PARTNERS OF CHHOTALAL MULJIBHAI v. BANK OF INDIA — 1972 DIGILAW 154 (GUJ)

S. H. SHETH, J. ( 1 ) THE Bank of India Limited which is the plaintiff filed the present suit against the defendants for recovering the sum of Rs. 2 941. 14 with future interest and costs. The plaintiff filed the suit on the following facts. The defendants had a cash credit account with the plaintiff and its overdraft limit was fixed at Rs. 25 0 The account continued to be operated upon for some time. On January 11 1962 the defendants executed for a collateral security a demand promissory note in favour of the plaintiff for a sum of Rs 25 0 It is at Ex. 39. On the same date an agreement of pledge was executed by the defendants in favour of the plaintiff. It is at Ex. 42. Under the agreement of pledge goods consisting of wheat rice and gramdal belonging to the defendants were pledged with the plaintiff. They were stored in the defendants godown which was placed under complete control of the plaintiff. On February 8 1962 the plaintiff asked the defendants to effect the turn over of the goods. On July 26 1962 the defendants assigned to the plaintiff two life insurance policies as further security for the advances obtained by them from the plaintiff. They are at Exs. 47 and 48. On August 6 1962 the plaintiff served upon the defendants notice Ex. 54 calling upon them to pay up before August 16 1962 the entire outstanding amount to the plaintiff in default of which the plaintiff stated it would dispose of the goods pledged with it either by public auction or by private contract. On August 19 1962 the plaintiff published a public notice of sale of the pledged goods in Loksatta a news paper of Baroda. By the public notice the plaintiff advertised the goods for sale by public auction on August 23 1962 On that date the defendants replied to the plaintiff. The letters are at Exs. 89 and 90. Two days prior thereto the defendants had requested the plaintiff to give them time for making payment. On August 26 1962 the defendants paid a part of the amount to the plaintiff with the object of redeeming the goods pledged with the plaintiff. The letters are at Exs. 89 and 90. Two days prior thereto the defendants had requested the plaintiff to give them time for making payment. On August 26 1962 the defendants paid a part of the amount to the plaintiff with the object of redeeming the goods pledged with the plaintiff. On August 30 1962 the plaintiff replied that the public auction which was to be held on 23rd August 1962 had been adjournedbetween 7th September 1962 and 11th September 1962 the plaintiff sold away all the goods by private contract. Thereafter the plaintiff appropriated towards its dues the sale proceeds of the goods in question. The plaintiff then Sled the present suit to recover the balance which remained outstanding against and payable by the defendants after giving them credit for the amount realised by it from the sale of the defendants goods. ( 2 ) THE defendants raised several defences. According to them the plaintiff had never informed them of the deterioration of the goods before disposing them of. The plaintiff had not demanded any further security from them in respect of the advances made by it to the defendants if the security already furnished by the defendants to the plaintiff was found insufficient. The plaintiff had not given to the defendants any notice of sale which took place on 7th September 1962. The plaintiff had not served upon the defendants notice under sec. 176 of the Contract Act. The plaintiff was negligent in as much as it disposed of the goods by private contract. The defendants also disputed the rate of interest which the plaintiff charged. ( 3 ) THE learned trial Judge held that by Ex. 54 the plaintiff had served upon the defendants notice under sec. 176 of the Contract Act. He further held that the plaintiff had not been negligent in dealing with the goods and that it was entitled to compound interest on the advances made by it to the defendantsin the result the trial Court passed in favour of the plaintiff the decree as prayed for. ( 4 ) THE defendants appealed to the District Court. The learned Extra Assistant Judge who heard the appeal confirmed the findings recorded by the learned trial Judge and dismissed the appeal. 5it is that appellate decree which is called in question by the defendants in this second appeal. ( 4 ) THE defendants appealed to the District Court. The learned Extra Assistant Judge who heard the appeal confirmed the findings recorded by the learned trial Judge and dismissed the appeal. 5it is that appellate decree which is called in question by the defendants in this second appeal. [ His Lordship after discussing the facts further proceeded:- ] ( 5 ) THE fourth and last contention which Mr. R. N. Shah has raised is that the plaintiff had not accounted for the goods which the defendants had pledged with it. The facts of the case disclose the following state of affairs. The defendants had pledged with the plaintiff 11 900 Kg. of wheat. The plaintiff had sold away 8 265. 5 Kg. of wheat. It had therefore failed to account for 3 634. 