Pramatha Nath Talukdar v. Maharaja Probirendra M. Tagore

JUDGMENT

1. This is a suit to establish title in six items of movables said to be of great artistic value, for possession thereof and for damages. The said goods are old curios originally belonging to the defendant Maharaja. On June 25, 1960 and on July 25, 1960 the plaintiff claims to have purchased the same from the Maharaja along with a number of other goods for Rs. 33,650 and Rs. 24,150. These goods at the dates of sale were lying in the Durbar Hall of the Tagore Castle belonging to the Maharaja defendant. The delivery of the goods was to be given on or before December 31, 1960. All the goods sold were taken delivery of by the plaintiff from time to time except the six items which are the subject matter of this litigation. It is alleged that shortly after the sale on September 17, 1960 the defendant Maharaja purported to have hypothecated a number of artistic goods lying in the same Durbar Hall to the defendant Madhodas Mundra. The plaintiffs case is that the movables sold to the plaintiff were not hypothecated to the defendant Madhodas Mundra. Be that as it may, the plaintiff's further case is that a suit was brought by Madhodas Mundra being suit No. 309 of 1961 against the defendant Maharaja on the said hypothecation, that the suit was decreed by consent on November 28, 1961 and that pursuant to and in terms of the said decree the hypothecated goods were sold by Mr. A.K Panja, the Receiver appointed in the said proceeding to the defendant Chowringhee Sales Bureau (Private) Ltd. It is pleaded that the goods sold as aforesaid included the six items of artistic goods previously sold by the defendant Maharaja to the plaintiff. It is alleged that all the defendants acted in fraud and collusion and the suit, decree and orders in that suit are all tainted with fraud and collusion. It is further alleged that the defendant Mundra and the other defendants had full notice that the plaintiff was the owner of the said goods having purchased them previously. It is stated in the plaint that the goods are of great artistic value and damage assessed at Rs. 1 lac has been claimed. Reliefs claimed are a declaration of title, possession, Injunction and alternatively for damages assessed at Rs. 1 lac against all the defendants except the defendant Panja. The defendants impleaded are the Maharaja, who is the seller, Madhodas Mundra, the said hypothecatee, the Chowringhee Sales Bureau, the purchaser from the Receiver as also the Receiver.

2. All the defendants except the Maharaja defendant filed written statements disputing the plaintiff's claim. All allegations of fraud and conspiracy made against the defendants have been denied. Defendant Mundra's case is that fie advanced a sum of Rs. 40,000 to the Maharaja on hypothecation of various movables lying in the Durbar Hall, that the bona fide instituted a suit to enforce his claim, that in the said suit Mr. Panja was appointed Receiver and pursuant to the order of the Court the said Receiver took possession of the goods, that ultimately a decree was passed with the consent of the parties and that in terms of the consent decree the Receiver sold the goods under order of Court to the defendant company. The defendant Mundra denies to have notice or knowledge of the prior sale to the plaintiff of the goods in suit. It is denied that the Maharaja or the Receiver had no power to pass title. It is contended that the company defendant acquired good title by purchase from the Receiver. The sale by the Receiver has been confirmed by an order of the Court. It is, therefore, contended that the suit is not maintainable against him and the purchaser.

3. The Company defendant in its written statement denies all allegations of fraud and collusion and knowledge of the plaintiff's title in the goods, if any. The goods were in actual possession of the receiver when the goods were sold by the Receiver pursuant to the decree and order of the Court. The sale was effected by the Receiver after proper advertisement. The plaintiff's title to the goods is disputed. It is contended that the suit is not maintainable, that the plaintiff has no cause of action to institute this suit and that the same should be dismissed with costs. Defendant Panja in his written statement alleged that when he was given possession of the goods there was nothing to indicate that the goods were sold to the plaintiff. He sold the goods pursuant to the decree of the Court. He denied all allegations of fraud made against him in the plaint.

