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Petitioner: MESSRS FOREMOST TRADING COMPANY VS Respondent: CALEDONIAN INSURANCE JUDGMENT
Court Name: Sindh High Court Judge(s): Nasir Aslam Zahid Title:MESSRS FOREMOST TRADING COMPANY vs CALEDONIAN INSURANCE
JUDGMENT
Reported As: PLD 1981 Karachi 540 Result: Suit decreed Judgment JUDGMENT This is a suit for the recovery of Rs. 1,00,914. Plaintiff is Messrs Foremost Trading Co., a partnership firm. Defendant No. I is Caledonian Insurance Company Limited and defendant No. 2 is the Eastern Mercantile Bank Ltd. (hereinafter referred to as "the Bank"). The case of the plaintiff, as set out in the plaint, is that in 1964 the plaintiff, who is an importer, and the Bank had entered into a contract of bailment whereby the defendant No. 2 was holding at their godown in Dacca as bailee the plaintiffs' goods namely cases of playing cards that were sent to the Bank from time to time through the plaintiff's clearing agents in Chittagong. The goods were kept in a godown which had been hired by the Bank and in which godown not only the goods of the plaintiffs were stored but goods of other parties were also stored. According to the plaintiff, the Bank was required to dispose of the goods according to the plaintiff's delivery orders sent to the Bank from Karachi and from the proceeds crediting the plaintiff's account with the Bank. The plaintiff's case is that the Bank as bailee of the goods of the plaintiff was bound to keep watch, guard and preserve the said goods in the usual manner in the ordinary course of business and was, as bailee. Responsible for any damage thereto while the goods were in their possession and in respect of which the Bank was getting remuneration for handling and storage. 2. The said goods had also been insured with defendant No. 1 Insurance Company under two policies namely a fire insurance policy and a burglary (business premises) policy. Both the plaintiff as well as the Bank were the beneficiaries under these policies. 3. By letter dated 12-2..1968 (Exh. 10/30) the Bank informed defendant No. 1 with a copy to the plaintiff about a fire having destroyed some of the goods of the plaintiff which, according to this
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letter, was detected by the Bank on 9-2-1968. A survey was carried out by the surveyors, nominated by defendant No. I company and for the loss suffered on account of fire, defendant No. 1 company indemnified the plaintiff. There is no dispute in this suit as regards the damage caused by fire to the goods of the plaintiff: 4. It is through letter dated 24-2-1968 (Exh. 10/32) the plaintiff was informed by the Bank that there was a shortage of the following goods belonging to the plaintiff which were kept under the custody of the Bank ; (i) Bonus playing cards-13 cases and 17 dozens. (ii) Broadway playing cards--16 cases (each of 6 gross). This shortage was the difference between the goods which should have been in the godown according to the ledger of the Bank and the goods actually found through physical inventory. While intimating this shortage to the plaintiff, the Bank wrote as follows : . "It appears that the shortages are due to theft and burglary in the godown in question and since it has just been detected we are reporting the matter to the Police." 5. The Bank lodged an F. I. R. On 27-2-1968 (Exh. 10/36) with the Police in Dacca and also intimated about the shortages to defendant No. I. There was exchange of letters between the parties. Later on the Police recorded a report under section 173, C. P. C. With the following remarks : "It is no use to keep the case pending as there is no hope of detection." 6. Plaintiff had made claims against the defendant No. 1 company on the basis of the burglary insurance policy and against the Bank as bailee of the goods. Both the defendants have denied this liability. Defendant No. 1, through letter dated 11-4-1968 (Exh. 10/40) denied its liability in the following terms "This policy protects you in respect of loss or damage caused by theft following upon. Or occasioned by an actual forcible and violent entry of the premises. Consequently there is no cover under the policy for the loss which you have advised to us and we regret we are unable to help you." The Bank through its letter dated 24-4-1968 (Exh. 10/42) denied its liability in the following terms : " . . The Bank did never undertake to make good loss in the event of loss or damage by fire, theft and burglary. The goods were; fully insured and a s such the insurance company will pay the actual loss as per invoice value caused due to fire, theft and burglary." As neither of the defendants satisfied the claim of the plaintiff, the present suit was filed for the recovery of Rs. 1,00,914, being the value of the goods of the plaintiff found short. 