Hemant Gupta, J.
1. The plaintiff-appellants are aggrieved against the judgment and decree passed by the learned first appellate Court, whereby their suit was decreed by the learned trial court but was dismissed in appeal.
2. The plaintiffs have filed a suit for declaration to the effect that plaintiff No. 1 is a registered firm under the Indian Partnership Act and is manufacturer of oxygen gas. Plaintiffs No. 2 to 5 are the distributors since 1942 of gas manufactured by plaintiff No. 1. The plaintiffs have alleged that oxygen gas is supplied to plaintiffs No. 2 to 5 and they return the empty gas cylinder to plaintiff No. 1 for refilling of gas after the consumers return the empty cylinders to plaintiffs No. 2 to 5. Plaintiffs No. 2 to 5 in the capacity of sole distributing agents of plaintiff No. 1 have been selling oxygen gas since July, 1977 to defendant No. 1 firm against cash payment, It is mentioned that the empty gas cylinders were required to be returned by defendant No. 1 to plaintiffs No. 2 to 5 for returning to the plaintiff for refilling with oxygen gas. 42 cylinders were supplied to defendant No. 1, however, 25 gas cylinders were not returned to plaintiffs No. 2 to 5. The empty cylinders were illegally pledged with State Bank of India who claims to have sanctioned some loan to defendant No. 1. The empty gas cylinders are the ownership of plaintiff No. 1 and plaintiffs No. 2 to 5 are the sole distributing agents who are under the obligation to keep the custody of those cylinder with good condition.
3. Defendant No. 1 was proceeded ex parte. In the written statement by the Bank it was alleged that the suit is legally not maintainable and no suit for mandatory injunction is competent in view of the averments made in the plaint. The suit is virtually for possession and custody of gas cylinders, therefore, no proper court fee has been paid on the market value of the cylinders or the loan amount. The bank also stated that it had no prior notice of the fact that title in the empty gas cylinders ever vested in plaintiff No. 1 nor any public advertisement to this effect was made. Defendant No. 4 is a bona fide banker treating defendant No. 1 in the ordinary course of business as owner of gas cylinders. Alternatively, it was pleaded that defendant No. 1 would be in a position of mercantile agent and therefore, defendant No. 1 was competent to raise money on the security of gas cylinders.
4. The learned trial court framed as many as 10 issues. However, the learned trial court found that the gas cylinders belong to plaintiff No. 1. These cylinders were supplied to plaintiffs No. 2 to 5 on the basis of Ex.P.4. Ex.P4 contains serial number of empty gas cylinders. It was found that the bank authorities had not conducted any inquiries to ascertain the ownership of defendant No. 1 in respect of the cylinders. The Manager of the bank has not been examined. The learned trial court also found that the suit for mandatory injunction was maintainable relying upon A.I.R. 1937 Nagpur 14 as the valuation was within the ambit of Section 7(iv)(c) of the Court fee Act and thus, held that the retention of 25 empty gas cylinders constituting suit property with defendant No. 1 bank is illegal, void and ineffective and decreed the suit filed by the plaintiffs.
5. In appeal, the first appellate court found the there is no privity of contract between the plaintiffs and defendants No. 2 and 4. Defendant No. 1 purchased gas cylinders in dispute from plaintiffs No. 2 to 5 and defendant No. 1 pledged these gas cylinders with defendant No. 2 to 4. Thus, the court held that the remedy of the plaintiffs is to file suit for possession of the gas cylinders in dispute or suit for the price thereof. Thus, the suit for mandatory injunction against defendants No. 2 to 4 was found to be not maintainable.
6. In the present second appeal the following substantial questions of law arise:
1. Whether defendant No. 1 is a mercantile agent who has a right to pledge these goods in favour of the bank to raise loan?
2. Whether the suit for declaration and mandatory injunction is maintainable in respect of gas cylinder, which were owned by the plaintiffs and were in possession of defendant No. 1 as purchasers of the gas?
7. The learned counsel for the appellants has vehemently argued that a perusal of the statements of the witnesses produced by the plaintiffs proved beyond doubt that plaintiff No. 1 is a manufacturer of gas and such oxygen gas is supplied to the consumers by plaintiffs No. 2 to 5 as sole distributors. As per terms of sale by plaintiffs No. 2 to 5, the gas cylinders are required to be returned after consumption of gas by the consumers. It is the gas which is sold and the gas cylinders remain the property of plaintiff No. 1, as the plaintiffs No. 2 to 5 have furnished security for the safe return of the cylinders in the sum of Rs. 1 lac. It was contended by the learned counsel for the appellants that since the plaintiff No. 1 is the owner of the gas cylinders and the possession of the gas cylinders with defendant No. 1 was that of a licensee, therefore, the suit for mandatory injunction was competent. In any case, the court has jurisdiction to mould the relief in terms of judgment reported as A.I.R. 1932 Lahore 401.
