Chellappan Pillai v. Canara Bank — 1988 DIGILAW 418 (KER)

JUDGMENT Shamsuddin, J. 1. Defendants Nos. 1 and 3 in O. S. No. 127 of 1979 on the file of the Court of the Subordinate Judge, Mavelikkara, are the appellants. 2. The suit was filed by the first respondent herein for money due under a cash credit account and mortgage loan account. The first defendant took these loans for expansion of his concern, Elite Radio and Electronic Components at Mararikulam Mini Industrial Estate after executing demand promissory notes, agreement of hypothecations of movables and an equitable mortgage. Defendants Nos. 2 and 3 are co-obligants. The hypothecation agreement was executed by the first defendant on March 10, 1976. On the same day, all the defendants executed another agreement. The demand promissory note was executed on the next day. The third defendant created an equitable mortgage in favour of the plaintiff. As per the loan account as on August 5, 1976, the first defendant was given financial assistance to the tune of Rs. 17,166.83, and the amount due to the bank on this account as on January 13, 1979, came to Rs. 22,057,67. As per the open cash credit account, the amount due to the bank as on January 13, 1979, came to Rs. 30,367.39. Thus, as on January 13, 1979, a total sum of Rs. 52,425.06 was due to the plaintiff-bank and in spite of repeated demands, the defendants did not pay the amount. In accordance with the conditions of the hypothecation agreement, the plaintiff took possesssion of the raw materials and machinery and they were auctioned and a sum of Rs. 13,424 was realised which was credited on May 3, 1979. Some furniture and fittings in the premises of the said concern and belonging to the defendants could not be auctioned by reason of a suit filed by the sellers claiming certain rights over these articles. The said suit was pending in the Munsiffs Court.According to the plaintiff, after crediting the amounts recovered by way of sale of articles, the balance due as on the date of the suit came to Rs. 45,499.21. It was also alleged by the plaintiff that the first defendant has paid to the bank a sum of Rs. 200 on December 6, 1976, towards the loan transaction and defendants Nos. 2 and 3 have acknowledged the liability as per their letters dated December 22, 1978. It is in those circumstances that the suit was filed. 45,499.21. It was also alleged by the plaintiff that the first defendant has paid to the bank a sum of Rs. 200 on December 6, 1976, towards the loan transaction and defendants Nos. 2 and 3 have acknowledged the liability as per their letters dated December 22, 1978. It is in those circumstances that the suit was filed. 3. In the written statement filed by the first defendant, it was contended that the court had no territorial jurisdiction, that the suit was barred by limitation and the payment of Rs. 200 by the first defendant was made not on December 6, 1976, but on December 3, 1976. He also contended that he remitted 10% of the loan sanctioned by the bank which was not credited. It was also alleged that a sum of Rs. 2,800 was sanctioned to him as subsidy by the Industrial Development Corporation and another sum of Rs. 2,800 remitted by him in the bank are not seen credited. It was further averred that the bank took possession of movable articles worth Rs. 60,000 on June 1, 1978, and some of the articles were stolen while the plaintiff-bank had custody of those articles and that the plaintiff was liable for the loss. It was also his case that there were several unauthorised entries making debits in the accounts in his name. The interest claimed also was disputed. In the above circumstances, he prayed that the suit be dismissed. 4. The second defendant contended that no equitable mortgage was created as per law and the third defendant contended that all the movables taken possession of by the bank had not been sold and an additional sum of Rs. 2,500 being the value of three radios and a cabinet should be credited towards the amount due to the bank. The third defendant also contended that the suit was barred by limitation. 5. The lower court held that it had territorial jurisdiction, that the value of the articles stolen while in the custody of the bank came to Rs. 2,000 but it was not proved that there was negligence on the part of the bank, and that, therefore, the plaintiff was not liable for the value of the stolen articles. The court also found that the defendants were liable to pay interest at the agreed rate and that the amount of Rs. 2,000 but it was not proved that there was negligence on the part of the bank, and that, therefore, the plaintiff was not liable for the value of the stolen articles. The court also found that the defendants were liable to pay interest at the agreed rate and that the amount of Rs. 200 was paid on December 6, 1976, and not on December 3, 1976, and that, therefore, the claim was not barred by limitation. It was also held that since defendants Nos. 2 and 3 are co-obligants, their liability is co-extensive with that of the first defendant and, therefore, they cannot be absolved of the liability to pay the amounts due to the bank. In this view of the matter, the lower court passed a decree, allowing the plaintiff to recover by sale of the plaint schedule properties a sum of Rs. 45,499.21 with interest on the principal sum of Rs. 39,764.71 at 14.5 per cent. per annum from the date of suit till the date of decree and at the rate of 12% per annum from the date of decree till the date of realisation. 6. Aggrieved by the judgment and decree of the court below, defendants Nos. 1 and 3 have filed this appeal. 7. In this appeal, learned counsel for the appellants raised three points : (1), The suit is barred by limitation ; (2) while in the custody of the plaintiff-bank, some articles were stolen and the plaintiff was, therefore, liable for the value of those articles ; and (3) 10% of the loan sanctioned by the bank was remitted in the bank but the said amount was not credited. 