4. At the trial on behalf of the plaintiff Hrishikesh Ghosh, the Secretary of the plaintiff gave evidence. Sher Singh Kushwa, Manager of defendant Mundra, gave evidence on Iris behalf. Ram Shuran Kashyap, the Manager of the defendant company, gave evidence on behalf of the defendant company. Receiver Panja also gave evidence. Various documents including the receipts given to the plaintiff by the defendant Maharaja, the promissory note, the letter of hypothecation as also an affidavit affirmed by the defendant Maharaja and given to the defendant Mundra have also been exhibited. The minutes of the Receiver as well as some correspondence and other Court papers have also been tendered in evidence.

5. The facts established before me on which the case has to be decided are as follows: The plaintiff purchased the goods from the defendant Maharaja as par particulars stated in the two receipts exhibited in this case. Immediate delivery of the goods sold was not given to Talukdar. With the consent of Talukdar the goods were left in the possession of the Maharaja. From time to time all the articles except the goods in suit were given delivery of to Talukdar. On September 17, 1960 the defendant Maharaja borrowed the sum of Rs. 40,000 from the defendant Mundra by hypothecation of some of the goods lying in the Tagore Castle of the Maharaja as per list set put in the letter of hypothecation of even date. The Maharaja on the said date executed a promissory note and affirmed an affidavit stating that he was the owner of the goods and had full title to hypothecate the same. At the date the defendant Mundra had no knowledge of the previous sale to Talukdar and of the defect of title of Maharaja in the goods if any. I hold that defendant Mundra advanced the money in good faith and without notice of the defect of title if any. There is not the slightest evidence to indicate to the contrary.

6. In usual course the defendant Mundra instituted the suit No. 301 of 1961 to enforce his claim. In the suit the defendant Panja was appointed Receiver by Court and not by consent of parties. The Receiver look possession of the goods hypthecated as identified by the Maharaja, accept the evidence of the Receiver that be took possession of the hypothecated goods on the identification of the Maharaja. Nobody knew better than the Maharaja as to what goods were hypothecated and the Receiver was right in taking possession only of those goods as were identified by the Maharaja. Whatever vagueness there might have been in the description of the goods hypothecated either in the letter of hypothecation or in the order of the Court, the identification of the goods by the Maharaja to the Receiver is conclusive as to what goods were hypothecated. The decree passed in the suit was a decree by consent and the effected by the Receiver was pursuant to and in terms of the consent decree. There was no element of fraud or collusion in the entire proceeding right from the institution of the suit and ending in the sale and making over possession to the defendant company as purchase). The purchase was bona fide, without any notice of defect of title in any of the goods. At no point of time the defendant Mundra had physical possession of the goods. The goods hypothecated were lying all along in physical custody and possession of the defendant Maharaja till possession was taken by the Receiver and ultimately made over by the Receiver to the purchaser. Whether the possession of the Receiver is the possession of Mundra or Maharaja or whether the Receiver in the matter of sale acted as the agent of Maharaja or Mundra is a question of law which may have to be considered later.

7. These are the facts found by me. On this what follows in law? Who is entitled to such goods as were sold to the plaintiff Talukdar previously but subsequently included in the list of hypothecation and sold ultimately by the Receiver in terms of the consent decree was the hypothecation good and did the defendant Company acquire title by purchase in preference to the plaintiff? It is contended that the defendant Company did acquire good title for two reasons firstly because of section 30(1) of the Sale or Goods Act and secondly, because the Company purchased them in a Court sale.

8. It is elementary that no title can be transferred unless the transferor had title therein. A transfer by a person without title cannot give any title to the transferee. This rule if rigidly adhered to in the case of transfer of movable property may lead to serious inconvenience and injustice. In the case of movables normally title is transferred by delivery. Law does not require either a deed or its registration for the purpose of effecting transfer of title in movables. An innocent purchaser who paid good money bona fide from a seller in actual physical possession of the goods may find that he had acquired no title to the property because his vendor had no title to convey. Which of the two innocent parties should suffer as a result of the wrongful act of a third party? It may be contended that of the two innocent buyers the first buyer should suffer because there was some act of omission on his part in not taking away the goods and leaving the same in the possession of the seller thereby enabling the seller to effect a sale a second time of the same goods to an innocent buyer. In equity therefore of the two innocent buyers the first should suffer. More important than this, was the need of commerce. It was contended by the merchants that unless the rigidity of the rule is relaxed trade and commerce would be seriously hampered. The rigidity of the rule has therefore been relaxed and Sections 27 to 30 of the Sale of Goods Act have been enacted whereby a transferee of goods acquires good title in the goods though his transferor had no title to convey. The sections lay down under what circumstances and under what limitations a person without title could convey good title to the buyer. In certain circumstances a seller in possession but without title is deemed in law competent to pass good title even though he had no title himself and no authority from the owner to pass title.

