Sukumaran, J.
1. Vijaya Bank Ltd., had its branch and activities in Cochin, among other places. Consequent on the enactment of the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance 1980, later replaced by Act 40 of 1980, the assets and rights became vested in the Vijaya Bank, the plaintiff in the case.
2. Messrs. Joshi Trading Company was one of the constitutents of the Bank. That firm had extensive dealings in rubber. It can be conveniently referred to as the firm. The firm had availed of various facilities from the Bank, including the pledging of goods and borrowing on the security of the goods pledged.
3. The 1st defendant had a variety ofbusiness activities. The partners of the firm were partners of D.B. Khona & Sons, well entrenched in business as shipping and clearing agents. In the light of the business transactions the Bank had with the firm, it entered into an arrangement with the 1st defendant for the storage of the goods, evidenced by Ext. A3 letter dated 12-4-1976.
4. After the 8th of November, 1977, the firm made itself scarce. The last deposit of rubber in the godowns by the firm was on 8-11-1977. As on 13-11-1977, there was an admitted balance of 140 tonnes, as seen from the Stock Register, Ext. B3, maintained by the 1st defendant. The balance stock is evidenced by Ext. A69 as well. The Court below itself, in paragraph 6 of its judgment, held:
'Thus it is the clear case that the quantity of rubber goods received by the 1 st defend ant as the final stock is 140 Tonnes.'
5. In December, 1977, the 1st defendant wrote to the Bank about the deteriorated law and order situation and requested the Bank to make alternate arrangements for the storage of the goods. The Bank, by Ext. A83, sought some further time in the matter.
6. When transactions became sticky, and outstandings continued to mount up, the Bank naturally endeavoured to enforce its rights and liquify the security. The Bank then had ajolting shock. The godowns were found empty.
7. The Bank sent a lawyer's notice, Ext. A78, on 14-6-1979 calling upon the 1st defendant to account for the goods entrusted with the 1st defendant. A reply was sought within two weeks. No reply was received within that time. Another notice, Ext. A79, was sent on 7-8-1979. Ultimately, on 23-2-1980, (more than about 8 months after Ext. A78 notice) the reply, Ext. A80 was sent.
8. Driven to the wall as it were, the Bank instituted the suit. Various contentions were raised by way of defence. The entrustment of the goods as pleaded by the Bank was denied. A plea of limitation was another. Subsidiary contentions such as about the price to beadopted if accountability in respect of the rubber stored had been established, and about the rate of interest payable, were also there.
9. The Court below dismissed the suit as barred by limitation. Article 3 of the 1st Schedule to the Limitation Act, according to that Court, was the applicable provision. That article allowed only three years time from the termination of agency. Ext. A82 letter was treated as a renunciation of agency. Reckoned that way, the suit filed on 28-1-1981 was found to be barred.
10. Findings were also entered on the other issues as well. According to the trial Court, damages for the quantity of accountable rubber has only to be reckoned according to the rates furnished by the firm on the basis of which the Bank had granted loans. Interest was found payable only at 6% per annum.
11. All the findings have been attacked in appeal by the plaintiff Bank.
12. The substantial question is about the bar of limitation.
13. As noted earlier, the defendant rested his case on Article 3 of Schedule I to the Limitation Act, 1963. The plaintiff maintained that the relevant Article is Article 70 which stipulated a period of 3 years from the date of refusal by the depositee to return the goods. Admittedly, reckoned that way, the suit is well within time. The crucial question therefore, is whether a relationship of depositor -- depositees or one of bailment, could be posited in the circumstances. If a bailment is established on the evidence and materials produced before the Court, the suit would not be hit by the limitation bar. Article 4 was also pleaded on the alternative.
14. There are cases in which Courts have strained much to sift the facts and to collate such of them as would enable inferring a case of bailment. That area is an extensive one, alike in England and in Australasia. It is unnecessary to have an excursion into those distant horizons for the purpose of this case.
