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PETITIONER: THE MORVI MERCANTILE BANK LTD. AND ANR.

       Vs.

RESPONDENT: UNION OF INDIA, THROUGH THE GENERAL MANAGER,CENTRAL RAILWAY,

DATE OF JUDGMENT: 03/03/1965

BENCH: SUBBARAO, K. BENCH: SUBBARAO, K. DAYAL, RAGHUBAR MUDHOLKAR, J.R. BACHAWAT, R.S. RAMASWAMI, V.

CITATION:  1965 AIR 1954            1965 SCR  (3) 254  CITATOR INFO :  RF         1978 SC 389  (9)

ACT:    Indian  Contract  Act (9 of 1872), s.  178,  Transfer  of Property  Act (4 of 1882). ss. 4 and 137 and Indian Sale  of Goods  Act (3 of 1930), ss. 30 and 53--Endorsel  of  Railway receipt--If pledgee of goods covered by receipt.

HEADNOTE: A  firm doing business in Bombay entrusted goods  worth  Rs. 35,500  the  Railway for delivery in Delhi. The  goods  were consigned  to  "self"  and the  firm  endorsed  the  railway receipts to a Bank against an advance of Rs. 20,000 made  by the  Bank to the firm. The firm also executed  a  promissory note  in favour of the Bank for that amount. When the  goods reached the destination, the Bank refused to take  delivery, on the ground that they were not the goods consigned by  the firm. The Bank, thereafter filed a suit for the  recovery of the value of the goods. The trial court dismissed the  suit. On appeal by the Bank, the High Court allowed the appeal and decreed  the  claim  for Rs. 20,000 on the  ground  that  as pledgee  of  the goods, the Bank suffered loss only  to  the extent  of the loss of its security. Both the Bank  and  the Railway  appealed  to this Court, and it  was  contended  on behalf  of the Railway that the endorsement of  the  railway receipt  in favour of the Bank, did not constitute a  pledge of the goods covered by the receipt and that the Bank had no right to sue for compensation.     HELD: (Per Subba Rao, Raghubar Dayal and Bachawat, J J): The firm by endorsing the railway receipts in favour of  the Bank,  for consideration. pledged the goods covered  by  the said  receipts, to the Bank, and the Bank being the  pledgee could  maintain the suit for the recovery of the full  value of consignment amounting to Rs. 35,500. [264 H; 265 D-E] On a reasonable construction of s. 178 of the Contract  Act, 1872,  ss. 4 and 137 of the Transfer of Property Act,  1882, and ss. 30 and 53    of the Indian Sale of Goods Act,  1930, an  owner  of  goods, can make a valid  pledge  of  them  by transferring  the  railway  receipt  representing  the  said

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goods.  To the general rule  expressed  by the   Maxim  nemo dat  quod non habet (no one can convey a better  title  than what  he  had), to facilitate mercantile  transactions.  the Indian  Law  has  grafted  some  exceptions,  in  favour  of bonafide pledgees by transfer     of documents of title from persons. whether owners of goods who do not possess the full bundle  of rights of ownership at the time the  pledges  are made,  or  their  mercantile agents. To confer  a  right  to effect  a  valid  pledge by transfer of  document  of  title relating to goods     on persons with defects in their title to  the goods. and on mercantile agents, and to deny  it  to the full owners thereof, is to introduce an incongruity into the  Act.  On  the other hand, the  real  intention  of  the legislature  will  be  carried  out if  the  said  right  is conceded  to  the  Full  owner  of  goods  and  extended  by construction  to persons with defects in their title to  the goods or to mercantile agents. A pledge being a bailment  of goods  under s. 172 of the Contract Act, the pledgee,  as  a bailee.  will  have the same remedies as the  owner  of  the goods  would have against a third person for deprivation  of the  said goods or injury to them under s. 180 of  the  Act. [264 A-C, H]                 255     Ramdas  Vithaldas Durbar v.S. Amarchand and Co.,  (1916) L.R. 43 I.A. 164 and The Official Assignee of Madras v.  The Mercantile  Bank  of India, Ltd. (1934) L.R.  61  I.A.  416, referred to.     Per Mudholkar and Ramaswami JJ. (dissenting): There  was no valid pledge of the consignments of goods represented  by the  railway receipt in favour of the Bank and the Bank  was not  entitled  to sue the Railway for compensation  for  the loss of goods, relying upon the endorsements of the  railway receipts in its favour. [272 G-H]     After  the  passing of the Indian  Contract  (Amendment) Act,  1930, the legal position with regard to the pledge  of railway receipts, is exactly the same in Indian Law as it is in  English  Law, and consequently, the owner of  the  goods cannot pledge the goods represented by a railway receipt, by endorsing   the    railway  receipt,  unless   the   railway Authorities  were notified of the transfer, and they  agreed to  hold  the  goods as bailee of  the  pledgee.  Under  the amended  law a valid pledge can no longer be made by  ever.v person  "in possession" of goods. It can only be made  by  a mercantile  agent as provided in s. 178 of the Contract  Act (after  amendment in 2930) or by a person who  has  obtained possession of goods under a contract voidable under s. 19 or s. 19A of the Contract Act, as provided by s. 178 0 the Act. or by a seller or buyer in possession of goods, after  sale. as  provided in s. 30 of the Indian Sale of Goods Act.  [271 F-G; 272 C-D] Further, though a railway  receipt and all  other  documents enumerated  in  s.  2(4)  of  the  Sale  of  Goods  Act  are assimilated  to  bills    of lading for the purpose  of  the right  to stoppage in transit and a pledge under s.  178  of the  Contract  Act,  its legal position is the  same  as  in English  law,  so  that, no rights are  created,  merely  by reason  of  the  endorsement of a  railway  receipt  by  the consignee between the endorses and the railway company which had issued the receipt     to the consignee the only  remedy of the endorsee being against the endorser. The  negotiation of  the  receipt may pass the property m the goods,  but  it does  not transfer the contract contained in the receipt  or the statutory contract under s. 74E of the Indian   Railways Act. Negotiability is a creature of a statute or  mercantile usage,  not of Judicial decisions apart from either. So,  in

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the  absence  of  any usage    of  trade  or  any  statutory provision  to  that  effect, a  railway  receipt  cannot  be accorded  the benefits which flow from  negotiability  under the  Negotiable  Instruments  Act,  so  as  to  entitle  the endorsee,  as the holder for the time being of the  document of title, to sue the carrier --the railway authority--in his own  name.  If  the claim of the Bank  was  as  an  ordinary assignee  of  the contract of carriage, then  it  had     to prove  the  assignment.  In the absence  of  proof  of  such assignment, or of the existence of any practice of merchants treating  a  railway receipt as a symbol of goods  making  a pledge of the receipt a pledge of goods, and in view of  cl. (3) of the notice printed at the back of the receipt that an endorsement made on the face of the receipt by the consignee was only meant to indicate the person to whom the  consignee wished  delivery of goods to be made if he himself  did  not attend  to take delivery, the Bank  had no right to sue  the Railway.  [273 E-G; 274 D-G]     Since  the  language of s. 178 of the  Contract  Act  is clear  and  explicit, if any hardship and  inconvenience  is felt  because such a practice of treating the receipt  as  a symbol of goods were not recognised. it is for Parliament to take  appropriate steps to amend the law and it is  not  for courts to legislate under the guise of interpretation.  [275 G] 256

