THE LEGAL WATCH
Trusted Contract Advisory
TLW - Contract Awareness Initiative
TLW - Legal Awareness Initiative
1. Ram Ghulam v. Government of U.P.
From the house plaintiff certain ornaments were stolen, the police seized and searched the ornaments from another house. The ornaments were kept in Collectorate Malkhana. Again, the got stolen from the collectorates office and were untraceable. The plaintiff learnt that the ornaments were not available at the Malkhana and in spite of notice the ornaments were not returned. The plaintiff filed a suit for recovery of the ornaments or the price.
Whether the government was liable to pay the plaintiff since it was in the position of bailee and the ornaments were lost because of its negligence of its servant?
The court held that the obligation of bailee cannot arise without the existence of the contract of bailment, the government is not liable to pay the damages to the plaintiff as the plaintiff had not transferred the possession of the ornaments to the government.
Principle of Law:
Bailment is delivery of by one person to another for some purpose upon a contact. Bailment is a contractual agreement. In absence of a contract, one cannot enforce the obligation.
Relevant section: Section 148.
2. L M Co-Operative Bank v. prabhudas Hathibhai:
A pledged some quantity of tobacco to plaintiff bank; the tobacco was still in A’s Warehouse. The goods at A’s Warehouse were seized by the collector on non-payment of tax dues by A. goods kept in Warehouse were damaged because of heavy rain. Plaintiff bank filed a suit for recovery of damages from the government.
Whether the government is liable to pay the damages to the plaintiff?
The Bombay High court contrary the judgement in Ram Ghulam v. Government of U.P. and held that the government is liable to pay the damages though the state had the possession not under contract.
Relevant Section: section 148
3. Ultzen v. Nichlos
In this case, when plaintiff went to a restaurant, a waiter without saying anything took plaintiffs coat and hung it on restaurants cloth stand. The plaintiff didn’t refuse. The coast got stolen from the restaurants stand. Plaintiff sued for recovery of damages.
Whether the plaintiff is liable for recovery of damages?
It was held that the plaintiff is entitled to recover damages as the action of the defendant amounted to bailor-bailee relationship though there was absence of explicit or verbal bailment.
The delivery takes place with the full conscience of the bailor and bailee.
Relevant section: section 148.
4. State of Gujarat v. Memon Mahomed 1967 SCR (3) 938
The respondent trucks were seized on allegation of smuggling by the appellant, the trucks were kept in open where they were damaged. Afterwards they were auctioned as unclaimed property under the magistrate order. The respondent was informed of such auction. He filed a suit against the government for recovery of vehicles or the value of them.
Issue: Whether the state is liable compensate the respondent?
The court held that if the goods seized by the custom authorities and were disposed before the decision is final and the authorities are not able to return the goods then the state is held liable for the same.
Relevant Section: 148
5. Kaliaperumal Vs. Visalakshmi (1938)
A goldsmith was appointed by a lady for melting old jewellery to make some new ornaments. Every evening the lady used to get half made jewels from the goldsmith and put them into a box which she left at the goldsmith’s house which she retained the key. One day she found that the jewels were stolen. She sued the goldsmith for the loss of property.
Issue: Whether the goldsmith is liable to compensate the damaged?
It was held that as there was re-delivery of goods, the gold is not liable. The lady had retained the key and the possession of was not with the goldsmith.
Principle of law:
It is the duty of bailor to place the bailee into the possession.
6. Lyell v. Ganga Dai
Plaintiff sued to recover damages for the loss of her husband (deceased) who was in service of the East India Railway company and was entrusted with duty of dispatching goods. The defendant through his servant sent to the railway station a box containing combustible and dangerous substances for dispatch to Gwalior, the defendant did not notify the contents. The goods exploded ad thereby the resulting death of the plaintiff’s husband.
Whether the defendant is liable to compensate the plaintiff?
It was held that if a person who sends an article of a dangerous and explosive nature to a railway company to be carried by such company, without notifying to the servants of the company the dangerous nature of the article. Is liable for the consequences of an explosion, whether it occurs in a manner which he could not have foreseen as probable, or not.