15. There is documentary evidence admitted the 1st defendant, (Ext. A3), which would give the essential, terms of the arrangement. The various stipulations therein will have to be carefully scrutinised, notwithstanding its nomenclature. Under Ext. A3, the 1st defendant had agreed not to deliver the goods to any party other than the Bank. Delivery was to be given in the presence of a representative of the Bank. The 1st defendant was to watch the godown and the goods, and to account for the goods entrusted. Thar much of care as would be taken by the owner of the goods was to be exercised by the 1st defendant in relation to the godowns and the goods. The Bank was to be indemnified by the 1st defendant against loss, destruction or deterioration of the goods. The safe custody of all the goods in their charge, and stored by them or held by them on the Bank's account, was a major obligation of the 1st defendant. The Bank had to be indemnified against all losses of an exhaustive nature and the costs and damages as indicated in clause (vi). Employment of agents or sub-agents by the 1st defendant was prohibited. The goods belonging to each of the constituents of the Bank in the godowns were to be kept 'separately as distinct from other goods'. Proper books of records of the goods entrusted were also to be maintained.
16. The entrustment of the goods had been specifically averred in paragraphs 8 and 9 of the plaint. In paragraph 8 it was stated :
'The predecessor Bank entrusted the rubber goods pledged by M/s. Joshi Trading Company to the 1st defendant......'
Again, in paragraph 9, there is a reference to the stock of goods kept under the custody of the 1st defendant in trust for and on behalf of the predecessor Bank. Paragraph 12 reiterated :
'. . . the said rubber goods pledged to theplaintiff and entrusted to the custody of the1st defendant are security for the amountadvanced ...'
Paragraph 13 of the plaint complains about the loss of the goods. In that context too, the emphasis on entrustment of the goods to the 1st defendant is clearly given ;
'But the regrettable fact is that no portionof the stock of rubber goods entrusted to the first defendant remains in its custody.'
17. Counsel for the respondent frankly agreed that these specific averments are not contraverted by specific pleadings in that behalf. Paragraphs 12 and 13 of the plaint have not been referred to at all while answering the averments and allegations contained therein.
18. DW 1 attempted a perfunctory performance to wriggle out of obligation of a bailee. He went to the extent of stating that the 1st defendant had not appointed any godown keeper. In the stress of the cross-examination, he was seen forced to admit that the godown keeper was appointed by the firm and had been paid by the firm itself. It was the godown keeper, according to him, who was receiving the goods as per the direction of the bank. Similarly, he admitted :
'The godowns were in our exclusive possession because the godown keys were with us.'
And in yet another portion, he stated :
'Even before the goods were placed in the godown, the keys were with us. The godown keeper took charge of the goods. .......JoshiTrading Company keeps the goods in the godown under our key and lock. When they bring the goods, the key will be with our godown keeper. Our godown keeper opens the godowns and allows the goods to be kept inside.'
In the continued examination of 28-1-1983, he stated:
'Since the godown keys were with us we were receiving and releasing the goods as per the instructions of the bank.'
And still later:
'The goods were entrusted with us exclusively.'
Towards the concluding portion of his deposition, he stated:
'The godown keeper used to watch thegodowns even after 17-12-77 since the keys were with us.'
And towards the conclusion of his deposition, he came with a statement which is categoric and crucial:
'The keys are still with us.'
In the circumstances, the pleadings in the case and the massive admissions as contained in the testimony of DW 1, will make it impossible for the 1st defendant to escape from its obligations as a bailee.
19. The evidence on relationship of the parties is essentially documentary. The 89 documents -- 86 on the plaintiff's side and 3 on the defendants -- contain, the type of letters indicative of the arrangement that existed between the parties. There is repetition of the same pattern of correspondence, relating to transactions of different times. It is therefore unnecessary to refer to all of them. Any representative group of documents would be sufficient for the purpose.
