(Sections 148-171)
Explanation.-If a person is already in possession of the goods of other contracts to hold them as a bailee, he thereby becomes the bailee, and the owner becomes the bailor of such goods, although they may not have been delivered by way of bailment."
A 'bailment' is thus a delivery of goods on condition that the recipient shall ultimately restore them to the bailor or dispose of them according to the direction of the bailee or dispose of them according to the directions of the bailor. Common example of bailment are hiring of goods, furniture or a cycle, delivering of cloth to a tailor far making a suit, delivering a watch or scooter for repair, depositing goods for safe custody etc.
Pollock and Wright: Any person is said to be considered as a bailee who otherwise than as a servant either receives possession of a thing from another or consents to receive or hold possession of a thing from another upon an undertaking with the other person either to keep and return or deliver to him the specific thing or to apply the specific thing according to the direction antecedent or future of the other person. Bailment implies a sort of relationship in which the personal property of one person temporarily goes into the possession of another. The ownership of the articles or goods is in one person and the possession in another.
Anamalai Timber Trust Ltd. v. Trippunitura Devaswom, AIR 1954 KLT 60: Where there is no obligation to return identical subject-matter, either in its original or in an altered from there can no bailment. Therefore. Bailment involves change of possession.
Haatmal Bhutoria v. Dominion of India, MANU/WB/0009/1961 : AIR 1961 Cal 54: Section 148 makes it clear that a seller can become a bailee if he contracts to hold the goods as a bailee. In the absence of such a contract he cannot be regarded as a bailee.
Kavita Trahan v. Balsara Hygiene Products Ltd., AIR 1992 Del 103: One of the requirement of bailment in delivery of goods to the bailee. Delivery of possession to the bailee in sine qua non of bailment. In order to constitute, a bailment change of possession in necessary.
(1) Delivery of Possession.-Delivery of goods to another person for some purpose is an essential element of bailment.
Vttzen v. Nicolls, (1894) 1 QB 92: "An old customer went into a restaurant for the purpose of dining there when he entered the room a waiter took his coat, without being asked, and hung it on a hook behind him. When the customer rose to leave the coat was gone.
What the waiter did might be no more than an act at voluntary courtesy towards the customer, yet the restaurant-keeper was held liable as a bailee. The waiter by taking the coat into his possession had relieved the plaintiff of its care and had thus assumed the responsibility of a bailee. It was he who selected the place where the coat should be put.
Kaliaperumal v. Ulsalakshmi Achi, AIR 1938 Mad 42: To constitute the bailment the delivery must be of the goods bailed and not mere document of the title vis-a-vis the goods. So where a person gave the railway receipt of goods to the plaintiff as security for loan it was held that the plaintiff was in no sense a bailee. It is only a respect of immovable property that an equitable mortgage can be created by handing over the title deeds of the property.
(2) Delivery of Possession upon a Contract.-Bailment is a relationship sui generis and unless it is sought to increase or diminish the burdens imposed upon the bailee by the very act of the bailment, it is not necessary to incorporate it into the law of contract and to prove a consideration.
Ram Gulam v. State of Uttar Pradesh, MANU/UP/0079/1950 : AIR 1950 All 206: In this case some stolen ornaments were in the custody of the police, they were again stolen and this time they could not be recovered. The plaintiff sued the government for the loss of ornaments. But his action was dismissed by Allahabad High Court on the ground that the possession of the goods was not under a contract. Since ornament were not delivered under a contract, the government never occupied the position of a bailee.
The decision of the Allahabad High Court in this case seems to be erroneous. This is based on the wrong assumption that a bailment cannot arise independently of contract.
(3) Bailee bound to return goods or to dispose of according to the direction of Bailor.-If the person to whom the goods are delivered is not bound to restore them to the person delivering them or to deal with them according to his mandate, their relationship will not be that of bailor and bailee.
Jagdish Chandra Prikha v. Punjab National Bank, AIR 1998 Del 266: Where a box containing gold jewellery and ornaments were entrusted to a Bank and the custody of box always remained with Bank, the ornament and jewellery were found missing when produced before that court, it was held that the Bank failed to discharge its duties as bailee and the heirs of bailor would be entitled to the price to market valve of gold ornaments at the time of the institution of the suit alongwith simple interest at the rate of 12% per. annum.
