Contracts of indemnity can be enforced without the actual loss of the indemnified so long as there is an absolute liablity of the type covered by the contract of indemnity. ) 2. S. 124 – Lala Shanti Swarup vs Munshi Singh & Others (Indemnity) (Vendor sold an encumbered land to vendee, who promised to make required payment against a mortgage to the mortgagee; Vendee fails to do so, vendor sustains loss in the form of ? th of their property being sold; Vendor sues under implied contract of guarantee.
Issue: Is there a contract of guarantee? Is the suit barred by limitation? Held: A conveyance which contains a covenant whereby th epurchaser promises to pay off encumberances on the sold property is nothing but an implied contract of indemnity, whose cause of action arises when ACTUALLY DAMNIFIED (Mortgage decree being passed does not amount to actual damnification)) 3. S. 125 – Gray v Lewis & Parker v Lewis (Indemnity) 4. S. 26 – Mountstephen v Lakeman (Guarantee) (L, director of the Board, tells M to connect the sewer system with individual houses although the Board hasn’t asked M to do so, as a whole. L says that he will see M gets paid (“I will see you paid”). Issue: Does the above statement impose a primary of secondary obligation on L (ie is this a contract of indemnity or guarantee? ) Held: Through his statement (when given its natural meaning), L placed a primary obligation on himself to indemnify M; Lack of a principal debtor also makes this a contract of indemnity ) . S. 126 – Punjab National Bank Limited v Bikram Cotton Mills (Guarantee) ( The Company executed 3 documents (promissory note, hypothecation and a letter) in favour of its creditor, the bank; On the same day, the Managing Agent of the company executed an agreement of guarantee with the Bank; Issue: Is this an issue of guarantee or indemnity? Whether the suit filed was premature? Held: As all documents were executed on the same day, it can be inferred from the conduct and intention of the parties that the agent enetered into an agreement of guarantee.
The bank was entitled to claim at any time the money due from PD as well as from G under the promissory note and the bond. The suit could not therefore be said to be premature. Also, the binding obligation created under the composition ‘between the company and its creditors does not affect the liability of the surety unless the contract of surety-ship otherwise provides. G is liable for “ultimate balance” which should be determined) (the nature of the bond of guarantee would be that of a continuing guarantee) . S. 126 – Ramchandra B. Loyalka v Shapurji N. Bhownagree (Guarantee) (D, a broker, forms a contract with P, to be a sub-broker reponsible for certain constituencies; Said constituencies default and owe D 16,000. P and D enter into a second agreement whereby P will be liable for the above amount; Note: Sub-broker is suing broker for his commission Issue: Was the agreement whereby P will be responsible for the constituencies a contract of guarantee or indemnity?
Held: For a contract of guarantee to subsist, there must be three parties to the contract (PD-C, G-C and PD-G (this last contract can be implied (S 145) or express, and is a contract of indemnity between PD and G); (i) Here, the last contract was absent, with the constituencies being unaware of the offer of P (the sub-broker); (ii) P (sub-broker) has an interest in the transaction (which happens in contracts of indemnity and not guarantee). Thus, contract was of indemnity; Also, the fact that D sued the lients for the price and then compromised without the consent of P is immaterial as P is not a party to the contract (i. e. , not guarantor)) 7. S. 126 – U. P. State Sugar Corporation v Sumac International Limited (Bank Guarantee) (Sumac entered into a contract with Sugar Corporation wherein Sumacwould have to deliver a new wing of Sugar mills to the corporation by a certain date; Sumac had to execute five unconditional bank guarantees in favour of P(plaintiff) for delivery, advance payments, etc.
U. P. Government informed P that it was to be converted into a joint venture and hence should stop expansion of mills; P cancelled agreement with D, and sought to enforce the bank guarantees. D applied for arbitration and an interim injuction against encashing the bank guarantees. Issue: When can injuctions be granted on unconditional bank guarantees. Held: Injuctions are not easily granted as this would affect commercial transactions.
