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Judgment
Sambasiva Rao, J.—Though these appeals are three in number and the suits out of which they arose are also three in number, the soul and crux of this diversity in numbers are one and the same. Only the Plaintiffs-Appellants and the amounts of their claims differ from case to case. But both the Defendants-Respondents and the nature of the dispute are identical. Logically, therefore, same arguments have been addressed in the Court below as well as before us and the trial Court rendered a single judgment in all of them. We propose to do the same.
Since the facts in the three appeals are identical, it would be adequate if we state the facts in A.S. 651/74 which arises out of O.S. 134/69 wherein the Plaintiff has claimed the largest amount of the three matters. Suffice it to mention that A.S. Nos. 326 and 510 of 1975 arise out of O.S. No. 135 and 136 of 1969 respectively. The Plaintiffs-Appellants in the first two regular appeals are firms, while the Appellant in the last is a single individual. The 1st Defendant-1st Respondent in all the matter is also a firm. The 2nd Respondent is described as an individual. The Plaintiff firm filed O.S. 134/69 (it is out of this suit A.S. 651/74 arises) to recover a sum of Rs. 1,09,653.85 ps. with future interest and costs against both the Defendants severally and jointly. We will hereafter refer to the parties as they were in the suits. The Plaintiff is a registered firm doing the business of bankers, merchants and commission agents at Kurnool. 1st Defendant is a public carrier firm with its head office at Yemmiganur and one of its several branches in Kurnool, 2nd Defendant is a dealer in old metals and vessels in Kurnool town. He purchases old metals and vessels and sells them in bulk to wholesale merchants within and outside the State of Andhra Pradesh. He sends them by road as well as by rail. When he sends them by road, he has been entrusting the work of transport to the 1st Defendant public carrier firm through a system of way bills. These way bills, it may be clarified even at this juncture, are distinct from the way bills required under Andhra Pradesh General Sales Tax Act to be in form No. X; they are more in the nature of railway receipts and may even be called "lorry receipts". Bui throughout they have been referred to in this litigation as way bills.
It is the case of the Plaintiffs that the 1st Defendant prepared four copies of the way bills in addition to the original. The original and one copy are given to the consignor viz, 2nd Defendant. One is sent with the lorry to the destination. One is despatched to the head office of the 1st Defendant firm at Yemmiganur and one retained in the office of issue. These way bills are documents of title and transferable, according to the Plaintiff. After the goods are entrusted to the 1st Defendant and way bills are prepared, the 2nd Defendant used to endorse the original way bill to the Plaintiff''s firm, which are bankers and commission agents. An invoice is also drawn in the name of the party at the destination. The 2nd Defendant secures a loan from the Plaintiff by endorsing the way bill. The Plaintiff, in its turn, endorses these way bills to the Central Bank, Kurnool. Not only the way bill is endorsed in favour of the Central Bank but also the hundi which has been drawn by the consignor against the consignee. By making the preliminary advance of the loan, the Plaintiff gets its commission. Thus the Plaintiff realises the amounts which it has advanced to the 2nd Defendant by endorsing the way bill, the invoice and the hundi to the Central Bank. The Bank sends the documents to their branch office at the destination which on their receipt sends intimation to the consignee. The consignee goes to the branch of the Central Bank at the destination and collects the document after paying the amounts. The consignee thereupon goes to the branch office of the 1st Defendant at the destination armed with the way bill and the invoice and collects the goods on their presentation. Between December, 1966 and the 1st week of January, 1967 the 1st Defendant obtained as many as 21 way bills and hundies as described in Schedule A to the plaint. All these hundies were dishonoured as a result of which the Central Bank returned all the documents to the Plaintiff and called upon it to pay the amounts the Bank had earlier paid to it. Here it is necessary to remember that the Bank called upon the Plaintiff to pay the amount, because it was the Plaintiff which endorsed the way bill, the hundi and the invoice in favour of the Bank and took money from it. Since there was a legal liability on the part of the Plaintiff to pay the Bank it discharged that liability and called upon both the Defendants to reimburse it with the amount. The totality of the claim thus made is Rs. 1,09,653.85 ps. Though the amounts vary in the other suits, the course of events has been precisely the same.
The 2nd Defendant remained ex-parte in the lower Court and did not even file a written statement. Even before us he was absent.