South Australian Insurance Co. v. Randell, (1869) 3 PC 101: The Privy Council observed, "where there is a delivery of property on a contract for an equivalent in money or some other valuable commodity and not for the return of the identical subject-matter in its original or an altered form, this is a transfer of property in value a sale and not a bailment."
The question as to how such delivery of goods can be made is dealt with in section 149 which provides that the delivery to the bailee may be made by doing anything which has the effect of putting the goods in the possession of the intended bailee or of any person authorised to hold them on his behalf. Where the bailee never intended to receive the goods. No delivery of possession without a conscious act on the part of bailee under section 149.
If such goods are bailed for hire, the bailor is responsible for such damage, whether he was or was not aware of the existence of such faults in the goods bailed.
Illustration
(a) A lends a horse, which he knows to be vicious, to B. He does not disclose the fact that the horse is vicious. The horse runs away. B is thrown and injured. A is responsible to B for damage sustained.
(b) A hires a carriage of B. The carriage is unsafe, though B is not aware of it, and A is injured. B is responsible to A for the injury.
Pollock and Mulla: Have aptly pointed out, "the language of this section is open to at least three constructions-
(i) The bailor is under a duty to take reasonable care to make the goods reasonably safe for the purpose for which they have been hired.
(ii) The bailor is under a duty to supply goods that are reasonably safe, the only defence being that the defect is a latent one that could not be discovered by any care as skill.
(iii) There is an absolute guarantee of fitness"
A person, who lends his cycle or horse to a friend, and if the knows that the cycle is without brakes or that the horse is unsound, he should disclose this fact and his duty ends there.
Union of India v. Amar Singh, MANU/SC/0004/1959 : AIR 1960 SC 233: In this case, some goods were consigned from Quetta in Pakistan to New Delhi. After the goods were carried by Pakistan Railway, they were carried by Indian Railway as the forwarding Railway. The goods were lost in the transit. The liability of forwarding Railway is governed by section 72 of the Railways Act according to which liability for the loss of goods bailed to the Railway is subject to the provisions of Railway Act, that of a bailee, under sections 151, 152 and 161 of Indian Contract Act.
The Supreme Court held that Indian Railway guilty of negligence for they did not take as much care of the goods as an ordinary man would have taken of his own goods.
Subba Rao observed under section 151, the bailor is bound to take such care of the goods bailed to him as a man of ordinary prudence would under similar circumstances take to his goods of the same bulk quantity and value of the goods bailed.
Kavita Trehan v. Balsara Hygiene Products Ltd., AIR 1992 Del 103: In all cases of bailment the bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would render under similar circumstances.
Section 152. Bailee when not liable for loss, etc., of things bailed.-The bailee, in the absence of any special contract, is not responsible for the loss, destruction or deterioration of the thing bailed, if he has taken the amount of care of it described in section 151.
R. v. Viscount Hertford, (1681) Shower 172: If money be given to one to keep generally without consideration and if the person be robbed, he is discharged. Where the bailor's goods are stolen from custody of the bailee, he will be liable if there has been negligence on his part. Where the plaintiff stayed at a hotel and his articles were stolen while he was away the hotelier was held liable as the room was, to his knowledge, in an insecure condition.
Illustration
A lets to B, for hire, a horse for his own riding. B drives the horse in his carriage. This is, at the option of A, a termination of the bailment.
Illustrations
(a) A lends a horse to B for his own riding only. B allows C, a member of his family, to ride the horse. C rides with care, but the horse accidentally falls and is injured. B is liable to make compensation to A for the injury done to the horse.
(b) A hires a horse in Calcutta from B expressly to march to Banaras. A rides with due care, but marches to Cuttack instead. The horse accidentally falls and is injured. A is liable to make compensation to B for the injury to the horse.
