Bombay High Court
Inditrade Business Consultants ... vs Kotak Mahindra Bank on 25 March, 2025
Author: A.S. Chandurkar
Bench: A.S. Chandurkar
2025:BHC-AS:13843
KVM
1/26
COMAO 9 OF 2024.doc
Digitally signed
by KANCHAN
KANCHAN VINOD
VINOD MAYEKAR
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
MAYEKAR Date:
2025.03.26
12:07:07 +0530
CIVIL APPELLATE JURISDICTION
COMMERCIAL APPEAL FROM ORDER NO. 9 OF 2024
IN
NOTICE OF MOTION NO. 764 OF 2024
IN
BOMBAY CITY CIVIL COMMERCIAL SUIT NO. 48 OF 2024
ALONGWITH
INTERIM APPLICATION NO. 9812 OF 2024
IN
COMMERCIAL APPEAL FROM ORDER NO. 9 OF 2024
Inditrade Business Consultants Ltd. ..... Appellant/
Applicant
VERSUS
Kotak Mahindra Bank & Ors. ..... Respondents
Mr. Vishal Pattabiraman a/w. Mr. Anuj Jhaveri, Ms. Ritisha Choudhary
i/b. Mr. Anuj Jhaveri for the Appellant/Applicant.
Mr. Zal Andhyarujina, Senior Advocate a/w. Mr. Abhishek Gupta, Mr.
Chirag Naik, Ms. Poornima Eapen, Ms.Akansha Agarwal i/b. MZM
Legal LLP for the Respondent no.1.
Coram : A.S. Chandurkar & Rajesh S. Patil, JJ.
Date on which the arguments were heard : 19th DECEMBER 2024
Date on which the judgment is pronounced : 25th MARCH 2025
JUDGMENT ( PER - RAJESH S.PATIL, J.) :
1. This Commercial Appeal from Order is filed by the appellant
(original plaintiff) under Section 13 of the Commercial Courts Act,
KVM
COMAO 9 OF 2024.doc
2015 challenging the order dated 11th June 2024 passed in Notice of
Motion No. 100764 of 2024 filed in Commercial Suit No. 100048 of
2024.
2. The appellants are original plaintiffs who had obtained financial
facilities being a short term loan against agricultural commodities
from the respondent no.1/defendant no.1 (Kotak Mahindra Bank)
being pledged and stored within the warehouse of respondent no.2.
The said agricultural commodities (cotton bales) were insured with
the respondent no.3 - Insurance Company.
For sake of convenience, the parties are referred to, as per their
nomenclature before the Trial Court/Bombay City Civil Court.
3. It is the case of the plaintiff that the agricultural commodities
(cotton bales) were worth Rs. 8,92,46,684/- against which the credit
facility loan worth of Rs.6,20,08,634/- was disbursed out of the
sanction limit from the defendant no.1 - Bank. The goods were stored
in the warehouse as per the terms and conditions on the sanction
letter being building preapproved warehouse. The plaintiff had
handed over security cheques in favour of the defendant no.1 Bank for
an amount of Rs.20 crores each. As per the sanction letter, the
insurance of the said commodities had to be taken wherein the
KVM
COMAO 9 OF 2024.doc
beneficiary of the said insurance was to be the defendant no.1 Bank,
and the premiums were to be paid by the plaintiff. The insurance
policy was valid from 8th September 2022 to 7th September 2023. The
defendant no.1 had also executed a Pledge Agreement (for short "PA")
and a Master Facility Agreement (for short "MFA") with the plaintiff.
4. According to the plaintiff, the General Manager of the defendant
no.2 informed the plaintiff that on 14 th May 2023 a fire had broken
out in the warehouse where the plaintiff's goods were stored, which
destroyed the entire stock of the plaintiff's agricultural goods (cotton
bales) which were pledged with the defendant no.1 Bank and stored
in the said warehouse, in furtherance of which the police complaint
was lodged with the Panvel Police Station. Thereafter the Insurance
Company appointed a Surveyor to ascertain the claim and the
incident. As the Insurance Company was processing the file of the
plaintiff, the defendant no.1 Bank raised the margin cost to the
plaintiff and also demanded to serve the margin call of
Rs.49,94,528/-.
