JUDGMENT R. Prasad, J.
1. This is a first appeal, which has been filed by one of the defendants, namely, Messrs Purshottam Dass Banarsi Dass from the decision of the 1st Additional Civil Judge. Kanpur in Suit No. 187 of 1952 dated 3rd August 1956. The Union of India through the Deputy General Manager. Western Railway, filed this suit against Uarshad Rai Natwar Lal Rawal, the Bank of Baroda. Birhana Road, Kanpur, Shri Shiva Chandra Misra and M/s. Purshottam Dass Benarsidass defendants 1 to 4 respectively. Messrs Purshottam Dass Benarsi Dass have filed the present first appeal.
2. The reliefs sought by the Union of India in the suit were that a decree be passed against defendant No. 4, the present appellant firm asking it to return the suit goods viz. 248 bags of Zeera and ordering it to pay compensation in respect of the fall in value by detention or otherwise consequent upon its wrongful retention, or alternatively that a decree be passed against defendant No. 4 that it should pay to the plaintiffs Rs. 38,000 with interest at six per pent from the date of the suit till realisation, or in the alterative a decree be passed against defendants Nos. 3 and 4 jointly and severally for Rs. 38,000 with six per cent interest from the date of the suit till realisation. There were certain other reliefs claimed by the plaintiffs but they are now no more relevant for the purposes of the first appeal.
3. The facts alleged in the plaint put shortly are these. The Union of India was the owner of the Western Railway. Unjha and Kanpur Collectorganj are both stations on the system of the Western Railway, and the Union of India in its commercial capacity as Railway carriers operated in regard to transport of passengers and goods on and in between the aforesaid stations. On 20th July 1950, Harshad Rai Natwar Lal defendant No. 1 booked a consignment of 248 bags of white Zeera at Unjha for Kanpur Collectorganj. Railway Receipt No. 577283 dated 20th July 1950 covered the consignment. It was consigned to self. Another consignment of one bag white Zeera was likewise booked by the defendant No. 1 ex-Unjha to Kannauj and the number of the relative Railway Receipt was 577284 dated 20th July 1950. This was also consigned to self. The first consignment was loaded in wagon No. 13973 to the extent of 130 bags, and wagon No. 11314 to the extent of 118 bags. They were despatched for destination by 412 Down shunting on 21st July 1950. The consignment of one bag ex-Unjha to Kannauj was loaded in a T. R. Van to its destination as it was a small consignment. Defendant No. 1 passed on the Railway Receipt in regard to one bag ex-Unjha to Kannauj to some cheats and sent the Railway Receipt with regard to the consignment of 248 bags ex-Unjha to Kanpur Collectorganj to the Bank of Baroda Kanpur branch with the request that the same be delivered to one Sitaldass Baldev Prasad, which was a fictitious name on payment of Rs. 30,000/ for which a Hundi was also drawn. The cheats went over to Kanpur and requested the Bank of Baroda for sometime to retire the Railway Receipt with regard to 248 bags On 24th July 1950, the Bank of Baroda had received the Railway Receipt covering the consignment of 248 bags along with the Hundi for Rs 30,000/ with direction as B. C. draft (bill to be collected) and not B. P. (bill purchased). The Bank of Baroda defendant No. 2 did not make any effort to find out if there was a firm by the name of Sitaldass Baldevdass in Nayaganj Kanpur. Nor did they ever present the Railway Receipt before 3rd August 1950 before the plaintiffs. The cheats who were in possession of the Railway Receipt relating to the consignment of one bag ex-Unjha to Kannuj cleverly and fraudulently made forgery in the said Railway Receipt so as to convert it into Railway Receipt relating to the consignment of 248 bags ex-Unjha to Kanpur. They changed the last digit of the Railway Receipt and its destination from Kannauj to Kanpur Collectoraganj. They effected delivery of the goods on 29th July 1950 and 1st August 1950 by endorsing the said Railway Receipt in favour of Shiv Chandra Misra defendant No. 3, in whose hotel at Meston Road, the said cheats were staying. Goods were thus obtained from the plaintiffs on the basis of a forged Railway Receipt by defendant No. 3, Shiv Chandra Misra, in collusion with the cheats. The forgery in the document was such, that it could possibly not be detected by a naked eye although the Railway staff took every precaution and care that was expected of them while making the delivery of the consignment. The defendant No. 3 is thereafter alleged to have pledged the goods with defendant No. 4, the present appellant for a sum of Rs. 18,700/-, but as the pledger did not have any rights in the properly pledged, the pledgee also did not derive any right in them. The possession and retention of the goods by defendant No. 4 was unauthorised, unjust and Illegal and that defendant No. 4 was bound to return the goods to the plaintiff and pay compensation for loss or to pay the price thereof. It was further alleged that the Bank of Baroda could not spot out any person of the description of Baldeo Dass Sita Ram and had received a telegram from defendant No. 1 on 3rd August 1960 and proceeded to enquire on phone from the Goods Supervisor at Kanpur Collectorganj whether goods as per Railway Receipt No. 577283 dated 20th July 1950 ex-Unjha to Kanpur Collectorganj had arrived Defendant No. 2 was then inform ed that the goods came in two wagons and that delivery of the same had been taken on the presentation of the Railway Receipt on 20th July 1960 (contents of wagon No. 13314 for 118 bags) and on 1st August 1950 (contents of wagon No. 13973 for 130 bags). Eventually the Bank sent its peon along with the original Railway Receipt, when the plaintiffs came to know that the goods delivered to defendant No. 3 were delivered on the basis of the forged Railway Receipt, and the plaintiffs then realised that the plaintiffs had been cheated in parting with the goods on forged Railway Receipt, of which the plaintiffs were in possession as bailees.