Goods must be used by that bailee strictly for the purpose for which they have been bailed to him. Any unauthorised use of goods would make the bailee absolutely liable for any loss of or damage to the goods. Even an act of God or inequitable accident would be no defence. A horse lent for riding should not be used for any other purpose and it is used outside the scope of the bailment, the bailee would be liable for any damage to the horse howsoever happening.
Illustration
A bails 100 bales of cotton marked with a particular mark to B. B, without A's consent, mixes the 100 bales with other bales of his own, bearing a different mark; A is entitled to have his 100 bales returned, and B is bound to bear all the expense incurred in the separation of the bales, and any other incidental damage.
Illustration
A bails a barrel of Cape flour worth Rs. 45 to B. B, without A's consent, mixes the flour with country flour of his own, worth only Rs. 25 a barrel. B must compensate A for the loss of his flour.
Section 158 deals with repayment of necessary expenses by bailor under the following circumstances-
(i) the goods are to be kept or to be carried to have work done upon them by the bailee for the bailor as per the conditions of the terms,
(ii) The bailee is to receive no remuneration for the same.
If these conditions are satisfied, the bailor shall be under obligation to repay to the bailee the necessary expenses incurred by him for the purpose of the bailment. whether a person would be entitled to claim any charges for keeping the goods until the delivery would depend on the terms of the contract. If the bailee has to incur any expenditure for the preservation of the goods from deteroriation not provided for in the contract of bailment, the bailee will be entitled to recover such expenditure from the owner in as much as the owner will derive benefit therefrom if ultimately the goods are delivered to the owner.
Surya Investment Co. v. State Trading Corporation of India, MANU/WB/0009/1987 : AIR 1987 Cal 46: A bailee cannot lose the possession as well as charges for bailment. Further, it is stated that a petitioner cannot be denied his claim for storage charges solely on the ground that the petitioner has claimed or exercised the right of lien and therefore, he is not entitled to get any charge for keeping the goods bailed.
Union of India v. Amar Singh, MANU/SC/0004/1959 : AIR 1960 SC 233: The Goods received by Indian Railway as forwarding Railway were lost, the Government was held liable because the Railway failed to return the goods. Similarly. Where books were given for binding and were not returned within reasonable time and were lost due to fire, the bailee was held liable for loss, although he was not responsible for fire.
When the purpose of bailment is accomplished or the time for which the goods were bailed has expired, the bailee should return the goods to the bailor without demand. If he fails to do so, he will keep the goods at his risk and will be responsible for any loss of or damage to the goods at his risk and will be responsible for any loss of or damage to the goods arising howsoever.
Shaw & Co. v. Symmons & Sons, (1917) 1 KB 799: The plaintiff entrusted books to the defendant, a bookbinder, to be bound the latter promising to return them within a reasonable time. The plaintiff having required the defendant to deliver the whole of the books then bound the defendant failed to deliver them within a reasonable time and they were subsequently burnt in an accidental fire on his premises.
The defendant was held liable in damages for the loss of the books. When the loss takes place while the bailee's wrongful act in operation, there is no question of any defence like 'act of God;' or inevitable accident' being setup. He is liable in any case.
Illustration
A leaves a cow in the custody of B to be taken care of. The cow has a calf. B is bound to deliver the calf as well as the cow to A.
Under this section bailor is entitled to any increase or profit which may have accrued from the goods bailed. As such the bailee is under statutory obligation to deliver to the bailor any increase on profit derived from the goods bailed.
Motilal Hirabhai v. Bai Mani, AIR 1925 PC 8: The Privy Council held that new shares allotted in respect of old shares pledged by a person are increase or profit within the meaning of section 163 and hence the pledger can successfully claim them.
Standard Chartered Bank v. Custodian, AIR 2000 SC 1488: When section 163 of the Contract Act really means is that accretion in respect of the goods bailed cannot be a property of the bailee but must be returned when the goods themselves bailed are returned. A necessary corollary to this would be that as the pledge extends to such accretions then when the goods are returned these accretions must also be given back.
If the bailor has no right to bail the goods, or to receive them back or to give directions respecting them and consequently the bailee is expected to some loss, the bailor is responsible for the same.