8. It is further contended that since the plaintiff No. 1 is the owner of gas cylinders which came in possession of defendant No. 1 with the sale of gas, therefore, the possession of defendant No. 1 over such gas cylinders is that of a licensee. Defendant No. 1 is not a mercantile agent and therefore, not competent to pledge the gas cylinders to raise loan in respect of the property which was not owned by defendant No. 1. The bank authorities have failed to conduct reasonable inquiry required by the bank to satisfy the title of defendant No. 1 in respect of such gas cylinders, therefore, the bank has no right to retain such gas cylinders.
9. Learned counsel for the bank on the other hand has vehemently argued that defendant No. 1 is a mercantile agent and therefore, pledge of goods is to be protected. He would be deemed to be competent to pledge the goods with the bank. It is contendedthat during the curse of its business, defendant No. 1 has purchased goods from plaintiffs No. 2 to 5 and thus, he is mercantile agent as defined under Section 2(9) of the Sale ofGoods Act 1930. Since such an mercantile agent has pledged goods, the plaintiff cannotdispute the action of defendant No. 1. Reliance was placed upon Shara Din and Anr.v. Gokal Chand, A.I.R. 1931 Lahore 526; Ah San and Anr. v. Mating Ba Thit,A.I.R. 1937 Rangoon 146; All Cheung and Anr. v. Ah Wain, A.I.R. 1938 Rangoon243: Firm Poonam Chand Shankarlal and Co. Bombay v. Firm Deepchand Sireymal,Ujjain and Ors., 4 A.I.R. 1972 M.P. 40.
10. I have heard the learned counsel for the parties at great length and have also gone through the record of the case carefully.
11. The first basic question which is required to be decided is whether defendant No. 1 is a mercantile agent as contemplated under Section 2(9) of the Sale of Goods Act, 1930. It would be beneficial to reproduce the definition of mercantile agent as contained in Sale of Goods Act and Section 178 of the Indian Contract Act, which read as under:
'2(9). 'Mercantile agent' means a mercantile agent having in the customary course of business as such agent authority either to sell goods, or to consign goods for the purpose of sale, or to buy goods, or to raise money on the security of goods.'
'178. Pledge by mercantile agent. When a mercantile agent is, with the consent or the owner, in possession of goods or the documents of title to goods, any pledge made by him, when acting in the ordinary course of business of a mercantile agent, shall be as void as if they were expressly authorised by the owner of the goods to make the same; provided that the pawnee acts in good faith and has not at the time of the pledge notice that the pawnor has no authority to pledge.
Explanation.- In this section, the expressions 'mercantile agent' and 'documents of title' shall have the meanings assigned to them in the Indian Sale of Goods Act, 1930 (3 of 1930).
12. A perusal of the record shows that it is a categorical stand of the plaintiffs that defendants No. 1 has been purchasing gas from plaintiffs No. 2 to 5 against cash payment with a liability to return empty cylinders which do not belong to defendant No. 1. It is further stated that defendant No. 1 has got absolutely no ownership or proprietary rights of the said cylinders as accordingly to the terms of the supply the gas cylinders are returnable after the expiry of 7 days from the date of the sale but not later than 20 days. Defendant No. 1 has not chosen to contest the suit. However, the bank has filed written statement taking up a plea that the loans were issued against stocks then in possession of defendant No. 1. The stocks were fluctuating. The cylinders were certified by defendant No. 1 as its own property and were in possession of defendant No. 1 in deliverable state. It is further stated that defendant No. 4 has no prior notice of the fact that the title to the empty gas cylinders ever vested in plaintiff No. 1.
13. Learned counsel for the respondents has laid stress on the words 'to buy goods' to contend that defendant No. 1 is mercantile agent and he has purchased goods from the plaintiff and thus, he has right to pledge the goods in terms of Section 178 of the Indian Contract Act, 1872. It. is further contended that any defect in the title of the defendant would not make the pledge illegal since the bank has acted in a bona fide manner while advancing loan on the security of gas cylinders.
14. The plaintiffs have produced Ex.P3. appointing plaintiffs No. 2 to 5 as its agent Ex.P4 contain the numbers of the gas cylinders challan No. against which the same were supplied to plaintiffs No. 2 to 5. Ex.P6 is the stock register of plaintiffs No. 2 to 5 to the effect that such gas cylinders were supplied to defendants No. 1 against invoices mentioned therein. PW1 is Gianinder Sharma, the Manager of Plaintiff No. 1 PW2 B.S. Bassi, is the Manager of plaintiffs No. 2 to 5. He has deposed that gas cylinders remain in the custody of the consumers till such time the consumers consume the gas therein.
M.L. Nayyar, Manager of the bank has appeared as DW1 who has deposed that defendant No. 1 has furnished declaration that gas cylinders belong to him.
