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Petitioner: ASHRAF ALI VS Respondent: BANK OF INDIA LTD. AND 2 OTHERS
Court Name: Sindh High Court Judge(s): Ajmal Mian Title: ASHRAF ALI vs BANK OF INDIA LTD. AND 2 OTHERS Case No.: Suit No, 178 and 179 of 1965 Date of Judgment:1980-04-08 Reported As: 1981 CLC 1582 Result: Suits decreed
JUDGMENT
JUDGMENT (a) This judgment will dispose of Suits Nos. 178/65 and 179/65. The facts leading to the filing of the above suits are shortly as follows :- (b) Suit No, 1781155 : ' This is a suit for the recovery of Rs, 2,98,260 comprising of Rs, 2,70,000 being the amount of the purchase price paid by the plaintiff for 15000 scrips of Karnaphuli Paper Mills Ltd. And Rs, 28,260 being the amount of interest at 6% for the period from 20th November, 1963 to 16th August, 1965. It has been averred that on or about 19th November, 1963, defendant No, 3 agreed to sell 15000 shares of Karnaphuli Paper Mills Ltd. To the plaintiff @ Rs, 18 per share and that defendant No, 3 represented that the aforesaid shares would be delivered by defendant No. 1, who in turn assured that 15000 shares would be delivered by them to the plaintiff's banker, defendant No, 2 on payment of the aforesaid price. It has been further averred that defendant No, 3 by letter dated 19th November, 1963 instructed defendant No, I to deliver the aforesaid 15000 shares against payment of Rs, 2,70,000 to the plaintiff and that the plaintiff instructed defendant No. 1 to give the delivery of aforesaid 15000 shares to his Banker defendant No, 2 against payment and that the plaintiff also instructed defendant No, 2 by his letter dated 19th November, 1962 to take the delivery of the aforesaid shares from defendant No. 1 against payment, for which the plaintiff enclosed his cheque of Rs, 2,70,000. It has also been averred that on or about 20th November, 1963 defendant No, 2 sent their cheque/pay order for Rs, 2,70,000 on behalf of the plaintiff to defendant No, l requesting the said defendant to deliver 15000 shares of Karnaphuli Paper Mills Ltd and that on or about 20th November, 1963 defendant No. 1 alongwith their letter dated 20th November, 1963 purported and pretended to send 15000 shares/scrips of Karnaphuli Paper Mills Ltd. With their list and defendant
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No, 2 received the said alleged shares/ scrips and paid for the same. It has been further averred that it was understood that defendant No. 1, was in possession of genuine shares scrips of 15000 shares of Karnaphuli Paper Mills Ltd. And that defendant No, 2 would pay for the same and take the delivery thereof. It has also been averred that defendant No. 1 had advanced money against these shares and accepted them as good security. It has been further averred that on or about 15th June, 1964 the plaintiff learnt that the purported shares/ scrips of 15000 shares of Karnaphuli Paper Mills Ltd. Delivered by defendant No. 1 against .The receipt of Rs, 2,70,000 from the plaintiff through defendant No, 2 were forged certificates and were of no legal effect and did not represent or related to 15000 shares of Karnaphuli Paper Mills Ltd. And that thereupon the plaintiff called upon defendant No. 1 to exchange the aforesaid forged shares for genuine shares or to refund the plaintiff's money, but defendant No. 1 declined to do so. It has been further averred that defendant No, I having received Rs, 2,70,000 from the plaintiff was bound in law as a banker to deliver genuine and valuable securities and that according to the banking pracnce '1cndant No, 2 had to check and take delivery of valuable and genuine share scrips. It has been also averred that in case defendant No. 1 had forged deeds and acted negligently and in violation of the obligations and representations and committed breach of duty which they owed towards the plaintiff and that by their acts of omission and commission wrongfully deprived the plaintiff of Rs, 2,70.000 and made wrongful gain of that amount from the plaintiff. It has also been averred that defendant No, 2 had no authority from the plaintiff to take forged shares, and forged transfer deeds and to debit the plaintiff's account for such payment. On the basis of the above averments the plaintiff has claimed the above reliefs. (c) Defendant No, I had filed a written statement on 20th January, 1966 but after filing an amendment application (C. M. A. 120/70) which was allowed by an order dated 12th February, 1970 filed an amended written statement on 16th February, 1970, wherein defendant No. 1 has averred that it gave no assurance to the plaintiff for delivery of any share. However, it has been admitted that defendant No, 3 on 19th November, 1963 asked defendant No. 1 to deliver 15000 shares of Karnaphuli Paper Mills Ltd. From his account to the plaintiff' against the payment of Rs, 2,70,000. The content of para 3 of the plaint has been admitted. 