Section 166 deals with responsibility of a bailee in a case where the bailor does not have title to the goods the bailee will not be responsible to the owner in case he delivers the goods bailed to the bailor or deliver them to any other person according to his direction if the bailee has acted in the good faith.
Banwarilal v. Road Transport Corporation, MANU/BH/0052/1989 : AIR 1989 Pat 303: Bailee is protected from the consequences of wrong delivery if he acts in good faith in delivering them back to or in accordance with the instruction of the bailor who has no title to the goods.
Section 167 confers right on the third person who claims title to the goods bailed. The remedy which is provided to him under this section is that he may apply to the court to stop the delivery of the goods to the bailor, and to decide the title to the goods.
(1) when the thing is in danger of perishing or of losing the greater part of its value, or
(2) when the lawful charges of the finder, in respect of the thing found, amount to two-third of its value.
Sections 168, 169 protect the interest of a finder in two ways. Section 168 allows the finder to retain the goods against the owner until he receives compensation for trouble and expense where the owner has offered a specific reward for the return of the goods lost, the finder may sue for such reward, and may retain the goods until he receives it.
Section 169 allows the finder to sell the goods in certain circumstances where the things found is commonly the subject of sale and if the owner cannot be found with reasonable diligence, or if refuses to pay the lawful charges of the finder, the finder may sell the goods in the following cases:-
(i) when due thing is in danger of perishing or of losing greater part of its value, or
(ii) when the lawful charges of the finder, in respect of the thing found amount to two-third of its value.
Illustrations
(a) A delivers a rough diamond to B, a jeweller, to be cut and polished, which is accordingly done. B is entitled to retain the stone till he is paid for the services he has rendered.
(b) A gives cloth to B, a tailor, to make into a coat. B promises A to deliver the coat as soon as it is finished, and to give a three months credit for the price. B is not entitled to retain the coat until he is paid.
Syndicate Bank v. Vijay Kumar, MANU/SC/0196/1992 : AIR 1992 SC 1066: Lien means right to retain a property or goods untill some charges due upon it or services rendered for its improvement, are paid. It is simply a right to retain the thing and does not give any right of property or ownership to bailee. If the bailee has rendered any service by exercise of labour or skill in respect of the goods, he gets the right to retain the goods untill he gets the remuneration for the service rendered. Lien are of two types:
(i) Particular lien,
(ii) General lien.
(1) Particular lien.
(i) The bailee must have rendered some service in relation to the thing bailed and must be entitled to some remuneration for it which must not have been paid.
(ii) The service rendered by the bailee must be one involving the exercise of labour or skill in respect of the goods bailed, so as to confer an additional value on the articles.
(iii) The services must have been performed in full in accordance with the direction of the bailor, within the agreed time or a reasonable line.
(iv) There must not be an agreement to perform the service on credit.
(v) The goods must be in possession of the bailee. If possession is last the lien is also lost.
(vi) There must not be a contract to the contrary.
If all the above mentioned conditions are satisfied, the bailee can exercise his right of particular lien untill he is paid for his service.
The following points must also be noted in connection with the bailee's particular lien:
(a) The bailee retaining the article to enforce his lien cannot change for keeping it,
(b) The bailee cannot exercise his lien for the non-payment of extra-ordinary expenses incurred in relation to the things bailed. He should sue for them.
Beaven v. Waters, (1828) 3 Car & P 520: The court observed that if a man has an article delivered to him, on the improvement of which he has to bestow trouble and expense, he has a right to retain at untill his demand is paid
Scarfe v. Morgan, (1838) 47 M&W 270 (283): Section 170 incorporates the common law principle that "if a man has article delivered to him, on the improvement of which he has to bestow trouble and expenses and the artificer to whom the goods are delivered for the purpose of being worked up into, from, or the farrier by whose skill the animal is cured of a disease, or the
house-breaker by whose skill he is rendered manageable, have liens on the chattles in respect of his charges.