JUDGMENT:     CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 474 and 475 of 62.     Appeal  from the judgment and decree dated  January  10. 1958, of the Bombay High Court in Appeal No. 375 of 1953.     J.C.  Bhatt,  B.R.Agarwala  and  H.K.   Puri,  for  ’the appellants (in C.A. No. 474 of 1962) and respondent (in C.A. No. 475 of 1962).     Niren    De,    Additional    Solicitor-General,    N.D. Karkhanis, B.R.G.K. Achar, for R.N. Sachthey, for Respondent (in C.A. No. 474 of 1962) and appellant (in C.A. Nos. 475 of 1962).     The  judgment of SUBBA RAO, DAYAL and BACHAWAT  JJ.  was delivered  by  SUBBA  RAO,  J.  The  dissenting  Opinion  of MUDHOLKAR and RAMASWAMI JJ. was delivered by RAMASWAMI J.     Subba  Rao,  J.  On October  4.  1949,  M/s.  Harshadrai Mohanlal  &  Co.. a firm doing business  at  Thana,  Bombay. hereinafter  called the firm, entrusted 4 boxes alleged   to have  contained  menthol crystals to the then G.LP.  Railway for carriage from Thana  to Okhla near Delhi under a railway receipt  bearing No. 233/27. On October 11, 1949,  the  firm consigned  2  more such boxes to Okhla from  Thana  under  2 railway  receipts  bearing Nos.  233/35 and 233/36. All  the said 6 boxes were marked with  the name of the said firm and were  consigned  to  "self".  The  said  firm  endorsed  the relevant  railway  receipts in favour of  Morvi  ’Mercantile Bank  Ltd., hereinafter called the Bank, against an  advance of  Rs.  20,000  made  by the Bank to  the  firm.  The  said consignments  did  not  reach  Okhla.  The  railway  company offered  to  deliver  certain  parcels to the Bank, but  the Bank refused to take delivery of the same on the ground that they  were  not  the goods consigned by  the  firm.  As  the railway  failed  to  deliver the boxes,  the  Bank,  as  the endorsee   of  the  said  railway  receipts   for   valuable consideration, filed Civil Suit No. 50 of 1950 in the  Court of  the  Civil Judge, Senior Devision.  Thana,  against  the

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Union of India through the General Manager, Central Railway, Bombay,  for the recovery of Rs. 35,500, being the value  of the  goods  contained in the said consignments  as  damages. The  defendant  in  the written-statement  averred  that  on February 1. 1950, the railway company offered to deliver all the  consignments  to the Bank, but  the  latter  wrongfully refused to take delivery of the same on the ground that  the consignments  were not identical to the ones consigned  from Thana;  it  put  the  plaintiff  to  strict  proof  of   the allegation that the consignments contained menthol  crystals as  alleged  or  that  the  aggregate  value  of  the   said consignments  was Rs. 35,500. or that the  railway  receipts were  endorsed  in  favour of  the  plaintiff  for  valuable consideration.     The learned Civil Judge found as follows: (1) The  boxes consigned by the firm contained menthol crystals and by  the wrongful      conduct  of  the  employees  of  the   railway administration the contents of the boxes were lost; (2)  the said consignments were not offered 257 for  delivery  to  the  Bank,  but  what  was  offered  were different  consignments  containing caustic  soda;  (3)  the relevant  railway  receipts  were endorsed by  the  firm  in favour  of the Bank for valuable consideration; and (4)  the Bank,  as endorsee of the railway recepts, was not  entitled to sue the railway company on the railway receipts for  loss of the consignments. On those findings the suit filed by the Bank was dismissed with costs. The Bank preferred’ an appeal to the High Court against the decision of the  learned Civil Judge, being First Appeal No. 375 of 1953.     The appeal was heard by a Division  Bench of the  Bombay High  Court,  consisting of J.C. Shah and Gokhale,  JJ.  The learned  Judges agreed with the learned Civil Judge  on  the first  3  findings;  but  on the 4th  finding  they  took  a different view. They held that the Bank, as endorsee of  the said railway receipts, was entitled to sue for  compensation for  the  loss suffered by it by reason of the loss  of  the consignments, but. as pledgees of the goods, it suffered the loss only to the extent of the loss of its security. On that view, the learned Judges gave a decree to the Bank for a sum of Rs. 20,000 advanced by it with interest and proportionate costs  in  both  the Courts. The plaintiff as  well  as  the defendant  preferred, by certificate, cross appeals to  this Court.     Learned  Additional Solicitor  General raised before  us the  following  points:  (1) In law  the  endorsement  of  a railway  receipt  does  not  constitute  a  pledge;  (2)  an endorsement   of   a  railway  receipt   for   consideration constitutes at the most a pledge of the railway receipt  and not the goods covered by it. and, therefore, in the  present case  the  Bank acquired only a right to receive  the  goods covered  by the relevant receipts from the railway; and  (3) if  the  endorsement  of  the  railway  receipts  does   not constitute  in law a pledge of the goods, the Bank   has  no right to  sue for  compensation, as, though the  proprietary right  in the goods was transferred to it, the right to  sue trader the contracts did not pass to it.     The  decision on the first point depends upon the  scope of the legal requirements to constitute a  pledge under  the Indian  law.  That calls for a careful scrutiny of  all  the relevant provisions  of the Indian Contract Act, the  Indian Sale  of  Goods Act and the Transfer of  Property  Act.  for their  combined  consideration  yields  the  answer  to  the problem raised.     Under the Contract Act, delivery of goods by one  person

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to  another  under a contract as security for payment  of  a debt  is a pledge. Ordinarily delivery of tangible  property is essential to a true pledge; but where the law  recognizes that  delivery  of tangible symbol involves  a  transfer  of possession  of  the  property symbolized,  such  a  symbolic possession  takes the place of physical delivery. The  short but difficult question, therefore. is whether the Indian law equates the railway receipts with the goods covered by  them for the purpose of constituting delivery of goods within the meaning 258 of  the Contract Act. Before the amendment of s. 178 of  the Contract Act and the passing of the Sale of Goods Act, 1930, the scope of railway receipts vis-a-vis the goods covered by them came up for consideration before the Judicial Committee in  Ramdas  Vithaldas Durbar v.S.Amarchand &  Co.,  C).  The head-note of that case succinctly gives the following facts: Sellers  of cotton consigned it to the buyer in Bombay,  and forwarded  to  him receipts issued by  the  railway  company which  had  undertaken the  carriage. The receipts  provided that  they  should  be given up at the  destination  by  the consignee,  and  that if he did not himself attend  to  take delivery  he  must  endorse on the  receipt  a  request  for delivery  to  whom  he wished it to be  made.  The  evidence showed  that  similar receipts for cotton were used  in  the ordinary  course  of  business in Bombay  as  proof  of  the possession  and control of the goods therein referred to  or as authorising the holder to receive or transfer the  goods. The  consignee  endorsed  and  delivered  the  receipts   as security  for advances made specifically upon them  in  good faith. The sellers sought to stop the cotton in transit. The Judicial  Committee  held  that the  railway  receipts  were instruments  of  title  within the  meaning  of  the  Indian Contract  Act,  1872,  s.103,  and  that  the  sellers  were therefore not entitled to stop the goods except upon payment or tender to the pledgees of the advances made by them. This decision  lays down 3 propositions, namely, (i) the  railway receipts in question in that case were used in the  ordinary course of business in Bombay      as proof of possession and control of the goods therein referred to, or as  authorising the  holder  to  receive or transfer the  goods;  (ii)  such railway receipts were documents of title and a valid  pledge of the goods covered by the receipts could be made under the Contract Act before it was amended in 1930. by endorsing and delivering  the same as security for advances made.  to  the owner of the goods.     It may be noticed at this stage that under  the Contract Act before it was amended in 1930  there was  no definition of the expression "documents  of  title", but  there.  was one in the Indian Factors  Act      (XX  of 1844) which. with certain modifications, made the provisions of  the  English Factors Act. 1842,  applicable  to  British India.  The  last  mentioned  Acts  defined  the  expression "documents  of  title  to goods as  including  any  bill  of lading,  dock-warrant. ware-housekeeper  certificate,  whar- finger’s  certificate. warrant or order for the delivery  of goods and any other document used in the ordinary course  of business as proof of the possession or control of goods.  or authorising   or   purporting  to   authorise,   either   by endorsement or by  delivery the possessor of the document to transfer  or  receive goods  thereby  represented’.  Railway receipt  was so nominee not included in the detinition.  But the  Privy Council, on the basis of the evidence adduced  in that  case, brought the railway receipts under that part  of the  definition  describing  generally   the   documents  of title  to  goods. It may also be noticed that  the  Judicial