Two exceptions: (i) Fraud: must be of an egregious nature such as to vitiate the entire underlying transaction; must be that of the beneficiary, and not the fraud of anyone else. (ii) Irretrievable harm/injury caused to either party on encashing guarantee: exceptional circumstances that make it impossible for the guarantor to reimburse himself if he ultimately succeeds, will have to be decisively established; existence of any dispute between the parties to the contract is not a ground for issuing an injunction to restrain the enforcement of bank guarantees. Hence, no injuction was granted) 8. S. 26 – National Highway Authority of India v Ganga Enterprises and Another (Bank Guarantee) (P invited bids for collection of toll on a highway; D had to provide Rs 50 lakhs as bid security on issuing a bid, in case of withdrawal of bid before 120 days, and Rs 2 Cr on acceptance of the bid, as performance security; The bank guarantee was to be paid by the bank without demur on a written demand merely stating that one of those conditions has been fulfilled, D removes his bid before 120 days, and his bid is found to be the highest and is accepted, but after withdrawal of offer; Thus, no contract formed; Issue: Whether P can enforce the bank guarantee of bid security without the breach/formation of a contract?
Held: The bank guarantee was an “on demand guarantee” to be granted without demur; By invoking the bank guarantee and/or enforcing the bid security, there is no statutory right, exercise of which was being fettered. Withdrawal of a bid and forfeiture of security are two different things. Forfeiture of such earnest/security, in no way, affects any statutory right under the Indian Contract. Thus guarantee was enforceable, and to enforce the back guarantee the creditor doesn’t have to show any evidence to show a breach. The bid security was given to meet specific contingency i. e. withdrawal of the offer within 120 days. The contingency having arisen, Appellants are entitled to forfeit.
The existence and non-existence of an underlying contract become irrelevant when the invocation is in terms of the bank guarantee. 9. S. 126 – Mahatma Gandhi Sahakra Sakkare Karkhane v National Heavy Engineering Co-Operative Limited and Another (Bank Guarantee) 10. S. 126 – Hindustan Construction Co. Ltd v State of Bihar & Others (Bank Guarantee) (HCCL contracted with the government to contruct a dam; had to execute two bank guarantees in favour of the governement (performance and mobilisation advancement); Governement applied to encash said guarantees claiming non-performance by HCCL, who then files for interim injunctions; Issue: Whether the bank guarantee is conditional or unconditional.
Held: Bank Guarantee was conditional (terms are of material importance); Advancement guarantee can be enforced only if obligations of HCCL are not discharged or there is misappropriation (neither of which can be proved) Performance guarantee can be given only to the “chief engineer” who was not the one who applied for it; Thus, injuction granted) 11. S. 128 – Greer v Kettle (Guarantee) (An agreement was made whereby Austin Friars ( A) were to be given a loan from Mercantile Marines(MC). A was to provide MC collaterals by way of shares of Iron Industrial Company to make the transaction a secured one. The Parent Trust company (P) agreed to guarantee the secured debt , thereby becoming the surety. However, it was later found out that A had not issued any shares, and A went on to default on the loan.
Issue: Whether P is still liable as surety although the debt is no longer secured, and whether P is estopped from declining the liable of surety. Held: The shares being given as collaterals was one of the pre-requisites for the defendant (P) to become a surety. They didn’t become guarantors for any unsecured loan , thus there is no question of imposing liability for which they never consented to. Also, estoppel cannot aply as P was not in a position to gain knowledge/privy to the existence or lack thereof shares mentioned in the recital; M was in such position, thus M is estopped. RATIO: A surety can insert pre-conditions to his liability as guarantor when he enters into a contract. ) 12. S. 28, 133-139 – Charan Singh v Messrs Security Finance Pvt. Ltd. and Others (Co-extensive Liability) (Facts: Decree holder entered into a compromise with one of the judgment debtors(Principal debtor) for the payment of Rs. 10,000/- then sues the other judgment debtor(Guarantor) for the remaining Rs. 20,000/- Issue: Do sections(S 133 to 139) of ICA apply when the surety, PD, and creditor acquire the roles of decree holder and judgment debtors? Held: After a decree has been passed, the liabilities of the surety and principal debtor are that under the decree and not under the original contract. i. e. The liability of the surety is no longer co-extensive with that of the debtor.
