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PETITIONER: NATIONAL BANK OF LAHORE LTD.

       Vs.

RESPONDENT: SOHANLAL SEHGAL AND OTHERS

DATE OF JUDGMENT: 05/03/1965

BENCH: SUBBARAO, K. BENCH: SUBBARAO, K. SHAH, J.C. BACHAWAT, R.S.

CITATION:  1965 AIR 1663            1965 SCR  (3) 293

ACT: Limitation  Act,  1908,  First  Schedule,  Articles  36  and 115--Scope of

HEADNOTE:     The respondents hired lockers in the safe deposit vaults from  the  appellant bank at Jullundur through  its  manager under different agreements on various dates during 1950.  In April 1951, the lockers were tampered with and the valuables of the respondents kept in them were removed by the Manager. In  due course the Manager was prosecuted and convicted  for theft.  The respondents filed three suits against  the  bank for  the recovery of different sums being the value  of  the contents  of  the lockers which had been removed.  The  bank denied  its liability on various grounds and also  contended that the suits were, barred by limitation.     The  trial court held that the Bank was liable  to  bear the loss incurred by the respondents and that the suits were not barred by limitation. On appeal, the High Court accepted the  findings of the trial court on both the  questions  and dismissed the appeals.     In  the  appeal  before  the  Supreme  Court,  only  the question  of  limitation  was raised. It  was  contended  of behalf  of the appellants on the facts found that  the  suit was  barred by limitation as the theft of the  valuables  by the Manager was a tort committed by him dehors the contracts entered  into  by the appellant with  the  respondents  and, therefore,  Article 36 of the Limitation Act which  required that a suit must be instituted within two years applied, and not  Art. 115, which provided for a period of limitation  of three  years; that the suits were, not based on a breach  of contract committed by the bank but only the theft  committed by its agent dehors the terms of the contract.     HELD: The suit claims, being ex contractu, were  clearly governed  by  Article  115  of the  First  Schedule  to  the Limitation Act and by Article 36. [298F]     There  were  clear allegations in the  plaint  that  the appellant committed breach of contract in not complying with some  of  the  contitions thereof  and  that  the  appellant understood  those  allegations in that light  and  traversed them. [298 E]

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   Even  ii the respondents’ claim was solely based on  the fraud  committed  by the manager during the  course  of  his employment,  such a claim could not fall under Art.  36.  To attract  Art.  36, the misfeasance must  be  independent  of contract.  The fraud of the manager committed in the  course of  his  employment  must be deemed to be  a  fraud  of  the principal,  i.e. the Bank must be deemed to  have  permitted manager  to  commit theft in violation of the terms  of  the contracts.  While under the contracts the bank was under  an obligation to provide good lockers and not to permit  access to the safe except to persons mentioned in the contracts, in violation of these terms the bank gave defective lockers and gave access to the manager, thus facilitating the theft.  In either  case the wrong committed was not independent of  the contract  but directly arose out of the breach of  contract. [298 G, H]

