P L D 1960 (W (PLP)

"I cannot say. They might have been delivered on payment or without payment." Later on he admitted:‑ "Verbal instructions are always reduced to writing and maintained in a book. That book is not available. Telephonic instructions were also reduced to writing and passed on to the Department concerned. In this case I cannot trace any telephonic instructions." In cross‑examination to the counsel for the defendant bank the witness stated:‑ "Every transaction entered into by the bank is recorded in writing in the bank's books on the same day and all the transac tions are checked and verified by the officers of the bank. Each and every delivery mentioned in Exh. 5/39 is checked and in token thereof initialled by an officer of the bank. There is no possibility of mistake in any transaction entered with by my bank. Every entry is properly checked and verified. " The plaintiff also examined P. W. 2 Muniruddin and this witness stated: "The deceased used to send instructions in writing to the defendant bank to deliver the shares on payment of the amount mentioned in the letter." He also proved the signatures of the deceased on Exhs. 5/4, 5/6 and 5/30. According .to this witness the deceased used to enter into contracts with Haji Jan Muhammad Ibrahim and "deceased never used to give any oral or telephonic instructions to the defendant bank in respect of the above‑mentioned transactions." The statement of Mr. Khairati does not at all help the defendants' case. Simply because the defendant bank took care and checked all the instructions that passed through them cannot prove that any verbal instructions were received by the defendant bank on the basis of which the shares in question were delivered to Haji Jan Muhammad Ibrahim without payment. Mr. Khairati has not stated that any such instructions were received by him. He only stated that verbal instructions must have been received. In law it cannot be taken as proof that the written instructions were later on modified by verbal instructions. It is at best a presumptive statement or an inference of the witness but it is not a positive statement in support of the plea of the defendant bank. I might have accepted the statement of Mr. Khairati had he made a categorical statement on this point or had the defendant bank produced any document containing a note of the alleged verbal instructions. In the absence of any such evidence it is not possible to accept the defendant's plea. On the whole I am clearly of the view that the defendant bank has not been able to prove that the deceased gave any verbal instructions to the bank to deliver the shares in dispute without payment to Messrs Haji Jan Muhammad Ibrahim. On the evidence on the record it is fully established that the defendant bank did not receive any payment in respect of the above‑mentioned shares. Neither the letters, nor the statement of account Exh. 5/1, nor other relevant documents produced by the defendant show that they received any payment in lieu of the shares in dispute. Accordingly my finding is that the defendant bank did not receive any payment in respect of the shares in dispute and the shares were delivered by them without receiving the payment, due to negligence. The next question for consideration is whether the deceased came to know about the negligence committed by the defendant bank in August, 1956. The plaintiffs in support of their case have produced P. W. Muniruddin (Exh. 6) an employee of the deceased. This witness stated:‑ "Neither I nor the deceased was aware that the amounts mentioned in Exhs. 5/4, 5/6 and 5/30 were not paid by Haji Jan Muhammad Muhammad Ibrahim. In 1956, the deceased prepared a statement of account for submission to the Income tax Authorities and in that connection I visited the defendant bank. I found that the amounts in respect of the shares mentioned in the above‑mentioned letters had not been credited to the deceased's account by the defendant bank. I personally attended the bank for the purpose of the deceased under the written authority given by the deceased. I asked from the defendant bank the details of 3600 Valika Woollen Mills shares. They gave me a rough statement.. This statement was given by Mr. Khairati but it was written by one of the clerks of the bank and I cannot identify his signature." He produced a rough statement of account marked A, which he obtained from the bank and which according to him was responsible to the discovery that the defendant bank had not given credit of Rs. 22,100 the sale proceeds of the shares in dispute to the deceased. P. W. Khairati admitted in his statement that P. W. Muniruddin approached him for obtaining detailed information of the disposal of the shares deposited with the defendant bank. He stated: "I do remember that Mr. Muniruddin present in Court approached me for information on behalf of the deceased but cannot say that I directed my office to give the information. Muniruddin did approach me for getting the details of 3,600 of Valika Woollen Mills. I don't remember whether any information was supplied". On this statement there can be no doubt left that P. W. Munirud din did approach the defendant bank to get the information and the information collected by this witness did lead to the discovery that the defendant bank had not given credit to the deceased of the amount of Rs. 22,100 in respect of the shares in question. This fact is also supported by a letter of the deceased dated 10th October, 1,956, (Exh. 5/35). In this letter the deceased stated:‑ "I have observed that you have disposed of 200 shares of Valika Woollen Mill Ltd., 100 shares on 17‑3‑1953, at Rs. 104 each, 75 shares on 23‑4‑1953, at Rs. 113 each and 25 shares on 23‑4‑53 at Rs. 129 each, but the proceeds amounting to Rs. 22,100 have not been credited to my account. I have seen you personally a number of times and requested you to give credit for the aforesaid sum and adjust interest accord ingly but so far nothing has been done and I am sorry to say that I am being put off. Will you kindly look into this matter and clear the account by giving credits for the amounts due to me as a mistake has been done and which is entirely yours. I await a very early and definite reply." This letter was replied by the defendant bank on 16th October, 1956, by Exh. 5/34, which reads as under:‑ "We are in receipt of your letter dated the 10th October, 1956. We are surprised to learn from it that after the lapse of over three years, you are now enquiring about the delivery of and payment for shares referred to therein. We were sending to you ‑ from time to time statements of your account and we, therefore, cannot understand as to how after the lapse of so much time, you are now question ing the delivery of shares referred to in your letter. We maintain that all deliveries of shares were effected according