Solanki

1. Gajanan Moreshwar v. Moreshwar Madan Mantri  Lease under BMC

2. Ram Narain v Hari Singh, AIR 1964 Raj 76  Contract for guarantee where consideration isn’t
there invalid.
3. Mir Niyamat v. CIBL, AIR 1969 AP 294 
4. SBI v Indexport  Overruled Manku Narayn (mortgage)
5. IFCI v Cannanore  (Nationalisation)
6. Amritlal v SBT  (Bank lost goods, contended 133, 135 and 139, only 139 allowed)
7. Centax v Vinmar  (Bank letter of indeminity and bank guantee should be honoured without
interference of court except in fraud)
8. Hindustan Steel v Tarapore  ( Fraud and irretrievable justice)
9. UP Cooperative v Singh Consultants (Courts shouldn’t interevene)
10. London v Holloway (Lee, fidelity Guarantee)
11. Mahanth v U Bi Yu (134, discharge of Pd)
12. State of MP v Kaluram  140, 141, goods lost, hence Surety discharged under 139
13. MS Anirudhan v Thomco
14. Harshad Shah (237, apparent authority
15. Shyama Devi (Capacity of agent of lady)
16. Bank of Bihar v. Damodar Prasad (128 coextensive)
17. Usman Jamal v. Govardhan Purshottam (Firm extra commission)

INDEMNITY AGENCY GUARANTEE

Kapil
1. Hardayal Ram Dass Ray Vs. B. and N. W. Ry. Co. AIR1929Pat296
2. State of Bombay (Now Gujarat) Vs.Memon Mahomed Haji Hasam 
3. Kush Kanta Barkakati Vs.Chandra Kanta Kakati and Ors AIR1924Cal1056 
4. Dominion of India as owner of G.I.P. Rly. and Anr. Vs. Gaya Pershad Gopal Narain
AIR1956All33 
5. Union of India (UOI) Vs. Motilal Kamalia and Ors. AIR1962 Pat. 384
6. R.d. saxena v. Balram Prasad 
7. Syndicate Bank v. Vijay Kumar and Ors 
8. Lyell v. ganga dai
9. KaliaPerumal Pillai v. Visa Lakshmi Achi 
10. Intl Authority v. Televista Electronics
11. State of Maharashtra, Bombay and Ors. Vs. Britannia Biscuits Co. Ltd.
12. United Breweries Ltd. Vs. State of Andhra Pradesh, AIR1997SC1316 
BAILMENT

INDEMNITY

Gajanan Moreshwar v. Moreshwar Madan

Plaintiff had lease from BMC for 999 years. Transferred lease to defendant and defendant
then had possession rights. For purpose of construction on land, defendant entered
agreement with Keshavdas regarding delivery of material. The cost of goods exceeded 5000
rupees so the defendant asked the plaintiff to enter into mortgage of property to Keshavdas.
The plaintiff did so for some amount of interest. Then the defendant needed more money
for construction and asked plaintiff to create further charge on mortgage property with
Keshavdas. The plaintiff did so again and same rate of Interest was charged. Finally the
defendant wanted the plaintiff to transfer land to him, but he couldn’t do so because title
deeds belonged to Keshavdas. To get these from keshavdas, the plaintiff had to pay 10000
and interest. The plaintiff sued the defendant and said that since he had undergone the
mortgage on the property due to the defendant’s request, the defendant is liable to
indemnify him. The counsel for defendant argued that according to 124 and 125 of ICA,
actual loss hasn’t occurred and hence the defendant isn’t liable to pay yet. Court said that
indemnity is a vast principle and not exhaustive till 124 and 125 of ICA. Hence he should be
indemnified, but he the court did not pass an order to indemnify because the defendant
never contended against indemnity. The court also held that no real loss should be
necessary for the indemnity holder to get indemnity from indemnifier because this would
cause great detriment to indemnity holder. The court finally passed a decree asking the
defendant to release papers of mortgage from Keshavdas within 3 months and if he is not
able to do so, he should pay to the court money which will be used to get the title deeds
from Keshavdas.

Osman Jamal And Sons Ltd. vs Gopal Purshottam

The plaintiff company was the defendant’s agent and it could buy goods or enter into
agreements of sale for the defendant with respect to buying gunnies and hessian. The
defendant according to the contract would indemnify them for any losses incurred. The
plaintiff entered into a contract with Maliram Ramjidas for Hessian for which the defendants
did not pay or accept delivery. Maliram Ramjidas then sold the goods to someone else at a
lower price and sued the plaintiff company for that. The plaintiff company sued the
defendant for the amount which Maliram asked for and also for some extra sum which they
would have gotten as commission had the contract of sale happened. The defendant
contended that
1) There would be no question of indemnity because the plaintiffs were agents of defendant
but to this the court said that there was a mistake and the plaintiff had entered the contract
of sale as principals hence there would be indemnity.
2) Secondly the defendant claimed that the plaintiff couldn’t get indemnity as the actual loss
hasn’t occurred yet. To this the court said that according to common law the indemnity
applies even when loss hasn’t occurred and the indemnity holder should not be asked to
first pay and then ask for reimbursement because this would be hugely detrimental to him.
3)Thirdly the court said that the defendant can only be asked to pay for the amount asked by
maliram and not for the supposed amount of commission because “the defendants may be
liable as undisclosed principals, and it would be a most unjust result if after paying the full
amount claimed in this case, of which sum the vendor would receive only a dividend, they
were called upon to pay a further sum to the vendor, to make up the balance due on the
contract made by their agent on their behalf.”

