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Petitioner: NATIONAL BANK OF PA KISTAN VS Respondent: MESSRS BRIGHT LEATHER WORKS AND 3 JUDGMENT
Court Name: Sindh High Court Judge(s): Zaffar Hussain Mirza Title:NATIONAL BANK OF PA KISTAN vs MESSRS BRIGHT LEATHER WORKS AND 3
JUDGMENT
Reported As: 1980 CLC 1170 Result: Suit decreed Judgment JUDGMENT ' This suit was originally instituted by the Bank of Bahawalpur Limited which has been substituted with the National Bank of Pakistan (hereinafter referred to as 'the bank' 0 on account of the devolution of the rights and liabilities of the former bank on the latter. Defendant No, 1 M/s. Bright Leather Works is a partnership firm of two partners who are defendants 2 and 3 and shall be referred to as 'the borrowers'. 2. The borrowers are the constituents of the bank and have an account in the firm name with the P. I. D. C. House Branch of the bank, Pursuant to a request by the borrowers the bank granted to them financial accommodation by way of overdraft facility to the extent of Rs, I lac for the purchase of bonus vouchers for import of Plastic Moulding material/compound under the bonus scheme and documentary credit facility in accordance with the import of the aforesaid goods. The case of the bank is that the borrowers utilized the aforesaid overdraft facility in full by purchasing of bonus vouchers in three lots which were converted into import licences for the import of Plastic Moulding Compound. The dispute in this suit relates to the third lot of bonus vouchers purchased for Rs, 30,678.02 for which Import Licence No, A-026278 was obtained. At the instance of the borrowers for the aforesaid import the bank opened two L. Cs. Dated 17th April, 1967 for 1492.3.9 and L. C. Dated 19th April, 1967 for fix 1646.14.0 in favour of M/s. Murubeni Hida & Company Limited, Tokyo, Japan. The documents ender the aforesaid two L. Cs. Including two demand drafts were negotiated and the bank paid the amount thereunder. The demand drafts being payable at site were presented to the borrowers who instead of making payment requested the bank that the said shipping documents be handed over to the clearing agent appointed by them, namely, Mahmood
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Corporation, defendant No, 4, herein, for clearance and storage of the consignments from the Customs and Karachi Port Trust, with a further request that the duties, taxes and other charges be also paid by the bank. It was also agreed that the bank shall have lien/charge over the said goods whilst they are stored with defendant No, 4. The bank accordingly handed over the shipping documents relating to the two consignments to defendant No, 4 and also paid duty, taxes and charges etc. As demanded by the said defendant. The latter cleared and stored both the consignments of Plastic Moulding Compound known as `Nipolon' acknowledging that the goods were under the charge/lien of the bank and were to be delivered to the borrowers under the bank's delivery order. According to the bank it had to pay a total sum of Rs, 67,844.62 in connection with the first L. C. And Rs, 75,573.27 in connection with the second L. C. The two consignments cleared through defendant No, 4 consisted of 1142 bags containing 62,810 lbs. Net weight of Plastic Moulding Compound. Out of the said quantity the borrowers took delivery of 25,135 lbs. Only. As regards the balance defendant No, 4 acknowledged that a quantity of 20,402 lbs. Of the value of Rs 46,924.60 at the import cost of Rs, 2,30 per lb. Had become short or was misappropriated while the goods were under its custody and agreed to make reimbursement for the said shortage. Out of this amount the bank admitted having received Rs, 21,000 from defendant No, 4. A quantity of 17,273 lbs. Was delivered by defendant No, 4' to the bank after the shortage was discovered. The bank alleged that the borrowers failed and neglected to lift the said 17,273 lbs. Of goods and repay the bank's dues. A quantity of 17,0354 lbs. Out of the said goods was, therefore, sold after notice to the borrowers and the sale proceeds were credited to the account of the borrowers. A quantity of 2374 lbs. Was still in stock at the date of the suit. Upon these allegations the bank claimed a sum of Rs- 67,165.44 as due and payable by the borrowers in their aforesaid account and sought a decree for this amount with interest at 10% per annum with a prayer that defendant No, 4 be made liable for the decretal amount to the extent of Rs, 25,924.60 (the balance of the value of admitted quantity found short while the goods were in the custody of defendant No, 4). 