The Union of India (UOI) and Others vs Devidayal Brijlal

Natesan, J.—This revision from the decision of the Subordinate Judge of Coimbatore in a Small Cause Suit for recovery of compensation from the Petitioners for goods damaged in transit through the Petitioner''s railway, raises an interesting question of law. One Bihari Lai as consigner despatched 221 bags of gram dhall from Mandiadampur in the Northern Railway to Coimbatore served by the Southern Railway, the goods being despatched under railway risk. The consignee was one Bihari Lal Mohan Lal. The consignee by his partner endorsed the railway receipt in favour of the Punjab National Bank Limited, Delhi. It is in evidence that the Plaintiff''s head office at Delhi got an endorsement of this railway receipt paying the Bank at Delhi and sent it to the Punjab National Bank Limited, Coimbatore. One Meenambika Company became an endorsee of the railway receipt from the Plaintiff and they paid the entire value of the goods to the Punjab National Bank Limited, Coimbatore, to whom the railway receipt had been sent. This Meenambika Company paid the railway freight and secured the goods from the railway. The goods were in damaged condition, and they took open delivery obtaining the necessary certificate from the claims inspector. There was a settlement of the claim between the Plaintiff and Meenambika Company and on account of the loss by reason of the damage, the Plaintiff paid Meenambika Company a sum of Rs. 1,383.60 being the loss suffered by Meenambika Company under the transaction. Under the letter exhibit A-4, Meenambika Company intimated the Chief Commercial Superintendent, Southern Railway, that they relinquished their claim for damages in the matter and authorised the Plaintiff to receive the sum on their behalf. It is in these circumstances the Plaintiff filed the suit after giving the necessary notice. Besides other defence on the merits, the railway inter alia questioned the right and title of the Plaintiff to sue. It may now be taken as beyond dispute that the goods got damaged by reason of negligence on the part of the railway. There is also no dispute as to the quantum of damages. The trial Court accepted the plea on behalf of the Plaintiff that Meenambika Company were only agents for the Plaintiff selling goods on commission basis at the Plaintiff''s risk, and that the Plaintiff had right and title to institute the suit.

The question now raised before me is whether the Plaintiff as an endorsee of the railway receipt can maintain the suit against the railway for damages and secondly whether Meenambika Company could in the circumstances made out in evidence be deemed to be only agents for the Plaintiff. Before considering the question raised that a mere endorsee of the railway receipt could not maintain a suit for damages or compensation against the railway, it would be convenient to fix the relationship between the Plaintiff and Meenambika Company. The plaint does not proceed on the basis of Meenambika Company being only commission agents for the Plaintiff for sale of the goods. A reading of the plaint leaves one with the impression that Meenambika Company took delivery of the goods from the railway on their own account only. I prefer to set out the relevant passages in the plaint in this regard:

In paragraph 3 it is stated:

The Plaintiff became the endorsee of the railway receipt in regard to the suit consignments and the same was endorsed to Messrs. Meenambika Co., Coimbatore who took delivery of the goods.

In paragraph 4 it is averred:

The goods arrived at Coimbatore on 31st March, 1960 and the same was inspected by the said Meenambika Company and then it was found that the goods were wet and caked and water damaged emitting a bad smell.

Paragraph 5 runs thus:

Messrs. Meenambika Company have as ultimate endorsees obtained delivery of the goods and sold the same in open market at the risk of the Plaintiff. As per their sales bills the goods on account of the damage did not fetch the proper price and an actual loss of about Rs. 2,600 was incurred. The Plaintiffs have settled with the Meenambika Company. The said Meenambika Company have executed a letter authorising the Plaintiff to sue the Defendants for compensation for loss in respect of the suit consignment. Further as immediate endorser to Meenambika Company the Plaintiff is entitled to sue.

