INDIAN BANK LTD. v. CHARTERED BANK et al

007-NLR-NLR-V-43-INDIAN-BANK-LTD.-v.-CHARTERED-BANK-et-al.pdf


Indian Bank Ltd. v. Chartered Bank.
49
1941Present: Moseley S.P.J. and Wijeyewarderie J.
INDIAN BANK LTD. v. CHARTERED BANK ei al.
11 & 12—D.C. Colombo, 10,413.
Bill of sale—Pledge of movable property—Custody and possession of property—Non-compliance with the provisions of Registration of DocumentsOrdinance (Cap. 101), s. 18—Roman-Dutch law.
Section 18 of the Registration of Documents Ordinance invalidates apledge of movable property, whether executed in writing or not, whichdoes not comply with the provisions of the section.
Held, further, that the phrase “ ostensibly and bona fide in such custody ”means that the possession of the person possessing should be not onlybona fide but should be of such a nature as to make it apparent to'othersthat such person was in possession.
T
HIS action was concerned with the conflicting claims of theplaintiff and the first defendant to certain bags of flour which
belonged to Mr. J. P. Kapadia who died in insolvent circumstances andwhose estate was being administered by the second and third defendantsas executors of his last will.
It was contended on behalf of the plaintiff that he held a valid pledgein respect of the bags of flour and that they had been actually deliveredover to the custody and possession of the plaintiff as pledgee as requiredby section 18 (a) of the Registration of Documents Ordinance. Even ifthe plaintiff had not the custody and possession as contemplated by theOrdinance, he was entitled to make his claim as a pledge under theRoman-Dutch law. The first defendant claimed the bags in question aspledgee in possession and in the alternative by virtue of a document(1 D 1) a right to retain possession of the bags and to sell them and applythe proceeds in satisfaction of his debt.
The learned District Judge rejected both claims and directed theproceeds to be paid to the second and third defendants.
M. de Silva, K.C. {with him N. Nadarajah, M. Tiruchelvam and
A. T. Perera), for the plaintiff, appellant.—The plaintiff held a validpledge over the bags of flour and has, therefore, a preferential right tothe money in Court. The plaintiff’s claim may be based on threegrounds :—(1) There was a good pledge under the common law; (2) evenunder section 18 (a) of the Registration of Documents Ordinance, No. 23of 1927 (Cap. 101) the plaintiff was in ostensible possession of the bagsof flour; (3) document P 34 confers an authority coupled with an interest.
As regards ground (1), where the passing of property, special or general,is effected by actual delivery of possession any accompanying documentdoes not have the effect of any such instrument as is described by section18 of the Registration Ordinance. There was a good pledge notwith-standing the non-registration of P 34. Our present Ordinance followsthe English law and strikes only at documents. See Wrightson v.McArthur Ex parte Hubbard and Halsbury’s Laws of 'England (2nd ed.),vol. 3, p. 6. The pledge contemplated in the Ordinance is a written1 (1921) 2 K. B. S07.2 (1886) 17 Q. B. D. 690.
50Indian Bank Ltd. v. Chartered Bank.
pledge. A “ bill of sale ” under sections 17 and 18 must necessarilyrefer to, and connote, a document. We have, by the present Ordinance,brought ourselves into line with the English law. '41 & 42 Viet. c. 31runs on exact parallel with our Ordinance.
| Wijeyewardene J.—Does a “ bill of sale ” always connote a docu-ment? See clause (b) of section 18.]
As against that there is section 23, and the word “ executed ” insection 18.
In regard to ground (2), it is clear, on the evidence, that we remainedostensibly in possession, within the meaning of the word “ ostensible ”in section 18. The question in this case must be decided in precisely thesame way as if the debtor, whose transactions have given rise to thecontroversy had been himself bringing this action. It would be startlingif there was anything in the state of the law which compelled us to saythat under the circumstances which occurred in this case he could success-fully maintain such an action—Charlesworth v. Mills' “ Ostensibly ”means something "less than real. Before 1871, according to the commonlaw, we had to have legal delivery and continued legal possession in orderto prove a valid pledge. The word “ ostensible ” relaxed the require-ments of the common law. One must have regard to the commercialnecessities of.the situation. The object of the Ordinance was to mitigatethe ill effects of secrecy and secret documents. If anybody made reason-able inquiries he would have found that we were in possession of the bagsof flour. Ostensible possession is unrelated to legal possession. A manmay be ostensibly in possession of a thing without being really inpossession, and, vice versa, one may be really in possession without beingostensibly in possession.
