Dena Bank vs Mrs. Glorphis James and others

Varghese Kalliath, J.—This is an appeal by the plaintiff. Suit is for recovery of money under three heads, plaintiff instituted the suit. Defendants have borrowed money from the plaintiff/Bank under bill purchase account, hypothecation account and cash credit pledge: We are now concerned in this appeal only with regard to the decree that has been denied on cash credit pledge. In regard to the other two items, a decree has been granted by the trial court and the defendants have not filed any appeal and that part of the decree has become final. As regards the cash credit pledge, only a short point that has to be considered in this case. The case of the plaintiff/Bank is that an amount of Rs. 3,83,906/- is to be realised from defendants 1 and 2 under cash credit facility with interest at the rate of 18.5%. The transaction is admitted by defendants 1 and 2. This amount was advanced on the security of a key loan pledge of certain goods-paints.

In regard to this claim, the contention of the defendants is that the plaintiff is not entitled to get a decree for the amount; because the plaintiff was not in a position to re-deliver the goods to defendants 1 and 2, on payment of the amount. It is plainly stated in the written statement that the pledged articles were in the safe custody of the plaintiff and so the defendants are not having any access to them. While so, the defendants on many occasions requested the plaintiff to dispose of the pledged articles and to credit the value of the same in their account. But the plaintiff was quite indifferent and negligent whereby the articles pledged perished. There is no serious dispute in this case at any rate at this stage that the articles pledged were perished, though on other points there is serious controversy.

The question considered by the court below is, in the circumstances when the pledged articles got perished and the Bank was not in a position to deliver it in the same condition in which it has been received, whether the plaintiff is entitled to a decree when the defendants have admitted that they have borrowed the amount shown in the plaint. The court below found that the Bank is also responsible for the deterioration and ultimate loss of the pledged articles and thereby they themselves debilitated in the matter of delivering back the the articles pledged. Plaintiff contended that the articles were kept in a room of the residential building of defendants 1 and 2. Though the key of the room was with the plaintiff/Bank, the plaintiff did not cause the sale of the pledged articles since the defendant was indifferent in disposing of the pledged articles in spite of advice by the Bank to dispose of the articles. However under these circumstances, it is now admitted by both sides (plaintiff and defendants) that the pledged articles were perished.

The trial court, after considering the various aspects of the matter found that the plaintiff is not entitled to a decree for the amount claimed under the cash credit facility, since the Bank was not able to re-deliver the articles pledged under that business head. In considering this aspect of the matter, the trial court observed that the Bank is in the position of a bailee and the Bank has not taken the proper care that was expected of a bailee and in that event, the Bank has no entitlement to get a decree. The exemption clause in the agreement of pledge also was considered by the trial court. But the trial court held that the exemption clause will not be potent enough to exonerate the liability of the plaintiff Bank as a bailee under Sections 151 and 152 of the Contract Act. For this, the trial court relied on the decision reported in 1967 S.C. 1322 (Lallan Prasad v. Rahmat Ali). Of course, in that decision, the Supreme Court, has said, relying on certain English decisions, that the pledged cannot maintain a suit for recovery of debt and retention of the pledged property.

In this case there is no serious contention that the Bank is claiming the amount advanced from the defendants and wanted to retain the pledged property. The pledged property has become valueless in this case. Defendants relied on 1967 S.C. 1322 and submitted that so long as the plaintiff is not in a position to deliver the pledged articles as it was delivered at the time of pledging plaintiff is disentitled to claim a decree.

We will be adverting to the above decision a little elaborately, but we may at this point say that in that decision, the Supreme Court has no occasion to consider the question whether there is any bar for a bailee to contract out of the provisions contained in section 151 and 152 of the Contract Act and the question how far the bailee is responsible when he was ready and willing to dispose of the pledged articles before it got deteriorated and it was frustrated on account of the indifferent attitude of the bailor in this case the pawnor.