4. The plaintiffs immediately reported the incident to the Watch and Ward and the Government Railway Police authorities Immediate action was taken. Defendant No. 3 was contacted and interrogated and from mm, clues with regard to the consignment of 248 bags of white Zeera were found, and it became known that the said consignment was in the possession of defendant No. 4 and locked in their godown. The police seized the consignment in the godown of defendant No. 4. The cheats, however, could not be traced out by the police. At the instance of the Government Railway Police, the Railway Magistrate direct ed that the consignment be released in favour of the plaintiffs and that the defdt. No. 4 be directed to hand over the goods to the Railway authorities. Defendant No. 4 went in revision before the District Magistrate from the aforesaid order of the Railway Magistrate, who in his turn referred the matter Mo this Court. Hon'ble M.C. Desai, J. directed the police to retain the goods but did not decide the question of title to the same. Defendant No. 1 had been a party to the proceeding in this Court at Allahabad and was informed of the orders passed Defendant No. 1 instead of filing a suit against the other defendants, filed suit No. 38 of 1951 in the Court of the Civil Judge, Mehsana claiming Rs. 34,000 and costs and interest against the plaintiffs. The suit was contested by the plaintiffs of the instant case and a written statement was filed. It was then alleged that the plaintiffs were entitled to file the instant suit as the goods were wrongly removed from the lawful possession of the plaintiffs.
5. Harshadrai Natwarlal Rawal, the first defendant contested the suit and filed a written statement. Defendant No. 1 admitted that he passed the Railway Receipt for one bag in the ordinary course of business to his customer against the payment of price, but that the receipt was not given to some cheats it was also admitted that the other Railway Receipt relating to 248 bags was sent to the Bank of Baroda Kanpur, but it was denied that the Bank was asked to give the receipt to some fictitious person of the name of Baldev Dass Sitaram. It has also been said in the written statement that the defendant No. 1 was not aware that Sital Das Balden Prasad was a fictitious person. It is admitted that defendant No. 1 directed the Bank to deliver the Railway Receipt for 248 bags to Messrs Sital Dass Baldeo Prasad against payment of Rs. 30,000 for which a Hundi was drawn. It was alleged that the contents of the two Railway Receipts were so different that forged entries had to be made with regard to numerous matters There was not only difference in the number of the digit of the printed number, but there were other differences also relating to the number of bags, the figures of weight, the amount of freight and places of destination. This being so, the forgery could not escape detection, but for the gross carelessness and negligence on the part of the Railway officials concerned. The first instalment of the consignment was delivered on 29th July 1950 and the other instalment on 1st August 1950. There was plenty of time to detect the forgery and get the person concerned arrested. The Railway staff failed to take precaution and care that they were bound to take. The forgery could be detected by naked eyes. It was then alleged that if some pledge in favour of defendant No. 4 is proved, the pledger having no title and interest could not pass any title or interest to defendant No. 4 and possession and retention of goods by defendant No. 4 was unauthorised, illegal and without title and it was defendant No. 4 who was responsible for the consequences thereof. It has been further stated in the written statement by defendant No. 1 that the Government Railway Police did not request the Railway Magistrate for an order for the disposal of the property. It was defendant No. 1. who moved the Magistrate. A report from the Government Railway Police was called for by the Railway Magistrate. The report was delayed. It was on the application of defendant No. 1 that the Railway Magistrate passed the order for the delivery of goods to the Railway authorities. The Railway authorities failed to make a move in the matter or to take possession of the goods from defendant No. 4. On account of carelessness and negligence of the Railway authorities, the matter was delayed, whereupon defendant No. 4 filed a petition in revision. The Railway did not contest the revision petition either before the Additional District Magistrate or the High Court. It was defendant No. 1, who contested the same in both the Courts. Defendant No. 1 therefore, brought a special suit No. 18 of 1951 in the Court of civil Judge, Mehsana and when the plaintiffs, namely. Union of India was served with summons of that suit the present suit was filed. It was admitted that that suit was being contested by the Union of India. There were no laches on the part of defendant No. 1 or defendant No. 2 in the matter. The Railway authorities were guilty of neglect and misconduct. The defendant No. 1 did not have any objection if a decree was passed in favour of the plaintiff against defendant No. 3 or 4. Defendant No. 1 would be satisfied by getting payment of his claim in suit No. 18 of 1951. In view of the pendency of the suit at Mehsana. the present suit was not competent.
