P L D 1966 (W (PLP)

NOORUL ARFIN, J.‑

The Continental Syndicate of Trade, the appellant herein, has come in Letters Patent Appeal from the judgment dated the 6th of May 1960, of our learned brother Qadeeruddin Ahmad, J., whereby Suit No. 967 of 1953, brought by Lloyds Bank Ltd., the respondent, was decreed for Rs. 50,944‑4‑4 (Rupees fifty thousand nine hundred and forty‑four, annas four and pies four) with interest and costs.

2. The appellant was a customer of Lloyds Bank Ltd., and had a current account and several loan accounts with it. The loan accounts relevant to this case are accounts bearing Nos. 27, 28, 29 and

168. Under the first three of these accounts, the appellant imported textile machinery on Letters of Credit established with the bank. Account No. 168 was in respect of car radios, imported through the bank. The amount due from the appellant on the loan accounts was Rs. 65,146‑9‑

0. The bank combined these accounts into one realization account which showed this figure as the debit balance against the appellant. Another sum of Rs. 3,298‑15‑4 was claimed to be due from the appellant on current account. The Bank's total claim was thus Rs. 68,445‑8‑

4. The bank sold the goods held under its pledge on the four loan accounts for Rs. 17,501‑4‑0, which amount was appropriated towards the appellant's out standings and a suit for Rs. 50,944‑4‑4 was filed by the bank in respect of the amount still due from the appellant. The appellant denied its liability for this amount on various grounds and in turn claimed Rs. 42,120 against the Bank as under:‑-- (i) Rs. 6,000 claimed by the appellant as refund of the of marginal amount; (ii) Rs. 5,140 alleged to be the insurance money the Bank but not paid to the appellant; (iii) Rs. 17,600 being the value of 22 drums of caustic soda, which, it was alleged, the bank failed to deliver to the appellant; (iv) Rs. 14,000 which the appellant claimed as damages for non‑delivery of a consignment of knitting wool imported by the appellant.

3. Numerous issues were raised, but the parties went on trial on the following issues only, the other issues have been dropped or not pressed: (a) Has the plaintiff bank maintained the defendant's account according to the normal banking practice and is the defendant bound by the same? (b) Did the defendant maintain current account with the plaintiff and has a sum of Rs. 3,298‑15‑4 become due by the defendant to the plaintiff bank? If so, on what date? (c) Did the plaintiff serve notice on the defendant of its intention of selling the goods and was the action of the plaintiff justified in selling the goods? (d) Were the goods sold at a fair and reasonable price? (e) Was the plaintiff liable to deliver 22 drums of caustic soda to the defendant? If so, did the plaintiff deliver the same to the defendant? (f ) Is the defendant's entitled to claim Rs. 17,000 on account of the value of the undelivered 22 drums in question? (g) Did the plaintiff refuse to deliver the goods related to loans Nos. 27, 28 and 29 on demand to the defendant? If so, with what effect? (h) Did the plaintiff supply to the defendant complete copy of the current account? If so, with what effect? (i) Is the defendant not liable to the loan account of loan No. 168 on account of plaintiff withholding the delivery of the goods? (j ) Is the defendant entitled to claim Rs. 6,000 on account of margin money paid to the plaintiff on the grounds set forth in paragraph 6 of the written statement? (k) Is the defendant entitled to a decree for Rs. 42,120 against the plaintiff as stated in para. 6 of the written state ment? (l) What sum of money if any, is due to the plaintiff from the defendant? (m) What amount, if any, is due, to each party against the other? (n) General.

4. The findings of the learned trial Judge on these issues being against the appellant, the Bank s suit was decreed and the appellant's counter‑claim dismissed.

5. Mr. Munawar Abbas, the learned counsel for the appellant, raised before us the following objections to the judgment in appeal :‑

(1) That the Bank sold the pledged goods without notice or sufficient notice required under section 176 of the Contract Act. (2) That the Bank was not entitled to combine the four loan accounts into one realization account. (3) That the Bank wrongly refused to deliver the pledged goods when delivery was demanded by the appellant. (4) That the sales of the pledged goods by the Bank was either fictitious or not according to the market rates. (5) That the debit balance of Rs. 3,298‑15‑4 on the current account had arisen because the Bank had wrongly debited to this account the amount due from the appellant on certain other accounts. (6) That the Bank wrongly credited the sum of Rs. 5,140 to the appellant's account instead of crediting this amount to the relevant loan account. (7) That the appellant's counter‑claim was wrongly rejected.