SBI v. Shyama Devi

The plaintiff paid regular amounts of money to a specific Kapil Deo Shukla who was a clerk in
Imperial Bank (Former SBI) and he was the neighbour of the plaintiff. KD Shukla
misappropriated the money and made fake entries in the passbook. KD Shukla was not
authorised to collect money from the plaintiff. It was contended by the plaintiff that KD
shukla was the agent of the bank. But the court held that the appellant-Bank was therefore,
not liable to make good the loss of Rs. 7,000/- caused to the respondent, by the act of K. D.
Shukla, while the latter was acting as an agent of the plaintiff and not within the scope of his
employment with the Bank.

Harshad Shah v. LIC

A certain Mr. Jaswant Rai Shah had taken 4 policies from LIC OF 25,000 each. He paid the
first 2 premiums. For the third premium, he could pay it within the due date. But within the
grace period of 1 month he gave a cheque of the premium to an LIC Agent. The LIC agent
deposited the cheque much later after the grace period ended. A day prior to the LIC Agent
depositing the cheque Mr. Jaswantrai dies. His wife and son claim the policies. LIC refuses to
pay and contends that an agent is explicitly told not to collect premiums and even though
this happens regularly, they are expressly prohibited from doing so and it is written so in the
contract of insurance as well. The plaintiff invoked the doctrine of apparent authority under
Sec 237 of the ICA. The court held that it wont be applicable as LIC had expressly prohibited
the agents to collect premium nd hence they are not authorised as gents to do so. But
keeping in mind the facts of the case, LIC was asked to refund the premium with interest
even though the plaintiff lost the case.

Mahanth singh v. U Ba Yi
The plaintiff who is a building contractor was employed by the four trustees of a pagoda
known as the Kyaikasan Pagoda. The terms of the employment are set out in a written
agreement dated 1st January 1933 and expressed to be made between the Board of the
Ryaikasan Pagoda Trustees and the appellant. It is signed by the appellant and each "of the
trustees. The respondent was trustee of the estate of a lady called Daw Dwe who had left
certain property for charitable purposes. He was not a party to the contract but had orally
guaranteed its due performance by the trustees, and in Burma such a guarantee is binding
though it is not in writing. The appellant fulfilled his contract and there was due to him a
sum. The plaintiff filed a suit against the 4 trustees and the respondent (surety). He thought
that the sum due to him was not in the named trustees and respondent’s personal capacity
but against anyone who may be the trustee from time to time. Soon the 4 rustees were
removed and 8 others were added. The plaintiff changed the names in the suit later by an
application. The court said that the claims against the new trustees were dismissed. Then
the plaintiff asked the old trustees’ names to be added again. The court refused so as it
could not be allowed again and again. The plaintiff then claimed the sum from the
respondent i.e. the surety. The surety refused to pay and contended that according to
section 134 of the ICA, if the Principle debtor is released, the surety is discharged and hence
according to the facts of the case he should be discharged. He further contended that
Section 2 (j), Contract Act, alters the position. In his contention that Section must
be read in its widest sense with the result that in India and Burma any contract in respect of
which an action cannot be brought is void, and therefore the plaintiff's right to recover the
debt from the original trustees being unenforceable, is void. It follows, he argues, that the
principal debtors having been absolutely released, the surety is discharged. The court held
that, not every unenforceable contract is declared void, but only those unenforceable by
law, and those words mean not unenforceable by reason of some procedural regulation, but
unenforceable by the substantive law. Under Section 134 the surety is discharged, if and
only if a contract has been entered into by which the debtor is released or if there has been
any act or omission on the part of the creditor, the legal consequence of which has been to
discharge the principal debtor. If, as in the present case, the only result of striking out the
original trustees from the action is to preclude the bringing by the appellant of a fresh suit in
respect of the subject matter against them, and is not to release or discharge the principal
debt, then the debt remains a debt though the creditor by reason of a rule of procedure
cannot himself bring an action upon it. In such circumstances there is nothing in the Section
to discharge the liability of the surety.

Amritlal v. State bank of Travancore

A partnership firm entered into an agreement with State Bank of Travancore for a cash
credit account facility. The appellant was a surety to the contract. There were also some
goods pledged as security. The principle debtor defaulted. The bank got a decree of payment
of moneys in their favour. The appellant filed an SLP in this regard and contended that

1) Sec 133 which says that the surety would be discharged if there is variation in terms of
contract, would be applicable as the cash credit facility was first for Rs. 1,00,000 and it was
later reduced to 50,000 without the surety’s consent. The court did not uphold this
contention as the plaintiff did not have enough proof.
2) Sec 135 is applicable as the bank had given time to the partners of the firm to make up for
the deficit. The court held that this also would not be applicable since the bank did not make
a contract to allow time to not sue. It only gave them time to make up for the deficit.
3) Sec 139 would be applicable which says that if the creditor loses securities of debtor and
thus impairs the remedy of the surety the surety would be discharged to that extent. The
court accepted this contention and said that since the bank had lost certain goods the surety
would be discharged to that extent.

Damodar Prasad v. Bank of Bihar

The appellant-creditor lent moneys to the first respondent on the guarantee of the second
respondent. The appellant filed a suit against the respondents for recovery of the amount due.and
the suit was decreed. While passing the decree, the Trial Court directed that the appellant would not
be at liberty to enforce the decree against the second respondent' until he had exhausted his
remedies against the first respondent. The appellant challenged this direction.
The High Court dismissed the appeal. In appeal in Supreme Court it was held that the direction must
be set aside. In the absence of some special contract to the contrary the surety has no right to
restrain execution against him until the creditor has exhausted all remedies against the Principal
Debtor. According to Section 128 of the ICA, the liability of the surety is co extensive with the
principle debtor. The very object of the guarantee is defeated if the creditor is asked to postpone his
remedies against the surety. In the present case the creditor is a banking company. A guarantee is a
collateral security usually taken by a banker. The security will become useless if his rights against the
surety can be so easily cut down.

