Dr.

Ram Manohar Lohia National Law University

Lucknow,U.P.- 226012

Project –CONTRACTS II

Project on – THE MORVI MERCENTILE BANK Ltd.

AND Anr. v. UNION OF INDIA

SUBMITTED BY- SUBMITTED TO-

Priyanjali Singh Ms. Vegesna Visalakshi
Enrollment no.- 200101100 Law of Contract
B.A. LL.B.(Hons.) 3nd semester RMLNLU, Lucknow
Section – B

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 ACKNOWLEDGEMENT

I have taken efforts in this project; however, it would not have been possible without the
kind
support and help of many individuals and organisations. I would like to extend my
sincere
thanks to all of them. I am highly indebted to Ms. Ankita Yadav for their guidance and
constant supervision as well as for providing necessary information regarding the project
and
also for her support in completing the project. I would like to express my gratitude
towards
family for their kind co-operation and encouragement which helped me in completion of
this
project. My thanks and appreciation also go to my friends in developing the project and
people who have willingly helped me out with their abilities.

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 INDEX
Acknowledgement ………………………………………………………………..2

Introduction……………………………………………………………………….4

Aims & Objectives………………………………………………………………...6

Research Methodology……………………………………………………………6

Facts of the Case…………………………………………………………………..7

Judgement…………………………………………………………………………8

Analysis………………………………………………………………………….14

Conclusion……………………………………………………………………….15

Annexure………………………………………………………………………...16

Bibliograpgy……………………………………………………………………...20

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 THE MORVI MERCENTILE BANK Ltd. And Anr. v.
UNION OF INDIA
INTRODUCTION

The case Morvi Merchantile Bank Ltd. V. Union of India is based on the crux that whether railway
receipts can be treated as goods under Section 178 of Indian Contract Act, 1872. Earlier Section 178
was not exhaustive and was limited to certain definitions but the scenario changed after
interpretation of different case laws.

Where a mercantile agent is in possession of the documents of title relating to his principal’s goods,
and if he pledges the same, the pledgee gets a good title if he acts in good faith and without notice.
An explanation to Section 178 says that the expression “documents of title” shall have the same
meaning as is assigned to it in Sales of Goods Act, 1930. Section 2(4) of the act provides that
“documents of title to goods” includes a bill of lading, dock warrant, warehouse keeper’s certificate,
wharfinger’s certificate, railway receipt, warrant or order for the delivery of goods and any other
document used in the ordinary course of business as a proof of possession or control of goods, or
authorising of purporting to authorise, either by endorsement or by delivery, the possessor of the
document to transfer or to receive goods hereby represented.

Before the Sales of Goods was separated from the contract act in 1930, railway receipts were not
included in the meaning of the expression “documents of title”. But the privy council had held that
“railway receipts” were also the documents of title as they are a symbol of possession and control of

goods covered by them.2 In 1930, when Sales of Goods Act was enacted “railway receipts” was
expressly included in the definition of “documents of title of goods”

Pledge is a bailment of personal property as security for some debt or engagement. Pawn was
synonymous with pledge at common law, but modem usage tends to restrict these words to the
bailment of tangible chattels for money advanced, and has introduced the term "Collateral Security",
or simply "Collateral", to designate the subject matter of a pledge given as security for an
engagement other than a simple borrowing of money, and particularly when the subject - matter

1
Sales of Goods Act, 1930
2
RamdasVithaldas Durbar v. S. Amerchand& Co,(1915-16) 43 IA 164; Official Assignee v Merchantile Bank of India Ltd,
(1933-34) 61IA 416
4
consists of incorporeal chattels such as stocks, bonds, or choses in action. 3 Section 1724 defines
pledge as security for payment of debt or performance of a promise is called “pledge”.