15. A perusal of the above evidence shows that the plaintiff No. 1 has proved the terms of agency in favour of plaintiffs No. 2 to 5 and in turn it has proved the terms of delivery of gas cylinders to the consumers. The consumers are entitled to retain such gas cylinders till such time the gas is consumed by them. Keeping in view the nature of the goods sold i.e. gas, the gas cylinders is a container, property in respect of which remains with the plaintiff No. 1. Plaintiff No. 1 has taken security of Rs. 1 lac. from plaintiffs No. 2 to 5 to return the empty gas cylinders. Therefore, I have no hesitation to hold that the declaration given by defendant No. 1 to the effect that he is owner of the gas cylinders was not correct. The bank has not made any inquiry to find out the nature of transaction between defendant No. 1 and the plaintiffs and have merely relied upon the declaration given by defendant No. 1. Defendant No. 1 is the consumer of the gas and not an agent competent to effect sale or purchase of the goods for and on behalf of the plaintiffs. As a consumer he is not a mercantile agent as defined under Section 2(9) of the Sale of Goods Act, 1930. As per definition mercantile agent is the one who has either an authority to sell goods, or to consign goods for the purpose of sale or to buy goods or to receive money on security of goods in the course of his business.
16. The defendant No. 1 has purchased gas for its own consumption and not for indulging in the business of sale or purchases of the gas on payment of consideration. Since the gas could be in deliverable stage in the gas cylinders only, therefore, the defendant No. 1 was in possession of the gas cylinders. In fact, plaintiffs No. 2 to 5 had deposited security of Rs. 1 lac for return of the gas cylinders that is why the plaintiffs have sold only gas to defendant No. 1 and not the gas cylinders.
17. The arguments of the learned counsel for the defendants that since he has brought goods from the plaintiffs in the course of business, therefore, he would be mercantile agent cannot be accepted. A person can be called a mercantile agent only if in the course of his business, he has the authority to buy goods, i.e. his business must be to buy goods as an agent and not as a consumer. If a person has bought goods for consumption, he would be buyer as defined under Section 2(i) of the Sale of Goods Act. Defendant No. 1 was, thus, a buyer of the goods as defined under Section 2(1) of the Sale of Goods Act and not a mercantile agent. There is nothing on record that the defendant No. 1 used to buy gas from the plaintiffs to further sell to anybody else. Therefore, 1 am unable to hold that defendant No. 1 was a mercantile agent. In fact, plaintiffs No. 2 to 5 are the mercantile agents and not defendant No. 1.
18. In Shara Din and Anr. v. Gokal Chand (supra), the court has interpreted 'possession' appearing in Section 178 of the Indian Contract Act, 1872 as juridical possession as distinguished from mere physical possession or bare custody. It has been held that a servant or a relation entrusted by the owner with the custody of goods during his absence cannot be said to be in possession thereof so as to be entitle to make a valid pledge thereof. The learned counsel for the defendants has, in fact, relied upon the said judgment to show that the possession of defendant No. 1 was legal and therefore, the pledge by defendant No. 1 was valid as the bank has acted in good faith. In the said case, it was found that the Manager of the firm has been pledging the ornaments with different persons of his own and thus, the possession of the Manager was not found to be unlawful. In Ah San's case (supra) it has been held that if a person has an authority to sell the goods owned by another, he is a mercantile agent of that person. But in the present case, there is no evidence that defendant No. 1 had authority to sell gas to any body else and thus, on the strength of the said judgment, the defendants cannot raise an argument that defendant No. 1 was a mercantile agent.
19. In Ah Cheung's case (supra), it has been held that Section 178 has been enacted in order to protect those persons who in good faith deal with persons whom they know to be mercantile agents but the details of-whose agency they are not and cannot be expected to be aware. The Court held to be following effect:
'It appears to me obvious that pledgees can plead the benefit of Section 178 only when they know the pledger to be a mercantile agent, otherwise I can see no meaning in the proviso that the pawnee must act in good faith and must not have at the time of the pledge notice that the pawnor has no authority to pledge; These words would be meaningless if a pledgee, having taken on pledge an article from a person whom he did not know, who, it afterwards appeared, had committed a criminal offence in this pledging the article but whom the pledgee subsequently discovers to be a mercantile agent of the person to whom the goods really belonged, can escape the liability to return the article merely on the strength of that fortunate coincidence. The section has been enacted in order to protect those persons who in good faith deal with person whom they know to be mercantile agents but of the details of whose agency they are not and cannot be expected to be aware. I do not think that this section has ever been otherwise applied. It is relied upon only in cases where the pledgee is aware that the pledger is a mercantile agent.'
20. Lastly, the learned counsel for the respondents has relied upon a Division Bench judgment of Madhya Pradesh High Court reported as Firm Poonam Chand Shankarlal and Co. v. Firm Deepchand Sireymal Ujjain and Ors., (supra).