7. Defendant No. I in their written-statement (Exh. 4) have denied that the shortage, if any, was due to theft and/or burglary. As an additional plea it has been pleaded that the alleged loss was not due to burglary as contemplated in the policy of insurance or to any peril insured against, and no liability, therefore, attached to the defendant No. 1. The Bank had taken up the preliminary objection in their written-statement (Exh. 6) that the Courts at Karachi bad no jurisdiction to try this suit. An application under Order VII, rule 11, C. P. C. (Misc. No. 5028/68) had been filed by the Bank for rejection of the plaint on this ground but the said application Was dismissed by order dated 20-1- 1969. Defendant No. 1 has not raised any objection to the jurisdiction of this Court to try this suit as is apparent from their written-statement as well as the order dated 20-1-1969. The stand taken in their written-statement by the Bank on merits was that there was no relationship of bailer and bailee between the plaintiff and the Bank. According to the Bank, the plaintiff had hired the godown of the Bank and had stored some playing cards on the clear understanding that the plaintiff would pay godown rent and other charges as required by the plaintiff. It was further denied that the Bank was disposing of the goods according to the plaintiff's delivery orders. It was pleaded that the. Goods were kept in the rented godown by the plaintiff and the goods used to be delivered by the local agents of the plaintiff in Chittagong. According to the Bank they had only rented their godown
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to the plaintiff and the entire responsibility in respect of the goods was of the agents of the plaintiff. In para. 13 of their written-statement they had taken up the stand that from the final report of the Police it was clear that the theft was committed by breaking through their windows and door of the godown. However, this final Police report has not been produced as evidence in this Court. According to the Bank, as this was a case of theft, defendant No. 1 was liable. 8. On the pleadings of the parties the following issues were framed :--- (1) What was the nature of relationship in respect of -the goods between the plaintiffs and the defendant 2 and whether they are liable to the plaintiffs for the shortfall as alleged ? (2) Whether the loss mentioned in para. 8 of the plaint actually occurred. If so what is the actual shortage and resultant quantum of loss ? (3) Whether and if so which of the defendant is liable for the loss if any and to what extent ? (4) Whether in the circumstances of the case the loss is covered by the Insurance Policy in question ? (5) Has this Court jurisdiction to try the suit ? (6) Whether the suit has not been properly drawn up, signed, verified and is bad for `defect of parties" as alleged in para. 6 of the written statement of defendant No. 2 ?" 9. On behalf of the plaintiff one witness was examined, namely, Kaus P. Agha, partner of the plaintiff firm, who also produced certain documents. After the evidence of this witness, the plaintiff closed their side. Neither of the defendants adduced any evidence. It may be noted here that the Bank was earlier being represented. As observed earlier, they had also filed their written-statement. However, later on after the plaintiff's evidence was recorded and their side was closed, no evidence was led on behalf of the Bank and their Advocate then stated no instructions. 10. I have heard at length the argument of Mr. Ibadatyar Khan, learned counsel ' for the plaintiff and Mr. S.H.Kazmi- learned counsel for the defendant No. 1. The Bank and their counsel were called absent. Before I refer to the contentions raised by learned counsel, I may refer to the burglary insurance policy (Exh. 10/19). According to this policy of insurance, defendant No. 1 were liable "if after payment of the premium specified in the said Schedule (of the policy) any of the contingencies specified therein shall happen during the period of insurance". In the Schedule to the policy the risk covered is specified as "loss or damage caused by theft following upon or occasioned by an actual forcible and violent entry of the premises situate and known as . . . . . . . . . : ' It is an admitted position that the policy of insurance was in force during the relevant period. As observed earlier, the defence of defendant No. 1 is that this was not a case of theft and, in any case, if it was a case of theft, it was not a theft committed following upon an actual forcible and violent entry into the insured premises. The case of the Bank has already been referred to earlier and it is a denial of their relationship as a bailee, and that the plaintiff only hired their godown and was keeping their goods in that godown and further that it was a case of theft and the plaintiff could recover the amount from defendant No. 1 who had issued a burglary insurance policy. 11. I now propose to deal with the issues framed in this suit. Issue No. L-"What was the nature of relationship in respect of the goods between the plaintiff and defendant No. 2 and whether they are liable to the plaintiff for the shortfall as alleged 7" As observed earlier, the Bank in their written-statement have taken the stand that the relationship between them and the plaintiff was not that of bailee and bailor. According to them, the plaintiff was paying rent to the Bank for the godown in which plaintiff's goods were stored and deliveries from that godown were being made by the agent in Chattagong of the plaintiff. The stand of the Bank is, therefore, that the Bank did not have the custody of the goods of the plaintiff and had no control over the same. However, from the evidence on record I find that the stand taken by the Bank is not correct. The evidence clearly shows the relationship between the plaintiff and the Bank to be that of a bailor and a bailee. I need here refer only to the correspondence exchanged
