Maradugula Venkataratnam and Others vs Kotala Ramanna and Others

The appellants instituted a suit in the District Court of Godaveri to establish their right to 650 logs of teakwood and for the recovery of the logs

or their value, Rs. 25,000, from the defendants. The lower court has dismissed the suit, holding that the appellants failed to establish their title to the

logs and hence this appeal.

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[Their Lordships after discussing the evidence proceeded as follows].

The effect of the transactions between the plaintiffs and 1st defendant seems to be this:--Timber was prepared with the help of moneys

advanced by plaintiffs to the 1st defendant under an agreement that they were to be sent to the plaintiffs so that the plaintiffs would sell and

appropriate the sale-proceeds towards the discharge of the debt owing by the 1st defendant to the plaintiffs and the timber having been

despatched from the forest where it was cut in pursuance of this agreement was in the course of transit when it was attached by the 2nd defendant.

The timber was intended for the plaintiffs and it had been cut and despatched under the directions of the two persons appointed under the Power-

of-Attorney executed by the 1st defendant, the sole object of which was that these two men should carry on the 1st defendant''s business in timber

in order to discharge the large debt owing by the 1st defendant to the plaintiffs. Under these circumstances, there can be no doubt, in our opinion,

that the plaintiffs acquired a right to the timber as soon as it was cut. The learned District Judge is of opinion that these facts gave the plaintiffs no

right to the timber. They had no lien on them by the implication of law in as much as, at the time it was attached, it was in the charge of the 1st

defendant''s men and there could be no lien so long as goods remained in possession of the owner. He has also found that there was no contract

between the plaintiffs and the 1st defendant creating a lien on the goods in question. We cannot agree with him either in his view of the law or in the

inference he has drawn from facts which must be taken to be well established. It seems to us that the timber having been prepared and put in the

course of transit in order that it may be sold by the plaintiffs in discharge of the debts due to them, the timber was specifically appropriated for the

satisfaction of such debts and there was thus a valid charge created on the timber. It was contended by Mr. T.R. Ramachandra Iyer, who

appeared for the respondent, that there could be no specific appropriation so long as the goods remained in charge of the 1st defendant''s servants,

but there is no authority for such a contention. No doubt, in most of the reported cases the goods which were held to be liable to a charge in

favour of the consignee had been placed in the hands of the master of a vessel or of a railway company. But the question whether there had been

appropriation of the goods by their owner for the benefit of a particular creditor is one of fact, and the law does not require any particular mode or

form of appropriation. If there has been a specific appropriation, then the consignor, if he is still in possession of the goods, will hold it merely as

trustee for the consignee. We think this case is exactly covered by the principle of the decision in Velji Hirji v. Bharmal Shripal I. L. R. (1896) B.

287 which is based on the rulings of the English courts. There, advances had been made against certain goods and those goods were despatched

by their owner to the commission agent who had made the advance for sale by him and the consignor drew hundis against the goods which the

consignee accepted and paid for on receiving the railway receipt for the goods. On the goods arriving at Bombay, where the consignee carried on

his business, they were attached by a judgment-creditor of the consignor while the goods were still at the railway station. It was held that the

commission agent was entitled to the goods, he having made advances against them and the attaching creditor was in no better position than the

consignor himself. The goods which were in the custody of the railway company at the time of the attachment were treated as if they were in the

possession of the consignor on account of or in trust for the consignee. We agree with the principle of this ruling which, in our opinion, is well

established by the decisions of English courts and is in consonance with obvious considerations of justice. It has long been settled that a contract to

sell or mortgage goods answering a particular description, which are to come into existence in the future, passes property in such goods when they

actually come into existence. See Holroyd v. Marshal (1861) 10 H.L. Cas. 191; Tailby v. Official Receiver (1888) 13 A.C. 523 and Collyer v.

Isaacs (1881) 19 Ch. D. 342. In the last of these cases occurs the well-known dictum of Sir George Jessel that a man cannot contract to assign

property which is to come into existence in the future and when it has come into existence, equity, treating as done that which ought to be done,

fastens upon that property, and the con tract to assign this becomes a, complete assignment. This proposition has been acted upon in India in more

than one case, and of these we need only mention Palaniappa v. Lakshmana I. L. R. (1892) M. 429; Baldeo Pershad Sahu v. A.B. Miller I. L. R.

(1904) C. 667. In the Calcutta case the assignment, which was in question there, was by way of mortgage of property to come into existence in

the future. That such a mortgage was valid in law was fully recognised, though it was held that no lien was created on the indigo produced in the

factory, which was the property in dispute there, to which money was advanced, because it was found that the money was not advanced for the

protection of the factory. In the present case the logs were prepared with the money lent by the plaintiffs under an agreement that the logs so

prepared should be sent to them in discharge of the debt due to them by the 1st defendant. In our opinion, directly the timber was cut under these

circumstances the plaintiffs acquired what has been called a special property in it. The timber when cut became specifically appropriated to the

contract, and it was even more clearly appropriated when it was despatched. See Virtue v. Jewell (1811) 4 Campbell 31; Anderson v. Clarke

(1824) 2 Bing. 20 : S.C. 27 R.R. 544; Bryans v. Nixy (1839) 4 M.& W. 775 : 1 H & H. 480 : 8 L.J. Ex. 137. In those cases, no doubt, the

goods were put in possession of the master of the vessel and bills of lading had been sent to the consignee, but as we nave just pointed out a

contract to assign goods for valuable consideration passes property in the goods in equity if the goods had been specially appropriated, and the

law does not require that the appropriation should be in any particular form. Nor does it make any difference in what form the contract is

expressed. It might be that if the assignment has been by delivery of a bill of landing, that would amount to assignment in law so as to enable the

consignee of the goods to maintain an action in favour of or against the master of the vessel. But we are not concerned with any such question here.

In this case there was an agreement that the 1st defendant should carry on the business through his agents Lakshmiah and Mutyalu solely for the

discharge of the debt due to the plaintiffs -and that the plaintiffs would be entitled to sell all timber cut with the help of the money advanced by them

in satisfaction of the debt due to them. We think the effect of this contract was clearly to create a charge on the timber and that, therefore, at the

time the timber was attached, the plaintiffs had a special property in it. This is not a case of the sort of lien mentioned in the Contract Act which an

unpaid vendor, a bailee, a factor, a banker, an agent, a pawnee or a finder of goods has on the goods in his possession. The contention of Mr.

T.R. Ramachandra Iyer, therefore, that the plaintiffs acquired no right to the timber because it was in the possession of the 1st defendant at the time

of the attachment, can have no weight. Mr. T.R. Ramachandra Iyer also argued that 5 years mentioned in the power of attorney executed in favour

of Lakshmiah and Mutyalu had expired on the date of the attachment, but that can make no difference in as much as the timber was cut while the 5

years had not yet expired.

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[Their Lordships after discussing other important questions disposed of the suit on the merits.]

In the result, we must allow the appeal and reverse the judgment of the District Judge. The plaintiffs will have a decree declaring the right to the

650 logs of timber in question. The plaintiffs shall have the costs of the suit in this Court and in the lower court.