P L D 1962 (W (PLP)

BASHIR AHMED, J.‑.This is an appeal under the Letters Patent against the judgment on the original side by Qadeeruddin Ahmad, J. arising out of two suits, Suit No. 149 of 1959 in which the appellant have claimed against the respondents a sum of Rs. 50,000 and Suit No. 174 of 1959 in which the respondents have preferred a counter claim of Rs. 1,87,405 against the respondents. The claim of each party arises from the same transaction. Both the suits were consolidated and disposed of by one judgment. The suit brought by the appellants was dis missed while that of the respondents was decreed. The decrees in both the suits have been challenged by this appeal.

2. The appellants deal in export of goat hair and wool. The respondents, who are bankers, provided them with banking facilities against the hypothecation of their goods at the rate of 40% of their value when in loose form. The goods were then cleaned and pressed into bales and then pledged with the respondents against another 50% of their value on transferring the goods to the godowns of the agents of the respondents. The total undisputed liability (if the appellants on the goods pledged (526 bales) in June 1958, came to Rs. 2,03,644‑13‑

0. The goods had lain with the agent of the respondents without any fruitful effort on the part of the appellants to dispose them of for a considerable length of time. The respondents became suspicious and had the goods surveyed through Messrs General Superin tendence Company (Pakistan) Ltd. Exh. 116 is the survey report according to which the goods contained in the bales were very inferior and were adulterated with dust, dirt, stones, pieces of bones and skin and short‑hair sweepings. The respondents smelled sharp‑practice and threatened to prosecute the appellants for the fraud practised upon them. They moved, without success, the Insolvency Court for adjudication of the appellants as insolvents, the finding of the Court being that the appellants had committed no act of insolvency. Later the goods were sold by the respondents for a sum of Rs. 40,000 and after adjusting the amount to the debt liability of the appellants claimed the balance of Rs. 1,78,405‑4‑0 with interest @ 6% per annum. The appellants, on the other hand, claimed that the goods pledged with the respon dents were of the value of Rs. 2,75,352 which left, after the discharge of their liability towards the respondents, a sum of Rs. 58,254‑4‑0 as still due from the respondents. The claim, however, was reduced to a sum of Rs. 50,000.

3. The pleadings gave rise to several issues but as noticed by the learned Judge there are only two points which are sufficient to dispose of the points of difference between the parties, namely :‑ (1) Whether the goods were sold by the respondents after proper notice and for proper value, and (2) What was the value of the goods which were pledged by the appellants and were sold by the respondents ? The answer to the first question depends on the construction to be placed on section 176 of the Contract Act, which reads :‑‑ "If the pawnor makes default in payment of the debt or performance, at the stipulated time, of the promise in respect of which the goods were pledged, the pawnee may bring a suit against the pawnor upon the debt or promise and retain the goods pledged as a collateral security, or he may sell the thing pledged, on giving the pawnor reasonable notice of the sale. If the proceeds of such sale are less than the amount due in respect of the debt or promise, the pawnor is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the pawnee shall pay over the surplus to the pawnor." It is claimed that the respondents had failed to give, before the sale of goods pledged, a notice as contemplated by this section. A brief statement of some facts is necessary for dealing with the plea.

