TaxTMI 
TaxTMI 
TaxTMI 
2025 (3) TMI 1597
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....agricultural commodities from the respondent no.1/defendant no.1 (Kotak Mahindra Bank) being pledged and stored within the warehouse of respondent no.2. The said agricultural commodities (cotton bales) were insured with the respondent no.3 - Insurance Company. For sake of convenience, the parties are referred to, as per their nomenclature before the Trial Court/Bombay City Civil Court. 3. It is the case of the plaintiff that the agricultural commodities (cotton bales) were worth Rs. 8,92,46,684/- against which the credit facility loan worth of Rs.6,20,08,634/- was disbursed out of the sanction limit from the defendant no.1 - Bank. The goods were stored in the warehouse as per the terms and conditions on the sanction letter being building preapproved warehouse. The plaintiff had handed over security cheques in favour of the defendant no.1 Bank for an amount of Rs.20 crores each. As per the sanction letter, the insurance of the said commodities had to be taken wherein the beneficiary of the said insurance was to be the defendant no.1 Bank, and the premiums were to be paid by the plaintiff. The insurance policy was valid from 8th September 2022 to 7th September 2023. The defenda....
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....e defendants filed their reply and after hearing the learned counsel for all the parties, the learned Judge of the City Civil Court by his order dated 11th June 2024 partly allowed the Notice of Motion, thereby directing the defendant no. 1 Bank not to take any coercive action against the plaintiff except by following due procedure of law. Being dissatisfied with the impugned order passed on 11th June 2024 by the Judge of City Civil Court, the plaintiff has filed the present Commercial Appeal From Order. 7. Mr. Vishal Pattabiraman, learned counsel appeared on behalf of the original plaintiff and made his submissions as under:- 7(i) The appellant (Original Plaintiff) had filed the present suit seeking recovery of damages for the destruction of 489.22 MT of Cotton Bales, valued at approximately Rs. 8,80,88,000/- which were pledged with the respondent no. 1 and destroyed in a fire incident on 14th May 2023 during the insured period. It is undisputed that the relationship between the plaintiff and respondent no. 1 is one of Pledger and Pledgee. Under Sections 151, 152, and 161 of the Indian Contract Act, 1872, the Pledgee is obligated to take due care of the pledged goods. ....
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....ther, the provisions of the sanction letters clearly depict that the CMA should be within requisite radius of Agri RM locations. There was only one pre-approved warehouse within such limitations placed by the defendant no.1 and therefore, it is abundantly clear that there was no choice given to the plaintiff. Furthermore, the CMA charges are decided by the Bank depending on the credit loan facility availed. 7(vi) A bare perusal of the provisions of the sanction letters shows that respondent no. 2 is an agent of respondent no. 1 Bank to hold the goods pledged with the Bank on behalf of the Bank and therefore there was no iota of doubt that there is a clear relationship of principal and agent, between the respondent no.1 Bank (being the principal) and CMA i.e., respondent no.2 (being agent of respondent no.1). The plaintiff placed reliance on the judgment of the Apex court in LIC v. Rajiv Kumar Bhasker, (2005) 6 SCC 188. 7(vii) Further, even Section 233 of the Indian Contract Act, 1872 where it is permissible for a third party while dealing with agent to hold the agent as also its principal liable. Thus, in view of the said case, CMA is acting on the direct....
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....e seeks to recover its dues, then it should be in a position to re-deliver the goods. 7(xiii) The plaintiff asserts that respondent no. 1 has been repeatedly issuing margin calls against the plaintiff. It is important to highlight that the very concept of margin calls necessitates that the quantity of commodities pledged must be commensurate with the credit facilities utilized. However, it is crucial to emphasize that the pledged commodities were rendered completely non-existent or valueless as a result of the fire incident, which effectively destroyed the collateral goods. This fact is not only pertinent but central to the matter at hand, and any demand for margin calls under such circumstances is unfounded and legally unsustainable. 7(xiv) The argument put forth by respondent no. 1 Bank, suggesting that the plaintiff must settle the credit loan facility before being entitled to the insurance money, is without merit. The fire occurred in respondent no.2's warehouse while the goods were under the custody and control of the bank, secured by the pledge. As the goods were pledged and the insurance policy listed the commodities as insured, the bank is the benefici....
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.... also relied upon following judgments:- (a) The judgment of Supreme Court in case of Bank of Rajasthan Limited vs. VCK Shares & Stock Broking Services Limited, (2023)1 SCC 1 (b) The judgment of Madhya Pradesh in case of Central Bank of India, Raigarh vs. M/s. Grains and Gunny Agencies & Ors. 1988 M.P.L.J. 453. 8. Mr. Zal Andhyarujina, learned Senior Advocate appeared on behalf of the defendant no.1 Bank and made his submissions as under :- 8(i) He submitted that the defendant no.1/Bank has expressly contracted out of the responsibility of preservation of the subject goods in bailment/pledge. 8(ii) As per Clauses 3 (VIII), (X) and (XII) in the Pledge Agreement dated 18 December 2018 at page 188 - 189 of appellant's (original plaintiff) COD Part - 1, the plaintiff was solely responsible for any loss or damage to the goods and that the Bank shall not be held liable. 8(iii) Service Agreement dated 7 February 2023 executed between the CMA and the plaintiff was undisclosed by the plaintiff before the Trial Court. 8(iv) The defendant no.1/Bank has the right as a pledgee to contract out of its obligations to preserve the subject ....