5. In the meanwhile, the defendant no.1 Bank adjusted the bank
account of the plaintiff to the tune of Rs.1,20,00,000/- on 20 th
November 2023 as maintained and operated by the defendant no.1
KVM
COMAO 9 OF 2024.doc
Bank and placed the said account under debit freeze. The plaintiff
hence wrote an E-mail on 20 th November 2023 to the defendant no.1
Bank requesting to reverse the said adjustment. However, the
defendant no.1 Bank reverted with the denial. The defendant no.1
Bank thereafter communicated to the plaintiff that the plaintiff should
pay the overdue loan account and also threatened that the plaintiff's
account would be declared as Non-Performing Asset (NPA) if the said
payments were not cleared. Hence, the plaintiff filed a suit before the
City Civil Court and claimed relief of mandatory and permanent
injunction against the defendant no.1 from depositing the security
cheque issued by the plaintiff in favour of the defendant no.1 Bank.
Further a decree of mandatory and permanent injunction against the
defendant no.1 from invoking corporate guarantee issued against the
guarantor in favour of the defendant no.1 Bank and mandatory and
permanent injunction against the defendant no.1 Bank from declaring
the plaintiff's account as NPA and also from the decree of mandatory
injunction to re-frame from harassing the plaintiff by making undue
claim against it. The plaintiff also filed an Interim Application in the
form of Notice of Motion seeking ad-interim relief against the
defendants.
KVM
COMAO 9 OF 2024.doc
6. To the Notice of Motion, the defendants filed their reply and
after hearing the learned counsel for all the parties, the learned Judge
of the City Civil Court by his order dated 11 th June 2024 partly
allowed the Notice of Motion, thereby directing the defendant no. 1
Bank not to take any coercive action against the plaintiff except by
following due procedure of law. Being dissatisfied with the impugned
order passed on 11th June 2024 by the Judge of City Civil Court, the
plaintiff has filed the present Commercial Appeal From Order.
7. Mr. Vishal Pattabiraman, learned counsel appeared on behalf of
the original plaintiff and made his submissions as under:-
7(i) The appellant (Original Plaintiff) had filed the present
suit seeking recovery of damages for the destruction of 489.22 MT of
Cotton Bales, valued at approximately Rs. 8,80,88,000/- which were
pledged with the respondent no. 1 and destroyed in a fire incident on
14th May 2023 during the insured period. It is undisputed that the
relationship between the plaintiff and respondent no. 1 is one of
Pledger and Pledgee. Under Sections 151, 152, and 161 of the Indian
Contract Act, 1872, the Pledgee is obligated to take due care of the
pledged goods. The destruction of the goods was caused by the
negligence of respondent nos. 1 and 2, and as a result, both
KVM
COMAO 9 OF 2024.doc
respondents are jointly and severally liable for the damage caused.
7(ii) It is undisputed that the commodities were under the lock
and key of the Bank and stored with the pre-approved warehouse
(CMA) of the bank. It is also undisputed that the CMA is the insured
entity, and the beneficiary is the Bank wherein the premiums are paid
by the present plaintiff. The clause mentioned in the sanction letters of
2018 and 2022 clearly depicts that in order to avail credit facilities,
the borrower has to store the commodities in the pre-approved
warehouse of the bank which shall be within the requisite radius of
the Agri RM location. Further, only after the CMA from the pre-
approved list of Banks and empanelled with the Bank is approved, the
credit facilities are sanctioned.
7(iii) The Supreme Court in the case of Taj Mahal Hotel vs.