Hutton v. Car Maintenance Co., (1915) 1 Ch 621: This case the plaintiff company maintained the car of the defendant. Some maintenance expenses having become due, the plaintiff company took over the car into its possession and claimed lien for the expense. The court, however, rejected its claim because what it did was simply to maintain the car and not to improve it.
Chase v. Westmare, (1816) 15 M&S 180: Only such goods can be retained on which the bailee has bestowed trouble and expense. He cannot retain any other goods belonging to the bailor which are in his custody.
Hartley v. Hitchcock, (1816) 171 ER 512: "Lord Ellenbruogh" cited that the defendant after the repairs were completed, relinquished his possession, and could not afterwards detain for the amount of the repairs. This lien in a possessory right which continues only so long as the possessor holds the goods.
(2) General Lien.
Syndicate Bank v. Vijay Kumar, MANU/SC/0196/1992 : AIR 1992 SC 1066: In merchantable system, the bank has a general lien over all form of securities to negotiable instruments deposited by or on behalf of the customers in the ordinary course of the banking business. The bank has the liberty to adjust from the proceeds of the two FDRs towards the due to the bank and if there is any balance left that would belong to the depositor.
Smt. K.S. Nagolambika v. Corporation Bank, MANU/KA/0498/2000 : AIR 2000 Kant 201: Section 171 of the Act is clear and categoric that unless a contract to the contrary is established by the plaintiff, the bank's right of lien will have to be accepted.
Om Shankar Biyani v. Board of Trustees, Port of Calcutta, MANU/SC/0118/2002 : (2002) 3 SCC 168: The proportion that the bailee, who exercise a lien, is not entitled to charge real for storage of goods can never apply to a case were the lien is exercised for
non-payment of rent are storage charges.
The right of general lien is a privilege and is specially conferred by section 171 on certain kinds of bailee only. These are-
(1) Bankers.-A banker has a general lien on all goods, cash, cheques and securities deposited with him as banker by a customer, for any money due to him as a banker. Thus, where a customer has a credit balance in one account of the bank and at the same time he owes money to the bank on another account, the banker's general lien entitles him to refuse the customer to operate the account in which he has a credit balance till he clears the debt due to the Bank.
Davendra Kumar v. Chaudhary Gulab Singh, ILR (1946) Nag 210: In this case it was observed that where valuable and securities are deposited for a specific purpose e.g., for safe custody the banker has no general lien on them as the acceptance of the goods for a special purpose impliedly excludes general lien.
Merchantile Bank of India Ltd. v. Rochaldar Gidumal & Co., AIR 1926 Sind 226: A bank received some money of his customer with instruction to transmit it telegraphically to his own firm at other place, it was held that the bank could not retain it as was not given to it for the purpose of bailment.
Jagdishwar Reddy v. Manager, Andhra Bank, (1988) 1 Andh LT 605: Where a person obtained a loan on a pledge of gold ornaments to the lending bank and subsequently became a guarantor for another person's loan. He was allowed to claim his ornaments on paying-off his personal loan though the loan of another person guaranteed by him still subsisted.
Syndicate Bank v. Devendra Karkera, MANU/KA/0001/1994 : AIR 1994 Kant 1: The principle of general lien does not extend to a loan taken by the customer from another branch of the bank. A guarantor was allowed to take back his securities from the bank when the bank guarantee in respect of which they were deposited came to an end. The bank was not allowed to retain them for the loan of another company in which also the guarantor was a director.
State Bank of India v. Deepak Malviya, AIR 1993 All 165 (168): Section 171 of the Indian Contract Act and the general principles covering the Banker's lien specifically authorises the bank to retain the pledged goods such as ornaments claiming lien over them till the Bank's money is not cleared for the loan in connection with the other account for which a decree has already been passed in favour of the Bank.
(2) Factors.-A factor is an agent entrusted with the possession of goods in the ordinary course of his business for the purpose of sale. He has a general lien on the gods of his principal, if any money is due to him by his principal whether for advances made or for remuneration.
Factor means an agent entrusted with possession of goods for the purpose of selling them for his principal. He is given the possession of the goods in the ordinary course of his business for his balance of account against the principal.
