INDIAN OVERSEAS BANK Vs. VENES AND COMPANY

JUDGEMENT

(1.) THE plaintiff is the appellant. THE plaintiff-Bank filed the suit for recovery of a sum of Rs. 78,642.33p with interest. According to the appellant, the first respondent-firm opened an account and apart from other facilities the appellant-Bank also had granted bill discounting facilities. THE first defendant-firm was therefore permitted to book its consignments with approved lorry transport operators preparing the invoice for the value of goods and mentioning the name of the drawee i.e., the parties to whom the goods were sent. THE respondent also drew "Hundis" on the drawee's name to pay the value of goods mentioned in the Hundi to the appellant on demand. THE set of documents which accompanied the despatch of goods are called "Bills". On receipt of these documents the appellant-bank would credit the value of the goods into the current account of the respondent's firm which would thereafter be permitted to withdraw the amount at their convenience. THEn the appellant-bank would send the set of documents, the "Bills" to the collecting Bank who would pay the amount after the Hundi is drawn and the goods are cleared. On 17-12-1979, the firm executed a letter of indemnity undertaking to indemnify all damages that may be sustained by the Bank acting for and on behalf of the firm. THE third defendant executed a deed of guarantee. A letter of hypothecation was also executed hypothecating the goods recovered by the bills. Seven Hundis were dishonoured and the lorry rebooked the consignments to the Bank, whi ch also kept the goods in their custody. THE appellant persuaded the first respondent-firm to clear the outstandings and to take back the rebooked lorry receipts and to clear the goods. With regard to the first six consignments the first respondent firm represented that they will soon clear the goods. With regard to the 7th consignment, the first respondent asked the Bank to take delivery of the goods, to sell the same and adjust the sale proceeds. This was done. In spite of the repeated demands made by the appellant-Bank the other bills were not cleared and therefore, the suit was filed. In the written statement, the respondent in addition to all the usual denials specifically stated that on the appellant's own admission it is the appellant who is in possession and custody of the goods belonging to the firm and therefore, the appellant ought to have sold the goods hypothecated to the appellant and appropriated the sale proceeds to the amount due from the first respondent firm and claimed only the balance from the respondent. THE Trial Court dismissed the suit on the ground that when the creditor is given a security the creditor is not entitled to recover the amount of his debt, when he is not in a position to return the security, when the debtor and the person giving the security are the same person. Against this, the present appeal has been filed.

(2.) MR. V. Narayanaswami, learned counsel for the appellant would submit that the Trial Court erred in dismissing the suit. The Trial Court ought not to have treated the hypothecation in favour of the Bank as being equivalent to a pledge. While the pledgee has a right of sale the same right of sale may not be available to a person in whose favour the goods are hypothecated. According to the learned counsel it is the respondents who have committed default and they had specifically issued the letter, Ex-A32 dated 27-08-1981, where they have requested the Bank not to recall the other bills and that they would try to settle the amount within a minimum period of six months and they sought the indulgence of the appellant-bank. Ex-A47 was also referred to wherein the respondent had again asked for time to pay the remainder in the overdue bills. He would submit that they had not exercised their power of sale only because the respondents have asked them not to do so. Having tied the hands of the appellant it is now not open to the respondents to say that since the appellant is not in a position to return the goods which were offered as security the appellant is not entitled to claim the amount for which the security was given.

(3.) IN this case, the possession of the goods were undoubtedly with the Bank and the goods are lost. IN fact as on date it is reported that the appellant-Bank is unable to even ascertain what happened to the goods. No doubt, it is true that the respondent had sought for time to repay under Exs-A32 and A47. But in the evidence on behalf of the appellant, P.W.1, has stated that under the hypothecation agreement they had the right to bring the properties to sale. They did not exercise the necessary care and caution to protect the goods in their control, nor did they take steps to sell them if their goods were in danger of deteriorating or being lost. Even pending the suit the appellant had not taken steps to secure the interest of the respondent in respect of the goods that were hypothecated which were admittedly in the custody of the appellant. If the appeal were to be allowed the appellant would be entitled to recover the amounts due but he would not be in a position to give back the goods that were hypothecated in favour of the appellant. This runs contrary to the judgments referred to above. The Trial Court has approached the matter from the correct perspective.