1-towever, paras Nos. 5 and 6 of the plaint, as framed have been denied. It has been averred that on 21st November, 1963 defendant No, 2 on behalf of the plaintiff paid Rs, 2,70,000 to defendant No. 1 to the account of defendant No, 3 against the delivery of the shares and that defendant No, 2 acknowledged the receipt of 1 5000 shares under their stamp and initials and that defendant No. 1 did not purport or pretend to sell 15000 shares, but only acted as bankers on instructions of defendant No, 3 to deliver the shares. It has been further averred that there was neither understanding between defendant No. 1 and the plaintiff that defendant No, I was in possession of genuine securities nor defendant No. 1 had agreed to deliver and transfer genuine scrips of 15000 shares of Karnaphuli Paper Mills Ltd. And that defendant No. 1 was expected to deliver only those securities that were lodged with them by defendant No, 3. It has also been averred that the shares in question were given to defendant No. 1 by defendant No, 3 as bankers for being held in his account, as his agent and on his behalf, and that in pursuant to his instructions contained in his letter dated 19th November, 1963 and in .Accordance with the plaintiff's letter addressed to defendant No. 1 the same shares were delivered to the plaintiff's bankers (defendant No, 2) against the payment and that these shares were accepted by the plaintiff's bankers without any objection and receipt therefor, was passed acknowledging that all the shares were received by them. It has been further averred that the plaintiff is estopped from questioning this now and that defendant No. 1 were neither liable to exchange the forged shares for genuine security nor to refund the plaintiff's money and that they acted only as agent of defendant No, 3 under his instructions and delivered what they had received. It has also been averred that there existed no privity of contract between them and the
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plaintiff regarding the sale of these shares. It has also been averred that the defendant No, I merely acted as agent of defendant No, 3 without any obligation to the plaintiff and made no representations to the plaintiff regarding the genuineness of the share scrips in question and defendant No. 1 did not gain anything, the total of Rs, 2,70,000 received from the plaintiff was credited to the account of defendant No, 3 at a current account with defendant No. 1 and that he used to overdraw his account from time to time on the security of shares which he used to deposit with defendant No, I and that in the same manner, defendant No, 3 deposited 15000 shares, which were received by defendant No 1 in ordinary course of business. It has also been averred that the amount of Rs, 2,70,000 received was credited to the account of defendant No, 3, who drew out the amount in ordinary course and in fact overdrew his account. It has also been averred that the suit is maintainable and it is hit by section 69 of the Partnership Act. (d) Defendant No, 2 in their written statement have raised legal plea about the maintainability of suit, but have admitted that they had acted in the transaction in question as an agent for the plaintiff. It has been averred that defendant No, 2 acted in good faith in accordance with the instructions of the plaintiff. It has been averred that the plaintiff was member of the Karachi Stock Exchange Ltd. And by and through his staff deals in shares, stock and securities and that the plaintiff and his staff had special knowledge and experience of checking and verification of share scrips and securities and the transfer forms or deeds. It has been further averred that in the course of dealings between the plaintiff and the answering defendant the plaintiff by himself through his staff had directed and made arrangement for checking and verification of share scrips and the transfer forms or deeds by a member of the staff of the plaintiff and on the strength of such checking and verification, these defendants used to be directed to accept delivery of the shares and to make payment on behalf of the plaintiff. It has been further averred that on or before 21st November, 1963 defendant No. 1 sent to the branch office of the answering defendants, their representative with their letter of 20th November, 1963 and that defendant No. 1 represented and warranted that they were handing over to the answering defendant 15000 shares of Karnaphuli Paper Mills Ltd. Shown in the list attached to their letter. It has been further averred that the agent of the answering defendant in-charge of their branch telephoned the office of the plaintiff and spoke to Mr. Rajabally his Manager and requested him to depute in terms of the directions a member of his staff to check and verify the share scrips and the transfer forms or deeds and to accept delivery on behalf of the plaintiff and that the plaintiff deputed one Syed Ahmed Hussain, who checked and verified the scrips shares and transfer forms or deeds and accepted the delivery of the same and as a token thereof signed at the foot of the letter dated 19th November, 1963 of the plaintiff to