In the case at hand, plaintiff has also very much relied on clause 17 of the agreement of pledge. In fact, in this case, Ext. A4 is the first agreement of pledge which was renewed by Ext. A19. In both these documents, Exts. A4 and A19, clause 17 is a clause exonerating the liability of the Bank. According to the plaintiff, even if there is a clause exonerating liability inclusive of on account of the negligence of the Bank, certainly they have to convince the court the extent of the operation of the clause in the circumstances unfolded in the case. We have to deal with the question of the extent of right of a bailee to have an exonerating clause like clause 17 of Exts. A4 and A19 and the extent and nature of its operations. Clause 17 reads thus:-

That the Bank shall not be in any way liable or responsible for any damage or depreciation which the goods for the time being pledged to the Bank and forming part of the security the subject of this Agreement or any part thereof may suffer or sustain on any account whatsoever while the same are in possession of the Bank during the continuance of this Agreement or thereafter and all such damage or depreciation shall be wholly on account of the Borrowers, howsoever the same may have been caused nor shall the Bank be responsible for any shortage resulting from theft or pilferage or otherwise however notwithstanding that the goods may be in the possession of or under the control of the Bank.

The question whether a bailee can have a contract with the bailor with a clause that even if the goods pledged got perished on account of the negligence of the bailee, the bailor has to suffer the loss and that the bailee has no responsibility, is a question on which there is divergence of opinion. So we feel that we are obliged to consider this aspect of the matter separately.

Counsel on both sides argued the case expansively and very ably. We proceed to consider this aspect of the matter first referring to Section 172 of the Indian Contract Act. Section 172 of the Indian Contract Act defines "Pledge", "pawnor" and "pawnee" - The bailment of goods as security for payment of a debt or performance of a promise is called "pledge". The bailor is this case called the "pawnor". The bailee is called "pawnee". Now we may refer to Section 148 of the Indian Contract Act which deals with ''bailment''. A ''bailment'' is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the direction 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 151 of the Indian Contract Act is important. It deals with the nature of care to be taken by the bailee. Section 151 of the Indian Contract Act reads thus:- "In all cases of bailment the bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quality and value as the goods bailed". Section 152 of the Indian Contract Act provides that the bailee, in the absence of any special contract is not responsible for the loss, destruction or deterioration of the thing bailed, if he has taken the amount of care delineated in Section 151.

Counsel for the appellant submitted that the correct law on the subject is the law that has been laid down in (1915) I.L.R.38 Mad 941 (Kariadan Kumber v. The British India Steam Navigation Company Limited). In that Division Bench decision rendered by Justice Sadasiva Ayyar, an earlier Full Bench decision reported in (1909) ILR 32 Mad 95 (Sheik Mohamad Ravuther v. The British India Steam Navigation Co. Ltd) has been referred. This case was dealing with the proper interpretation of bill of lading which provided clause of exemption from liability for the negligence of the servants of the ship owner and in dealing with that question, the court observed, following the privy council decision reported in (1909) A.C. 366 (Chartered Bank of India, Australia and China v. British India Steam Navigation Company Limited), that such a clause is valid. Sadasiva Iyer J. in (1915 ILR 38 Mad 941 said: "White, C.J., says on this point at page 107, "Mr. Sundara Ayyar contended that a contract which purported to relieve a shipowner from his liability as a carrier for negligence was contrary to public policy and should not be enforced. As pointed out by Walton, J., in Price & Co. v. Union Lighterage company (1903) 1 K.B., 750), the law of the United States of America forbids a carrier to exempt himself by contract from liability for negligence, whilst the law of England does not. I am of opinion that on a question of this character Courts in India ought to follow the law of England". Further it is said that a decision of the Privy Council though not in a case arising from India is binding on the courts in India.

The exemption clause provided exemption from all liabilities arising from whatsoever cause. This clause was challenged on the basis that it is opposed to public policy and hence void u/s 23 of the Indian Contract Act. In (1909) ILR 32 Mad 95 (FB) Chief Justice White and Wallis, J. said "In England it is competent to a shipowner to protect himself, by express contract, from liability for the negligence of himself or his servants. This is also the law applicable in India". Sankaran Nair, J. said: "The rule of English law, which allows shipowners to exempt themselves, by express contract, from liability for negligence, cannot be applied in India, as it is inconsistent with the provisions of the Indian Contract and the manifest intention of the Legislature in enacting such provisions...A contract limiting such liability will be opposed to public policy and void u/s 23 of the Contract Act, as it will be against the interests of the mercantile community and not necessary in the interests of the shipowners". As pointed out by Walton J. in Price & Co. v. Union Lighterage Company (1903) 1 K.B. 750), ''the law of England, unlike the law of the United States of America, does not forbid the carrier to exempt himself by contract from liability for the negligence of himself and his servants; but, if the carrier desires so to exempt himself, it requires that he shall do so in express, plain and nambiguous terms''. So far as the general question goes this is the law which has been received and applied by the Indian Courts". The Division Bench referred to several decisions: (1884) ILR 10 Cal 489 (Jellicoc v. The British India Steam Navigation Co.), (1905) ILR 28 Mad 400 (Hajee Ismail Sait v. The Company of the Messageries Maritimes of France) and (1909 ILR 32 Mad 95 (Sheik Mohamad Ravuther v. The British India Steam Navigation Co. Ltd). In the matter of bill of lading apart from the general law of contracts, there are special laws of Indian Carriers Act and Bills of Lading Act. There is no controversy that the ship owner is in the position of a bailee in respects of the goods entrusted to the ship owner for transmission and the owner of the goods is the bailor.