Thirdly, document P 34 confers an authority to sell coupled with aninterest—Charlesworth v. Mills (supra). Such authority is not revokedby death:—Bowstead on Agency (9th ed.) p. 332; Carter v. White'
Babcock et al. v. Lawson et al.' which the District Judge purported tofollow is really in my favour. Whales’ Trustee v. Early ‘ too has noapplication. See also 27 Cape S. C. 73. The meaning of the word“ assurance ” appearing in section 17 (1) of Cap._101 is dealt with, inGunatileke v. Ramasamy Pulle. ° Great Eastern Rly. Co. v. Lord’s Trustee'is directly in point to show that the transaction between the plaintiff andKapadia cannot be regarded as a bill of sale and to establish that mypossession is entitled to protection.. The fraud committed by Kapadiacannot prejudice my claim—-Farquharson Bros. & Co. v. King & Co.'.
H. V. Perera, K.C. (with him E. F. N. Gratiaen and Walter Jaya-wardefie), for the first defendent, respondent, Was called upon to addresson grounds (1) and (3) only.—The Roman-Dutch law regarding pledgesappears.in Maasdorp’s Institutes, vol. 2 (5th ed.) p. 259. According to theOrdinance of 1871 a “bill of sale” had to be. in writing and, as regardspledges, the Roman-Dutch law was codified, and open and actual deliveryof possession was made necessary. The term “ bill of sale ” in section 17
1 (1S92) A. C. 231 at 240.4 3 Bttchaman's Rep. 474.
*50 Law Times 670.* (1919) 6 C. W. R. 125.
3 48 L. J. Q. B. 524.6 L. R. 1909 A. C. 109.
1 (1902) vl. C. 325.
WIJEYEWARDENE 3.—Indian Bank Ltd. v. Chartered Bank.51
of the present Ordinance, on the other hand, catches up every form ofpledge, documentary and non-documentary. A word can be given anymeaning by the Legislature. The word “ includes ” in section 17 is verygenerally used in interpretation clauses in order to enlarge the meaningof words or phrases occurring in the body of the statue—Dilworth et al. v.Commissioner of Stamps.1 There is an expression of opinion by Dalton J.in Appuhamy v. Appuhamy ‘ that the term “ bill of sale ” refers not onlyto documents but also to transactions such as pledges.
No right of sale was conferred by P 34. One cannot extract from abad pledge some other contract. In Roman-Dutch law a lien gives nocause of action. A right of sale of property, unless coupled with aninterest, is revoked by death. For meaning of “ coupled with an interest ”see vol. 3 Maasdorp’s Institutes (1924) p. 337. But this point need not bedealt with further in view of the fact that it was agreed in the DistrictCourt that the plaintiff’s claim should be rejected if the pledge was heldto be bad.
On the facts it cannot be said that the plaintiff had a mortgage overany particular bags of flour at the time he came to Court.
N.K. Choksy (with him S. J. Kadirgamer), for the second and thirddefendants, respondents.
M. de Silva, K.C., in reply—The rule of interpretation stated bythe Privy Council in Cadija Umma et al. v. Don Manis Appu et al.3 ishelpful to interpret “ bill of sale ” in section 17. It is not possible tointerpret that term without limiting it to writing. In every kind ofbusiness the word “ bill ” occurs as representing any writing—The Bankof England v. Anderson. ‘ The dictum of Dalton J. in Appuhamy v.Appuhamy (supra) was merely obiter.
The Roman-Dutch law relating to mortgage of movables has not beenentirely swept away by legislation (Ramen Chetty v. Campbell. *)
Cur. adv. vult.
November 7, 1941. Wijeyewardene J.—
This action is concerned with the conflicting claims of the plaintiffand the first defendant to certain bags flour which belonged admittedlyto Mr. J. P. Kapadia, who died in insolvent circumstances on June 9, 1939,and whose estate is now administered by the second and third defendantsas executors of his last will.