Relevant section: section 150
7. Chaturgun v Shahzady
Brief Facts: In this case the plaintiff lent some ornaments to the defendant to return it after use. The ornaments got stolen while in the possession of defendant. Plaintiff sued for recovery of damages. Defendant denied his liability to compensate the plaintiff.
Issue: Whether the defendant is liable to compensate the plaintiff?
It was held that there was presence of implied contract to return the borrowed goods to the plaintiff. The defendant was made to compensate to the plaintiff.
Bailment is the delivery of goods by one person to another for some purpose, when the purpose is accomplished the good has to be return to the bailor, if the bailee did not take care of the good as prescribed under s.151 is liable to for the loss of goods bailed.
Relevant section: section 148,151,152.
8. MORVI MERCANTILE BANK V. UNION OF INDIA (AIR 1965 SC 1954)
M/S Harhada Mohanlal & Co. entrusted certain boxes to be delivered from Thana to Okhla to a railway company disclosed two railway receipts. The railway receipts were endorsed to Morvi Mercantile Bank against an advance of ₹20000. The consignment did not reach the said destination instead the railway company offered to deliver certain parcels which did not match the goods consigned to the bank which the bank rejected. The railway company filed a suit for recovery of ₹35500 against the value of the goods.
1. Whether the railway receipt endorsement constituted a pledge?
2. Whether the bank was the pledgee of the goods?
It was held that the railway receipt’s amount to valid pledged under Indian contract act 1872. The bank was allowed to recover the damages, pledgee being a bailor of goods has the same remedies as the owner of goods as regard the third persons.
If any third person deprives the bailee for the use of possession of the goods bailed the bailee is entitled to use such remedies which might have used in the like case if no bailment had use in by the real owner.
Relevant Sections: section 180
8. Read V. Dean
In this case the defendant gave a motor launch to the plaintiff to go on a holiday on the river Thames. The launch got fire the plaintiff was unable to put it out as the extinguishing equipment was out of order. The plaintiff was injured and suffered loss. The plaintiff filed a suit to recover compensate damages.
Issue: Whether the defendant is liable for compensate the plaintiff?
It was held that the defendant is liable to compensate the plaintiff. Since the defendant was at fault to disclose the fact, he was made liable.
Principal of law:
The bailor is responsible for any loss incurred by the bailee by reason of non-disclosure of fact regarding the goods bailed.
Relevant Section: Section 164.
9. Martin V. London Country Council
In this case the plaintiff was brought as patient to a hospital and the plaintiff bought two pieces of jeweler and a gold cigarette case these valuable jewels were given to the hospital officials for safe custody. The jewels were subsequently stolen by a thief who broke into the room in which they were kept. Plaintiff filed a suit for recovery of damages.
Issue: Whether the plaintiff is entitled to recover the damages?
It was held that the defendants were bailees and the articles were lost from the possession of bailees, they were made liable to pay the damages.
The bailee is responsible for the loss goods bailed, in absences of any special contract, if he did not take amount care of the goods bailed.
10. Dwaranath V. S.N Rivers Railway Company:
Dwaranath bailed his goods to the river railway company. During the course of action, the train carrying the goods bailed caught fire and the goods were destroyed. Plaintiff failed a suit against the railway company for recovery of damages.
Issue: Whether the railway company is liable to pay the compensation.
It was held that, since the railway company failed to prove that they took due care while handling the goods it was made liable to pay compensation to the plaintiff.
Relevant Sections: Section 151.
11. Shanti lal v. Tara Chand
The plaintiff had a commission agency shop in Agra where he carried a business of purchasing and selling gain and other goods for his constituents. A large quantity of goods was purchased by the plaintiff on behalf of defendant which was lying in the plaintiff’s warehouse. Due to unexpected flood the grains were damaged. The plaintiff filed a suit for recovery of damages from defendant.
Issue: Whether the plaintiff is entitled to recover compensation from defendant?
The court observed that the plaintiff failed to responsible care of goods bailed and hence is not liable for the compensation.
Principle of law: The bailee is responsible for the loss or damage of the goods bailed, in absences of any special contract, if he did not take amount care of the goods bailed.
Relevant Sections: section 151, 152.
