TMI Blog1975 (7) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... er alia, provided that the goods pledged would remain in the exclusive possession and under the exclusive control of the bank-, that a margin of 20 to 30 per cent in favor of the bank would always be maintained; and that the' plaintiff would insure the stock against all risks and if the plaintiff made default, the bank would get the necessary insurance effected to the debit of the plaintiffs account with it. It is further alleged that as a result of the disturbances in the then West Punjab in March, 1947, the Bank called upon the plaintiff to get the stock insured against riot and civil commotion on which the plaintiff insured the said goods in the sum of ₹ 2,80,000/- with Lloyds of London for one year from May 5, 1947 to May 5, 1948; that the account was operated by the plaintiff until August 21, 1947 when the value of the stock according to the figures given in the stock report of the bank's go down keeper and counter-signed by its manager stood at ₹ 2,16,302/- although the actual value of the stock would be to the order of ₹ 2,40,000/-; that on account of further production, the value of the stock rose to ₹ 2,58,000/-; that notwithstanding the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t being conclusive between the parties; and that Pran Nath because the stock had been hypothecated by the plaintiff with the answering defendant, were as a result of a three party agreement namely the plaintiff, this defendant and Mr. Pran Nath Lamba (Guarantee Broker) and that the stock in question continued with the plaintiff and the said guarantee broker subject to the control of the bank in a limited manner (sic). On the merits of the claim, it was not disputed that the plaintiff had opened a cash credit account with the bank in terms of the agreement signed between the parties; and that stocks belonging to the plaintiff were pledged by way of security. It was, however, alleged that the securities, though pledged with the bank, were equally in possession of the plaintiff and were required to be so in the terms of the agreement and that it was the duty of the plaintiff to submit a daily report to the bank containing the details of the stock. It was further alleged that the daily statement had to be verified as correct by the plaintiff and the godown-keeper and the physical possession of the goods pledged was always as much that of the plaintiff and the godown-keeper, a no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... multaneously and the situation was discussed between the parties every moment and both the parties agreed that the situation was extremely dangerous to life and property and wholly beyond the control of both the parties. The bank accordingly denied its liability to inform the plaintiff of the conditions at Jahania. It was further alleged that to the best of the information of the bank, the stock of goods belonging to the plaintiff had been taken possession of by the Dy. Custodian of Evacuee Property, Multan , and that this fact was within the knowledge of the plaintiff or at least which should have been known to the plaintiff. It was denied that the bank had sold any part of the pledged goods but pointed out that to the best of the information available to the bank, what happened to the goods was set out by the bank in paragraph 6 of its plaint in the suit instituted by it in Pakistan. The said paragraph which is quoted in extenso in the written statement is in the following terms:- That the goods pledged by the defendants were lying at Jahania in the factory of the defendants and in the locked godowns, situate therein under the care of the plaintiff bank's godown-kee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also the property pledged with it, had to be left behind, in properly locked godowns and after having taken as much care as was possible under the circumstances. It was further contended that the bank had no control over the circumstances and according to law and agreement, the answering defendant is immune from all liability in this matter and is not answerable to the plaintiff for the pledged stock even if it had been destroyed by the rioters or looted (although according to the information the plaintiff were not the subject of loot or plunder). It was further alleged that by giving up its claim against the insurers, the -plaintiff had absolved the bank from all liabilities and that in any event no claim could be made against the bank unless he makes good the amount due to the answering defendant on account of advances made by the answering defendant to the plaintiff on the security of the pledged goods and that even in the impossible event of any claim being decreed in favor of the plaintiff, the same must, in equity, be set off against the amount which would be due from the defendant to the plaintiff on the basis of the above-said loaning documents . The amount due to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence. After the through the records and the written arguments, it appeared to me that the parties had neither placed any material before this Court am made any submissions in the written arguments, inter alia, with regard to the existence, and effect of Evacuee Property Laws in Pakistan and the impact of the take-over if any, of the pledged stocks by the Pakistan authorities permit to such law on the claim of the plaintiff I also, found a complete absence in the submissions made by the parties of the impact of the Displaced Persons Debts Adjustment) Act 1951 on the rights and obligations of the parties forming subject-matter of the suit. 1, Therefore, had the matter listed for further arguments and while supplementary written arguments were submitted on behalf of the plaintiff, Shri R. M. Lai, learned counsel for the bank contented himself by relying on the material and submissions already placed by him on the record and closed his case by a statement that be could not usefully add to the existing material or the written submissions, 6. 