Ram Narain v. Hari Singh

The plaintiff who was a creditor sued the Principal debtor and the surety to recover the principal
amount along with interest. Lt. Col was the surety for Harisingh if any dues were remaining on his
part. The Lt. Col. repudiated the claim of the plaintiff and denied the allegation that he had
undertaken the responsibility for the re-payment of the alleged loan. He pleaded lack of
consideration for his suretyship although he admitted having signed the entry. For the validity of a
contract of guarantee it is adequate consideration if "anything is done or any promise made for the
benefit of the principal debtor." According to Sec 127 of ICA. In Ghulam Husain Khan v. Faiyaz Ali
Khan,it has been held that the word 'done' in Section 127 shows that past benefit to the principal
debtor can be good consideration for a bond of guarantee. This court said that the meaning of the
word done was used in its unnatural sense and it was held that anything done or any promise made
for the benefit of the principal debtor must be contemporaneous to the surety's contract of
guarantee in order to constitute consideration therefore. A contract of guarantee executed
afterwards without any consideration is void. So far as the claim of Interest is concerned evidently
none is available against the Lt. Col. as his very liability as a surety has been held by me to be
nonexistent as according to section 128 of the ICA, the liability of the surety is co extensive with that
of the creditor. Hence, the plaintiff will not be entitled to recover either the amount or the interest
from the surety.

Mir Niyamat v. CIBL

Two brothers had an account with the bank and had availed an overdraft facility. They were jointly
and severally liable. The bank on their default asked for a decree against one brother and against the
assets residing with the legal heir of the deceased brother. The Court below also has held the 1st
defendant liable on the ground that he has executed the two collateral securities in the form of
promissory notes in favour of the Bank. One of the brothers was surety to another. After careful
reading of section 127 of ICA, the court observed that a careful reading of these two provisions
would clearly indicate that the primary idea of suretyship is an undertaking to indemnify the debtor
in case he does not fulfil his promise, the contract of guarantee being thus a contract to indemnify.
The central point in such a case is to determine what was the contingency which the parties had in
their minds when the contract of guarantee was entered into. It is, however, to be borne in mind
that whatever may be the form of the contract, it must be satisfactorily proved and that it must have
consideration. Like any other contract, a contract of guarantee must be supported by consideration.
It is however, not necessary that the consideration should flow from the creditor and be received by
the surety. Consideration between the creditor and the principal debtor is a valid and good
consideration for the guarantee given by the surety. There is considerable conflict of opinion as to
whether the past benefit to the principal debtor amounts to a good consideration. In other words
whether past consideration can be a good consideration for a contract of guarantee. In these
circumstances we do not find any difficulty in rejecting the contention of the learned Advocate
for the 1st defendant that the two promissory notes executed as collateral securities were void
because they were executed for past consideration. Hence the brothers were held liable to the bank
for payment of the dues and this wasn’t a case of past consideration.

SBI v Indexport
The appellant, one of the Nationalised Banks, is a decree-holder. M/s. Indexport Registered,
respondent No. 1, is a partner firm. Shri Janeshwar Kumar Jain, respondent No. 2, was a
partner of respondent No. alongwith one Shri Ajay Kishan Mehta (since deceased and now
represented by his mother Smt. Savitiri Devi, respondent No. 3). Shri Ram Kishan, respondent
No. 4, is a guarantor. The appellant-Bank had granted to respondent No. 1 a Packing Credit Facility to
the extent of Rs. 1,00,000/- and respondent No. 4 had executed a Deed of Guarantee in favour of
the appellant-Bank. As a security, respondent No. 2, had also created an equitable mortgage of his
shop in favour of the appellant. The Additional District Judge, Delhi, following the decision of this
Court in Manku Narayana's case (supra) took the view that it is a composite decree, personally
against the principal debtor and the guarantor and also against the mortgaged property of
defendant No. 2, and therefore, since it is a composite decree and the mortgaged property is also
involved, the decree holder should have proceeded first against the mortgaged shop and since it has
not done so, the execution application against the objector (guarantor) does not lie. The decree-
holder challenged this decision. The court held that the decree is simultaneous and it is jointly and
severally against all the defendants including the guarantor. It is the right of the decree holder to
proceed with it in a way he likes. Section 128 of the Indian Contract Act itself provides that "the
liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided
by the Contract". It will be noticed that the guarantor alone could have been sued, without even
suing the principal debtor, so long as the creditor satisfies the court that the principal debtor is in
default. Hence the court overruled the Manku Nrayan case and held that the bank could sue the
principal debtor or surety and it could also proceed against the mortgaged property first.

IFCI v. Cannanore
Defendants 2 to 4 executed deed of mortgage in their individual capacity guaranteeing joint and
several liability for the payment of loan advances to first defendant under the deed of guarantee -
Default in payment of instalments to foreign suppliers who invoked the deferred payment guarantee
against the plaintiff. Suit filed against defendant-respondent and sureties. Meanwhile managing
agency system terminated and company which was acting as a managing agent ceases to be so- Sick
Textiles Undertakings (Nationalization) Ordinance promulgated and defendants’ units’ nationalized
vesting management of company into Central govt. The plaintiff argued that Section 56 of ICA will
be applicable according to which doctrine of frustration would come into place and hence the
sureties remedy will be impaired. According to Section 141 of the ICA, this would discharge the
surety. The court held that Doctrine of frustration as envisaged in terms of section 56 of the Contract
Act, 1871 does not have any application to the contextual facts of the case. The right of the
appellant to recover money from respondents 1, 2 and 3 who stood guarantors arises out of the
terms of the deeds of guarantee which are not in any way superseded or brought to a naught merely
because the appellant may not be able to recover money from the principal borrower. It may here
be added that even as a result of the Nationalisation Act the liability of the principal-borrower does
not come to an end. It is only the mode of recovery which is referred to in the said Act. Defendants 2
to 4 executed deed of mortgage in their individual capacity guaranteeing joint and several liability
for the payment of loan advances to first defendant under the deed of guarantee.