20. The first in the chain of events is the approach made by the firm to the Bank for the grant of loan. The goods of the firm had to be pledged in favour of the Bank to secure a portion of the advances. The arrangement between the Bank and the 1st defendant --godown keepers comes into existence thereafter. The pledge of goods to secure the cash credit advances is evidenced by Ext. A2 dated 23-2-1976. Ext. A3 dated 12-4-1976, incorporating the rights and obligations of the 1st defendant under the arrangement have been referred to already. Ext. A4 series show how the 1st defendant writes to the Bank intimating about the receipt of rubber goods in the godown from the firm. The firm sends to the Bank a communication confirming the quantity of goods entrusted with the 1st defendant on each occasion. The letter of pledge by the firm in favour of the Bank is evidenced by Ext. A4(b). The subsequent dealing with the goods disclosed by the delivery order, and the intimations about the stock position are evidenced by documents like Ext. A5 series dated 19-6-1976 and Ext. A6 series dated 23-6-1976.
21. In the course of the three cornered correspondence, the Bank's communication to the 1st defendant about the pledge of rubber goods by the firm, the request of the firm to the 1st defendant to advise the Bank about the receipt of the goods, and the letter of the Bank to the 1st defendant to take delivery of the goods and to hold them as security, and the 1st defendant sending a communication to the Bank acknowledging receipt of the goods from the firm, and the advance of amounts made by the Bank to the firm have been established.
22. Certain important features need special attention in this connection. The first and the foremost is the entrustment of the goods with the 1st defendant.
23. A digression on the broad features of the trade in this area may be desirable to better appreciate the larger aspects. There are, of course, dealers who have their own go-downs. Godowns may be essential, particularly when the volume of business is huge and the commodity dealt with is bulky in nature. Businessmen who do not have the roots in a place, or such of those who adopt the fly-by-night operation may prefer avoiding investment on the construction of costly godowns. Similarly the dealers who do not have a large turn over of business, may think of considerable saving in the investment of non-essential assets like storage godowns.
24. The firm did not invest in a godown; nor did it take one on lease. It had therefore necessarily to entrust the goods with a go-down owner or godown keeper. If the Bank has a godown of its own, spacious enough to store the goods pledged to it by a customer, the problem would be easily solved. Things could be different if the Bank has no such facility. A firm like the 1st defendant, whose partners had connection with the trade in that locality for a long time, could be of services in such a situation. That was how the present arrangement, evidenced by Ext. A3 and other documents, was brought about between the plaintiff Bank, the firm and the 1 st defendant.
25. A Bank advances money, ordinarily, with great care and circumspection. It ensuresthat the money so advanced is safe and secure. A key loan arrangement ensures that the goods purchased by the borrower are put in possession of the Bank as security for the loan advanced. The Red Clause provision generally seen in standard forms is illustrative of the care taken by a Bank to have a hold on the goods which form the substantial security.
26. As regards the goods stored in the godown, ordinarily, the owner would be the firm. The firm need not, at a given instant, have the possession of the goods with itself. The possession of a person entrusted with the goods could be that of the person who initially arranged for the storing of the goods there, or of a person who, in accordance with the agreement between the parties, is treated as the person having possession. The question is one of intention of the parties. He who has the possession of the goods, either real or constructive, would be the person who could control the movement of the goods entrusted with the godown keeper. It is perfectly possible that the ownership in the goods already entrusted with the godown keeper, could change, even when goods remain stationary in the place where they were originally stored. The original owner of the goods is the bailor and the godown keeper is the bailee under the original transaction. The godown keeper can continue to be the bailee, when the status of the bailor is shifted to and placed on a person other than the original owner.
27. In the present case, there is no claim over the goods by the original owner, the firm. It could not make any such claim either, having regard to the strong and substantial banking arrangement that existed between the firm and the Bank. This aspect reduces the area of controversy.