4. The respondents have relied on three notices, Exh. 64 (dated the 16th of January 1958), Exh. 84 (dated the 23rd of June 1958) and Exh. 87 (dated the 19th of September 1958), as satisfying the statutory requirement. The learned Judge has found, and for reasons with which we are in complete agreement, that Exhs. 64 and 87 do not fall within the ambit of section 176 of the Contract Act. The notice contained in Exh. 84, in the estimate of the learned Judge however, does fall within it. Before us the learned counsel for the appellants has strenuously challenged that finding. A reference to the notice shows that the appellants were asked to make, inter alia, a complete discharge of the balance of the over‑draft account with the respondents on or before the 15th of July 1958 and then ended with the following statement:‑ "Please take notice that in default of compliance of any one of the above‑mentioned demands, our clients will take steps to recover all that is due to them from you without further reference to you." The learned Judge has found, in the expression "without further reference to you" a notice to the appellants by the respondents of their intention to sell the goods. On a bare analysis of section 176 of the Contract Act, it is apparent that the pawnee can either bring a suit and retain the goods or reduce the liability by sale of the goods and sue for the balance. It is in the latter case that the section places the pawnee under an obligation to give the pawnor a reasonable notice of the sale. The reason for the provision is not difficult to gather. When such a notice is issued the pawnor is fixed with definite knowledge that the goods belonging to him will be liquidated after the time stipulated in the notice. He is thus placed under an obligation to look after his interests to see that the goods fetch the highest value and if he fails to look after his interests he has to be content with a bargain as settled by the pawnee, The pawnee, if he has to bring a suit on the liability, would serve a notice to justify a claim for the costs which the filing of the suit entails. It is In this context that Exh. 84 has to be read. A mere intention to take a particular action without an indication that the decision has already been taken will not satisfy the test laid down in the A section. The liability of the pawnor springs up only when such a clear intention incorporating the decision is expressed. The learned Judge is in agreement with the statement of the law of Waheeduddin Ahmad, J. in Usman Malik v. The Bank of Bahawalpur Ltd. (P L D 1959 Kar. 725) but seeks to distinguish it on the ground that it recognises what is basic that the facts of each case will be the determining factor for the conclusion whether the notice required by section exists or not. We do not see, in the circumstances of the present case, how the qualification will be of any assistance in the construction of the notice before us. The notice merely required the liability to be satisfied and did in no manner suggest that a decision to sell the goods for reduction of the liability before the filing of the suit had already been taken. The learned Judge has also noticed the Full Bench case of the Travancore High Court, Sankaranaraya Saraswathy Amal v. Kottyam Bank Ltd. (A I R 1950 Trav. 66) and has reproduced a few observations from the judgment to show that all that the notice need contain is an intimation of the intention to sell and where such an intention was unequivocally expressed, if the debt was not paid within the stipulated period, the legal requirements of a valid notice are satisfied. We are in respectful agreement with the statement of the law contained in the judgment of Waheeduddin Ahmad, J. and in the Full Bench judgment of the Travancore High Court. The learned Judge on these premises has examined the facts of this case and has read in the expression "without any further reference to you" an unequivocal intention to seil the goods. We do not find it possible to deduce any such conclusion. There can be nothing more unequivocal than to say so and if the intention is a matter of inference, it is difficult to predicate that the intention has been expressed in unequivocal language.

5. The learned Judge then proceeded to examine the facts which have been placed on the record to discover that such an intention was expressed or at any rate clearly understood by the appellants. The appellants had sent their clerk Hasan Ali to the respondents along with a buyer, Amir Hoodbhoy, a month or so before the actual sale by the respondents. The following pieces of evidence were referred to by the learned Judge as indicating that the respondents were secretive in the sale of the goods pledged with them. In the letter Exh. 138, the Eastern Express Company Ltd., as agents, intimated to their principals, the respondents, about the quality of the respondents' goods pledged with them and the value the goods could fetch. The relevant portion of the letter reads :‑ "As this calculation is however based on the confidential information with which you have provided us, we have not passed it on to Messrs Hooseinbhoy Hoodbhoy & Sons (the appellants)." The same point appears in the statement of Muhammad Imtiaz Ahmad (P. W. 1) which was to the effect that the respondents were the goods, nor of the price offered or accepted by them. A grievance was also made of the fact that samples were taken in their absence and without any information to them. The learned Judge has on these facts refused to draw any conclusion against the respondents and held both the acts justified on the short ground that the agent will be acting against the interests of his principals if be were to convey the information to the appellants and also that once valid notice had been served the respondents were under no obligation to keep the appellants informed of the progress of sale. On the finding that the appellants had an unequivocal notice of the intention of the respondents to sell the good., it is difficult to fall in line with the argument that the agent would be failing in his duty if he intimated the result of his inquiries to the defendants or the respondents had kept the appellants informed of the price offered for the goods. In the fact, that the appellants made several attempts to sell the goods and brought customers who were not acceptable to the respon dents for they were purchasers either in small lot or for the reason that they were satisfied that they were not bona fide purchasers, the learned Judge has found material for holding that the appellants had the requisite knowledge of the intention of the respondents of sell. It appears to us plain that the basic distinction has been missed that the mere knowledge of the pawnor that the pawnee was selling the goods is no substitute for the requirements of the section which place the pawnee under an obligation to serve a notice of his decision to sell the goods in default of the discharge of the liability. Even on the finding e that the appellants had aliunde the requisite knowledge of the activities of the respondents, it would be impossible to hold that the pawnor is placed under an obligation on coming by such knowledge to step in or in default to suffer the disability provided In section 176 of the Contract Act. It appears to us that if the section were to receive that construction the funda mental protection afforded by the section would be rendered wholly nugatory.