3. The defendants contested the suit, the borrowers filing a joint written statement and defendant No, 4 filing a separate written statement. In their written statement the plea of the borrowers was that the shipping documents were sent to the defendant No, 4 by the bank directly and therefore, the latter were the agents of the bank. It was further alleged by the borrowers that the bank had agreed that the goods would be cleared and stored by the bank and delivery would be made to the borrowers against the sale of goods by them. It is their case that the goods under the two L. Cs. Comprising of 1,142 bags weighing 55 lbs. Each of standard quality were cleared and stored by the bank through defendant No, 4 appointed by the bank itself. They denied having appointed defendant No, 4 or having any dealings with it. It was further averred that defendant No, 4 cleared and stored 993 bags out of the total quantity of 1,142 whilst the remaining 149 bags were lying with the K.P.T. In damaged and loose condition regarding which the bank agreed to allow the borrowers to remove the contents of those bags directly from the K.P.T. They alleged that the open contents of the said bags in loose condition after being cleared were subsequently delivered by defendant No, 1 to the bank. The said defendants further denied the correctness of various statements and entries from the books of the bank. They also denied the delivery of the quantities alleged by the bank. According to the said defendants, defendant No, 1 took the delivery of 390 bags from the godowns of the plaintiff's clearing agent (defendant No, 4) against payment. Additionally defendant No, 1 took delivery of the loose and damaged contents of 149 bags from the K.P.T. As already mentioned and delivered the same to the bank on 3rd June, 1968. Defendant No, 4 had cleared and stored in their godowns in all 993 bags each weighing 55 lbs., out of which, defendant No, 1 took delivery of only the aforesaid 390 bags and the remaining 603 , bags in standard packing remained in possession of defendant No, 4. The said defendants, therefore, claimed that the bank and their clearing agent defendant No, 4 had misappropriated the said 603 bags and the contents of 149
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bags. The net weight of the said remaining 603 undelivered bags works out to be 33,165 lbs. And not 20,402 lbs. As alleged by the bank. As regards the loose contents of 149 bags the said defendants claimed that the bank and defendant No, 4 were further responsible for not having the same surveyed in time and claim adequate compensation from the insurance company. They also disputed the godown charges which according to them were payable only for 390 bags of which delivery was given to them. The said defendants claimed compensation for the remaining 603 bags containing 33,165 lbs. At Rs, 2.50 per lb. Plus 20% profit making the total compensation per lb. @ Rs, 3. Thus the total amount claimed by way of compensation by the said defendants for the aforesaid quantity was Rs, 99,495, but the bank had only credited Rs, 46,924.60. Upon these allegations the said defendants denied their liability for the re-payment of the dues of the bank. They also alleged that they were prepared to pay Rs, 3 per lb. For the balance quantity of 33,165 lbs. Contained in 603 "bags provided they were delivered in the original and standard packing but the same were not so delivered. 4. In addition to the denial of the claim of the bank the aforesaid defendants No, 1 and 2 preferred a counter claim against the bank .And defendant No, 4 for rendition of accounts and decree for the amount found due against them in favour of the defendants, on the allegation that they had misappropriated the remaining quantity of 33,165 lbs. 5. Defendant No, 4 filed a separate written statement wherein they admitted the clearance and storage of the goods but denied the rest of the allegations of the bank. They, however, admitted the figures as to delivery of the goods and the remaining balance as alleged by the bank. According to them they had undertaken to make good the loss for the short fall and in this connection they had paid Rs, 29,321.56 to the bank. The rest of the amount was to be paid by them under an agreement by instalments. 6. On the pleadings of the parties the Court framed the following issues with the consent of the parties: (1) What was the number of bags of plastic moulding compound received by the Clearing Agents ? (2) What was the number of bags of plastic moulding compound delivered by the Clearing Agents to defendant No, 1 under the orders of the plaintiff (3) What was the number of bags delivered to defendants I to 3 ? (4) What was the quantity of bags of plastic moulding compound sold and in what condition and to what effect ? (5) What amount if any is due from the defendants to the plaintiff ? If so, from which defendant or defendants ? ' (6) Whether there was shortage/misappropriation of the goods ? If so, in what quantity and of what value and who is liable for the same ? (7) Whether the counter claim is not maintainable under section 69 of the Partnership Act? (8) Whether the Clearing Agent defendant No, 4 was agent of plaintiff or defendants" 1, 2 and 3 ? (9) Whether the counter claim is barred by time ? (10) Whatshall the decree be ? ' Issues Nos. 1, 2 and 3 : 7. The learned counsel for' the parties did not raise any dispute as to these issues. It was agreed that there is no dispute that 993 bags were cleared, by the clearing agent and 390 bags were delivered to defendants 1 to 3. Findings to these issues are recorded accordingly. ' Issues Nos. 4 and 8 : 8. It will be convenient to deal with the questions raised in these two issues together. The first question that requires consideration is whether defendant No, 4 were the agents of the plaintiff or the defendants. It is the case of the bank that the contesting defendants addressed to them letter