Centax v Vinmar
The appellant, the buyer, covenanted to purchase and respondent No. 1 Messrs Vinmar Impex Inc.,
Singapore, the sellers, agreed to sell goods on an irrevocable letter of credit being opened by the
appellant in favour of respondent No. 1, the sellers. One of the terms of the contract as per the
letter of intent dated April 29,1985 signed by both the parties pertained to the 'shipping mark'
and was to the effect: "Bills of lading should mention shipping mark 5202". The Shipping Company
was refusing to release the cargo for want of the original bills of lading and other documents,
respondent No. I instructed them to release the said cargo upon the appellant furnishing bank
guarantee for release of the goods in lieu of the original bills of lading and other documents.
Accordingly, the Allahabad Bank, at the instance of the appellant, executed four letters of indemnity,
variously described as letters of guarantee or letters of indemnity or both, and each of the
documents has been countersigned by the appellant in favour of the Shipping Company. On the
strength of the said letter of indemnity the Shipping Company delivered the goods to
the appellant without production of the original bills of lading, marine insurance policy
signed invoices etc. The Shipping Company having made a demand upon the Allahabad Bank to
honour the letters of indemnity and the Bank having called upon the appellant to pay the amount
due, the appellant brought a suit in the Original Side of the Calcutta High Court seeking to recover
Rs. 9,25,020.80p. as damages from respondent No. 1, the sellers alleging that they were in breach in
that the goods despatched by respondent No. 1 were of inferior quality and not the goods contracts
for i.e. not of grade 5202 but of grade 5502, and also because they had failed to forward the original
shipping documents. The appellant applied for grant of a temporary injunction restraining the
Allahabad Bank from making any payment to the Shipping Company in terms of the letters of
indemnity and also restraining respondent No. 1 from recovering the amount due thereunder. The
main point in controversy in that case was whether the Court should in a transaction between a
banker and banker grant an injunction at the instance of the beneficiary of an irrevocable letter of
credit, restraining the issuing bank from recalling the amount paid under reserve from the
negotiating bank, acting on behalf of the beneficiary against a documents of guarantee indemnity at
the instance of the beneficiary. It was observed that commitments of banks must be allowed to be
honoured free from interference by the courts. Otherwise, trust in international commerce would be
irreparably damaged. Except possibly in clear cases of fraud of which the banks have notice, the
courts will leave the merchants to settle their disputes under the contracts by litigation or arbitration
as available to them or stipulated in the contracts. The court held that the same principles should
apply to a banker's letter of indemnity. Hence the bank was held liable to honour the letters of
indemnity and the respondent was asked to pay the bank under the contract of suretyship.

Hindustan v. Tarapore
The HSCL awarded a contract to the contractor for construction of civil works in its plant. It was a
lumpsum contract and was to be completed in a certain time. The contractor was not able to
complete the work within the stipulated time and at its request the time for completion of the work
was extended. Even during this extended period the contractor could not complete the work. It
appears that some disputes arose between the appellant and the contractor and the contractor
appointed an arbitrator and called upon the appellant to appoint its arbitrator for deciding those
disputes. Now those disputes are pending before the two arbitrators appointed by the parties. Soon
by mutual agreement the contract work was reduced and the contract price was fixed. This reduced
work also was not completed within the extended time and at the request of the contractor the time
for completing the work was extended again. As the contractor did not complete the work by that
time the HSCL rescinded the contract. Bank of India gave 14 guarantees in favour of HSCL at the
instance of the Contractor. HSCL by three separate demand letters informed the bank that the
contractor has failed to fulfil its obligations under the contract and has committed breach of its
terms and conditions and by reasons thereof it has suffered loss/damage far exceeding the amount
guaranteed by the bank, but for the purpose of invoking the bank guarantees it has assessed such
loss/damage. By those letters it also called upon the bank to pay to the appellant the said sum
without any demur or protest. The contractor on coming to know of this demand filed in the Court
of Principal Subordinate Judge at Visakhapatnam and prayed for an injunction restraining HSCL from
encashing the bank guarantees. That court held it to be invalid but the High Court overturned it and
granted an injunction. The Supreme court in the case held that no injunction should be granted. the
correct position of law is that commitment of banks must be honoured free from interference by the
courts and it is only in exceptional cases, that is to say, in case of fraud or in a case where
irretrievable injustice would be done if bank guarantee is allowed to be encashed, the court should
interfere. Hence the High court judgment was overturned and appeal allowed.

State of Madhya Pradesh v. Kaluram

At an auction for sale of felled trees, Jagatram (J) was awarded the sale, on payment of a security
and subsequent payment of instalments. He executed a contract in favour of the Governor of M.P.
which specified, (among other terms), that the contractor had to furnish a coupe boundary
certificate which concerned the area from which contractor was allowed to take away the trees.
Nathuram and Kaluram (K), the defendants, stood sureties for Jagatram. Jagatram removed the
entire quantity of the trees, paid the first instalment but failed to pay the rest. State of M.P(S)
claimed for recovery. Kaluram filed an action against the State claiming that he was not liable to pay
the arrears of forest dues recoverable from Jagatram. Surety contended that the forest authorities
gave time to J and didn’t take any steps as part of their duty towards the surety i.e. did not seize and
sell the trees of Jagatram as soon as the second instalment had fallen due. Because of the inaction
on the part of State, his eventual remedy against Jagatram was impaired and therefore he stood
discharged as surety. Since, the creditor, State had lost or had parted with the security without the
consent of the surety, the latter is, discharged to the extent of the value of the security lost or parted
with under S.141 of ICA. Kaluram stood discharged from all liability to pay.