6. The appellants relied, in order to show that they had no notice of the respondents' intention to sell, on their reply to the notice which is contained in Exh. 129 in which they expressed their inability to discharge the balance of the overdraft account within the stipulated period and held out the hope that they were making shipments in the near future when they would be able to discharge the liability. They claim to have respected the provisions of their agreement with the respondents and disowned any liability for an action and then ended with the observation‑

"Therefore the payment of costs for any action against us does not arise." The reply, according to the appellants, clearly showed that they entertained no apprehension about the sale of the goods pledged. The reply, though detailed, is silent on that point and this circumstance in itself would support the contention of the appellants that they did not spell any such intention as has been spelled out by the learned Judge from the language of Exh.

84. The plea has been rejected by the learned Judge on the ground that the costs in the context refer, not only to the costs incurred in bringing the action but also, to the costs involved in the conduct of the sale and disposal of the goods pledged with the respondents. We are unable, with respect, to place that construction on the letter which, in our estimate, will be a strained construction. It is no doubt true that in order to enforce the liability the respondents had moved the Insolvency Court for adjudication of the appellants as insolvents and had also made a prayer for the goods to be sold to the learned Judge on the insolvency side. This may be material for holding that the respondents considered as one method of reduction of the liability to be the sale of the goods and the adjustment of the price towards the liability, but this would, in our estimate, be no material for holding that the intention of sale in the language of section 176 of the Contract Act could be spelled out by any such prayer. In the cases placed before us by either of the side, there is not a single case where the intention to sell remains unexpressed and still it has been spelled out on the finding that the pawnor bad the requisite knowledge. After giving this aspect of the case our most anxious consideration, we find ourselves unable to accept the construction placed by the learned Judge on section 176 of the Contract Act and in disagreement with him we hold that the requirements of the section are not satisfied in the present case.