to your instructions, and as such, the question of giving any credit in your account does not arise." The defendant bank has not examined any other officer on this point and P. W. Muniruddin's statement in this respect remains unrebutted. P. W. Muniruddin appears to me a truthful witness and I am satisfied on his statement that the deceased for the first time came to know about the negligence of the defendants in respect of the shares in dispute in August, 1956. The contention of the learned counsel for the defendants that the defendant bank had been sending advice memos to the deceased, a specimen of which is contained in Exh. 5/32 and the deceased should be fixed with the responsibility of the knowledge that the said amount was not credited to his account is not well -founded. The defendant bank has not produced before me any advice notes sent by them in this connection. In fact they have not produced any record to show that any advice note was at all sent to the deceased to convey the information ‑that the shares in dispute were delivered to Haji Jan Muhammad Ibrahim without payment under his instructions. It was next urged by the learned counsel for the defendants that as the defendant bank has been sending periodical statements of account and confirmatory letter's about the account maintained by the deceased, the deceased is estopped from challenging the correctness of the account and is not entitled to reopen them. This contention also is not well founded. There is nothing on the record to show that the deceased's attention was specifically drawn to any such statement of account. The mere fact that the banks send periodical letters showing the balance standing in favour of their clients cannot result in any estoppel of the A customer. The banks generally recognise this position, which is evident from the fact that they always ask their customers to confirm it in writing. This practice appears to have been followed by the defendant bank. The specimen of such confirmatory letter Exh. 5/43 fully supports this view. The defendant bank have not produced any letters to that effect signed by the deceased. They have produced two, documents Exhs. 5/41 and 5/42, which go to show that letters were sent to the deceased showing what amount was standing as balance against him but they failed to produce any confirmation of the balance shown in them as is required by the specimen Exh. 5/43. In the absence of such confirmation no importance can be attached to Exhs. 5/41 and 5/42. At best it binds the defendant bank but cannot at a late stage estop the customer from challenging its correctness. In law estoppel arises only in such cases where a party ha changed his position on account of .the other party's conduct, but no such evidence is led in this case see Imperial Bank of Canada v. Mary Victoria Begley (A I R 1936 P G 193). Accordingly this contention fails. Similarly, I don't find any force in the contention that the status of the pass book of a bank is that of settled account or the deceased is estopped from questioning the conclusions of the entries in the pass book. The learned counsel for the defendant did not cite any decided case on this point in his favour. This subject is at length discussed in Paget's "Law of Banking" (1947, Fifth Edition) under Chapter XVIII at page 344 onwards. The sum total of the discussion is that the position of the pass book is most unsatisfactory. According to the learned author, its proper function is to constitute a conclusive, unquestionable record of the transaction between bank and customer and it should be recognised as such. After full opportunity of examination on the part of the customer all entries at least to his debit ought to be final and not liable to be subsequently re‑opened at any rate to the detriment of the banker. But the learned author has doubted this proposition of law. Bray, J., referred to this aspect of the question in Kepitigalla Rubber Estates, Limited v. The National Bank of India Limited (1909 2 K B 1010) and in concluding a long and careful judgment remarked: "Apart from authority one has only to look at the facts of this case to see how absurd it would be to hold that the taking out of the pass book and its return constituted a settled account. It would mean this, that a Secretary of a company, by going to the bank for his own purposes in order to prevent the discovery of his own fraud, and without any knowledge on the part of any of the directors, and getting the pass book (with a pencil entry in it of the balance), can bind the company for all purposes." This decision was approved and followed by Channell, J. in Walker v. Manchester and Liverpool District Banking Co., Ltd. ((1913) 108 L T 728). It appears to me unless and until evidence is produced that the customer examined the pass book with all the relevant docu ments little reliance can be placed on the pass book and the customer in law is not estopped from disputing entries appearing in the book although he raised no objection on it. The case of the defendants here is much worse. Their contention is not in respect to any particular entry in the pass book. They contend that the deceased is not entitled to show that the sale of the shares in dispute have not been credited in his account by the defendant because the status of the pass book is that of a settled account. I am not prepared to accept this position and will rest my decision on the broad and simple ground that the entries in the pass book do not fall within the term "settled account," which applies only to those accounts that are submitted and accepted by the other side to whom the accounts are rendered and cannot be considered so, as on the facts of this case their acceptance cannot even be inferred from the conduct of the deceased. In fact the pass book is not of any help to the defendants as the deceased has not challenged the correctness of any entries in it. Accordingly this plea also fails. The most important question for consideration in this case is what is the position of the defendant bank in respect of the delivery of the shares to Messrs Haji Jan Muhammad Ibrahim. The plaintiffs' counsel contended that their position was that of an agent. But Mr. Abdul Aziz, the learned counsel for the defend ants, contended that their position was that of a pledgee and if the pledgee wrongfully converts the securities pledged with them, at best the plaintiffs could file a suit for the recovery of the amount for the wrongful conversion of the goods pledged with them. Counsel for both the parties have cited a large number of authorities in support of their respective contentions. Mr. Abdul Aziz, the learned counsel for the defendant bank, has drawn my attention to Bank of Dacca, Ltd. v. Gour Gopal Saha (A I R 1936 Cal. 409), Neikram Dobay v. Bank of Bengal (19 I A 60) and 14 A C

