1986 PLP 2661 (MLD)

The appellant being aggrieved with the judgment and decree, dated 19‑10‑1979 passed by the First Senior Civil Judge, Karachi dismissing the suit for recovery of Rs.25,615 has filed the present appeal.

2. The facts in brief are that the plaintiff consigned seven cases of handicraft equivalent to Pak Rs.25,615 by Ship "PRESIDENT TYLOR" to Mr. B.L. Rodgers, President Kundi International U S.A. The covering documents of the aforesaid, consignment were handed over to the respondent for being forwarded to the First American National Bank through the defendant bank with specific instructions that the documents be delivered to the consignee against payment. According to the plaintiff the defendant bank acted negligently and carelessly. The American Bank released the document without realising the value of the aforesaid consignment. The plaintiff contacted the American National Bank and they informed that they had not received the proper instructions. The plaintiff, therefore, sued the defendant /respondent for the recovery of the said amount as the defendants were responsible to recover the sale proceeds for and on behalf of the appellant/ plaintiff. The plaintiffs called upon the defendants to repatriate the sale proceeds or the consignment. The defendants however denial their liability on the ground that they had delivered full and proper instructions.

3. The defendants in their written statement admitted to have sent the documents to the U.S.A. Bank for collection. It is also admitted that the documents were delivered by the U.S.A. Bank to the consignee without payment despite the fact that the defendant bank had given specific instructions to deliver the documents against payment. It is stated that defendants are not responsible for mishandling of the matter by the American National Bank who are also the shippers Bankers in U.S.A. The defendants bank had tried its best to obtain repatriation of the amount but to no effect. The pleadings of the parties are reflected in the following issues:‑ . (1) Whether defendants failed to carry out their contractual obligation to convey the instructions about the delivery of documents to drawee against payment? If so what is its effect? (2) Whether the defendants are liable for loss claimed in the suit? (3) What should the decree be?

4. The learned trial Court examined the witnesses and then dismissed the suit on the premises that there was no negligence on the part of the defendant bank for causing delay in discharge of their obligation. Reliance has been placed on section 212 of the Contract Act and it has been observed that the respondent cannot be made liable as the defendant had acted promptly in discharge of their obligations.

5. I have heard learned counsel for the parties. Learned counsel for the respondent has supported the judgment and the reasoning of the trial Court. Both the parties have relied upon Exh.1l. The documents were sent to the U.S.A. Bank by the defendant for collection under F . B . C . No.38834. The 'X' is the relevant column which reads as under; please follow instructions marked 'X'. 'X' documents to be delivered against payment. It is thus specifically mentioned in Exh.11 that the documents were to be delivered against payment but in this case the admitted position that the documents had been delivered without receiving any payment. Learned counsel for the appellant has referred to Exh.19 which is a letter addressed by the American National Bank to the plaintiff wherein it has been stated as under:‑ "We regret the way in which the entire matter has been handled. Upon receiving the case we find that we had nod received the proper instructions for handling the documents as you wished them i. be handled. We also find that these documents were carried of this bank by Mr. Rodgers arid Sinaullah Kundi, both of whom would have known better had there been proper instructions. The assertions made in this letter are not controverted by the respondent. The plaintiff's General Manager Muhammad Ehsan appeared as a witness. The defendants witness has himself produced Exh.19. Therefore, the contents of this documents have been admitted by the defendant, thus the negligence on the part of the defendant is not denied. The trial Court has taken the erroneous view that section 212 of the Contract Act would be attracted in the present case. According to this section an agent is bound to conduct the business of the agency with as much skill as is generally possessed by persons engaged in similar business, unless the principal has notice of his want of skill. The agent is always bound to act with reasonable diligence, and to use such skill as he possesses; and to make compensation to his principal in respect of the direct consequences of his own neglect, want of skill or misconduct, but not in respect of loss or damage which are indirectly or remotely caused by such neglect, want of skill or misconduct. The learned trial Judge has come to the conclusion that the agent was liable to make compensation if there was any neglect or want of skill or misconduct, but not in respect of loss or damages which are remotely caused by such neglect. In the present case there was specific instruction by the plaintiff that the documents to be delivered after receiving the payment but this instruction has not 'been carried out by the American Bank as their case was that no proper instructions had been given. It is also not clear whether letter Exh.11 had been delivered to the American Bank.

6. For the disposal of the present controversy the proper provisions are sections 192 and

194. These provisions are reproduced hereinbelow:‑ "

192. Where a sub‑agent is properly appointed, the principal is, so far as regards third persons; represented by the sub‑agent, and is bound by and responsible for his acts. as if he were an agent originally appointed by the principal. The agent is responsible to the principal for the acts of the sub‑agent. The sub‑agent is responsible for his acts to the agent, but not to the principal, except in case of fraud or wilful wrong.

