T.V. Anilkumar J.
1. The sole defendant/the Cochin Port Trust Limited in O.S. No.200 of 1999 before Sub Court, Ernakulam is the appellant in R.F.A No.224 of 2005. The first plaintiff Company who sued the appellant for damages in the suit is the sole appellant in R.F.A. 292 of 2005.
2. Suit for damages claiming Rs.43,62,500/- with interest was decreed against the defendant only in part for an amount of Rs.39,34,325/- with interest. While the first plaintiff is aggrieved by the refusal of the remaining amount out of Rs.43,62,500/- claimed, the appellant is aggrieved by the entire relief granted in the suit.
3. Reference to parties hereunder will be according to their ranks in the plaint unless the context shows otherwise.
4. First plaintiff is a private limited company engaged in the manufacture of wheat products, represented in the suit by its Director. Second plaintiff is another private company which is a forwarding and clearing agent engaged by the first plaintiff. 27,500 metric tonnes of Australian standard white wheat imported from M/s. AWB Limited, Melbourne, Victoria, Australia for an invoice value of Rs.16,90,98,000/- reached the defendant Port Trust by sea on 15.05.1999. The goods had already been insured with Oriental Insurance Company Limited, Divisional Office, Kozhikode. The first plaintiff claims that it is the owner of the imported goods. The discharge of cargo from the ship to the transit sheds and warehouses in wharf commenced on 15.05.1999 itself and it continued till 11.06.1999 when the entire cargo were removed to the sheds and warehouses hired by the second plaintiff from the defendant.
5. The case of the first plaintiff is that goods were initially discharged to the transit shed Q-5 and then to transit shed Q-6 after the former was fully filled up and then to warehouse No.3 in the wharf. This process of filling up the said sheds in the wharf at Ernakulam and warehouse No.3 outside Mattancherry wharf continued for a few days. Simultaneously the second plaintiff used to clear the cargo from the sheds and warehouses to the place of destination of the first plaintiff in Kozhikode. In addition to the above sheds and warehouse, cargo continued to be discharged to over flow sheds Q-5 and Q-6 inside the Mattancherry wharf and warehouse No.6 in the wharf at Ernakulam also. There was continuous rain, according to the first plaintiff, since 15.05.1999 till the discharge of entire cargo was completed on 11.06.1999. There was leakage of water from concealed pits in the central portion of the warehouse and this caused flooding of water inside warehouse No.3 and over flow shed Q-5 in the Mattancherry wharf. The wheat at the bottom was completely wet by water and this could be detected only late when the process of bagging and standardisation of wheat commenced. As a result of wetness, huge quantity of wheat stored in warehouse No.3 and over flow shed No.Q-5 was damaged and rendered useless for human consumption. The matter was forthwith brought to the notice of the defendant also. It is contended in the plaint that 359.02 tonnes of wheat stored in warehouse No.3 and 440.69 tonnes in over flow shed Q-5 were damaged resulting in total loss of Rs.52.50 lakhs to the first plaintiff.
6. The first plaintiff intimated the Marine Insurance Company about the damage caused to the goods and upon a survey being conducted through its licenced surveyor with notice to the defendant, it was detected that the first plaintiff sustained a loss of Rs.52,60,956/-. The salvage value of Rs.9,03,887/- was deducted by the Insurance Company. Another deduction was made for an amount of Rs.4,22,745/- being the excess amount due to the Insurance Company as per the policy condition. Ultimately first plaintiff was found eligible to claim only a sum of Rs.39,34,324/- towards damages from the defendant. The first plaintiff's claim was finally settled with the Marine Insurance Company for an amount of Rs.38,11,182/-. Amount settled was paid to the first plaintiff and it was acknowledged under Ext.A9 voucher dated 07.02.2000. Consequently, the Marine Insurance Company sought to subrogate to the rights of the first plaintiff invoking Section 79 of Marine Insurance Act, 1963(for short 'M.I. Act').
7. During the pendency of the suit, the company was allowed to be impleaded as third plaintiff and accordingly it prosecuted the suit jointly with the first plaintiff and obtained a decree for a sum of Rs.39,34,324/-. But, according to the first plaintiff, despite its claim having been settled with third plaintiff, it is entitled to realise from the defendant Rs.4,22,745/- being the excess amount deducted by the third plaintiff in compliance with the policy condition and accordingly plaint was amended claiming the aforesaid amount also from the defendant.
8. According to the plaintiffs, the defendant is liable for the entire loss caused to them arising out of its negligence and carelessness in keeping the storage places in good and leak proof condition. It is contended that under Section 43(1) of the Major Port Trust Act,1963(for short 'the M.P.T.Act'), the Port Trust is in the position of a bailee being responsible for the loss of goods stored in the sheds and warehouse as stipulated by Sections 151, 152 and 161 of the Indian Contract Act, 1872 (for short 'Contract Act'). It is also contended that though the damage caused to the wheat as a result of wetness was duly intimated to the defendant by two letters dated 12.07.1999 and 03.11.1999, no steps were taken in the matter by the defendant to remedy the grievance of the first plaintiff. On the grounds aforementioned, the third plaintiff has sought to recover from the defendant a sum of Rs.38,11,182/- as the subrogee of the first plaintiff and the first plaintiff has sought to recover from the defendant the amount of Rs.4,22,745/- deducted by the Insurance Company towards excess amount deductible as per the policy conditions.