The case Morvi Mercantile Bank Ltd. V Union of India5 deals with the above concept. It
incorporates the application of Section 178 and Section 180 of the Indian Contract Act, 1872. One of
the most essential ingredients of a valid pledge is the delivery of possession. “Delivery of the chattel
pawned is a necessary element in the making of a pawn.”6 The property pledged should be delivered
to the pawnee.7 Thus, where the producer of a film borrowed a sum of money from financier
distributor, and agreed to deliver the final prints of the film when ready, the agreement was held not
to amount to pledge, there being no actual transfer of possession.8 Section 149 of The Indian
Contract Act,1872says that delivery of documents may be actual or constructive. In the case, Morvi
Mercantile Bank Ltd. V Union of India9, major issue was whether delivery of documents of title
would enable the pledgee to obtain the possession is equally effective to create a pledge. Under the
Contract Act, delivery of goods by one person to another under a contract as security for payment of
a debt is a pledge. Ordinarily delivery of tangible property is essential to a true pledge; there are
cases where the law recognizes that delivery of tangible symbol involves a transfer of possession of
the property symbolized, such a symbolic possession takes place of physical delivery. Summing up,
the question was whether the Indian law equates the railway receipts with the goods covered by
them.

3
Bouvier’s Law Dictionary, 8th Edition, 1914, Vol III, p.2604
4
The Indian Contract Act, 1872
5
AIR 1965 SC 1954
6
Suneel Kumar Gupta v Punjab & Sind Bank, AIR 2006, Utt 26: (2006) 4 AIR Kant (NOC) 488 (Utt) (NOC), goods pledged
with creditor remaining in the custody of debtor, could not be said to be pledged, delivery of possession, actual or
constructive, is necessary. The creditor bank was paying from the borrower’s account insurance premium. That did not
establish constructive possession of thebank.
7
Things delivered should include the increments, if any, on the goods, where shares and securities are pledged, it was
held that bonus shares, dividends and interest income in respect of the securities received by the pledgee became a
pledged property, Standard Chartered Bank v Custodian, 2000 6 scc 427: AIR 2000 SC 1488.
8
Revenue Authority v Sudarshanam Picture, AIR 1968 Mad 319
9
AIR 1965 SC 1954
 AIMS & OBJECTIVES
 To analyse the judgement of the case, Morvi Mercantile Bank Ltd. V. Union ofIndia.
 To further research about various provisions related to the case in the Indian Contract Act,
1872, Sales of Goods Act, 1930 and Transfer of Property Act,1882.

RESEARCH METHODOLOGY
To start the project, research in right way was most important. All the data and contents collected
depended upon correct way of research. The method of research was doctrinal method. These data
and contents depend upon the original case and other sources, and to find these sources hard-work
and dedication was applied. Right and apt information and data were picked from various books and
other sources and then analysed and interpreted in my own view. Various sources had been referred
to gather useful information and knowledge. Articles and opinions of some renowned researcher
were used to interpret review of literature and conclusion of the project work. The compilation of
data collected was done chronologically which was equally important to have meaningful content.
Every point information was organised in correct sequence and then written in my own words. Then
the sources which were referred to have been listed that followed bibliography and blogs.
 FACTS OF THE CASE
On October 4. 1949, M/s. HarshadraiMohanlal&Co..a firm doing business at Thana, Bombay.
hereinafter called the firm, entrusted 4 boxes alleged to have contained menthol crystals to the then
G.LP. Railway for carriage from Thana to Okhla near Delhi under a railway receipt bearing No.
233/27. On October 11, 1949, the firm consigned 2 more such boxes to Okhla from Thana under 2
railway receipts bearing Nos. 233/35 and 233/36. All the said 6 boxes were marked with the name of
the said firm and were consigned to "self". The said firm endorsed the relevant railway receipts in
favour of Morvi 'Mercantile Bank Ltd., hereinafter called the Bank, against an advance of Rs.
20,000 made by the Bank to the firm. The said consignments did not reach Okhla. The railway
company offered to deliver certain parcels to the Bank, but the Bank refused to take delivery of the
same on the ground that they were not the goods consigned by the firm. As the railway failed to
deliver the boxes, the Bank, as the endorsee of the said railway receipts for valuable consideration,
filed Civil Suit No. 50 of 1950 in the Court of the Civil Judge, Senior Devision. Thana, against the
Union of India through the General Manager, Central Railway, Bombay, for the recovery of Rs.
35,500, being the value of the goods contained in the said consignments as damages. The defendant
in the written-statement averred that on February 1. 1950, the railway company offered to deliver all
the consignments to the Bank, but the latter wrongfully refused to take delivery of the same on the
ground that the consignments were not identical to the ones consigned from Thana; it put the
plaintiff to strict proof of the allegation that the consignments contained menthol crystals as alleged
or that the aggregate value of the said consignments was Rs. 35,500. or that the railway receipts
were endorsed in favour of the plaintiff for valuable consideration.