273. In these cases the banks concerned took as a security towards their over‑draft amounts certain securities from their clients and converted them to their own use. It was held that the position of the banks was that of a pledgee and when they convert the securities pledged with them for their own use they become wrong‑doer and the pledger can recover compensation for the wrongful conversion of the securities pledged with them. Mr. Dingomal, the learned counsel for the plaintiffs, has invited my attention to the commentary of Banking Law and Practice in India by M. L. Tannan, an Indian publication, particularly to the statement at page 358 under Chapter XV in which the learned Commentator opined that the modern joint -stock bank has to perform not only proper banking functions, but also those which are more in the nature of services undertaken with a view to increase its utility to the community. The learned counsel pointed out that the author has classified the services rendered by the bank into two portions (a) Agency services and: (b) Miscellaneous or general utility services, and urged that when the defendant bank delivered the shares under the instructions of the deceased they were acting as agent of the plaintiff and were not acting as pledgees. This question is not of so much importance from the point of the liability of the defendant bank as from the point of view of finding out which of the Articles of the Limitation Act applies to the facts of this case. In my opinion the view expressed in A I R 1936 Cal. 409 correctly describes the relationship of the banker and the customer. The learned Judges of the Calcutta High Court observed: "The relationship of banker and customer is generally that of agent and principal, of debtor and creditor or of pledgor and pledgee; there are however cases where the banker stands in the relation of trustee as well as agent for his customer." On the facts of this case it is clear to me that when the deceased asked the defendant bank to deliver the shares held by them as security towards over‑draft account on payment of amounts mentioned in the letters, the defendant bank was not acting in the capacity of a pledgee but was acting only as an agent of the deceased. I agree that a bank as a pledgee under the provisions of the Contract Act on default has power of sale without resorting to Courts. Had they utilised the shares towards their own use or sold them at their own instance, it could be urged that they were acting as pledgees, but since the defendant bank was acting on the instructions of the plaintiff, their position was clearly that of an agent and no more. It was urged by the learned counsel for the defendant that the delivery of the shares by the defendant bank in this case amounts to the redemption of the pledged goods and in doing so they acted as pledgee and can only be sued for wrongful conversion and not for negligence. This argument appears to me absolutely fallacious. The arrangement between the defendant bank and the deceased was that the deceased was entitled to sell the shares pledged with them and the defendant bank had agreed to deliver them on receipt of the sale price. This is exactly what the deceased did under letters Exhs. 5/4, 5/6 and 5/30 and the defendants in these circumstances were acting under the instructions of the deceased as collecting agents and not as pledgee. In order to determine whether a party stands in the relation of agent or principal in reference to the other contracting party, the nature of the agreement and the course of business have to be taken into account. Under section 182 of the Contract Act an agent is a person employed to do any act for another or to represent in dealing with third persons. On the terms of the letters written by the deceased undoubtedly the defendant bank was acting as the agent of the deceased to collect the sale proceeds of the shares in dispute and to credit them in his account. Mr. Abdul Aziz, however, urged that the defendant bank was acting gratuitously and cannot be burdened with negligence. In law whether an agent is acting gratuitously or otherwise, he is responsible for negligence in the discharge of his duties. I am fortified in my view by a decision of the Lahore High Court reported in Punjab National Bank Ltd., Layallpur v. Diwar Chand and others (A I R 1931 Lah. 302). In that case of a Joint Hindu Family owned, among other properties certain mills to work which the family entered into an arrangement with a Bank by which the Bank allowed them a cash credit of Rs. 60,000 and created an equitable mortgage of the said mill of the amount concerned. Under the agreement the joint family agreed to insure properties mortgaged for a sum of Rs. 40,000 and to assign and deposit the policy with the bank, if so required. This clause however was not acted upon. Subsequently the Manager of the joint Hindu Family on his own wrote to the bank that he wanted to have the mill insured. Accord ingly a policy of insurance was taken out for one lac of rupees on the building, machinery and on some stock of wheat lying in it. This policy was renewed again for one year but after it had lapsed the mill was later on leased out to a third person and the wheat and wheat products lying in the said premises did not belong to the joint family. When the policy was about to expire the bank inquired from the Manager of the family whether they wanted to renew the policy for one lac of rupees. The Manager of the joint family replied that as the wheat no longer belonged to the family the insurance may be‑effected only on the building and machinery in the sum of one lac of rupees. The bank replied that the company has been asked to renew the policy as instructed and got the equitable mortgaged registered. The Manager of the family was later on informed that the policy was renewed and the policy was retained by the bank. It so happened that the mill subsequently caught fire and the machinery was burnt. On investigation by the Insurance Co. it was found that the policy had been renewed on the old terms i.e., the machinery and buildings were insured for Rs. 50,000 and the wheat and the wheat products for Rs. 50,