9. The defendant filed original written statement and thereafter, an additional written statement also to the amended plaint.
10. It contended that the suit itself was barred by limitation, since it was not brought within six months as required by Section 120 of the M.P.T. Act. The first plaintiff's claim for payment of excess amount deducted by the Insurance Company was opposed on the ground that after full and final settlement of its claim with the third defendant company, it could no longer seek to recover any amount from the defendant. The claim of the subrogee as additional third plaintiff was also contended as being barred by limitation, as it came to be raised only after expiration of three years. The title claimed by the first plaintiff to the goods imported was denied and on that ground itself, the suit was contended to be not maintainable. Second plaintiff being only a clearing agent, its claim for damages was resisted as being hit by Section 230 of Contract Act. Arrival of cargo at defendant Port by sea on 15.05.1999 and the complete discharge of goods to the sheds and warehouses right from the day till 11.06.1999 was admitted by the defendant.
11. It is contended that Section 43 of the M.P.T. Act has no application to the facts of the case and the Port Trust has never been a bailee under law and is not responsible for the alleged loss sustained by the plaintiffs. It is also contended that the moment the cargo was discharged to warehouses, it came to be under the full control and custody of the clearing agent and the defendant did not thereafter owe any responsibility to the consignee in the matter of the safety and security of goods. Second plaintiff/agent took the warehouse on lease accepting terms and conditions of lease and offered to keep the goods stored at its sole risk and responsibility. The cargo stored in transit sheds in Ernakulam wharf and over flow sheds in Mattancherry wharf on demurrage for a short interval were immediately removed by second plaintiff to warehouse Nos.3 and 6 and therefore the plaintiffs could not allege that any damage occurred to goods kept in over flow shed Q-5 in Mattancherry wharf. In any view of the matter, the defendant acted only in good faith and therefore, was entitled to immunity from legal action in the light of Section 121 of the M.P.T. Act. After the clearing agent had taken lease of the warehouse Nos.3 and 6, none of the plaintiffs could contend that the defendant was a bailee liable for the loss arising out of breach of obligation cast under Sections 151 and 152 of the Indian Contract Act. Defendant was not duly informed of the damage caused to the cargo and further, the alleged damage was denied to be on account of the defendant's conduct. It was contended that though there was rain during the season, no damage was caused to the goods on account of alleged leakage of water. The amount of damages claimed was stated to be exaggerated. The defendant denied liability for payment of any amount towards damages. This is the sum and substance of the contentions in the written statement.
12. The court below after framing necessary issues examined the Divisional Manager of the third plaintiff as PW.1. The officer-in-charge of the first plaintiff and the licenced surveyor deputed by the Insurance Company were examined as PWs.2 and 3 respectively. On the side of the plaintiffs, Exts.A1 to A21 were admitted in evidence. The Additional Traffic Manager of the defendant Port Trust was examined as DW.1 and on its side Exts.B1 to B9 were admitted in evidence through him.
13. The issues with respect to period of limitation and maintainability of suit were decided by the court below in favour of the plaintiffs. It was found that the suit was perfectly maintainable and Section 230 of the Contract Act relied on by the defendant had no application to the facts of the case. The court below went into the factual question as to whether plaintiffs sustained any loss on account of damage allegedly caused to the wheat stored in over flow shed Q-5 and warehouse No.3 in Mattancherry wharf and found on evidence that a total loss of Rs.52,60,956.61/- was caused. After deducting the salvage value as well as the excess amount deductible as per the policy condition, the surveyor assessed Rs.39,34,324.59 being the amount of net loss. The court below found the defendant to be liable for the loss since it had been acting as a bailee in custody of goods all throughout as stipulated by Section 43 of the M.P.T. Act. However, the claim of the first plaintiff against defendant for recovery of the amount deducted by the Insurance Company towards excess amount as per policy condition was not granted even though no ground for refusing the relief was indicated in the impugned judgment. That is how, the first plaintiff has also chosen to file R.F.A. No.292 of 2005 challenging the impugned judgment and decree.
14. The findings rendered by the court below in support of the impugned decree were assailed by the learned counsel for the appellant/ defendant on various grounds. Likewise, the learned counsel for the first plaintiff also assailed the impugned judgment alleging that court below failed to award Rs.4,22,745/- which the first plaintiff had sought to recover from the defendant.
15. The points that arise for consideration in these appeals are following.
1 Is the finding that suit is not barred by limitation legal?
2 Is the finding that first plaintiff is the owner of the cargo stored in shed Q-5 and warehouse No.3 legal?
3 Is the finding that appellant/defendant is a bailee in the facts and circumstances of the case, and is therefore liable to pay for the alleged loss suffered by the plaintiffs, is legal?