E.H. Parakh v. King Emperor, AIR 1926 Oudh 202. It is necessary for the lien to arise that the goods should have been delivered to the factor in the course of business and in his capacity as a factor.
A factor who used to have various dealings with his principal was instructed by the principal to effect a policy of insurance on a ship. The principal sent the premium and the policy remained in the possession of the agent, who claimed lien for the money which was owing to him in his capacity as a factor.
(3) Wharfingers.-A wharfinger has a general lien on the goods as regards charges due for the use of wharf against the owner of the goods. A wharfingers is a person who keeps a wharf, a platform in a harbour on which goods are kept for purpose of loading or unloading ships. A wharfinger can retain all such goods untill his charges are paid. A manufactures possessing a wharf for receiving goods of his customers will not be entitled to general lien as a wharfinger.
(4) Attorneys of High Court.-An attorney or solicitor of a High Court has a general lien an all papers and documents belonging to his client which are in his possession in his professional capacity untill the fee for his professional service and other cost incurred by him are paid. But if the solicitor refuses to act any more for the client, he is not entitled to any lien.
R.D. Saxena v. Balram Prasad Sharma, AIR 2000 SC 2912: The Supreme Court finally observed that looking from any angle, it cannot be said that the case papers entrusted by the client to his counsel are the goods in his hand upon which he can claim a retaining lien till his fee or other charge is incurred are not paid. Thus general lien envisaged under section 171 of the Contract Act is not available to Advocates in respect of the case papers entrusted by the client to him.
(5) Policy-brokers.-They can retain the policy of fire or marine insurance for their brokerage. His lien extends to any balance or any insurance account due to him from the person who employed him to effect the policy.
(1) The right of particular lien can be claimed by every bailee who has in accordance with the purpose of a bailment, rendered any service involving the exercise of labour or skill in respect of the goods bailed provided that there is no contract expressing a contrary intention on the other hand, the right of general lien can be claimed only by bankers, factors, wharfingers, attorneys of High Court and policy brokers.
(2) The right of particular lien can be claimed only in respect of goods upon which some labour or skill has been exercised by the bailee. The right of general lien, on the other hand, can be claimed in respect of any goods for any charge due in respect of other goods.
(3) Right of particularly lien can be successfully claimed if by the exercise of labour or skill, there has been some improvement of the goods but the same is not necessary in case of general lien.
Under section 172 of the Contract Act, bailment of goods as security for payment of a debt performance by promise in called pledge i.e., delivery of goods by one person to another under contract as security for payment of a debt or performance of a promise is a pledge. In other words, a pledge is the delivery of goods by the pledger to the pledgee by way of security upon a contract that they shall when the debt in paid or promise is performed, be returned or otherwise disposed of according to the direction of the pledges. Thus as appears from the definition of the pledge under section 172, there are following three essential ingredients of a pledge-
(i) There must be a bailment of goods as defined in section 148 of the Contract Act that is delivery of goods,
(ii) The bailment must be by way of security,
(iii) The security must be for payment of a debt or performance of a promise.
Canara Industrial and Banking Syndicate Ltd. v. Ram Chandra, AIR 1968 Mys 133: A pledge being a bailment of goods as security you payment of a debt, the pledgee will have the same remedies as the owner of the goods would have against, third person for deprivation of the said goods on injury to them.
Suneel Kumar Gupta v. Punjab & Sind Bank, AIR 2006 Uttra 26: Delivery of the chattel pawned is a necessary element in the making of a pawn. The property pledged should be delivered to the pawnee. Pledge is the delivery of the possession of the pledged property. The delivery of possession may either be actual on constructive.
Reeves v. Copper, (1933) Bing NC 136: In this case, the captain of the ship pledged his chronometer with his employer, the ownership. The captain was allowed to keep the chronometer and to use it for the purpose of a voyage later on the captain pledged it again with another person. It was held that the first pledge was valid as it was a case of constructive delivery.