7. This, however, does not solve the problem for on the conclusion reached by us it is clear that the respondents are liable for wrongful conversion of the goods. Unlike mortgages, which involve transfer of a title in the property to the mortgagee, the goods pledged remain the property of the pawnor. The right to sell goods which belong to another can only rest on some statutory provision and the exercise of any such power which does not flow from any such right would constitute an inroad on the rights of the owner of such property. The provision in section 176 of the Contract Act creates the right and prescribes also the method for its exercise. We have found that the sale by the respondents in the present case was in contravention of the statutory provision. This being so, the appellants could have claimed irrespective of their liability, to be compensated for the sale of goods belonging to them. In the present case, no such result flows for there is counter claim which has been consolidated. This brings us to the consideration of the loss the appellants have suffered by the sale of goods pledged with the respondents. The proposition is fairly established that the appellants are entitled in law to the price which the goods would have fetched in the open market on the date of the suit. The first difficulty which confronts us in the assessment of the price is the determination of the quality of the goods. In the survey carried out by Messrs General Superintendence (Pakistan) Ltd.‑it is significant that the integrity of this agency is above question for the appellants also admit that even till the date of the suit they had also entrusted their own affairs to the same agency‑it was reported, vide Exh. 116, that the goods had deteriorated and were also mixed with pieces of bones and skin and some parts of which were slightly water‑affected. The report is dated the 31st of July 1958. In the report submitted by the same agency, vide Exh. 117, the estimate of the prices the goods could fetch was also submitted. It is not the appellants' case that the goods have changed hands or there has been any negligence by the respondents in the disposal of goods. No challenge has been raised either to the identity of the goods. If this was the quality of the goods on the date of the report, it is obvious that a year later the condition must have further deteriorated and if the goods were water affected, as the report indicated, their market value must have considerably deteriorated as well a conclusion which the estimate of the price by the same agency also affirms. In our view, since the goods had ceased to be in essence marketable it can serve no useful purpose to refer to the market rates prevailing on the relevant date. An exami nation of the relevant evidence on the point is not of much help. The appellants examined Amanullah (D. W. 2), Office Secretary of Pakistan Wool and Hair Merchants' Association, who, on his own showing has no knowledge of the peculiarities of the trade and had been in the employ of the Association for hardly a year. He placed before the Court a copy of the report of the Association on the prices of long and medium goat hair (Exh. 136) which refer to the relevant time. The Association had, at the time, eleven of its members on the Evaluation Committee. The rates incorporated in the ‑report were based on their report which in turn was based on information received from foreign customers and on the inquiries made from the local market. The report in the present case was based on the rates reported by three out of the eleven members of the Evaluation Committee. The witness had no knowledge why the other members had not reported, nor could he throw any light how they had worked out the rates. The report, in these circumstances, has, in our estimate, little value. If the three members who are stated to have supplied the information contained in the report had been produced, the sources of their knowledge could have been put to the test of cross‑examination. In the case before us, the appellants could find no customers inspite of their best efforts. Even an attempt to have them adjudicated Insolvents failed either to kindle in them real earnestness to get the best customers available for the goods or they were really of such a poor quality that they could not reasonably expect any customers There is sufficient material on the record to justify the conclusion that the respondents had been constantly pressing the appellants for the discharge of their liability towards them, and for one reason or another the appellants had been trying to postpone the performance of their duty. If there was any local market for the goods it was more the concern of the respondents than in truth of the appellants to see that the goods were sold for in that event the debt which the appellants owed to the respondents would have been paid to them. If the goods were really adequate to discharge the liability both the parties, in our estimate, were equally interested to see teat they fetch the highest price. The salient fact, therefore, remains that there were no customers in the local market and the attempts made by the appellants to produce one or two doubtful customers, and that also for small quantities, also lends itself to the construction that the goods had no great value. On this point the statement of Shamasuddin appellant is significant. According to him the prices had gone up in August 1958, because of the bouns system. The price‑level of tire commodities in the world market could not be affected by the bonus system which merely afforded an incentive to the exporters to export their goods and to cover up against the possible loss or diminution to profits by utilizing the bonus vouchers. The witness was asked why he had failed to sell the bales and the only answer he gave was that their number was large and they could not be sold in a lot. It was specifically put to him why he did not try to get several buyers. The reply is significant for it involves the admission that the local buyers would not purchase the goods which were meant to be exported for they were suspicious about their contents. He also admitted his failure to find a foreign importer. He acknowledged to have made several infructuous attempts and then gave it up as a hopeless affair. Two instances were cited by the witness where the goods exported were reported not to correspond to the certificate of yield issued by Irving Boody & Company at New York. The importers in New York, on discovering that the goods did not correspond to the certificated quality refused to pay the balance of the price. There are similar incidents of the goods having been sent to H. Meyer & Co., New York, which met with the same result. A reference to the letter Exh. 120 shows that the foreign buyers were disappointed in the appellants' goods because of the discrepancy between the samples sent by them and the goods subsequently supplied. It would be fair on these premises to conclude that they had lost credit in the foreign market. There is no escape from the conclusion, so far as the present appeal is concerned, that the appellants could find no customers for the goods pledged with the respondents, either in the foreign market or in the local market.

8. Another argument pressed to our consideration was the valuation of the goods by the inspectors of the respondents at frequent intervals so long as the goods remained pledged with them. 1n these valuation reports, the reported value corresponded approximately to the advances made to the appellants. The learned Judge has examined with great care this aspect of the case, and we are in agreement with him that the valuation made by the inspectors was influenced in no small degree by the valuation of goods according to the books of the appellants. The goods neither in the loose form nor in the final shape could be thoroughly examined, and the report, however carefully done would, in the last resort, depend mostly on the confidence which one businessman reposes in another. We are unable, therefore, to attach any weight to those reports for the assessment of the market value of the commodities when they were converted and sold by the respondents.

9. After going through the entire evidence on the record, we find ourselves in complete agreement with the learned Judge on the second issue. There is no satisfactory evidence to show that at the time of their conversion the goods were in a market able state. There is no adequate evidence to show that the goods had any local market at the relevant time, and if there was one, the price which the goods could have fetched. We are equally satisfied that the sale of the goods for a sum of Rs. 40,000 fairly represents the price which the goods could have fetched in the open market. The measure of compensation in cases of wrongful conversion is the price which the goods could have fetched if they had been sold in the open market. The goods) have in fact fetched that price, and the appellants are entitled for the reduction of their liability to that extent. The learned Judge allowed that deduction and decreed the balance of the liability which was still unsatisfied. As already stated by us, the amount of liability is not a point of difference between the parties.

10. In the result we affirm the conclusion reached by the learned trial Judge, and dismiss the appeal with costs. K. B. A./A. H. Appeal dismissed.