000. The Insurance Company therefore paid only Rs. 50,000 towards the insurance of the machinery and buildings. The manager of the Joint Hindu Family thereupon instituted a suit against the bank claiming Rs. 52,000 on account of compensa tion, loss and damages due to the negligence of the Bank in connection with the renewal of the policy. Their Lordships on these facts held that the bank was acting in the manner as agent of the plaintiff and not as a mortgagee and was liable for the loss caused by its gross negligence in not carrying out the instructions of the principal irrespective of the fact whether it was acting as gratuitous agent or not. Their Lordships observed "Had the plaintiff's instructions been duly carried out the company would have been paid double the amount that was actually paid, and the loss was directly due to the negligence of the Bank." They further observed at page 306: "It seems to me that an agent who negligently omits to comply with the clear instructions of his principal must be regarded as guilty of gross negligence and, whether the bank was acting as `gratuitous agent' or not, I consider that it was responsible to the plaintiff for any loss occasioned by that negligence." In my opinion the principle applied in that decision is also applicable to the facts of the present case. In this case also the defendant bank delivered the shares on the instructions of the plaintiff, they did not act on their own, and although they acted in a gratuitous manner they acted as collecting agent for the deceased, which is one of the services undertaken by them for the conve nience of their customers. In my opinion the defendants being the agent of the deceased were bound to carry out the instructions and having failed to do so, committed negligence and must compensate the plaintiffs for their negligence. On the above‑mentioned finding the appropriate Article of the Limitation Act applicable to the facts of this case appears to be Article

90. It is a residuary Article for suits by principals against, agents for negligence and misconduct, the terminus a quo being when the neglect or misconduct becomes known to the principal. In A. C. Mukerjee v. The Municipal Board, Benares (A I R 1924 All, 467), Article 90w was applied in a suit by a Municipality against its executive officer for loss sustained by it owing to be regard of directions amounting to negligence. This Article was also applied in a Lahore case filed by a Bank against its Director for misconduct in sanctioning a loan in violation of the rules. Similarly it was also applied to a bank clerk in charge of Saving Bank Accounts in A I R 1930 All.