We may also quote some more passages from (1909) ILR 32 Mad 95. White C.J., referring to several English decisions of the Appeal Court, observed thus: "Having regard to the way in which the earlier authorities have been considered in the more recent cases, I do not propose to discuss the earlier cases which were cited in argument. I will merely say that as regards shipping contracts with the exception of Taubman v. The Pacific Steam Navigation Company (1872) 26 L.T. 704, I know of no case in which the shipowner has been held to be protected him from negligence unless the contract protected him from negligence in express terms. It seems doubtful whether this case should now be treated as a binding authority. Further, the contract there had reference to passenger''s baggage and it is not clear whether the shipowners were under any liability as common carriers with regard to this baggage''''. The learned judge made it clear that unless the contract exempts the ship owner from the liability for negligence ship owner as a bailee will be liable for the negligence. This postulates that the ship owner as a bailee can contract out of the liability envisaged u/s 151 read with Section 152 of the Contract Act.

Following the English Common Law, it has been held that a common carrier can get rid of his liability by unambiguous contract providing for exemption has been accepted in India: Justice Sankaran Nair though agreed in the conclusion, on facts, did not agree with the propositions laid down by the majority of the Bench. Justice Sankaran Nair said that the rule of English law, which allows shipowners to exempt themselves, by express contract, from liability for negligence, cannot be applied in India, as it is inconsistent with the provisions of the Indian Contract Act and the manifest intention of the legislature enacting such provisions. Clearly His Lordship said that a contract limiting such liability will be opposed to public policy and void u/s 23 of the Contract Act, as it will be against the interest of the mercantile community and not necessary in the interest of the shipowners. But it has to be remembered that it is not the majority view expressed in the Full Bench decision reported in (1909) ILR 32 Mad 95.

Counsel for the appellant referred to several decisions. In deference, we mention all these decisions. (1) AIR 1953 Mad 3 (British India Steam Navigation Company Limited v. T.P. Sokkalal Ram Sait) (2) AIR 1955 Mad 602) Home Insurance Co. v. Ramnath & Co.) (3) AIR 1959 Mad 285 (Indian Airlines Corporation v. Jothaji Maniram) (4) Rukmanand Ajitsaria Vs. Airways (India) Ltd. and Another (5) Indian Airlines Corporation Vs. Sm. Madhuri Chowdhuri and Others, and (6) State Bank of India Vs. Quality Bread Factory and Others, .

But we do not think that it is necessary to consider all those decisions for the purpose of resolving the issue before us. We may refer to AIR 1965 Calcutta 252. This case arose out of a tragic air crash at Nagpur when a Dakota air plane crashed soon after it started flying from Nagpur to Madras. Shortly the facts of the case can be summarised thus: Plaintiffs were the heirs and legal representatives of a deceased Passenger Sunil Baran Chowdhury and that the action was brought for their benefit. It was pleaded in the plaint that as a result of the accident, the passenger Sunil Baras was killed. The accident took place on 12th December, 1953 at 3.25 a.m. about two miles from the end of the runway of Sonegaon Airport Nagpur when the said plane attempted to land owing to engine trouble immediately after it had taken off from the said aerodrome. It was contended that the defendant/Indian Air Lines Corporation was liable for damages for breach of contract in not safely carrying the passenger and for breach of duties under the Carriage Act and/or the notification thereunder. There was an alternative plea in the plaint which alleged that the deceased died of the said accident which was caused by the negligence and/or misconduct of the defendant/Corporation or its agents.