Kapadia who was carrying oh a large business in wheat flour had astore at Prince Street, Pettah, which it is now' admitted, could not haveheld more than 4,000 bags of flour at a time.
Kapadia used to borrow large sums of money from the plaintiff bankand the first defendant bank, representing to them that they had sufficientsecurity in the bags of flour kept at his stores. This representation wasuntrue as the sums borrowed by him were far in excess of the value of themaximum number of bags that could have been kept there. At the timeof his death Kapadia owed Rs. 50,747.13 to the plaintiff and
' L. R. (1899) A. U. 99 at 105.3 (1938) 40 N. L. R. 392 at 396.
* {1933) 35 N. L. R. 329 at 330.4 3 Bingham's New Cases 589 at 601.
5 {1896) 2 N. L. R. 94.
52
WIJEYEWARDENE J—Indian Bank Ltd. v. Chartered Bank.
Rs. 346,434.28 to the first defendant. During the lifetime of Kapadia,each bank was ignorant of the transactions of Kapadia with the otherbank.
. For the purposes of this case, it is not necessary to consider the trans-actions between the plaintiff and Kapadia earlier than October 17, 1938.Shortly before that date, Kapadia asked Mr. Rau, the agent of theplaintiff bank, for a loan of Rs. 150,000 on the security of 15,000 bags offlour, some of which were said to be already in the store, and the balance,at the Customs, pending their removal to the store. Rau acceded toKapadia’s request and lent him Rs. 150,000 on October 17, 1938, andthere was no other debt due at the time by Kapadia to the plaintiff on.the security of the bags kept at the Prince street store. According to itspractice, the bank obtained from him three documents—a promissorynote P 21, a letter P 22 and a letter of hypothecation P 23. Both theletters P 22 and P 23 referred to the security as 15,000 bags “ stored andto be stored ” at the store, in view of the fact that Kapadia himselfinformed Rau that some of the 15,000 bags were awaiting transporationto the store. Kapadia purported to give the bank possession of thehypothecated goods by handing to Rau some seven or eight keys andpadlocks of the store.In order to secure the possession so obtained,
the plaintiff bank placed an additional padlock on the door of the storeand employed a man called Krishnan as a watcher at the store from8 a.m. to 6 p.m. In terms of the arrangement reached between Kapadiaand the plaintiff bank, the watcher was further directed not to permitany bags to be removed from the store except on a delivery order issuedby the plaintiff bank but to keep the store open for the admission of anybags. The plaintiff bank stated that it was in possession of the bags inthe store in that manner up to the death of Kapadia. During that periodthe plaintiff bank lent to Kapadia—
On December 22, 1938, Rs. 75,000 on documents P 26, P 27 and
P 28 on the security of 9,000 bags.
On March 6, 1939, Rs. 55,000 on' documents P 29, P 30 and P 31 on
the security of 5,000 bags.
On March 31, 1939, Rs. 55,000 on documents P 32, P 33, and
P 34 on the security of 5,000 bags.
There was however a difference between these three loans and the firstloan. Each of these loans was'given on the security of bags representedby Kapadia to be actually in the store at the time and not covered by anyprevious letter of hypothecation. The plaintiff bank was satisfied- withthe assurance of' Kapadia with regard to each of these loans that therewas in the store, as security for each loan, the number of bags mentionedin the relative documents. The documents themselves referred to thebags as “ stored ” in the Prince street store and not as bags “ stored andto be stored ” as in P 23. None of these documents P 22, P 23, P 27,P 28, P 30, P 31, P 33 and P 34. were registered under the provisions ofsection 18 (b) of the Registration of Documents Ordinance.
The bank kept separate accounts for each loan, crediting against eachloan any payment made by Kapadia in respect of that loan. WheneverKapadia made such a payment, the plaintiff bank issued to him a
WlJEYEWARDENE J.—Indian Bank Ltd. v. Chartered Bank.