5 Kg. of wheat. The defendants had pledged with the plaintiff 3 200 Kg. of rice out of which the plaintiff had sold away 2 557 Kg. and had failed to account for the balance of 643 Kg. of rice. The defendants had pledged with the plaintiff 558 Kg. of gram dal out of which the plaintiff had sold away 455. 5 Kg. and had failed to account for 102. 5 Kg. of gram dal. Except the question relating to the failure of the plaintiff to account for the aforesaid shortages the rest of the facts are admitted. They are also proved by Exs. 134 to 136. It is undisputed that when the plaintiff weighed the goods in question between 7th September 1962 and 11th September 1962 for being sold away it gave no notice thereof to the defendants. In other words the defendants did not know that their goods which had been lying under complete control of the plaintiff were in the process of re-weighment and re-ascertainment of their quantities. There are therefore two facts about which there is no dispute before me. The plaintiff had not given any notice to the defendants of their intention to reweigh the goods for the purpose of selling them away. Having found the aforesaid shortages the plaintiff had given no notice to the defendants intimating to them the shortages which the plaintiff had discovered on reweighment of the goods in question. The plaintiff had not given any notice to the defendants of their intention to reweigh the goods for the purpose of selling them away. Having found the aforesaid shortages the plaintiff had given no notice to the defendants intimating to them the shortages which the plaintiff had discovered on reweighment of the goods in question. The question therefore which has arisen before me is whether the defendantsthe pawnors were entitled to notices from the plaintiffthe pawnee in respect of the reweighment of the goods and reascertainment of their quantities and in respect of the shortages discovered by the plaintiff in their quantities. In my opinion they are entitled to such notices. The goods admittedly belonged to the defendants. Admittedly they were under complete control of the plaintiff. Admittedly certain quantities of the goods had been pledged by the defendants with the plaintiff. Indisputably therefore the plaintiff which had the right to sell away the goods under the terms of the contract after complying with the provisions of sec. 176 of the Contract Act was bound to account for the entire quantities of goods. If the goods were of perishable nature or if their quality was such as would deteriorate with the resultant decline in their marketability it was absolutely necessary for the purpose of protecting the pawnor that he should have been called upon to remain present at the time when the pawnee reweighed them or reascertained their quantities. Since he was not given any such opportunity it was impossible for him to know how the pawnee had dealt with his goods. It was also impossible for him to know whether his goods were properly handled or mishandled whether there was any pilferage of his goods or whether there was any defalcation or misappropriation thereof. If he was not given any such opportunity it was impossible for him to allege and to prove that the shortages discovered in the quantities of the goods pledged by him with the pawnee were on account of lack of care or negligence on the part of the. pawnee or on account of any misappropriation defalcation or pilferage of a part of the quantities with or without the knowledge of the pawnee. pawnee or on account of any misappropriation defalcation or pilferage of a part of the quantities with or without the knowledge of the pawnee. The normal degree of protection to which a pawnor is entitled in respect of the goods pledged by him with the pawnee requires that the pawnor should have a reasonable opportunity of remaining present and verifying the facts which are discovered as a result of reweighment and reascertainment of the quantities of goods pledged by him with the pawnee. In the instant case no such opportunity indisputably was given to the defendants. Prima facie therefore the plaintiff must be held to have failed to duly account for the shortages discovered by it in the quantities of the goods pledged by the defendants with it. ( 6 ) MR. B. R. Shah has tried to meet this aspect of the defendants case by pointing out to me certain facts. He has argued that the goods in question were weighed by the plaintiff in the presence of its men and in the presence of the purchaser to whom they had sold the goods. Mr. R. N. Shah has disputed the presence of the purchaser at that time. I am assuming that statement made to me by Mr. B. R. Shah is a correct statement. Even then it cannot be said that the presence of some persons on behalf of the plaintiff and the presence of the purchaser can in any manner whatsoever dispense with the reasonable opportunity to the defendants to remain present and verify the facts for themselves. ( 7 ) IT is necessary to remember that the godown in which the goods in question were stored had been under complete and exclusive control of the plaintiff and that the plaintiff had free and uncontrolled access to it. Its access to the godown was not under any circumstances subject to a check by the defendants. In the