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between the plaintiff and the Bank which is sufficiently clear on this point. From the correspondence it is found that the Bank was charging the plaintiff by way of handling charges in respect of the goods as well as godown keeper's salary. Exh. 10/12 is a letter dated 3-3-1965 of the Bank addressed to the plaintiff in which they have referred to the handling charge. What is important is that they have mentioned in this letter that they had not charged for the godown keeper's salary and conveyance to godown staff and further the godown rent which was being charged from the plaintiff was also very low. Exh. 10/18 is another letter of the Bank addressed to the plaintiff in which they have stated that previously the godown, in which the plaintiff's goods were stored, was used by 3 parties, but goods of one of the parties had been cleared and that portion had been occupied by the plaintiff's latest consignment. In this letter the Bank further stated that godown was watched by a staff round the clock whose salary was realised from the occupant. By a letter dated 4-12-1967 (Exh. 10/28) the Bank again informed the plaintiff that the godown staff's salary was being recovered as one Chowkidar was permanently posted in that godown to watch the stock round the clock and his salary was distributed amongst the stock owners (including the plaintiff). From the correspondence it is also apparent that from time to time the Bank used to inform the plaintiff about the stock of plaintiff which was in the custody of the Bank. The F.1. R., (Exh. 10/36) about the theft of the playing cards had also been lodged by an officer of the Bank with the local Police in Dacca. Then there is the admission of the Bank in their letter dated 4-3-1968 addressed to Messrs Sinclair Murray (Pak.) Ltd. (surveyor appointed by defendant No. 1 company) that the Bank had been storing the stock of cards belonging to the plaintiff since January, 1964. They have further stated that "we have been keeping the goods of the above account (plaintiff) and its sister concern Messrs B. C. Aga & Co. In the same godown. On receipt of the delivery advice from Karachi Office of the Company we used to deliver the goods to the person concerned noted in the delivery orders. The godowns were being checked at regular intervals." 12. The factual position that emerges from the documentary evidence detailed in the previous paragraph is that the goods of the plaintiff used to remain in possession of the Bank as bailee for which the Bank was charging the plaintiff ; the godown in which the goods were kept was guarded by a godown keeper/chowkidar of the Bank ; and deliveries of the goods used to be made by the Bank on delivery orders issued by the plaintiff. It is also established that for the godown, rent was being charged and other charges for handling the goods as well as on account of the salary of the Chowkidar were being recovered by the Bank from the plaintiff. It is on account of these established facts that I have reached the conclusion that the Bank was bailee for reward of the goods of the plaintiff which were stored with the Bank. 13. The other point which requires determination under Issue No. 1 is whether the Bank is liable to the plaintiff for the shortfall. The fact that there was a shortfall is an admitted position. The Bank had itself informed the plaintiff about the shortfall and according to them this was due to a theft that had taken place. As a bailee it was the B; k's duty under section 151 of the Contract Act, 1872 to take as much care of the goods bailed to them as a man of ordinary prudence would, under similar circumstancestake of his own goods of similar nature. If the bailee has taken such care as required under section 151, he is absolved of responsibility in view of section 152 of the Contract Act. The burden of proving that the requisite care has in fact been taken is on the bailee. No evidence has been) led on behalf of the Bank, and in the circumstances, this burden has not been discharged. I am accordingly of the view that as bailee for reward, the Bank is liable to the plaintiff for the shortfall of the goods. Issue No. 1 is decided accordingly. 14. Issue No. 2.-"Whether the loss mentioned in para. 8 of the plaint actually occurred ? If so, what is the actual shortage and the resultant quantum of loss ?" (i) Bonus playing cards-13 cases and 17 dozens. (ii) Broadway playing card--r16 cases (each of 6 gross).