28. When entrustment of the goods with the 1 st defendant is established beyond doubt, primarily and instantaneously the godown keeper would become a bailee. If he is the bailee, some one must be the bailor. At the initial stage, and at the time of the commencement of the storing of the goods, it would be the original owner --- the firm. Has there been any change in the position of thebailor vis-a-vis the bailee as a result of the later transactions between the bank, the firm, and the 1st defendant? While considering this question, some contentions can be referred to and the legal position examined in the background of such contentions.
29. The law of bailment is encapsulated in Section 141 of the Indian Contract Act. The explanation to the section illumines areas which might have been otherwise hazy as in a twilight. We have had the advantage of three Indian decisions which had explained different aspects of bailment from the point of view of the Indian statute: Dhanraj Mills Ltd. v. Laxmi Cotton Traders, AIR 1960 Bombay 404, Nadar Bank Ltd. v. Canara Bank Ltd., AIR 1961 Madras 326 relied on by respondents' counsel and Joseph Annamma v. Kora Thressiamma, AIR 1972 Kerala 170 relied on by counsel for the appellant. The principles gatherable therefrom, as also decisions rendered elsewhere, have been of great assistance in evolving our approach to and assessment of the problems.
JO. Even while understanding and interpreting this specific statutory provision, it is useful to have a historical background of the development of the related law. Law, which is so close to life, has many things to pick up from the vivacity and diversity of experiences.
31. The antiquity of bailment and its having remained 'a fragmented subject' are noteworthy features. 'Its development has been sporadic and ill co-ordinated'. (See Palmer on Bailment, Page 1). Palmer adopts the view 'that a bailment comes into being whenever one person is knowingly and willingly in possession of goods which belong to another.' That there has been expansion of the concept of bailment in recent years, is demonstrated by the author by reference to decided cases, including Harding v. Commr. of Inland Revenue, (1977) 1 NZLR 337.
32. One doctrine, the doctrine of attorn-ment, as associated with bailment, has been noted with reference to the passage in the book 'Possession in the Common Law' byPollock and Wright (1888). An apt passage in the book reads;
'A bailment may arise without any change of physical possession, as for instance where a person is bailee from one person, he may become the bailee of another by attornment, i.e. by agreeing to hold under him,....'(Page 134)
33. Commercial transactions, by their very nature, are complex in character. An identical event can generate different legal relations. That is so in relation to bailment also. In the present case, the conflicting I concept as presented by the authorities --about the bailment on the one hand and about agency on the other -- is an understandable reflection of this legal complication. The legal preposition is thus propounded :
'.........a person may become the bailee of achattel while occupying simultaneously the position of servant or agent towards the bailor........ the two relationships are imposedfor different purposes and identified by different tests. Thus they may co-exist without conflict within a single situation.'
It would then follow that notwithstanding the generation of a situation of agency, the transaction can still have the mould and content of a contract of bailment. If a bailment is thus born, a placenta accompanying it, can be safely ignored.
34. Possession is the soul and sustenance of a contract of bailment. The concept of possession itself is one beset with complications. Even great legal minds had experienced difficulties in delineating its delicate contours. Lord Parker C. J. found it difficult in Towers and Co. Ltd. v. Gray, (1961) 2 QB 351 where he observed:
'The term 'possession' is always giving rise to trouble.'
Another Judge said;
'.....in truth the English law has never worked out a completely logical and exhaustive definition of 'possession'. '
The thoughts are collected in Sullivan v. Earl of Caithness, (1976) 2 WLR 361 at 363. Lord Parker C. J. however, had made some helpful observations in the course of his decision in Woodage v. Moss, (1974) 1 WLR 411. He said:
'In some contexts, no doubt, a bailment for reward subject to a lien, and where perhaps some period of notice has to be given before the goods can be removed could be of such a nature that the only possession that there could be said to be would be possession in the bailee. In other cases, it may well be that the nature of the bailment is such that the owner of the goods who has parted with the physical possession of them can truly be said still to be in possession.'
