was cross-examined. In the'e circumstances, it would clearly be wrong to allow the plaintiff to succeed against the appellant on the ground of fraud.I agree that this appeal must be allowed and the suit as against the appellant dismissed with costs.

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