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Committee. though (1) [1910] T  R. 45 T.  A. 164. 259 its attention was called to the provisions of ss. 4 and  137 of  the Transfer of Property Act, preferred to  decide  that case  decors the said provisions. In the Explanation  to  s. 137  of  the  Transfer  of Property  Act,  1882,  which  was introduced by the Amending Act 2 of 1900, the definition  of the  expression  "mercantitle document" is  practically  the same as that found in the Indian Factors Act noticed by  the Judicial  Committee  in the decision cited supra,  with  the difference  that  it  expressly  includes  therein   railway receipt.  Under s.4 thereof the Chapter and the sections  of the  Act shall be taken as part of the Indian Contract  Act, 1872.  In  1930 Parliament  in enacting the Indian  Sale  of Goods  Act,  1930,  presumably borrowed  the  definition  of "documents  of title to goods" from the Indian  Factors  Act and  the  English  Factors  Act  noticed  by  the   Judicial Committee,  but  expressly included in the   definition  the railway receipt. This indicates the legislative intention to accept the mercantile usage found by the Judicial  Committee in  Ramdas  Vithaldas Durbar v. S. Amerchand &  Co.(1).  The same  definition  was  incorporated  by  reference  in   the Explanation  to s.178 of the Contract Act as amended in  the year  1930.  This  definition is also  in  accord  with  the definition of "mercantile document of title to goods" in the Explanation  to s.137 of the Transfer of Property  Act.  The Judicial  Committee  had another occasion  to  consider  the question  of pledge of railway receipt in Official  Assignee of Madras v. Mercantile Bank of India. Ltd.(2). The facts in that  case  were  as follows: The  insolvents  did  a  large business  in groundnuts, which they purchased from  the  up- country  growers; the nuts were then dispatched by rail  and arrived  in Madras by one or other of the two railways,  the Madras  &  Southern Maharatta Railway or the   South  Indian Railway. Under an arrangement between the said Railways  and the  Madras  Port  Trust, the  consignments  of  nuts   when received  were deposited in the go downs of the Madras  Port Trust.   The  general  course  of  business  was   for   the insolvents  to obtain from the railway companies in  respect of  each  consignment or wagon had a  railway  receipt.  The insolvents  obtained  loans from the respondent  Bank  after sending to the said Bank the railway receipts duly  endorsed in blank and also after executing a promissory note for  the amount a letter of hypothecation. When the goods arrived  at the port, delivery was taken from the Port Trust against the railway   receipts.   At  the  time  the   insolvents   were adjudicated the bags of ground-nuts in question in that case were  either  in transit on the railway or  in  the  transit sheds  or  godowns of the Port Trust.  On those  facts.  the main question was whether the pledge of the railway  receipt was  a pledge of the goods represented by them or  merely  a pledge of the actual documents. If there was a  valid pledge before the insolvency, the Bank would be entitled to receive the  amount realised by the sale of the goods; if  not,  the Official  Assignee  would be entitled to  it.  The  Judicial Committee, after considering (1) (1916) L.R. 43 LA. 164. (1) (1934) L.R. 51 I.A. 416, 423. 260 its  earlier decision in Ramdas Vithaldas Durbar’s case  (1) and  all  the  relevant provisions  which  we  have  noticed earlier,  came  to  the conclusion that there  was  a  valid pledge  of the goods represented by the receipts. It may  be noticed  that  this decision also turned upon  the  relevant

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provisions of the Contract Act before its amendment in 1930, though at the time the decision was made the amendment  came into  force. On the question whether a pledge of a  document is a pledge of the goods as distinct from the document,  the Judicial Committee observed:                     "Their Lordships likewise in the present               case  see  no reason for  giving  a  different               meaning  to  the term (documents of  title  to               goods) in s.178  from that given to the  terms               in  ss.  102 and 103; in  addition  a  railway               receipt  is  specifically  included’  in   the               definition of mercantile document of title  to               goods  by s. 137 of the Transfer  of  Property               Act, 1882, which, in virtue of s.4 of the Act,               is to be taken as part of the Contract Act  as               being  a  section  relating  to  contracts.  A               railway   receipt  is  now  included  in   the               definition  of documents of title to goods  in               s.  2, sub-s. 4, of the Indian Sale  of  Goods               Act, 1930."               On   the  construction  of   the    expression               "person" in s. 178 of the Contract Act, it was               argued that the said expression took in only a               mercantile  agent and that the law  in   India               was  the  same as in England.  Rejecting  that               plea,  the Judicial Committee remarked  at  p.               426 thus:                      "Their  Lordships did not in that  case               see   any   improbability   in   the    Indian               Legislature  having taken the lead in a  legal               reform.                      It   may well have seemed that  it  was               impossible ’to justify a  restriction on   the               owner’s power  to pledge which was not imposed               on  the like powers of the  mercantile  agent.               The same observation may well be true m regard               to   the  words  now  being  considered.   The               reasonableness  of any such change in the  law               is  well  illustrated  by  the  facts  of  the               present case, where it was clearly intended to               pledge  the  goods,  not  merely  the  railway               receipts,  and  the respondents have  paid  in               cash  the advances they made on that  footing.               In  these circumstances, it would be indeed  a               hardship   that   they   should   lose   their               security." These   pregnant   observations  show  that  there   is   no justification  to the distinction that is being   maintained in   England   between pledge of a bill of  lading  and  the pledge  of documents of title of the than a bill of  lading. The  Judicial Committee in this decision clearly laid  down, after  noticing all the relevant provisions of the  Contract Act, the Transfer of Property Act and the Sale of Goods  Act that railway receipts were documents of title and the  goods cover (1)(1916) L.R. 43 I.A. 164. ed  by  the documents could be pledged by  transferring  the documents.  This  decision  is  in  accord  with  the   view expressed by us on a fair reading of the said provisions.     Even so, it is contended that by the amendment of s. 178 of the Contract Act in 1930, the Legislature has taken  away the  right  of an owner of goods to pledge the same  by  the transfer of documents of title to the said goods. Under  the old  section "a person" who was in possession of  any  goods etc. might make a valid pledge of such goods, whereas  under

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the  present  section "a mercantile agent", subject  to  the conditions mentioned therein, is authorized to make a pledge of  the  goods  by  transferring  the  documents  of  title. Therefore,  the argument  proceeds, a  person  other than  a mercantile  agent  cannot make a valid pledge  of  goods  by transferring the documents representing the said goods. This argument  appears to be plausible and even attractive;  but, if accepted, it will lead to anomalous results. It means  an owner  of goods cannot pledge the goods by transferring  the documents  of  title, whereas his agent can do  so.  As  the Privy  Council  pointed out it is impossible  to  justify  a restriction on the owner’s power to pledge when there is  no such restriction imposed on the like powers of a  mercantile agent. A careful scrutiny of s. 178 of the Contract Act  and the  other  relevant provision thereof  indicates  that  the section  assumes  the power of an owner to pledge  goods  by transferring  documents  of title thereto  and  extends  the power  even to a mercantile agent. A pledge is  delivery  of goods  as  security  for payment of a  debt.  If  a  railway receipt  is a document of title to the goods covered by  it, transfer  of the said document for consideration  effects  a constructive delivery of the goods. On that assumption if we look  at s. 178 of the Contract Act, the legal  position  is apparent.  The  material  part s. 178 of  the  Contract  Act reads:                      "Where a mercantile agent is, with  the               consent  of the owner. in possession of  goods               or the documents of title to goods, any pledge               made  by  him,  when acting  in  the  ordinary               course  of  business of  a  mercantile  agent,               shall  be  as valid as if  he  were  expressly               authorised  by the owner of the goods to  make               the  same;  provided that the Pawnee  acts  in               good  faith  and has not at the  time  of  the                             pledge notice that the pawner has not authority               to pledge." The  section emphasizes that a mercantile agent shall be  in possession  of  documents of title with the consent  of  the owner  thereof; if he is in such possession and pledges  the goods  by  transferring the documents of title to  the  said goods, by fiction, he is deemed to have expressly authorized by the owner of the goods to make the same. The condition of consent  and the fiction  of authorization indicate that  he is doing what the owner could have done. So too. 262 s.  30  of  the  Indian Sale  of  Goods  Act  discloses  the legislative  mind.  The relevant part of the  said’  section reads:                     "Where  a  person,  having  sold  goods,               continues or is in possession of the goods  or               of  the documents of title to the  goods,  the               delivery  or transfer by that person or  by  a               mercantile agent acting for him, of the  goods               or  documents of title under any sale,  pledge               or  other  disposition thereof to  any  person               receiving  the same in good faith and  without               notice  of  the previous sale shall  have  the               same  effect  as  if  the  person  making  the               delivery or transfer were expressly authorised               by the owner of the goods to make the same." This  sub-section shows that a person who sold the goods  as well  as a mercantile agent acting for him can make a  valid pledge  in the circumstances mentioned therein. If an  owner of  goods or his mercantile agent after the owner  has  sold