6. The Bank of Baroda defendant No. 2 also filed a written statement alleging that the plaint did not disclose any cause of action, and. therefore, the plaint was liable to be dismissed under Order 7 Rule 11 C. P. C as against the Bank. It was admitted that the Railway Receipt for 248 bags was sent by defendant No. 1 to the Bank but that it was not correct that defendant No. 1 had requested defendant No. 2 to give the receipt to a fictitious person Baldeo Das Sita Ram. The Bank was not aware that Baldeo Das Sita Ram was a fictitious person. It was true that defendant No. 1 had directed the Bank to deliver Railway Receipt for 248 bags to Messrs Baldeo Dass Sita Ram against payment of Rs. 30,000 for which a Hundi was drawn. The Bank had no knowledge of the alleged Railway Receipt for one bag of Zeera. Nor did the Bank knew that the person to whom the Railway Receipt for 248 bags was directed to be delivered was in possession of the other alleged receipt for one bag. The Bank, however, admitted that a gentleman describing himself to be a partner of Messrs Baldeo Dass Sita Ram went to the Bank and had expressed readiness to retire the Hundi within a short time. The Bank did not receive the payment of Rs. 30,000/- and interest from 28th July 1950 which was a condition precedent to the delivery of the Railway Receipt under the direction of defendant No. 1. The Bank also said that in view of the nature of the forgery alleged, it should have been noticed and detected even at a casual glance. The Bank received a telegram whereupon the Bank sent its peon to the Railway Station, Kanpur with the Railway Receipt which when presented to the Assistant Goods Inspector, Kanpur was taken and kept by him into his custody and the peon was informed that the goods had already been cleared. The Goods Inspector also informed the Bank about it on phone. The Bank also further took up the case that there were no laches on the part of the Bank or defendant No. 1, and that delivery to a wrong person was due to misconduct and neglect on the part of the staff of the plaintiff.
7. In the written statement filed by Shiv Chandra Misra defendant No. 3. it was admitted that certain respectable and rich-looking gentleman stayed as a passenger in the Hotel Nehru Nivas. Meston Road. Kanpur. He described himself as Harshadlal Natwar Lal Rawal. Defendant No. 3 was working in the Hotel as its Manager. Defendant No. 3 was not guilty of any collusion with any cheat in obtaining the goods from the plaintiff. It was also asserted that the defendant No. 3 was not privy to the alleged pledgment of the goods He, however, admitted that he got the goods released from the Railway authorities, but did so as a bona fide endorsee of the Railway Receipt as an agent. He did not obtain delivery of the goods wrongfully as alleged by the plaintiff. There was no cause of action against defendant No. 3. Sri Indramani, the elder brother of defendant No. 3 was the proprietor of the Hotel at Meston Road. Kanpur known as Nehru Niwas and in 1948 when defendant No. 3 had to leave his studies on account of his failure in the VIII class, he was asked by Sri Indramani to help him in the management of the Hotel, and in that capacity, defendant No. 8 was working in the said hotel. The allegation with regard to the actual event, as made in the written statement of defendant No. 3 is that in the month of July 1950. a respectable and rich looking gentlemen went to the hotel and rented a room. He held out that his name was Harshadrai Natwar Lal Rawal, and that he came from Ujha in Gujrat and that he was proposing to start business at Kanpur. He also said that he was a stranger to Kanpur and needed help in securing godown, and office etc. for establishing business Defendant No. 3 carried out his biddings in certain matters in the interest of the hotel. On the 29th July 1950, the aforesaid person endorsed a Railway Receipt to the defendant No. 3 and gave instruction to him to take delivery of the goods from the Railway Authorities. Defendant No. 3 took delivery of the goods on 29th July 1950 and 1st August 1950 and got them stocked in the godown, which had been rented for that purpose. Defendant No. 3 had nothing to do with the dealings between the aforesaid person and the defendant No. 4. He did not act in collusion with any cheat. The plaintiff got defendant No. 3 arrested. Eventually he was released on bail. The police did not find any case against him and submitted a final report. Case against him was, therefore, dropped. Defendant No. 8 was himself a victim of the fraud.