aforesaid circumstances it was all the greater duty of the plaintiff to place itself above board by giving a reasonable opportunity to the defendants to remain present and to verify the facts for themselves. Mr. BR. Shah has next contended before me that the evidence on record proves that it was the deterioration in the quality and quantity of goods in question which accounts for the shortages in the quantities of three kinds of goods pledged with the plaintiff. Mr. BR. Shah has next contended before me that the evidence on record proves that it was the deterioration in the quality and quantity of goods in question which accounts for the shortages in the quantities of three kinds of goods pledged with the plaintiff. He has further argued that witnesses after witnesses have deposed to the fact of what they observed at the time of weighing the quantities of goods. They did not know what had happened earlier. Therefore this evidence cannot be marshalled so much to the aid of the plaintiff as to exonerate it from giving a reasonable opportunity to the defendants to verify the quantities of goods in question for themselves and to determine the loss caused by deterioration in their quality and quantity with the passage of time. The defendants could have challenged the plaintiffs evidence only if they had known the facts. They could have known the facts if they were given a reasonable opportunity of remaining present and verifying the quantities of the goods in question. Since they were not given any such opportunity it was impossible for them to challenge the plaintiffs evidence. Under the aforesaid circumstances the evidence led by plaintiff loses its value and significance. In my opinion unless the contract or the law provides to the contrary it is absolutely necessary for a pawnee to give the pawnor a reasonable opportunity of remaining present for the purpose of verification of the quantities of goods which are subject to deterioration when their quantities are checked verified reweighed or reascertained. This duty of the pawnee becomes much more articulate when the goods pledged by a pawnor with the pawnee are sought to be sold away by the pawnee inspite of the pawnors desire to the contrary to realise its dues in satisfaction of the loan advanced by it to the pawnor. Mr. B. R. Shah has not been able to point out to me anything from the agreement of pledge Ex. 42 to show that the plaintiff had a unilateral right of reascertainment or reweighment of the quantities pledged by the defendants with it without giving any notice or opportunity to the defendants to remain present at that time. He has relied upon clause 12 of Ex. 42 to show that the plaintiff had a unilateral right of reascertainment or reweighment of the quantities pledged by the defendants with it without giving any notice or opportunity to the defendants to remain present at that time. He has relied upon clause 12 of Ex. 42 which states that the plaintiff is not accountable for any loss which the goods pledged by the defendant with the plaintiff may have suffered. The nonaccountability of the plaintiff arises only when the facts have been ascertained by the action of both the parties or by the action of one party after having given notice to the other party of its intention to do a particular thing. The nonaccountability of the plaintiff does not arise from any action which it may take unilaterally and at its own sweet will without giving a reasonable opportunity to the defendants of its intention in that behalf. The clause relating to nonaccountability therefore does not in my opinion help the plaintiff. Secs. 173 to 179 deal with the relationship between the pawnor and the pawnee and their mutual rights and obligations They do not confer upon the pawnee any such unilateral right to do anything that it pleases. On the contrary if the pawnee wants to sell away the goods pledged by the pawnor with him then he must give the pawnor a reasonable opportunity to verify its quantities and to satify himself on the point The question of verifying the quantities of the goods pledged by the pawnor with the pawnee may not arise in cases of those commodities which are not subject to deterioration or which are not perishable in character. But in case of commodities which are subject to deterioration or which are perishable such a duty is in my opinion implied in the obligation which the pawnee undertakes irrespective of the fact whether there is an express provision to the aforesaid effect or not In the aforesaid circumstances I am of the opinion that the plaintiff has failed to account for the aforesaid shortages in the quantities of wheat rice and gram dal pledged by the defendants with it. It is therefore not entitled to file this suit to recover the balance remaining outstanding from the defendants. The plaintiffs suit must therefore fail. It is therefore not entitled to file this suit to recover the balance remaining outstanding from the defendants. The plaintiffs suit must therefore fail. ( 8 ) IN the result I allow the appeal set aside the decree passed by the Courts below and dismiss the plaintiffs suit. The respondent shall pay the appellants the costs of this appeal. .