The above are the only relevant allegations in the plaint in regard to the Plaintiff''s right to sue, and it is clear therefrom that it is not the case of the Plaintiff that Meenambika Company were only agents of the Plaintiff and the ownership of the goods was with the Plaintiff at any time, much less at the time when delivery was taken from the railway. In the letter referred to in the plaint, Meenambika Company relinquish their claim for damages and purport to authorise the Plaintiff to receive the sum on their behalf. This letter emphasises the fact that the Plaintiff was not recognised as owner of the goods entitled to damages in his own right. If the letter is to be given effect to, it will be recognising an assignment of a right to sue for damages. No doubt, at the trial a case of commission agency was developed and this found acceptance. But it is admitted by P.W. 2, that no record has been filed to show that Meenambika Company sold the goods as commission agents of the Plaintiff. Meenambika Company had paid the full value of the goods to the Punjab National Bank Limited, Coimbatore, when taking the railway receipt from the Bank. No doubt that by itself may not negative agency. P.W. 1 a clerk of Meenambika Company, admits that there was no record to show, that they were to sell the goods as commission agents and that the Plaintiff never wrote to them to pay their own money, take the goods and sell them as commission agents. But in the absence of any pleading to the effect and when the entire evidence is consistent with the case of Meenambika Company selling the goods on their own account, it is difficult to sustain the finding of the trial Court that Meenambika Company acted only as agents for the Plaintiff. I have, therefore, to examine the maintainability of the suit claim on the basis that the Plaintiff is an endorsee of the railway receipt for value who had re-endorsed it to Meenambika Company for value and compensated Meenambika Company for the loss sustained by them by reason of the damaged condition of the goods. It is argued that by reason of the letter exhibit A-4 given by Meenambika Company, the Plaintiff could be deemed to have obtained a re-endorsement from Meenambika Company.

I am unable to see how on the facts found the Plaintiff could have any right to sue. In my view a mere endorsee would have no right to sue on the contract of carriage with the railway company. Mr. S.S. Ramachandra Ayyar on behalf of the Petitioners referred me to three decisions of this Court: Poochammal Vs. Sundarammal and Others, , Mercantile Bank of India Ltd. v. Central Bank of India Ltd. ILR (1938) Mad. 360 (P.C.) and Yacob Rowther Sons v. Union of India ILR (1965) 1 Mad. 248, 251. In Poochammal Vs. Sundarammal and Others, , Phillips J., held that only the consignee could sue for loss caused by the non-delivery of the goods after the goods had been delivered to the Railway for delivery to him. In Yacob Rowther Son''s case ILR (1965) 1 Mad. 248, 251 the question whether a consignor could file a suit against the Railway for non-delivery loss or deterioration of the goods entrusted to it for carriage came up for consideration. Ramachandra Ayyar C.J., who delivered the judgment for the Bench observed:

A Railway receipt will no doubt entitle the person who is named in it as the consignee or as endorsee to receive the goods ; by the terms of the contract of bailment such a person could even relieve the railway of all liability. But where he has not so done and where the question of suing for loss arises, the principle must be that he who sustains the loss must sue.

The contention in that case on behalf of the railway was that the consignee would be the bailor and not the consignor. Examining the contention it is observed at page 252:

Only one among them, consignor and consignee, can be the bailor. The question in each case, therefore, will be as to who has title to the goods.

We have, therefore, to see whether the Petitioner in the instant case continued to be the owner of the goods after their delivery to the railway on 13th October 1959, and at the time when they were received at Howrah. Significantly enough, there is nothing in the plaint to show that the Petitioner was the owner of the goods. Exhibit A-16 is a copy of the Petitioner''s ledger with reference to his transactions at Calcutta. There is nothing in it to indicate that the sale was on commission basis or that the consignee was the agent of the Petitioner.

Earlier it is observed:

Except in cases where the consignee is named, a consignor ordinarily can be regarded as the owner of the goods. Even if the railway receipt is issued or endorsed in favour of another, the consignor can show that title to the goods continues to vest in him. In such a case, he would be the person incurring the loss and as the bailor and a party to the contract, could institute the suit. But where under a contract of sale, the property in the goods has passed on delivery to the railway, the latter receives it as the agent of the buyer. The bailor will then be deemed to be the buyer himself. The fact that the contract of carriage had been entered into by the seller or consignor could not in that case disentitle the consignee to sue, as in this country a third party for whose benefit the contract had been made, could sue on it.