1 have gone through the records and have considered the written submissions made On behalf of the parties and examined the various questions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r was any attempt made on behalf of the bank to establish any such variation. That the issue was raised by the bank in a rather half hearted manner is clearly indicated by the written arguments filed on behalf of the bank in support of this issue. It only contains a bald statement that issue No. 1 should be decided against the plaintiff and it be held that the plaintiffs have not, proved any terms of the Cash Credit Account. No attempt has, Therefore, been made to substantiate the pleas raised by the bank or to indicate why Ex. 131/7 is no proof of the terms and conditions of the Cash Credit agreement between the parties. 8. A reference to Ex. D 1/7 leaves no manner of doubt as to the terms and conditions incorporated in it. This agreement partakes the character of the usual document drawn between the bank and the borrower during the material period and, inter alia, provides for the pledge of goods by way of security for the amount to be advanced by the bank from time to time, the margin that must be maintained between the value of the goods and the amount of drawing, the manner in which the goods must remain under the lock and key of the bank through the godown-keeper, the li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e pledged goods in the possession of the bank at the end of August, 1947 was of the order of ₹ 2,58,000/- and that the plaintiff was entitled to recover from the bank the aforesaid value minus a sum of ₹ 38,589/- credited by the bank in the plaintiff's account on account of the amount realized by the bank either from the Pakistan authorities, as alleged by it, or as part of the sale proceeds, as is apparently contended by the plaintiff, entitling the plaintiff to ₹ 2,19,411. In its written statement, the contention as to the true value of the goods lying in pledge at the material date was denied. The bank, however, did. not give in its written statement what according to its record or estimation was the extent of or the value of the said goods and merely contented itself by a denial. The claim of the plaintiff that as on August 28, 1947, the value of the pledged goods in the possession of the bank was of the order of ₹ 2,58,000/- was sought to be substantiated by the oral evidence of P. W. 11, Ram Saran Dass, who was admittedly the bank's godown-keeper, in charge of the godown where the pledged goods were stocked during the material period; P. W. 12, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The plaintiff further pointed out a discrepancy between paragraph 6 of the plaint filed in the Multan suit as extracted in the written statement and what was claimed by the plaintiff to be its correct reproduction in the replication. According to paragraph 6 of the said plaint, as claimed by the plaintiff, the pledged goods stored in locked godowns, compound and Railway Station were in possession of the bank through the godown -keeper at Jahania ; and the said goods were partly plundered and destroyed by rioting mobs in spite of care and precaution by the plaintiff bank partly seized and sold by the Custodian of Evacuee Property, Multan. The plaintiff also made an allegation in the replication that paragraph 6 of the Multan plaint as made out in the written statement was a result of a fabrication. The plaintiff also filed along with the replication what was described as a copy of the original plaint. 12. This issue, of which the onus was on the bank, was sought to be substantiated in the course of the written arguments filed of behalf of the bank, solely on the ground that this Court should take judicial notice of the fact of the partition of the country, the insecurity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of similar taw in India. To succeed on this question, the bank -had to prove, like any other fact, the existence of such a law in Pakistan, by producing and proving the Pakistan statute dealing with the matter. This is so because this Court is not entitled to take any judicial notice of foreign laws and all foreign laws required to be proved in a Court of this country must be proved like any other fact. In the absence of any such material even the partial take over by the Pakistan authorities of the pledged goods for which the bank received an amount referred to above, could not exonerate the bank of its liability, if any, under the law to the plaintiff. The bank has miserably failed to place on record the necessary material to take advantage of the plea raised in the written statement and I have, Therefore, no hesitation in holding that although part of the pledged goods was taken over by the Pakistan authorities, it had no effect, on the existing material, on the liability, if any, of the bank to the plaintiff. Issue No. 3 is decided accordingly. Issue NO. 4. 