4 Whether the finding that third plaintiff sustained loss and was entitled to the decree amount is legal and correct?
5 Is the first plaintiff/appellant in R.F.A No.292 of 2005 entitled to claim from the defendant Rs.4,22,745/- being the excess amount deducted by the Insurance Company as per the policy conditions? 16.Point No.1:- The contention of the appellant, Port Trust that the suit is barred by limitation is based on Section 120 of the M.P.T. Act, 1963. Section 120 of the M.P.T. Act, 1963 reads as follows:
“120. Limitation of proceedings in respect of things done under the Act
No suit or other proceeding shall be commenced against a Board or any member or employee thereof for anything done, or purporting to have been done, in pursuance of this Act until the expiration of one month after notice in writing has been given to the Board or him stating the cause of action, or after six months after the accrual of the cause of action.”
17. As per this provision, unless the suit against Port Trust is brought within six months since the date of accrual of cause of action, it will be time barred. This provision also warrants that no suit shall be filed against the Board of Trustees or any member of employee of the Board before the expiration of one month after a notice in writing has been given.
18. The cause of action for the present suit commenced, according to plaintiffs, since the date of their knowledge about damage caused to wheat stored in over flow shed Q-5 and warehouse No.3 in the defendant's wharf. PW.2/ the officer-in-charge of the first plaintiff company said that damage to wheat in warehouse No.3 came to his notice on 09.06.1999. As regards damage to goods in shed Q-5, it came to his notice only on 09.08.1999 when wheat at the bottom level was being removed. PW.1/ Divisional Manager of third plaintiff Marine Insurance Company, which later came on record as subrogee also supported the version of PW.1. The court below accepted PW2's version and found that suit was filed within the stipulated period of six months. We also do not have a different view in this matter, since no illegality either on facts or law could be attributed to the finding of the court below.
19. The defendant does not have any case that damage to goods came to the notice of plaintiffs much earlier than the dates of cause of action alleged in the plaint. The nature of the contention of the defendant in this respect is a bare denial of the allegation that there was damage. The date of knowledge about damage proved by PW.2 must be true since no circumstances are pointed out to reject the veracity of his testimony in court. Immediately after noticing that wheat stored in warehouse No.3 was damaged, first plaintiff sent Ext.A14 notice to the defendant on 12.07.1999. Similarly, Ext.15 registered notice was also sent to the defendant on 16.08.1999 informing that damage was caused to wheat stored in over flow shed Q-5. Service of these two notices on defendant had been sufficiently proved. In Ext.A16 reply sent to Ext.A14 notice the defendant did not deny the allegation of damage except claiming to be ignorant of the incident. The Port Trust took the stand that the first plaintiff alone was responsible for the alleged damage and alleged that goods were kept in own custody at the sole risk and responsibility as per the terms and conditions of lease arrangement between parties. Ultimately on 03.11.1999, Ext.A17 suit notice was also sent to defendant claiming damages. Acceptance of Ext.A17 is not a disputed fact. Suit was filed on 08.12.1999 after expiration of one month from Ext.A17 suit notice. So also, it could be seen that institution of suit was within six months from the date of acquisition of knowledge of damage. Therefore we too hold, agreeing with the court below that suit was filed within the time stipulated by Section 120 of the M.P.T. Act.
20. It was also contended by the appellant/ defendant that at the least the claim of the third plaintiff was barred by limitation, since its claim came to be raised in the suit only after expiration of three years from the date of original cause of action. This too, is incapable of acceptance and is liable to be rejected. The third plaintiff was brought on record on 29.11.2003. It is an admitted fact that the claim of first plaintiff was settled by the third plaintiff during the pendency of the suit for an amount Rs.38,11,182/-. The payment of the amount was proved by Ext.A9 receipt dated 07.02.2000 issued by the first plaintiff.
21. Under Section 79(1) of the M.I. Act, the insurer who pays for the loss is entitled to take over the interest of the assured and claim subrogation to all the rights and remedies of the assured in respect of the subject matter covered by the insurance. It, therefore, goes without saying that right of the third plaintiff to subrogation accrued under law only upon discharge of its liability. The Insurance Company cannot seek to come on record as a subrogee without settling the claim of the insured and sue on a premature cause of action. The third plaintiff was impleaded in the suit after accrual of cause of action and as per order on IA No.982/2001 dated 29.11.2005 and before expiration of period of three years since the date of discharge of its liability. Therefore, the contention that third plaintiff's claim is time barred was rightly rejected by the court below. We perfectly agree with this view and endorse the finding of the court below.
22. Point No.2:- This is a seriously agitated issue which also the court below found in favour of the plaintiffs. First plaintiff has no documents to prove that it had placed orders with the consignor for import of 27,500 metric tonnes of ASW. Ext.A3 series bills of lading do not mention the name of the first plaintiff as consignee. The name of consignee as per the bills of lading is 'PEC limited'. Ext.A2, Marine Insurance Policy dated 13.05.1999 issued by the third plaintiff is also in the name of 'PEC Limited'. The second plaintiff is only a forwarding and clearing agent appointed by the first plaintiff. Quite naturally, second plaintiff cannot sue for damages otherwise than on behalf of the master owning the goods imported. Section 230 of the Indian Contract Act can hardly come to the aid of first plaintiff and help sue for damages unless it could prove itself to be the owner of the goods.