United India Insurance Co. Ltd. (2020) 2 SCC 224 observed that a
party can contract out from liability was in context of common carrier
at sea. The Apex Court has observed that in the case of common
carrier, the conditions at sea are unpredictable and therefore such
carriers should have the liberty to contract out of liability for their
servants' negligence. It is also observed that the liability in context of
common carrier as bailees is governed by Carriers Act of 1865 and not
KVM
COMAO 9 OF 2024.doc
by Sections 151 & 152 of the Indian Contract Act. The Apex Court has
clarified that the terms "in absence of any special contract" in Section
152 mean that the Bailee can opt for a higher standard of care than
Section 151 and not otherwise.
7(iv) Even otherwise, plaintiff respectfully submits that there is
no such clause in the agreement which states that respondent no. 1
and/or its servants and/ or agents will not be liable for the negligence
of its agents or servants. It is incorrect to state that the clause which
merely reads that the pledger was responsible for taking care of goods
would not mean the bank and/or its agents are exonerated from
negligence.
7(v) CMA is the Agent of respondent no.1 - Bank. The
respondent no. 1 Bank has itself admitted that the warehouse/ CMA
has to be chosen by the pre-approved list provided by the bank. Thus,
the plaintiff's had no choice but to choose the respondent no. 2 CMA.
Further, the provisions of the sanction letters clearly depict that the
CMA should be within requisite radius of Agri RM locations. There
was only one pre-approved warehouse within such limitations placed
by the defendant no.1 and therefore, it is abundantly clear that there
was no choice given to the plaintiff. Furthermore, the CMA charges
KVM
COMAO 9 OF 2024.doc
are decided by the Bank depending on the credit loan facility availed.
7(vi) A bare perusal of the provisions of the sanction letters
shows that respondent no. 2 is an agent of respondent no. 1 Bank to
hold the goods pledged with the Bank on behalf of the Bank and
therefore there was no iota of doubt that there is a clear relationship
of principal and agent, between the respondent no.1 Bank (being the
principal) and CMA i.e., respondent no.2 (being agent of respondent
no.1).
The plaintiff placed reliance on the judgment of the Apex court
in LIC v. Rajiv Kumar Bhasker, (2005) 6 SCC 188.
7(vii) Further, even Section 233 of the Indian Contract Act,
1872 where it is permissible for a third party while dealing with agent
to hold the agent as also its principal liable. Thus, in view of the said
case, CMA is acting on the directions of the Bank and therefore there
is presence of an ostensible authority which is present between the
two bodies and therefore there is a presence of a contract of agency.
7(viii) CMA, the agent of defendant no.1, has been negligent in
its duties. The emails with respect to the insurance claims have
clearly stated there have been traces of arson (email dated 24 th August
2024 tendered separately which have been detected at the warehouse
KVM
COMAO 9 OF 2024.doc
and therefore the respondent no. 3 viz. Insurance had rejected the
claim. Furthermore, the report submitted by the Fire Fighter Authority
records that the fire was caught due to over storage. Therefore, it is
abundantly established that the CMA has been negligent in storing the
cotton bales at its facility. Even otherwise the plaintiff has sufficiently
in Para No. 8, 9, 14 & 19 of the Plaint has pleaded that the loss of
goods is attributable to the respondent no. 1 & 2 and therefore the
same are jointly and severally liable.
7(ix) Further, it is submitted that vide email dated 13 th
November 2024 (email dated 24 th August 2024 tendered separately)
respondent no. 2 informed that the insurance claim has been
reopened. Therefore, it is abundantly clear that if the insurance
company grants insurance, the money shall be obtained by the
respondent no.1 Bank, it being the beneficiary and if the claim is
rejected by respondent no.3 insurance company, it would clearly
establish and solidify the argument of the plaintiff that respondent no.
1 & 2 were negligent. Thus, holding them jointly and severally liable.
7(x) The defendant no.1 cannot recover its dues when it is not
in a position to return the goods bailed.