12. N.R. Srinivas Iyer v. New India Assurance Co. Ltd.
The plaintiffs car met with an accident which was insured by the defendant’s company. the insurance company was intimated about the accident and car was taken to repair shop for repairing with a request to discharge its obligation under the policy of insurance. The repair motors submitted an estimate to the insurance company. A fire broke in the workshop of repair shop and the car was destroyed. The garage was not insured.
Whether the bailee (insurance company) is liable?
It was held that the bailee is responsible for the loss of the car as they were not able tp rove that they had taken reasonable care. If the loss accrues due to an act of the bailee’s servant within the scope of his employment, then the bailee is liable.
Relevant sections: section 151.
13. Smt. Basavva Kom Dyamangouda vs the State of Mysore And Anr AIR 1977 SC 1749
Large number of ornaments and were stolen from the appellant’s house. A number of stolen articles were recovered from a accuse. The articles were produced before the chief judicial Magistrate court who ordered the police officer in charge to retain the articles in his custody. The articles were kept in a guard room of police station in a trunk with a list of the articles. The articles got stolen from the police station guard room.
Issue: Whether the state is liable to compensate the appellant?
It was held that the since the property was stolen from the possession of state and the state failed to prove that they took reasonable care the state were made liable to compensate the damages caused to the appellant.
Principal of law: The bailee is responsible for the loss or damage of the goods bailed, in absences of any special contract, if he did not take amount care of the goods bailed.
14. Hatton v Car Maintenance Co Ltd:
The defendants company accepted to garage the motor car of the plaintiff for 3 years on an annual rent. It was agreed by the plaintiff to take the car out as and when she wants. The plaintiff failed to pay the rent; the defendant detained the car to claim a lien.
Whether the plaintiff is allowed to get the car?
It was held that the plaintiff is allowed to take out the car as and when she required. The defendant has no lien.
Principal of law: the lien can be maintained if there is involvement of labor or skill.
Relevant Section: section 171
15. R.O Saxena v. Balram Prasad AIR 2000 SC 2912
The appellant was a legal advisor of the Madhya Pradesh State Co-Operative Bank Ltd. The bank terminated the appellant and asked to return all the documents related to the back. The appellant did not return the files and informed the bank that the files will be return only after the dues were paid to him. The bank filed a complaint before the sate bar council. The advocate contented that he has a right on lien on those files.
Issue: Whether an advocate can have a lien on the litigation papers entrusted to him by his clients for fee due?
It was held that no right on the files entrusted to him by the client. The files cannot be referred as good.
Principal of law: clients files with advocate cannot amount to goods bailed.
Relevant sections: Section 171
16. Atul Mehra V. Bank of Maharashtra:
The appellant had hired locker at Bank of Maharashtra (respondent). The appellant had deposited jewellery in the said locker. The locker at the bank were broken and the contents were stolen by a thief. It was alleged that the lockers were made of plywood which was ought to be have been made of iron and concrete. A suit was filed against the respondent.
1. Whether the plaintiffs are entitled to recover any amount?
2. Whether the relationship of locker hirer and the bank constitute bailment?
It was held that mere hiring of a locker is not sufficient to constitute a contract of bailment. The question of reasonable care would arise after the actual possession of the property is given by bailee to the bailor. The plaintiff is not entitled to recover the damages.
Relevant Section: Section 148
17. Bank of Rajasthan v. Hajarimal Milap C. Surana
The respondent was indented to the Bank of Rajasthan. The respondent deposited certain precious stone as security. The respondent filed a suit in the court for recovery of the debt. While the suit pending the parties came to an agreement and the appellant filed another suit for enforcement of the agreement.
1. Whether the second suit is maintainable the first suit was still pending?
2. Whether the precious stones constitute full and final settlement of the debt?
3. Whether the appellants claim to interest is justified?
w.r.t issue 1 another suit filed was for enforcement of the agreement not for the recovery of original debt.
w.r.t issue 2 the deposition of precious stone did not constitute full settlement of the debt, it was mere security.
w.r.t the appellants claim to interest was justified.