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the  goods,  can  make a valid pledge  by  transferring  the documents  of  title  to  the goods, it  would  lead  to  an inconsistent  position if we were to hold that an owner  who has  not  sold  the  goods  cannot  pledge   the   goods  by transferring the documents of title. Sub-s. (2) of s. 30  of the Indian Sale of Goods Act relevant to the present enquiry reads:                      "Where a person. having bought or agreed               to buy goods. obtains, with the consent of the               seller,   possession  of  the  goods  or   the               documents of title to the goods. the  delivery               or transfer by that person or by a  mercantile               agent   acting  for  him.  of  the  goods   or               documents  of title under any sale, pledge  or               other   disposition  thereof  to  any   person               receiving  the same in good faith and  without               notice  of  any  lien or other  right  of  the               original seller in respect of the goods  shall               have  effect as if such lien or right did  not               exist." This  sub-section  clearly recognizes that a  buyer  or  his mercantile  agent  can  pledge goods  by   transferring  the documents of  title thereto: it protects a bona fide pledgee from the buyer against any claim by the original owner based on  the  lien or any other right still left in him.  If  the owner--the  purchaser  becomes the owner-cannot  pledge  the goods  at  all  by  transfer  of  documents  of  title.  the protection  given under sub-s. (2) of s. 30 of the  Sale  of Goods  Act  to  a bona fide purchaser  is  unnecessary.  The material part of s. 53(1) of the Sale of Goods Act reads:                     "Subject to the provisions of this  Act,               the unpaid seller’s right of lien or  stoppage               in  transit  is not affected by  any  sale  or               other disposition of the goods which the buyer               may have made, unless the seller has  assented               thereto:                     Provided that where a document of  title               to   goods   has  been  issued   or   lawfully               transferred to any person as buyer or owner of               the  goods,  and  that  person  transfers  the               document to a person who takes the document               in good faith               263               and  for  consideration, then,  if  such  last               mentioned  transfer  was by way of  sale,  the               unpaid  seller’s right of lien or stoppage  in               transit   is  defeated,  and,  if  such   last               mentioned  transfer  was by way of  pledge  or               other   disposition  for  value,  the   unpaid               seller’s right of lien or stoppage in  transit               can only be exercised subject to the rights of               the transferee."  This sub-section protects a bona fide pledgee from an owner against  any rights still subs sting in his  predecessor-in- interest.  This assumes that the owner can pledge the  goods by  transfer  of the relevant documents of title.  The  said sections  embody  statutory exceptions to the  general  rule that  a person cannot confer on another a higher title  than he possesses.     The argument that s. 178 of the Contract Act, as amended in  1930.  restricts the scope of the  earlier  section  and confines  it only to a mercantile agent was noticed  by  the Judicial   Committee  in  Official  Assignee  of  Madras  v. Mercantile Bank of India, Ltd. (1) and it observed therein:                     "The  Indian Legislature may  well  have

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             appreciated   in   1872  the   exigencies   of               business,  even though in 1930 they  recanted.               Or perhaps they did not appreciate  fully  the               effect of the actual words of the section." These observations indicate that the Judicial Committee  did not  express  any final opinion on the construction  of  the amended  s. 178 of the Contract Act as the question  in  the appeal before it related to the unamended section.  Further, it  did  not notice the other sections referred  to  earlier which  throw  a flood of light on the true  meaning  of  the terms of s. 178 of the Contract Act, as it now stands.  This conclusion also accords with the view expressed by Bachawat. J..  in  Commissioner  for the Port  Trust  of  Calcutta  v. General Trading Corporation Ltd.(2).     The Indian decisions cited at the Bar do  not deal  with the question whether a valid pledge of goods can be effected by  transfer  of  documents  of title,  such  as  a  railway receipt,  representing the goods; they were mainly concerned with  the question whether an endorsee of a railway  receipt for  consideration could maintain an action on the basis  of the  contract embodied in the said receipt: see the firm  of Dolatram  Dwarakdas v. The Bombay Baroda and  Central  India Railway  Co.  C);  Shah  Muji Deoii  v.  Union  of  India(4) Commissioner  for  the  Port Trust of  Calcutta  v.  General Trading  Corporation  Ltd.  (2);  and  Union  of   India  v. Taherali (2).  These raise a larger question on which  there is  a conflict of opinion. In the view we have taken on  the question  of  pledge,  it is not necessary  to  express  our opinion thereon in these appeals.   (1) (1934) L.R. 61 LA. 416, 423. A.I.R. 1964 cal. 290.   (3) (1914) I.L.R,. 38 .Rom. 659.   (4) A.I.R. 1957 Nag. :31.   (5) (1956) 58 Born. L.R. 650. 264     The law on the subject, as we conceive it, may be stated thus:  An owner of goods can make a valid pledge of them  by transferring  the  railway  receipt  representing  the  said goods.  The general rule is expressed by the maxim nemo  dat quod non habet, i.e., no one can convey a better title  than what  he  had.  To  this  maxim,  to  facilitate  mercantile transactions, the Indian law has grafted some exceptions, in favour  bona  fide pledgees by  transfer of   documents  .of title  from  persons,  whether  owners  of  goods  or  their mercantile  agents  who do not possess the  full  bundle  of rights  of  ownership at the time the pledges are  made.  To confer  a  right  to effect a valid pledge  by  transfer  of documents  of title relating to goods on owners      of  the goods  with  defects in title and mercantile agents  and  to deny  it  to  the full owners thereof  is  to  introduce  an incongruity into the Act by construction. On the other hand, the real intention of the Legislature will be carried out if the  said right is conceded to the full owner of  goods  and extended by construction to owners with defects in title  or their mercantile agents.     We  are glad that, on a reasonable construction  of  the material provisions of the relevant Acts, we have been  able to  reach this conclusion- To accept the contentions of  the respondents to  the contrary would be a retrograde step  and would  paralyse  the  entire mechanism  of  finance  of  our internal trade. In this vast country where goods are carried by  railway  over long distances and remain in  transit  for long  periods of time, the railway receipt is regarded as  a symbol  of  the goods for all purposes for which a  bill  of lading is so regarded in England. The next question is whether the plaintiff would be entitled