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The plaintiff were informed that the shortage was apparently due to theft and burglary in the godown and that the matter was being reported to the Police. The value of the missing cards in the claim bill dated 28-3-1968 sent by the plaintiff to defendant No. 1 gives the value at the rate of Rs. 33/1 per dozen for Broadway playing cards and at the rate of Rs, 66 per dozen for Bonus playing cards. The total amount for the missing goods at these rates came to Rs. 1,00,914 which is the amount claimed in the suit by the plaintiff against the defendants. This claim bill is attached to Exh 10/37 which is the letter dated 28-3-1968 of the plaintiff addressed to defendant No. 1. From the correspondence on record I find that this amount has not been challenged by either of the two defendants. Exh. 10/39 which is. The survey report dated 4-4-1968 of Messrs Sinclair Murray (Pak.) Ltd. Surveyors nominated by defendant No. I company, the figure is slightly higher that is Rs. 1,03,236. The exact shortage is not challenged in the survey report nor the value of the missing cards claimed by the plaintiff. In his evidence, P. W. 1 partner of the plaintiff (Exh. 10) has stated that the market rate of Bonus playing cards was between Rs. 60 to Rs. 66 a dozen and Rs. 33 to Rs. 40 per dozen for Broadway playing cards. The witness has also given in his evidence the market rate at the date of giving evidence as Rs. 120 to Rs. 130 a dozen for Bonus playing cards and Rs. 65 to Rs. 70 per dozen for Broadway playing cards. There is no cross-examination of .The plaintiff's witness on this point. As observed earlier, no evidence has been led on behalf of either of the defendants. In the circumstances, the extent of shortage and the value of the missing goods given by the plaintiff is accepted. I accordingly hold that the loss mentioned in para. 8 of the plaint. Actually occurred and the actual shortage is as given in the said paragraph. The value of the missing playing cards given by the plaintiff' as Rs. 1,00,914 is also accepted. Issue No. 2 is decided accordingly. 15. Issue No. 3.--"Whether and if so, which of the defendants is liable for the loss, if any, and to what extent ?" Issue No. 4-"Whether in the circumstances of the case the loss is covered by the Insurance Policy in question ?" I will take up Issues Nos. 3 and 4 together. I have, while deciding Issues Nos. 1 and 2, already held that the Bank (defendant No. 2) is liable to the plaintiff for the loss and I have also held that the Bank is liable for the entire claim made by the plaintiff in the present suit. To the extent, therefore, that Issue No. 3 relates to the liability and its extent in relation to the Bank, this part of Issue No. 3 stands decided. The question which yet remains to be answered under Issues Nos. 3 and 4 is whether defendant No. 1 is liable under the insurance policy and, if so, to what extent. 16. If the loss that has been suffered by the plaintiff has not been caused by theft, defendant No. I obviously would not be liable. They would only be liable in case the loss has been caused on account of theft, and further, on account of the special words used in the policy if the loss or damage has been caused by theft following upon or, occasioned by an actual forcible and violent entry of the premises. The first contention of Mr. S. H. Kazmi, learned counsel for defendant No. 1, was that the lost that has been suffered by the plaintiff was not on account of theft. According to learned counsel, the burden was on the plaintiff to prove that the present was a case of theft and which the plaintiff have failed to discharge. In the alternative, the argument of Mr. Kazmi was that if the Court comes to the conclusion that loss was caused on account of theft, even then the plaintiff will not succeed against defendant No. 1 as it has not even been attempted by the plaintiff -w establish that it was a case of theft following upon or occasioned by an actual forcible and violent entry of the godown. According to learned counsel for the plaintiff, in the present case the plaintiff has only alleged that loss was caused to them on account of theft and there is neither any allegation in the plaint nor is there any evidence at all that the theft had taken place following an "actual forcible and violent entry" of the Bank's godown. 17. In this case Police report was not produce in evidence and in the pleadings of the plaintiff (para. 10 of the plaint) only this much has been stated that the Police had made a report under section