DEFINING THE ISSUES

 Whether endorsement of railway receipt constitutes apledge?

 Whether endorsement of a railway receipt for consideration constitutes a mere pledge on the
railway receipt or on the goods covered by it aswell?
 Whether the person in whose favour railway receipts are endorsed has the right to suefor
loss ofgoods?
 Whether Bank is the pledgee of the goods or is only the pledgee of the documents of titleand
accordingly could only keep the documents against payment by thefirm?
 JUDGEMENT
Morvi Mercantile Bank v Union of India is the case where the question is whether the Indian law
equates the railway receipts with the goods covered by them for the purpose of constituting delivery
of goods within the meaning of the Contract Act. On the basis of the broad facts of the case, the
learned civil judge observed some important points.10
The appeal was heard by a division bench of the Bombay High Court consisting of J. C. Shah and
Gokhle, JJ. The learned judged agreed with the Civil Judge on the first three points but they had a
dissenting approach regarding the fourth point. They were of the view that the Bank, as endorsee of
the said railway receipts, was entitled to sue for compensation for the loss suffered by it by reason of
the loss of the consignments, but. as pledgees of the goods, it suffered the loss only to the extent of
the loss of its security. On that view, the learned Judges gave a decree to the Bank for a sum of Rs.
20,000 advanced by it with interest and proportionate costs in both the Courts. The plaintiff as well
as the defendant preferred, by certificate, cross appeals to thisCourt.11
Decision by the honourable judges of the Supreme Court required careful scrutiny of The Indian
Contract Act, 1872, The Indian Sales of Goods Act and Transfer of Property Act to resolve all the
issues raised above. One of the most important concept required to answer the above questions was
that of Pledge. Under the Indian Contract Act, 1872, delivery of goods by one person to another
under a contract as security constitutes a valid pledge. Usually, the delivery of tangible property was
to be taken as a valid pledge but here the question was whether where the law recognizes that
delivery of tangible symbol involves a transfer of possession of the property symbolized, such a
symbolic possession takes the place of physical delivery. Summing up, the question was whether the
Indian lawequates the railway receipts with the goods covered by them for the purpose of
constituting delivery of goods within the meaning of contract act. Before the amendment of Section