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to recover the full value of the  consignments amounting  to Rs. 35,500/- or, as the High Court held,  only  the   amount of  Rs.  20,000/- with interest, i.e.,  the  amount  secured under the pledges. The answer to this question depends  upon the construction of s. 180 of the Contract Act, it reads:                     "If  a third person wrongfully  deprives               the  bailee  of the use or possession  of  the               goods  bailed,  or does them any  injury,  the               bailee is entitled to use such remedies as the               owner  might have used in the like case if  no               bailment had been made; and either the  bailor               or the bailee may bring a suit against a third               person for such deprivation or injury " Under  this section, a pledge being a bailment of  goods  as security  for payment of a debt, the pledgee will  have  the same remedies as the owner of the goods would have against a third  person for deprivation of the said goods or injury to them.  If so, it follows that the Bank, being  the  pledgee, can  maintain the present suit for the recovery of the  full value of the consignments amounting to Rs. 35,500/-. 265     The last question is whether the Bank was the pledgee of the goods or was only the pledgee of the documents of  title whereunder  they  could  only  keep  the  documents  against payment  by  the  consignee as contended on  behalf  of  the Railway.  The firm borrowed a sum of Rs. 20,000/-  from  the Bank and executed a promissory note, Ex. 104, dated  October 6,  1949,  in  its favour.  It  also  endorsed  the  railway receipts  Nos. 233/27, 233/35 and 233/36 in  favour  of  the Bank.  The Accountant of the Bank deposed that  the  railway receipts  were  endorsed  in  favour  of  the  Bank,   which had.advanced the said amount to the firm on the security  of the said railway receipts. The evidence of this witness  was not  challenged in the High Court. The Bank.advanced  alarge amount  of  money    to the firm.  The  three  transactions, namely the advancing of loan the execution of the promissory note  and the endorsement of the railway receipts,  together form  one  transaction.  Their combined effect is  that  the Bank  would  be in control of the goods till  the  debt  was discharged.  This  is  a well  known  practice  followed  by Banks.The  Judicial  Committee both  in   Ramdas   Vithaldas Durbar  v. S. Amerchand & Co.(1), and the Official  Assignee of Madras v. The Mercantile Bank of India, Ltd.(2) heId that such a transaction was a pledge. We, therefore, hold on  the facts  of this case that the firm  by endorsing the  railway receipts in favour of the Bank for consideration pledged the goods covered by the said  receipts to the Bank. In  this view it is not necessary to express our opinion  on the question whether if the transaction was not a pledge  of the goods,the Bank would be entitled to sue on the basis  of the contract entered into between the firm and the Railway. No  other question was raised. In the result,  Civil  Appeal No.  474  of 1962 filed by the Bank is  allowed;  and  Civil Appeal No. 475 of 1962 filed by the Railway is dimissed. The plaintiff’s  suit is decreed with costs throughout. Ramaswami,  J.   We regret we are unable to agree  with  the judgment pronounced by our learned brother Subba Rao J.    On  October  4,  1949, M/s. Harshadrai  Mohanlal  &  Co., (hereinafter  referred  to as the firm)  entrusted  4  boxes containing "menthol crystal" to the then G.I.P. Railway  for carriage from  Thana railway station to Okhla near Delhi. On October  11,  1949,  the firm consigned 2  more  boxes  also alleged  to have contained "menthol crystal" to  Okhla  from Thana  railway  station. The Railway  Receipts  issued  were numbered 233/27, 233/35 and 233/36.  All the six boxes  were

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consigned  to  "self".  It  is alleged  that  the  Rail  way Receipts  with  regard to these six boxes were  endorsed  in favour  of Morvi Mercantile Bank Ltd. (hereinafter  referred to as the plaintiff-bank) against an advance  of Rs.  20,000 by  the plaintiff-bank on security of the Railway  Receipts. The  G.I.P.  Railway offered to deliver the boxes  at  Okhla rai1way  station but the plaintiff-bank declined  to  accept the same alleging that the boxes were not those    (1) (1916) L.R. 43 I.A. 164.    (2) (1934) L.R. 61 I.A. 416, 423. 266   which  were consigned from Thana station.  The  plaintiff- bank filed   Civil, Suit No. 50 of 1950 in the Court of  the Civil Judge, Senior   Division, Thana, claiming a sum of Rs. 35,000  as  damages for   breach of contract. The  suit  was contested by the defendants  on   the ground that  identical boxes  which  were  consigned by the firm    at  Thana  were offered  to the plaintiff-bank who declined to accept    the same  and the Railway Administration had, not  committed  an breach  of contract and, therefore, the Union of  India  was not  liable   to pay any damages. The trial Judge held  that the boxes Consigned by the firm contained "menthol crystals" and  by  the  unlawful   conduct of  the  employees  of  the railway administration the contents of the boxes were  lost, but he took the view that the plaintiff bank. as endorsee of the   railway  receipts,  was  not  entitled  to   sue   for compensation  for loss of the consignments. In  taking  that view    the learned Civil Judge followed a decision  of  the Bombay High   Court in Shamji Bhanji & Co. v. North  western Railway  Company(1). The Civil Judge  accordingly  dismissed the  suit by a judgment and decree dated January  15,  1953. Against that decision the plaintiff-bank preferred an appeal to the Bombay High Court which continued the findings of the Civil  Judge that tile Railway failed’ to deliver the  boxes at Okhla and the  boxes  contained  "menthol crystals".  The High  Court also held that  the plaintiff-bank assignees  of the railway receipt was entitled to bring a suit for damages for breach of contract against the Union of India though the damages  would  be limited to the loss of its  security.  In taking  this  view  the Bombay High Court  relied  upon  its previous  decision  in   The  Union  of  India  v.  Taherali Isaji(2).   The  first  question  for determination in  this  case  is whether  there  was  a valid pledge  of  boxes  of  "menthol crystals"   in  favour         of  the   plaintiff-bank   by endorsement on the railway receipts by the firm.   In English Law a pledge arises when goods are delivered by one person called the ’pledgor’ to another person called the ’pledgee"  to be held as security for the payment of a  debt or  for discharge of some other obligation upon the  express or  implied  understanding that the  subject-matter  of  the pledge is to be restored to the pledgor as soon as the  debt or  other obligation is discharged. It is essential for  the creation of a pledge that there should be a delivery of  the goods comprised therein. In other words, a pledge cannot  be created  except by delivery of the possession of  the  thing pledged,  either  actual  or  constructive.  It  involved  a bailment.  If ’the pledgor had actual goods in his  physical possession,  he could effect the pledge by actual  delivery; but in other cases he could give possession by some symbolic act, such as handing over the key of the store in which they were.  If.  however, the goods were in the  actual  physical possession  of  a third person, who held for the  bailor  so that  in  law his possession was that of  the  bailor,  this pledge  could’ be effected by a change of the  character  of