the answering defendant, and that thereupon, the answering defendant issued pay-order for Rs, 2,70,000 in favour of defendant No. 1, whose representative endorsed the receipt for the same at the foot of the letter dated 20th November, 1963, of defendant No. 1 to the answering defendant. It has been averred that the answering defendant acted in good faith in accordance with directions of the plaintiff and no liability attaches to them as alleged or at all. It has been further averred that on the facts and the circumstances, there was no negligence on the part of defendant No, 2 and that negligence if any was on the part of the plaintiff and of his staff acting on his behalf, and that the alleged forgery was not such as could be discovered at the time of the delivery. It has been denied that defendant No, 2 acted negligently or committed breach jointly with defendant No. 1 or made any representation or deprived the plaintiff or caused him loss. It has been averred that the answering defendant made payment of the sum of Rs, 2,70,000 to defendant No. 1 by a pay-order and that said defendant No. 1 was payee of the said pay-order. Has also been averred that the consideration for the above payment delivery was effected by defendant No. 1 and/or defendant No, 3 of 15000 shares of Karnaphuli Paper Mills Ltd. And that as no such shares were delivered and that shares delivered were discovered to be forged the payment made was without consideration
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or for consideration which failed and that said defendant No, I had interest as the pledgee and that they had the right of sale of the said shares. It has also been averred that defendants Nos. 1 and 3 committed breach of conditions and warranties applicable. It has also been averred that the answering defendant are entitled to indemnity and contribution from defendants Nos. 1 and 3 jointly and severally to the full extent of decree that may be passed against them. (e) Defendant No, 3 has also filed a written statement but, has not led any evidence. Defendant No. 1 in his written statement has denied para 1 of the plaint and has averred that the transaction was "a Badla deal" and that the rate was Rs, 18 and the centre rate agreed to be, was Rs, 18.50. It has also been averred that the settlement was made at a difference of 50 Paisa higher or lower as the case may be. It has been further averred that there was no mention and/or direction of shares or any particular distinctive numbers and that the shares were to be settled in connection with Badla transaction at Rs, 18 per share to be re-settled to defendant No, 3 at Rs, 18.50 per share after one month, and that the said shares under Badla transaction were re-purchased at Rs, 18.50 per share from the plaintiff. It has also been averred that thereafter fresh badlas were used to be made every month and defendant No, 3 was charged by the plaintiff difference in market rate and also out of Badla settlement an interest and that the last transaction was made on 26th May, 1964 under which Badla the shares delivery was agreed to be on 30th June, 1964. It has been averred that the alleged sale agreement of 21st November, 1963 was washed out by subsequent fresh Badla transactions and that the plaintiff has no cause of action on the basis of delivery of 21st November, 1963. It has been further averred that prior to the transaction in question defendant No, 3 had a number of transactions with the plaintiff under which large number of shares were delivered by the plaintiff to defendant No, 3, who used to deposit his shares with his Bank. It has also been averred that defendant No, 3 had deposited large number of shares with his Bank when blank transfer deeds were also deposited with the banks and that latter were authorised to verify the shares from the companies. It has been denied that on 15th June, 1964 Inc plaintiff learnt that the share scrips of 15000 shares delivered by defendant No, I were forged. It has been averred that the plaintiff had not given any particulars of the alleged forgery. It has been denied that defendant No, 3 is responsible for the alleged forgery or that he is liable to make good the alleged loss suffered by the plaintiff. 2. (a) <Suit No, 179/65.-In the above suit defendants Nos. 2 and 3 are the same who are defendants Nos. 2 and 3 in Suit No, 178/65. However, defendant No, I is American Express Co. Inc. Instead of Bank of India, which is defendant No. 1 in the aforesaid Suit No, 178 of 1965. ' This is a suit for the recovery of Rs, 3,90,687.50 comprising of Rs, 3,56,250 being the price paid for 19000 shares of Karnaphuli Paper Mills Ltd. To defendant No. 1 and Rs, 34,437.50 being the amount of interest at 6% per annum for the period from 9th January, 1964 till 16th August, 1965. It has been averred that on or about 8th January, 1964 defendant No, 3 agreed to sell 19000 shares of Karnaphuli Paper Mills Ltd. At the rate of Rs, 18.75 per share totalling Rs, 3,56,250 and that said defendant No, 3 represented that 19000 shares of