194. Where an agent, holding an express or implied authority to name another person to act for the principal in the business of the agency, has named another person accordingly, such person is not a sub‑agent, but an agent of the principal for such part of the business of the agency as is entrusted to him." A perusal of these provisions would show that agent of an agent is not the agent of the principal. The American Bank was not appointed as sub‑agent with the consent of the appellant. The American Bank was the agent of the defendant respondent. There is no contract between the principal and the sub‑agent. Before appointing a sub‑agent the agent must have expressed or implied authority to appoint such agent to act on behalf of the principal. Such authority is lacking in the present case. The agent is to act with reasonable diligence and if any loss is caused to the principal then he is entitled to sue his agent and recover the amount for the loss caused to him by the negligence of his agent. The loss caused to the principal in the present case is not due to the remote consequences of the action of the agent. Learned counsel for the respondent has referred to A I R 1960 Pun.

590. This authority does not advance the case of the respondent. On the other hand it goes against him. The facts of the cited case are: ‑ P.N.. Bank sued B.D. Co. for recovery of Rs.18,000 on basis of an overdraft account. Defendant company pleaded that only Rs.1,700 were due to the Bank after adjusting and obtaining credit on account of a Hundi and Railway receipt handed over to the Bank for collection from certain firm through M. Bank. This claim of the defendant was in the nature of a set off. The defendant company also asserted that the plaintiff bank was guilty of extreme negligence and delay in presenting the relevant draft as also of otherwise behaving in an improper and unbusiness like manner in performing its duties as a banker. The. plaintiff bank denied the allegations of neglect or default on its part and pleaded that the defendants had definitely instructed the plaintiff to present the bill for collection through M.Bank with the result that its duty and responsibility came to an end as soon as it acted in accordance with the mandate given by the defendants. There being no brand of the P.N Bank at the place of recovery an implied authority to employ an agent for the collection work was also relied upon, and it was expressly pleaded that such an appointed sub‑agent was to be looked upon as the agent of the principal. The admissibility of the counter‑claim was also controverted and it was pleaded that it was barred by limitation. It was held that the position of the M. Bank was that of the sub‑agent was appointed under the authority of the defendant firm, but them' was no privity of contract between them. It was further observed that the banker was bound to do not only what was legally imperative upon . a .holder but also what was prudent in the interests of his customer. The banker must act in good faith and without negligence; and the onus of proving the absence of negligence is on the banker. It was further held that the P.N. Bank was guilty of negligence in dealing with the business of collecting the draft through the M.Bank. Though the M. Bank had been named by the defendant Company for collecting the draft, the instructions issued to the plaintiff Bank were that on realising the amount of the draft it was to be credited to the Company's account. ‑It was fairly well‑settled that if a Banker is dilatory in endeavouring to procure acceptance or payment or is otherwise negligent in‑'doing the business of the agency and his customer suffers for the consequence, the banker would be liable to make it good. ' In the reported case M. Bank had been named by the defendant but in the present case the bank was not appointed with the consent of the plaintiff. Thus the case of the plaintiff is on better footing than the facts of the case cited by the learned counsel. I may also quote another authority which applies to the facts of, the present case. It is reported in P L D 1957 Kar.

229. It was held:‑ " Before an appointee of the agent can be said to act for the principal in the business of the Agency, the Agent must have expressed or implied authority to appoint such person to act in the business of the agency 'for the principal. In the absence of such authority, there is no privity of contract between the principal and such appointee, and the latter is only a sub‑agent of the agent and not an agent of the principal. The defendant bank, in accordance with the terms of agreement with the plaintiff, was required to open two letters of credit in London for plaintiff and to procure two separate sets of documents in respect thereof. The defendant Bank, however, was not an authorised dealer in exchange, and, therefore, employed another Bank to arrange for the Letters of Credit, and got the application for the same, which were addressed to the other Bank, signed by the plaintiff, and also signing them itself, presuming to do so as guarantor. Eventually, the defendant Bank, instead of two Letters of Credit, allowed the sellers to draw only one draft in respect of the whole amount and only one set of documents, consisting of only Delivery Order issued by the Shipping Agents at Karachi and not clean shipped on board Bill of Lading as originally contracted for. It was held that the defendant Bank was the principal so far as the other Bank was concerned and that the other Bank was dealing with the defendant Bank and not with the plaintiff. The other Bank was the subagent of the defendant Bank and not the agent of the plaintiff. There was no privity of contract between the plaintiff and the other Bank. The suit was, therefore, maintainable against the defendant Bank for breach of the terms of contract in respect of the supply of Letters of Credit."

7. The upshot of the above discussion is that the judgment and decree passed by the trial Court cannot be sustained. The same are set aside. The appeal is accepted and the suit is decreed in the sum of Rs.25,615 with costs of court‑fee paid by the appellant in the trial Court as well as in this Court, but the other cost is not allowed. S. Q. Appeal accepted.