7(xi) The plaintiff respectfully submits when a Pawnee initiates
KVM
COMAO 9 OF 2024.doc
a suit for the recovery of a debt, he retains the right to hold the
pledged goods as security. However, he is obligated to return these
goods upon payment of the debt. The right to sue for the recovery of
the debt is premised on the Pawnee's ability to redeliver the goods
upon satisfaction of the debt. If the Pawnee places himself in a
position where he cannot redeliver the pledged goods, he cannot
claim a decree in his favor.
7(xii) The plaintiff in support of the above has placed reliance
on the case of Lallan Prasad v. Rahmat Ali, 1966 SCC OnLine SC 266,
wherein the Apex Court inter alia has held that if a Pawnee seeks to
recover its dues, then it should be in a position to re-deliver the goods.
7(xiii) The plaintiff asserts that respondent no. 1 has been
repeatedly issuing margin calls against the plaintiff. It is important to
highlight that the very concept of margin calls necessitates that the
quantity of commodities pledged must be commensurate with the
credit facilities utilized. However, it is crucial to emphasize that the
pledged commodities were rendered completely non-existent or
valueless as a result of the fire incident, which effectively destroyed
the collateral goods. This fact is not only pertinent but central to the
matter at hand, and any demand for margin calls under such
KVM
COMAO 9 OF 2024.doc
circumstances is unfounded and legally unsustainable.
7(xiv) The argument put forth by respondent no. 1 Bank,
suggesting that the plaintiff must settle the credit loan facility before
being entitled to the insurance money, is without merit. The fire
occurred in respondent no.2's warehouse while the goods were under
the custody and control of the bank, secured by the pledge. As the
goods were pledged and the insurance policy listed the commodities
as insured, the bank is the beneficiary of the policy. The provision in
the insurance policy must be interpreted in the context of the pledge,
not independently. Since the credit facility was obtained after the
goods were pledged, and the fire occurred during the existence of the
credit facility, the appellant should not be required to pay the alleged
dues unless the respondent no. 1 Bank is in position to handover the
goods simultaneously with recovering the dues.
7(xv) The plaintiff has not waived off its claim for the negligent
acts of respondent no.1 and respondent no.2, that has caused damage
to the goods under sanction letter dated 14th September 2023.
7(xvi) The plaintiff categorically denies the alleged case of the
respondents that the plaintiff has waived its rights to claim negligence
or claims for the damage suffered due to the destruction of goods
KVM
COMAO 9 OF 2024.doc
caused by fire.
7(xvii) It is further submitted that respondent no.1 Bank is using
the sanction letter in a malafide manner as no fresh disbursement
would take place until the issue of the fire incident is resolved under
the said sanction. Further, it is shocking to fathom that the Bank has
itself renewed the sanction letter despite being aware that no
commodities are being pledged. Thus, the purported sanction letter
dated 14th September 2023 came to be renewed upon insistence of the
respondent no. 1 Bank vide email dated 14 th September 2024.
Pertinently, no amount was disbursed by the respondent no. 1 Bank,
nor any amounts were obtained by the appellant under the new
sanctioned letter.
7(xviii) The plaintiff has nowhere accepted the liability of the fire
and has time and again objected to the margin calls raised by
defendant no. 1. The plaintiff's case has always imposed liability on
the bank as the cotton bales were in lock and key of the bank and fire
incident broke out whilst the commodities were pledged with the
Bank and in possession of the CMA, the agent of the Bank.
7(xix) As set out hereinabove, the plaintiff humbly submits that
defendant no. 1 Bank cannot now shy away from its obligations when
KVM
COMAO 9 OF 2024.doc
defendant no.1 Bank and its agents has failed to take reasonable due
care as per Section 151 of the Indian Contract Act, 1872. Furthermore,
defendant no.1 Bank cannot recover when it is not in a position to
deliver the goods back, being the bailee/ Pledgee. Mr. Pattabiraman,
learned counsel also relied upon following judgments:-
(a) The judgment of Supreme Court in case of Bank of
Rajasthan Limited vs. VCK Shares & Stock Broking
Services Limited, (2023)1 SCC 1
(b) The judgment of Madhya Pradesh in case of Central
Bank of India, Raigarh vs. M/s. Grains and Gunny
Agencies & Ors. 1988 M.P.L.J. 453.