The consignee''s right of suit when property has passed to him is, therefore, clear. In the present case we are concerned neither with the consignor nor with the consignee. Here is a case of the Plaintiff being a mere endorsee. He had himself parted with the railway receipt to another person who in fact took delivery of the damaged goods from the railway. In Macnamara''s Law of Carriers by Land, second edition, page 96, Article 90, the principle is set out thus:

In the case of goods the subject-matter of a contract of sale being lost or damaged and in the absence of any special contract between the carrier and the seller or buyer as the case may be, the proper person to sue the carrier is the person in whom the property in such goods is vested during transit:

In Mercantile Bank of India Ltd. v. Central Bank of India Ltd. ILR 1938 Mad. 360, 378 (P.C.), it is observed

The railway receipt, though a document of title, was in form merely an authority to take delivery of the goods and the possession of such a document contained no representation that the holder had any implied authority or right to dispose of the goods. It was, at the best, an ambiguous document. Its possession no more conveyed a representation that the merchants were entitled to dispose of the property than the actual possession of the goods themselves would have conveyed any such representation. It is not like a negotiable instrument ; the possession of the railway receipt is no more significant for this purpose than the possession of the goods would have been

On the question of title to sue by the endorsee of a railway receipt, there is considerable conflict of authorities in the various High Courts and differing views have been pronounced in the same High Court also. In one of the recent cases on the matter Commissioners for the Port of Calcutta Vs. General Trading Corporation Ltd. and Another, , Bachawat J., (as he then was) and Mukherjee J., dealt with the question in great detail. Mukherjee J., if I may say so with respect, has exhaustively considered the more important of the English and Indian authorities on the question. Referring to a railway receipt, the learned Judge formulated its function thus at page 310:

A railway receipt is like a bill of lading, a receipt for the goods delivered by the consignor and accepted by the railway as well as a contract.

A railway receipt is not a nagotiable instrument.

Transfer of a railway receipt by endorsement and delivery after the goods have been railed and before they have been delivered to the consignee passes only such property in the goods as it was the intention of the parties to the endorsement to transfer. On transfer of a railway receipt by way of sale, mortgage or pledge, the property in the goods would pass absolutely or otherwise according to the intention of the parties provided that the transfer is competent to dispose of the goods.

The railway discharges its obligations completely as soon as it delivers the goods to the consignee or to person whose name is endorsed on the railway receipt as the assignee.

Endorsement and delivery of the railway receipt does not transfer the contract mentioned in or evidenced by the railway receipt to the transferee.

An endorsee of a railway receipt cannot sue the railway on the contract contained in the railway receipt merely because the property or an interest in the goods has been transferred to him. He only has such right of suit as would belong to a person having a proprietary interest in the goods that is to say, he can sue in his own name only for conversion or negligence. Without such property or interest he has only the right to receive delivery of the goods and his position can be likened to the position of a consignee who has no right of property in the goods.

Bachawat J., observed at page 320:

The railway receipt is not like a bill of exchange. The negotiation of the railway receipt may pass the property in the goods, but it does not transfer the contract contained in the receipt or the statutory contract u/s 74-E of the Indian Railways Act. The contract is not annexed to the goods and does not run with it.

At page 321 the learned Judge further observed:

The like principles apply in the case of a railway receipt and the consignee named in it and the endorsee of it having some proprietary interest in the goods may sue the railway administration in tort for conversion of the goods or for negligence causing loss or injury to them, but the consignee or the endorsee, having no proprietary interest in the goods and who incurs no risk in their transportation cannot maintain such a suit. Like presumptions as to the proprietory interest of the consignee or the endorsee may be made in the case of a railway receipt as in the case of a bill of lading.

Now a railway can be made liable on the basis of the contract of bailment or in tort for conversion or negligence. The latter action can only be by the owner for the time being who is damnified. As regards suits on contract, only the contracting parties can normally sue though certain exceptions are recognised in Indian Law. While considering the position of an endorsee of a railway receipt, we may refer to the observations in Subrahmania Pattar v. Narayanan Nayar ILR (1900) Mad. 130, 135 where it was observed:

The mere fact that after a contract has been made between A and B, A gives C authority to act for him for a consideration, does not create any privity between C and B, so as to enable C to sue B for breach of bis contract with A.