The defendant/Indian Air Lines Corporation relied on the terms and conditions of the passenger''s Air Ticket dated 11th December, 1953 issued by the defendant to the said Sunil Baran Chowdhury. Defendant/Corporation relied on the exemption clause. The exemption clause provided that the carrier shall be under no liability whatsoever to the passenger, his/her heirs, legal representatives or dependants or their respective assigns for death, injury, or delay to the passengers or loss damage, detention or delay to his baggage or personal property arising out of the carriage or any other services or operations of the Carrier, whether or not caused, occasioned by the act, neglect or negligence or default of the carrier, or of pilot flying operational or other staff or employees or agents of the carrier or otherwise howsoever and the carrier shall be held indemnified against all claims, suits, actions, proceedings, damages, costs, charges and expenses in respect thereof arising out of or in connection with such carriage or other services or operations of the Carrier. Considering the exemption clause, the Court held that the obligation imposed by law on common carriers in India is not founded upon contract, but on the exercise of public employment for reward. The liability of common carries in India is not affected by the Contract Act 1872. Therefore, no question of testing the validity of this exemption clause with reference to Section 23 of the Contract Act could at all arise. The Contract Act does not profess to be a complete Code dealing with the law relating to contracts. An exemption clause of this kind was not hit by any section of the Contract Act, be it Section 23 or any other section, because the Contract Act itself had no application. No Act applies to internal carriage by air. The court further considered that the exemption clause could not be severed from the other terms of the contract and that it was the very basis and foundation of the contract of carriage. The carrier said that he was prepared to take the passenger by air provided the passenger exempted him from liability for negligence. Such a clause was the foundation of the contract. No doubt the carriage was for the price of the ticket but then that carriage and that price were only on that very condition that the carrier shall be exempt from any liability as stated is the exemption clause.

The judgment of Justice Sankaran Nair was also referred to in Indian Airlines Corporation Vs. Sm. Madhuri Chowdhuri and Others, of this decision summarises the point of law discussed in (1909) ILR 32 Mad 95 We feel that it is apposite to quote paragraph 29.

The argument that Section 23 of the Contract Act was not considered in that case cannot also be a reason to hold that this particular section of the Contract Act makes this exemption clause bad. In The Bombay Steam Navigation Co. Ltd. Vs. Vasudev Baburao Kamat, the view of Sankaran Nair, J., in his dissenting judgment in Sheik Mohammed Ravuther v. E.I.S.N. Co. Ltd. ILR 32 Mad 95, expressing the opinion that section 23 of the Contract Act hits. such exemption clause was rejected. In fact in a recent decision of the Madras High Court in Indian Airlines Corporation Vs. Jothaji Maniram, the point is made clear beyond doubt. There it is held that a common carrier is a person who professes himself ready to carry goods for every body. In the case of a common carrier the liability is higher, because he is considered to be in the position of insurer with regard to the goods entrusted to him. But where it is expressly stipulated between the parties that the carrier is not a common carrier, that conclusively shows that the carrier is not liable as a common carrier. It was also distinctly laid down by that decision that even assuming that the carrier could be deemed to be a common carrier or held liable as such it was open to such a carrier to contract himself out of liability as common carrier, or fix the limit of his liability. This Madras decision given by Ramachandra Iyer, J., reviews all the relevant decisions on this point. It also notices at page 238 of the report the view of Sankaran Nair. J., and rejects it.

The decision reported in (1971) 41 Com. Cas. 557 (Balkrishnan R. Dayma v. Bank of Jaipur Ltd.) is almost a similar case, which we are now considering. This was also a case of banker and customer and the liability was also under cash credit account. The question of relationship of bailor and bailee and the extent of liability of the Bank in case of loss of goods in custody of the bank and a clause in agreement making the borrower responsible for all losses were considered in this case. In this case the Bombay High Court particularly considered the case of the clause with respect to the question of negligence on the part of the Bank''s servants. After referring to English decisions including Price & Co. v. Union Lighterate Co. (1904) 1 K.B. 412 (C,A), the court held that "on a reasonable business like construction of clause 7 of the agreement, which provided, inter alia, that "during the continuance of this agreement the borrowers shall be responsible for all losses, damages or deterioration of the said goods caused by theft, fire rain, earthquake, lightning or any other cause whatever, notwithstanding that the goods may be in the possession or under the control of the Bank", the 1st defendant bank was exempt from liability for negligence on the part of their servants in taking care of the pledged goods". The court observed, after referring to the English decisions, Haigh v. Royal Mail Steam Packet Co (1880) 52 LJQB 640 (C.A.), Joseph Travers and Sons Ltd. v. Cooper (1915) 1, K.B. 75 (C.A.) and Manchester. Sheffield and Lincelnshire Railway Co. v. Brown (1883) 8 App. Cas. 703 that it is quite clear that if the words "any loss however caused" or "under any circumstances" are used, it is sufficient information given as a warning that the person who is entrusted with the goods is not going to be responsible for his servants not exercising due care and it is not necessary to employ express words like "whether caused by my servants negligence". As clause 7 contains the words, "loss caused by any other cause whatever" they are wide enough to include negligence on the part of the defendants servants in taking care of the said goods.