8. Mr. Zal Andhyarujina, learned Senior Advocate appeared on
behalf of the defendant no.1 Bank and made his submissions as
under :-
8(i) He submitted that the defendant no.1/Bank has expressly
contracted out of the responsibility of preservation of the subject
goods in bailment/pledge.
8(ii) As per Clauses 3 (VIII), (X) and (XII) in the Pledge Agreement
dated 18 December 2018 at page 188 - 189 of appellant's (original
plaintiff) COD Part - 1, the plaintiff was solely responsible for any loss
or damage to the goods and that the Bank shall not be held liable.
KVM
COMAO 9 OF 2024.doc
8(iii) Service Agreement dated 7 February 2023 executed
between the CMA and the plaintiff was undisclosed by the plaintiff
before the Trial Court.
8(iv) The defendant no.1/Bank has the right as a pledgee to
contract out of its obligations to preserve the subject goods.
9. The defendant no.2 is not the agent of the Bank and therefore,
the Bank cannot be held liable for negligence (if any) of the defendant
no.2. The Sanction Letter dated 14 th September 2023 states that the
borrower/plaintiff shall clear pending margin calls before renewal of
limits. The outstanding dues underlying the loan granted against the
pledged goods are to be repaid by the plaintiff before their respective
maturity date and that no extension or rollovers therein would be
allowed.
10. The said Sanction Letter, executed pursuant to the fire incident
and pursuant to the Bank issuing margin calls upon the plaintiff,
records the plaintiff's categorical admission of the existence of an
outstanding debt and the plaintiff's liability to meet the margin calls
without making any claim for set-off against a purported claim for
damages for loss of pledged goods.
11. Further, the plaintiffs/appellant's email dated 25 July 2023 to
KVM
COMAO 9 OF 2024.doc
defendant no.1/Bank categorically admits that the fire incident was an
"unforeseen event"; and does not claim negligence as against the Bank
and/or make any claim to set off damages against the repayment of
the outstanding dues.
12. The Insurance Company had appointed a surveyor and the
claim was re-opened. The claim value booked is Rs.8.29 Crore towards
a loss of 489.22 Mt taken with bank. The loan outstanding along with
interest against the credit facility on 14th May 2023 was Rs. 6.20 Crore
therefore the loss incurred by the Plaintiff is Rs. 2.09 Crore will also
be processed through said Insurance Company under the complete
claim.
13. Reliefs sought by the plaintiff were hit by Section 41 of the
Specific Relief Act, 1963.
14. Without prejudice to the above, the Bank had taken reasonable
care of the pledged goods as per Section 151 of the Contract Act.
15. In fact, though the choice of warehouse rested with the plaintiff,
the Bank also ensured that warehouse where the goods were to be
stored was required to be approved by the Bank and Collateral
Manager after due inspections.
16. That being the case, in terms of Section 152 of the Contract Act,
KVM
COMAO 9 OF 2024.doc
the loss of these goods i.e. the cotton bales would then not make the
Bank responsible for the same. Section 152 of the Contract Act,
absolves the bailee from being held responsible for the loss,
destruction of the bailed goods if the amount of care taken was that as
described in Section 151 of the Contract Act.
17. Mr. Andhyarujina, learned Senior Advocate relied upon
following judgments :-
1. The judgment of Punjab & Haryana High Court in
case of State Bank of India vs. M/s. Quality Bread Factory,
Jullundur Road, Batala & Anr. (1983) 2 I.L.R. 406
2. The judgment of this Court in case of Bombay Steam
Navigation Company Limited vs. Vasudeo Baburao Kamat,
1927 SCC OnLine Bom 34
3. The judgment of Madras High Court in case of Sheik
Mahamad Ravuther vs. British India Steam Navigation Co.