The resistance to the suit claims came from the 1st Defendant. It took several pleas. It averred that the Plaintiff is not a registered firm and so the suit does not lie. It went on to allege that the consignor viz., the 2nd Defendant should fill up the forwarding note describing the nature, weight and other particulars of the goods consigned. On the basis of this forwarding note, way bills are prepared by the 1st Defendant''s employees. The consignor himself should prepare the statement in form No. X as required by Rule 45(4) of the Andhra Pradesh General Sales Tax Rules. The way bill prepared by the employees of the 1st Defendant firm will be sent with the lorry along with document in form No. X. The sales tax will be collected by the carrier at the destination. When the way bill was presented, sales tax was collected and then the branch office of the 1st Defendant firm at the destination would realise the consignment to the consignee. Way bills are prepared strictly in accordance with the details furnished in the forwarding note and that is clear from condition No. 1 of the way bill. The way bill is not a document of title which can be endorsed in favour of any body else. It is negotiable only to scheduled banks. When the forwarding note was presented, the officials of the 1st Defendant firm believed them and prepared way bills and handed them over to the 2nd Defendant. The 1st Defendant has nothing to do with the Plaintiff and has no privity of contract with it. It has no connection whatsoever with the alleged payments which the Plaintiff makes to the 2nd Defendant on the basis of the way bills and hundies and has no knowledge of them. For the first time, the 1st Defendant came to know about these alleged advances said to have been made by the Plaintiff to the 2nd Defendant through the notice Ex. A-24 received by it on 3-2-1967. If copies of the way bills are at variance with the original way bill showing much lesser and different quantities, the 1st Defendant has nothing to do with it. The way bills and their copies might have been brought into existence by the 2nd Defendant and perhaps an accountant of the 1st Defendant firm might have colluded with the 2nd Defendant in fabricating these documents. That accountant has been absconding. The 1st Defendant has nothing to do with the fabrication of the way bills and it has never authorised its accountant to do any thing irregular or fraudulent. There is no liability of any sort on the 1st Defendant and so it is not liable to pay anything to the Plaintiff.
Identical issues have been framed in all the three suits. The trial Court held that the Plaintiff firm is a registered one and the suit filed by it is maintainable. It held that there was no privity of contract between the Plaintiff and the 1st Defendant and further the 1st Defendant was not notified by the Plaintiff of the endorsement of the way bills or the advances made against the security of way bills. Therefore, the 1st Defendant is not liable for the amounts advanced by the Plaintiffs on the security of way bills. Though the 1st Defendant is not in any way liable, the hundies executed by the 2nd Defendant are true and executed for valuable consideration. The way bills filed by the Plaintiff are not true and authentic and the 1st Defendant was not entrusted with goods as mentioned in the way bills produced in the Court. The way bills are not documents of title and are not transferable. Even if one of the employees of the 1st Defendant helped in the perpetuation of the fraud which is now alleged, the 1st Defendant is not liable. Since that employee was not acting within the course of his employment in perpetuating the fraud by fabricating way bills. These are the main conclusions of the Court below as a result of which it dismissed the suits against the 1st Defendant and decreed them with costs against the 2nd Defendant.
As we have said, the 2nd Defendant, who has evinced no interest either in the lower court or in the appeals, has not chosen to prefer any appeal against the decree passed against him. These three appeals are filed by the Plaintiffs seeking decrees against the 1st Defendant as well.
Mr. P. Shiv Sankar, while presenting the case of the Appellants, raised the following points : (1) the evidence discloses that the 2nd Defendant on one hand and the 1st Defendant or its agents or servants on the other colluded together and committed fraud in preparing the way bills. So, the 1st Defendant is liable to pay the amount. (2) Even supposing the management of the 1st Defendant firm was not aware of it when its accountant played fraud and fabricated the way bills as is found by the trial court, the 1st Defendant firm would be liable because that accountant had perpetuated the act in the course of his employment with the 1st Defendant. (3) Way bill is a document of title and is negotiable by an endorsement.
Naturally a preliminary doubt arises as to how the 1st Defendant, which is merely a public carrier, could be held liable to the loss, if any, sustained by the Plaintiff in its dealings with the 2nd Defendant when there was no privity of contract between the two parties. There was no direct dealing in so far the consignment of the goods of the 2nd Defendant is concerned, between the Plaintiff and the 1st Defendant. The 2nd Defendant consigned the goods through the 1st Defendant and it was only later the Plaintiff came on the scene by taking an endorsement of the way bill and advancing money on its basis to the 2nd Defendant. It is not even the Plaintiff''s case that the way bills had been endorsed to it and advances had been made with the knowledge and consent of the 1st Defendant. Ostensibly, the dealings between the Plaintiff and the 2nd Defendant were conducted without any reference to the 1st Defendant. The further endorsement of the way bills and the hundies by the Plaintiff in favour of the Central Bank was also without any intervention or consent of the 1st Defendant. That is why the first question arises as to how the Plaintiff seeks to make the 1st Defendant also liable for the amount along with the 2nd Defendant.