14. The question for consideration under this issue is whether the goods in dispute were in the joint possession of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t are under the lock and key of the bank. It is equally well known that the godowns as indeed the other Part of the factory where the goods may be shored remained under the care of a godownkeeper which is the employee of the bank although his salary may be debited to the borrower. It is equally well known that the involvement of a guarantee-broker or the mere payment Of the salary of the godownkeeper by the borrower does not either convert the guarantee broker as the borrowers agent or make the godown keeper the employee of the borrower. The provisions in the cash credit agreement Ex. DI/7 do not in any way represent a departure from the normal Practice obtaining in that behalf in this part of the world. It is true that there is distinction between hypothecation of goods and pledge of goods, in that, the hypothecated goods need not be m the physical possession of the bank but may remain under the actual physical possession of the borrower with a view to enable the borrower to use the same ether as raw material or in the room of fabrication of goods or as finished goods. This is a facility granted to the borrower by the banking institutions so that the actual operations of the borro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation cast on it by law as a bailee of the goods, would not be liable to account for the pledged goods or to pay the price thereof to the plaintiff. It was further pleaded on behalf of the bank that the take over by the Deputy Custodian of the Evacuee Property, Multan of the pledged goods under the Pakistan law, extinguishes the liability of the bank but that plea has been dispelled by me while dealing with issue No. 3. Issue No. 6 arises the question as to the liability of the bank to account for the goods or to pay their price to the plaintiff and is based on the plea of the plaintiff that the bank failed to take much care of the pledged goods as a it was bound to take as a bailee or as an ordinary person would have taken of his own goods because in dealing with the pledged goods, die bank was guilty of negligence. 20. The question that, Therefore, requires consideration is whether in dealing with the pledged goods which were admitted in the possession of the, bank during the material period, the bank successfully discharged its obligation as a ballee by taking as much care of the goods as it would have as an ordinary prudent owner of it or in other words, was the bank guilty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That, Therefore, takes me to that next question ' if ' having regard to the fads and the circumstances of this case, it could be said that the bank successfully discharged the obligation cast on it as a bailee or in other words, whether the bank took as much can of the goods as a man of ordinary prudence would in similar circumstances take of his own. 23. Considerable oral evidence has been led depicting generally the situation that obtained in what was then dominion of Pakistan including the district of multan is the wake of partition of India and the holocaust that followed, the setting up of the two dominions, insecurity of the life and property of the non-Muslim population under the compulsion. of adverse circumstances. It is however, unnecessary to refer to the evidence because the factum of the partition of the India, the extra-ordinary breakdown of law and order machinery following that, the consequent insecurity of the life and property of the non-Muslims in the then dominion, of Pakistan and the compulsive, migration of the mass of these persons to the territories now forming part of India and the fate that overtook their properties have now come to be part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra-ordinary situation that developed. It is not possible to test this obligation on the touchstone of the duties of a bank in normal circumstances. It is not disputed that the plaintiff, as indeed millions like the plaintiff, had to leave the comfort of their hearth and home and left their moveable and immovable properties uncared for, to ensure protection of their life. and preservation of whatever little they could salvage while leaving what, was then their homeland. A test as to what a prudent person would have done in relation to his own property in the extraordinary situation that developed is provided by the conduct of the plaintiff and its partner as indeed similarly situated other unfortunate Hindus who had to migrate to the territories now forming part of India. Id that is what they did with respect to their own properties as indeed the blank and other in situations did with their own properties, it is difficult to imagine that the bank could have done any better with regard to the property that was pledged with it. The contention on behalf of the plaintiff that the case of an individual was distinguishable from that of a banking institution does not carry the plaintiff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cases would have, Therefore, any relevance to the extra ordinary situation in which the parties were placed, In the result, the bank could not be said to be liable to account for the pledged goods or to pay the price thereof to the plaintiff because it had discharged its obligation as a bailee and could not have taken any other steps to protect the property. 