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the possession of the (1) A.I.R. 1947 Bomb.169.  (2)(1956)58 Bomb L.R. 650.               267 third party, that is by an order to him from the pledgor  to hold  for  the pledgee, the change being  perfected  by  the third  party  attorning to the pledgee,  thus  acknowledging that  he  thereupon held for’ the latter. There was  thus  a change of possession and a constructive delivery; the  goods in  the  hands  of the third party  came   by  this  process constructively in the  possession of the pledge.  But. where goods  were  represented by documents the  transfer  of  the documents  did not change the possession of the goods,  save for’   one  exception,  unless  the   custodian    (carrier, warehouseman  or’  such) was notified of  the  transfer  and agreed to hold in future as bailee for the piedgee. The  one exception  was the case of bills of lading, the transfer  of which  by  the law merchant operated as a  transfer  of  the possession of, as well as the property in, the goods.,  This exception  has  been  explained  on  the  ground  that   the goodsbeing at sea the master could not be notified; the true explanation  was  perhaps  that it was a  rule  of  the  law merchant,  developed  in  order  to  facilitate   mercantile transactions, whereas the process of  pledging goods on land was regulated by the narrower rule of the common law.     The position in English Law, therefore, was that in  the case  of delivery of documents of title other than bills  of lading, a pled of the documents is merely a page of the ipsa corpora  of  them, for the transfer of  documents  does  not change  the  possession of the goods  unless  the  custodian (carrier,   warehouseman  or  such) was  not  filed  of  the transfer  and  agreed to hold in future as  bailee  for  the pledgee.  In Inglis v. Robertson and Baxter(1). It was  held by  the  House  of  Lords that where  goods  are  lodged  in warehouses in Scotland a pledgee of the goods must, to  make effective  all real rights which depend on the  constructive delivery  of  the goods, give notice of the  pledge  to  the warehouse-keeper. The Factors Act 1889 enacts:                   "S.3.  A pledge of the documents of  title               to goods shall be deemed to be a pledge of the               goods.";  and s. 1: ’For the purposes of  this               Act’ (sub-s. 5). The expression ’pledge’ shall               include  any contract, pledging, or  giving  a               lien   or  security  on,  goods,  whether   in               consideration of an original advance or of any               further  or  continuing  advance  or  of   any               pecuniary liability’. Sect. 9 prescribes  that               the  effect  of delivery or  transfer  of  the               documents  of  title of the  goods  under  any               pledge &c., by a person who having bought  the               goods  obtains with the consent of the  seller               possession of the goods or documents of title,               shall  have the same effect as if  the  person               making   the  delivery  or  transfer  were   a               mercantile agent in possession of the goods or               documents  of  title with the consent  of  the               owner." Goods were stored by G, a domiciled Englishman, in a  bonded warehouse  in  Glasgow, transferred into the name  of  G  as owner; and the Warehouse-keeper issued to G delivery  orders showing that (1) (1898) A.C. 616. 268 the  goods were held to G’s order or assigns by  endorsement ’hereon’. G obtained a loan from I an English merchant,  and

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delivered  to  him  in England  a  letter  of  hypothecation stating  that he deposited a part of the goods with  him  in security, with power of sale, and G endorsed and handed to I the delivery warrants. I did not intimate or give notice  of the right he had acquired to the warehouse-keeper. R. &  B., claiming as personal creditors of G, .arrested the goods  in the hands of the warehouse-keeper and then raised an  action against  him  in  the Scottish Court  claiming  through  the arrestment  a preferable right thereto. It was held  by  the House  of  Lords  that s. 3 of the Factors  Act,  1889,  was merely  intended to define the full effect of the pledge  of the documents of title made by a mercantile agent, and  that it  had  no application to the case .of the  pledge  of  the documents of title by one in the position of G, ’who was not a mercantile agent within the meaning of the Act; nor was  G a  pledgor within s. 9 of the same Act. At pages 625 to  627 Lord Watson states:                     I  can see no reason to doubt  that,  by               Scottish   law  as  ’well  as   English,   the               endorsement  and  handing  over  of   delivery               orders  in  security of a loan, along  with  a               letter  professing  to hypothecate  the  goods               themselves,   is   sufficient  in   law,   and               according    to   mercantile   practice,    to               constitute a pledge of the documents of title,               whatever  may be the value and effect  of  the               right so constituted. In my opinion, the right               so created, whether in England or in Scotland,               will  give the pledgee a right to  retain  the               ipso  corpora of the documents of title  until               his advance is repaid. The crucial question in               this  case is whether the right goes  farther,               and vests in the pledgee of the documents, not               a  jus ad rein merely, but a real interest  in               the goods  to which these documents relates.                     It  was not disputed by the  appellant’s               counsel, and it is hardly necessary to repeat,               that  by  the   common  law  of  Scotland  the               indorsation     and      hypothecation      of               delivery  .orders,  although it may  give  the               pledgee a right to retain the documents,  does               not give him any real right in the goods which               they  represent.  He can only attain  to  that               right by presenting the delivery orders to the               custodier  by  whom  they  were  granted,  and               obtaining  delivery of the goods from him,  or               by making such intimation of his right to  the               custodier  as will make it the legal  duty  of               the  latter  to hold the goods  for  him.  His               right, which in so far as it   relates to  the               goods is in the nature of jus ad rem,  will be               defeated  if,  before he has  either  obtained               delivery  or given such intimation, the  goods               are validly attached in       the hands of the               custodier by a creditor of the person for whom               the custodier holds them."               269 The principle is reiterated by the House of Lords in  Dublin City  Distillery Ltd. v. Doherty(1). in which the  plaintiff advanced  moneys to a distillery company on the security  of manufactured  whisky of the company stored in a  ware-house. Neither  the  company nor the excise  officer  could  obtain access to the warehouse without the assistance of the other, and   the    whisky   could  only  be   delivered   out   on presentation  to the  excise officer  of a special form   of

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warrant  supplied  by  the Crown. On the  occasion  of  each advance  the  company entered the name of the  plaintiff  in pencil  in their stock-book opposite the particulars of  the whisky  intended  to be pledged  and   delivered    to   the plaintiff    (1)   an   ordinary trade  invoice  and  (2)  a document  called a warrant, which described the  particulars of  the  whisky and stated that it was  deliverable  to  the plaintiff or his assigns. It was held by the House of  Lords that the plaintiff was not entitled to a valid pledge on the whisky  comprised in the warrants. At pages 843 and  847  of the  Report  Lord Atkinson states the law on  the  point  as follows:                     "As  to the second question, it was  not               disputed   that,  according  to  the  law   of               England, and indeed of Scotland. a contract to               pledge  a specific chattel, even though  money               be  advanced  on the faith of it,  is  not  in               itself sufficient to pass any special property               in the chattel to the pledgee. Delivery is, in               addition, absolutely necessary to complete the               pledge;  but  of course it is  enough  if  the               delivery be constructive, or symbolical, as it               is called,  instead  of actual.                     The  example  of  constructive  delivery               frequently given is the delivery of the key of               the  store  or house in which the  goods  have               been placed; but that is because, in the words               of Lord Hardwicke, ’it is the way of coming at               the possession, or to make use of the  thing’,               Ward  v. Turner (1751) 2 Ves. Sen. 431  at  P.               443).                      The  giving by the owner of goods of  a               delivery order to the warehouse man does  not,               unless  some  positive act be done  under  it,               operate  as  a constructive  delivery  of  the               goods  to which it relates: Mc Ewan v.   Smith               (1849)  2 H.L.C. 309). And the delivery  of  a               warrant   such  as  those  delivered  to   the               respondent  in  the present case  is,  in  the               ordinary case, according to Parke B., no  more               than  an acknowledgment by the  warehouse  man               that  the goods are deliverable to the  person               named  therein or to any one he  may  appoint.               The warehouseman holds the goods as the  agent               of the owner until he has attorney in some way               to  this person, and agreed to hold the  goods               for  him;  then, and not till then,  does  the               warehouseman.become  a bailee for the  latter;               and  then,  and  not till  then,  is  there  a               constructive   delivery  of  the  goods.   The               delivery and’               (1) (1914) A.C. 823.               270               receipt of the warrant does not per se  amount               to a delivery and receipt of the goods: Farina               v.  Home  (16 M. & W. 119);  Bentall  v.  Burn               ((1824) 3 B.&C. 423)."  In  our  opinion,  the position  in   Indian   Law  is  not different  Section 172 of the Contract Act which  defines  a ’pledge’ affirms the English Common Law. Section 172  states that  "the  bailment of goods as security for payment  of  a debt or performance of a promise" is called’ a "pledge". The bailor is in this case called the "pawnor" and the bailee is called the "pawnee". According to s. |48 of the Contract Act "a  bailment  is  the delivery of goods by  one  .person  to