Karnaphuli Paper Mills Ltd. Would be delivered by defendant No. 1 to the plaintiff's Banker, defendant No, 2 on payment of the aforesaid price. It has been further averred that defendant No, 3 by a letter dated 8th January, 1964 instructed defendant No. 1 to deliver 19000 shares of Karnaphuli Paper Mills Ltd. Against payment of Rs, 3,56,250 to the plaintiff and endorsed a copy of the letter to the plaintiff. It has also been averred that the plaintiff instructed defendant No, 2 by his letter dated 8th January, 1964 to take delivery of 19000 shares of Karnaphuli Paper Mills Ltd from defendant No. 1 against the payment, for which the plaintiff enclosed his cheque for Rs, 3,56,250, and that on 8th January, 1964 defendant No, 2 sent a cheque for Rs, 3,56,250 on behalf of the plaintiff to defendant No. 1 requesting defendant No. 1 to deliver 19000 shares of Karnaphuli Paper Mills Ltd. It has been further averred that on 8th January, 1964 defendant No. 1 without sending any bill or their covering letter or list of distinctive numbers of shares purported and pretended to send 19000 shares scrips of Karnaphuli Paper Mills Ltd. And
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merely acknowledged the receipt of plaintiff's cheque against the delivery of alleged share scrips and defendant No, I received the said alleged share scrips. The plaintiff has made identical averments and has also raised identical legal pleas in the present suit, which has been done in Suit No, 178/65 and therefore, it will be futile to repeat the same. On the basis of the aforesaid averments and legal pleas the plaintiff has claimed the above reliefs. (b) Defendant No. 1 in their written statement has denied that they had given any assurance or made any representation to the plaintiff regarding the delivery of 19000 shares of Karnaphuli Paper Mills Ltd. It has been averred that defendant No, 3 had deposited with the answering defendant 19000 shares of Karnaphuli Paper Mills and that by writing dated Nth January, 1964 defendant No, 3 instructed the answering defendant to deliver the said 19000 shares of Karnaphuli Paper Mills Ltd. To the plaintiff against payment of Rs, 3,56,250 and that the said writing also contained an endorse. Ment by the plaintiff that these shares be delivered to the Habib Bank Ltd. K. S. E. Br. It has been averred that on the same date the Habib Bank Ltd. Stock Exchange Branch tendered a pay-order for Rs, 3,56,250 and took the delivery of the said shares. It has been admitted that 19000 shares were delivered by answering defendant to defendant No, 2 on 8th January, 1964, however, it has been denied that it was necessary that the same defendant should have sent any bill or any covering letter of list of distinctive numbers of shares to defendant No, 2 or to the plaintiff. It has also been averred that the answering defendant were not itself selling any share to the plaintiff or to defendant No, 2 but were acting on the instructions of defendant No, 3 for delivering the said shares to the plaintiff. It has been denied that the answering defendant gave any understanding to or agreed with the plaintiff or with defendant No, 2 to deliver or transfer the share scrips of 19000 shares of Karnaphuli Paper Mills Ltd. And that there was anything apparent to indicate that the shares certificates were not genuine and that the answering defendant merely acted on defendant No, 3's advice and instructions in delivering the said share scrips to defendant No, 2 and that there was no question of the answering defendant transferring the said shares to the plaintiff or to defendant No, 2. It has been further averred that the answering defendant was instructed by defendant No, 3 to deliver to the plaintiff/defendant No, 2 the 19000 Karnaphuli Paper Mills Ltd. Share scrips, which had been deposited with the answering defendant by defendant No, 3 and that the. Answering defendant did not itself enter into any transaction either with the plaintiff or with defendant No 2 and therefore, there was no question of the answering defendant being required to exchange the share scrips delivered to defendant No, 2 for other shares scrips. It has been averred that claim of the plaintiff and of defendant No, 2 if any is against defendant No, 3. Who was and is the only contracting party in the transaction and that payment of Rs, 3,56,250 has been made to defendant No, 3 and the claim for refund if any is against defendant No, 3. It has been further averred that the answering defendant was merely an intermediary for receiving payment against the delivery of share scrips and did not hold out any assurance or representation to any party regarding the transaction in question and that there was no obligation on the answering defendant to warrant the genuineness of the share scrips and that in any case the share scrips on their face are apparently in good order. It has been denied that the answering defendant acted negligently or that they were under any obligation or duty towards the plaintiff or made any representation to the plaintiff. (c) Defendant No, 2 have filed written statement admitting therein that they acted as the agent for the plaintiff, but have made identical averments on facts and on law, which they have made in Suit No, 178/65. They have also claimed indemnity and contribution from defendants Nos. 1 and 3 jointly and severally in case they are to be held liable. However, it will be pertinent to state a few facts herein, which are different from the first suit. It has been averred that on 8th January, 1964 defendant No, 3 and one Mohammad Vali Khan a member of their staff deputed by defendant No. 1 came to the branch office of the answering defendant and represented that they had 19000 shares