573. Mr. Abdul Aziz, learned counsel for the defendants, urged that on the facts of this case Article 115 of the Limitation Act applies. In support of his contention the learned counsel relied on E. L. Ramswamy Chetty sand another v. M. S. A. P. L. Palaniappa Chetiiar (A I R 1930 Mad. 364) at page

371. That suit was for redemption of certain jeweles pledged with the defendants. It was found that the pledgee unauthorisedly converted the goods. Their Lordships of the Madras High Court held that the act though an unauthorised conversion did not put an end to the contract of pledge so as to entitle the pledgee to have the property back without payment. The contention before the Court was that it was a suit for damages governed by Article

36. In that connection Pandalai, J., observed at page 371 "We think that Article 36 has no application to the suit as it is for wrongs independent of contract and that this case arises out of a contract of pledge though technically the appellant's act amounted according to the authorities to conversion. But as held by Privy Council in Nekram Dobay v. Bank of Bengal ((1892) 19 Cal. 322=19 I A 60; 6 Sar. 164 (P C)) above referred to that conduct was not inconsistent with the condition of the contract as to have the effect of putting an end to the contract so as to enable the pledger to avoid the contract under section 153, Contract Act. If the contract is thus till subsisting whether the suit be regarded as one for redemption governed by Article 145, or as one for damages for breach of contract governed by Article 115, the suit which was brought on 19th January, 1926, before the expiry of 3 years from 25th January, 1923, the date of the alleged sale, is well‑ within time and is not barred." But as already observed the defendants in this case did not convert the goods to their own use. They did not commit any breach of the terms of the pledge and the question of the breach of the contract does not arise at all. But it appears that in cases of Principal against his Agent for neglect or negligence Article 115h as no application. In my opinion it is too late in the day to argue that a suit for compensation for loss resulting from the neglect of an agent under section 212, Contract Act is governed by Art.

115. I am fully satisfied that the defendant bank's position in respect of the transaction in question being that of a collecting agent, Article 90 applies and the defendants having failed to show that the deceased had knowledge of their negligence much earlier than three years before the institution of the suit, the suit is not barred by limitation. Assuming for the sake of argument that the defendants were not the agent of the deceased and Article 90 does not apply, then the question will be what other Article of the Limitation Act applies. Defendants have not taken up the position that the suit has arisen out of breach of any express or implied terms of the contract. On the other hand they alleged that they acted on the oral instructions of the deceased. In any case Article 115 is also a residuary article and will not be applied if some other article applies. In my opinion, on the above assumption, the nature of this suit will be that of a suit for recovery of the share in dispute or for credit in the account between the parties for the sum realised by the defendants or for compensation for the loss suffered by the deceased, and will be governed by Article 145 of the Limitation Act. In Muhammad Habibul Haq and others v. Seth Tikam Chand (A I R 1938 P C 110) their Lordships of the Privy Council treated a case where Government Promissory Notes are left by a debtor with his creditor as security for a sum borrowed by him or for safe custody, a suit for recovery of the notes or for the credit in the account between the parties for the sum realised for the sale of the notes and interest, and observed "Their Lordships agree with the Subordinate Judge that this Article had no application. The notes remained with Tikam Chand as Security or at any rate for safe custody and on either view not Article 49 but Article 145 is the relevant Article and the suit was well within time. The appeal must therefore succeed on this point The notes have been sold under circum stances not satisfactorily explained, but the appellants, though they cannot recover the notes, are entitled to credit in the account between the parties for the sum realised by the sale of the notes with interest." Similarly in Perla Nagamam Sri Lakshmi Vilasa Draviya Sagaya Nidhi Ltd. Varalakshmi Ammal (A I R 1942 Mad. 386) in a suit for accounts and recovery of bank shares in specie lodged with the bank as a security for a loan it was held that the suit was governed by Article 120 or Article 145, Limitation Act. It is thus obvious that on any view of the matter the suit is well within time. After careful consideration of the oral and documentary evidence produced in this case, I am of the opinion that the defendant bank in disregarding the instructions of the deceased by handing over the shares in dispute without receiving the payment from Haji Jan Muhammad Ibrahim acted negligently and are liable to compensate the deceased for their gross negligence. Accordingly I grant the plaintiffs decree as prayed for. On this view of the matter my findings on the issues in this case are as under Issue No. 1.--‑Negative. Issue No. 2.‑--It was conceded by the learned counsel for the defendants that the plaintiff gave written instructions. Accord ingly the issue is decided in favour of the plaintiff. Issue No. 3.

‑Negative. Issue No. 3.--‑(a) Negative. (b) Does not arise. (c) The defendant bank was not justified in charging any interest on the amount of Rs. 22,100 from the dates when they delivered the shares in dispute to Messrs Haji Jan Muhammad Ibrahim. Issue No. 4.‑--(a) Negative. (b) Negative. (c) Negative. Issue No. 5.‑

Decree as prayed. For the reasons given above the plaintiffs are granted a decree for Rs. 26,947 as prayed with interest from the date of the suit till payment. The defendants will also bear the costs of this suit. K. B A. Suit decreed.