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Petitioner: TRADING CORPORATION OF PAKISTAN (PVT) LTD. SHAHRAH-E-FAISAL, KARACHI VS Respondent: MURSHED ENTERPRISES and 2 others
Court Name: Sindh High Court Judge(s): Mushir Alam Title: TRADING CORPORATION OF PAKISTAN (PVT) LTD. SHAHRAH-E-FAISAL, KARACHI vs MURSHED ENTERPRISES and 2 others Case No.: Suit No,1056 of 1991 Date of Judgment:2003-12-23 Reported As: PLD 2004 Karachi 407 Result: Suit dismissed
JUDGMENT
JUDGMENT InstantsuithasbeenfiledbytheplaintifffortherecoveryofRs,41,22,000fromthedefendantNo,1,aPartnershipFirmanditspartnersi,e,defendantsNos.2and3respe this suit are as follows:-- The plaintiff appointed the defendant No,1 as Custodian to store the Sugar imported by the plaintiff. It is claimed that, from February, 1988 to July, 1988, plaintiffs imported and entrusted High Quality 26,735 metric tons of Sugar, to the defendant No,1 for storage and deliveries to the plaintiffs or their nominees against the Delivery Orders. According to the plaintiff out of the total quantity entrusted to the defendant 432.200 Metric Tons of Sugar was short delivered. The Surveyors of the plaintiff and their Insurance Company confirmed such short delivery. Plaintiff averred that, the defendants did not dispute the short delivery but, attributed short delivery, damages or loss due to flood and rain. According to the plaintiffs, in terms of Clause 10 of the Agreement dated 13-7-1987, the defendants are liable to make good the losses. It was further pleaded that, such losses could be set-off against the pending bills and/or bank guarantees in terms of Clause 10 of the Agreement. It is the case of the plaintiffs that, defendant No,1, being bailee of the goods, had not taken good care of the entrusted goods, as required under law. According to the plaintiffs, the defendants, to avoid the liability have asserted loss on account of heavy rainfall. It is further the case of the plaintiff that, the shortage was not covered under the Insurance Policy, as such, difference for the short delivery could not be claimed from National Insurance Corporation. Plaintiffs also refuted the assertion of the defendants that, actual weighi difference are minimal or that it occurred owing.To piecemeal handling of the consignment and the quantity of shortage, falls within the permissible limit of tolerance allowed by the plaintiff. The plaintiffs have claimed the value of short delivery in para 10 of the plaint as follows:- "That the plaintiff is entitled for the loss/shortages suffered by it and to collect and recover from the defendants the market value/price of the aforesaid quantity of sugar short delivered to the plaintiff. The plaintiff is, therefore, entitled to recover and receive from the defendants the following amounts. Total shortage 432.200 M/Tons @ Rs,10,000 Per M/Tons. Rs,43,22,00,000 Less the bank guarantee. Rs,02,00,000,00 Amount recoverable. Rs,41,22,000 Defendants filed joint written statement and so also made Counter claim for Rs,3,38,162,00. Defendants denied that, they were appointed 'Custodianin terms of Agreement dated 13-7-1987. It was asserted that, the defendants were awarded custodianship in respect of sugar stored at Rashid Godown, vide letter dated 20-1-1998, and in two other godowns of (i) Usman Textile Mills and (ii) Dost Muhammad Cotton Mills, through another letter dated 4-7-1988. Defendant asserted that, the plaintiffs without consulting the defendants hired the above godowns. It was pleaded that, the choice of the godowns was not proper, more particularly, Rashid Godown beside situated in low-lying area was unprotected against floodwater. It was asserted that, the quantity entrusted to the defendants was short. It is the case of the defendants that, shortage in Rashid Godown was negligible i,e, 1.6% of the total quantity stored. As regard Dost Muhammad Godown, shortage was barely .017%, which percentage, according to defence is permissible limit of tolerance. It was further pleaded that, the sugar stored in the Rashid Godown was affected by rain and flood and the negligible shortage was on account of frequent handling, bursting and re-stitching of bags with the resultant spillage which loss is unavoidable and accepted as per trade usage. It was further claimed that the plaintiffs though entered into an agreement to engage the defendant as Clearing & Forwarding Agent but his service as a Clearing Agent were not availed. Instead, suit consignment was got cleared and forwarded for storage by plaintiff through other Clearing and Forwarding Agents. It was pleaded that, damage/loss to the bulk of goods stored, occurred due to act of God. According to the defendants, they took all