London General Omnibus Company, Limited v Holloway

In 1903, Lee was employed by the plaintiff as a clerk .Plaintiff always took a bond from the employee
and a surety to secure the fidelity of the employee. Due to some circumstances, no such bond was
taken at the time of Lee’s appointment. In 1905, it was discovered that Lee had misappropriated
some money received by him on the behalf of the plaintiff. The amount misappropriated was made
good by some relatives of Lee other than the defendant. Plaintiff demanded a bond and a surety to
secure the honest discharge of duties by lee as a condition for renewal of employment. Defendant
who was a relative of Lee agreed to become surety and be liable for the honest discharge of duties
by Lee. The bond was given in 1905 and the defendant was not informed about the previous
misconduct of Lee. In 1909, it was discovered that Lee again misappropriated the money received by
him on the behalf of the company. The Plaintiffs brought their action against the defendant to
execute the bond in respect of the amount so misappropriated. It was held that where the employer
of a servant, when taking a bond from another, which purported to make him responsible as surety
for the fidelity of the servant, did not disclose to the surety the fact, known to the employer, but not
known to the surety, that the servant had previously been guilty of dishonesty in his employment,
the employer cannot enforce the bond against the surety in respect of subsequent dishonesty of the
servant, although the nondisclosure by the employer of the previous dishonesty of the servant was
not fraudulent. (Congruent to Section 143 of ICA).

U.P. Cooperative v. Singh Consultants

Appellant State entered into contract with respondent company for supply and installation of
vanaspati manufacturing plant. Appellant contended that time was essentially the essence of
contract . Respondent furnished two bank guarantees as security for money advanced by appellant
for undertaking work. Respondent defaulted and failed to complete work within stipulated time
appellant invoked two guarantees. After completion of plant respondent filed petition under
Arbitration Act for order restraining appellant from realizing bank guarantees petition was filed and
then later dismissed. The High Court in appeal decided that invocation of performance guarantees
was illegal. Supreme Court held that irrevocable commitment in form of bank guarantee cannot be
interfered with except in case of fraud or in case of apprehension of injustice - there was no fraud
involved and no question of irretrievable injustice was involved. High Court not to be interfered with
the bank guarantees. Supreme Court set aside Order of High Court.

MS Anirudhan v Thomcos Bank Ltd.

Lyell v. ganga dai
The bailor of dangerous goods is responsible to the bailee of any losses that might hav occurred to
the bailee due to the goods if he doesnt get it into the knowledge of the bailee.

( Section 150 specifies the duties for both kinds of bailor. It says that the bailor is bound to disclose
any faults in the goods bailed that the bailor is aware of, and which materially interfere with the use
of them or which expose the bailee to extraordinary risk. This means that if there is a fault with the
goods which may cause harm to the bailee, the bailor must tell it to the bailee. Section 150 imposes
a bigger responsibility to the non-gratuitous bailor since he is making a profit out of the bailment. A
non gratuitous bailor is responsible for any damage that happens to the bailee directly because of
the fault of the goods irrespective of whether the bailor knew about it or not.)

Kalia Perumal Pillai v. Visa Lakshmi Achi

The question is whether the defendant can be charged as a bailee and made liable for the loss of
some gold belonging to the plaintiff. The evidence shows that the plaintiff arranged that certain
jewels which she desired to be made should be got made by certain goldsmiths working in the
defendant's house, apparently because there was more convenient accommodation there. The
plaintiff admits that she used to attend every day in the defendant's house during the time that the
goldsmiths were at work. It is true that even according to the defendant's written statement he
received at the outset two old jewels from the plaintiff for the purpose of being melted into gold and
being utilized for the making of the new jewels; but any bailment that could be gathered from that
admission must be taken to have come to an end as soon as the plaintiff was put in possession of the
melted gold. as soon as the goldsmiths' work for the day was over, the plaintiff used to receive the
half made jewels from the goldsmiths, put them into a box which the defendant had given her for
her use and put the box in a room in the defendant's house. One of the plaintiff's witnesses adds
that even the key of that room was kept in the plaintiff's possession. On these facts, I do not see my
way to hold that the defendant can be regarded as a bailee in respect of the gold or the half finished
jewels. Under the provisions of Sections 148 and 149, Contract Act, delivery is necessary to
constitute the bailment. It is true that the delivery may be made by doing anything which has the
effect of putting the goods in the possession of the intended bailee; but the mere leaving of the box
in a room in the defendant's house, when the plaintiff herself took away the key of that room,
cannot certainly amount to delivery within the meaning of the provision in Section 149.

Kush Kanta Barakati v. Chandra Kanti karkatti

The first defendant hired the Plaintiff’s elephant for 10 months, promising to pay hire. There was a
written agreement between them. The Defendant made the Plaintiff competent to recover the hire
and the price of the elephant in case of a breach of contract. Subsequently, a contract was made but
was never executed. But the plaintiff delivered the elephant and the defendant started using it for
carrying timber. The defendant kept the elephant even after the expiry period. The elephant died
before he could return it. The plaintiff contended that he be allowed the recovery amount as well as
the money for the iron chain. The court held that according to sec 148 of the ICA, the bailee is
supposed to return the goods of the bailor according to his instructions. The defendant contended
that he couldn’t return it because it was festive season and the driver was sick. The court held that it
wasn’t a case of impossibility of the contract and according to sec 161 and 162 of the ICA, and hence
the plaintiff would be entitled to recover the damages. The allegation of the iron chain has not been
satisfactorily established. Hence, that portion of the claim must be disallowed.