9. Mr. Sankar Das Banerjee, learned counsel appearing for the plaintiff, contends that section 30(1) does not apply to the instant case for two reasons. Firstly sale, pledge or other dispositions by the seller in possession protected by the section does not cover a case of hypothecation by the seller in possession. Hypothecatee acquires neither title nor possession in the goods hypothecated and unless the subsequent disponee acquires possession, he is not protected by Section 30(1) of the Sale of Goods Act. Secondly delivery or transfer contemplated by the section to the subsequent disponee must be a voluntary act on the part of the seller in possession and it does not include a case where the seller is compelled to give possession by a decree or order of the Court. Mr. Goutam Chakraberty and Mr. Samiren Sen learned Counsel appearing for the defendant Mundra and the defendant Company on the other hand contended that the section should be given a wide interpretation to protect the interest of an innocent transferee. In their submission the words “other disposition should be given a wide meaning to cover ‘hypothecation’ as well. Even if the word ‘other disposition’ is to be construed ejusdem generis, it would only exclude gift i.e, transfer without consideration. “Generis” indicated by the word “Sale or pledge” is a transfer for consideration. Secondly it is contended that the section would apply even though delivery or transfer by the seller in possession is not voluntary in the sense that it is given by the seller in possession not directly but by the Receiver pursuant to a decree or order of the Court. The ‘Receiver’ in cases like the present is deemed in law to act as the agent of the seller in possession, the section does not rule out agency at all, so that delivery given by the Receiver means delivery given by the seller in possession either directly or through the agency of the Receiver so as to get the protection of the section. Further in the instant case the decree pursuant to which the goods were sold was a consent decree and as such it must be held that in the instant case the Receiver Panja acted in the matter of sale as the agent of the seller in possession. Mr. Samiran Sen submitted that to contend that Section 30(1) only contemplated cases of seller in actual physical possession and that delivery or transfer must be direct and not by an agent, leads to this obvious absurdity that it would leave out a good many cases of sale or transfer including all sales and transfer by a company because from its very nature a company cannot act except through an agent. The interpretation given by Mr. Baneriee, therefore, must be rejected on the ground that it leads to absurdity.

10. Section 30(1) does not require that the seller must he in actual physical possession of the goods. It is enough that he should have such control over the goods as to transfer possession by making over a document of title. The section refers to possession not merely of goods but also of documents of title of goods. Possession of documents of title to goods is equated to possession of goods. Possession of documents of title enables the holder of the document to transfer title and possession by endorsement and delivery of the documents of title to goods. It is clear therefore that S. 30(1) does not require that the seller must be in actual physical possession of the goods. The next point of controversy raised is whether the word ‘delivery’ in the section refers to goods and transfer refers to documents of title to goods. In Ilalsbury 3rd Edition Volume 34 page 84 footnote it is stated: “Apparently delivery applies to goods and transfer to documents of title”. Authority in support of the above is the decision of North, J. in the case of Nicholson v. Harper, reported in (1895) 2 Ch 415. It is doubtful whether the case can be considered as an authority for the above proposition. At page 418 of the report the learned Judge makes the following observation:

“I read the Act to mean that there must be a delivery of the goods by the seller in possession, or, where there is no delivery of the goods, the transfer of documents of title — well known mercantile documents, defined by the Act by reference. That being so, in the present case there has been no delivery to the defendants since the sale at all, and no transfer of any documents of title; nor could there have been, for there were no such documents.”

11. The sentence quoted above has been construed as supporting the above proposition. 1895-2 Ch 415 is an authority for the proposition that in order to be protected there must be some act whereby the subsequent disponee obtained possession from the seller in possession which he did not have before. In the cited case there was no act of transfer and hence it was held that the section would not apply.