23. Despite the fact that the documents on record do not show that the first plaintiff is the true importer cum owner of the goods, there are a few circumstances which help to draw a reasonable inference that first plaintiff alone is the owner of the goods imported. The first plaintiff's contention is that it could not have directly involved in the process of import of goods, since it was yet to procure import licence from authorities and therefore, it fully depended on PEC Limited and caused it to import 27,500 metric tonnes of wheat by sea. This was testified by the officer-in-charge of first plaintiff company examined as PW.1. We believe that there must be truth in what he had said.
24. It is an admitted fact Ext.A2 Marine Policy was assigned by the third plaintiff in the name of first plaintiff. The endorsement on the reverse side of Ext.A2 proves the assignment of policy. This, in our view, has got much relevance and is capable of probabilising the case that first plaintiff imported the goods through 'PEC Limited'. It is true that assignment of policy by itself is no evidence for transfer of title to goods. Nevertheless, it is one of the circumstances to assume that first plaintiff engaged 'PEC Limited' to import ASW, since it lacked import licence to pick up a direct dealing with the consignor. There are yet again material circumstances also which probabilise that the first plaintiff alone acquired title to the goods imported.
25. The 'PEC limited' has not come forward claiming any rival ownership, right or interest in the goods imported. Not only 'PEC limited', none of the companies mentioned in the bills of lading came forward asserting any rival interest over the goods. It is proved beyond any pale of doubt that right from the day of arrival of cargo at the defendant Port on 15.05.1999 till their clearance to sheds and warehouses on 11.06.1999, the second plaintiff has been acting as the clearing and forwarding agent of first plaintiff. None of the persons including second plaintiff has a case that it has been acting on behalf of 'PEC Limited' or any other importer. After damage to goods was noticed, it was first plaintiff company which has been taking all the initiatives and legal steps claiming damages for the loss sustained. None else has intervened in the matter giving any ground for an inference that there are third parties interested in claiming rival title to the goods. These circumstances are sufficient enough to draw a reasonable conclusion that first plaintiff alone is the owner of the goods imported notwithstanding the fact that its name did not appear on the bills of lading or allied documents. The testimonies given by PWs.1 and 2 in this respect are trustworthy and we do not find any reason to interfere with the finding of the court below accepting first plaintiff as the owner of the goods. It appears that undue reference was made to Section 230 of the Contract Act which did not have much bearing on the facts of the case. We hold that suit brought in the name of first plaintiff is maintainable and it is entitled to sue for damages through second plaintiff, its agent.
26. Point No.4:- With respect to the claim of the first plaintiff that it sustained loss to the tune of Rs.52.50 lakhs, the court below concluded on the basis of Ext.A21 original and Ext.A6 supplementary survey reports that 768.135 metric tonnes of wheat was damaged. PW.3/the licenced surveyor who prepared Ext.A21, deducted the salvage value to the tune of Rs.9,03,887/-. Additional deduction of Rs.4,22,745/- was also made towards excess amount as per policy condition and balance amount of Rs.39,34,325/- was fixed as the amount of compensation.
27. The question that arises for consideration is whether the amount of loss was correctly arrived at and the assessment made as per survey reports was in accordance with law.
28. There is no dispute by the defendant Port Trust that wheat imported was stored in the over flow shed Q-5 and warehouse No.3 in Mattancherry wharf. The total quantity of wheat found damaged in these two storage places was quantified as 799.59 metric tonnes by the surveyor in Ext.A21 report. The appellant's contention in the written statement in this respect is that no damage was caused to the goods. The plaintiffs' case is that ever since the cargo was discharged to the sheds and warehouses right from 15.05.1999 till 11.06.1999, there were continuous rain fall. PW.2 testified that due to heavy flow of water from the concealed pits in the central portion of the warehouse, there was leakage of water from underground which naturally damaged the wheat collected at the bottom portion of the entire stock. The defendant also did not dispute that there was rain when the cargo were being discharged to the aforesaid shed and warehouse.
29. The definite contention of the appellant is that there was no leakage from underground or anywhere nor any damage was caused to the goods on account of the alleged wetness. The initial burden rests only on the plaintiffs to prove that on account of the wetness, the wheat stored in the over flow shed Q-5 and warehouse No.3 in Mattancherry wharf got damaged and became useless. There is, in this respect, reliable oral evidence from PW.2/the officer-in-charge of first plaintiff that he had seen the goods wet by water from underground. To a great extent PW.1/the Divisional Manager of the third plaintiff also corroborated him. There are a few admissions also from the testimony of DW.1, Traffic Manager giving definite indication that the damage was the result of wetness which crept into the warehouse. He admitted that there was continuous rain during the relevant period and the water leaked from the concealed pits underground the warehouse. PW.2 said that only when wheat was being removed from the bottom, the wetness could be detected and the matter was immediately brought to the notice of the appellant. This assertion is not seen challenged during the cross-examination of PW.2.