21. In that suit, the plaintiff used to purchase and sell cotton and cotton seeds through Dhanjit Ladhabhai for which defendants No. 1 and 2 were partners. The plaintiff directed defendant No. 2 to deliver the cottons bale to M/s Sukhdeo Cotton Press Company, Ujjain. Subsequently, the plaintiff directed the firm to transfer bales to M/s Man-goolal Treekamlal of Bombay in the account of M/s Sukhdeo Cotton Press Company, Ujjain. But these instructions were flouted by the firm. The defendants No. 1 and 2 in fact pledged the bales with M/s Deepchand Sireymal, Ujjain. In these circumstances, the plaintiffs filed suit on the ground that defendants No. 1 and 2 and the firm had no title in the goods and therefore, no right to pledge the bales. The suit was dismissed as it was found that defendant No. 2 had authority to sell as Adhatia (Commission Agent) of the plaintiffs. Therefore, if the defendant No. 2 pledged the goods with defendant No. 3, the plaintiff cannot claim any decree against defendant No. 3 on the ground that defendant No. 2 acted contrary to any special direction of the plaintiff. In that case, there was no dispute regarding statute of defendants No. 1 and 2 as mercantile agent who was working as Adhatia. The Latin maxim being 'Nemo Dat Quod Non Babet' i.e. no man can give a better title than he himself possess has an exception in Section 178 of the Indian Contract Act, which has been developed for the protection of commercial transitions. It was so held:
'As a corollary of this fundamental rule, no one can pledge goods unless he is the owner or lawfully represents the owner. Consequently, if a person obtains a pledge of goods from another who has no valid title to make a pledge the former acquires no security over them. But another principle of law came to be developed for the protection of commercial transactions. That other principle is that a person who takes from one who is known to be mercantile agent and who is in possession of the goods, gets a good title provided he acted in good faith and had no notice that the pledger had no title or authority to pledge. Under the first principle if a person deals with goods of another without his authority or consent, the transaction is nugatory against the owner. The second principle steps in to protect those who in good faith deal with a mercantile agent who is known to them as such and who is in possession of the goods.'
The Division Bench has concluded that there are 5 elements in Section 178 of the Contract Act, which are as follows:
(1) the pledger must be a mercantile agent,
(2) the pledger must be in possession of the goods or of title deeds within the meaning of Sale of Goods Act;
(3) the mercantile agent was in such possession with the consent of the owner;
(4) the mercantile agent made the pledge while in the ordinary course of business of mercantile agent; and
(5) the pledgee acted in good faith and had no notice at the time of contract of pledge that the pledger had no authority to pledge.
22. The learned counsel for the defendants have laid stress on the observation of the Division Bench to the effect that possession is a conclusive evidence of ownership so far as it is necessary- to protect a pledgee who act in good faith and has no notice that the pledger has no authority to pledge. It is contented that since defendant No. 1 was in possession of the gas cylinders thus, the pledge by such defendant along with his declaration that he is owner of the cylinders shows that the bank acted in a bona fide manner. However, I am unable to accept such an argument of the defendants. If a misleading statement is made by defendant No. 1, it would not be sufficient to bind a plaintiff so as to deprive them of their property. There is nothing on record to show that the bank has taken any steps to verify the correctness of the averments made by defendants No. 1 in his declaration. In normal course it is well known that it is the gas which is sold as the gas cylinders are only the containers. Any reasonable inquiry into the ownership for the gas cylinders would have disclosed that such cylinders are in fact, not owned by defendant No. 1 The self-serving declaration made by defendant No. 1 and reliance thereon by the bank is not sufficient to hold that the action of the bank to accept the gas cylinders as security is worthy of acceptance.
23. Still further, the defendants have not been able to prove that defendant No. 1 wasmercantile agent or that he made the pledge in the ordinary course of business of mercantile agent, nor the bank has proved that the action was in good faith. The first appellate court has dismissed the suit only on the ground that the plaintiff has filed a suit formandatory injunction and not for recovery or for possession of gas cylinders. The otherfinding recorded by the learned trial Court has not been reversed. Since the plaintiff No. 1 is the owner of gas cylinders and plaintiffs No. 2 to 5 were acting as agent ofplaintiff No. 1 therefore, the possession of defendant No. 1 was a permissive possessioni.e. for the use of gas and to return the gas cylinders after the gas is consumed. The cylinders were bound to be returned after the consumption of the gas. Possession of defendant No. 1 over such gas cylinders was that of a licensee alone since the ownership always vested with the plaintiff. Therefore, the suit for mandatory injunction was maintainable and rightly filed by the plaintiffs and decreed by the trial court.
Consequently, the judgment and decree passed by the learned first appellant court isset aside and of trial court is restored with costs throughout.