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another for some purpose, upon a contract that  they  shall, when  the purpose is accomplished, be returned or  otherwise disposed  of  according  to the  directions  of  the  person delivering  them. The person delivering the goods is  called the  ’bailor’.  The  person to whom they  are  delivered  is called the ’bailee’. Section 149 states that the delivery to the  bailee  may  be made by doing anything  which  has  the effect  of  putting  the  goods in  the  possession  of  the intended bailee or of any person authorised to hold them  on his  behalf. Reference should also be made to s. 178 of  the Contract  Act,  as  it  stood  before  the  Indian  Contract (Amendment) Act, 1930. The original s. 178 states:                     "A  person who is in possession  of  any               goods, or of any biII of lading, dock-warrant,               warehouse-keeper’s  certificate   wharfinger’s               certificate, or warrant or order for delivery,               or  any other document of title to goods,  may               make   a  valid  pledge  of  such   goods   or               documents:  Provided that the pawnee  acts  in               good  faith and under circumstances which  are               not such as to raise a reasonable  presumption               that the pawnor is acting improper                   Provided also that such goods or documents               have not been .obtained from the lawful owner,               or from any person in lawful custody of  them,               by means of an offence or fraud."   By  the Indian Contract (Amendment) Act, 1930 the  section was  repealed and the subject-matter of that section is  now spread over the present ss. 178 and 178A of the Contract Act and  s. 30 of the Indian Sale of Goods Act. The new  section 178 of the Contract Act states:                     "Where  a mercantile agent is, with  the               consent  of the owner, in possession of  goods               or the documents of title to goods, any pledge               made  by  him,  when acting  in  the  ordinary               course  of  business of  a  mercantile  agent,               shall  be  as valid as if  he  were  expressly               authorised  by the owner of the goods to  make               the  same; provided* that the pawnee  acts  in               good  faith  and has not at the  time  of  the               pledge notice that the pawnor has no authority               to pledge.                Explanation--in this section the  expressions               mercantile    agent’   and    ’documents    of               title shall have the meanings assigned to them               in the Indian Sale of Goods Act, 1930."               271               Section  30  of the Indian Sale of  Goods  Act               provides as follows:                      "30(1)  Where  a  person,  having  sold               goods,  continues or is in possession  of  the               goods  or  of the documents of  title  to  the               goods, the delivery or transfer by that person               or  by a mercantile agent acting for  him,  of               the  goods  or documents of  title  under  any               sale,  pledge or other disposition thereof  to               any  person receiving the same in  good  faith               and without notice of the previous sale  shall               have  the same effect as if the person  making               the   delivery  or  transfer  were   expressly               authorised  by the owner of the goods to  make               the same                      Where a person, having bought or agreed               to buy goods, obtains, with the consent of the               seller.   possession  cf  the  goods  or   the

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             documents of title to the goods, the  delivery               or   transfer   by  that  person  or    by   a               mercantile agent acting for him. of the .goods               or  documents of title under any sale,  pledge               of’  other  disposition the  thereof   to  any               person  receiving the same in good  faith  and               without  notice of any/ten or other  right  of               the  original seller in respect of  the  goods               shall have effect as if such lien or right did               not               exist."  Section  178A  of  the  Contract  Act               states:                   "178A.   When  the  pawnor  has   obtained               possession of the goods pledged by him  trader               a  contract  voidable  under  section  19   or               section  19A,  but the contract has  not  been               rescinded  at  the  time of  the  pledge,  the               pawnee  acquires a good’ title to  the  goods.               provided  he  acts in good faith  and  without               notice of the pawnor’s defect of title." After  the passing of the Indian Contract  (Amendment)  Act, 1930 the legal position with regard to the pledge of railway receipts  is  exactly  the same in Indian law as  it  is  in English law and consequently the owner of the goods  cannot, pledge the goods represented by the railway receipts in  the present case unless the railway authorities are notified  of the transfer and they agree to hold the goods as bailee  for the piedgee.     On  behalf  of the appellants Mr.  Bhatt  placed  strong reliance  upon  the decision of the  Judicial  Committee  in Official  Assignee  of Madras v. Mercantile Bank  of  India, Limited  (1) in which it  was held that a  railway  receipt, providing that delivery of the consigned goods is to be made upon  the  receipt being given up by the consignee or  by  a person  whom he names by endorsement thereon, is a  document of  title  within the meaning of the  Indian  Contract  Act, 1872,  (s. 178 for which a new section was  substituted.  by the  amending  Act IV of 1930), and a pledge  of  a  railway receipt  operated under the repealed section as a pledge  of the  goods. But this decision is not of much  assistance  to the   appellants,   because  it  was  concerned   with   the interpretation  and legal effect of s. 178 of  the  Contract Act as it stood before the Indian Contract (Amending) (1) (1934) 61 I.A. 416. 272 Act  (Amending Act IV of 1930). It was held by the  Judicial Committee  in that case that under the repealed s.  178  the owner  of  the goods could obtain a loan on  security  of  a pledge of the goods by the pledge of the documents of title. But  it is significant to note that s. 178 has been  amended by  the  Amending Act, 1930 and under  the  present  section statutory  power  to pledge goods or documents of  title  is expressly confined to mercantile agents while acting in  the customary  course  of  the business.  There  are  two  other instances  in  which a person other than the  owner  of  the goods  may  make a valid pledge of the goods and  these  two instances are dealt with in s. 178A of the Contract Act  and s.  30   of  the   Indian Sale of  Goods  Act.  The  result, therefore, under the amended law is that a valid pledge  can no longer be made by every person "in possession" of  goods. It can only be made by a mercantile agent as provided in the new  s.  178  of the Contract Act or by  a  person  who  has obtained  possession of the goods under a contract  voidable under s. 19 or s. 19A of the Contract Act as provided in  s. 178A,  or by a seller or by a buyer in possession  of  goods

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after sale  as provided in s. 30 of the Indian Sale of Goods Act. Learned Counsel for the appellants also referred to the decision  of  the  Judicial Committee  in  Ramdas  Vithaldas Durbar  v.S.  Amerchand  &  Co.(1)  in  which  the  Judicial Committee  explained  the  legal effect of  s.  103  of  the Contract  Act, as it originally stood. It was held by   Lord Parker  that the railway receipts are instruments  of  title within the meaning of the Indian Contract Act. 1872, s. 103, and  that  the sellers were therefore not entitled  to  stop the  good’s in transit except upon payment or tender to  the pledgees  of the advances made by them. It is manifest  that the  decision  cannot afford assistance to  the  appellants. because, in the first place, it related to the  construction of old s. 103 of the Contract Act in regard to the right  of stoppage  of  goods in transit, and, in  the  second  place, there  has been a significant change in the law in  view  of the  legislative amendment of s. 178 of the Contract Act  by the Indian Contract (Amendment) Act. 1930.     In the present case, therefore, our concluded opinion is that there is no valid pledge of the consignments of menthol crystals  represented by the railway receipts in  favour  of the plaintiff-bank and the finding of the High Court on this point is  erroneous in law     We  shall  next  deal  with  the  question  whether  the plaintiff  can sue on the contract of bailment  even  though there  is  no  valid pledge of the goods in  favour  of  the plaintiff. It was contended on behalf of the appellants that the plaintiff-bank was the endorse of railway receipts  and, therefore,  it  was  entitled to  sue  the  defendants   for compensation  for  the loss of the goods. We are  unable  to accept  this argument as  correct.  At Common law a bill  of lading  was not negotiable like a bill of exchange so as  to enable the endorsee to maharaja an action upon it in his own name, the effect of the (1914) 43 I.A. 164. 273 of  the endorsement being only to transfer the  property  in the  goods but not the contract itself. It was  observed  by Alderson,  B. in Thompson v. Dominy (1) as follows:                     "This   is  another  instance   of   the               confusion, as  Lord Ellenborough in Waring  v.               Cox  expresses  it,  which  ’has  arisen  from               similitude      reasoning      upon       this               subject  Because,  in Lickbarrow v.  Mason,  a               bill  of lading was held to be negotiable,  it               has  been contended that instrument  possesses               all the properties of a bill of exchange;  but               it  would  lead  to  absurdity  to  carry  the               doctrine to that length. The word ’negotiable’               was not used in the sense in which it is  used               as  applicable to a bill of exchange,  but  as               passing the property in the goods only."     Delivery  orders,  warrants,  written  engagements    to deliver goods and similar documents are in the same position as the bills of lading were before the Bills of Lading  Act, 1855  (18 & 19 Vic. c. 111 ). They are mere promises by  the seller,  being  the  issuer or transferor,  to  deliver,  or authorise  the  buyer to receive possession. It is  only  by reason of the enactment of the Bills of Lading Act, 1855 (18 &  19 Vic. c. 111) that the issue or transfer of a  bill  of lading  operates  as a delivery to the buyer  of  the  goods shipped, and the consignee of the bill of lading is entitled to  sue  upon the contract contained in the same.  The  same provisions are contained in the Bills of Lading Act (Act IX) of  1856 in India. It is true that the railway  receipt  and