35. In the present case, as already noted above, there is no contest on the part of the original owner of the goods about the possession over the goods. He could not, on the basis of Ext. A3, claim any such possession. Nor can the bailee repudiate the contract which he has entered into with the Bank. In truth and substance the possession of the goods by the bailee, namely the 1st defendant godown-keeper, is for and on behalf of the Bank, notwithstanding that it was the borrower firm, that had initially deposited the goods in the godown. Settled principles do not in any way conflict with this basic legal position. If such a legal position arises, the mere fact that yet another legal relationship is also visible from another angle, would not in any way upset or obliterate the well cast and well-welded relationship between the plaintiff and the 1st defendant.
36. In the light of the above discussion, we hold that there existed a relationship of bailor and bailee between the Bank and the 1st defendant.
37. The further question that has to be discussed is the extent of the bailee's obligations and the effect of the evidence in the case on the plea of the 1st defendant of the extinguishment of those obligations.
38. Denning Lord Justice described the essence of a bailee's obligations in these words:
'The essence of the contract by a warehouseman is that he will store the goods in the contractual place and deliver them on demand to the bailor or his order. If he stores them in a different place, or if he consumes or destroys them instead of storing them, or if he sells them, or delivers them without excuse to somebody else, he is guilty of a breach which goes to the root of the contract.......'
(See Swan Hunter and Wigham Richardson Ltd. v. France Fenwick Tyne and Wear Co. Ltd., The Albion, (1953) 1 WLR 1026).
39. On the onerous liability of a bailee, the classic decision is that of the Court of Appeal in Morris v. C.W. Martin and Sons Ltd., (1966) 1 QB 716. It highlighted the character of a bailee and recalled the rule that a bailee could not escape liability by delegating his task, or entrusting the goods, to another.
40. The above principle has particular relevance in the present case, when the 1st defendant firm (speaking through its partner the 2nd defendant examined as D.W, 1) attempted to shirk the responsibility of the firm by stating:
'The confirmation letters are prepared by our typist. I did not check up. I have not personally seen placing of the goods in go-down.'
About the situation after 15th December,1977, in a very light vein, he stated :
'I have not visited the godown either on 15th, 16th, 17th or thereafter. No other partner also visited. Only the godown keeper visited.'
41. If, as we have found, the relationship of a bailor and bailee existed between the Bank and the 1st defendant, the bailee's responsibility will not evaporate easily.
42. There is a well known distinction between the bailee's right of immediate possession on the one hand and the cessation of the bailee's responsibility for the goods received as a bailee. 'It is not enough merely to leave the goods exposed and vulnerable totheft in a place from which the bailor may collect them......' (See Palmer on Bailment,Pages 86-87). It has been clearly admitted by D.W. 1 that the defendant retained the key of the godown all through. The facts proved and even the admissions made as D.W. 1 would clearly establish that the 1st defendant did not discharge his fundamental obligation as a bailee in relation to the goods. Ext. A82 letter would not in such circumstances extinguish the liability of the 1st defendant as a bailee.
43. The Court below exonerated the defendant from its liability on the ground that it had indicated about a difficult situation in which the 1 st defendant could not continue to hold the goods. The bailee cannot reupdiate his liability by a simple communication of that nature, in the light of the principles already discussed. Even otherwise, the bailee has got a duty to take all reasonable and diligent steps in the discharge of its responsibility as a bailee. If there is a difficult situation arising out of the labour disorder or otherwise, the law and order agencies have to be alerted about it. Even if they are indifferent (a case which has not been made out by the 1st defendant) it is not without remedy. The large number of cases coming before this Court under Article 226 of the Constitution seeking police protection is proof positive of the availability of effective relief to any party who seeks protection of person or property in the State. No such attempt was made by the bailee 1st defendant. The Court below criticised the plaintiff for not taking any action, and even went to the extent of observing that if the plaintiff itself could not protect the goods, the 1 st defendant could not be blamed. The portions of P. W. 1 's deposition have been extracted torn out of the context. P.W. 1 no doubt wrote to the Head Office. The Head Office did not take any tangible action but this statement of P.W. 1 is coupled with the farther statement that there was no threat to the goods. The following sentence will make the point clear:
'I did not receive any instruction from the Head Office regarding taking custody of the goods by the bank because the development did not warrant any danger to the goods.'