6. As to the first point, M. Munawar Abbas referred us to section 176 of the Contract Act which requires a pawnee to give notice to the pawnor before proceeding to sell the pledged goods. The section reads as under: "Pawnee's right where pawnor makes default. 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." The appellant's contention is that the requirement of this section as to notice of sale has not been complied with. The two notices, Exh. 11/7 dated 28‑10‑1951 and Exh. 11/1 dated 22‑2‑1952, which the Bank has treated as notices of sale, have not been proved to have been given to, or served on, the appellant. The reason behind this contention is this. These notices were given on behalf of the Bank by Messrs Lalchand & Co., a firm of Advocates which had extensive commercial practice in Karachi. No representative of this firm was produced to prove the despatch of the notices or the receipts thereof by the appellant. It is, therefore, urged that we should disregard these documents and hold that no notice of sale as required by section 176 of the Contract Act was given We are, however, unable to sustain this objection. There is sufficient material on i.e record to show that the appellant did in fact receive the notice in question. The first of these notices is Exh. 11/7 dated 28‑10‑1951. On 16th January 1952, the bank wrote to the appellant Exh. 11/15 in which, after referring to the personal visit to the bank of the appellant's proprietor, Mr, Nazar Ali Shaikh, it was stated that the bank had agreed to defer the auction of the pledged goods and legal action against the appellant till 19‑1‑1952, and that if payment was not made by this date, the bank would proceed with the sale of the goods. The appellant has not denied the receipt of this letter or the visit to the Bank of its proprietor. The necessity of this visit can be explained only by the fact that the appellant knew that the Bank had decided to sell the pledged goods and that this knowledge was the consequence of the notice date 28‑10‑1951 given by Messrs Lalchand & Co. We are, therefore, not inclined to accept the appellant's version that it did not receive the two notices of sale Exhs. 1 1/7 and 11/1. In any case, the letter Exh. 11/15, by which the bank informed the appellant that the goods would be sold if payment was not made by 19‑1‑1952 is itself sufficient notice of sale under section 176 of the Contract Act.

7. It was then urged by Mr. Munawar Abbas that the two notices Exhs. 11/7 and 11/1 do not comply with the requirements of section 176 of the Contract Act. The appellant's complaint is that the notices did not contain the exact figures of the amounts due from the appellant, nor the intimation of the Bank's clear decision to sell the pledged goods on the appellant's failure to make payments by specified dates. Before examining this contention, we may consider the contents of the two notices. The first notice dated 28‑10‑1951 (Exh. 11/7), stated "you have not yet cleared your accounts relating to Camley Refrigerators and Car, Radios" and then called upon the appellant to pay the amounts due on these accounts within one week, failing which, the appellant was informed, the bank would dispose of the goods by public auction or by private treaty. The second notice, dated 22‑2‑1952 (Exh. 11/1), was also in similar terms, but with the difference that instead of describing the accounts by reference, to the goods, the numbers of the three accounts to which the notice related were giver.

8. The question is, in what respect these notices do not comply with the requirements of section 176 of the Contract Act. We have to note that the power of sale given to the pawnee under this section is subject to‑only one limitation, which is, that the notice of sale should be reasonable. The section does not require that the amount due from the pawnor should be specifically stated in the notice. It is enough if the notice contains material from which the debtor can infer as to what debts he has to pay to the pawnee. It is also not necessary that the notice should contain the date or place of sale or that the pawnee should first arrange the sale of the pledged goods, and then communicate hiss decision to the pawnor. The words in section 176 of the Contract Act "he may sell the thing pledged on giving the pawnor reasonable notice of the sale", merely require that the notice should contain an intimation of the pawnor's intention to sell this goods if the debt was not paid within a reasonable time. In our opinion, the two notices fulfil these requirements. In the first notice, the accounts on which payment was demanded from the appellant were described by reference to the goods to which the accounts related. The second notice contained the numbers of the accounts. From these references, it was possible for the appellant to know as to what amounts it was required to pay to the Bank. We are also of the view that the appellant was aware of the debts payable by it to the Bank, and on this ground also the notices cannot be considered bad because the amounts of the debts were not specifically stated therein. The notices also informed the appellant that if payment was not made within one week, the pledged goods would be sold. In this way, the intention of the bank to sell the goods was clearly communi cated to the appellant.