precaution and care as a person of ordinary prudence would have taken, of his own goods under the given circumstances. In Paragraph 4(i) to (viii), of their joint written statement, defendants outlined the measure and steps taken by them to avert and mitigate the loss. It was pleaded that, damage was caused due to heavy rainfall with hailstorm and overflow of drain water at the entrance gate. Nearly 3 to 4 lower layers of stacks of sugar bags were damaged due to floodwater and the top layers of sugar bags were damaged by the leakage of rainwater from the ceiling and broken ventilators. Defendant without loss of time on the following date i,e, 18-7-1988 reported the situation to the plaintiffs. Resultantly, National Insurance Corporation ("NIC"), on the instruction of the plaintiff, appointed their Surveyors to assess the loss. At the same time, plaintiffs also directed the godown owners to repair the godown. It is further pleaded that, the Insurance Surveyors, to assess the damage separately, desired for separation of the bags damaged by floodwater and rainwater but, the plaintiff declined such exercise. Instead, the plaintiffs settled the claim with the Insurance Company on or about 31/8/1989. Further defence of the defendants was that, in fact, no actual weighing was done at the time when the goods were received in defendant's custody. It was asserted that, the plaintiff had alleged negligence after almost one and a half years from the date of actual loss. It is also asserted that loss, if
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any were to be made good by the Insurance Company and since the plaintiff had already settled whatever loss they suffered from the Insurance Company therefore, there appears to be no justification to claim any further loss from the defendants. As regard counter-claim, it was asserted that the plaintiffs have illegally encashed the Bank Guarantee, which were not given in respect of subject contract. Secondly, the defendant No,1 have not been paid rental for three (3) months amounting to Rs,75,000 at rate of Rs,25,000 per month. Defendants also claimed mark-up on counter-claim amount from the date of suit till payment. Following consent issues were adopted on 4-4-1993:-- (1) Whether defendant No,1's appointment by the plaintiffs as "Custodianof plaintiffsgoods was made under Agency Agreement dated 13-7-1987 and letter dated 20-1-1988? (2) Whether letter dated 20-1-1988 is independent of Agency Agreement dated 13-7-1989 and whether the said letter alone determines rights and obligations of parties to suit? (3) Whether damage/loss to goods occurred due to negligence of the defendant No,1 as alleged? (4) Whether damage/loss to goods stored in Rashid Godown occurred due to alleged heavy rains and leaking roof and due to its location in low- lying area in the circumstances alleged in para.4 of the written statement? (5) Whether loss in goods stored in 4 Godown of Dost Muhammad and Usman was caused due to alleged frequent handling and bursting and re- stitching of bags and was allegedly negligible and acceptable by trade usage as alleged in para.7 of the Written statement? (6) Whether the plaintiff failed to take alleged steps as stated in para 6 of the written statement? (7) Whether plaintiffs settlement with insurer was premature and collusive? (8) Whether the plaintiffs unlawfully encashed bank guarantee of Rs,2 lac as alleged? (9) Whether the plaintiffs failed to pay custodianship charges for the months of January, February, and March, 1990 to the defendant No,1 as alleged? (10) To what amounts, if any are the plaintiffs entitled against the defendants? (11) To what amount, if any are the defendants entitled against the plaintiffs in respect of their counter-claim? (12) What should the decree be? Plaintiff in support of its claim examined its Manager OSD, Mr. Manzar Saleem. The defendant examined Muhammad Sami-ul-Haq one of the partners of defendant No,1 firm. Findings on the aforementioned issue ad-seriatim are recorded as follows:- Issues Nos. 1 and 2:- Both the issues being inter-related are decided together. It is the case of the plaintiffs that defendant No,1 was appointed under an Agreement dated 13-7-1987 (Exh. No,P5/1).Mr. Mamnoon Hassan, learned counsel for the plaintiff, contended that in terms of the Agreement (Exh. No,P 5/1) the defendant No,1 was appointed as a Clearing Agent and under the terms of the agreement defendant No,1 was also responsible to provide storage facility for the imported consignment and give delivery to the plaintiffsRepresentative. It was asserted by Mr. Mamnoon Hassan that, when the consignment arrived at Karachi, it was entrusted to the defendant under separate