Counsel for respondents greatly relied on the decision reported in Central Bank of India Vs. Grains and Gunny Agencies and Others, . The Madhya Pradesh High Court, after referring to (1909) ILR 32 Mad, 95, observed that Justice Sankaran Nair, member of the Full Bench held that a contract by a bailee purporting to exempt him self wholly from liability for negligence was not valid. Further, the Division Bench (M.P.) observed that this conclusion is however contrary to the dicta of other two Judges, White C.J. and Wallis J. It is stated that the view taken by the two judges have been referred to by all High Courts including the Madras High Court in Karidan Kumar v. B.I.S.N. (1913) ILR 38 Mad 941), and Home Insurance Co. Ltd. and Another Vs. Ramnath and Co., Madras, . A contract of exemption from liability for any loss or damage due to the fault, carelessness or negligence of the staff binds the parties and is not hit by section 23 of the Contract Act. The Madhya Pradesh High Court also followed the same dictum as in Indian Airlines Corporation Vs. Sm. Madhuri Chowdhuri and Others, and Indian Airlines Corporation Vs. Jothaji Maniram, . After referring to those cases, the Division Bench (Madhya Pradesh) observed thus: "S. 152 is subject to S. 151 which requires the bailee to take care of the goods bailed to him as a man of ordinary prudence would take on his own goods. Section 161 makes the bailee responsible for delivery or tender at the proper time of the goods bailed and in default makes him liable for any lose, destruction or deterioration thereof from that time. It is well settled that in cases governed by sections 151 and 152, the loss or damages of goods entrusted to a bailee is prima facie evidence of negligence and therefore the burden to disprove negligence lies on the bailee. The bailee has to prove that he exercised due care and was not negligent. If, in spite of this the loss occurred, he is absolved of all responsibility". The court further considered the exemption clause and found that clause 9 of the pledge agreement exonerates the Bank from any liability for the loss, deterioration or damage whether caused by theft, rain, flood, earthquake, lightning or any other cause whatever and the court said that this clause nowhere exempts the Bank from liability for negligence of its servants. It was emphasised that the causes enumerated in the agreement are natural causes without the human intervention which could not be prevented by any amount of foresight or care. The statement that the agreement enumerates only natural causes is not very correct, the contract also contemplates loss of goods on account of theft which is an act of third party despite the care taken by the bailee and also any other clauses whatever.

Counsel submitted that even if the exemption clause. Viz. clause 17 is a valid clause. So long as it does not expressly include the exemption of liability on account of negligence of the Bank''s staff the exemption clause will not exonerate the Bank from not delivering the goods or for the liability of causing deterioration or ultimate dissipation of the goods. We do not agree with this proposition. We may also say that the approach made by the Madhya Pradesh High Court is not acceptable to us. It has to be noted that the Division Bench (Madhya Pradesh) has said: "This clause nowhere exempts the Rank from liability for negligence of its servants." This is a distinction without much force in the state in which a Bank has taken a pledge for the purpose of cash credit facility. Of course, we have to note that the Division Bench (Madhya Pradesh) has referred to the decision reported in AIR 1924 Rang. 356 (Hollandia Pinmen v. H. Oppenheiner). But in that decision what is stated is only that the exemption clause intended to safeguard against the negligence of employees must be explicit in the contract and that the special condition which is to limit the liability of the bailee must be made known to the bailor and assented to him. Certainly the Division Bench of the Madhya Pradesh High Court found that clause 9 of the agreement does not exonerate the Bank from liability for the loss on account of the negligence of its servants. Further the Division Bench said that it cannot endorse the liberal interpretation put on words "any other cause" by Bombay High Court in Balakrishnan''s case (1971) 41 Com. Cas. 557 (Bom).