& Ors., 1908 SCC OnLine Mad 151
4. The judgment of this Court in case of Balkrishan R.
Dayma vs. Bank of Jaipur Ltd. & Anr., 1970 SCC OnLine
Bom 8.
KVM
COMAO 9 OF 2024.doc
18. We have heard the learned counsel for both the sides and with
their assistance, have gone through the documents on record.
19. The present Appeal from Order challenges an order passed by
the Judge of the City Civil Court thereby refusing to grant relief in
favour of the plaintiffs.
19.1 The plaintiff/present appellant had sought in the Notice
of Motion, the following prayers :-
a) Pass ad-interim Ex-parte injunction orders, thereby
restraining the defendants, their agents, representatives,
employees etc. from harassing the plaintiff on account
recovery outstanding amount.
b) Pass ad-interim Ex-parte injunction orders, thereby
restraining the defendant No. 1 from depositing the
Security Cheques issued by the Plaintiff.
c) Pass ad-interim Ex-parte injunction orders, thereby
restraining the defendant No. 1 invoking corporate
guarantee issued against the guarantors.
d) Pass ad-interim Ex-parte injunction orders, thereby
restraining the defendant No. 1 from declaring the
Plaintiff's account as a Non-Performing Asset /and
reporting the account of plaintiff as defaulter to external
agencies.
19.2 While, the City Civil Judge by its order dated 11 th June
2024 did not grant these prayers, but directed the defendant Bank not
to take any coercive action against plaintiff, except by following due
KVM
COMAO 9 OF 2024.doc
procedure of law. The plaintiff has challenged this order dated 11 th
June 2024 in Appeal From Order.
19.3 The plaintiff's case in the suit is that the plaintiff had
purchased goods (cotton bales) worth Rs. 8,92,46,684/- The said
goods were pledged by the plaintiff with defendant no.1 Bank in order
to get the credit facilities of Rs.6,20,08,634/-.
19.4 Goods were stored in warehouse of defendant no.2, and
there was a valid insurance policy with defendant no.3, on the date
when the entire goods worth Rs.8,80,88,000/- were destroyed by fire
on 14th May 2023. As pledged goods were destroyed the defendant
no.1 - Bank started making margin call and demanded amounts from
plaintiff.
19.5 The defendant no.1 - Bank by its email dated 20 th
November 2023, informed the plaintiff that they have adjusted
Rs.1,20,00,000/- from plaintiff's bank account and also placed the
account under debit freeze. And further that the plaintiff's account
will be turning into N.P.A. The issue before us is whether the bank can
be directed not to take action of recovery of its dues from borrowers
who have defaulted in payment of outstanding loan amount.
19.6 At the time of granting loan the defendant no.1 - Bank
KVM
COMAO 9 OF 2024.doc
had issued letter dated 4th November 2022 to the plaintiff- borrower,
which contained standard and common conditions (applicable to all
finance facilities). Certain important conditions needs to be looked
into for deciding the present proceeding :
Insurance - Borrower to provide copy of the master insurance car
marking bank as beneficiary to the extent of the value of stocks lying
in their warehouse. Insurance should cover for theft, burglary, fire,
floods and other standard perils. Insurance policy to be taken and
marked in favour of bank.
Designated Warehouse - Warehouse where the goods are to be stored
will require to be approved by the bank and collateral Manager after
due inspections.
Margin Call - Prices will be marked to market on weekly basis. When
the available margin fall by 5%, the bank shall intimate the company
to top up the margins either by providing additional stocks under
pledge or by reducing the outstanding exposure for maintaining
stipulated margin. Delay in servicing margin call will attract penal
interest @ 2% per month on the entire balance outstanding in the
account.