letter dated 20-1-1988 (Exh. No,P 5/1). According to him, such entrustment was in continuation of the agreement Exh. P 5/1. Mr. Hamza I. Ali, learned counsel for the defendants controvert the stance of the plaintiffs. It was urged that, the appointment as a Clearing Agent is entirely different from the appointment as a custodian of the subject goods. He contends that, the plaintiff did not engage the services of the defendant No,1 as Clearing Agent. Subject consignment was got cleared through other Clearing Agents. He therefore argued that terms and conditions of the Exh.P 5/1 cannot be invoked. Mr. Hamaza, stressed that defendant's services were availed only as custodian of sugar, in terms of Exh.P.5/2. The plaintiffs hired the godowns of their own choice, without consulting the defendants. He, therefore, argued that, had the appointment as a custodian been in terms of the Agreement dated 13-7-1989 (Exh.No,P5/1) then subsequent appointment through (Exh.No,P5/17) would have referred to the above Agreement. Whereas, in Exh.No,P 5/17 reference is made to a letter dated 20-1-1988 i,e, Exh.No,P 5/2. It was therefore, asserted that, the defendant was appointed and acted as custodian in terms of Exh.No,P 5/2 dated 20/1/1988 and Exh.No,P 5/17 dated 4-7-1988. Heard the arguments and perused the record. In order to appreciate the arguments of both the learned counsel, examination of Agreement dated 13-7-1987 (Exh. No,P 5/1) would be beneficial. The recital reads as "WHEREAS the TCP has decided to award its contract in connection with the clearance of the imported goods to the Clearing Agents named above". In Clause (1) it was required that the "Clearing Agents should be in lawful possession of Godown space of not less than 10,000 square feet'. It was further provided in clause (2) that, Godown for storage space shall be in conformity given in annexure I. Specification As per Annexure 'Igives standard specifications for various categories of goods. For the category of sugar the specifications were 'covered space ensuring complete protection against sun and rain'. Under clause 4, thereof, it is provided that the Clearing Agent shall remove the goods to Godown or KPT warehouse for storage as and when required by TCP's and give delivery to the nominee Other terms and condition required Clearing Agent to maintain Avery Weigh scales, fire-fighting equipment obtain bonded warehouse. Obtain insurance cover for the risk of damage to the Godown acquired by him. Clause 10 reads "The Clearing Agent shall be liable to indemnify the TCP against all damages/shortage/losses occurring in his Godown for any reason whatsoever shall be assessed by TCP.......... It has come on record that, the plaintiffs did not engage the defendant No,1 as their Clearing Agent in respect of subject goods, nor the goods were stored in the warehouse of the defendant No, 1. In cross-examination, witness of the plaintiffs had stated that, "1 see Exh.P 5/2 and say that this was a bonded warehouse. It is correct that the defendants were appointed custodian in respect of sugar cargo only." The witness further admitted, "We appointed Shadab Corporation, as our clearing and forwarding agents. It is correct to suggest that two other vessels had subsequently arrived at the Karachi Port with sugar cargo, which was imported by us. Those were M.V Belley and M.V. Bahia. The clearing agent of former was Mobco and of the later was Shandab Corporation." The witness, further deposed that; "it is correct to suggest that, initially we appointed defendants as custodian of the sugar cargo which was to be stored in the Godown of Rashid Texitle Mills limited. I see Exh.P5/17 and admit its contents". Recital in the Agreement, Exh.P5/1, specifically provided that, the agreement relates to the appointment of defendant No,1 is as clearing agent only. Clause (2) of the said Agreement prescribes the specifications for the godowns. Clause (10) encompasses the indemnity'clause against all damages/shortages/losses occurring in his godowns, for any reasons whatsoever and recovery of such damages/shortage/loss against the Bank Guarantee and pending bills. It has come on record that, the plaintiff acquired all the Godowns themselves. It is, therefore, not the case of the plaintiffs that, the Godowns were not of the SpeLification, as provided in the Agreement (i.e Exh.P-5/I). Since, the plaintiff did not engage the services of the defendant No,1 as Clearing Agent (Recital). Nor the defendant removed the goods to the Godown (Clause-4). Nor the defendant No,1 (clause 9) obtained the insurance cover. Nor the damages/shortages/losses occurred in his godowns (Clause 10) as provided for under Agreement Exh.P-5/1.