9. To sustain his objection to the notices, Mr. Munawar Abbas relied on the decision of this Court in Hooseinbhoy Hoodbhoy v. Netherlands Trading Society (P L D 1962 Kar. 565). We think that this decision is not applicable to the facts which are before us. In this case the notice which was urged to be the notice under section 176 of the Contract Act was as follows:‑ "Please take notice in default of compliance of any one of the above demands, our clients will take steps to recover all that is due to them from you without further reference to you." It was held that this notice could not be treated as notice under section

176. We are in respectful agreement with this view. This notice neither contained material to indicate to the debtor as, to what amount he was required to pay, nor did it communicate the pawnee's intention to sell the pledged goods. But in the present case the two notices, as we have explained above, do not suffer from any of these defects.

10. Mr. Munawar Abbas then pointed out that the Bank sold the pledged goods on different dates between January and May 1953; long after the dates of these notices. According to him, the sales should have been made within reasonable time after the notices. This not having been done, the sales did not bind the appellant and could not be treated as sales in pursuance of the notices in question. He supported this contention by referring the decisions under section 54 of the Sale of Goods Act. This section requires an unpaid seller to sell the goods within reasonable time after giving the notice of re‑sale to the buyer. But there is no such limitation on the pawnee's right of sale in B section 176 of the Contract Act. The decisions under section 54 of the Sale of Goods Act will not, therefore, apply to a case under section 176 of the Contract Act, the requirement under which is only that reasonable notice of sale should be given. It is for the pawnee to choose the time to put his power of sale into operation and in order to do so, he does not require any further authority or permission from the debtor. It is correct that the exercise of this power should not suffer from absence of bona fides. But no material has been placed before us to show that delay in effecting the sales was deliberate and mala fide, or that the sales were improper in any way or so much below the market rates as to raise a reasonable inference of bad faith on the Bank's part. We, therefore, see no force in the appellant s, complaint with regard to delay in the sales.

11. The next two points, the merger of the four loan accounts into one realization account, and the Bank's refusal to deliver the pledged goods to the appellant, may be taken together. The appellants grievance is, that the effect of combining these accounts was to make the goods pledged in each account security for the total balance due on all the accounts, and that this resulted in depriving the appellant of its right under .section 177 of the Contract A‑c, to redeem the goods in each account separately at any time before sale. For reasons we will discuss, this contention has no force It is now well recognised that the Banker, unless precluded by agreement, is entitled to combine different accounts of a customer The principle is thus stated in Halsbury Vol. II Simond's Ed 72 para. 322:‑‑- "Unless precluded by agreement the banker is entitled to combine different accounts kept by the customer in his own right, whether deposit or current and to exercise his lien or set‑off for the resulting balance." In Garnett v. M'kewan ((1873) 8 Ex. Ch. 10), it was observed that the Bank is entitled at any time to combine the several accounts of a customer and to charge an account with credit balance with the debit balance of another account".

13. However, Mr. Munawar Abbas contends that the right to combine the accounts did not entitle the Bank to treat the goods held in one account as security for the balance in other accounts This reasoning is attempted to be supported by reference to the provisions of section 177 of the Contract Act' which permits a pawnor to redeem pledged goods at any time before they are sold. But this right of the pawnor, in our opinion, is subject to the Bank's right under section 171 which provides that in the absence of a contract to the contrary, the banker is entitled to retain, as security for the general balance of account, any goods bailed to him. No special agreement exclndin'2 this general term has been shown to exist in this case. On the contrary, the two agreements between the parties produced in evidence conferred on the Bank the right to exercise lien on goods, pledged in one account for the balance due in other accounts These agreements are Exh. 11/2 dated 21st January 1949 and Exh. 8 dated 1st August 1950, by which the appellant pledged its refrigerators and stocks of knitting wool, car radios and other goods with the bank. Both these documents empowered the Bank to sell the pledged goods and to treat the sale proceeds as security for all the indebtedness and liabilities of the appellant. According the Bank was entitled to treat the goods pledged in the four loan accounts as security for the general balance which became due to it by the merger of these accounts in the realization account.

