STATE OF BIHAR Vs. BANK OF BIHAR LTD

JUDGEMENT

(1.) This appeal has been preferred by the State of Bihar against the decision of the Fourth Additional Subordinate Judge, Patna, granting a decree for a sum of Rs. 93,910/10/9, together with interest at 6 per cent per annum from the date of the institution of the suit to the Bank of Bihar Ltd., the sole plaintiff, in the suit of which this appeal arises.

(2.) The facts now admitted are these : Under an arrangement with the South Bihai Sugar Mills Ltd., defendant No. 2, that is, the Jagdishpore Zamindary Co. Ltd. (hereinafter referred to as the Company) came into possession of the manufacturing section of the Mills at Bihta from the beginning of the crushing season of 1946-47. Defendants 3 to 5 were the Directors of the Company. Early in 1947, the Company entered with the Bank into a cash credit agreement, according to which tha company was to pledge with the Bank the entire stock of sugar manufactured by them in the Mills and to take advances of money from the Bank under the cash credit system. On tha 6th December, 1947 the outstanding advances of the Bank against the Company stood at Rs. 3,23,486/2/-, and the Bank was holding 6239 bags of sugar as pledgee, the sugar bags having been kept in the godowns within the premises of the Mills, but under the locks and keys of the Bank. The cash credit account was further secured by the personal guarantee furnished by the aforesaid Directors. On the 24th August, 1947, the Sugar Controller for India passed an order under the Essential Supplies Temporary Powers Ordinance 1946, which was replaced by the Essential Supplies Act, 1946, directing the Mills to place at the disposal of the Government of Bihar 680 tons of sugar. Under Clause 7 of the Sugar and Sugar Products Control Order the Chief Controller of Prices and Supplies, Bihar, issued an order on the 27th September, 1947 directing the said Mills to supply to the District Magistrate of Patna 17441 maunds of sugar during the period from January to November, 1947; and the deliveries of sugar were to be made to different stockists as per direction of the District Magistrate or the Subdivisional Magistrates concerned. In pursuance of this order, a direction was issued to the Mills on the 2nd December, 1947 for the supply of 14,743 maunds of sugar. Even though the Factory Manager of the Mills had received advances from many of the stockists, no supply of sugar was made and it was apprehended that the Factory was only bidding time and trying to avoid making the supply until the 8th December, 1947, when sugar was to be decontrolled. The Government of Bihar, therefore, passed an order on the 5th of December, 1947 under section 3 of the Act for the seizure of 5,000 maunds of sugar, and in pursuance of this seizure order, the Rationing Officer and the District Magistrate of Patna got the locks of the Bank put on the godowns broken open on the 6th or 7th December, 1947 and forcibly removed 4999 1/2 maunds of sugar. Thereafter, two separate criminal cases were started against the General Manager and the Cane Manager of the Company. The case under Section 7 of the Essential Supplies (Temporary Powers) Act ended in acquittal; but the case under section 186 of the Penal Code against the General Manager, Shree Santosh Kumar Jan, ended in conviction, as the obstruction offered by the accused to the seizure was held to be illegal. This conviction was upheld by the Patna Higri Court in S. K. Jain v. State, AIR 1950 Pat 436 as also by the Supreme Court in S. K. Jain v. State, AIR 1951 SC 201. Both the High Court and the Supreme Court also found that the seizure was lawful. Ultimately, the seized sugar was sold by auction at Rs. 29/8/- per maund, and the amount of money fetched by the sale was deposited in the Government Treasury. Subsequently, however, the Cane Commissioner got a certificate issued against Jagdishpu Zamindari Company for realisation of arrears of cane cess and the entire sale proceeds deposited in the treasury were attached and ultimately made over to the Cane Commissioner.

(3.) The plaintiff-Bank contended that the seizure of the sugar was illegal and claimed from the State the quantity of sugar seized plus damages calculated as interest on the price of sugar at 6 per cent per annum from the 7th December, 1947 to the date of the institution of the suit, or the price of the sugar which, according to the Bank, would come to Rs. 1,81,70079/3 plus interest, at the same rate and for the same period. In the alternative, the Bank prayed for a decree against defendants 2 to 5 for Rs. 93,910/-and odd being toe amount due against them under the said cash credit account of defendant No. 2 as maintained in the plaintiff's book with future interest at a reasonable rate. These defendants asserted that the Bank had no claim against them, though they supported the Bank in other respects.