30. DW.1 clearly admitted in his cross-examination that there was damage to the wheat stored in warehouse No.3 also. This statement is inconsistent with the contention in the written statement denying leakage and damage. This witness developed a new case in the cross-examination that the damage was due to failure of second plaintiff to store goods as per warehouse specifications. No such case had ever been advanced in the pleadings as the specific reason for damage. The inconsistency between the pleading and evidence of the appellant probabilises the case put forth by the plaintiffs that damage to goods occurred due to wetness. In one portion of the testimony of DW.1, he sought to explain that damage was only to goods stored in warehouse No.3 and wheat in over flow shed Q-5 remained unaffected. This explanation also does not seem to be convincing and satisfactory.
31. There is no dispute that the Board had received Ext.A15 notice dated 16.08.1999 informing it that wheat stored in over flow shed Q-5 in Mattancherry wharf was already damaged by water. DW.1 claimed that immediately he made enquiries; but could not find out any damage to the goods stored in the shed. He does not appear to be reliable in this respect since he was not in a position to convince the court as to what kind of enquiry was made in this matter. Further, he could not offer to explain as to why reply was withheld, if he detected no damage to the goods. On the other hand, there is evidence from PW.3/Surveyor that wheat was wet by water and found in damaged condition on the date of his inspection.
32. DW.1 also admitted that there was prior notice to appellant Port Trust before the surveyor commenced inspection; but for no good reasons none from the appellant Port Trust attended the inspection. There is no reason to disbelieve PW.2's testimony that information about damage to goods was brought to the notice of the authorities of Port Trust then and there itself, immediately after he had noticed the cargo in damaged condition.
33. On conjoint reading of testimonies of PWs.1 and 2 and DW.1 coupled with Exts.A21 and A6 reports submitted by PW.3, we are satisfied that the wheat stored in OFS Q-5 and warehouse No.3 were damaged to the extent indicated in the report. The appellant cannot ignore the report contending that it was prepared behind its back. There is sufficient indication in the report also besides the admission of DW.1 that prior notice of inspection was given to the appellant but none of the authorities of the Board was present for no fault of plaintiffs or the licenced surveyor. Despite PW.3 having been cross-examined with respect to his findings in the reports, their correctness and credibility could not be assailed in any manner. Therefore, we agree with the finding of the court below that 799.59 metric tonnes of wheat stored in over flow shed Q-5 and warehouse No.3 were damaged.
34. Point Nos.3 & 5:- The court below while adjudicating the nature of purported liability of the defendant, accepted the case of the plaintiffs that the defendant was acting as the bailee of the first plaintiff in terms of Section 43(1) of M.P.T. Act while being in charge of the goods stored and consequently rejected the contention of the defendant that the first plaintiff was only a lessee keeping custody of goods at its own risk and responsibility as per the terms and conditions on which storage places were occupied. This finding is seriously challenged by the learned counsel for the appellant.
35. Section 43(1) (ii) of the M.P.T. Act, 1963 reads as follows:
“43. Responsibility of Board for loss, etc., of goods.—
(1) Subject to the provisions of this Act, the responsibility of any Board for the loss, destruction or deterioration of goods of which it has taken charge shall,
(ii) in other cases, be that of a bailee under sections 151, 152 and 161 of the Indian Contract Act, 1872 (9 of 1872), omitting the words “in the absence of any special contract” in section 152 of that Act:
[Provided that no responsibility under this section shall attach to the Board—
(a) until a receipt mentioned in sub-section (2) of section 42 is given by the Board; and
(b) after the expiry of such period as may be prescribed by regulations from the date of taking charge of such goods by the Board.”
36. Section 43(1)(ii) enjoins upon the Board of Trustees to take over statutory liability for the damage caused to the goods of the consignee, as a bailee liable under Sections 151, 152 and 161 of the Contact Act,1872. Section 151 of the Contract Act reads as follows:
“151. Care to be taken by bailee.—
In all cases of bailment the bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quantity and value as the goods bailed.”
37. Under Section 151, the standard of care required of a bailee must conform to that of a man of ordinary prudence, as he would take of his own goods, of the same bulk, quantity and value in similar circumstances. That means once the Port Trust takes charge of the goods and stores them in its custody, its liability for loss turns out to be that of a bailee under the Contract Act.
38. It is an admitted fact that goods imported were stored in the sheds and warehouses owned by the defendant in the wharves at Ernakulam and Mattancherry. Among the storage places, we are concerned in the suit only with over flow shed Q-5 in the bonded area of Mattancherry wharf and warehouse No.3 located outside the said wharf since loss claimed relates to goods kept in those two storage places alone. Section 148 of the Indian Contract Act reads thus:
“148. ‘Bailment’, ‘bailor’ and ‘bailee’ defined
A ‘bailment’ is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called the ‘bailor’. The person to whom they are delivered is called the ‘bailee’.