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeals  Nos.  929. 930 and 931 of 1963.     Appeals  by special leave from the judgment  and  decree dated  October 11, 1961 of the Punjab High Court in  Regular First Appeals Nos. 136, 137 and 138 of 1959.     Hans  Raj Sawhney and B.C. Misra, for the appellant  (in all the appeals).     B.R.L.  lyengar,  S.K.  Mehta and  K.L.  Mehta  for  the respondents (In C.A. No. 229 of 1963). V.D. Mahajan, for the respondent. (In C.A. No. 930 of 1963).     Kanwar  Rajendra Singh and Vidya Sagar Nayyar,  for  the respondent (In C.A. No. 931 of 1963). The Judgment of the Court was delivered by     Subba  Rao,  J. These appeals by special leave  raise  a question, of limitation.     The National Bank of Lahore Limited, hereinafter  called the  Bank, is a banking concern registered under the  Indian Companies Act and having its registered office in Delhi  and branches  at  different  places in India.  Though  its  main business  is banking, it carries on the incidental  business of hiring out lockers out of cabinets in safe deposit vaults to  constituents for safe custody of their jewels and  other valuables. It has one such safe deposit vault at its  branch in Jullundur. The respondents herein hired lockers on rental basis  from the Bank at Jullundur through its Manager  under different  agreements  on different dates  during  the  year 1950. in April 1951 the said lockers were tampered with  and the  valuables of the respondents kept therein were  removed by  the Manager of the Jullundur branch of the Bank. In  due course the said Manager was prosecuted before the Additional District Magistrate, Jullundur, and was convicted under  ss. 380 and 409 of the Indian Penal Code. The respondents  filed 3  suits in the Court of the Subordinate  Judge,  Jullundur, against  the  Bank  for the recovery of  different  sums  on account of the loss of the valuable contents of the  lockers hired  by  them. The Bank denied its  liability  on  various grounds  and  also contended that the suits were  barred  by Iimitation.      The  learned Subordinate Judge held that the  Bank  was liable to bear the loss incurred by the plaintiffs and  that the suits were not barred by limitation. On appeal, the High Court  of  Punjab  accepted  the  findings  of  the  learned Subordinate  Judge on both the questions and  dismissed  the appeals. The present appeals arise out of the said  judgment of the High Court.

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    The  only  question raised in these appeals is  one  of limitation.  Before considering the question of   limitation it  is  necessary  295 notice  briefly the findings of fact arrived at by the  High Court. The High Court summarized its findings thus:                  (1)  The  whole object of  a  safe  deposit               vault  in which customers of a Bank  can  rent               lockers  for  placing their  valuables  is  to               ensure their safe custody. The  appellant-Bank               had  issued  instructions  and  laid  down   a               detailed  procedure for ensuring  that  safety               but  in actual practice the Manager alone  had               been made the custodian with full control over               the  keys of the strong room and a great  deal               of laxity had been observed in having no check               whatsoever on him.                   (2) The lockers had been rented out to the               plaintiffs  by the Manager Baldev  Chand,  who               was  entrusted with the duty of doing  so.  It               was  he who had intentionally rented OUt  such               lockers  to  the  plaintiffs  which  had  been               tampered with by him. This constituted a fraud               on   his   part   there   being   an   implied               representation  to  the  plaintiffs  that  the               lockers were in a good and sound condition.                   (3) Although the Bank authorities were not               aware of what Baldev Chand was doing. but  the               fraud,  which he perpetrated, was  facilitated               and  was  the result of the gross  laxity  and               negligence   on   the   part   of   the   Bank               authorities.                   (4)  The lockers were  indisputably  being               let out by the Manager to secure rent for  the               Bank. Having  found the said facts, the High Court held  that  the fraud  was committed by the Manager acting within the  scope of his authority     and therefore, the Bank was liable  for the  loss incurred by the respondents. Then it proceeded  to consider  the  question of limitation  from  three  aspects, namely.  (i) the loss was caused to the respondents. as  the Manager  of  the Bank committed fraud in the course  of  his employment; (ii) there was a breach of the implied condition of  the  contract. namely, that only such lockers  would  be rented out which were safe and sound and which were  capable of being operated in the manner set out in the contract; and (iii)  there  was a relationship     of  bailor  and  bailee between the respondents and the Bank, and therefore the Bank would be liable on the basis of the contract of bailment. It held  that from whatever aspect the question was  approached Art. 36 of the First Schedule to the Limitation Act would be out  of place and the respondents’ claims would be  governed by  either Art. 95 or some other article of  the  Limitation Act.     Learned counsel for the appellant accepted the  findings of  fact,  but contended that on the facts found  the  suits were  barred  by limitation. Elaborating  the  argument  the learned counsel pointed out that the theft of the  valuables by  the  Manager  was a tort committed  by  him  dehors  the contracts entered into by the appellant with the respondents and. therefore, Art. 36 of the First Schedule 296 to  the  Limitation  Act was immediately  attracted  to  the respondents’ claims.     The  scope  of  Art. 36 of the  First  Schedule  to  the