53
delivery order authorising him to remove a number of bags the value ofwhich priced at Rs. 10 per bag was equivalent to the amount paid. Onthe presentation of a delivery order by Kapadia, Krishnan would permithim to remove the number of bags mentioned in the order. When he hadremoved that number of bags or made a pretence of having removedthat number, Kapadia would hand over to Krishnan the delivery orderendorsed by him to be returned to the plaintiff bank. I use the words,“ made a pretence of ”, because, very often, the delivery order was for anumber of bags far in excess of the number which the store could havepossibly held, and it was, therefore, not possible to remove on any suchdelivery order all the bags mentioned in it. But Kapadia had to makethe pretence that he removed all the bags so mentioned in order to preventthe plaintiff bank from having any doubts as to the representations madeto it from time to time by Kapadia regarding the number of bags kept byhim in the store. The issue of a delivery order released automatically thebags mentioned in it from the charge imposed on those bags by therelative letter of hypothecation.
On March 31, 1939, the indebtedness of Kapadia to the plaintiff bankwas Rs. 137,683.15, and the plaintiff bank believed that it had therequisite number of bags in the stores as security for the balance dueunder the relative letters of hypothecation. On that day Kapadia got afurther loan of Rs. 55,000 on the security of 5,000 fresh bags which healleged he had placed in the store. In respect of that loan Kapadia gavethe plaintiff bank the promissory note P 32, the letter P 33 and the letterof hypothecation P 34. By P 34 Kapadia purported to give the bank5,000 bags of flour kept in the store as security for that loan.
The first loan of Rs. 150,000 was settled on March 30, 1939, the secondloan of Rs. 75,000 on May 4, 1939, and the third loan of Rs. 65,000 onMay 30, 1939. On June 7, 1939, the fourth loan alone remained unsettledand the balance due on that loan was Rs. 50,747.13.
The number of bags found in the store on June 9, 1939, was 2,504.,Those bags were sold under the orders of Court and the proceeds of saleamounting to Rs. 24,979 were deposited in Court. The claims in thisaction were, thereupon, confined to the fund in Court.
The first defendant bank claimed the bags in question as a pledgee inpossession and, in the alternative, claimed by virtue of 1 D 1 a right totretain possession of the bags, sell them and apply the proceeds of sale insatisfaction of the debt due to it.
The District Judge rejected the claims of the plaintiff and the firstdefendant to any preferential right in the sum of Rs. 24,979 and directedthat the money should be paid to the second and third defendants.
Both the plaintiff and the first defendant have appealed from the decreeof the District Court, appeal No. 11 being by the plaintiff and appealNo. 12 by the first defendant.
At the argument before us the plaintiff-appellant’s Counsel contended—
that the plaintiff was entitled to a preferential right to the fund in
Court as the holder of a vaild pledge of- the bags of flour ;
that the plaintiff was authorised as an agent by Kapadia to sell the
bags and appropriate the proceeds in satisfaction of the debt
54WIJEYEWARDENE J.—Indian Bavk Ltd. v. Chartered Bank.
due to the plaintiff and that the plaintiff therefore, couldexercise the right so given, even if he did not hold a valid pledge'of the bags.
The first defendant’s Counsel pointed out that it was not open to theplaintiff to put forward his claim before us on ground (b) as it was speci-fically agreed in the District Court–as recorded by the District Judge—that the plaintiff’s claim tc a preferential right should be rejected in theevent of his being held not to have a val’d mortgage over the bags. Inthese circumstances we derided to ^onfire ourselves to a considerationof the first ground alone in adjudicating or the rights of the plaintiff.
In support of his argument that the plaintiff held a valid pledge inrespect of the bags of flour, the plaintiff’s Counsel argued—
that the bags had “ been actually delivered over into the custody
and possession of the plaintiff as pledgee and they continuedand remained ostensibly and bona fide in such custody andpossession ” until he made his claim as required by section 18 (a)of the Registration of Documents Ordinance.
that even if the plaintiff had not the custody and possession contem-
plated by section 18(a) of the Registration of Documents
Ordinance, he was entitled to make his claim as a pledgee underthe Roman-Dutch law.
In dealing with the first point it is sufficient, for the purpose of thisappeal, to consider the question whether the bags were “ ostensibly ” inthe custody and possession of the plaintiff. It was contended on behalfof the plaintiff that the “ ostensible ” possession contemplated by section18 (a) was something less than “actual” possession and that “ostensibly”was used in that section as opposed to “ actually ”. I am unable toaccept that contention as the word “ ostensibly ” occurs in the phrase“ ostensibly and bona fide in such custody ”. I think the phrase meansthat the possession of the person possessing should be not only bona fidebut should be of such a nature as to make it apparent to others that suchperson was in possession. Giving the word “ ostensibly ” that meaningI shall consider, now, the evidence to determine whether the bags were“ ostensibly ” in the custody or possession of the plaintiff.