New India Assurance Co. Ltd. v. Lakka Vijya Gopala Reddy, MANU/AP/0492/2003 : AIR 2003 AP 465: In this case, loan was taken from the bank for buying mechanised fishing boat which was hypothecated to Bank and was also insured for ensuring security in the said loan. The said fishing boat was subsequently destroyed. The Bank sued the insurance company for compensation. It was held that there is no privity of contract between the bank and the insurance company and that the bank being not a party to the insurance policy cannot sue the insurance company for compensation.
Thus the Pawnee has the right to retain the goods pledged untill his dues are paid. He has the right to retain the goods pledged, not only for payment of the debt or performance of the promise, but for the interest due on the debt and all necessary expenses incurred by him in respect of the possession or for the preservation of the goods pledged. Thus this right may be termed as the pawnee's right of particular lien.
Bank of Chittoor v. Narasimhulu Naidu, MANU/AP/0113/1966 : AIR 1966 AP 163: A cinema projector and accessories were pledged with a bank. The bank allowed the property to remain with the pledgers, since they formed the equipment of a running cinema, subsequently, the pledgers said the machinery.
The court held that the sale was subject to the pledge. There was a constructive delivery or delivery by attornment to the bank.
Smt. Aratibala Mohanty v. S.B.I., MANU/OR/0063/1991 : AIR 1991 Ori 260: The petitioner had taken the loan on the pledge agreement. On account of order of attachment from the court and seizure of the property, the bank which had the obligation to deliver back the possession of the goods when the pawnee exercised her right of redemption did not discharge that obligation. The Division Bench of the Orissa High Court held that the bank as the pawnee having refused to perform its obligation of redelivering the goods on debts being satisfied cannot claim any interest for the said period and the observations to the effect of the pawnee is not in position to re-deliver the goods, he cannot have both the payment of debt and also the goods would apply.
Section 174 provides that when the pawnee lends money to the same debtor after the date of the pledge without any further security, it shall be presumed that the right of retainer over the pledged goods extends even to subsequent advances. This presumption can be rebutted only by a contract to the contrary. It will be noticed that although a pawnee has a particular lien only but this section allows him to track his subsequent advances to the original debt, in the absence of any agreement to the contrary.
Branch Manager, State Bank of Mysore v. K. Amarnath, (2003) 2 Kar LJ 31: Where the contract provided that the hypothecatee would have the power to take possession of and sell hypothecated goods without intervention of the court. It was held that a dispute resulting from the exercise of this power was outside the scope of determination in a writ jurisdiction.
Central Bank of India v. Siriguppa Sugars & Chemicals Ltd., MANU/SC/3367/2007 : AIR 2007 SC 2804: A sugar manufacturing company had pledged its stock of sugar with the lending Bank. It was held that the rights of the bank over the pawned sugar had precedence over claims of the cane commissioner for payment to cane growers and claims of workmen. In the absence of winding-up of the company, their claims ranked as those of unsecured creditors.
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.
Syndicate Bank v. Mahalaxmi Ginning Factory, MANU/KA/0279/2004 : AIR 2005 Kant 5: If an agreement of term loan and hypothecation with a bank, there was no provision empowering the bank to debit any amount by way of xerox charges or legal fees. The court did not permit the bank to debit such amounts.
Section 176. Provides for pawnee's right where 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. In such a option the pawnee has the following options:
(a) He may bring a suit against the pawnor upon the debt or promise and retain the goods pledged as a collateral security,
(b) He may sell the goods pledged on giving the pawnor reasonable notice of the sale.
State Bank of India v. Neela Ashok Naik, MANU/MH/0236/2000 : AIR 2000 Bom 151: This section makes at clear that it is the discretion of the pawnee either to sell the goods in case the pawnor makes default as bring a suit for recovery of the debt and retain the goods pledged as collateral security.
Central Bank of India v. Siriguppa Sugars & Chemicals Ltd., MANU/SC/3367/2007 : AIR 2007 SC 2804: Thus, it is obvious that the pawnee has been given a right to sell the goods after giving a reasonable notice to the pawnor. But in case, he does not himself sell the property but allows his creditor to sell it and if any loss is sustained, the pawnor will not be held liable to pay the balance.