8. Defendant No. 4 the present appellant before us also filed a written statement and contested the suit The story as disclosed in the written statement of defendant No. 4 is that on 31st July 1950, four persons went to the shop of defendant No. 4 out of whom one gave out his name to be Harshad Rai and another as Shiv Chand. Defendant No. 4 is a firm of commission agents with a established reputation in the city. The person who had given out his name as Harshad Rai informed defendant No. 4 that he had 248 bags of Zeera which he wanted to sell through commission agency of defendant No. 4 The aforesaid Harshad Rai also informed defendant No. 4 that he had a firm of long standing styled as "Harshad Rai Natwar Lal" at Unjha in Gujarat and that he was one of its partners. The other person whose name was given out to be Shiv Chand was introduced by the aforesaid Harshad Rai as his Munim. The aforesaid Harshad Rai also told the defendant No. 4 that Shiv Chand would stay at Kanpur, look after the sales of the goods through the commission agency of defendant No. 4 on terms which had been settled between the parties. It was agreed that defendant No. 4 would advance only 65 per cent of the price of the said goods to the alleged Harshad Rai Natwar Lal, and that the usual expenses, interest, commission etc. would he charged according to the market usage. After the said goods had been sold, account would be adjusted and if there was any balance found due to the said firm, that would be paid. On the same date, the aforesaid Harshad Rai brought 118 bags of Zeera to the shop of defendant No. 4 loaded on a Thela and another consignment of 190 bags was likewise brought to the shop of defendant No. 4 on 1st of August 1950 At the request of the alleged Harshad Rai a sum of Rs. 1000 ex-elusive of thela charges was paid by defendant No. 4 to Shiv Chand on 1st August 1960. Goods were duly credited and payment debited to the account of the firm styled. Harshad Rai Natwar Lal. A receipt for the payment of Rs. 1000 was also obtained from the said Shiv Chand in the dastkhati bahi of defendant No. 4. A further slim of Rs. 15,000 was paid to the alleged Messrs Harshad Rai Nalwar Lal by the defendant No. 4 on the security of the aforesaid goods under a crossed cheque No. 1/0-54287 drawn in favour of Messrs Harshad Rai Natwar Lal on the Allahabad Bank Ltd. Kanpur on the 2nd August 1950. The cheque was received by Shiv Chand who signed acknowledgment thereof in the dastkhati bahi of defendant No. 4. On 3rd August 1950, the laid Harshad Rat and Shiv Chand again visited the shop of defendant No. 4 and talked about business. While leaving the shop the said Harshad Rai demanded a further sum of Rupees 700 which was paid to him in the same account against receipt in the dastkhati bahi. Defendant No. 4 was further required to send a letter to firm Harshad Rai Natwar Lal giving the details of the aforesaid payments. The defendant No. 4 advanced, in due course of business, a sum of Rs. 16,700 exclusive of thela charges, to the aforesaid persons in good faith and bona fide on the security of the aforesaid goods, honestly believing that they were dealing with a customer The allegation of the plaintiff that no right in the goods in dispute passed on to defendant No. 4 and that the possession and retention of the goods by defendant No. 4 was unauthorised and illegal, was denied. Defendant No. 4 was not bound to return the goods or pay compensation for loss or to pay price of the goods to the plaintiff. It was admitted that the goods were seized by the police from the godown of the answering defendant. It was then alleged that the Government Railway Police moved the Railway Magistrate for the release of the goods in favour of the plaintiff and he had passed an order on the 6th December 1950 to that effect. It was further asserted that it was the duty of the Railway administration to satisfy itself that delivery was made on the proper Railway Receipt and to the proper person. Invoices were made in triplicate by means of carbon paper, the first of which is for the record, the second is the Railway Receipt and the third for the invoice foil. The contents of the invoice are copied out in the delivery book so that the Railway Receipt when presented could be checked on their basis at the time of delivery. The plaintiff was grossly negligent in not checking and discovering the alleged forgery which must have been of a multiple character at the time of making delivery of 248 bags of Zeera to some cheat. Both defendant No. 1 and the plaintiff enabled the alleged cheat to lake delivery of the goods in question by their gross negligence and the plaintiff further misconducted itself in giving delivery to the cheat. There were no suspicious circumstances about the pledge of the goods with defendant No. 4. The defendant No. 4, therefore, took the pledge bona fide and in good faith without any notice of the defect in the title of the pledgor The position of the defendant No. 4. therefore, was that of an innocent holder for value and defendant No. 4, was therefore, entitled to legal protection. Suit for recovery of the goods by the plaintiff was barred by estoppel by negligence As the defendant No. 1 and the plaintiff enabled the alleged cheat to occasion the loss, they themselves are liable to suffer the same, as according to the defence, it was a well settled principle of equity that wherever one of two innocent persons must suffer by the acts of a third person, he who has enabled such third person to occasion the loss, must sustain it. Defendant No. 4 further claimed as set off of its due against the value of the goods in question. It was then alleged that as defendant No. 1 who was the consignor and was a party to the proceeding before the Railway Magistrate regarding the goods in question, had not chosen to take any action against defendant No. 4, the plaintiff could not proceed against defendant No. 4 as the rights of the plaintiff were in no way independent of those of the consignor. The position of the plaintiff was that of a bailee-cum-agent of defendant No. 1 and plaintiff acted as agent of defendant No. 1 in giving delivery of the consignment, as such the plaintiff did not have any right to institute and maintain any action against defendant No. 1. A further plea was taken that the value of the goods in dispute had been highly inflated by the plaintiff and that the plaintiff could claim only that value which the sale of the goods in question fetched, inasmuch as such sale was within the knowledge of defendant No. 1 as well as the plaintiff and the goods were sold to avoid loss to the parties.