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As noted above, plaintiffswitness admitted that, the defendant No,1 was appointed as custodian in terms of Exh.P-5/2 dated 20-1-1988 for Rashid Textile Mills SITE. In respect of Godowns of Usman Textile Mills and Dost Muhammad Cotton Mills Limited, as per Exh.P-5/17 dated 4-7-1988. Examination of last mentioned appointment of custodian i.e, Exh.P-5/17 shows that, it makes a reference to the letter-dated 20-1-1988 (Exh.P-5/2). Such fact fortifies the contention of Mr. Hamza that, had the appointment of custodian been made in terms of Exh.P-5/1 then, in subsequent appointment as custodian, reference should have been made to the Agreement (Exh.P-5/1) and not to Exh.P-5/2. In view of the foregoing, I have no doubt in my mind that, the plaintiff appointed the defendant No,1 as 'Custodianof the subject consignment in terms of letter dated 20-1-1988 (Exh.P-5/2 and letter dated 4-7-1988 Exh.P-5/17. The appointment as custodian was not in terms of the Agreement dated 13-7-1987 (Exh.P-5/1). Issue No,1 and 2 are answered accordingly. Issue No,3. Admittedly, damage to the sugar was caused due to rainwater and hailstorm. Short delivery is also not disputed. In order to ascertain as to whether the damage/loss to goods occurred due to the negligence of the defendant No,l. It will be beneficial to examine what were the duties and obligations of the defendant No,1 under the contract of bailment. In order to ascertain, whether the defendant No,1 caused the loss. It would be beneficial to appreciate the degree of care that a bailee is required to take. Degree of care, a bailee is required to take, is provided for, in terms of sections 151 and 152 of the Contract Act, which reads as follows: Section 151. Care to be taken by bailee.--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, under similar circumstances, take of his own goods of the same bulk, quality and value as the goods bailed. Section 152. Bailee when not liable for loss etc. Of thing 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.' From a bare perusal of above provisions, it is apparent that, the moment goods are delivered to the bailee, he assumes duty to take as much care of the goods bailed to him, as a man of ordinary prudence would have taken of his own goods. Unless, it is provided otherwise, by way of any special contract, a bailee cannot be held responsible for the loss, destruction or deterioration of the goods bailed. If the bailee is able to demonstrate that, he had taken as much care of the goods bailed to him as a man of ordinary prudence would have taken. Then even if the loss, destruction or deterioration has taken place, he gets statutory exoneration from any such liability by virtue of section 152 of the Contract Act. To foist the responsibility and impose liability as a bailee, it is to be shown that, there was a contract of bailment either express or implied between the parties. That a loss, destruction or deterioration of the goods bailed has occasioned and lastly, the bailee had not taken as much care of the goods bailed to him as a man of 'ordinary prudence would have taken under a given circumstances. As held above, the relationship between the parties was that of bailor and bailee. The contract of bailment was expressed i,e, in writing (Exh.P-5/2 and Exh. P-5/17). It is admitted position that loss had occasioned on account of rain and flood water. Admittedly the plaintiffs themselves acquired the godowns, where the subject sugar was stored. The specifications of the godown as were considered suitable for the purpose of storage of the sugar are specified by the plaintiffs themselves in the Annexure '1to the Agreement (Exhibit No,P-5/1) i,e,, covered space ensuring complete protection against sun and rain. In all fairness, since the plaintiffs hired the godowns, it is but legitithate to presume that, the plaintiffs acquired the godowns as per their own specification. In terms of section 151 of the Contract Act, the degree of care, which a bailee assumes is that of a man of ordinary prudence. No hard and fast rules could be outlined for fixing of such degree of care. It may vary from case to case. The degree of care is also dependent on the nature, description, quality, and quantity of goods and so also nature of bailment contract. Terms and conditions of bailment are recorded in Exh.P-5/2, which inter alia provide for receipt of the consignment. Proper stacking, keeping account, storage of damage bags and sweeping. Re-stitching, and re-filling torn and damaged sugar bags. Liaison with customs, submission of periodical reports, arrange security, notify any repairs etc. Required in the Godwon. To follow other direction as may be given by the TCP from time to time and remuneration for the services. Since the terms and conditions of bailment were reduced in writing, the responsibility and or liability of the bailee would be governed under the terms set out in Exh.P-5/2. No special terms and condition, as regard the consequences for the loss if any, were stipulated that may foist the liability for loss, destruction or deterioration on the bailee as required under section 152 ibid. Ordinarily a bailee is required to ensure that, (i) all reasonable precaution has been taken to avoid a risk, which. Reasonably could be foreseen. (ii) in case where a contingency has arisen then, it is to be seen that with what diligence and promptitude the bailee