12. The reason why the learned counsel for the plaintiff sought to rely on the above proposition is, that the subject matter in the instant case being “goods” and not “documents of title of goods”, Mundra the hypothecatee cannot claim protection because there has been no delivery of the goods. The contention of the defence is that the word ‘transfer’ in the section not merely refers to ‘documents of title’ but to ‘goods’ as well. To get the protection of the section it is not imperative that the seller in possession must make a delivery of the goods to the subsequent disponee, in the instant case the hypothecatee. Transfer of an interest in the goods by hypothecation is also permissible and such bona fide transfer of interest would be protected by the section. The fallacy of the defence argument is that by hypothecation no interest or property is transferred to the hypothecatee. Hypothecatee has nothing more than an equitable charge to have his claim realised by the sale of goods hypothecated. By a charge no interest in the property is transferred. The only light acquired by the charge-holder is the right to be paid out of the property charged. The hypothecatee having nothing more than equitable charge acquires no property in the goods charged. Section 30(1) would come into play only when property right is transferred to the disponee. If the subsequent hypothecatee of the seller in possession acquires no property right, what protection he can get under Section 30(1) of the Sale of Goods Act? It is not to be forgotten that the hypothecatee has not only no interest in the goods hypothecated, he has not even the right to gel possession of the goods. Having no right of property not even right to possession, I apprehend that a hypothecatee is not entitled to any protection under Section 30(1) of the Sale of Goods Act. In the view, I have taken, it is impossible to hold that “other disposition” in Section 30(1) covers hypothecation as well. It is strenuously contended that “other disposition” should be given a generous interpretation to cover ‘hypothecation’ as well. It is argued that the only difference between “pledge” and “hypothecation” is that whereas the pledgee has possession while the hypothecatee has not. Otherwise the two are the same. But the fact of possession gives the pledgee a property in the goods and this makes the difference between pledge and hypothecation to be vital for the purpose of Section 30(1) of the Sale of Goods Act. Transfer by way of “sale, pledge or other disposition” referred to in section 30(1) has reference to property right in the goods. Inasmuch as hypothecation does not give any property right in the goods hypothecated, other disposition cannot include hypothecation. In law there can be mortgage of movables and mortgage gives property right to the mortgagee. “Other disposition” in section 30(1) may cover a case of mortgage along with sale or pledge. In my view it does not include hypothecation. Mr. Banerjee is right in his submission that the words “other disposition” must be construed ejusdem generis that is of the same generis as sale or pledge i.e, transfer of property or right to property for consideration. In any event ‘transfer’ contemplated by the section must include some property right in the movables, and hypothecatee gets no such property right in the movables. Even if the word “transfer” is construed to be referable to goods and not the documents of title in goods, section 30(1) is not applicable to hypothecation of goods by the seller in possession, for reasons stated above.

13. In the above view it is not necessary to decide in the facts of this case whether it is imperative that the subsequent disposition by the seller in possession must involve actual transfer of possession of goods or documents of title of goods. 1895-2 Ch 415 seems to lay down that without such transfer of possession the section would not apply. I respectfully agree with the view. The section seeks to protect possessory title and gives the person in possession ownership even though he obtained possession from person without any title. The seller in possession having already sold the goods, had no title in the goods to transfer. The only thing that the seller had is possession. The act of ‘delivery or transfer’ therefore cannot but have reference to anything other than possession. The vendor or pledger without title had nothing else to transfer. The “delivery or transfer” of the goods or documents referred to in the section cannot but mean delivery or transfer of the possession of the goods or document and this phrase “a person receiving the same” means a person receiving the possession thereof. In the instant case the Maharaja as hypothecator cannot in law and did not in fact give possession to Mundra of the goods hypothecated. On ibis ground also it must be held that the transaction with Mundra evidenced by the letter of hypothecation, dated September 17, 1960 is not covered by Section 30(1) of the Sale of Goods Act.