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173 of the Code of Criminal Procedure with the remark that it was no use to keep the case pending as there was no hope of detection According to the survey report dated 4-4-1968 (Exh. 10/39) of Messrs Sinclair Murray (Pakistan) Limited, Surveyors appointed by defendant No. 1 to make enquiries into the question of theft alleged to have occurred in the godown of the Bank, the extent of loss has not been challenged. However, the version of the Surveyors as regards the manner in which the shortage must have occurred conflicts with the case of the plaintiff. The relevant paragraphs of Exh. 10/39, the Survey report, are reproduced here : "The stock in the godown was checked by our representative and as against 40 cases or 2880 dozs. Shown in the Bank's godown register only 10 cases 17 dozs. Were found on physical tally indicating shortage as stated above. It is confirmed that the godown was locked on 16-10-1967 and that there had been no occasion to open the godown until 9-2-1968. The shortage was only detected at the time of making inventory when inspecting the contents of the cases. On examining 2 doors and 2 windows of the godown no sign of forcible entry was found, therefore, we are of the opinion that the shortage has resulted in wrong or excess delivery by the insured's staff. The stock in the insured's godown is covered under the risk of burglary under Policy No. 1154213 for Rs. 2,00,000. In view of what we have written above we are of the opinion that no liability attaches." 18. As observed earlier only one witness was examined on behalf of the plaintiff and no evidence was led on behalf of the defendants. The partner of the plaintiff-firm who gave evidence in this case has produced documents exchanged between the parties, and copy of the F. I. R. He has given evidence to the effect that the goods of the plaintiffs used to be sent by rail or road from Chittagong to Dacca and in Dacca they were kept by the Bank in their godown and on the delivery orders issued by the plaintiff from Karachi, deliveries were made by the Bank as per instructions of the delivery orders. According to the witness the shortage in the stock was intimated by the Bank itself to the plaintiff and that it was the Bank itself who had informed the plaintiff that the shortage was on account of the theft. Apart from the correspondence exchanged between the parties and the F. I. R. The only other piece of evidence is the surveyors' report referred to above. According to learned counsel for defendant No. 1, neither the correspondence exchanged between the parties nor the F. I. R. Proves anything and that the only thing that could be said to have been established is the factuin of loss but the plaintiff have failed to prove that any theft had taken 'place in the godown of the Bank where the goods of the plaintiff were stored. 19. The Surveyors' report (Exh. 10/39) was sent to the plaintiff by defendant No. 1 under cover of their letter dated I1-4-1968 (Exh. 10/40) whereby defendant No. 1 denied their liability under the insurance policy. On record there is no reply by the plaintiff to Exh. 10/40. The present suit was filed by the plaintiff on 5-8-1968. According to Mr. Kazmi, the surveyors' report was not challenged by the plaintiff and in fact it has been filed by the plaintiff as their document. In the circumstances it was urged that the plaintiff cannot dispute the correctness of the surveyors' report. 20. Mr. Ibadat Yar Khan, learned counsel for the plaintiff had developed his case on the following contentions;-- (a) It was a triangular case with the two defendants opposing the plaintiff and denying liability. In the circumstances it was urged that the plaintiff could not possibly be expected to get any assistance from the Bank or to call any employee of the Bank as its witness. Mr. Ibadat Yar Khan argued that the Court should appreciate the difficult position the plaintiff was placed in view of the triangular nature of the case and the handicap of the plaintiff in producing the best evidence regarding the theft of their goods. (b) It was then contended that in paras. 13, 14 and- 23 of the written statement of the Bank it had been pleaded that the loss had occurred on account of theft pursuant to breaking open the doors and windows of their godown, and this part of the written statement be accepted as evidence. In so far as the Bank is concerned this can be taken as an admission but I am of the view that these
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averments in the written statement of the Bank by themselves cannot be taken as pieces of evidence against the defendant No. 1 who have denied such allegations. Plaintiff cannot succeed against defendant No. 1 only on the basis of such averments. (c) It was also contended by learned counsel for the plaintiff that the plaintiff have produced whatever evidence was possible for them to adduce and the Court may keep under consideration the fact that neither of the defendants has led any evidence. I do realize the position of the plaintiff but according to law the plaintiff has to prove their case and on the basis of the evidence on record it is to be determined whether the defendant No. 1 is liable to the plaintiff under the Insurance policy. 21. As far as the factual part is concerned I would…
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