1990 (4) TMI 291 - SC - Indian Laws

Bank liable for failure to deliver goods despite absence of fiduciary relationship

UCO Bank Versus Hem Chandra Sarkar

UCO Bank Versus Hem Chandra Sarkar - 1990 AIR 1329, 1990 (2) SCR 709, 1990 (3) SCC 389, 1990 (3) JT 369, 1990 (1) SCALE 784 Issues Involved:1. Existence of an agreement between the parties.2. Whether the Bank acted as a trustee and/or agent of the plaintiff.3. Existence of a fiduciary relationship between the parties.Detailed Analysis:Issue 1: Existence of an AgreementThe trial court found that there was an agreement between the Bank and the plaintiff. The court observed that the evidence on record showed regular accounts of goods for the plaintiff maintained by the Bank. The operation of Current Account No. 391 and the debits made from it in connection with transactions of the plaintiff indicated an agreement or arrangement between the parties. The court inferred that the Bank agreed to receive bills and documents, take delivery of goods, store them in its godown, and deliver them to the plaintiff as required. This issue was answered in favor of the plaintiff.Issue 2: Bank as Trustee and/or AgentThe trial court determined that the Bank acted as an agent of the plaintiff. The evidence showed that the Bank collected bills, made remittances to mills, applied for drafts on behalf of the plaintiff, and met expenses of storing goods by debiting the plaintiff's account. These actions led to the reasonable inference that the Bank acted as an agent of the plaintiff, involving a relation of trust and confidence. The Bank's position was that of an intermediary owing duties to both the Calcutta parties and the plaintiff. This issue was also resolved in favor of the plaintiff.Issue 3: Fiduciary RelationshipThe trial court concluded that there was a fiduciary relationship between the Bank and the plaintiff. The Bank collected cheques, remitted money to mills, adjusted bills by debiting the plaintiff's account without cheques, and met expenses of storing goods. The stock register showed that the Bank stocked goods on account of the plaintiff in its godowns. The court found that these actions established a fiduciary relationship. This issue was decided in favor of the plaintiff.Appellate Court's Observations:The High Court affirmed the trial court's decree, noting that if the plaintiff paid for the goods and the Bank neither delivered the goods nor rendered accounts, a fiduciary relationship could exist. The Bank appealed to the Supreme Court, arguing that the plaintiff's case based on an oral agreement was contrary to banking transactions and that the Bank acted as a collecting agent for the supplier, not as an agent or trustee for the plaintiff.Supreme Court's Judgment:The Supreme Court disagreed with the lower courts' findings on the fiduciary relationship. The Court stated that the normal method of banking operation and the maintenance of the current account did not indicate a fiduciary relationship. The Court also found no justification to hold that the Bank acted as an agent of the plaintiff, as the Bank took charge of goods as a bailee, not as a trustee or agent.However, the Supreme Court held that the Bank's failure to deliver the goods to the plaintiff, despite receiving payment, made it liable. The Bank's plea that the goods were delivered to an authorized agent was not substantiated by evidence. The Bank's liability was absolute, and it was required to return the goods or pay an equivalent amount to the plaintiff. The appeal was dismissed with costs, but not for all the reasons stated by the lower courts.Conclusion:The Supreme Court dismissed the appeal, holding the Bank liable for the non-delivery of goods despite the absence of a fiduciary relationship or agency. The Bank's actions as a bailee did not absolve it from liability for failing to deliver the goods to the plaintiff. The appeal was dismissed with costs.