The bags were kept in a store which was well-known as the store ofKapadia The rent for the store was paid by Kapadia. Though the-plaintiff bank kept its own servant, Krishnan, as the day watcher,Mr. Rau, the agent of the plaintiff bank states that “ one of the terms ofour agreement (with Kapadia) was that the deceased (Kapadia) had tokeep a night watcher ”. According to the same witness—
“ Krishnan’s instructions were to keep the store open during the
day if deceased (Kapadia) wanted it ”.
“ His (Krishnan’s instructions were to have the place locked and if
deceased wanted to put flour into the warehouse Krishnan wasto open the doors and allow him to do so. Deceased may wantto enter the warehouse apart from taking goods in. He maycome there to look at his stock or to take samples to show 'prospective purchasers. In fact he could do anything excepttaking stock out.
55
WIJEYEWARDENE J.—Indian Bank Ltd. v. Chartered Bank.
“ Kapadia generally had free access to the stores with any prospec-tive purchaser
Krishnan wore no distinctive badge to show that he was' employed bythe bank. No arrangement was made for Krishnan to stop near the storewhen the store was closed. In reply to the question, “ if the door waslocked where was Krishnan to remain? ” Mr. Rau did not hesitate toreply, “ He could have stayed in the shop opposite or somewhere there,I was not concerned where Krishnan stood Rau has further statedthat the plaintiff “ put up no notices anywhere saying that the stockinside the store was mortgaged (to the Baiut). There were no suchnotices either inside or outside
It is admitted by the plaintiff that on three occasions, at least, Kapadiaremoved the keys from Krishnan and kept them with him for a day or two.When Krishnan reported to Rau on the first two occasions that Kapadiaremoved the keys from him, Rau did not question Kapadia about thematter. Speaking of this, Rau stated, “ on the previous occasions whenKrishnan reported the incident of the keys what could I do? I condonedthe irregularity. I did tell Krishnan he should not do a thing like thatagain. But I did not speak to the deceased ”.
The accountant of the Chartered Bank describing his visit to the storein April, 1939. stated :—“ On my visit to the Prince street store I wasaccompanied by the deceased who called for me by appointment at theBank. It was some time before noon …. I know the gatewhich has been described as the wicket gate. When I arrived there itwas shut. The deceased opened the lock with the key which he had inhis possession. He had the keys in his pocket. The main door waslocked. It had a number of padlocks. Deceased opened these padlockstoo with the keys which were in his possession. There was nobodypresent who indicated that a third party had any claim or right withregard to the contents of the store ”.
Once a delivery order issued by the plaintiff bank was shown toKrishnan, the store was kept open for Neina Cassim, the cart contractoremployed by Kapadia, to go in and out of the store for the removal of thebags. As Krishnan himself did not keep an account of the bags removed,he was unable to control Neina Cassim’s .movements. The door wouldbe kept open a number of days until the deceased told Krishnan that hehad removed all the bags mentioned in the delivery order. During thatoeriod, Neina Cassim and his coolies “ used to come and remove, bagsfrom the store on cart chits issued by the deceased
Both Mr. Mehta, a clerk employed by the deceased, and Mr. Homji,the manager of the deceased, were not aware that the goods of thedeceasd had been pledged with the plaintiff bank though their officewas only a few minutes’ walk from the Prince street store. I do not thinkit necessary to refer in greater detail to the evidence. I am satisfied thatthe bags were not ostensibly in the custody and possession of the plaintiff.
The second point was put forward on the basis that the Registration ofDocuments Ordinance; 1927, struck at documents and not at transactions.It was argued as a necessary consequence that -though P 34 might beinvalid for non-compliance with the provisions of section 18, the validityof the transaction would still remain to be considered, in the circumstances
56WIJEYEWARDENE J.—Indian Bank Ltd. v. Chartered Bank.
of this case, according to the principles of the Roman-Dutch law. Ourattention was drawn, in this connection to a number of cases (Ex parteHubbard (1886) 17 Queen’s Bench Division 690, Charlesworth v. Mills'and some others) where the English Courts have held that, in certaincircumstances, though the documents themselves were invalid under theBills of Sale Acts of 1878 and 1882, the transactions referred to in thesedocuments would not be questioned, if valid under the common law.