has acted to avert or minimize the loss. (iii) the promptitude he showed to apprise the bailor of the contingency encountered by him, to seek his opinion as to further course of action, (iv). To what extent bailee complied with the directions of the bailor after the bailee notified the contingency encountered by him. When loss, destruction or deterioration has occurred initial burden is on the bailee who is custodian of warehoused goods to prove that he had taken such care as was expected from a person of ordinary prudence in similar circumstances. Once such burden is discharged, then the burden shifts on the owner of the goods to prove that the custodian of the goods was negligent in discharge of his statutory duty to take care of: the goods entrusted to him. Before examining the degree of care and precaution taken by the bailee. It is to be seen as to what was the contingency or situation in which the bailee was required to act, and then to see whether under such contingency he acted in a manner expected from a man of ordinary prudence. It has also come on record that, on 17-7-1988, there was heavy rainfall in Karachi. The defendant No,1 on the very next day through letter dated 18-7- 1988 (Exh.P-5/18) notified, the plaintiff of damage caused by the rain and floodwater. Now it is to be seen as to with what promptitude and prudence the defendants encountered and faced the contingency and how they acted to avert the loss and damage. In this case, the bailee, defendant No,1 asserted that on the fateful day, on account of heavy rainfall and gushing of water they acted as a person of ordinary prudence would have acted under the given situation. Defendants categorically stated in para-4 of the written statement that the damage/loss to the bulk of goods stored occurred due to the Act, of God and elements of nature namely rain and floodwater. Against which, the defective Rashid Godown provided wholly inadequate protection. It was asserted that, defendant No,1 having complied with all its obligations under the letter/contract of 20-1-1988 particularly and generally having taken as much care of the goods bailed as a person of ordinary prudence would under similar circumstances taken care of his own goods, defendants detailed the steps taken by them in subparagraph (i) to (viii) of Para-4 of the written statement. One of the obligations of the bailee in terms of the Exh.P-5/2 as referred to above was 'to intimate the bailor about any repair etc, required in the Godown for proper storage/safety of TCP cargo.' Defendants caused the production of letter dated 11 February, 1988 (Exh.No,P5/16) through the plaintiffs, own witness, Exh.P-5/16 recounts the telephonic conversation that the defendants had with the plaintiff who were informed (1) the Godown has not properly been cleaned, (2) the floor of Godown is damaged at 12 places, (3) 14 (Fourteen) windows panes are missing, and (4) service toilets are out of commission. There is nothing on record to show that the plaintiff paid any heed to the defects pointed out by the defendants, in the Godown or that, the plaintiff took any remedial measure to carry out the repairs or remedy the defects pointed, out by the defendant No, 1 . On the very next day of natural calamity, the defendants through letter dated 18-7-1988 (Exh.P-5/18) intimated the plaintiffs:-
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"that as a result of heavy downpour yesterday afternoon during deliveries the rainwater entered into Rashid Godown through main gate damaging bottom layers of sugar bags. The roof of the Godown also leaked at various places. Further, following the conditions prevailing in Hyderabad and the situation in some of the areas of Karachi including S.I.T.E grew tense disrupting the normal activities, nevertheless, all possible steps were taken to sweep out the water as far as and as quickly as possible to minimize the loss/damage. In response of such intimation, plaintiffs directed the Godown owners through letter dated 20 July, 1988 (Exhibit No, P-5/19) to carry out the necessary repairs to avoid any further loss to the Government Cargo. Through letter of same date (as per Exhibit No,P-5/20), the plaintiffs directed their insurer (NIC) as under:-- "It has been brought to our notice by the custodian of the Godown M/s. Murshid Enterprises, Karachi that as result of recent heavy rains in Karachi, the rainwater entered through main gate into Rashid Textile Mills Godown, and damaged bottom layer of sugar bags. The roof of the Godown also leaked at the various places. However, all possible steps were taken to sweep out the water to minimize the loss/damage. In the light of the above circumstances, you are requested to carry out survey, assess the loss sustained to the consignment through your surveyor and make payment of the loss so sustained to TCP as per the above stated Godown insurance cover. Plaintiffs accordingly appointed the Surveyors to carry out the survey and assess the loss. The Report of Surveyor dated 24 September, 1989 (Exhibit No,P-5/38) is relevant for the purpose of determining the degree of care taken by the defendant No,1 as bailee. Report reads as follows: -- " On 17th July, 1988 a very intensive rain with hailstorm hit SITE area Karachi around 0900 hours. It rained whole day almost non-stop until next day. The Meteorological report as of 17th and 18 July, 1988…
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