The general assertion of the Court below (on page 12 lines 27--28) that the situation was such that no one dared to face the agitating labourers is neither justified on evidence nor correct on the basis of the actualities in this State regarding law and order situation and the constitutional functioning of the Government and of the Courts. The materials and evidence will clearly posit a case of negligence on the part of the 1st defendant.
44. We must now indicate how the Court below erred in coming to a contrary conclusion.
45. The Court below has referred to the substance of the transaction in paragraph 6 of its judgment. The relevant portion reads:
'The Borrower Company will request the first defendant to advise the Bank the receipt of those goods. The Borrower Company will give another letter to the Bank requesting the Bank to take delivery of the goods and hold them as security. The 1st defendant will send a communication to the Bank acknowledging receipt of the said goods from the Borrower Company. Then the Bank will advance money to the borrower company on the security of those goods. This practice was going on from 1976 onwards. The last en-trustment was on 8-11-77. Whenever amounts were repaid by the borrower company, the Bank was releasing the proportionate quantity of good's. When amounts remitted by the borrower company in the Bank the Bank will give intimation to the first defendant to release a particular quantity of goods. The 1st defendant will then release so much quantity of goods to the borrower. The balance of goods in the custody of the 1 st defendant will be then worked out and intimated to the Bank.'
46. The possession of the 1st defendant as bailee of the goods viz. the Bank is therefore self evident. If that be so, the 1st defendant cannot disown its character as a bailee, however convenient it may be, on a later occasion and in the special situation it had landed itself. Even on the finding of the Court below, the case of a bailment with theplaintiff as a bailor and 1st defendant as bailee is clearly made out.
47. The assertion of the plaintiff in the suit notice Ext. A79 dated 14-6-1979 about the entrustment of the goods with the 1st defendant as the bailee and the liability of the 1 st defendant to account for the goods to the plaintiff was not demurred to within a reasonable period of the receipt of the communication. They sought only further time to give a reply. No reply was furnished within the stipulated time of two weeks, Another notice Ext. A79 was sent on 7-8-1979 to the 1st defendant. The silence of the 1st defendant continued even thereafter. This is not the conduct of a business concern who wants to contest its legal status in relation to the transaction involving heavy stake. The period of silence was not marginal. It continued for about another six months, when Ext. A80 reply was sent on 23-2-1980. Even in Ext. A80, no positive or specific stand disputing the status of the 1st defendant as bailee was put forward by the 1st defendant.
48. A conduct of a party may be irrelevant in the construction of the documents evidencing the legal relationship between the parties. However, the conduct may be usefully adverted to, to appreciate the lack of bona fides on the part of the 1 st defendant in the belated pleading of an absence of bailment. No responsible person of the 1st defendant firm had stepped into the witness box to explain the basic features of the transaction. The manager examined as D.W. 1, is not competent to give any useful evidence explaining the background of the transaction or the effects thereof.
49. The Court below mixed up the facts and missed the law when it observed :
'Even though these goods were pledged to the Bank when the amounts were borrowed, actually the goods did not move out of the godowns of the borrower company. Though the 1st defendant was acting as warehousing agent, the goods were stored in the godown of the borrower company itself.'
This is at variance with its own findingcontained in paragraph 6 of the judgment. It is contrary to the admission of the 1st defendant himself which owned the custody of the goods by its statement in Ext. A68 that there was a balance stock of 140 tonnes as on 30-11-1977.
50. In the light of the above discussion, the existence of a contract of bailment and the extent of the contractual liability for 140 tonnes are clearly established.
51. With the above finding fastening a liability on the part of the 1st defendant, it becomes necessary to examine the plea of limitation put forward by the 1 st defendant to have an escape route.