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dated 30th May, 1967 (Exh. 6/1) requesting the bank to hand over the documents relating to the goods in question to defendant No, 4, contents of which are in the following terms :- "We shall be obliged if you will kindly send the documents relating to the above Letters of Credit to M/s. Mahmud Corporation, Karachi, for clearance of the goods as the steamer is arriving on 31st instant. ' Kindly also pay the customs duty, sales tax, etc. We shall take the delivery of the goods on clearance against payment of all your dues." ' It was pointed out on behalf of the bank that it has come in the evidence through the bank's witness Noor Ahmed that the bank does not do the business of clearing and forwarding and for this purpose an agent is to be appointed. Accordingly it was submitted that the defendants had requested the bank for appointing a clearing agent for the purpose of obtaining the clearance of the goods through the aforesaid letter in which further facilities regarding payment of customs duty etc. Were requested for. On the other hand, on behalf of the defendants it was pointed out that P. W. Noor Ahmed admitted in the cross-examination that the documents were handed over to defendant No, 4 by the bank prior to 19th May, 1967. P. W. Mohd. Afzal also admitted that approved list of clearing agents is maintained by the bank and that out of the three Letters of Credit for documents of one were given to P. P. C. C. (another forwarding and clearing agent) and the remaining two to Mahmud Corporation by the bank. He further admitted that the documents were given to Mahmud Corporation after consultation with the defendants on phone and the letter (Exh. 6/1) was written after about 11 days. He further stated that when the clearing agents apply to the bank for being brought on the approved list a bond is taken from them by the bank. The version of defendant Abdul Hanif was that no objection was taken to the routine letter given to the bank after they had already passed on the documents to defendant No, 4 for clearing the goods. He, however, admitted that the P. P. C. C. Were appointed as clearing agents at his instance by the bank vide letter dated 23rd August 1967 (Exh. 8/18). The last-mentioned letter is substantially in the same terms as letter Exh. 6/1. The defendant also admitted that he would have paid godown charges for the period during which his goods were stored in the godowns. 9. Now there can be no doubt that in relation to the clearance of goods and their storage the bank was acting as the agent of the defendants but the question that requires consideration is whether the defendant No, 4 was the agent of the bank or of the defendants. Each side in the first instance disclaimed the relationship of principal and agent as between themselves and defendant No, 4 and claimed that the latter were the agents of the other party and therefore, the negligence on the part of the clearing and forwarding agents was not the responsibility of the party. The precise question was raised in Syed & Company v. M. M. Ispahani Ltd. (1). It was held that for the purpose of clearing the goods the clearing agent was formally appointed by the bank according to the instructions and for the benefit of the consignee and that, as such, the clearing agent occupied the position of an agent of the consignee and not of the bank. It was further held that there was privity of contract between the consignee and the clearing agent who by reason of an appointment through the bank occupied the position of a substituted agent. It was also held that according to sections 194 and 195, Contract Act the act of appointing the clearing agent for the purpose of clearing the goods was within the competence of the bank and that the former had knowledge of the fact that the latter acted in this behalf for its principal for the time being, namely, the consignee. The reason for holding this was that the obligation, if any, on the part of the bank in connection with the work of clearing the goods ceased as soon as private of contract was created between the consignee and the clearing agent. The facts of the present case are somewhat similar to the facts of the reported case. The evidence on record clearly establishes that defendant No, 4 were appointed clearing agents on behalf of the contesting defendants with prior authority but in any case the appointment was ratified by letter dated 30th May, 1967 (Exh. 6/1) long before the