Hardayal Ram Dass Ray Vs. B. and N. W. Ry. Co.

The plaintiffs sent 11 bags of turmeric to the railway station to Bettiah through one of their peons
with the direction that some of the bags were to be dispatched to Moradabad and some to Batala.
The bags were unloaded and placed in the railway goods-shed but this was not done in the presence
of the goods clerk or any other railway servant. The peon handed to the railway clerk in charge of
the shed two consignment notes but the clerk instructed the peon to come for a receipt on the
following day as he was too busy to write it. Later, it was discovered that 9 out of the 11 bags were
missing. The question before the court was that whether the goods given by the appellants to
respondent amount to the delivery of goods or not. It was found that bags were left in the shade in
the absence of any railway staff. Sufficient evidence that traders bring goods at their own risk. The
court held that the goods had not been put in the possession of the railway company and that mere
acceptance of the consignment notes was not equivalent to the acceptance of the goods by the
railway company. The court denied the contention of the plaintiff that Rule 19 framed by the Bengal
and North Western Railway Company be taken into account on the grounds that the delivery of
goods is a question of fact in each and every case which is not dispensed by the said rule. The appeal
was dismissed but there was no order as to costs.

Dominion of India as owner of G.I.P. Rly. and Anr. Vs. Gaya Pershad Gopal
Narain
The main question here was whether a consignee, who is not the owner of the goods but to whom
the goods are consigned for the purpose of sale on commission basis, is entitled to maintain the suit
for loss in respect of damage caused to the goods in transit? Four different persons each booked a
wagon of oranges from Katol in C. P. (now Madhya Pradesh) for Lucknow. In each case the plaintiff-
respondent was mentioned in the Railway Receipt as the consignee. The plaintiff took delivery of
one wagon but found that the goods had deteriorated greatly owing to the late arrival of the wagons
at Lucknow and he refused to take delivery of the other three wagons. He then instituted the four
suits out of which these appeals arise for damages. One of the defences taken by the appellants was
that the plaintiff, being admittedly only a commission agent, had no 'locus standi' to maintain the
suits. It must first of all be determined what is the position of the owner, the consignor and the
consignee. The Railway is principally concerned with the consignor, since the contract for the
carriage of goods is with him and, by reason of Section 72 of the Indian Railways Act, the liability of
the Railway is that of a bailee under Ss. 150, 151 and 161 of the Indian Contract Act. Under Section
161 of the Contract Act it is primarily to the consignor as bailor that the Railway is liable for
damages. It is well established in India that not only can parties to a contract sue upon it but also
persons who are entitled to a benefit under it, or to whom the rights created by it have been
transferred. Further Section 160 of the Contract Act provides for a return of the goods bailed not
only to the bailor but also according to his directions. Sections 163 and 166 of that Act also
contemplate delivery not only to the bailor but according to his directions. The court held that If,
therefore, the goods are not in good condition it is the consignee. who can enforce the contract and
sue for damages for a breach of the contract vis-a-vis the consignor or the owner. The consignee
may only be an agent but vis-a-vis the railway he is the person who is entitled by reason of the
contract to receive the goods in good condition and to give a valid discharge. There is, however,
nothing to prevent the consignor and the railway entering freely and voluntarily, into a contract for
the benefit of a third person. In such an event one of the contracting parties -- the railway -- cannot
without the consent of the other party resile from the contract and refuse to make delivery to the
third party. If the goods have deteriorated to such an extent that delivery cannot be properly made,
their equivalent, which is their cash value must be delivered to the consignee, and it is the consignee
who can enforce payment of this cash value which is, after all what the suit for damages is.

R.D. Saxena v. Balram Prasad

The main issue posed in this appeal has sequential importance for members of the legal profession.
The issue is this: Has the advocate a lien for his fees on the litigation papers entrusted to him by his
client? Appellant, now a septuagenarian, has been practicing as an advocate mostly in the courts at
Bhopal, after enrolling himself as a legal practitioner with the State Bar Council of Madha Pradesh.
According to him, he was appointed as legal advisor to the Madhya Pradesh State Co- operative Bank
Ltd. (Bank, for short) in 1990 and the Bank continued to retain him in that capacity during the
succeeding years. He was also engaged by the said Bank to conduct cases in which the Bank was a
party. the Bank terminated the retainership of the appellant and requested him to return all the case
files relating to the Bank. Instead of returning the files the appellant forwarded a consolidated bill to
the Bank showing an amount of Rs.97,100/- as the balance payable by the Bank towards the legal
remuneration to which he is entitled. He informed the Bank that the files would be returned only
after setting his dues. In the reply which the appellant submitted before the Bar Council he admitted
that the files were not returned but claimed that he has a right to retain such files by exercising his
right of lien and offered to return the files as soon as payment is made to him. In this appeal learned
counsel for the appellant contended that the failure of the Bar Council of India to consider the
singular defence set up by the appellant i.e. he has a lien over the files for his unpaid fees due to
him, has resulted in miscarriage of justice. Learned counsel for the appellant endeavoured to base
his contention on Section 171 of the Indian Contract Act. Files containing copies of the records
(perhaps some original documents also) cannot be equated with the goods referred to in the
section.  In the case of litigation papers in the hands of the advocate there is neither delivery of
goods nor any contract that they shall be returned or otherwise disposed of. That apart, the word
goods mentioned in Section 171 is to be understood in the sense in which that word is defined in
the Sale of Goods Act. It must be remembered that Chapter-VII of the Contract Act,
comprising sections 76 to 123, had been wholly replaced by the Sales of Goods Act, 1930. The word
goods is defined in Section 2(7) of the Sales of Goods Act as every kind of movable property other
than actionable claims and money; and includes stock and shares, growing crops, grass, and things
attached, to or forming part of the land which are agreed to be severed before sale or under the
contract of sale. Thus understood goods to fall within the purview of Section 171 of the Contract Act
should have marketability and the person to whom it is bailed should be in a position to dispose it of
in consideration of money. In other words the goods referred to in Section 171 of the Contract Act
are saleable goods. There is no scope for converting the case files into money, nor can they be sold
to any third party. Hence, the reliance placed on Section 171 of the Contract Act has no merit. If a
need arises for the litigant to change his counsel pendente lite, that which is more important should
have its even course flowed unimpeded. Retention of records for the unpaid remuneration of the
advocate would impede such course and the cause pending judicial disposal would be badly
impaired. If a medical practitioner is allowed a legal right to withhold the papers relating to the
treatment of his patient which he thus far administered to him for securing the unpaid bill, that
would lead to dangerous consequences for the uncured patient who is wanting to change his doctor.
Perhaps the said illustration may be an over-statement as a necessary corollary for approving the
lien claimed by the legal practitioner. Yet the illustration is not too far-fetched. No professional can
be given the right to withhold the returnable records relating to the work done by him with his
clients matter on the strength of any claim for unpaid remuneration. The alternative is that the
professional concerned can resort to other legal remedies for such unpaid remuneration. A litigant
must have the freedom to change his advocate when he feels that the advocate engaged by him is
not capable of espousing his cause efficiently or that his conduct is prejudicial to the interest
involved in the lis, or for any other reason. For whatever reason, if a client does not want to continue
the engagement of a particular advocate it would be a professional requirement consistent with the
dignity of the profession that he should return the brief to the client. It is time to hold that such
obligation is not only a legal duty but a moral imperative.