Explanation.—If a person is already in possession of the goods of another contract to hold them as a bailee, he thereby becomes the bailee, and the owner becomes the bailor of such goods, although they may not have been delivered by way of bailment.”
39. As per Section 148, a person assumes and possesses the legal status of a bailee only after he takes delivery of goods and as long as he continues to keep them in his custody.
40. The legal concept of bailment is elucidated in P.Ramanatha Aiyar's Advanced Law Lexicon 4th Edition and the learned author has extracted the following from the books Bailments 5 (9th Edition, 1878) by Joseph Story and Law of Bailments by Tomlin (page 117).
“The customary definition of a bailment considers the transaction as arising out of contract. Thus Justice Story defines a bailment as 'a delivery of a thing in trust for some special object or purpose and upon a contract express or implied, to conform to the object or purpose of the trust' Joseph Story, Bailments 5 (9th Edition, 1878)
“It is “a delivery of goods in trust, upon a contract expressed or implied that the trust shall be faithfully executed on the part of the bailee.” (the person to whom they are delivered.) 2 Comm 451; to which Sir.W.JONES adds: “and the goods redelivered as soon as the time or use, for which they are bailed, shall have elapsed or be performed.”(Law of Bailments, p.117;Tomlin)”
41. Once the custody ceases and goods are put back to the possession of the person who entrusted, the bailment of goods also comes to a close and thereafter, he cannot be imputed with the legal status of a bailee. In other words, what determines the bailment is the custody or possession of the goods and once custody changes and the person takes back the goods entrusted to him, the statutory relationship of bailor and bailee created by Section 43(1) of M.P.T. Act comes to a total cessation.
42. The material question, therefore, is which of the parties was in custody of goods stored in OFS Q-5 and warehouse No.3 when damage to goods occurred. We have already rejected the contention of the defendant that no damage was caused to OFS Q-5. A conjoint reading of paragraph Nos.8 to 10 in the written statement of the appellant shows that first plaintiff stored wheat in transit sheds Q-5 and Q-6 located in bonded area of Ernakulam wharf and OFS Q-5 and Q-6 in bonded area of Mattancherry wharf for a short interval on payment of demurrage charges and the goods were thereafter removed to warehouse Nos.3 and 6 outside the respective wharves in Mattancherry and Ernakulam. In short, the defendant's contention is that on the date of alleged damage, there was no storage of goods in any of the sheds as if the entire cargo had already been removed to the warehouses outside the respective wharves. According to us, this contention is not fully correct to the extent it referred to OFS Q-5.
43. At the time of inspection of OFS Q-5, PW.3/ surveyor found the wheat therein in damaged condition. Even DW.1 could not specifically deny that there were damaged goods in OFS Q-5, while he was cross-examined. This aspect was dealt with at length in earlier paragraphs of this judgment, when we discussed point No.4. We are not concerned in this suit with goods stored in transit sheds Q-5 and Q-6 and even plaintiffs too admit that goods in those sheds were simultaneously shifted to warehouse outside the wharf and also to first plaintiff's place of destination in Kozhikode.
44. The testimony of DW.1 makes it clear that goods stored in the sheds within the bonded areas of wharves remained in the custody of the Port Trust unlike those kept in the warehouses outside the wharves. This is the contention taken in the written statement also. It is stated in the testimony of DW.1 as well as the pleadings of the defendant that the goods stored in OFS Q-5 remained in the custody of Port Trust on payment of demurrage charges. If this is the factual position, it goes without saying that defendant Port Trust is liable to compensate the plaintiffs, as a statutory bailee in terms of Section 43(1) M.P.T. Act. The finding of the court below in this respect cannot be faulted. As the bailee of goods stored in OFS Q-5, appellant was bound to have taken such a standard of reasonable care as required of an ordinary prudent person in similar situation. Leakage of water from underground during rains was a possible risk which the defendant ought to have anticipated and requisite safeguards should have been taken to prevent such challenges. The defendant cannot, therefore, be said to have acted in good faith. The defendant did not adduce any evidence in discharge of its initial burden of proof that OFS Q-5 had been constructed as a water or leak proof storage.
45. During the course of the trial, the defendant relied on Exts. B1 to B3 documents and contended that OFS Q-5 was taken by second plaintiff on monthly lease undertaking to keep the goods in its own custody, risk and responsibility and therefore defendant ceased to be a bailee after execution of Exts.B1 to B3. Ext.B1 is a letter of acceptance cum lease arrangement signed by second plaintiff on 29.09.1998. Exts.B2 and B3 are dated 31.12.1999 signed by parties acknowledging that OFS Q-5 was handed over to the second plaintiff for storage of goods. Ext.B1 document containing the lease conditions recites in Clause (9) that the cargo should be kept by the occupant at the sole risk and responsibility as a lessee. But we find that as a matter of fact, contention of defendant based on Exts.B1 to B3 is inconsistent with its own case pleaded in paragraph Nos. 8 to 10 in the written statement. Defendant cannot in disregard of its pleaded case bank upon Exts.B1 to B3 to contend that the goods in OFS Q-5 were kept in the custody of second plaintiff as a lessee. Even otherwise also, Exts. B1 to B3 will not help the defendant since none of them relates to the relevant period during which damage occurred to the goods stored in OFS Q-5. Ext.B1 was executed even prior to the date of arrival of consignment at the Port. Ext.B3 was executed after the institution of suit. There is genuine doubt as to whether space taken on lease as per Exts.B1 to B3 was concerned with storing of first plaintiff's goods. We reject Exts.B1 to B3 as being wholly irrelevant.