52. In a case where the relationship of bailment (or of a depositor and depositee) is established between the plaintiff Bank and the 1st defendant, the starting point of the limitation is only when there is a refusal of the 1st defendant to deliver the goods when demanded in that behalf by the plaintiff-Bank. That has arisen only under Ext. A80 dated 23-2-1980, when the 1st defendant refused to comply with the request of the plaintiff for the return of the goods. This facet of the cause of action has been specifically pleaded in the plaint. That plea is fully justified in the light of the facts and circumstances established. If the case is one of bailment, Article 70 will doubtless apply. That being the special article in relation to bailment, other articles including Article 3 or 4 referred to by the Court below will not have any application. In view of our specific finding about the existence of the relationship of bailor and bailee Article 70 is immediately attracted. Thereunder the cause of action starts only from the date of refusal after demand. That refusal was only on 23-2-1980. The suit filed on 31-1-1981 is therefore well within time. We may also indicate that even if Article, 4 -- relating to a suit by a principal against an agent for neglect or misconduct -- is relevant and applicable, even then the suit is not hit by the bar of limitation. The emphasis on the words 'neglect' or 'misconduct', should not be missed. That posits a knowledge on the part of the plaintiff about the neglect or misconduct on the part of the bailee. Mere missing of thegoods would not result in an automatic finding of neglect or misconduct. More materials are necessary for any authority to come to a bona fide and proper finding about neglect or misconduct. The letter Ext. A83 expressing disability to continue to hold the goods would not by itself constitute any foundation for a conclusion that there was neglect or misconduct. We are also of the view that Exts. A83 and A84 would not be construed as documents terminating the agency. Expression of a difficulty is not the same thing as an unambiguous pronouncement of termination of the agency. Viewed from any angle, the plea of limitation is not sustainable. The suit is well within the prescribed time. The finding of the Court below that the suit is barred by limitation is wholly erroneous and has to be vacated. We do so.
53. Two subsidiary questions would arise when the suit is found to be maintainable and when the liability of the 1st defendant is found to be alive and subsisting. They are: (i) the actual quantum in respect of which the liability extends, and (ii) the computation of the value of the goods found accountable.
54. On the first question, we start with the basic admission of the 1st defendant about Us custody of 140 tonnes as on 30-11-1977. Any diminution in the liability has to be pleaded and made good by the 1 st defendant. The plea is restricted to the seizure of the goods in pursuance to the proceedings under Cooperative Societies Act and the legal proceedings in a civil suit and in criminal case. The Bank has admitted the extinction of pro rata liability in respect of the goods seized from the godown of the 1st defendant on the basis of the orders passed in the proceedings under the Co-operative Societies Act. As regards the alleged seizure of the goods in the civil and criminal cases, the plaintiff has not admitted any erosion of the liability of the 1st defendant in the matter. The Court below granted such a reduction in its liability on the ground that the seizure made in pursuance of the orders passed by civil court and criminal court have necessarily to be adjusted against the admitted liability of the 1st defendant.
55. In entering the above finding, theCourt below allowed itself to be insensitive to basic facts. Extinction of the liability was easily granted by the Court below on the ground that the goods referred to in the orders of the Civil and Criminal Courts had been, as a matter of fact, seized and removed from the godown of the 1st defendant. This overlooks the important and massive facts in relation to time and space. The ordinary course of events in business and the generalities of business practices have been completely disregarded by the Court below in coming to such a rash conclusion.
56. Any one who had occasion to have a peep into the extensive godowns abutting the backwaters of the Cochin Port, would be aware of the manner in which goods are carefully stored in different places. It has necessarily to be so. There could not be any mixing up of the goods, whether they be coffee or tea, coir or rubber, or cashew or pepper. Even a close proximity of certain types of goods can create problems while shipping them to overseas markets and for preserving them for longer periods. Even as regards similar types of goods, mixing up is impermissible when they belong to different parties. They have necessarily to be kept separately and distinctly. Otherwise, it would seriously affect the rights of the parties who have reposed their faith in the 1st defendant for the proper custody of the goods. The 1st defendant cannot dump goods of the similar type for the only reason that they are generally of the same nature. This basic and fundamental obligation of the 1st defendant as a godown keeper and bailee cannot be wished away by the 1st defendant or waived by a Court of law. A reasonable conduct on the part of a bailee would insist on the maintenance and up keep of the goods received from different parties and at different times in distinct and separate lots. (Vide Palmer on Bailment).