Syndicate bank v. Vijay Kumar

The appellant is Syndicate Bank. The firm by the name of M/s. Jullundur Body Builders, respondent
No. 2 (hereinafter referred to as "Judgment-debtor") have been enjoying various types of credit
facilities from the appellant Bank for the last so many years. They were also enjoying overdraft
facility with a limit of Rs. 1,00,000/-. Respondent No. 1 (hereinafter referred to as 'Decree-holder"
obtained a decree against the Judgment-debtor for Rs. 1,04,441.35 p. with future interest @ 9%. In
the course of the execution proceedings the Judgment-debtor agreed to pay the decretal amount in
the installments of Rs. 5,000/- per month. To ensure compliance with the undertaking, the
Judgment-debtor was required by the executing court to furnish a Bank guarantee for a sum of Rs.
90,000/- in favour of High Court of Delhi. On 10.9.80 the Judgment-debtor requested the appellant
Bank to furnish a Bank guarantee for a sum of Rs. 90,000/- in favour of Registrar of High Court of
Delhi. The Bank agreed to furnish the Bank guarantee on the condition that the Judgment-debtor
should deposit the entire sum of Rs. 90,000/-as security for the guarantee with the Bank. or 17.9.80
respondent No. 3, partner of the Judgment-debtor firm deposited by way of two Fixed Deposits
Receipts ("FRDs" for short) of Rs. 65,000/- and Rs. 25,000/- respectively after duly discharging them
by signing on the reverse of each FDR. As per the recital in the said letters the Judgment-debtor
agreed that the deposits and renewals shall remain with the Bank so long as any amount on any
account is due to the Bank from them i.e. M/s. Jullundur Body Builders and the bank gave bank
guarantee. It was contended before us that the appellant Bank has a banker's lien over the amount
deposited by the Judgment-debtor who is their client and as Bankers they have a right to hold the
security in respect of overdraft amount and therefore the attachment cannot be sustained. by
mercantile system the Bank has a general lien over all forms of securities or negotiable instruments
deposited by or on behalf of the customer in the ordinary course of banking business and that the
general lien is a valuable right of the banker judicially recognised and in the absence of an
agreement to the contrary, a Banker has a general lien over such securities or bills received from a
customer in the ordinary course of banking business and has a right to use the proceeds in respect of
any balance that may be due from the customer by way of reduction of customer's debit balance.
Such a lien is also applicable to negotiable instruments including FDRs which are remitted to the
Bank by the customer for the purpose of collection. Applying these principles to the case before us
we are of the view that undoubtedly the appellant Bank has a lien over the two FDRs.
International Airport v. Televista Electronics
The facts of the case are that the Respondent/Plaintiff booked a consignment of 2000 sets of
integrated circuits via M/s. KLM Airlines from Singapore to Delhi. This consignment arrived in India
on 22.11.1986 vide Airway bill No. 074-7075 IG No. 86/8326 in a sound condition. The said
consignment was received by the Appellant/Defendant from the carrier M/s. KLM Airlines. This
consignment was however subsequently found not traceable during the period, when the same was
in the possession and custody of the Appellant/Defendant. The Respondent/Plaintiff on the failure of
the Appellant/Defendant to pay the value of the consignment filed the subject suit for recovery of
the value of the consignment and which has been decreed. The first issue was that the
Respondent/Plaintiff was bound to have made the Airlines, i.e. M/s. KLM Airlines as a party to the
case and since M/s. KLM Airlines has not been made party to the suit, the suit was bad for non-
joinder of necessary party. The second issue argued was that there is no privity of contract of the
Appellant with the Respondent and therefore the Appellant is not liable to the Respondent since
there is no direct relation between bailor and sub bailee. The court held that the law in this regard is
clear that the bailor can directly sue the sub-bailee with respect to the value of the goods which
have been lost. Further, there cannot be a defence that the Appellant will not be liable because of a
contract of the Appellant with M/s. KLM Airlines, (Clause 8(1)(c) of the Contract) which provides that
in case of any loss or damage the Appellant will be indemnified by the carrier. The Trial Court has
rightly held that the contract between the Appellant and the carrier KLM Airlines will only operate
inter se the Appellant and the Airlines, and it cannot, in any manner, alter or take away the liability
of the Appellant towards the Respondent whose consignment was lost. I therefore reject the
argument that the suit was bad because of non-joinder of M/s. KLM Airlines or there was no privity
of contract with the Appellant and the Respondent and therefore the Appellant could not be sued
and that the Appellant could be exempted by virtue of Clause 8(1)(c) of its contract with M/s. KLM
Airlines. The appellant also argued placing reliance of Sec 151 and 152 that he had taken care like a
prudent man would take care of his goods. In the court’s opinion these Sections at the first blush
may seem to apply however a deeper look shows that the Sections will not apply because when the
bailment is to a carrier the contract of carriage is governed by the Carriage by Air Act, 1972. In the
facts of the present case, the liability would have been either of the carrier, who is the bailee or of
the sub-bailee, who is the Appellant. Accordingly, since the liability of the original bailee will be
governed by the Carriage by Air Act, 1972, the liability of the sub-bailee will also be in accordance
with the said Act and not the Contract Act. If the same has to be otherwise then it would mean that
a carrier can simply avoid its strict liability under various Acts pertaining to carriage of goods by
simply making a sub-bailment, and this surely cannot be done because the same will defeat the
intention of the Carriers Acts. I may note that liability of a carrier under various Acts pertaining to
carriage such as Carriage by Air Act, 1972, Carriers Act, 1865, etc., is a strict liability more or less
equal to that of an insurer and thus the normal law of bailor and the bailee can not apply to exempt
a carrier who of course is a bailee, but will be governed by the special provisions of the Carriage by
Air Act, 1972. Hence the sub bailee shall be liable accordingly.