24. The next question that requires consideration is as to whether the bank pursued with the necessary doggedness and thoroughness the claim with the Pakistan authorities for compensation for the part of the pledged goods that was taken over. Considerable stress was laid on behalf of the plaintiff on the various agreements entered into between the two dominions with regard to the take over and restoration of properties belonging to banking institutions on both sides; and it was argued, that the bank did not take effective steps either for the Presentation of the properties under these agreements or for payment of adequate compensation after they were taken over. It was, however, contended on behalf of the bank that in spite of their best effort, the bank was unable to find the precise position and was only able to get the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r provided that in case the plaintiff fails to insure the goods, the bank would be at liberty to effect insurance at the expense of the plaintiff. According to the plaintiff, when called upon to take out such insurance, the plaintiff got the pledged goods duly insured against all risks including civil commotion with the Lloyds of London in the sum of Rs.- 2,50,000/-. It, however, appears that the insurers repudiated the claim apparently because the claim for the loss was not lodged with the insurers within the requisite time. The insurers were originally Placed as defendants in the suit but the suit against the insurers was withdrawn eventually apparently because the plaintiff thought it had no case against the insurers because of default in submitting the information of the loss and in lodging the claim with them within time. The contention of the plaintiff is that it is the bank who bad been in touch with the developments in Pakistan and that, having been aware that the goods had been insured at the instance of the bank, the: bank should have taken steps to inform the insurers of the developments and to have lodged the claim with them within the requisite time, but that the bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... another reason. If the plaintiff fell obliged to withdraw the suit against the insurers merely because the report of the loss or the claim was not lodged with the insurers within time, the plaintiff has to thank itself because the plaintiff was fully protected in terms of the policy notwithstanding the aforesaid default by virtue of the provisions of Section 18 of the Displaced Persons (Debts Adjustment) Act 1951. Section 18 clearly provides that where property in West Pakistan belonging to a displaced person was insured against any risk arising out of fire, not and civil commotion and there has been a loss, the insurers Amu not be entitled to refuse the payment of the sum due under any claim on the ground that -(a) no report was lodged with the police within the agreed time; (b) the claim was not made to the company within the agreed time. The plaintiff, Therefore, withdrew the suit against the insurers to its own prejudice, and could not blame the bank for any default on its part. I had particularly invited the attention of learned counsel for the plaintiff to this provision but no attempt was made to meet this objection. The contention of the plaintiff that the bank has been ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained by it from the Pakistan Court, the claim was barred by time. The claim was also disputed on the merits. 28. The onus of all the three issues was on the bank and no attempt was made on behalf of the bank to support any of these either in the written statement or in the oral submissions in Court. The reticence on behalf of the bank on the question that these issues raise is understandable because the bank has not paid any court-fees on the amount that it claims because not being a case of an adjustment, such a claim could only be made if appropriate court-fees had been paid. The claim for set off is also barred by time because the claim relates to a period prior to 1947 and no attempt has been made to show that there has been any acceptance of liability or any acknowledgement by the plaintiff. I am, however, unable to agree with the learned counsel for the plaintiff that the claim of the bank, it any, based on the credit account got merged in the decree obtained by the bank from the Pakistan Court .If the decree obtained by the bank from the Pakistan Court was a nullity, as contended, on behalf of the plaintiff, because the plaintiff, being a foreigner in that Court, never s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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