9. The court below framed a large number of issues which arose on the pleadings of the parties.
10. On the question whether the plaintiff had the right to sue, it held that the plaintiff did have a right of suit against defendant No. 4 also. It further found that the Railway Receipt on the basis of which delivery of the goods was taken was forged and that therefore none of the persons who possessed the goods after delivery from the Railway had any legal title to it. The person who posed as Harshad Rai was a mere imposter and a cheat. The plaintiff had been wrongfully deprived of the goods by a person who had no title to them. The court below further took the view that the person who pledged the goods with defendant No. 4 had no title to them. Defendant No. 4 did not, therefore, get any title to the goods. The further conclusion arrived at by the court below is that defendant No. 4 was an innocent holder for value, vet defendant No. 4 could not get title to the goods in law Section 27 of the Sale of Goods Act could not give any protection to defendant No. 4. The Court below also took the view that no case had been made out to show that there was any conduct of the plaintiff which precluded it from deriving the authority of the cheat to keep the goods in the commission agency of defendant No. 4. Another important finding returned by the Court below is, that the plaintiff was not guilty of any negligence in the matter of delivery of the goods to defendant No. 3. This being so, there was no estoppel by negligence which could be used against the plaintiff' claim. On the plea of set off, court below observed that although such plea was raised in the written statement, but the same had been withdrawn by the counsel for the defendant by his statement dated 29th March 1954. The plaintiff was entitled to file the suit as bailee and the question of any personal injury or damage to the plaintiff did not arise But the Court below also noticed that the defendant No. 1 the consignor had obtained the decree against the plaintiff and the plaintiff had paid up that claim. In that view of the matter, plaintiff did suffer damage. It was also found that the plaintiff had failed to prove actual collusion between defendant No. 3 and the cheat, but that defendant No. 3 was also liable to pay damage to the plaintiff as he had committed the tortious acts of trespass and conversion. On the question of quantum of damages, the court below came to the conclusion that the proper value to be fixed was Rs. 30,000 on the payment of which amount, the Railway Receipt was directed by defendant No. 1 to be delivered. The court below also examined the evidence with regard to the market rate in the first week of August 1950 and came to the conclusion that the rate was Rs. 100 per 50 seers or Rs. 80 per standard maund. Calculating on that basis, court below fixed the figure at Rs. 29,760 on that count, and added a sum of Rs. 240 by way of price of 248 containers. Court below, accordingly fixed the value at Rupees 30,000. On such finding court below proceeded to decree the suit against defendant Nos. 3 and 4 for a sum of Rs. 30,000 with pendente lite and future interest at the rate of three per cent per annum. The rest of the suit was dismissed. So far as defendants Nos. 1 and 2 are concerned, they had been exempted by the plaintiff and therefore, no question of a decree against them arose.
11. Shri Shiv Chand Misra defendant No. 3 has submitted to the decree and has filed no appeal in this Court. The appeal before us is an appeal filed only by defendant No. 4. Consequently, we have to deride the same on that basis.
12. In support of the appeal, learned counsel for the appellant has urged that on the facts and circumstances of the case, it is dear that defendant No. 1, the consignor himself was guilty of fraud and deceit In making forgery in the Railway Receipt relating to one bag of consignment so as to change it into a Railway Receipt for the consignment of 248 bags, it was necessary that the forger should have had possession of both the receipts. The only person who had possession of both the receipts at one time was the consignor. It was also suggested that the Bank employees may have been taken into confidence by the cheats to enable them to gain their object According to the learned counsel, if that be so, then the case had to be decided on other principles and plaintiffs suit could not be decreed.
13. We, however, are unable to entertain that submission owing to the fact that no such plea had been raised by the appellant in its written statement, and such a case has not undergone trial. The defence raised by the appellant as a whole clearly excludes the plea that is now sought to be introduced.