The surety and PD become co-judgment debtors. The relevant sections of the ICA do not apply to decrees, only apply to creditor, surety and principal debtor. Thus, the creditor can get amount for surety) 13. S. 128, 134 – Syndicate Bank v Channaveerappa Beleri and Others (Co-extensive Liability) (Period of limitation for contracts of guarantee) ( The Bank (P) gives a credit loan to a company, who defaults on their payment. P sues the directors of the company (D), who are the sureties of said loan; D claims limitation period starts from when the company (ie Debtor) defaults on payment; Issue: When does the period of limitation start for a contract of guarantee, as against the surety?
Held: It runs from the time when the balance is constituted and demand is made. The Guarantee Contract mentions that there shall be payment on demand , thus a demand is a condition precedent for the liability of the guarantor. Time will start running when the contract is broken ( A. 55) or when the right to sue accrues ( A. 113) , that is when the demand is made and it is refused by the surety. This is a contract of continuing guarantee with a live account. The time period started to run from the moment the refusal by the surety was made. Thus the suit is not time barred. RATIO: Limitation period for a debtor starts when the debt is incurred , and for surety when the demand for payment is made. ) 14. S. 39 – Radha Kanta Pal v United Bank Of India Ltd. (Guarantee) (Raji Kanta (legal heir-Radha Kanta) gave a fidelity bond in favour of Nishe Kant (an employee of the bank), who then misapproprited funds and left without a notice. The bank then encashing promissory notes given by Rajni Kant as security; Radha Kant wants to stop payment as he claims the bank continued to hire Nishi Kant, even after knowlegde of dishonesty, without informing the surety (Invoking the aplicability og S 139) Issue: Does the surety’s liability get discharged under S 139? Held: The surety’s liability, for the faithful discharge by another, of his duties depends on the exact terms of that guarantee. Utmost care in supervision may not be a term in the contract; continued employment of proved dishonesty is an implied term, wherein the surety’s liability is discharged) The guarantor in such a case guarantees the fidelity and not the infidelity of the servant. He guarantees the fidelity and ensures the loss against the risk of infidelity and not the fact of infidelity. Under Section 139 the two important requirements are: (i) The act of the creditor is inconsistent against with the rights of the surety. (ii) The remedy of the surety against the principal debtor has been impaired. (ii) is lacking, thus S 139 does not apply, although the creditor continued to hire Nishi Kant after knowledge of his dishonesty, thereby violating the rights of the surety. Verdict for the Bank to encash promissory notes, and Radha can sue Nishi Kant) 15. S. 34, 137 – Aziz Ahmad v Sher Ali and Others (Time bar= barred debt, NOT extinguished debt; barred debt is still a live debt) (Facts: NA; Issue: Whether the surety is discharged when the creditor allows the execution of his decree against the principal debtor to be barred by limitation; Held: Mere omission to sue within limitation period does not discharge the surety. S 137 states that mere forbearance on part of the creditor does not discharge the surety. Debt becoming time barred does not amount to “omission” under S 134. On expiry of the period of limitation, the creditor loses the remedy but not the right to the debt, and thus omission to sue does not discharge the debtor. S 134 does not apply; The surety has argued that he will lose the right to seek remedy under s. 140 and s. 145 as the rights of the creditor cannot be enforced. (Applicability of S 139?? However the surety can guard against such contingency by including a term in the contract whereby as soon as the guaranteed debt becomes due , the surety will be invested with all the rights creditor has against the debtor after making the payment; read this case against the case of Syndicate bank) RATIO: A creditor has no duty to the surety to pursue his legal remedy against the principal debtor and his failure to take action will not discharge the surety. 16. S. 129 – Margaret Lalita Samuel v Indo Commercial Bank Limited (Continuing Guarantee) (Samuel and his wife, the appellant, exected a continuing guarantee in favour of a company which the bank had a running account with. The company ceased to operate. Issue: Was each debt a new loan, with a different cause of action, thus barred by limitation? Ie what is the limitation period of a continuing guarantee?