13. As to the Bank's claim on the current account the position is this. Two debit entries were made in this account: One was for Rs. 1,421‑4‑0 and was made on 22‑4‑1951 and the other entry was for Rs. 3,767‑0‑0 and is dated 28‑7‑1951. These entries, according to the appellant, produced a debit balance in the current account which was till then in credit. The nature of the first entry was explained by the Bank's witness Muhammad Yousuf, who stated that the amount of Rs. 1,421‑4‑0 represented the debit balance of loan account No.

74. This account was closed and its debit balance was transferred to the current account by making the debit entry in question. The second debit entry was explained by the appellant's proprietor, Mr. N. A. Shaikh. He stated in his evidence that the amount of Rs. 3,767‑0‑0 represented the price of one out of eleven bales of cotton piece goods which had been short‑landed. The bank debited this amount to the current account. The appellant's contention is that the Bank could not exercise any lien on the credit balance standing in the current account for the debits due to it from the appellant. It is urged that under section 171 of the Contract Act, it is only goods bailed, and not .money deposited, with the banker which could be the subject of lien. It is stated that money deposited in the bank to the credit of the current account of the customer does not constitute a bailment, nor remain an ear‑marked sum of money. Such money ceases to be the customer's property and the banker cannot be said to be in possession of any property of the customer. In this way, the condition necessary to the existence of the exercise of the lien on the appellant's current account was lacking. It is correct that money deposited in the current account is not an earmarked sum of money and may not aptly be treated as the subject of lien. However, we think that the two debit entries in question were made by the bank in the exercise of its right of set‑off or appro priation. Under this right, a banker can take into account any item in its own favour as against any payment made by the customer before arriving at the balance subsisting between them. Accordingly, the appellant's objection to the two debit entries made by the bank in the current account is without any sub stance.

14. The appellant next objected to the credit entry of Rs. 5,140 made in the current account on 18‑8‑1951. The, parties' counsel were in agreement that this amount was received by the Bank from an Insurance Company on account of loss in transit of some Refrigerators imported by the appellant. We confess that we have not been, able to understand the appellant's grievance on this point. The amount was received by the bank on the appellant's account and due credit was given to the appellant therefore by making the credit entry in question in the current account.

15. With regard to the appellant's objection to the sales of the pledged goods made by the bank, we are unable to accept the appellant's suggestion that these sales were fictitious or were according to the market rates. The onus to prove these allegation was on the appellant who; however, failed to bring any material on the record to support these allegations. It was open the appellant to produce evidence as to the market rates of the goods on the dates the sales were made. No much evidence, however, was produced.

16. Turning to the appellant's counter‑claim, we will first take up the item of Rs. 5,

140. This amount was received by the bank from an Insurance company for loss in transit of some Refrigerators. As noted above, the amount was credited to the appellant current account on 18‑8‑19‑

51. The inclusion of this item in the counter‑claim is without any basis.

17. The next two items of the counter‑claim, for Rs. 6,000 and Rs. 17,600, are inter‑connected and relate to a consignment of 70 drums of caustic soda imported by the appellant through the bank in loan account No.

59. Due to the appellant's failure to take delivery, the Bank cleared the goods from the Customs and stored them with its agents, namely Cox and Kings. The appellant later on took delivery of 48 drums. The remaining goods were in bad condition. By letter dated the 30th of November 1949, (Exh. 11/9A). Cox and Kings requested the bank to pursuade the appellant to take delivery of the 22 drums as storage thereof was not possible on account of their bad and damaged condition. By letter dated 29‑5‑1950 (Exh. 7/2), the appellant expressed to the Bank its inability to take delivery of these 22 drums on account of some litigation pending in Court. The Bank closed this loan account on 22‑8‑1951. The outstanding balance was adjusted by transfer of Rs. 6,600 from the appellant's margin account which was in credit on this date. The appellant's claim for Rs. 6,000 is in respect of the credit balance in the margin account. When it was pointed out to Mr. Munawar Abbas that this amount had been transferred and credited to the loan account No. 59, he did not press the appellant's claim for this item of the counter‑claim.