14. In paragraph 31 of the written statement, the case taken by the appellant was that the defendant No. 1 and the plaintiff enabled that alleged cheat to take delivery of the goods in question by their gross negligence. In paragraph 34 of the written statement, the plea taken is to the same effect and further that the defendant No. 1 and the plaintiff enabled the alleged cheat to occasion loss and that therefore defendant No. 1 and plaintiff were liable to suffer the same. It is also alleged that out of two innocent persons, who must suffer loss on account of the acts of a third person, he who has enabled such third person to occasion the loss must sustain it. These averments in the written statement clearly exclude the plea that is now sought to be agitated before us.
15. The next argument advanced by the learned counsel for the appellant is based on the principle of equity that wherever one of two innocent persons must suffer by the act of third, he who enables such person to occasion the loss must sustain it. It has been submitted that the Railway in giving delivery to a wrong person acted grossly negligently and on account of such conduct of the Railway, the cheat was enabled to occasion the loss and the plaintiff was estopped from denying the title of the cheat. This being so, it was for the Railway to suffer loss and not for defendant No. 4 In support of his argument, teamed counsel invited our attention to case of K.M. Mohambaram v. Ram Narayan Brahmin, AIR 1935 Mad 850. In that case, the defendant-appellant and plaintiff respondent put fourth rival claims to the ownership of a motor bus. The facts of the case were that the defendant-appellant was the original owner of the bus and was in possession of the registration certificate relating to the same. In May 1932, the defendant-appellant arranged with one A. Mudaliar that the latter should run the bus as his agent and left with him a letter signed by himself addressed to the District Magistrate requesting that 'G' permit be transferred to A. Mudaliar. Mudaliar in his turn altered this letter without the knowledge of the appellant into one addressed to the District Superintendent of Police and requesting the transfer to him of the registration certificate. The registration certificate was accordingly transferred and the plaintiff-respondent thinking that Mudaliar was the owner of the bus purchased the same from him. The bona fide nature of the respondents purchase was not contested and the question that arose in that case was as to which party was to suffer as a result of Mudaliar's fraud. As it was a case of sale, their Lordships referred to Section 27 of the Sale of Goods Act. The relevant part of section 27 Sale of Goods Act is as follows:
"Where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the Roods is by his conduct precluded from denying the seller's authority to sell."
16. In that case, the court below had found that the conduct of the defendant was blameworthy inasmuch as he had no right to leave the registration certificate along with Other papers in the bus and it was his duty to keep that certificate in his own possession. Further it had held that it was the duty of the defendant to have inspected the papers from time to time to assure himself that his agent had committed no fraud and that he should have issued some kind of public notice to obviate the possibility of any innocent would be purchaser being defrauded. Their Lordships of the Madras High Court, however, did not agree with the aforesaid finding of the trial court. The view taken by the High Court, was that on that basis the decision of the court below could not be sustained. Another argument, in that case to support the decision of the trial court, was that it was not necessary to find out that the appellant's conduct had been blame-worthy. According to that argument, Section 27 of the Sale of Goods Act embodied the English rule of equity, which was said to have been very succinctly laid down in (1787) 2 Term Rep 63 at p. 70 by Ashhurst J. in the case of Lickbarrow v. Mason in the following words.
"That wherever one of two innocent persons must suffer by the acts of a third, he who has enabled such third person to occasion the loss must sustain it."
Their Lordships accepted the principle relating to interpretation of Section 27 of the Sale of Goods Act, and proceeded to examine English cases in which its application had been considered. The case on which the learned counsel for the appellant has based his argument is the case of Henderson and Co v. Williams, (1895) 1 QB 621. This was the first case that was examined by their Lordships of the Madras High Court in the case before them.
17. In the case of Henderson and Co., (1895) 1 QB 521 the dictum laid down by Lord Halsbury was that the true owner having enabled Fletcher to hold himself out as the owner, could not set up his title against that of the p urchaser. The other case that was considered by the Madras High Court is the case of Com monwealth Trust Ltd. v. Akotey, 1926 AC 72. In that case also, the appellant's title was affirmed, on the rule of equity which we have already quoted earlier After considering those two English decision, their Lordships of the Madras High Court observed:
"Now it is clear from an analysis of these two cases that when the real owner 'enables' a third party to occasion a loss, he must by his own act put him directly in a position to do so."