We would give a brief resume of the plaint version as to how the 1st Defendant is also sought to be made liable. It is averred in the plaint that when the goods were entrusted for carriage, the 1st Defendant issued what are called "way bills" which were prepared in quadruplicate by them. Two copies had been given to the consignor and the third copy was sent by them to their office at the destination. The fourth copy was kept in the head office. The way bills contain an acknowledgment of receipt of the consigned goods entrusted to them, in good condition, giving details of the nature of the goods, number of articles, description of the goods, weight, freight and value thereof in rupees and the time and date of entrustment. The way bill given to the cosigner constitutes a document of title so far as the goods are concerned. The 1st Defendant is bound to deliver the entrusted goods to the consignor''s assignee or order and in addition, the terms and conditions of the way bill make the 1st Defendant liable directly to any Bank to whom it is transferred or pledged. The 1st Defendant is subject to all the duties and obligations of the carrier under Carriers Act 3 of 1865 and the Indian Contract Act. On the presentation of the way bills by the 2nd Defendant which has been issued by the 1st Defendant, the Plaintiff advanced moneys to the former on their security. These way bills issued by the 1st Defendant played a decisive and crucial role in inducing the Plaintiff to make the payments in accordance with which hundies were prepared. 1st Defendant acted in collusion with the 2nd Defendant and played a huge fraud by deliberately mentioning inflated figures regarding the number of artices (bags), the weight, freight and the total value in rupees in the copies of way bills issued by them to the consignor and by some fraudulent process, maintaining different office carbon copies with understated figures and with a different entry even in regard to the nature of the goods. This calculated fraud had the effect of the 2nd Defendant coming into possession of the documents of title to goods viz., way bills containing entries made by the 1st Defendant''s office (booking clerk) under his signature showing a particular quantity of goods and value which, in turn, was directly responsible for amounts advanced as loans to the consignor by the Plaintiff on the basis and security of these way bills under the various hundies. The 1st Defendant is any way liable under law and equity for the loss and consequences that flowed from the fraud committed by its servants and agents i.e., booking clerks, in the course of his employment and within the scope of his authority, which is that of issuing of way bills.
From the above material averments in the plaint, it is patent that the Plaintiff is seeking to make the 1st Defendant also liable on two grounds. (1) The 1st Defendant itself co-operated with the 2nd Defendant in perpetuating the fraud. The fraud, which is alleged by the Plaintiff, is that the way bill showed larger quantities and more valuable goods as consigned, while the four copies prepared showed much smaller and less valuable quantities of goods. Since the original way bill which showed more valuable goods as consigned, emanated from the 1st Defendant and believing them, the Plaintiff advanced the moneys, the 1st Defendant is liable to pay the amount. In fabricating these false documents, original way bill showing more valuable goods and their copies much less valuable goods, the 1st Defendant colluded with the 2nd Defendant. (2) In any case, even supposing that the fabrication was done by some of the employees of the 1st Defendant firm in the course of their employment, the 1st Defendant becomes liable under law and equity.
If any one or both the two grounds are made out, the 1st Defendant could be liable ; if not, no liability can be fastened to that Defendant even if the way bill issued for the consignment is a document of title and is negotiable. Therefore, the crucial question is one of fraud, as is specifically stated by both sides.
The fraud said to have been played by the 1st Defendant acting in collusion with the 2nd Defendant is by deliberately mentioning inflated figures in the originals of the way bills regarding the number of articles, weight, freight and the total value in rupees. Office carbon copies, which had been issued, showed only understated figures and with different entries even regarding the nature of the goods.
The 1st Defendant stated thus, in his written statement as to how the process of consignment take place in its office. Whenever the goods are brought to the 1st Defendant, the consignor or any person on his behalf has to fill in a form called "Goods forwarding note" giving details of consignor''s name and address, consignee''s name and address, number of articles, name and description of articles, weight, value, frieght paid or to be paid mentioning the places of despatch and destination. The consignor or his representative has to further certify that he is satisfied with the description marks and weight or quantity of goods consigned by him and that they have been correctly entered in the goods forwarding note and that the consignment is booked with the knowledge and acceptance of the conditions recorded on the reverse of the forwarding note. Simultaneously, the consignor delivers Form X prescribed under Rule 45(4) of the Andhra Pradesh General Sales Tax Rules duly filled in. On the basis of the ''goods forwarding note'' and Form X the carrier prepares the way bill in quintuplicate out of which two are given, to the consignor, one copy is sent alongwith Form X to the destination along with the lorry carrying the consignment, one copy is sent to the head office for information and the fifth is retained in the records of the office from where the goods are consigned. Condition No. 1 on the reverse of the way bill shows specifically that the nature, condition and contents and value of the consignments are unknown to the 1st Defendant''s lorry service and that the firm carries the goods as packed at owner''s risk.
The first aspect which arises in connection with the question of fraud is as to which of the above two versions is true. Before we examine the evidence on the allegation of fraud, it would be useful to notice some broad features of the transaction. 1st Defendant is only a public carrier. Patently, its interest is only to collect the freight charges on the consignments of goods entrusted to it for carriage from one place to another. This is a well established firm with nearly 150 branches in Andhra Pradesh and also in several areas of the South. In the very nature of its functioning, it is not benefited by carrying the assigned goods one place to another beyond the collection of the freight charges. When there is no benefit derived by it, there is no possible reason why the 1st Defendant should fabricate false way bills. Patently, it accepts consignments on the basis of the representation made by the consignor in the form of the "goods forwarding note" giving details of the consignee''s name and address, number of articles, name and description of the articles, weight, value, freight whether paid or to be paid. The very first condition on the reverse of the way bill is to the effect that the nature, condition, contents and value of the consignments are unknown to the 1st Defendant lorry service and that it carries the goods as packed at owner''s risk. Therefore, the probability is against the 1st Defendant being a party to any fraud in showing in the original way bills larger quantities of goods than those which were actually entrusted to it. Further, it has nothing to do with the Plaintiff''s advancing moneys after taking endorsements on the way bills and hundies and also with the further endorsement by the Plaintiffs in favour of the Central Bank. There is no evidence on record worthy of acceptance to show that these endorsements on the way bills and hundies by the 2nd Defendant in favour of the Plaintiffs and the further endorsements in favour of the Central Bank were done with the concurrence or at least knowledge of the 1st Defendant. In the very nature of things, it looks improbable that the 1st Defendant is in any way connected with the 2nd Defendant''s transactions with the Plaintiffs. Moreover, no copy of the way bill was produced by the Plaintiffs. This was particularly pointed out by the trial court.