Held: The defendant undertook to pay any amount that may be due by the company at the foot of the general balance of its account or any other account whatever. In the case of such continuing guarantee, so long as the account is a live account in the sense that it is not settled and there is no refusal on the part of the guarantor to carry out the obligation, the period of limitation does not commence running. Limitation would only run from the date of breach (ie refusal to pay by surety). The over draft account that the bank had in the name of the company continued to be active even after the company ceased the business. The defendant also sent a letter acknowledging her liablity, thus confirming the liability for the still active account) 17. S. 133 – M. S.
Anirudhan v The Thomco’S Bank Ltd ( the Bank gave a form of guarantee, to be filled by G (Guarantor) to the PD (debtor). G put in th value of 25K, which the bank refused, stating their maximum was 20K. The PD made the value 20K, thus altering the document; Issue: Whether surety’s liability is discharged under S 133; Whether this was a material alteration (change in the nature/obligation of the contract), affecting the original contract; Whether PD acted as the agent of G, who was thus estopped from going back on granting implied authority to PD to make said changes. Held: The alteration was held to be unsubstantial, as 25K includes 20K, and it is in fact to the benefit of the guarantor.
Also, said alteration did not change the nature/obligation of the surety, it only reduced the liability. S 133 does not apply. PD was held to act as agent, had apparent authority to make such changes (due to the fact that G had handed over the form to PD to give to the Bank), and hence G was bound by the principle of estoppel. DISSENT: The original offer of 25K was rejected by the Bank, and thus, no contract was formed. ) 18. S. 129, 130 H. B. Basavaraj v Canara Bank (Continuing guarantee: In the absence of a specific written document by Basavaraj revoking the guarantee, the guarantee stands and the legal representatives of the deceased are liable to repay the loan. ) 9. S. 140, 141 – Craythorne v Swinburne (Guarantee) (CHECK BRIEF; The oral promise that John Swinburne gave was actually, collateral to facilitate the guarantee and others were not privy to the agreement and as such John Swinburne had limited his liability. Defendant was collateral security and not co-surety, and is exempt from the principles of equity (to contribute to the debt payment) as he did so through specifics in a contract) 20. S. 139, 141 – State of Madhya Pradesh v Kaluram (Security) (Facts: Auction by the Divisional Forest officer held J as the highest bidder. Four installments of payment had to be made for the sold forest produce.
As per the terms of the contract, the Government may prevent the forest contractor (J) from taking forest produce in excess of that which was paid for, w. r. t. particular installments. i. e. the forest produce not yet paid for was equivalent to security. (This could be resold). Issue: Whether S 141 of the ICA applies. I. e. whether the Government lost the principal debtor’s security without the consent of the surety, thus discharging the surety. Held: The surety is discharged from all liability as S 141 applies. The State lost the security of the forest contractor by allowing forest produce (completely under their control) to be taken without payment. Thus, the rights against the debtor that the surety acquires after the creditor is paid no longer exists, thereby discharging the surety.
Ratio: The term “security” under S 141 is not used in strictly technical terms, but refers to all rights, which the creditor possesses against the debtor/his property at the time of formation of contract. In this case, the right of re-sale of goods served as security under S 141) 21. S. 134, 139 – Mahanth Singh v U Ba Yi (Facts: Plaintiff was a building contractor employed by four trustees of ‘X’ pagoda. Respondent is the guarantor of said trustees. Plaintiff filed a suit for payment against the four trustees, then changed the suit to strike down the names of the four ex-trustees, and add eight names of present trustees. Thus, due to some procedural rule, the plaintiff is prevented from instituting proceedings against the original four trustees.