State of Maharashtra, Bombay and Ors. Vs. Britannia Biscuits Co. Ltd.
The respondents manufactured and sold biscuits in tins. In respect to the biscuits sold in Bombay
and its suburbs, the assessee (respondents) charged only for the price of the biscuits. With regards
to the tins, the respondents took a refundable deposit (which was 20% more than the actual cost of
the tin), with the stipulation that if the tins were returned within a period of three months and in a
good condition, the refundable amount would be returned. The assessee however, did not adhere to
this, in practice, and accepted tins even after three months. As per its accounting practice the
assessee wrote off 50% of the outstanding unrefunded deposit for the assessment year 1967-68 and
treated 20% of the deposit amount as profit. The Assessing auth. treated this amount as sale price of
unreturned tins and included the same in the taxable turnover of the assessee. Whether there was
an obligation upon the purchaser to return the tins or was it a case where the return or non-return
of the tins lay within the discretion of the purchaser? Neither the endorsement on the price list nor
the endorsement on the invoice can be said to create an obligation to return. Also, the time limit
was not strictly adhered to. Once it is held that there was no obligation to return the tins the theory
of bailment falls to the ground and the said trading receipt can’t be anything but sale price. The
transaction relates to s, 24 of the Sale of Goods Act as per which the position of the purchaser, until
he returns the good within the prescribed period, is that of a bailee and on the expiry of the said
period he becomes a purchaser.Hence it was an out and out sale transaction and the assessee was
supposed to pay tax for the tin cans as well.

United Breweries v. state of A.P.

The assessee (the appellant) sold beer in bottles and crates. With regard to the sale of beer, a
scheme was framed under which the assessee collected the sale price of beer and also deposits for
the crates and the bottles so as to keep down the cost of Beer. The customers, in turn, would sell
beer to the consumers and apart from the price of beer will recover 40 paise per bottle as deposit to
ensure return of the bottles. The bottles will ultimately be taken back by the assessee and the trucks
will be sent and the credit notes will be given to the customers for return of the empties. The
Commercial Tax Officer held that since the customers did not always return the bottles and crates
and these were higher in value than the amounts deposited as security, the taxable turnover had to
be computed by the value of the bottles also. Whether the transaction was an out and out sale, or a
case of bailment? Whether the bottles and the crates were sold along with the beer or not will
depend upon the intention of the parties. The facts of this case reveal that UB did not intend to sell
the bottles or the crates to the customers, on the contrary UB was very anxious not to lose the
bottles and crates in which the beer was supplied. 40 paise was charged as deposit and the
customers were also advised to do likewise when they sold the beer to the consumers. Therefore, an
out and out sale of the bottles did not take place when beer was supplied in bottles by UB to its
customers.Section 24 of SOGA cannot be applied as s.24 is subject to the provisions of Section 19
which provides that the property in specific or ascertained goods is passed to the buyer only at such
time as the parties to the contract intend it to be passed. the customers clearly know the price they
will have to pay for the beer. They are required to pay an additional amount by way of deposit for
taking away the bottle which is refunded if the bottle is returned. If the bottle is not returned, the
deposit is retained as liquidated damages for the loss of the bottle. There is a clear intention not to
sell the bottle. The court was of the view that the deposit cannot be considered as price of the
bottles. The court was of the view that the High Court was in error in holding that the crates and the
bottles were sold along with the beer. In the facts of this case, the deposits could not be treated as
the price of the bottles and the crates. Hence this was a case of bailment. This case watered down
judgment of State of Bombay v. Britannia Biscuits.

State of Bombay (Now Gujarat) Vs.Memon Mahomed Haji Hasam

The customs department had seized the property of a certain Memon Mahomed Haji Hasam under
an offence under the Junagarh Customs Act. The property was left uncared for and deteriorated
heavily over time. The plaintiff went to the court and got a decree asking release of property. The
court awarded the decree. The Customs Dept. Still refused to give back the property. Instead it sold
the property at a avery low rate(due to deterioration). The plaintiff went to the court and contended
that teh customs’s department was the bailee and hence was supposed to exercise