Mr. Shiv Sanker criticised this part of the trial Court''s criticism of the failure of the Plaintiffs to produce a copy of the way bill as totally unjustified. On the probabilities of the case, we are not inclined to agree with the learned Counsel''s criticism. It is common ground that four copies used to be prepared alongwith the original of the way bill. Out of them, only two copies were retained by the 1st Defendant. One was sent in the lorry with the consignment. Two copies were handed over to the consignor alongwith the original. When the Plaintiffs claim that they had advanced large amounts of money on the basis of the original of the way bills, could it be believed that they had parted with the heavy amounts without keeping even a copy of the way bill with them? It is reasonable to conclude that they should have insisted on keeping and in fact kept one of the copies with them. But they did not choose to file that copy into court. This is precisely the omission on the part of the Plaintiffs which the trial Court pointed out. It also gave scope for the 1st Defendant to advance the case that the Plaintiffs and the 2nd Defendant joined hands in altering the middle part of the originals of the way bills after their issuance by the 1st Defendant by entering larger and different quantities of goods than were actually consigned and were entered in the copies. The 1st Defendant went even to the extent of suggesting that the middle portion of the original way bills was erased through some chemical process by the Plaintiffs and the 2nd Defendant and new entries were made therein with the object of gaining profit. This part of the 1st Defendant''s theory as to erasure of the middle portion of the original way bills through chemical process was not accepted by the trial Court. As the lower Court pointed out, the original way bills appear to be suspicious. The names of consignees and their addresses contained in the originals and in the copies produced before the Court tally. But the body of the bills i.e., middle portion relating to the number of articles, their description, weight, freight and value differ. In some copies, differences in the colour of the carbon paper and impressions on the reverse of the way bills are discernible. On an examination of the documents Exs. A-4, A-5, A-11, A-12, A-31, A-56 and A-57, which are some of the way bills, we find there is difference in thickness of writing between the original and the copies. Even P.W. 1 admitted that there are different carbon impressions on one side of the copies Exs. A-18, A-19, A-25 and A-26. Further the way bills Exs. A-18, A-19, A-25, A-26, A-70, A-77, A-84 and A-151 demonstrate that black carbon papers were used for writing on the top portion while blue carbon was used for writing the body of the way bills. There is no need to use different carbon papers, one for top portion and the other for the body of the way bills.
In addition to the above features of the original and the copies of the way bills, there is another circumstance. The signature of the consignor 2nd Defendant appear to be different from document to document i.e. , goods forwarding notes, the documents in form No. X and the receipts issued by him for the amounts received by him. A comparison of the goods forwarding notes Exs. B-243, B-244 and B-247 with Exs. B-171, B-176 and B-166 which are forms No. X and the receipts for the money Exs. A-9, A-16 and A-23 would demonstrate that the 2nd Defendant was signing differently on different occasions. His clerk Krishna Murthy also was changing his signature from occasion to occasion.
It is thus manifest that there was a fabrication of the middle portions of the original way bills. It was argued on behalf of the 1st Defendant before the trial Court as well as before us that the Plaintiffs actively participated in the perpetuation of this fraud and fabrication of the original way bills, because it was they, along with the 2nd Defendant that would be benefited by drawing large commissions on the amounts advanced by them and later recouped from the Central Bank. The 1st Defendant also advanced a theory that the Plaintiffs had no means to pay the large amounts which they claim to have paid to the 2nd Defendant. The lower Court was not inclined to accept this theory pointing out that there was no acceptable evidence regarding the financial capacity and stability of the Plaintiffs. In any case, it is not necessary for the purpose of this case to go into this question. The real point in issue is whether the 1st Defendant was one of the perpetuators to the fraud so that it could be made liable along with the 2nd Defendant to pay to the Plaintiffs. The lower Court did not accept the case of the Plaintiffs in this behalf. We will now consider the material evidence adduced by the parties in this behalf.
P.W. 1, the Plaintiff in O.S. 135/69, denied the version of the 1st Defendant that he had colluded with the 2nd Defendant and tampered with the way bill with the aid of some chemical process. He admitted in the cross-examination that condition No. 1 in the way bill was introduced by way of abundant caution by the carrier and that the said condition applied equally to persons who advanced moneys. When he was asked as to how he had expected the carrier to give warranty for the goods when the lorry receipt used the significant words "said to contain", the answer he gave was:
As the 1st Defendant is a reputed firm approved by Indian Banks Association that its employees also make enquiries and personally weigh the contents, I acted on the said lorry receipt.
It was clearly put to him that his firm, 2nd Defendant and the latter''s agent Krishna Murthy colluded and suitably altered the way bills in order to enjoy the advance facilities given by the Bank. It was also suggested to him that they colluded with each other and erased the original writing by chemical and other process and altered the figures to suit their convenience and trade. Though he denied the suggestions, there is nothing in his evidence which proves the 1st Defendant''s participation in the fabrication of the way bill.