It was argued on behalf of the plaintiff that the term “bill of sale" insection 17 of the Ordinance connoted a writing and that therefore whena “ bill of sale ” was defined as including a pledge it had the effect ofrestricting the “ pledges ” referred to in the Ordinance to written pledges.
It was sought to strengthen this argument by referring to the word• “ executed ” in section 18 which it was said, connoted a writing.
Now sections 17, 18 and some of the following sections have beenenacted in place of Ordinance No. 8 of 1871 and No. 21 of 1871 whichwere repealed by section 50 of the Registration of Documents Ordinance.Ordinance No. 8 of 1871 itself was passed ,in order to remedy the evilpointed out in (1858) 3 Lorenz 49 that according to the then existing law,it was possible for a person holding a written mortgage of movablesunaccompanied by possession to claim a preferential right as against othercreditors who had given credit to the mortgagor in ignorance of theexistence of the special mortgage. Ordinance No. 8 of 1871 renderedinvalid certain transactions in respect of movables, if there was nocompliance with the provisions of section 2 of that Ordinance. Thatsection enacted that “ no pledge or conventional hypothecation or bill ofsale of any movable property ” shall be valid—
“ unless the said property shall have been actually delivered
— and shall continue and remain ostensibly and bona
fide in such custody and possession ”,
“ unless such pledge, hypothecation or bill of sale shall have been
created by writing and unless such writing shall have
been duly registered ”.
Section 3 of that Ordinance corresponding to section 19 of the presentOrdinance provided that “ no transfer or assignment …. of anypledge, conventional hypothecation, or bill of sale' of any movableproperty shall be valid and effectual ”…. unless such transfer
or assignment was in writing and registered.
Section 6 of that Ordinance defined the words “ bill of sale ” andaccording to that definition a bill of sale did not include a pledge orconventional hypothecation. The effect of this was that the draftsmanhad to use the expression “ pledge, conventional hypothecation or bill ofsale ”, in sections 2, 3 and 4 of that Ordinance in order to make thesesections applicable to pledges and conventional hypothecations in additionto “ bill of sale ”. A comparative study of the provisions of OrdinanceNo. 8 of 1871, Ordinance No. 21 of 1871, and sections 18 to 24 of theRegistration of Documents Ordinance. leads me to the opinion that, bymaking' a “ bill of sale ” to include a pledge and a conventional hypotheca-tion in section 17 of the new Ordinance, the Legislature merely carried outinto effect its intention to substitute for the words “ pledge conventionalhypothecation or bill of sale ” occurring in-the old Ordinance the shorter
* us92) A. C. 231.
WIJEYEWARDENE J.—Indian Bank Ltd. v. Chartered Bank.57
expression “ bill of sale In other words, the Legislature groupedtogether the various transactions referred to in the definition ofbill ofsale ” in section 6 of the old Ordinance and added to that group the twotransaction of pledge and conventional hypothecation and indicated bythat section that the enlarged group would henceforward be known bythe term “ bill of sale It thus obviated the necessity for the use of thecumbrous expression “ pledge, conventional hypothecation or bill of sale”favoured in the old Ordinance. Nor do I think that the word “ executed ”in section 18 of the present Ordinance conveys the idea that the “ bill ofsale ” referred to is a written “ bill of sale I do not see any reason whythe word “ executed ” should not be given its ordinary meaning “ carriedinto complete effect Moreover the words in clause (b) of section 18 ofthe present Ordinance, “ unless such bill of sale shall have been createdby writing ”, suggest that the Legislature contemplated also a class of“ bills of sale ” other than “ bills of sale ” created by writing. In theabsence of a cogent reason I am not prepared to hold that the “ bill ofsale ” in section 17 of the Registration of Documents Ordinance is awritten instrument and thus bring into existence even greater evils thanthose which were condemned in 3 Lorenz 49. I do not think that theLegislature intended to, or didJn fact, effect a drastic change in our lawas suggested by the plaintiff’s Counsel when it enacted sections 17 and 18of the Registration of Documents Ordinance in place of sections 6 and 2 ofOrdinance No. 8 of 1871. I am of opinion that section 18 of the presentOrdinance refers to documents and transactions, and hold therefore,against the plaintiff on the second' point raised by him.