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Limitation Act is fairly well settled. The said article says that  the  period of limitation "for  compensation  for  any malfeasance,  misfeasance  or  nonfeasance  independent   of contract  and not herein specifically provided for"  is  two years  from  the time when the malfeasance,  misfeasance  or nonfeasance takes place. If this article applied, the  suits having  been filed more than 2 years after the loss  of  the articles  deposited with the Bank, they would be dearly  out of  time. Article 36 applied to acts or  omissions  commonly known   as  torts  by  English  lawyers.  They  are   wrongs independent  of contract. Article. e 36 applies  to  actions "ex  delicto"  whereas  Art.  115  applies  to  actions  "ex contractu".  "These torts are often considered as  of  three kinds, viz. non-feasance or the omission of some act which a man  is by law bound to do, misfeasance, being the  improper performance  of some lawful act, or malfeasance,  being  the commission of some act which is in itself unlawful". But  to attract  Art.  36  these  wrongs  shall  be  independent  of contract. The meaning of the words "independent of contract" has  been felicitously brought out by Greer, L.J. in  Jarvis v. Moy, Davies, Smith, Vanderveil and Co.(1) thus:               "The distinction in the modern view, for  this               purpose, between contract and tort may be  put               thus. Where the breach of duty alleged  arises               out  of  a  liability  independently  of   the               personal obligation undertaken by contract  it               is  tort and it may be tort even though  there               may  happen  to  be  a  contract  between  the               parties,   if   the  duty’  in   fact   arises               independently  of  that  contract.  Breach  of               contract occurs where that which is complained               of  is  a breach of duty arising  out  of  the               obligations undertaken by the contract." If  the suit claims are for compensation for breach  of  the terms of the contracts, this article has no application  and the appropriate article is Art. 115, which provides a period of 3 years for compensation for the breach of any  contract, express  or  implied,  from the date when  the  contract  is broken. If the suit claims are based on a wrong committed by the  Bank or its agent dehors the contract, Art. 36 will  be attracted.     Let  us now apply this legal position to the  claims  in question. One of the contracts that was entered into between the plaintiffs and the Bank is dated February 5, 1951. It is not disputed that the other two contracts, with which we are concerned, also are of the same pattern. Under that contract the Bank, the appellant herein, and Sohanlal Sehgal, one  of the  respondents  herein, agreed "to hire,  subject  to  the conditions endorsed, the company’s safe No. 1651/ [1936] 1 K.B. 399. 405.       297 2203 Class lower for one year from this day at a rent of Rs. 40". The relevant conditions read as follows:               It is agreed that the connection of the renter               of  the  safe  and the Bank  (and  it  has  no               connection) is that of a lessor and lessee for               the  within mentioned safe and not that  of  a               banker and customer.                   15.  The  liability  of  the  company   in               respect of property deposited in the said safe               is limited to ordinary care in the performance               by employees and officers of company of  their               duties  and shall consist only of (a)  keeping               the  safe  in vault where  located  when  this               rental  contract is entered into or in one  of