19.7 So also, pledge agreement was entered into between
KVM
COMAO 9 OF 2024.doc
plaintiff and defendant no.1 - Bank. The clause 3(x) reads as under:-
Clause 3(x) - " The Pledger (s) agrees that the pledgee
shall not be held liable for any loss, damage or
depreciation (s) which the said pledged goods/securities
undergo while in possession nor shall the pledgee be
held liable in case of theft, burglary, loss by fire, floods,
earthquake, enemy, warfare, civil commotion and riots
and the like and the authority herein contained in favour
of the pledgee to enable them to seel and transfer the
said pledged goods / securities is hereby declared to be
irrevocable during the currency hereof, and the pledgor
(s) hereby consents that the terms and conditions herein
before stipulated shall apply so long as any amounts
remain due and payable by the Borrower (s) to the
pledgee. "
19.8 In our view, there cannot be any legal bar on the Bank
from taking any steps to recover its money. Monies which the Bank
had offered as loan was ultimately public money. If the Bank is
prohibited from recovery of its outstanding amount, it will have
repercussion on its banking business.
19.9 The Apex Court in Bank of Rajasthan Ltd. v. VCK Shares &
Stock Broking Services Ltd.(2023) 1 SCC has settled that while a
borrower may have the right to institute a parallel suit for damages
against the Bank, there can be no question of a stay on the Bank's
recovery proceedings under the RDB Act.
19.10 Bombay Steam Navigation Company Limited (supra) the
KVM
COMAO 9 OF 2024.doc
Division Bench, Bombay High Court was dealing with facts when the
plaintiff's agent at Bombay shipped some packages to the plaintiff at
Honawar by a vessel belonging to the defendant company. One of the
conditions of the bill of lading, was that the defendant company was
not liable for loss from the negligence of its servants. Whilst the
shipment was being unloaded in the Honawar harbour, one of the
packages got loose from a sling, fell into the sea and was lost. The
plaintiff sued to recover the value of the lost package.
The Court concurred with the decision in Sheik Mahamad
Ravuthers vs. The British India Steam Navigation Co. Ltd., (1908) 32
Mad. 95 in which the majority decision held that a shipowner is
competent to protect himself by express contract from the liability for
the negligence of his servants.
19.11 Quality Bread Factory (supra) the Punjab and Haryana
High Court follows the judgment passed in Lakhaji Dollaji & Co. v
Boorugu Mahadeo Rajanna.
19.12 Lakhaji Dollaji & Co. v Boorugu Mahadeo Rajanna ,
Division Bench, Bombay High Court, were dealing with fact where the
plaintiffs instructed the defendants, who carry on business as
commission agents in bullion in Bombay, to purchase silver bars on
KVM
COMAO 9 OF 2024.doc
their account and to keep them. The defendants purchased the bars
and kept them, where three of the bars were lost. Per the contractual
understanding between the parties, the defendants agreed to keep the
bars at the plaintiff's risk. The plaintiffs sued for damages for the lost
bars.
It was held that it was open to the bailee to contract himself out
of the obligations imposed by Section 151 of the Indian Contract Act
and that the Act does not expressly prohibit contracting out of Section
151. It follows the judgments passed in Bombay Steam Navigation
Co. Ltd. vs. Vasudev Baburao and Sheik Mohamad Ravuther vs. British
India Steam Navigation Co. Ltd.
19.13 Balkrishan R. Dayma. Bank of Jaipur, Ltd. & Anr., 1970
SCC OnLine Bom 8 the Division Bench of the Bombay High Court
were dealing with the facts. In this case the plaintiff/borrower availed
a cash credit account facility from the defendant-bark, pledging goods
stored in the plaintiff's godown, with the keys and control handed to
the defendant-bank. Clause 7 of the pledge agreement stipulated that
the borrower would bear all losses, damages, or deterioration caused
by theft, fire, natural disasters, or other causes, irrespective of whether
the goods were under the bank's possession or control.
KVM
COMAO 9 OF 2024.doc
This Court rejected the contention that Clause 7 did not apply
where the defendant-Bank or its servants were negligent. The Court
held that the clause was not limited to instances without negligence
and that excluding negligence would import words of limitation into
the agreement. Further, the Court reasoned that a Bank is not an
insurer of goods under Section 152 of the Indian Contract Act, 1872,
unless expressly stated, and liability is generally limited to negligence
unless otherwise contracted. The Court also noted that words like
"any loss however caused" or "under any circumstances" provide a
sufficient warning to the bailor that the bailee is exempt from liability
for negligence.