8. It is not disputed that if the payment of Rs. 200 was really made on December 3, 1976, and not on December 6, 1976, the suit was barred. Learned counsel for the appellants mainly relied on exhibit B-l, a pass book to show that Rs. 200 was remitted only on December 3, 1976. Exhibit A-35 is the credit slip relating to payment of Rs. 200. That shows that the payment was really made on December 6, 1976, and not on December 3, 1976. Exhibit A-37 is the shroff cash book and on going through exhibit A-37, it is seen that Rs. 200 credited as per pay slip No. 109 and exhibit A-35 shows that the number assigned to the slip is 109. 200. That shows that the payment was really made on December 6, 1976, and not on December 3, 1976. Exhibit A-37 is the shroff cash book and on going through exhibit A-37, it is seen that Rs. 200 credited as per pay slip No. 109 and exhibit A-35 shows that the number assigned to the slip is 109. In the circumstances, there cannot be any doubt that the payment was made only on December 6, 1976, and not on December 3, 1976. There is nothing to show that exhibit B-1 entry in the pass book relates to this payment. In the circumstances, there is no substance in the contention of counsel for the appellants that the payment was made only on December 3, 1976, and, therefore, the suit was barred by limitation. 9. We shall now deal with the second contention of learned counsel for the appellants. It is submitted that the bank was in the position of a bailee in respect of the goods taken possession of by the bank and that the goods were in the custody of the bank and that the key of the building was also in its custody and that in the circumstances there is a presumption that goods were lost on account of the negligence of the bank. Learned counsel invited our attention to a Division Bench ruling of this court in Joseph v. F.A.C.T. Ltd. [1964] KLJ 1188, where it was held that once the contract of bailment is proved and there is entrustment of the goods with the bailee, the loss of the subject-matter of the bailment is itself prima facie evidence of the negligence of the bailee. This ruling was followed by another Division Bench of this court in Cochin Port Trust v. Associated Cotton Traders Ltd. [1983] KLT 562 ; AIR 1983 Ker 154 . It was held that to escape the liability for the loss or damage, the onus is on the bailee to prove that he had taken necessary precautions and care required under law. The court also held that if the bailee places before the court evidence to show that he had taken reasonable care to avoid damage which is reasonably foreseeable or had taken all reasonable precautions to obviate risks which may be reasonably apprehended, he may be absolved of his responsibility. The court also held that if the bailee places before the court evidence to show that he had taken reasonable care to avoid damage which is reasonably foreseeable or had taken all reasonable precautions to obviate risks which may be reasonably apprehended, he may be absolved of his responsibility. Learned counsel for the appellants submitted that the plaintiff has not rebutted the presumption by adducing evidence that all care and precautions were taken by the bank. 10. Sri T.R.G. Warrier, learned counsel for the appellants, heavily relied on Section 151 of the Contract Act and argued that the bailee is bound only to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own goods. He submitted that the goods were kept in the same building in which the first defendant kept the articles and care which an ordinary man is expected to take of his own goods was taken in this case also and in spite of that, goods were stolen and in the circumstances, the plaintiff-bank was not liable in respect of the value of the goods stolen. PW-1 was examined in the case on behalf of the plaintiff. His evidence does not explain the circumstances under which the articles were lost or the nature and care taken by the bank to protect and preserve the goods. On going through the evidence of PW-1, we are not satisfied that the bank has rebutted the initial presumption available to the defendants of negligence on the part of the bailee. The first defendant has claimed loss of Rs. 60,000 as value of the goods lost, but there is absolutely no evidence to show that goods worth Rs. 60,000 were lost. PW-1 admitted that the value of the goods lost is about Rs. 1,500 to 2,000. In the circumstances, we hold that the plaintiff is liable to the extent of Rs. 2,000 for the goods stolen while in the custody of the bank and this amount should be credited towards amounts to be recovered from the defendants. 11. As regards the third contention, there is no evidence to show that the defendants deposited any amounts other than those credited by the bank. 2,000 for the goods stolen while in the custody of the bank and this amount should be credited towards amounts to be recovered from the defendants. 11. As regards the third contention, there is no evidence to show that the defendants deposited any amounts other than those credited by the bank. We went through the records relating to the cash credit account and the mortgage loan account of the defendants and we are satisfied that no such payment of 10% of the mortgage loan sanctioned was remitted by the defendants. Therefore, that contention also is unsustainable. In the result, the appeal is allowed in part holding that the defendant is entitled to get credit for the amount of Rs. 2,000 for the goods lost while in the custody of the bank and that the said amount has to be debited from the amounts due from the defendants to the bank. The judgment and decree of the lower court are modified to the above extent. The parties will bear their own costs.