18. As regards the amount of Rs. 17,600, the appellant's stand is that the loan account No. 59 was closed as adjusted on 22‑8‑1951 and, therefore, the appellant should be deemed to have paid to the bank the price of the 22 drums of caustic soda which was calculated at Rs. 17,

600. It was admitted by the appellant that on 10‑12‑1951 the bank gave a delivery order (Exh 9/8) to the appellant on Cox and Kings for these drums. The complaint is, that Cox and Kings did not in fact deliver these goods alleging that the goods had been wrongly delivered to some other party. Mr. Nazar Ali Shaikh, the appellant's proprietor, stated in his evidence that he brought this fact to the notice of the Bank in writing. But this letter has not been produced, nor was the bank's witness, Muhammad Yousuf, cross‑examined on this point. Mr. Bhojani, the learned counsel for the bank, stated before us that the 22 drums of caustic soda probably had to be destroyed due to deterioration, by the Bank's agents Cox and Kings. He further stated that at no time any complaint had been received from the appellant regarding non delivery of these goods by Cox and Kings. In our opinion, there is substance in what Mr. Bhojani has stated. The responsibility for this state of affairs is entirely on the appellant, who failed, to take delivery of 'these goods for several years in spite of requests from the Bank and its agents. Accordingly, the appellant cannot have any claim for Rs. 17, 600 against the Bank.

19. The last item of the counter‑claim is Rs. 14,

000. This amount is claimed by the appellant as damages for loss allegedly caused by the Bank's refusal to deliver to the appellant a consignment of knitting wool exported by a London firm, G. R. Irani & Co. in 1951 against a bill of exchange for 2,458‑15‑Od made payable by the appellant to the Bank. By letter dated 31‑7‑1952 (Exh. 15), the exporter extended the time of payment of the bill by 90 days and agreed that in the meantime the appellant should take delivery of the goods on payment to the Bank of the Custom duty and clearing charges. Consequently, by letter dated 4th September 1952 (Exh. 9/11), the appellant requested the Bank to deliver the goods to S. M: Yusuf & Brothers on payment of landing and clearing charges. Apparently, the Bank did not agree to this request. On 5th September, the appellant wrote to the Bank Exh. 9/12, in which the appellant complained that the Bank had refused to accept Exh. 9/1 I from the representative of S. M. Yusuf & Brothers. This letter also referred to the visit of the appellant's proprietor to the Bank in connection with the delivery of this consignment and the Bank's reply that no instructions for delivery had been received from G. R. Irani & Co. This letter was followed by Exh. 9/13 dated 16‑9‑1952, in which the appellant again made demand for delivery of the goods. We regret to note that the Bank has not given any satisfactory explanation as to why these goods were not delivered to the appellant in spite of the exporter's instructions. To none of the letters above mentioned the Bank sent any reply. The Bank's witness, Muhammad Yusuf, stated at the trial that G. R. Irani & Co. had instructed the Bank not to deliver the goods to the appellant. But the letter containing these instructions , has not been produced. The Bank has not even explained as to what actually happened to the goods. For its defence, the Bank has relied on section 230 of the Contract Act. Mr. Bhojani urged that the Bank, bong merely agent, of G. R. Irani & Co., was not liable for non‑delivery of these goods to the appellant. This contention, in our opinion, is erroneous, because the basis of the appellant's claim for Rs. 14,000 is in tort and not on breach of contract by the Bank.

20. However, the difficulty in the way of the appellant is not the nature of the Bank's liability but the appellant's own failure to prove damages. No satisfactory evidence has been brought on record to prove that the appellant suffered any, loss by the Bank's refusal to deliver the goods in question. Mr. Nazar Ali Shaikh, the appellant's proprietor, stated in his evidence that S. M. Yusuf & Brothers had agreed to pay to the appellant Rs. 14,000 as profit on this consignment of wool. But the writing containing this arrangement has not been produced. Nor has any representative of the buyer come in the witness box to support the appellant's contention. The appellant has not even proved the market rates knitting wool in the first week of September 1952, to enable the Court to test the correctness of tile appellant's claim that S. M. Yusuf & Brothers had agreed to buy the consignment at a trice which would have yielded a profit of Rs. 14,000 to the appellant. In the absence of these materials, it is not possible to accept the appellant's contention that it sustained loss to the extent of Rs. 14,000 by the Bank's refusal to deliver the consignment of knitting wool to S. M. Yusuf & Brothers.

2. In the light of the above discussion, we hold that the appellant is not untied to the reliefs claimed in this appeal. The appeal is, therefore, dismissed, but in the circumstances of this case we leave the parties to bear their own costs. K.B.A. Appeal dismissed.