Their Lordships found that in Henderson and Co's case. (1895) 1 QB 521 owners had definitely put the sugar at the disposal of Fletcher, and in the latter case the owners had definitely sent to Laing the documents which would give him the right to take the cocoa from Railway company and hold it as if it were his own. By the direct act of the owners, therefore, in each case Fletcher and Laing were in a position to dispose of the goods, and as it was this direct act which gave them that authority, the owners were naturally held to be precluded by their conduct from denying the title of Fletcher and Laing to sell Examining the facts of the rase that was before their Lordships of the Madras High Court, it was observed that the facts of that case were quite different from the facts of the two English cases. The defendant-appellant had undoubtedly put Mudaliar in possession of the bus and had left him also in possession of the document of title to it. That document was, however, in appellant's own name and unless it was transferred in the name of Mudaliar, Mudaliar could not have right to dispose of the bus. The mere fact that the registration certificate was left with Mudaliar alone was not sufficient. It was also observed that it was not possible to argue that the appellant ought to have contemplated the possibility of forgery and fraud on Mudaliar's part. The decision in the Madras case, therefore, does hot support the case of the appellant before us. The learned counsel for the appellant, however, apart from the decision of that case, relied on the above quoted dictum laid down fry Ashhurst J. in (1787) 2 Term Rep 63 (supra).
18. The rule stated by Ashhurst J. in (1787) 2 Term Rep 63 (supra) came up for consideration before the Privy Council in Mercantile Bank of India Ltd v. Central Bank of India Ltd. AIR 1938 PC 52. The appellant in that case also claimed to have succeeded upon the basis of that rule stated by Ashhurst J. Again in that connection, the decision. In the case of 1926 AC 72 (supra) was cited to show the application of the aforesaid rule stated by Ashhurst J. In that case, the Full Court of the Gold Coast had held that no property had passed because the merchant had no title. That judgment was reversed by the Privy Council, which had made the following observation:
"To permit goods to go into the possession of another with all the insignia of possession thereof and of apparent title, and to leave it open to go behind that possession so given and accompanied, and upset a purchase of the goods made for full value and in good faith, would bring confusion into mercantile transactions, and would be inconsistent with law and with the principles so frequently affirmed following (1787) 2 Term Rep 63 (supra)."
19. The Privy Council in the Mercantile Bank case AIR 1938 PC 52 (supra) took the view that what was stated there, in the Commonwealth Trust case, 1926 AC 72 could cover the case if it was applied without qualification. Their Lordships, however, found it impossible to accept without qualification as a true statement of law the principles that had been broadly laid down and observed that that case was not one which it would be safe to follow. The Privy Council then referred to the case of Jones Ltd. v. Waring and Gillow Ltd., 1926 AC 670 and noticed that Lord Sumner in that case had observed:
"There was no duty between Jones Ltd. and Waring and Gillow Ltd. and without that, the wide proposition of Ashhurst J. in (1887) 2 Term Rep. 63 (supra) would not apply. . . ." Their Lordships held that Lord Sumner in that case put the principle of estoppel as depending upon a duty, but the passage from the judgment in the case of London Joint Stock Bank v. Macmillan, 1918 AC 777 pointed out that the rule expressed by Ashhurst J. was too wide and said that the accurate rule was stated by Blackburn J. in Swan v. North British Australasian Co., (1863) 2 H and C 175. Referring to the judgment of the Court below of Wilde B. in that case Lord Blackburn, J. said:
"He omits to qualify the rule he has stated by saying that the neglect must be in the transaction itself, and be the proximate cause of leading the party into the mistake; and also, as I think, that it muni be the neglect of some duty that is owing to the person led into that belief or, what comes to the same thing, to the general public of whom the person is one, and not merely neglect of what would be prudent in respect to the party himself, or even of some duty owing to third persons, with whom those seeking to set up the estoppal are not privy."
In the case of Farquharson Brothers and Co. v. King and Co., 1902 AC 826 an observation was made by Lord Lindley to the same effect. Lord Lindley also expressed the view that the dictum of Ashhurst J. was too wide. It was also noticed that the observation made by Ashhurst J. was not necessary to the decision of the case which was before his Lordships Another case that was noticed by the Privy Council is the case of Johnson v. Credit Lyonnais, (1877) 26 WR 195. It was found that the decision in 1926 AC 72 was also inconsistent with the case last referred to. In the Johnson's case. (1877) 26 WR 195 (supra), it was held that the conduct of the plaintiff in leaving the dock warrants, which were the indicia of title, in the hands of a vendor of the goods after he had been paid by the plaintiff as purchaser, without any change being made in the books of the dock company, did not disentitle the plaintiff from claiming for conversion against the defendants, who in good faith made advances to the fraudulent vendor on the security of the dock warrants thus left in his hands. It was further held that in a sense, the plaintiff by leaving the indicia of title in the vendor's hands had enabled him to defraud the defendants, but it was noticed in the judgment of the court below that Cockburn. C. J. had observed as follows:
"The case for the plaintiffs rests on the general proposition of law which as a general proposition cannot be contested that the mere possession of the property of another, without authority to deal with the thing otherwise than for the purpose of safe custody, as was the case here, will not, if the person so in possession takes upon himself to sell or pledge to a third party, divest the owner of his rights as against the third party however innocent in the transaction the fatter party may have been."