Issue: (i) whether the liability of the surety is discharged by the act of the present appellant in forgoing his claim against the principal debtors. i. e. Whether S 134, 139 apply. (ii) Whether the agreement of debt is declared void (due to inability of the creditor to file a claim) under S 2 (g), (j) under the ICA Held: (i) Surety is still liable. S 134-The principal debtor is not discharged of his debt, the creditor is merely stopped from claiming said debt due to procedural instruments. S 139-The right of the surety against the debtor is not infringed, thus this section does not apply. (ii) S 2 (g), (j) apply only to those contracts which are void by substantive law, not procedural law. Hence, the principal debtor is not discharged absolutely, and surety remains liable. ) 22. S. 33, 135, 141 – Amrit Lal Goverdhan Lalan v State Bank of Travancore & Others (Plaintiff is partner of a firm that is the pricipal debtor of the bank. P is surety of said debt. According to facts, the Bank owned certain stocks of the firm as collateral, but admitted to being short of stocks worth Rs. 35,000 (or there abouts), through its own negligence; Issue: Is the surety’s liablity discharged by virtue of applicability of S 133, 135, 141? Held: S 133 is not applicable as the facts show that the variance referred to by P (ie, variance wrt the limit of credit to be granted) were merely internal communications, not in the form of a formal document and thus not binding on the Bank (ie no varuance took place); S 135 s not applicable as according to facts, the Bank gave time to the PD to make good the quantity of goods referred to in the monthly statement, which is not equivalent to giving time to make payments ithin the meaning of S 135; S 141 is applicable; The bank, through its own carelessness, lost some share of security for which the surety will no longer be liable, under S 141; Thus, surety has to pay amount due-35,000 (ie security lost)) 23. S. 139, 141 – State Bank of Saurashtra v Chitranjan Rangnath Raja and Another (Bank had granted credit to the limit of Rs. 75,000 to the PD, who pledged 5000 tins of groundnut oil to the Bank, who negligently lost said security; Issue: Whether the surety had knowledge of the said securtiy and whether S 141 is applicable; Held: S 141 would apply if it can be shown that the creditor had taken more than one security from the principal debtor at the time when the contract of guarantee was entered into.
Here there were two forms of security: plegde of goods and personal guarantee of the surety. Section 141 comprehends a situation where the debtor has offered more than one security one of which is the personal guarantee of the surety. The knowlegde of the surety wrt to the existence of the security is immaterial (Although, it was found that the surety granted the guarantee on the assumption that the security would be given). S 141 applied regardless of presence of knowledge on the behalf of the surety) 24. S. 148 – Trustees of the Port of Bombay v Premier Automobiles Limited (Bailment) – High Court 25. S. 148 – Trustees of the Port of Bombay v Premier Automobiles Limited (Bailment) –Supreme Court 26. S. 48 – State of Maharashtra, Bombay and Others v Britannia Biscuits Company Limited and Others (Bailment) (Facts are similar to United breweriers, except that there was a three month epriod within which the biscuit tins had to be returned, and such tins were accepted even after time limit was over. Issue: Sale or bailment? Also, was there an obligation on the purchasers to return the tins? Held: Intention (As can be seen from the accounts) of the company shows that the transaction was a composite one, resulting first in entrustment of the tins with the purchasers. If returned within three months, the trust is returned, if not, the transaction becomes one of sale. There exited no obligation to return (time was not strictly followed). Neither the endorsement on the price list nor the endorsement on the invoice can be said to create an obligation to return. ) 27. S. 48 – Messrs Kalyani Breweries Limited v State of West Bengal and Others (Bailment) (Facts: Kalyani Breweries sell beer, and the Tax Authorities claim that the amount obtained through the “forfeited deposits” for the bottles actually amount to sale of the bottles. Issue: Were the bottles sold or bailed? Held: The court held that the bottles were sold and not bailed for two reasons. (i) The company failed to issue a circular describing their bailment scheme. I. e. The terms of the bailment were not set. Also, the “bailee” had no knowledge (implied of actual) of the proposed bailment. There can be no bailment WITHOUT the knowledge of the bailee. Further, CONSENT is not equal to KNOWLEDGE (ii) The deposit amount was the same as that of the price of the bottle. This favoured an intention to sell, rather than bail. ) 28. S. 48 – State of Bombay v Memon Mahomed Haji