46. The argument of the learned counsel for the appellant based on Regulation 134 of the Cochin Port and Dock Regulation, 1975 which exempts the Board from liability for loss and damage to goods is also not capable of acceptance under law. Regulation 134 reads as follows:
“134 "Board not responsible for loss or damage to goods under certain circumstances:- The Board shall not be responsible for loss or damage to goods, caused by fire, water used in extinguishing fire, vermin, other unavoidable causes or circumstances beyond their control.”
47. Immunity from liability could be claimed under Regulation 134 only when damage to goods occurs due to unavoidable causes and circumstances beyond the control of the Board. Wetness arising from leakage of water from underground during rains is certainly a matter which the Board could have anticipated well in advance and necessary steps could have been taken in that regard to prevent such mischiefs. Nothing to prevent possible risks was done at the instance of the defendant. Therefore, we are of the opinion that it cannot escape from its liability taking shelter under Regulation 134. Equally, claim by the Board for protection for acts allegedly done in good faith by virtue of Section 121 of the M.P.T. Act cannot also sustain for reasons aforementioned.
48. Liability of defendant in relation to goods stored in warehouse No.3 also stands, in our view, on the same footing as in relation to OFS Q-5. The plaintiffs' case in respect of goods stored in warehouse No.3 also is that defendant was the bailee at the time of occurrence of damage to goods. The legal status imputed to defendant could be established only if cargo stored in warehouse No.3 is shown to have been in the sole custody of the defendant. Otherwise, claim for damages can hardly succeed. In order to prove the status, the plaintiffs have no documents and hence they rely only on the nature of contentions of the defendant and also circumstances brought on record.
49. Under Section 43(1) of the M.P.T.Act, no responsibility for loss of goods could be fastened on the authorities of Port Trust unless a receipt mentioned in Section 43(2) of the M.P.T Act had been issued by them. In this case, plaintiffs have not produced any such receipt. But that cannot be taken as a ground for non suiting the plaintiffs, since entrustment of cargo with defendant is not a disputed fact between parties in this case. When entrustment is admitted by the Port Trust, there is no need for producing the receipt referred to above as held in United India Insurance Co. Ltd. v. Pooppally Coir Mills [1994(2) KLT 473].
50. On the other hand, the definite case of the defendant in the written statement is that after the cargo initially stored in OFS Q-5 in the bonded area of wharf having been shifted to warehouse No.3 outside the wharf in Mattancherry, the legal relationship underwent change. It is contended that the cargo came to the exclusive custody of the second plaintiff when it was removed from OFS Q-5 and stored in warehouse No.3. In other words, specific contention is that second plaintiff took the cargo as a lessee accepting conditions of lease agreement and undertook to keep the goods in its own risk and responsibility. In this respect, the defendant relied on Exts.B4 to B6 documents also. Section 49(1) of the M.P.T. Act provides that the Board of Trustees has the power to frame scale of rates and impose requisite conditions of lease in respect of the property belonging to it for the purpose of storage of cargo. Ext.B4 is a letter of acceptance cum lease arrangement containing conditions of lease for storage of cargo. Exts.B5 and B6 are documents signed by parties at the time when the storage place was handed over and accepted. These documents do not make any difference with Exts.B1 to B3 executed in relation to OFS Q-5. Exts.B4 to B6 are documents executed with respect to warehouse No.6 in Ernakulam wharf.
51. In our opinion, Exts.B4 to B6 are not sufficient to support the case of the defendant that second plaintiff took custody of goods as lessee agreeing to keep them at its own risk and responsibility. No documents proving lease arrangement in respect of warehouse No.3 were produced by the defendant. Exts.B4 to B6 do not in any way relate to warehouse No.3. Exts.B4 and B5 were executed as early as on 11.03.1999 much before the goods were even imported. These documents, we find to be quite irrelevant and incapable of establishing contractual relationship of lessor and lessee as between second plaintiff and defendant.
52. It is relevant to note in this respect the effect of Section 43(1) of the M.P.T. Act casting statutory liability on the Board of Trustees put in charge of the goods to act as a bailee exercising reasonable standard of care as envisaged under Section 151 of the Contract Act. It is an undisputed fact that the defendant took charge of the cargo on 15.05.1999 itself immediately after the consignment arrived at the defendant Port. Therefore, unless there is some material to show the point of time when the custody of goods with defendant ceased and second plaintiff took over from it, the ordinary presumption must be that the defendant continued to hold the custody of goods stored in warehouse No.3 at the time when the goods suffered damage.