19.14 In the judgment of Lallan Prasad (supra) of the Supreme
Court relied upon by the plaintiff, the appellant had advanced
Rs.20,000/- to the respondent against the promissory note. The
respondent executed an agreement whereby he agreed to pledge as
security aero-scraps and to deliver them at appellant's house and keep
them there in his custody. The appellant's case was the respondent
failed to deliver the goods and stored them in a plot adjacent to the
aerodrome. When the suit was filed to recover the amount advanced,
the respondent in the written statement admitted the said loan, but
KVM
COMAO 9 OF 2024.doc
alleged that they had delivered aero-scraps to the appellant.
Therefore, though appellant was entitled to obtain a decree but he
should willingly redeliver the goods pledged. In such a situation, the
Supreme Court held that pawnee has to return the property pledge. If
by his default, the pawnee is unable to return the security against the
payment of debt, the pawner as a good defence to the action. In our
view, the ratio will not be applicable to the present proceeding, as in
the present proceeding as per pledge agreement, the goods were in
the warehouse and as per the terms if there was a fire, the Bank could
not be held liable.
19.15 In case of Chairman, LIC vs. Rajiv Kumar (supra),
Supreme Court, was dealing with the issue of principal and agent,
regarding life insurance police floated for employees. In the present
proceeding, there is no question of agency. It is a case of borrower
and lender.
20. The Insurance Company initially has rejected amount to be paid
under the insurance policy. However, on the request being made by
the plaintiff, they are again considering the claim in the policy.
21.1 Mr. Andhyarujina, learned Senior Advocate appearing on
behalf of the defendant no.1 Bank on instructions submitted that if the
KVM
COMAO 9 OF 2024.doc
insurance claim is granted by the defendant no.2 - Insurance Company
to the defendant no.1 Bank. The said amount would be adjusted by
the defendant no.1 Bank and only for the balance amount, they will
proceed further against the plaintiff.
21.2 The statement made by the learned counsel appearing for
the defendant no.1 Bank is accepted by this Court as an undertaking
given to this Court.
21.3 The credit facility that exist between the plaintiff and the
defendant no.1 Bank is in the nature of contract between the parties.
Hence, both of them are bound by the terms of the contract.
21.4 The plaintiff has availed credit facility and is duty bound
to repay the said amount as per the terms agreed between the plaintiff
and the defendant no.1 Bank.
21.5 If the Insurance Company pays the entire amount as
claimed by the plaintiff, the said amount is to be adjusted by the
defendant no.1 Bank against its claim and for the balance amount (if
any) the defendant no.1 is free to take such steps by following the due
procedure of law.
22. The learned Judge of the City Civil Court has considered all
relevant aspects and has come to the finding that the defendant no.1
KVM
COMAO 9 OF 2024.doc
Bank is at liberty to take recourse in accordance with the due
procedure of law. We do not find any reason whatsoever to interfere
with the impugned interlocutory order.
23. We find no merit in this Commercial Appeal From Order and
hence the same is dismissed. No costs. In view of disposal of the
Commercial Appeal From Order, pending Interim Application is also
disposed of. It is however observed that any observations made by the
trial Court in the impugned order or in the present order shall not
come in the way of either party and all contentions are kept open for
being raised before the trial Court.
[ RAJESH S. PATIL, J. ] [ A.S. CHANDURKAR, J. ]
24. At this stage, the learned counsel for the appellant seeks
extension of the impugned relief granted earlier.
25. Ms. Poornima Eapen, the learned counsel appearing for the
respondent no.1 strongly opposes the request made by the appellant.
We find that there is no reason to extend the interim relief. The
request made by the learned counsel for the appellant is rejected.
[ RAJESH S. PATIL, J. ] [ A.S. CHANDURKAR, J. ]