Hasam (Bailment) (Facts: The Customs Authority requisitioned the petitioner’s trucks, and later sold said goods in an auction as unclaimed goods, while the appeal against the initial requisition was pending. The appeal was granted, and the owner demanded Issue: (i) Was there any obligation to take reasonable care of said goods? i. e. Whether the Government was in a position of bailee while the appeal was in progress. (ii) Whether bailment can take place without a contract Held: The argument of the government, which stated that bailment was absent due to the lack of a contract, was rejected, as there can exist a bailment WITHOUT a contract. The Government was under both a statutory as well as implied obligation to take reasonable care of the goods.
Also, the order of auction does not interfere with the owner’s right to his goods as said auction was procured through false representation of fact. ) 29. S. 148 – K. L. Johar and Company v Deputy Commercial Tax Officer (Bailment) (Hire-purchase agreement amounts to a sale; A was the owner and not the financial agent as the terms of the agreement say that title will remain with the A till option to purchase is exercised. A hire purchase agreement has two elements: (1) element of bailment and (2) element of sale in the sense that it contemplates an eventual sale. The element of sale fructifies when the option is exercised by the intending purchaser after fulfilling the terms of the agreement.
When all the terms of the agreement are satisfied and the option is exercised a sale takes place of the goods which till then had been hired. Tax is from the sale transaction. Also, the taxable amount will not be the final price paid at the option to sale (Re. 1) or the amount paid through hire instalations; will be determined reasonably by th etax authorities) 30. S. 148 – United Breweries Limited v State of Andhra Pradesh (Bailment) (Facts: UB are suppliers of beer. The Sales Tax authority wants to tax UB for the “sale” of the bottles and crates, while UB claims that there was no sale, but only bailment of said bottles and crates. UB charged a certain amount for the bottles and crates, providing for a refund of the said amount of the return of the bottles.
They also asked their customers to charge the consumers the same amount as a deposit for the bottles. UB also issues a circular publicizing their scheme regarding refundable deposits for bottles. Also, it must be noted that the deposit for the bottles was lesser than the actual price. Issue: Whether the bottles and crates were sold, or bailed. Held: The court looked into the INTENTION of the parties. From the circular issued by UB, it is observed that they were anxious to get the bottles back. They urged their customers to charge a deposit from the consumers so as the get the bottles back. They also stated that they would be able to gain greater business efficacy on return of the bottles.
The forfeiture of the deposited amount did not amount to the price of the bottle, but came under S 74 of the ICA as LIQUIDATED damages. Also, the argument that there was no contractual obligation on the part of the customers to return said bottles, and hence bailment cannot be proved failed. This is because bailment is possible without the presence of a contract (implied, or otherwise)). 31. S. 150 – Hyman v Nye & Sons (Bailment) (Defendant is a jobmaster from who the plaintiff hired a pair of horses, a carriage and a driver; Carriage breaks down, P sues for damages. Issue: The degree of duty of care in the case of a hire agreement. Held: Reasonable care must be taken. NOTE:
English law says that the hirer is not liable for defects he knew nothing about (or could not have reasonably known about). S 150 negates this rule wrt India. The thing bailed must be as fit and proper as care and skill can make it for use in a reasonable and proper manner. It is not at all unreasonable to exact such vigilance from a person who makes it his business to let out carriages for hire. The defendant had to show in this case that the accident was not preventable by him by exercise of any skill. He did not show the same in the initial trial. Result: The trial judge gave too low a level of duty of care to the jury, new trial. ) 32. S. 51 – Coggs v Bernard (Gratuitous Bailment) (Check briefs) 33. S. 148 – The Pioneer Container, KH Enterprise v Pioneer Container (Sub Bailment) – Privy Council (Taiwan, Hong Kong, sub-bailment; imposition of a duty on sub-bailee outside a contract; clause regarding specific governing law applicable based on the terms which the owner had allowed to bailee to sub-bail said goods. Check brief) 34. S. 148 – Morris v C. W. Martin and Sons Ltd. (Sub Bailment) – Court of Appeal (D as sub-bailee for reward was under a duty of care and P as head-bailor could sue for breach of this duty. A common law duty exists only if there is a relationship between the parties.