53. The best evidence to prove cessation and discontinuance of custody was production of lease agreement if any, with respect to warehouse No.3. In the absence of any such lease arrangement being brought on record, the natural presumption would be in favour of the plaintiffs' contention that defendant continued to hold custody of goods in warehouse No.3 at the relevant period. The proved custody of goods stored in warehouse No.3 shows that the defendant was acting as a bailee and therefore it was bound under law to discharge liability of a bailee for the loss caused on account of failure to keep the warehouse in good and leak free condition, exercising the standard of care as envisaged by Section 151 of the Contract Act.
54. The oral evidence given by plaintiffs 1 and 2 is also to the effect that defendant has been acting all throughout as bailee. In the plaint averments also, there is no admission that second plaintiff accepted the storage space as a lessee of the defendant. Tho
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ugh it was admitted in the plaint that the space was hired on charges, the substance of contention is that goods remained only in the custody of the defendant Port Trust. This was further affirmed in the oral evidence given by PWs.1 and 2 also. The inconsistency between the pleadings of the defendant and the evidence adduced is also a matter to be taken serious notice of and the benefit of this inconsistency, in our view, ought to be given to the plaintiffs. We have already referred to Exts.B1 to B3 and observed that case of lease arrangement put forward on the basis of these documents with respect to OFS Q-5 is contrary to the very case set up in the written statement. Looking at Exts.B1 to B3 and the pleadings, it is hard to assume that defendant has got consistent case about the nature of custody of goods held in the sheds in the bonded area of wharf and warehouses outside the wharf. For all these reasons together, we are of the opinion that defendant's case that the second plaintiff hired warehouse No.3 as lessee lacks probability. On the other hand, the case of the plaintiffs that defendant was the bailee of goods stored in OFS Q-5 and warehouse No.3 is highly probable. The finding of the court below that defendant took charge of goods as bailee and failed to exercise standard of reasonable care in storing the goods and consequently incurred liability to compensate the loss suffered by plaintiffs is only to be upheld. 55. The loss assessed by the surveyor in Ext.A21 report was accepted by the court below and decree was accordingly granted in favour of third plaintiff for an amount of Rs.39,34,325/-. But this figure of damages does not appear to be in exact tune with the claim put forward by the third plaintiff in the plaint. Under Section 79(1) of the M.I. Act, the Insurance Company which subrogates to the rights of the assured upon discharge of its liability, is entitled to prosecute the claim in its own name taking over the interest of the assured in the subject matter. The third plaintiff, the subrogee settled the claim of first plaintiff for an agreed total sum of Rs.38,11,118/-. Going by the principle of subrogation in Section 79(1) of the M.I. Act, third plaintiff could have claimed a decree limited to that amount alone. But we find that the court below granted a decree exceeding the amount settled between parties. This is illegal. The court below therefore committed a serious error by awarding decree exceeding Rs.38,11,118/-. The decree passed against the defendant, therefore, requires to be modified and scaled down to Rs.38,11,118/- with reasonable rate of interest from the date of suit till realisation. 56. In R.F.A.No.292 of 2005 filed by the first plaintiff it has sought to recover from the defendant Rs.4,22,745/- being the excess amount deducted by the third plaintiff as per the terms of the policy. The objection taken by the defendant to the claim for the aforesaid amount is that after the plaintiffs 1 and 3 having finally settled the claim for damages, the first plaintiff cannot supersede the settlement and insist for award of additional amount of damages. We are not inclined to accept this contention, since final settlement arrived at between the insurer and insured cannot help the wrongdoer to wriggle out of the legal liability which it has incurred. The amount claimed by the first plaintiff in the appeal is indisputably an integral part of the total amount of damages assessed by the Insurance Company through its surveyor. Therefore, the wrongdoer/defendant who caused damage cannot disown the liability under law and refuse to meet the legitimate claim for damages. The claim settled between the insurer and insured is a matter exclusively between the contracting parties. 57. The defendant being the wrongdoer under law cannot take advantage of the amicable settlement of rights entered into between the parties to contract of insurance. Therefore, we hold that court below erred in refusing to grant decree in favour of first plaintiff for recovery of Rs.4,22,745/- from the defendant. In this respect also, the decree of the court below requires to be modified as hereunder. The third plaintiff, Insurance Company will recover from the defendant a sum of Rs.38,11,118/- with 12% interest per annum from the date of suit till the date of decree and thereafter at the rate of 6% interest per annum till realisation. The first plaintiff also will recover from the defendant a sum of Rs.4,22,745/- with 12% interest per annum from the date of suit till the date of decree and thereafter at the rate of 6% interest per annum till realisation. In the result, R.F.A. No.224 of 2005 and R.F.A. No.292 of 2005 are disposed of with costs modifying the impugned judgment and decree dated 17.09.2004 in the manner aforementioned.