In regard to the general words exempting the liability like ''whatsoever'', ''howsoever'' and ''any account whatsoever'', we shall advert to certain passages from Chitty on Contracts, 25th Edition. In paragraph 878, it is said that the liability for negligence may be effectively excluded if words are used which indicate that all damages, however caused, is to be comprehended within the exemption, or which throw the risk upon the plaintiff. If the defendant merely says "any loss", he is directing attention to the kinds of losses, and not to their cause or origin; so liability for negligence will not necessarily be excluded. But if he says "however caused" "from whatever other cause arising", howsoever arising" "arising from any cause whatsoever", relieves from all responsibility for any injury, delay, loss or damage, however caused", have been held to be effective. Further it is stated that any words in fact, which clearly indicate an intention to exclude all liability without exception, for example, "no liability whatever'', or "under any circumstances", will be considered sufficient.

The learned author has relied on the decided cases:

Joseph Travers & Sons Ltd. v. Cooper (1915) I.K.B. 73,

Gibaud v. G.E. Ry (1921) 2 K.B. 426,

Rutter v. Palmer (1922) 2 K.B 87, 94,

Ashby v. Tolhurst (1937)2 K.B. 242,

White v. Blackmoer (1972)2 Q.B. 651,

A.B. Farr Ltd. v. Admiralty (1953) 1 W.L.R. 965, (1961) 1 W.L.R. 367,

Cater (J) (Fine Worsteds Ltd. v. Hanson Haulage (Leeds) Ltd. (1965) 2 Q.B. 495,

James Archdale & Co. Ltd. v. Comservices Ltd. (1954) 1 W.L.R. 459,

Rutter v. Palmer (1922) 2 K.B. 87 etc.

In Volume 2, paragraph 2369 of Chitty On Contracts (Twenty-fifth edn.). It is noted thus :- "Subject to the provisions of the Unfair Contract Terms Act, 1977, the bailee may exempt himself from his common law liability by special conditions in the contract, but the exempting words must be express, unambiguous and adequate in all the circumstances since they will be construed strictly against the bailee."

It has also to be noted that: "Although the scope of an exemption clause is a question of construction, depending on the intention of the parties, the bailee will seldom be able to rely on his exemption clause if he deals with the chattel in an unauthorised manner and will require clear words for an exemption clause to be construed as wide enough to cover a fundamental breach of the contract of bailment". So there is absolutely no difficulty for us to hold that even for the negligence of the bailee, the bailee can be exonerated from all liabilities. The only necessary condition which provides for such exemption, must be express and clear and that the bailor must know the purport of the exemption clause clearly. In this case, it is very difficult for us to say that the bailor did not know about the exemption clause.

Now, our only task is to construe or interpret the clause. In clause 17 of Ext. A19, it is very clearly and plainly stated, "Bank shall not be.... may suffer or sustain on any account whatsoever while the same are in possession of the Bank during the continuance of this Agreement.... nor shall the Bank be responsible for any shortage resulting from theft or pilferage or otherwise notwithstanding that the goods may be in the possession of or under the control of the Bank". This clause, according to us, the basis of the passages from chitty on contracts we have already referred, makes it clear that the bailee is not responsible even for the negligence of the bailee.

Counsel for the respondents very strongly argued that the clause only exempts the Bank and not the employees of the Bank or the staff of the Bank. Of course, counsel has relied on AIR 1989 M.P. 28, which we have already said that it is difficult for us on to follow.

In this case, we have to examine what is the negligence which has to be exonerated. Respondents have pledged certain goods with the Bank/bailee. The pledged goods certainly are in the custody of the Bank. There are provisions in the pledge agreement enabling the Bank/bailee to sell it, if necessary or when the bailor/owner defaults in making the payment. In this case, the goods pledged are paints. Normally paints are kept in tight containers. Of course, there is no serious dispute that the goods perished.