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all other documents enumerated in s. 2, sub-s. (4), Sale  of Goods  Act,  are  assimilated to bills  of  lading  for  the purposes  of the right of stoppage in transit under s.  103, Contract  Act  and  a pledge under s. 178, Contract  Act  as explained by  the  Judicial Committee  in  Ramdas  Vithaldas v.  S.  Amerchand& Co.(2) and Official assignee of Madras v. Mercantile  Bank  of  India(1).  But  the  effect  of  these decisions is not to assimilate the railway receipt to a biIl of lading for all purposes whatsoever. The legal position of the railway receipt is the same as it was in English law and that position is not affected at all by the enactment of  s. 2,  sub. s. (4) of’ the Sale of Goods Act, or the  enactment of  provisions analogous to ss. 103 and 178 of the  Contract Act.  As  stated in Halsbury’s. Laws  of  England,  Hailsham Edition, Vol. 29, at p. 143, Art. 179:                   "Such documents, although they may purport               to   be,  or  may  commonly  be  treated   as,               transferable, are not negotiable  instruments,               unless there be a trade usage to  that effect.               Accordingly, subject to the provisions of  the               Factors  Act  1889, the  owner  cannot   claim               delivery  of the goods except from the  seller               who  is the issuer or immediate transferor  of               the document." It  is manifest that there are no rights created  merely  by reason  of the endorsement of a Railway Receipt between  the endorsee and   (1) 153 E.R. 53x.   (2) (1916) LIt. 43 I.A. 164.   (3) (1934) L.R. 61 I.A. 416, 423. 274 the railway company which has issued the railway receipt  to the  .consignee,  the  only remedy  of  the  endorsee  being against the endorser. This was the position in English  law, except in the case of .bills of lading the transfer of which by the Law Merchant operated as a transfer of the possession of as well as the property in ’the goods as observed by Lord Wright in Official Assignee of Madras v. Mercantile Bank  of India,  Limited(1)  at page 422. The endorsee may  bring  an action  as an assignee of the contract of carriage but  then the  assignment has to be proved as in every other case.  It is true that by reason of s. 137 of the Transfer of Property Act,   the  provisions  relating  to  the  transfer  of   an actionable claim do not apply to a railway receipt, and  the assignment need not be according to any particular form, but a  railway receipt is not like d negotiable instrument  (See Mercantile  Bank  of India Ltd. v.  Centarl  Bank  of  India Ltd.(2). It is also apparent that subject to the  exceptions mentioned in ss. 30 and 53 of the Indian Sale of Goods  Act. 1930, and s  178  of  the Contract Act, 1872. its  possessor cannot  give  a better title to the goods than he  has.  The negotiation of the railway receipt may pass the property  in the  goods. but it does not transfer the contract  contained in  the receipt or the statutory contract under s.  74-E  of the  Indian  Railways Act. Negotiability is  a  creature  of statute or mercantile usage, not of judicial decisions apart from either. So, in the absence of any usage of trade or any statutory provision to that effect, d railway receipt cannot be  accorded  the benefits which flow   from   negotiability under  the Negotiable Instruments Act. so as 10 entitle  the endorsee as the holder for the time being of the document of title to sue the carrier-the railway authorities--in his own name.  If file claim of the  plaintiff  is  as  an  ordinary assignee of the contract of carriage, then the plaintiff has to  prove the assignment ’in his favour. In the present case

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the plaintiff-bank has furnished no such proof of assignment in  its favour. In view of cl. (3) of the notice printed  at the  back  of  the  railway receipt  it  is  clear  that  an endorsement  made on the face of the railway receipt by  the consignee  is  meant  to indicate the  person  to  whom  the consignee  wishes  delivery of the goods to be  made  if  he himself  does  not attend to take delivery.  An  endorsement made  by  the consignee on the face of the  railway  receipt requesting  the railway company to deliver the goods to  the endorsee  merely  conveys to the railway  company  that  the person  in  whose  favour the endorsement  is  made  by  the consignee  is constituted by him a person to whom he  wishes that  delivery  of the goods should be made on  his  behalf. Clause (3) of the notice printed at the back of the  railway receipt states:                      "That the railway receipt given by  the               railway company for the articles delivered for               conveyance, must be given up at destination by               the   consignee  to  the    railway   company,               otherwise  the railway may refuse  to  deliver               and that the signature of the consignee or his               agent in the delivery               (1) (1934) L.R. 61 I ,A. 416.. .(2) (1937)  65               I.A. 75.               275               book  at  destination  shall  be  evidence  of               complete delivery.               If  the consignee does not himself  attend  to               take delivery   he must endorse on the receipt               a request for delivery to   the person to whom               he wishes it made, and if the receipt   is not               produced,  the delivery of the goods  may,  at               the  discretion  of the  railway  company,  be               withheld  until  the person  entitled  in  its               opinion   to   receive  them  has   given   an               indemnity  to the satisfaction of the  railway               company." In  the present case the plaintiff has not proved by  proper evidence  an assignment of the Contract of Carriage. In  our opinion,  the law on the point has been correctly stated  by Bhagwati,  J. in Shamji Bhanji & Co. v. North  Western  Rly. Co.(1).  It  follows, therefore, that the plaintiff  has  no right to bring the present suit against the Union of India.   Counsel  for  appellant has referred to  the  practice  of merchants in treating a railway receipt as a symbol of goods and in making pledge of goods by pledge of railway receipts, but no such practice or custom has been alleged or proved on behalf of the plaintiff in the present case. In the  absence of  such allegation or proof it is not open to the Court  to take  any judicial notice of any such practice. Counsel  for appellant  also  referred  to  possible  inconvenience   and hardship  to merchants if such a practice is not  judicially recognised, but the argument from inconvenience and hardship is  a dangerous one and is only admissible  in  construction where the meaning of the statute is obscure.  In Sutters  v. Briggs(2). Lord Birkenhead stated: "The consequences of this view of s. 2 of the Gaming    Act, 1835  will  no  doubt be extremely  inconvenient  to    many persons. But this is not a matter proper to influence    the House  unless  in  a doubtful case  affording  foothold  for balanced  speculation  as to the probable intention  of  the legislature." In  the present case the language of s. 178 of the  Contract Act  is  clear  and  explicit  and  if  any  hardship   and’ inconvenience   is  felt  it  is  for  Parliament  to   take

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appropriate steps to amend the law and not for the courts to legislate under the guise of interpretation. For the reasons expressed, we hold-that Civil Appeal 474  of 1962  brought by the plaintiff-bank should be dismissed  and Civil  Appeal  475  of 1962 brought by the  Union  of  India through  the  General  Manager, Central  Railway  should  be allowed  with  costs  and’ the suit  of  the  plaintiff-bank should be dismissed with costs   throughout.                       ORDER BY COURT In accordance with the majority Judgment. Civil Appeal   474 of  1962  is  allowed  and  Civil  Appeal  475  of  1962  is dismissed,plaitiff’s suit is decreed with costs throughout. (1) A.I.R. 1947 Bom. 169. I.A.C. 1. (2) [1922] I.A.C.1. N)3SCI--5 276