If the pawnor makes default in payment of the debt, or performance, at the stipulated time of the promise, in respect of which the goods were pledged, the pawnee may bring a suit against the pawnor upon the debt or promise, and retain the goods pledged as a collateral security; or he may sell the thing pledged, on giving the pawnor reasonable notice of the sale. If the proceeds of such sale are less than the amount due in respect of the debt or promise, the pawnor is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the pawnee shall pay over the surplus to the pawnor.
Relevant Section: Section 176
18. The Official Assignee of Madras v. The Mercantile Bank of India Ltd.
The plaintiff was assigned with property of the insolvents CK Nayaran and sons. The insolvents had a business of groundnuts. They were purchased from country and transported through railway to the Madras port. The insolvents had leased a godown in the port but the sign board was of the Banks’s (respondent) name. the respondent had financed the insolvents business by advancing money against consignment of goods. The respondent use to regularly lend loan to the insolvents against the consignments, though the railway company knew about the arrangements but were never informed specifically. The company was declared insolvent. Some consignments reached the port but the port authority did not release them until their debt were paid off. Later the goods were sold off by the port authority.
Whether a railway receipt is a document of title and thus the pledge of railway receipts, the pledge of the goods?
The privy council held that railway receipts is a document of title and pledging such documents is same as pledging the goods themselves.
Principal of Law:
In common law, a commercial agent can pledge the goods by pledging their title documents, but not the owner. This place is an irregular one. The term “person” and “agent” is used by Indian law to describe who may pledge goods. This involves all owners of the said product and agents. The principle that the pledging of the title documents is equivalent to the pledging of the items was created by the Indian factors Act and can also be interpreted by ICA Section 178.
Relevant Section: Section 178.
19. Hyman & wife v. Nye Sons (1881) 6 QBD 685
The defendant lent a carriage, a pair of horses and a driver. To the plaintiff for a specific journey. During the journey a bolt in the under-part of the carriage broke, the splinter bar became displaced, the carriage was upset and the plaintiff was injured. Plaintiff files a suit against the defendant for compensation.
Whether the plaintiff is entitled to receive compensation?
It was held that defendant Is liable to compensate the plaintiff. Justice Lindley said that “A person who lets out carriages is not responsible for all defects discoverable or not; he is not an insurer against all the defects which care and skill guard against. His duty is to supply a carriage as fit for the purpose for which it is hired as care and skill can render it”.
On the other hand, the judgment in this case explicitly exempts the bailor from all responsibility if the fault in the bailed goods was latent and ordinary care and diligence would not have found it.
Relevant section: Section 150
20. Sri Narasimhaswami, Namagiri Amman v. Muthukrishna Iyengar
The plaintiff had entrusted certain ornaments and jewels to the defended (an Archaka of the temple) for decorating and adorning the Goddess, while the ornaments were with the defendant they got stolen. The plaintiff failed suit against the defendant.
Whether the defendant misappropriated the jewels of plaintiff?
It was held that due to the negligence of the defendant the ornaments were lost. The plaintiff is entitled to recover damages from the defendant
Principle of law:
The bailor has the right to demand damages against the bailee if the bailor transfers the custody of his goods to the bailee and if the bailee fails to secure the bailor's goods.
21. Phillips v Brooks Ltd  2 KB 243
A fraudster represented himself as Sir George Bullough and a purchased a ring from Phillips a jeweler with a cheque and singed it in the name Sir George Bullough and gave the this person address. Since Philips knew of Bullough and where he lived, he allowed him to take ring before the cheque cleared. The fraudster then pledged the ring to a bona fide third party.
Issue: Whether Philips can seek the possession of the ring relying on mistake to identify to void the contract?
It was held that the fraud makes the contract voidable and any pledge under a voidable contract is valid.
If possession of good is obtained under a voidable contact the pledge created by him is valid. It must satisfy certain conditions; the contract must not be rescinding before the contract of pledge is entered. Pawnee must act in good faith without notice of the pawnor’s defective title.