P.W. 2 was the Plaintiff in O.S. 134/69. According to him, his firm transacted business with the 2nd Defendant from 1964 to 1967. Prior to the transactions, which were the subject-matter of the suit, there were earlier dealings between the parties to the tune of Rs. Six lakh. His claim in the suit was Rs. 1,09,000/-. Thus, the Plaintiffs firm advance as much as Rs. 7,09,000/- on the security of lorry receipts. Out of this, he had realised amounts to the extent of Rs. Six lakhs. All this demonstrates, in ample measure, the large scale of dealings between the Plaintiff on the one hand and the 2nd Defendant on the other. He admitted that earlier there were no disputes about the details given in the lorry receipts. Nor was there any suspicion that the receipts had been meddled with. He further conceded that the 1st Defendant is a reputed firm approved by the Indian Banks Association. There cannot be any doubt about it because the 1st Defendant had nearly 150 branches spread over the Southern States. He however, denied the suggestion that after the lorry receipts had been given, the writings were obliterated with the aid of chemical or other process. He admitted that there was inaccuracy in the plaint. He stated : "The contention in the plaint that the 2nd Defendant was paid the amounts on the dates when hundies were drawn is partly correct and partly incorrect. Only just now 1 came to know of the incorrect version in the plaint". This shows that the plaint averments were made without close scrutiny of the true facts. In the cross-examination, the witness practically conceded that one Krishna Murthy was a clerk to the 2nd Defendant. However, he denied the suggestion that the 2nd Defendant, Krishna Murthy, himself and the Plaintiffs in the other suits colluded together and erased the original writing by chemical or other process to alter the figures to suit their convenience and trade. It was clearly suggested to him that they waited for 2\\ years to file the suit to create documentary evidence and accounts and to allow the writing to fade away. He had earlier admitted that he had certain limits for advance from the Central Bank and it was put to him that he had joined hands with the 2nd Defendant to draw money upto his limits and carry on lucrative business of this type.
This evidence read with that of P.W. 1, who was the Plaintiff in O.S. 135/69, does not establish any connection between the 1st Defendant and the fraud ultimately perpetuated. This aspect is further heightened by the circumstances that there was nearly 2� years delay in filing the suit. After the lorry receipts and hundies were not accepted by the consignees, the Plaintiffs issued notices in the first instance to the 2nd Defendant. The Plaintiff in O.S. 134/69 issued a notice, copy of which is Ex. A-126 on 30th of January, 1967. Four days later, they gave a telegraphic notice to the 1st Defendant. The Plaintiff''s advocate issued a notice Ex. A-124 to the 1st Defendant on 3-2-1967. Within fortnight therefrom, the 1st Defendant sent a reply notice to the Plaintiff''s advocate on 16-2-1967. Correspondence went on like this till 10th July, 1967. Though these notices were exchanged between February and July, 1967, the Plaintiffs waited till October 1969 to file the suits. This hesitation on the part of the Plaintiffs to sue the 1st Defendant along with the 2nd Defendant lends support to the feeling that the Plaintiffs themselves were not quite convinced that the 1st Defendant had participated in any fraud and that the waiting of more than two years was caused in order to create some material.
Now coming to the oral evidence adduced on behalf of the 1st Defendant, the first witness examined on their side is the former manager of the 1st Defendant company. It is common case that one Subrahmanyam, who was an employee of the 1st Defendant, was working as a clerk at the time of writing these lorry receipts at Kurnool. D.W. 1 stated that the said Subrahmanyam, who had been working as a clerk in the head office, was transferred and posted to work as Accountant in the branch office at Kurnool. Ex. B-39 was a copy of the proceedings issued by the Manager to this effect. The said Subrahmanyam was working as Accountant at Kurnool. In fact he sought an increment in his salary as per Ex. B-40. As Accountant, Subrahmanyam was in charge of accounts. He had to prepare daily cash abstract and send one copy to the head office along with the vouchers. Ex. B-41 the book of daily cash abstract was in the handwriting of Subrahmanyam. Likewise, the same person maintained Ex. B-42 the attendance register. It is the categorical statement of D.W. 1 that, as an Accountant, Subrahmanyam was not authorised to book consignments. D.W.I specifically stated that all the way bills marked on behalf of the 1st Defendant were in the handwriting of Subrahmanyam. But the columns relating to weight, freight, number, description, value and other particulars were not written by Subrahmanyam. The destination also was changed. This alternation came to the notice of the 1st Defendant firm only after they received notices from the Plaintiffs and after examination of the way bills. He admitted that the 1st Defendant firm was issuing way bills with the banker''s clause to the customers if they needed them. Clause 16 in the lorry receipt is the banker''s clause and all the suit way bills contain the said clause. In the cross-examination the witness asserted that the Branch Manager cannot prepare the way bill and in fact his signature is not necessary on it. He is not connected with its preparation. In Kurnool, the Branch Manager Was not preparing the way bills. Depending on the size of the branch, the persons competent to sigh the Way bill would sign it. In fact it is the booking cleric that prepares and signs the way bill, but he does not sign for and on behalf of the Branch Manager. The Accountant cannot prepare arid sign the way bill arid he cannot sigh on behalf of the Branch Manager. However, all the way bills, which are now the subject-matter of the suits, have been prepared and signed by the Accountant. He being the Branch Manager, could not check the suit way bills because it was not possible for the head office to check all the way bills. He had no explanation to offer as to how the Accountant Subrahmanyam prepared all the 51 way bills referred to in Ex. A-196. He could identify the hand Writing of the Accountant Subrahmanyam and he denied the suggestion that all the entries in the suit way bills were written by the said Subrahmanyam. He stated that Subrahmanyam absconded from the 1st Defendant''s service from March, 1967. By absconding, he meant that the where about of that person were not known. He did not give any police complaint because he could not say if Subrahmanyam had committed any offence. He did not know how the suit bills were issued with blanks in the relevant columns.