One way of establishing such a relationship is by taking voluntarily into custody the goods which are the property of another. The judge held that the defendant by voluntarily accepting from Mr Beder the custody of the fur, which they knew was a property of a customer of his, brought into existence a relationship of bailor and bailee by sub bailment and created a common law duty by the defendant to the plaintiff. The common law duty was with respect to taking care of her mink stole. The other common law duty was that the mink stole should not be converted meaning that nothing should happen to it that interferes with Mrs Morris’s right to property of the mink stole.
Whether it be a contractual bailment or a tortious bailment, the bailee has reversionary rights over the goods and thus the bailee would have the liability that the goods don’t get converted. CW Marrtin held vicariously liable, exemption clause does not apply. ) 35. S. 151 – Lakshmi Narain Baijnath v Secretary of State for India (Duty of Care of Bailee) (Defendant was transporting bales of jute-caught in cyclone-allowed jute to stay in the boat during the cyclone-boat leaks, jute stays wet for 30 hours-damaged, and rejected by the Mills; Issue: To what extent is the duty of care of the bailee under S 151; Held: This is an issue of fact rather than an issue of law. Courts held that the bailee did not take reasonable care of a prudent madn u/S 151, held liable for damage caused. ) 36. S. 60, 161, 167, 171 – Coastal Oil Mills, Ongole v Andhra Pradesh Industrial Development Corporation, Vice-Chairman, Hyderabad and Others (Third Party in Bailment) (AP Ind Corp seized bailee’s goods on default of the latter in certain payments; AP wrongfully claimed the bailor’s goods and refused to give said goods (oil) back; By a petition and decree by the 2nd defendant- the bank, goods were auctioned off (however, most of the goods had perished by then); Issue: third party in bailment; Held: the Bank was held to be liable as it failed to establish its lien over the goods; The bank was also responsible for withholding and auctioning the goods; AP and bailee not liable. ) 37. S. 170 – Messrs Kalloomal Tapeshwari Prasad and Company v Messrs Rastriya Chemicals and Fertilizers Limited and Another (Particular Lien) (Bailor had contracted to send 5000 metric tons of fertilizer for storage to bailee; bailor sent more than the agreed amount; bailee incurred expenses in accomodating for the excess; Issue: Whether the bailee could exercise a particular right of lien; Held: S170 applies only to situations where labour and skill have been applied to the goods bailed so as to improve the goods bailed.
The bailee was only required to transport and store the goods and hence it was decided that no labour, skill or improvement in the goods to entitle him enforce the lien. Also, there was a clause in their bailment contract than prevented any exercise of lien by the bailee, and hence the bailee’s suit fails on this ground as well. Held that he has right to recover the extra charges by separate suit but his lien is unenforceable. ) 38. S. 170 – E. H. Parakh and Others v G. Mackenzie and Company Limited (Particular Lien) (The bailee did not do anything to improve the goods by exercise of labour or skill but only stored it, hence no lien under S170 of ICA) 39. S. 171 – R. D.
Saxena v Balram Prasad Sharma (General Lien of advocates) (The relationship of advocate and client was severed as between the plaint