If there is a breach and C wishes to sue B, he must do so in the name of A, that is in the name of the person whose right has been violated.

Learned Counsel for the Respondent referred me to a recent decision of the Supreme Court in Morvi Mercantile Bank Ltd. v. Union of India (1965) 35 Comp. Cas. 629. In that case certain boxes of menthol crystals valued at Rs. 35,500 were despatched by railway for carriage under three railway receipts. The firm endorsed the railway receipts to the Bank against an advance of Rs. 20,000 and also executed a promissory note for that amount. The boxes were lost by the wrongful conduct of the employees of the railway administration. The Bank as an endorsee of the railway receipts for valuable consideration filed the suit for recovery of a sum of Rs. 35,500 as value of the goods consigned as damages. Sxjbba Rao J., (as his Lordship then was) who spoke for the majority of the Court observed at page 639:

In this vast country where goods are carried by railway over long distances and remain in transit for long periods of time, the railway receipt is regarded as a symbol of the goods for all purposes for which a bill of lading is so regarded in England.

Referring to Section 180 of the Contract Act, his Lordship observed at page 639:

Under this section, a pledge being a bailment of goods as seourity for payment of a debt, the pledgee will have the same remedies as the owner of the goods would have against a third person for deprivation of the said goods or injury to them. If so, it follows that the Bank, being the pledgee, can maintain the present suit for the recovery of the full value of the consignments amounting to Rs. 35,500.

Holding that on the facts of the case the firm by endorsing the railway receipts in favour of the Bank for consideration pledged the goods covered by the said receipts to the Bank, the learned Judge has considered it unnecessary to express any opinion on the question, at page 640:

whether if the transaction was not a pledge of the goods, the Bank would be entitled to sue on the basis of the oontract entered into between the firm and the railway.

In the course of the discussion, the learned Judge refers to the conflict of opinion on the question whether an endorsee of a railway receipt for consideration could maintain an action on the basis of the contract embodied in the said receipt. The other two learned Judges (Mudholkar J., and Ramaswami J.) dissented from the view of the majority and held that there was no valid pledge of the consignments of menthol crystals represented by the railway receipts in favour of the plantiff-bank and then proceeded to consider whether the Plaintiff could sue on the contract of bailment, even though there was no valid pledge of the goods in favour of the Plaintiff. Ramaswami J., who spoke for himself and Mtjdholkab J., after noticing that the endorsee may bring an action as an assignee of the contract of carriage but then the assignment as to be proved as in every other case, observed:

The negotiation of the railway receipt may pass the property in the goods, but it does not transfer the contract contained in the receipt or the statutory contract u/s 74-E of the Indian Railways Act. Negotiability is a creature of statute or mercantile usage, not of judicial decisions apart from either. So, in the absence of any usage of trade or any statutory provision to that effect, a railway receipt cannot be accorded the benefits which flow from the negotiability under the Negotiable Instruments Act, so as to entitle the endorsee as the holder for the time being of the document of title to sue the carrier the railway authorities in his own name. If the claim of the Plaintiff is as an ordinary assignee of the contract of carruwe, then the Plaintiff has to prove the assignment in his favour.

Holding that in the case before the Court the Plaintiff had no 1. proved by proper evidence an assignment of the contract of carriage, the learned Judges held that the Plaintiff had no right to bring the suit.

In the light of the above discussion on the averments on which the Plaintiff''s claim is founded, it is unnecessary to discuss the legal position further in this case. The plaint does not proceed on the basis of the Plaintiff''s ownership of the goods at the relevant time or on the basis of any pledge. That the Plaintiff was an endorsee of the goods by itself, does not give him right of suit, in the light of the principles above noticed. It has not been pleaded or established that he had become an assignee of the rights under the contract of carriage prior to Meenambika Company taking delivery of the goods and notifying the damages. In the circumstances, this suit by the Plaintiff has to fail and will have to be dismissed. The revision is allowed. In the peculiar circumstances of the case, the parties will bear their respective costs throughout.