This evidence of the Manager of the 1st Defendant firm will have to be read along with that of D. W. 2, who was the Branch Manager of the 1st Defendant Branch at Kurnool between 1961 and 1969. He stated that in all the way bills, which Were the subject-matter of the suits, Subrahmanyam wrote the portions relating to the date and the names of the consignor and the consignees. The rest of the matter in the way bills like the number of articles, their description, weight, freight, values were not in the handwriting of Subrahmanyam. The corresponding copies of the way bills kept in the headquarters and sent to the designation were in the handwriting of Subrahmanyam. The 1st Defendant firm had no knowledge that the 2nd Defendant was negotiating the original way bills. In cross-examination, he stated that he had one booking clerk under him and usually he would not check hrs work. The loading clerk would be at the godown. The Accountant was not authorised to prepare the way bills. He could not even sign them on behalf of the agent. He would not have kept quite had he seen Subrahmanyam writing any way bills. He was not aware that he had written the 51 way bills during May 1966 and November, 1966. None but the booking clerk had to prepare the way bills. The Booking clerk did not complain to him that the Accountant had been preparing the way bills at any time. The Accountant Subrahmanyam had left service voluntarily.
Then We have the evidence of D W 3 who was the booking clerk in the 1st Defendant firm''s branch at Kurnool from 1966 to 1969. He categorically stated that only the booking clerk was authorised to book and nobody else had that authority Subrahmanyam being the Accountant had no authority to book goods. The witness also clarified that way bills Would be prepared only if the goods were brought to the spot.
The witness stated that excepting the suit way bills, all the other way bills found in the books Exs. B-50 to B-57 were in the witnesses'' handwriting. It is very significant that only the suit way bills were in the handwriting of the Accountant Subrahmanyam.
In this connection and in the light of the evidence of D. Ws. 1 to 3, we will have to refer to Exs. B-37, B-39 and B-40 Ex B-37 is a circular dated 22nd of May 1963 issued by the head office of the 1st Defendant firm regarding preparation and issue of way bills. The circular directed that the booking clerks, working in all branch offices, should prepare and issue way bills only for the goods actually entrusted for carriage and that it was only the booking clerks who had to prepare the way bills and issue them It specifically forbids any other person to issue the way bills. Further, the way bills had to be prepared with reference to the Goods Forwarding Note prepared and sent by the consignor. The freight had to be charged only after weighing the consignments. It was ordained that these instructions should be followed strictly. As explained by D.Ws. 1, 2 and 3 these instructions had to be issued to maintain a regular system and to fix the responsibility of preparing the way bills on the booking clerk.
On 27th of January, 1965 another proceedings Ex. B-39 was issued by the 1st Defendant transferring Subrahmanyam from the head office at Yemmiganur to the branch office at Kurnool. These proceedings would show that Subrahmanyam, who was by then working as Accounts Assistant in the head office, was transferred and posted to work as Accountant in the branch at Kurnool. This would show that Subrahmanyam was posted at Kurnool only as an Accountant and as per the instructions of Ex. B-37, he not being the booking clerk, could not book any goods.
Ex. B-40 is an application dated 2nd March, 1965 made by Subrahmanyam to the General Manager to increase his emoluments. Therein he clearly stated that he had been transferred to Kurnool as Accountant from 27-1-1965. These three documents read with the clarifications contained in the oral evidence of D.Ws. 1 to 3 would show that only booking clerks could book the goods and that Subrahmanyam was only an Accountant at the relevant time in the Kurnool branch.
The ev dence of the booking clerk in the Kurnool branch from 1966 to 1969 examined as D.W. 3 shows the staff which the Kurnool branch had at that time. One Narasappa was the Branch Manager, Subrahmanyam was the Accountant, five persons were looking after loading and unloading goods and he was the booking clerk. He categorically asserted that nobody else was authorised to book and that Subrahmanyam had no authority to attend to that work. He also reiterated that excepting the suit way bills, all the other way bills found in the books were in his handwriting only. This witness also added that in the disputed original way bills the portions relating to the columns intended for number of articles, description, weight, freight and values were not in the handwriting of Subrahmanyam, the Accountant. Only the rest of the portions were in the handwriting of Subrahmanyam. None of the disputed way bills were in the witnesses handwriting. Even though Subrahmanyam had no authority to book when the witness, who was the booking clerk, went out for lunch, Subrahmanyam booked the goods.