There remains to be considered the argument of the Counsel for thefirst defendant, that, in any event, the plaintiff has failed to prove that hehad any interest under P 34 in the 2,504 bags that were in the store onJune 9, 1939. According to Kapadia’s books there were in the store
bags on March 31, 1939. It could not have held more than 4,000bags. At that time the indebtedness of Kapadia to the bank on theprevious loans was Rs. 137,683.15. These bags should be regarded, inthe absence of any evidence to the contrary, as some of the bags thatwere effected by the previous letter of hypothecation. This would meanthat, at the time Kapadia gave letter P 34 hypothecating 5,000 bags inthe store, there were, in fact, no bags in the store available for suchhypothecation, as the agreement was that the bags to be hypothecatedshould not be bags covered by a previous letter of hypothecation. Theview most favourable to the plaintiff, that could be taken, is that the
bags in the store on March 31, 1939, were available for hypothe-cation under P 34 and were, in fact, so hypothecated. Even if it bepossible to consider the position in that light, it would not help theplaintiff very much, in view of the removals and additions made betweenMarch 31, 1939, and June 9, 1939. According to Kapadia’s books, only3,860 bags were brought to the store during that period. On June' 9, 1939,there were left only 2,504 bags. The number of bags that must havebeen removed, therefore, during that period would be 5,292. Accordingto >Kapadia’s books the number removed during that period was 5,223while according to the delivery orders returned by Kapadia endorsed byhim he had authority to remove 7,500 bags. In view of the fact that it
58
WIJEYEWARDENE J.—Indian Bank Ltd. v. Chartered Bank.
■was not the practice of Kapadia to remove always the total number ofbags mentioned in the delivery orders, this disparity between the numberremoved and the number authorised to be removed is not strange.Taking the figures most favourable to the plaintiff,-I shall take thenumber removed from March 31, 1939, to June 9, 1939, as 5,223 bags.There is nothing in the evidence to show that the 5,223 bags which wereremoved did not include the entire stock of 3,936 bags which were in thestore on March 31, 1939. The figures themselves show conclusively thatat least 1,432 bags out of that stock had been removed. The resultingposition then is that it is not possible to say the 2,504 bags that wereultimately found in the store were a portion of the bags hypothecatedunder P 34. The same result is reached even if one goes through the moredetailed process of considering each addition and each removal during theperiod. The form employed by the plaintiff for letters of hypothecation 'enabled the plaintiff to describe with reference to distinctive marks thebags mentioned in each letter of hypothecation. The plaintiff neglectedto get a specific description of the goods in the letter of hypothecation andthe consequence is that it is not possible to say that the bags ultimatelyfound in the store were the bags hypothecated under P 34, in view of theadditions and removals effected after March 31, 1939.
I hold, for the reasons given by me, that the plaintiff’s appeal mustfail.
As regards appeal No. 121 the Counsel for the first defendant did notpress the appeal against that part of the decree of the District Courtdismissing his claim to a preferential right in the bags. He contended,however, that the first defendant should not have been ordered to paythe second and third defendants the costs of the action. I think that, inthe circumstances of this case, the first defendant has a just grievance andI direct that the part of the decree dealing with the payment of costs bythe first defendant to second and third defendants be deleted.
Mr. Choksy who appeared for the second and third defendants askedthat an order be made by us enabling the second and third defendants tocharge the estate of Kapadia with the costs incurred by them. On the■evidence before me, I am inclined to the view that the second and thirddefendants should be allowed to debit the estate of Kapadia with the costshere and in the District Court, but I do not think it proper to make suchan order in this action. The second and third defendants should makean application for this purpose in the testamentary case in which theestate of Kapadia is administered and the Judge dealing with the matterwill, no doubt, make an appropriate order, after such inquiry as mayappear necessary to him.
I direct decree to be entered affirming the judgment of the DistrictCourt subject to the modification made by me regarding the costs of thesecond and third defendants. There will be no order as to the costs ofthese appeals.
Moseley S.P.J.—I agree.
Appeals dismissed.