A pawnor who defaults in payment of the debt amount at the stipulated date, has a right to redeem the debt at any subsequent time before the actual sale of goods pledged. Thus an agreement that the pledge should become irredeemable, if it is not redeemed within a certain time, would be invalid of course, the pawnor redeeming after the expiry of the specified time must pay to the pawnee, in addition, any expenses which have arisen after his default.
Hulas Kanwar v. Allahabad Bank, MANU/WB/0159/1958 : AIR 1958 Cal 644: The language of sections 176 and 177 of the Contract Act seems to suggest that those two sections apply in terms only to cases where a time is stipulated in the agreement of hypothecation for the payment of the debt or the performance of the promise. Sections 176, 177 equally apply to cases where a time for the payment of the debt has been fixed as the original agreement of pledge or hypothecation and to cases where no such time in stipulated.
Explanation.-In this section, the expression 'merchantile agent' and 'documents of title' shall have the meanings assigned to them in the Indian Sale of Goods Act, 1930 (3 of 1930).
A merchantile agent who is, with the consent of the owner, in possession of the goods or the documents of title to goods (e.g., railway receipt or bill of loading) can make a valid pledge of the goods while acting in the ordinary course of business of a merchantile agent. Such a pledge will be valid even if the agent had no actual authority to pledge provided that the pawnee acts in good faith.
Al Cheung v. Ah Wain, AIR 1938 Rang 243: 176 IC 708: This section aims at protecting those persons who in good faith deal with persons whom they know to be merchantile agents, but of the details of whose agency they are not and cannot be expected to be aware.
Section 2(9) Sale of Goods Act.-Merchantile agent means an agent having in the customary course of business as such agent authority either to sell goods, or to consign goods for the purpose of sale or to buy goods or to raise money on the security of goods.
Sharadin v. Gokulchand, AIR 1931 Lah 526: The court interpreted 'possession' appearing in section 178 as juridical possession as distinguished from mere physical possession or bare custody. It has been held that a servant or a relation entrusted by the owner with the custody of goods during his absence cannot be said to be in possession thereof so as to entitle to make a valid pledge thereof.
Section 178A provides that if the pawnor has obtained the possession of the goods under a contract which is voidable under sections 19 or 19A, Contract Act, then a pledge by him would be valid if the pledgee had no notice of the want of defect of title and that the contract had not been rescinded at the time of the pledge.
Example.-A purchases a ring from B exercising coercion and pawns it with C before the contract is rescinded by B, the pledge is valid. C will get a good title to the ring and B can only claim damages from A.
Visalakshi Ammal v. Coimbatore Janopakara Nidhi Ltd., MANU/TN/0275/1941 : AIR 1942 Mad 299: However, in order to come within the scope of section 178A, a person seeking relief thereunder must establish that the pawnor had a legal title on the date of the pledge though that title is defective either under section 19 and 19A of the Contract Act. The essence of that provision is that the pawnor must have had a title to the goods pledged on the date of the pledge.
Section 179 must be read with section 170. Because all that section 179 says is that a person may pledge his limited interest in the goods when he has a limited interest only. It is on enabling provision which clearly provides that the pledge in the circumstances mentioned therein is valid only to the extent of the interest. Where no such interest exists a valid pledge will not take place under section 179.
For example.-A delivers a suit length to B, the tailor master, for making a suit and agrees to pay Rs. 1,500 as sewing charges. B pledges the suit with C for Rs. 3,000. The pledge is valid to the extent of B's interest in the suit, namely Rs. 1,500 (Sewing Charges). A can therefore, recover the suit only on paying Rs. 1500 to C the pledgee.
The section 180 enables a bailee to sue any person who has wrongfully deprived him of the use or possession of the goods bailed or has done them any injury. The bailees' rights and remedies against the wrongdoer are just the same as those of the owner. An action, may, therefore be brought by the bailee or the bailor.
Purshottam Das v. Union of India, MANU/UP/0171/1967 : AIR 1967 All 549: Whatever is obtained by way of relief or compensation in any such suit shall, as between the bailor and the bailee, be dealt with according to their responsive interests.
© Universal law Publishing Co.