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of Karnaphuli Papers asking payment for them at Rs, 18.75 per share. It has been further averred that the agent of defendant No, 2 Incharge of their branch telephoned the office of the plaintiff for direction, thereupon the plaintiff through his Manager Mr. Habib Ali Mohammad authorised in this behalf, instructed the answering defendant that defendant No, 3 was his valued client and delivery must be taken and payment made and that he further stated that, he was sending a member of the staff of the plaintiff to check and verify the scrips of the shares and the transfer forms or deeds and to take delivery on behalf of plaintiff and that the member of the staff of the plaintiff deputed as aforesaid was one Mr. Syed Ahmed Hussain who checked and verified the scrips of the shares and transfer forms or deeds and accepted delivery and endorsed receipt for the same on the letter of plaintiff dated 8th January, 1964, whereupon answering defendant debited the cheque of the plaintiff in their books and issued pay-order for Rs, 3,56,250 in favour of defendant No. 1, whose representative said Mohammad Vali Khan endorsed receipt for the same on the letter of the plaintiff. It has been averred that the answering defendant acted in good faith and as per instruction of the plaintiff. Etc. (d) Defendant No, 3 has also filed a written statement but, did not lead and evidence in the above suit as well. In his written statement defendant No, 3 has denied that on 19th November, 1963, he agreed to sell 19000 shares scrips of Karnaphuli Paper Mills Ltd. To the plaintiff as alleged at Rs, 18.75 per share. It has been averred that the transaction between plaintiff and defendant No, 3 was a 'Badla transaction' made on 7th January, 1964 whereby difference of Re. 00.24 was pa?Able by defendant No, 3 to the plaintiff. It has been further averred that the above shares were to be settled in connection with the Badla transaction at Rs, 18.75 per share to be re- settled to defendant No, 3 at Rs, 18.99 per share after one month (10th February, 1964 delivery) and that the said shares under the Badla transaction were repurchased at Rs, 18.99 per share from the plaintiff and that thereafter fresh Badla transactions were used to be made every month and defendant No, 3 was charged by the plaintiff difference in the market rates and also difference of Badla settlement, and that the last transaction was made on 26th May, 1964 under which Badla shares delivery was agreed to be made on 30th June, 1964. It has been averred that the alleged delivery made on 8th January, 1964 was washed out by the subsequent fresh Badla transactions. In the above written statement defendant No, 3 has also denied the fact that he was responsible for the forgery or that he was liable. 3. In Suit No, 178/65, 7 issues were framed by the Court on 7th August, 1967 and whereas in Suit No, 179/65, 23 consent issues were adopted on 19th September, 1966. However, on 20th February, 1980, 3 additional issues by the consent of the learned counsel for the parties were framed by me in Suit No, 178 of 1965 and in Suit No, 179 of 1965, it was ordered that issues framed in Suit No, 178 of 1965 with the above 3 additional issues would be treated as issues for above Suit No, 179 of 1965 as well. It was also agreed by the parties that the evidence in one case was to be read into for the other case. The following are the aforesaid issues framed by the Court on 7th August, 1967 and the 3 additional issues adopted by me on 20th February, 1980 :- "(1) (a) whether the defendant No, 2 acted as plaintiff's agent in the transactions in suit ? (b) If so, whether the defendant No, 2 complied with the plaintiff's directions in the business of agency ? (2) Whether delivery of shares was taken by the defendant No, 2 ott acceptance of shares by the representative of the plaintiff ? If so, what is the effect ? (3) Was the plaintiff negligent in the transactions in the suit. If so, what is the effect ? (4) Whether the share certificates in suit are forged certificates ? If so, when the forgery was discovered and what is its effect on the suit ? (5) Were there any warranties from defendants Nos. I and 3 with regard to the genuineness or number of shares in dispute in this suit ? If so,…
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