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goods (1) PLD 1959 Dacca 206 were cleared on 3rd June, 1967. I, therefore, hold that defendant No, 4j were the agents of the contesting defendants and not the sub-agents of the bank. Issue No, 8 is answered accordingly. 10. As to Issue No, 4 the admitted position is that the total quantity in the two consignments was 1142 bags each containing 55 lbs. The evidence shows that out of this quantity only 993 bags were cleared and stored by defendant No, 4. The remaining 149 bags were torn and their contents were scattered in the K. P. T. Godowns from where the delivery was received by defendant No, 1 directly. Admittedly the contesting defendants received delivery of 390 bags out of the 993 bags. Accordingly only 603 bags containing 33,165 lbs. Of goods remained in balance with defendant No, 4. It is also admitted position vide Exh. 6/127 that from the contents of 149 bags directly cleared by defendant No, 1, 4702 lbs. Were delivered by defendant No, 1 to the bank. It is also admitted position that a quantity of 20,402 lbs. Was found short or missing while the goods were in the custody of defendant No, 4. Therefore, the total balance remaining charged with the bank would come to 17,465 However, according to the account (Exh. 7/1) produced by the bank they sold 15,862 lbs. At Rs, 1.2) per lb. And a quantity of 1,173.1-2 lbs. At Re. 0.62 per. Lb. Therefore, the total quantity sold according to the bank was 17,0354 lbs. Whereas the balance admittedly in the custody of the bank ought to be 17,465 lbs. For which credit should be given to the contesting defendants. P. W. Noor Ahmed admits that a shortfall to the extent of 20,402 lbs. Was detected in the contents of 603 bags while they were stored in the godowns of defendant No, 4. The remaining paper bags were torn and the contents were re-packed by the bank without notice to the contesting defendants. It is also admitted by P. W. Mohd. Afzal Khan that after re- packing the goods they were transferred to the bank's godowns without information to the contesting defendants. The same witness also admitted that no intimation in writing was given to the contesting defendants about the shortage detected in the goods. Admittedly the bank directly settled the matter with defendant No 4 as regards the shortage @ Rs, 1.75 per lb. As against the import rate of Rs, 2.30 per lb. It was argued that the condition of the remaining quantity of the goods consisting of 603 bags was not the same in which they were imported in standard packing with the Trade Mark of the manufacturer and, therefore, the contesting defendants were under no obligation to receive the delivery of the same as they were entitled to the goods in the same condition in which they were imported. On these premises it was contended by the learned counsel for the contesting defendants that the bank was responsible for the loss. However, as I have already held that defendant No, 4, the clearing agents, were the agents of the contesting defendants and not-the sub-agents of the plaintiff bank, I find no force in the argument that any damage caused to the goods while they remained in the custody of the clearing agents can be the responsibility of the hank. Nor is there any force in the submission that the contesting defendants were entitled to refuse to take delivery to the prejudice of the bank for the reason that the goods were damaged while they remained in the godown after their clearance by the clearing agents of the defendants. 11. To sum up, it may be stated that admittedly out of 993 bags cleared by defendant No, 4 a quantity of 390 bags was delivered to the defendants against payment to the bank leaving the balance of 603 bags containing 33,165 lbs. In addition to this 4,702 lbs. Of goods were delivered by defendant No, 1 from the 149 bags directly cleared by him. Therefore the total balance of goods under charge with bank was 37,867 lbs. Out of which a quantity of 20,402 was found short, leaving a balance of 17,465 lbs. According to evidence of the bank, they sold 17,035.1-2 lbs. Which leaves a balance of 429.1-2 lbs. Unexplained. Findings accordingly. ' Issue No, 6 : ' It was contended on behalf of the contesting defendants that the entire contents of 603 bags, the remaining balance after defendants took delivery of 390 bags, were misappropriated and some
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other goods were disposed of by the bank as the goods of the defendants. This contention is based on the ground that evidence on record shows that the goods lying in the godowns were not in the standard packing as they were received from the foreign suppliers under their trade mark and were lying scattered mixed with cement. These goods were admittedly taken over by the bank and shifted to their own godown under their control and custody. As to the effect of the action on the part of the bank to take over the goods without notice to the contesting defendants, I shall discuss the question under other issues. However it is clear from the evidence that there was shortage of 20,402 lbs. (370.94 bags) for