57. Admittedly, the goods which are the subject matter of the seizure of the civil court and of the criminal proceedings, had been received by the 1st defendant only about two weeks after the submission of the statement admitting the custody of 140 tonnes ofrubber. That means that the seized goods are new entrants to the godown. They are distinct and separate. An unpaid vendor of the firm vis-a-vis those goods can exercise the lien or enforce the legal rights only as against those goods. They cannot proceed against the goods already pledged to another party or over which third parties have valid and legal rights. If the goods are kept separately and distinctly, any party who has got remedies against the firm can proceed only as against that lot of the goods kept in the 1st defendant's godown distinctly and separately, and not from the stock of goods held under bailment with the Bank.
58. The Commissioner appointed in the case has given useful report and furnished relevant information to decide this issue. The Commissioner did not see any trace of any goods in the godown at the time of his visit. (Ext. A77). The 1st defendant had godowns including those bearing Nos. 452, 460 and 463. The goods seized were from the godown 460 whereas the goods which are the subject-matter of the bailment with the plaintiff had been stored in the other two godowns. Consequently, the proceedings in the civil and criminal cases could not in any way affect the liability of the 1st defendant to the plaintiff. It was the duty of the 1st defendant to protect the interest of the owner of the goods, even if there were any attempts at abusing the legal process and to get at the custody of the goods which had been the subject-matter of a bailment by the plaintiff-Hank. The only deduction that could be granted from the admitted liability of 140 tonnes is the quantity covered by the seizure in pursuance of the proceedings under the Co-operative Societies Act, aggregating to 51.043 tonnes. The plaintiff is therefore entitled to recover from the 1st defendant the value of rubber goods weighing 88.957 tonnes (140 minus 51.043).
59. The Court below granted only the price computed at the rate at which they were valued by the Bank for the purposes of demanding security. When the 1st defendant has failed to return the goods, it was bound to make good the market value of such goods, that is, amount sufficient for the purchase ofthe goods of the same type as on the date of the liability. The market value of such types of goods has been established by acceptable evidence in the case like the price quoted by a competent authority like the Rubber Board (Ext. A81). There was no cross-examination suggesting that the market value was lower than that indicated in that document. The Court below unfortunately felt that the damages payable by the 1st defendant is limited to the value fixed by the Bank for the purpose of making advances to the firm. The finding is wholly misconceived and in total departure from the well established principles of law. The plaintiff is entitled to get the amount with reference to the market value of the goods as on the relevant date. The monetary compensation due to the plaintiff will thus be Rs. 1067484.
60. The Court below has awarded interest at 10% noting that the suit involves a commercial transaction and that the Court has a discretion in such cases to award interest at a rate higher than 6%. There is no justification for giving a drastic reduction in the rate of interest, once the commercial character of the plaint claim is accepted and found by the Court below. That Court gave misplaced sympathy to the 1st defendant in observing that the 1st defendant had not benefitted by the plaint transaction. The rights of the plaintiff, a nationalised bank, arising out of gross negligence on the part of th,e 1st defendant, cannot be ignored in that connection. The plaintiff has claimed interest at 20.5%. We feel that interest at the rate of 16% would be proper in the circumstances.
61. In the light of the above discussion, we set aside the judgment decree of the Court below. The suit will stand decreed. The liability of the 1st defendant is reckoned in relation to 88.957 tonnes of rubber valued at Rs. 12/-per kilogram and with the liability for interest from the date of suit at 16% per annum till the date of realisation.The appeal is disposed of as above with costs here and in the Court below.