D.W. 4, the loading clerk of the 1st Defendant firm deposed that he used to receive the way bills directly from the booking clerk immediately after the booking was over. The loading would take place as soon as the lorry was available subject to a maximum of 4 or 5 days. Till then, the goods would be in his possession. The goods would be kept in the same hall and not in any separate godown. There were no seals put to the gunny bags containing the suit consignment. He asserted that there was no scope for anybody to tamper with the contents in the 1st Defendant''s office.
D.W. 5 who was working as Branch Manager at Madras from 1961 to 1968, also asserted that there was no possibility of tampering with the gunny bags though they had no seals.
The evidence considered above cannot lead to the conclusion that the 1st Defendant was a party to the fraud, whoever might have been responsible for the fabrication of the original way bills. In the first place, it has no reason whatever for creating false way bills. It is a well established company with nearly 150 branches all over the Southern States. It is difficult to believe that such a well-known firm would perpetuate fraud. More than this, is the circumstance that it would not derive any profit or gain by such fabrication. Why should a reputed firm like the 1st Defendant be a party to the fraud out of which it does not derive any benefit ? It is true the writing on the portions of the top and bottom of the disputed way bills is in the handwriting of the Accountant. As the above evidence discloses the inflated figures in the middle are not in the handwriting of the Accountant. The lower Court did not accept the theory of erosion of the middle portion by some chemical process. The lower Court also observed that it was quite likely that the entries in the original way bills were not written but were kept blank at the time by the Accountant patently to facilitate fabrication later and that the inflated figures in the originals came to be written subsequently by someone. Be that as it may, the conclusion is inescapable from the evidence on record and as it stems from the discussion above that the 1st Defendant was not a party to the fabrication. Therefore, this part of the contention of the Plaintiffs should be repelled.
The next contention of Mr. Shiv Sankar, which should be considered, is that though the 1st Defendant was not directly a party to the fraud, it cannot escape from the vicarious liability because its employee Subrahmanyam was a party to the fraud. 1st Defendant being the employer, should accept full responsibility to the acts of its employee because it was on the way bill issued by the 1st Defendant the Plaintiff acted. In the first place, it is difficult to precisely fix the liability of fraud on Subrahmanyam even. Even supposing for argument''s sake that the Subrahmanyam left the middle portion of the way bill blank or wrote something which was not there and differently from the copies, can the 1st Defendant be made liable for these acts of fabrication committed by Subrahmanyam ? Could it be said that he wrote these false portions of the way bills in the course of his employment ? We have already noticed that the 1st Defendant had, long prior to the issuance of these disputed way bills, given standing and strict instructions that nobody else other than booking clerks should book the goods. It is also well-established that Subrahmanyam was only an accountant at that time in the Kurnool branch. It also clearly emerges from the evidence that there was a booking clerk during the relevant period in the Kurnool branch. Because of these circumstances, it cannot be said that Subrahmanyam, being only an Accountant had neither express or implied authority to write the way bills. It is also of great significance that Subrahmanyam prepared the way bills only of the 2nd Defendant which are now in dispute and none else. All the others were prepared by the booking clerks. If Subrahmanyam colluded with the 2nd Defendant and fabricated these way bills without the knowledge of the appropriate authorities of the 1st Defendant and also quite contrary to the standing instructions, by no stretch of imagination could it be said that he was acting in the course of his employment. D.W. 3, the booking clerk at the Kurnool office could not authorise Subrahmanyam to prepare the way bills. Therefore, it is not possible to say that Subrahmanyam had either express or implied authority to prepare the way bills and much less to fabricate them.
Here we may usefully refer to some decisions, English as well as Indian, which have a bearing on this question. In Grand and Ors. v. Norway and Ors. 1950(10) CBR 665 it was held that the master of a ship signing a bill of lading for goods which had never been shipped, was not to be considered as the agent of the owner in that behalf so as to make the later responsible to one who had made advances upon the faith of bills of lading so signed.
In Board v. London General Omnibus Company (1900) 2 QBD, 530 the facts are : A conductor of an omnibus belonging to the Defendants drove it through some by-streets at a considerable pace and while so doing negligently ran into and injured the Plaintiff. The driver was absent. At the trial the Plaintiff gave no evidence that the conductor was authorised by the Defendants to drive the omnibus in the absence of the driver. The Court of Appeal held that the Plaintiff had not discharged the burden cast upon him by showing that the injury was due to the negligence of a servant of the Defendants acting within the scope of his employment and that therefore the Defendants were entitled to judgment. This decision is opposite to the circumstances, of the present case. The Plaintiffs in this case did not discharge the burden of showing that the originals of the way bills were prepared by Subrahmanyam while he was acting within the scope of his employment. On the other hand, the Defendants succeeded in showing that Subrahmanyam had no authority to prepare the way bills.