which defendant No, 4 were responsible as the agents of the contesting defendants and not the bank. There is no evidence that the bank misappropriated the entire quantity of 33,165 lbs. In their letter dated 27th July, 1968 (Exh. 6/75) the bank has explained the position to defendant No, 4, , who by their letter dated 16th October, 1968 (Exh. 6/78) accepted responsibility for the loss of 20,402 lbs. And agreed to pay cost at the alleged ruling market price of Rs, 1.75 per lb. Finding accordingly. ' Issues Nos. 7 and 9 : ' These issues can be conveniently disposed of together. The first question that arises for consideration is whether the counter-claim set up by the contesting defendants is barred under the provisions of section 69 of the Partnership Act for want of registration of the partnership firm of M/s. Bright Leather Works (defendant No, 1) who was admittedly the other contracting party with the plaintiff bank. Mr. Khalil-ur-Rehman candidly conceded that the defendant firm is not registered and did not advance any argument, how the counter-claim set up by the contesting defendants was not hit by the provisions of section 69. 12. Now Order VIII, rule 6 of the Code of Civil Procedure provide that the effect of set off pleaded in the written statement is that such written statement shall have the same effect as a plaint in a cross-suit. It is also well settled that whilst a set-off is essentially a defence to the action by the plaintiff, a counter-claim is in the nature of a cross-action. In the present case the case set by the defendants in their counter-claim claiming damages and rendition of accounts from the plaintiff bank is clearly an amalgam of both a set-off as well as a cross-action, seeking to wipe out the plaintiffs claim and making an additional claim. Additionally rule 162 of the Sind Chief Court Rules (0. S.) as applicable to this Court, also provides that the counter-claim pleaded by a defendant, shall have the same effect as a cross-suit. Such being the nature of the counter-claim. It obviously falls within the restrictive provisions of subsection (3) of section 69 of the Partnership Act, which have the effect of applying the bar contained in subsection (2) of the said section, to a claim of set-off or other proceeding to enforce a right arising from a contract. Subsection (2) of section 69 stipulates that no suit to enforce a right arising from a contract shall be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered. Accordingly the counter- claim of the defendants is not maintainable and cannot be adjudicated upon, in absence of registration of the firm. 13. In this view of the matter the question of limitation raised in Issue No, 9 does not arise. ' Issues Nos. 5 and 10 : 14. Before considering the question whether any amount is due' from the defendants to the plaintiff it is necessary to dispose of an important argument advanced on behalf of the contesting defendants. It was contended that since the bank was the Pawnee of the goods belonging to the defendants it was its obligation under the law to preserve intact the goods and return the same in the same condition, to enable itself to file action for the recovery of its dues. Reliance in this behalf was strongly placed on A. M. Burq v. Central Exchange Bank Ltd. (1). In this case the Court held that where the bank was unable to return the pledged goods (or prove their loss or damage) it was not competent for it to bring action for recovery of the debt secured by the pledge of such goods. The decision proceeded on the principle of equity "that the creditor is not entitled to recover the
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amount of his secured debt when he cannot return the security", But the facts of the reported case are distinguishable inasmuch as in that case the bank brought the action without accounting for goods in question. In the present case the case of the bank, however, is that the goods were sold by the bank after notice to the defendants and the suit has been brought for the outstanding balance after adjusting the sale proceeds of the pledged goods. It is well established that a pledgee has such a right to recover his debt by exercising his right of sale after notice and bring personal action for recovery of the balance. In the cited case their Lordships noticed the rule laid down in Nim Chand v. Jaga Bundha Ghose (2) which is in the following terms :- "There can be no doubt that when movable property is pledged to a person for money lent, be acquires, a special property therein, he has a charge upon it for the satisfaction of the loan advanced, and is entitled under section 176 of the Contract Act, either to bring a suit against the owner upon the debt or promise, retaining the goods pledged as collateral security, or he may sell the things pledged upon giving reasonable notice of the sale." 14-A. Obviously therefore, if the pledgee/creditor opts to exercise hi right of sale for the satisfaction of his debt, he cannot…
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