20. In the instant case, assuming that the Railway Authorities were negligent in effecting delivery on the basis of Railway Receipt presented by defendant No. 3, the question that arises is whether the act of defendant No. 4 in accepting to advance money on the pledge of the commodity was the proximate result of such negligence on the part of the Railway Authorities. From a perusal of the written statement of defendant No. 4, it is obvious that the representations on the basis of which defendant No. 4 agreed to advance money on the security of the commodity to the persons concerned, were to the effect that those persons were really Harshad Rai and Shiv Chand; that Harshad Rai and Shiv Chand had 248 bags of Zeera which they wanted to sell and (by implication were entitled to sell); that the aforesaid Harshad Rai had a firm of long standing styled as Harshad Rai Natwarlal at Unjha, Gujarat and that he was one of its partners; that the other person was Shiv Chand and that Shiv Chand was the Munim of Harshad Rai Natwarlal. It was the result of acting upon the aforesaid representations that the defendant No. 4 agreed to enter into the transaction. The entering into the transaction by the defendant No. 4 was not caused by any representation to the effect that the consignment had been delivered to these persons by the Railway authorities under Railway Receipt. This being so, it cannot be said that the neglect of the Railway authorities in relation to the delivery of the goods on the basis of the Railway Receipt was responsible for inducing the defendant No. 4 to enter into the transaction. All that can be said, against the Railway Authorities is that they should not have delivered the consignment on the basis of the Railway Receipt presented before them. In giving delivery on the basis of that Railway Receipt, it cannot be said that the Railway Authorities were doing something which could induce others to believe that the person holding the consignment, was the real owner thereof or that he had a right to deal with the same. We are, therefore, of the view that the claim of the plaintiff is not liable to be defeated on that basis.
21. It was then urged that the true owner of the goods in question was defendant No. 1 and not the Railway. The Railway was not entitled to file the suit for the recovery of the goods or its price against defendant No. 4 with whom the goods had been pledged and who had acted in good faith and paid consideration for the transaction. It is not disputed that the position of the Railway as public carrier is that of a bailee.
22. Learned counsel for the respondent has invited our attention to Section 180 of the Indian Contract Act and has urged that as bailee, the Railway it as much entitled to file the suit for recovery of the goods from defendant No. 4 as the bailor himself.
23. On behalf of the appellant, it was also urged that in giving delivery to a wrong person, the Railway as bailee was liable to be sued for conversion. The Railway, therefore, was a fort-feasor and as such was not entitled to sue. We have no doubt in our mind that bailee is competent to file a suit for recovery of the goods fraudulently or forcibly taken out of his possession by persons without title. In view of the fact of the case, it is hardly necessary to enter into discussions with regard to the rights and liabilities inter se the bailor and bailee. What is apparent on the facts of this case, that while the plaintiff was in lawful possession of the goods as bailee, possession of the same was by an act of fraud taken by defendant No. 3. It could not be urged with any force that the Railway whose lawful possession had been wrongly disturbed could not recover the goods from defendant No. 3. We are unable to accept the submission that this right of the plaintiff to recover the goods from the hand of the defendant No. 3 would stand negatived only because defendant No. 3 or persons for whom defendant No. 3 acted as agent, managed to pass on the possession of the goods to defendant No. 4 as pledges thereof. It may be that the defendant No. 4 acted in good faith and paid consideration to the pledgers, but that to our mind could not defeat the right of the Railway to recover the goods from the possession of defendant No. 4. Section 27 of the Sales of Goods Act is a provision relating to sale and not a provision relating to a transaction of pledge. No. provision of law has been pointed out to us in support of the contention that the plaintiff is not entitled to recover the goods under the circumstances of the cases from the possession of defendant No. 4, except the rule of equity which we have already dealt with.
24. In the view that we have taken, it is not necessary to discuss various other cases that have been cited at the bar.
25. On the question of quantum of damage, or price, the learned counsel for the appellant has urged that the goods had been seized on the 3rd August 1950 by the police and they were ultimately sold by the defendant No. 4 in the middle of October 1951. The quantum should have been fixed according to the market rate in October 1951 and the estimate of the value made by the court below is consequently erroneous. On the facts of this case, however, we are of the view that the responsibility for the delay must be placed on defendant No. 4. When the Railway Magistrate had directed the release of the goods in favour of Railway, it was defendant No. 4 who preferred the revision which was ultimately referred to the High Court. On account of the aforesaid proceedings taken by the defendant No. 4, the goods could not be restored to the Railway earlier. "We" have considered the reasoning of the Court below in fixing the amount recover-
able by the plaintiff and we do not find any good reason to differ from that view.
26. We, therefore, do not find any force in this appeal, which is hereby dismissed with costs.