Mishap happened is a matter of relevant consideration. It is also significant and relevant to examine the evidence to understand the stand taken by the defendant in the matter of disposing of the articles pledged. The case of the defendant is that the bailee has not exercised its power to sell the pledged goods at the appropriate time. In the evidence given by the second defendant, he has deposed thus:-

The above quoted statement in the background of the attendant circumstances reveal that the defendants are also instrumental for not disposing of the pledged articles at the appropriate time. Being owners of the goods the defendants'' attitude in the matter of disposing of the pledged goods by the pawner might have considerably influenced the Bank.

Now regarding the negligence of the staff as distinguished from the negligence of the Bank, it has to be noted that the power to sell the goods can be exercised only by the Bank and so, it has to be considered that the Bank has committed some negligence on its part or it failed to act according to the agreement and thereby the Bank alone is guilty of negligence. We say so in order to emphasise the fact that the negligence that can be attributed is that of the Bank, because only if the Bank decides to sell, the staff or the employees can effect the sale of the pledged articles. So, in effect there is no force in the argument that the employees are not taken in the exoneration clause, clause 17 of Ext. A 19. We are of opinion that considering the agreement and considering the nature of the bailee, the employees are taken in clause 17 of the agreement. Assuming that the employees are not taken in clause 17, we are of opinion that the negligence that can be considered is that of the Bank and certainly that has been exempted by clause 17 of the agreement.

We are of opinion in view of the deposition of 2nd defendant that it is not proper on our part to hold that the Bank, the bailee has not taken proper care as that of an owner, since the owner himself was only anxious to delay the sale of the pledged articles even when the Bank advised for the sale of the goods pledged. In this view the Bank has not committed any default as a bailee.

Now, we have to advert to one decision of the Supreme Court. which we have already noted, vis., AIR 1967 S. G. 1322 (Lallan Prasad v. Rahmat Ali). In fact, in this decision, the question of exemption was not at all considered, since that question never arose in that case and so not much reliance can be placed on that decision. The court below has gone wrong in relying on that decision without giving proper reliance on the exemption clause. We may also advert to the decision of a learned single Judge of this Court, reported in The Dhanalakshmi Bank Ltd. Vs. K.K. Jose alias Jose Mohan and Others, . In this decision the learned single Judge relied on the following passage from Lallan Prasad Vs. Rahmat Ali and Another, . "If by his default the pawnee is unable to return the security against payment of the debt, the pawner has a good defence to the action". But it has to be noted that immediately after that passage, the Supreme Court has observed that: "If it were otherwise the result would be that he would recover the debt and also retain the goods pledged and the pawner in such a case would be placed in a position where he incurs a greater liability than he bargained for under the contract of pledge". True the latter passage is also noticed by the learned single Judge. But it has to be noted that the Supreme Court has held that the pawnee cannot retain the goods and ask for the return of the amount advanced by the pawner.

In the case at hand, the pawnee/Bank is not retaining the goods and asking the pawnee/debtor to repay the debt. Further, the learned single judge had no occasion to consider any exemption clause which has been relied on in this case by the appellant herein.

Counsel for the respondents submitted that in the plaint, the Bank has not pleaded that the goods perished and that the debtor has to make the payment, since the Bank has no security and that the Bank is not in a position to realise the amount by effecting the sale of the goods. It was also submitted that the Bank/plaintiff has not referred to the exemption clause in Exts.A4 and A19. But we do not think that even though it has not been stated so the defendants were not put to any prejudice, since it is made clear in the short written statement filed by the defendants that the goods got perished. Further in the written statement, the defendants made an averment that on many occasions the defendants requested the plaintiff to dispose of the pledged articles and credit the value of the same in their account. But in evidence, they were not able to say anything to prove this aspect of the matter. As we said earlier, in fact, what the 2nd defendant said is that the Bank wanted to effect the sale of the goods, but it was not done presumably on account of the requests made by the defendants. Considering all the aspects of the case, we feel that the dismissal of the suit in regard to the amount under cash credit pledge, is unsustainable. We set aside the judgment to that extent. In the result, while confirming the decree passed by the court below, we direct the 1st and 2nd defendants to pay a further sum of Rs. 3,83,906/- with interest at the rate of 9% per annum from the date of suit till realisation. We have fixed the rate of interest taking into account the peculiar circumstances involved in this case. Parties will bear their respective costs in this appeal. This decree will not preclude the defendants from claiming any amount they are entitled to from the Insurance Company in respect of the policy taken for covering the pledged goods. If such a policy is with the Bank/plaintiff, the Bank is directed to return it.