22. Relevant Section: Section 178 A
Vithoba Laxman Kalar v/s MarotiUkandsaKala
The plaintiff bailed cattle to the defendant for grazing. The agreement said that the plaintiff will pay ₹3 per month for grazing the cattle. the plaintiff failed to pay the defendant. The dues arose to ₹45 after 15 months. Defendant gave notice to the plaintiff that he will sell his cattle if the dues not paid. The plaintiff did not reply and the defendant sold the cattle.
Whether the bailee has the right to sell goods bailed for recovery of dues?
It was held that the one cannot sell the goods bailed for recovery of dues. Though section 170 has given right to bailee to retain goods until the dues are recovered for service rendered but no where in the section it said that the bailee can sell goods to recover dues.
The bailee has right to retain goods until he receives remuneration for services he has rendered in respect of them. But he has no right to sell the goods for recovery.
Relevant section: section 170
23. The secretary of State vs. Sheo Singh Rai
Nine government promissory notes for cancellation and consolidation into a single note ₹48,000 were delivered by the plaintiff to the treasury officer at Meerut. The notes were misappropriated by the servants of the defendant. The plaintiff failed a suit against the sate to hold hem responsible as bailees.
Whether the state is liable as bailee?
The court held that they were not liable because unless there is delivery and a promise to return, bailment cannot take place. The government was not obliged to return the notes or to dispose of the surrendered notes in compliance with the plaintiff's instructions.
A Bailment is delivery of by one person to another for some purpose upon a contact. Bailment is a contractual agreement. In absence of a contract, one cannot enforce the obligation.
Relevant Section: Section 148.
24. Eduljee vs. Café John Bros
Brief Facts: The plaintiff-respondent had purchased a second-hand refrigerator which the appellant repaired and sold to the plaintiff. Some amount was due, the refrigerator broke down again the vendor for repairing the refrigerator where the vendor took the engine and some other parts for repair. The vendor claims a lien on the parts for the payment due.
Issue: Whether the appellants can exercise the lien?
The court denied the lien by stating that after the possession has been delivered to the owner, the lien cannot be exercised and a mere act of grace to repair cannot revive the right as it is not a new contract.
The bailee has right to retain goods until he receives remuneration for services he has rendered in respect of them but before the possession is given to the owner.
25. K. Sita v. Corporation Bank 1999
An agriculture loan was taken by the petitioner from the respondent by pledging certain gold articles. Plaintiff paid after loan; the loan was discharged under the central Agriculture Debt Relief Scheme. Meanwhile the petitioner took another loan from the respondent under Gramadhaya scheme. The petition paid sum of her loan. Since the agriculture loan was fully discharged, the petition noticed the bank for return of the jewels pledged for her first loan. The bank replied stating that the jewels were taken over on lien until the other loan was fully discharged.
Whether the was entitled to retain the jewls?
It was held that was held entitled to retain the jewels.
Principal of law:
The right to hold the bailed securities for a general balance of the sum implies a general lien. The general lien requires the possession of the property on which charges are due, but the general lien entitles the bailee to keep all bailed goods, whether or not charges are due on such goods. Bankers, wharfingers, factors, HC lawyers and policy brokers are entitled to a general lien, but unless there is a contract to the contrary, no other person can maintain the products for that balance.
Relevant section: section 171
26. Lallan Prasad v. Rahmat Ali & Anr. 1967 SCR (2) 233
The respondent borrowed ₹20000 from the appellant against promissory note and a receipt. The first respondent signed an agreement under which it agreed to pledge the debt aerospace’s as protection, to deliver them to the appellant and to hold them in custody of the appellant. On the promissory note, the appellant filed a lawsuit alleging that the first respondent had failed to supply the goods, that the deal was thus not pledged to maturity and that, accordingly, it was entitled to recover the amount advanced by the appellant. On the basis of the facts, it was determined that the goods had been shipped to the appellant, and that it was his undertaking.
Whether the appellant is entitled to any recovery as the respondent never delivered to him the said goods.
It was held that the appellant would not be entitled to a decree on the promissory note and would not be in possession of the goods found to have been shipped to him. However as long as the transaction does not take place, the pawner is entitled, upon payment of the debit, to redeem the goods. Accordingly, the right to sue the debt requires that the Pawnee is in a position to repay the goods upon payment of the debt and that if, by refusing the promise or otherwise, the Pawnee is in a position to repay the goods, he is unable to receive a decree.