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....n was that as described in Section 151 of the Contract Act. 17. Mr. Andhyarujina, learned Senior Advocate relied upon following judgments :- 1. The judgment of Punjab & Haryana High Court in case of State Bank of India vs. M/s. Quality Bread Factory, Jullundur Road, Batala & Anr. (1983) 2 I.L.R. 406 2. The judgment of this Court in case of Bombay Steam Navigation Company Limited vs. Vasudeo Baburao Kamat, 1927 SCC OnLine Bom 34 3. The judgment of Madras High Court in case of Sheik Mahamad Ravuther vs. British India Steam Navigation Co. & Ors., 1908 SCC OnLine Mad 151 4. The judgment of this Court in case of Balkrishan R. Dayma vs. Bank of Jaipur Ltd. & Anr., 1970 SCC OnLine Bom 8. 18. We have heard the learned counsel for both the sides and with their assistance, have gone through the documents on record. 19. The present Appeal from Order challenges an order passed by the Judge of the City Civil Court thereby refusing to grant relief in favour of the plaintiffs. 19.1 The plaintiff/present appellant had sought in the Notice of Motion, the following prayers :- a) Pass ad-interim Ex-parte injunction orders, thereby restraining t....
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....er insurance car marking bank as beneficiary to the extent of the value of stocks lying in their warehouse. Insurance should cover for theft, burglary, fire, floods and other standard perils. Insurance policy to be taken and marked in favour of bank. Designated Warehouse - Warehouse where the goods are to be stored will require to be approved by the bank and collateral Manager after due inspections. Margin Call - Prices will be marked to market on weekly basis. When the available margin fall by 5%, the bank shall intimate the company to top up the margins either by providing additional stocks under pledge or by reducing the outstanding exposure for maintaining stipulated margin. Delay in servicing margin call will attract penal interest @ 2% per month on the entire balance outstanding in the account. 19.7 So also, pledge agreement was entered into between plaintiff and defendant no.1 - Bank. The clause 3(x) reads as under:- Clause 3(x) - " The Pledger (s) agrees that the pledgee shall not be held liable for any loss, damage or depreciation (s) which the said pledged goods/securities undergo while in possession nor shall the pledgee be held liable in case of theft,....
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....d to keep them. The defendants purchased the bars and kept them, where three of the bars were lost. Per the contractual understanding between the parties, the defendants agreed to keep the bars at the plaintiff's risk. The plaintiffs sued for damages for the lost bars. It was held that it was open to the bailee to contract himself out of the obligations imposed by Section 151 of the Indian Contract Act and that the Act does not expressly prohibit contracting out of Section 151. It follows the judgments passed in Bombay Steam Navigation Co. Ltd. vs. Vasudev Baburao and Sheik Mohamad Ravuther vs. British India Steam Navigation Co. Ltd. 19.13 Balkrishan R. Dayma. Bank of Jaipur, Ltd. & Anr., 1970 SCC OnLine Bom 8 the Division Bench of the Bombay High Court were dealing with the facts. In this case the plaintiff/borrower availed a cash credit account facility from the defendant-bark, pledging goods stored in the plaintiff's godown, with the keys and control handed to the defendant-bank. Clause 7 of the pledge agreement stipulated that the borrower would bear all losses, damages, or deterioration caused by theft, fire, natural disasters, or other causes, irrespective of wh....
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.... being made by the plaintiff, they are again considering the claim in the policy. 21.1 Mr. Andhyarujina, learned Senior Advocate appearing on behalf of the defendant no.1 Bank on instructions submitted that if the insurance claim is granted by the defendant no.2 - Insurance Company to the defendant no.1 Bank. The said amount would be adjusted by the defendant no.1 Bank and only for the balance amount, they will proceed further against the plaintiff. 21.2 The statement made by the learned counsel appearing for the defendant no.1 Bank is accepted by this Court as an undertaking given to this Court. 21.3 The credit facility that exist between the plaintiff and the defendant no.1 Bank is in the nature of contract between the parties. Hence, both of them are bound by the terms of the contract. 21.4 The plaintiff has availed credit facility and is duty bound to repay the said amount as per the terms agreed between the plaintiff and the defendant no.1 Bank. 21.5 If the Insurance Company pays the entire amount as claimed by the plaintiff, the said amount is to be adjusted by the defendant no.1 Bank against its claim and for the balance amount (if any) the defendant no. 1 is ....