1938 (3) TMI 20 - HC - Indian Laws

Appeal allowed, Japanese ship-owning company not liable for bills of lading issuance. Respondents to pay costs.

The appeal was allowed, setting aside the Court of Appeal's orders and restoring Buckland J.'s orders. The appellants, a Japanese ship-owning company, ... - Issues Involved:1. Liability for issuing bills of lading without Mate's receipts.2. Conversion of goods and the right to immediate possession.3. Applicability of Section 178 of the Contract Act, 1872.Issue-wise Detailed Analysis:Issue 1: Liability for Issuing Bills of Lading without Mate's ReceiptsThe appellants, a Japanese ship-owning company, were held liable for issuing bills of lading to the Export Company without obtaining Mate's receipts, which the respondents claimed deprived them of their security on the goods. The contracts stipulated that the property in the goods would pass when the goods were delivered alongside the ship. Clause 3 of the contract indicated that payment was to be made against Mate's receipts, while Clause 4 provided for a seller's lien on the Mate's receipts and the goods until full payment was made. The court concluded that the sellers had parted with both property and possession, leaving them with an equitable charge rather than a possessory lien. Consequently, the appellants were not liable for issuing the bills of lading without the Mate's receipts, as there was no express or implied notice to the appellants to withhold the bills of lading.Issue 2: Conversion of Goods and Right to Immediate PossessionThe respondents argued that they retained a right to immediate possession of the goods through their possession of the Mate's receipts, and thus the appellants' delivery of the goods to the bill of lading holders constituted conversion. The court found that the respondents did not retain a possessory lien but only an equitable charge, which did not support a claim for conversion. The court emphasized that a bill of lading is not a negotiable instrument and does not transfer a better title than the transferor had. However, equitable rights, such as the respondents' lien, do not affect a bona fide transferee for value. Therefore, the respondents could not claim conversion against the appellants.Issue 3: Applicability of Section 178 of the Contract Act, 1872The court considered whether the Bank, which had received the bills of lading from the Export Company, had a better title to the goods under Section 178 of the Contract Act, 1872. The Court of Appeal had remanded the case to determine this issue, but the Privy Council found it unnecessary to decide this point, given their conclusions on the first two issues. The court noted that the transaction appeared to be a normal banking transaction, and the presumption of good faith would likely suffice to discharge the onus of proof under Section 178.Conclusion:The appeal was allowed, the orders of the Court of Appeal were set aside, and the orders of Buckland J. were restored. The respondents were ordered to pay the appellants' costs in the Court of Appeal and before the Privy Council. The court concluded that the appellants were not liable for issuing bills of lading without Mate's receipts and that the respondents did not have a possessory lien to support a claim for conversion.