14. If Mundra had no title in the goods not even the right to possession by reason of hypothecation and his only right was to bring the property to sale in enforcement of the equitable charge, he could not in enforcement of his right give better title to the purchaser than he himself had in the property. Can the delivery by the Receiver to the purchaser of the goods sold pursuant to a decree or order of the Court be considered to be “delivery or transfer of possession” by the seller in possession within the meaning of Section 30(1) of the Sale of Goods Act? Two questions arise on this point. First, does the section envisage a sale pursuant to a decree or order of the Court? Second in the matter of sale did the Receiver act as the agent of the Maharaja? The word ‘delivery’ has been defined in Sale of Goods Act as “Voluntary transfer of possession” and the word ‘transfer’ in the section must be construed to mean ‘voluntary transfer also’. “Delivery or transfer” pursuant to a decree or order of the Court is not voluntary and as such is not within the meaning of the section. Such a sale pursuant to an order of the Court in my judgment was not intended to be protected by Section 30(1) of the Sale of Goods Act. Whether or not such a sale by Court gives good title to the purchaser is entirely a different question and may have to be considered later. But there is no doubt in my mind that such a sale was not intended to be protected by Section 30(1) of the Sale of Goods Act. It is contended however that in the instant case, the decree is by consent and pursuant to the consent decree the Receiver sold the goods and the company defendant purchased the goods. Mr. Gautam Chakraborty cited a number of decisions of this Court and passages from Woodroffe's Receiver in support of his argument that though the Receiver is an officer of the Court yet in some cases he may be deemed to act as agent to the owner to convey title to the purchaser. The leading case on the subject is the case of Wilkinson v. Gangadhar Sirkar reported in 6 Beng. L.R 468. The decision Poreshnath Mookerjee v. Omerto Nath Mitter, reported in (1890) ILR 17 Cal 614 was also cited by Mr. Chakraborty. Several passages from Woodroffe's Receiver were also read. Mr. Banerjee in his turn cited some other authorities of this Court in support of his contention that when pursuant to an order of the Court a Receiver is directed to seize goods he acts not as agent of the parties but as officer of the Court. He has referred me to the decision of R.C Mitter, J. in the case reported in AIR 1942 Cal 982 (Sic) and of Buckland, J. in the case reported in Ramnarayan Satyapal v. Carey & Daniel*, ILR 58 Cal 174: (AIR 1931 Cal 491). A Receiver is an officer of the Court and when pursuant to an order of the Court he takes possession of goods or sells the same, he does so as an officer of the Court. It is true that in some cases the Receiver is deemed to act as agent of the parties in order that the purchaser may acquire legal title. When pursuant to an order of the Court a Receiver is directed to sign a conveyance on behalf of the legal owner, he may be deemed to be the agent of the party for the purpose of transferring legal title. It may be so. But the question is can the Receiver in such cases be deemed to be acting as the agent of the seller, so as to give good title to the purchaser under Section 30(1) of the Sale of Goods Act. It is unnecessary to consider the broad and general question whether the Receiver can be deemed in law to act as a seller or whether under the Sale of Goods Act the seller in possession can make delivery thirough an agent, or he must do it himself. In other words, it is unnecessary to consider whether agency is completely ruled out in the matter of making delivery by the seller in possession to the disponee to enable the latter to acquire good title under Section 30(1) of the Sale of Goods Act. The short and limited question necessary for adjudication in the instant case is whether the receiver in a suit by the hypothecatee of goods in which the hypothecator consents to a decree for sale can be deemed to be the agent of the hypothecator i.e the seller in possession in making delivery of the goods under the Sale of Goods Act. Sale by the Receiver pursuant to a decree or order of the Court is not a sale by the owner of the goods but by the Court and the position is not different if the decree or order is by consent of the parties. It is a sale by the Court all the same, as distinct from the sale by a party to the litigation. What S. 30(1) contemplates is a sale by the seller in possession and the requirements of the section would not be satisfied even if the seller himself sold the property pursuant to a decree or order of the Court. Intervention of the decree or order of the Court creates a new and different jural relationship, which would prevent the operation of Section 30(1) of the Sale of Goods Act. In order to attract the provisions of Section 30(1) of the Sale of Goods Act, the sale must be by the seller in possession qua seller. But the sale effected by the seller pursuant to a decree or order of the Court is a sale by the judgment-debtor pursuant to and as directed by the decree or order of the Court. Such sale whether by the seller himself or by Receiver pursuant to a decree or order of the Court cannot be considered to be a sale by the seller in possession even if the Receiver, is deemed to act as the agent of the party to effect such sale because of change of jurat relationship. In my view Section 30(1) of the Sale of Goods Act will not apply to the instant case firstly because the sale and delivery of the goods to the defendant by the Receiver pursuant to the consent order is not voluntary and secondly because the jural relationship is changed and the sale by the receiver is not a sale by seller in possession but by judgment debtor, even if the Receiver is deemed in law to act as the agent of the seller in possession. Title of the defendant company in the instant case cannot be protected by Section 30(1) of Sale of Goods Act.