Pawnee's rights which provides that in the event of default by the Pawnee, the Pawnee has (1) the right to sue the debt and maintain the goods as collateral security, and (2) the right to sell the goods to the Pawnee after fair notice of the planned sale.
Relevant section: section 176
27. Union of India v. Udho ram & sons.
Some goods were transported by railway by m/s Radha Ram Sohan Lal from Calcutta to Delhi. Few articles out of the consignment wee not delivered to the plaintiff after they were robbed during transit. A suit to recover compensation was bought by the plaintiff. The trial court noticed that the train left Howrah at 1;30am the wagon in which the goods were loaded was properly riveted and sealed, but the seal and rivets from one wagon’s door were discovered open when it reached Chandapur station after 2 hours. The robbery took place at an intermediate point, when the train paused there for around 15 minutes at 2:05am for a home signal. Railway security police were found to be in the guard’s van as well.
1. Whether the railway authorities were liable for the goods in transit?
2. Whether the railway authorities were in the position of the bailee and liable to indemnify for the loss caused?
It was held that due care was not taken by the railway. First, they did not prove from the record that the railway protection police escorting the train were adequate in strength, and second, that the railway protection police did not keep an eye on wagons, unlike a cautious man, particularly when the train stopped, in order to avoid theft of goods. The defendants were also found liable.
A bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence might take on his own goods of the same bulk, quality and value as the goods bailed in comparable circumstances.
Relevant section: section 151.
28. Calcutta credit corporation ltd v. Prince peter of Greece.
A car received by an automobile garage for repair caught fire. A pucca house, walled by wooden planks, was the garage. Not only petrol-containing engines, but also other fuels such as thinners and paints have been placed in the garage. Wooden walls separated the garage and a portion of it was allowed to be used for cooking purposes. The arrangement for extinguishing the fire was insufficient. The space in which the complainant's car was stored could not be opened until 15 minutes after the fire had been found, as the room keys were not available.
Whether the defendant is liable to compensate the plaintiff?
It was held that the defendant is liable to compensate the plaintiff as the defendant failed to take due care.
Bailee cannot be excused by pleading that he had taken similar care of his own goods or his own goods have been lost or damaged along with those of the bailor or that the bailor had the knowledge that his goods were being kept in a negligent manner. The court held that the bailee has to take care as a man of prudence or reasonable care.
Relevant section: Section 152.
29. Gopal Singh Hira Singh v. Punjab National Bank.
In 1946, the claimant corporation pledged those goods to the Jahania office of the defendant bank. That area where the branch was located became part of Pakistan after the partition of the country in August 1947. The applicant company purchased an action for the recovery of more than 2 Lakh rupees, the amount of the goods pledged and interest on it because the bank refused to return the goods pledged to the applicant company that had migrated to India. The defendant bank argued that the goods promised had been plundered and stolen by the rioters in the course of disturbances that happened to be there at that time in order to escape responsibility.
Whether the bank is liable to compensate the plaintiff?
The court observed that “the obligation of the bank to take care of the pledged goods must be seen in the context of the extraordinary situation that developed.” The court observed that as the conditions existed at the time of the separation of the land, the life and property of the non-Muslim community was insecure under the compulsion of adverse circumstances, there was an unprecedented collapse of the machinery of law and order, and the compulsive exodus of the masses of these people from Pakistan to India. As was the defendant bank, this was also true of establishments staffed by Hindu workers. It was held that in such conditions, the bank should not be found guilty of any wrongdoing, because the land with the bank had to be left uncared there.
Relevant section: 152.
30. Sundar Lal v. Ram Swarup.
A wooden shop was contracted on a contractual understanding that the shop must be restored in the same state and that the contractor would be responsible for any loss or harm to the shop. The shop was destroyed by the crowd during the communal riots in the area.
Whether the bailee is liable to compensate the plaintiff?
It was held that because the devastation of the shop was due to no fault on the part of the builder, he was not responsible for any damages.
A bailee is not responsible for the loss or damage of goods bailed if has taken due care of the goods.
Relevant section: Section 151