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             equal  specifications, the door to which  safe               shall  be  locked at all time except  when  an               officer   or  an  employee  is  present,   (b)               allowing no person access to said safe. except               hirer  or  authorised deputy, or  attorney  in               fact    having    special   power    to    act               identification  by signature being  sufficient               or his/her legal representative in the case of               death,  insolvency  or  other  disability   of               Hirer, except as herein expressly  stipulated.               An  unauthorised opening shall be presumed  or               inferred  from proof of partial or total  loss               of contents.                  16. The company shall not be liable for any               delay caused by the failure of the vault doors               or locks to operate.                  17. The company shall not be liable for any               loss etc. The only purpose of the contract was to ensure the safety of the  articles  deposited in the safe deposit vault.  It  was implicit  in  the contract that the  lockers  supplied  must necessarily  be in a good condition to achieve that  purpose and, therefore, that they should be in a reasonably  perfect condition.  It  was  an implied term  of  such  a  contract. Condition  15  imposed  another obligation on  the  Bank  to achieve  the same purpose, namely, that the Bank should  not allow  access to any person to the safe except the hirer  or his authorised agent or attorney. If the articles  deposited were  lost because one or other of these two conditions  was broken  by the Bank, the renter would certainly be  entitled to  recover damages for the said breach. Such a claim  would be ex contractu and not ex delicto and for such a claim Art. 115 of the First Schedule to the Limitation Act applied  and not Art. 36 thereof.     Learned  counsel  for the appellant contended  that  the suits were not based upon the breach of a contract committed by the Bank but only the theft committed by its agent dehors the   terms   of  the  contract.  This  leads  us   to   the consideration  of the scope of the plaints presented by  the respondents.  It  would  be enough if we  take  one  of  the plaints  as  an  example, for others also run  on  the  same lines. Let us take the plaint in Civil Suit No. 141 of 1954, i.e.,  the suit flied by Sohanlal Sehgal and others  against the  Bank for the recovery of d sum of Rs. 26,500.  We  have carefully gone through 298 the plaint, particularly paragraphs 8, 9 and 10 thereof.  It will  be       seen from the plaint that though it  was  not artistically  drafted the relief was claimed mainly  on  two grounds,  namely,  (i) that it was an implied  term  of  the contract  that the locker rented was in  a  good  condition, and  (ii)  the valuables were lost because the  Manager,  on account of the negligence of the Bank in not taking all  the necessary  precautions, committed theft of the  articles  in the  course of his employment. In the written-statement  the defendant  denied its liability both under the terms of  the contract  and also on the basis that it was not  liable  for the  agent’s  fraud. The High Court found that at  the  time when  the lockers were rented out they were in  a  defective condition  and that the Bank, in actual practice,  made  the Manager  the sole custodian with full control over the  keys of  the strong,room and permitted a great deal of laxity  in not having any check whatsoever on him. In this state of the pleadings and the findings it is not possible to accept  the contention  of the learned counsel’ for the  appellant  that

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the  plaintiffs did not base their claims on the  branch  of the  conditions  of the contracts. This argument is  in  the teeth  of  the  allegations made  in  the  plaint,  evidence adduced  and the arguments advanced in the Courts below  and the  findings arrived at by them. While we concede that  the plaint  could  have  been better drafted and  couched  in  a clearer  language, we cannot accede to the  contention  that the plaints were solely based upon the fraud of the  Manager in  the course of his employment. We, therefore.  hold  that there were clear allegations in the plaints that the  defen- dant committed breach of the contracts in not complying with some  of  the  conditions thereof  and  that  the  defendant understood  those  allegations in that light  and  traversed them.  The  suit  claims, being ex  contractu  were  clearly governed by Art. 115 of the First Schedule to the Limitation Act and not by Art. 36 thereof. If Art. 115 applied, it  is not disputed that the suits were within time.     Even  if  the  claim  was  solely  based  on  the  fraud committed   by  the  Manager  during  the  course   of   his employment.  we do not see how such a claim fell under  Art. 36  of the First Schedule to the Limitation Act. To  attract Art.  36. the misfeasance shall be independent of  contract. The fraud of the Manager committed in the course     of  his employment is deemed to be a fraud of the principal, that is to say the Bank must be deemed to have permitted its manager to commit theft in violation of the terms of the  contracts. While  under the contracts the Bank was under an  obligation to give to the respondents good lockers ensuring safety  and protection   against   theft,  it   .gave   defective   ones facilitating theft; while under the contracts it should  not permit  access  to  the safe to  persons  other  than  those mentioned  in  the  contracts. in  violation  of  the  terms thereof  it  gave access to its Manager and enabled  him  to commit  theft.  In either case the wrong committed  was  not independent  of the contract. but it directly arose  out  of the breach of the contract. 299 1n  such  circumstances  Art.  36  is  out  of  place.   The competition between Arts. 115 and 120 to take its place need not  be considered. for neither of those Articles  hits  the claim, as the suits are within 3 years. which is the shorter of  the two periods of limitation prescribed under the  said two Articles.      In this view it is not necessary to express our view on the  question  whether  the contracts in  question  were  of bailment.     In  the result, the appeals fail and are dismissed  with costs one hearing fee.                                  Appeals  dismissed. 300