15. It was faintly argued by the learned counsel for the defendants that the purchaser acquired good title because the sale is by the Court and confirmed by the Court. It is however elementary that whereas in the case of private sale there is an implied covenant of title by the vendor, no such covenant is given either by the decree-holder or by the Court in the case of Court-sale pursuant to a decree or order of the Court. All that passes to the purchaser is the right, title and interest of the parties to the suit. If they have none, the purchaser acquires no title to the property purchased. The position of the purchaser is no Letter, if the sale is not by the Court but pursuant to the order of the Court. In either case the purchaser acquires no title. If therefore at the date of sale neither the defendant Maharaja nor the defendant Mundra had any title to the goods sold, the defendant company did not acquire any title therein by reason of his purchase from the Receiver in execution of the decree. The defence contention to the contrary cannot be upheld in law.

16. I have already held that the plaintiff is the owner of six items of movables in suit by purchase from the defendant Maharaja. Neither the defendant Mundra nor the defendant company has any title therein. This finding is however not enough to enable me to pass a decree for possession as against of the defendant compay. In order to obtain a decree for possession of the said movables as against the defendant company, it must be proved to my satisfaction that the defendant company is in possession of the same by reason of its purchase from the Receiver. The description of the goods in the letter of hypothecation and in the order of the Court is in such terms that no identification is possible. Indeed it is the plaintiff's case that the said six items of goods were in fact not included in the list of hypothecation. From the documentary evidence tendered in this case, I am unable to record a finding that the goods in suit or any of them were sold to the defendant company and are in its possession.

17. Apart from the evidence led by the plaintiff, there is also the evidence of the Receiver on the point. This evidence has to be considered now. The Receiver was closely cross-examined by Mr. Das as to whether he could identify any one of the goods in suit having been sold to the defendant company. The Receiver could only identify item No. VI in para 5 viz. the oil painting of Danee and shower of Gold being item No. VI in paragraph 5 of the plaint. Item No. (V) being the Statue of Phallas could not be identified and he did not take possession of it. The remaining 4 items be could not identify.

18. The position therefore is that only one item of the goods in suit viz., item No. (VI) viz., oil painting of Danee and shower of gold, sola to the plaintiff by the “Maharaja was subsequently sold by the Receiver to the defendant company. For reasons stated above the defendant company acquired no title in the said picture and the plaintiff's title therein as a prior purchaser from the Maharaja must be declared and affirmed. Except the said picture the defendant company is not liable to make over possession of any one of the other 5 items of artistic goods in suit.

19. In the result, there will be a decree as follows:

It is declared that the plaintiff is the absolute owner of the articles mentioned in paragraph 5 of the plaint. There will be a decree for possession as against the defendant company of only one item, namely, item No. (vi) in paragraph 5 of the plaint or its value assessed at Rs. 5,000. As against the defendant Maharaja, there will be a decree for possession of the remaining items or their value, as indicated above (Omitted-Ed).

20. In the facts of this case, the plaintiff will pay only the costs of the Receiver. The plaintiff will get costs from the defendant Maharaja on undefended scale. Save as aforesaid, the parties will bear their own costs: certified for two counsel.

21. An injunction has been issued by this Court. The injunction will stand dissolved after six weeks.

LI/RSK/D.V.C

22. Order accordingly.