The House of Lords relied on Grand and Ors. v. Norway and Ors. 1950 (10) CBR 665 in George Whitechurch Limited v. Cavanag 1902 AC 117. It was held by the House of Lords that a Company, when it permitted its secretary to certify transfers of shares, does not authorise him to do more than give a receipt for certificates of shares which are in general, lodged in the office. If the secretary oversteps the marks of his authority and gives a receipt or acknowledgement for certificates which have not been lodged, the company is not estopped from setting up the true facts and pleading that the action does not lie.
In Chao v. British Traders and Shippers Ltd. 1954 (1) All E.R. 779 a date in the bill of lading was forged. It was found that the agents were deceiving their own employers and therefore the agents knowledge was not the knowledge of the sellers and consequently the sellers were not guilty of fraud. If at all Subrahmanyam was a party to the deceit, by no stretch of imagination could knowledge of that deceit be attributed to the 1st Defendant. So, the consequence of the fraud could not be fastened to the 1st Defendant.
A Division Bench of the Madras High Court consisting of Rajamanner, C.J. and Venkatadri, J. held in Nanguheri Co-operative Urban Bank v. Alamelu (1961) II M.L.J. 361 that a bank or a limited company cannot be held to be answerable to third parties for the fraudulent acts of its servant or officer when the latter is not acting within the scope of his authority and when he is acting in breach of the rules and bye-laws of the bank. The principle enunciated by the learned Judges of the Madras High Court would apply with equal relevancy to the facts and features of the present cases.
The unreported decision of this Court in L.P.A. 160/71 decided by Ekbote, C.J. and Chennakesav Reddy, J. on 25th of August, 1972 is practically analogous to the present cases. As it happened in the case on hand, there also there was a circular issued by the transport company to all the Managers directing them not to issue lorry receipts without actual receipt of goods. It was held that the Plaintiff was nowhere in the picture when the lorry receipt was issued. Therefore, the transport company, which was the 3rd Defendant, was not in any way liable to compensate the loss sustained by the Plaintiff.
The principles would clearly show that even if Subrahmanyam was a party to the fabrication, it was done only outside his normal functions without the knowledge of the 1st Defendant and quite contrary to its instructions. Therefore, it cannot be said that he fabricated the way bills, even if he did so, in the course of his employment under the 1st Defendant, so that the latter could be mulcted with any loss which third parties might sustain on account of the fabrication.
We may here refer to four, decisions relied on by Mr. Shiv Sankar. The first of them is Bissesser Das Kasturchand v. Kabulchand Asaram AIR 1945 Nag 121. The case arose u/s 186 of the Contract Act. What all the Division Bench held there is that the authority of an agent, according to Section 186, may be express or implied. When it is to be inferred from the circumstances of the case, things spoken or written, or the ordinary course of dealing, may be accounted circumstances of the case. In such an event, even if the agent has acted in excess of his actual authority the liability, of the firm remains, when the contracting party has been led into an honest belief in the existence of the authority to the extent apparent to him. Even if fraud is committed by agent for his own benefit, the firm is liable if the agent is acting within the scope of his implied authority. In the light of the circumstances of the case and the conclusions we have reached, neither Section 186 of the Contract Act nor this decision of the Nagpur High Court can help the Plaintiffs. From the circumstances of the case, it cannot be inferred that Subrahmanyam had any express or implied authority to fabricate the way bills or even to prepare them. Therefore, the principles of Section 186 as explained by the Nagpur High Court has no application.
The Privy Council held in Citizens'' Life Assurance Company Limited v. Brown 1904 AC 423 that a Corporation cannot be held to be incapable of malice so as to be relieved of liability, for maliceous libel when published by its servant acting in the course of his employment. The servant may, have had no actual authority, express or implied, to write, the libel complained of. But if he did so in the course of his employment which is authorised, the corporation is liable. As we have found, on the face of the evidence in this case Subrahmanyam did not fabricate; the originals in the course of his authorised employment under the. 1st Defendant Therefore, this, decision does not help the contention of the Plaintiffs.
To the same effect is the decision of the House of Lords in Lloyd v. Grace Smith and Co. 1912 AC 716 wherein it was held that a principal is liable for the fraud of his agent acting within the scope of his authority, whether the fraud is committed for the benefit of the principal or for the benefit of the agent. Subrahmanyam, as we have held, was not acting within the scope of his authority when he made false entries in the originals even supposing he made those entries. Therefore, these rulings do not help the contention of Mr. Shiv Sankar in order to make the 1st Defendant vicariously liable.
Reliance was also placed on Section 8 of the Carriers Act. But we do not see that the said provision would apply to these cases since that provision deals only with loss or damage. We find support for this view from, the decision of this Court in D.P. Narasa Reddy Vs. Ellisetti China Venkata Subbayya and Another, . In any way, it must be noticed that the Plaintiffs did not file the suits as the owner of the goods.
For the aforesaid reasons, we find that the 1st Defendant is not liable to pay the amounts claimed, to the Plaintiffs.
In this view, it is not necessary to go into the other questions whether the way bills or the lorry receipts were documents, of title and whether they were negotiable by endorsement Our decision on the first point itself would non-suit the Plaintiffs, against the 1st Defendant. Since the appeal were preferred seeking a decree against the. 1st Defendant also, they are liable to be dismissed.
In the result, the three appeals are dismissed with costs of the 1st Defendant-1st Respondent in all the three appeals.