10
(1)The boxes consigned by the firm contained menthol crystals and by the wrongful conduct of the employees of the
railway administration the contents of the boxes were lost;
(2)The said consignments were not offered for delivery to the Bank, but what was offered were different consignments
containing causticsoda;
(3)The relevant railway receipts were endorsed by the firm in favour of the Bank for valuableconsideration;
(4)The Bank, as endorsee of the railway receipts, was not entitled to sue the railway company on the railway receipts
for loss of the consignments. On those findings the suit filed by the Bank was dismissed withcosts.
17812 and passing of the Sales of Goods Act, 1930 there was no such provision of equating the
railway receipts with goods to constitute a valid pledge. The same issue was raised in the case of
RamdasVithaldas Durbar’s v. S. Amerchand& Co.13
The above case laid down three propositions:
(i) the railway receipts in question in that case were used in the ordinary course of
business in Bombay as proof of possession and control of the goods therein referred to, or as
authorising the holder to receive or transfer thegoods;
(ii) such railway receipts were documents of title and a valid pledge of the goods covered by
the receipts could be made under the Contract Act before it was amended in 1930, by
endorsing and delivering the same as security for advances made to the owner of thegoods.
Talking about the background of the phrase “documents of title”, earlier it was not included in the
Indian Contract Act, 1872 before its amendment but there was a similar provision in the English
Factors Act, 1842 which was applicable to the whole of British India. The last mentioned act defined
the expression “documents of title” as any bill of lading, dock-warrant. Ware-housekeeper
certificate, whar-finger's certificate warrant or order for the delivery of goods and any other
document used in the ordinary course of business as proof of the possession or control of goods or
authorising or purporting to authorise, either by endorsement or by delivery the possessor of the
document to transfer or receive goods thereby represented'. In 1930Parliament in enacting the
Indian Sale of Goods Act, 1930, presumably borrowed the definition of "documents of title to
goods" from the Indian Factors Act and the English Factors Act noticed by the Judicial Committee,
but expressly included in the definition the railwayreceipt.

The Judicial Committee considered the question of pledge of railway receipts in another case of
Official Assignee of Madras v.Mercantile Bank of India14.The main question was whether the

12
The Indian Contract Act, 1872
13
(1916) LR 43 IA 164; The facts of the case are as follows: Sellers of cotton consigned it to the buyer in Bombay, and
forwarded to him receipts issued by the railway company which had undertaken the carriage. The receipts provided
that they should be given up at the destination by the consignee, and that if he did not himself attend to take delivery
he must endorse on the receipt a request for delivery to whom he wished it to be made. The evidence showed that
similar receipts for cotton were used in the ordinary course of business in Bombay as proof of the possession and
control of the goods therein referred to or as authorising the holder to receive or transfer the goods. The consignee
endorsed and delivered the receipts as security for advances made specifically upon them in good faith. The sellers
sought to stop the cotton in transit.
pledge of the railway receipt was a pledge of the goods represented by them or merely a pledge of
the actual documents. The Judicial Committee, after considering its earlier decision in
RamdasVithaldas Durbar's case15 and all the relevant provisions which we have noticed earlier, came
to the conclusion that there was a valid pledge of the goods represented by the receipts.

On question whether a pledge of a document is a pledge of the goods as distinct from the document,
the learned judges observed that:

"Their Lordships likewise in the present case see no reason for giving a different meaning to the
term (documents of title to goods) in s.178 from that given to the terms in ss. 102and 103; in
addition a railway receipt is specifically included' in the definition of mercantile document of title to
goods by s. 137 of the Transfer of Property Act, 1882, which, in virtue of s.4 of the Act, is to be taken
as part of the Contract Act as being a section relating to contracts. A railway receipt is now
included in the definition of documents of title to goods in s. 2, sub-s. 4, of the Indian Sale of Goods
Act,1930."16

Regarding the expression of “person” in Section 17817 the learned judges observed that:
"Their Lordships did not in that case see any improbability in the Indian Legislature having taken
the lead in a legalreform.

It may well have seemed that it was impossible to justify a restriction on the owner's power to
pledge which was not imposed on the like powers of the mercantile agent. The same observation
may well be true m regard to the words now being considered. The reasonableness of any such
change in the law is well illustrated by the facts of the present case, where it was clearly intended to
pledge the goods, not merely the railway receipts, and the respondents have paid in cashthe

or other of the two railways, the Madras & Southern Maharatta Railway or the South Indian Railway. Under an
arrangement between the said Railways and the Madras Port Trust, the consignments of nuts when received were
deposited in the go downs of the Madras Port Trust. The general course of business was for the insolvents to obtain
from the railway companies in respect of each consignment or wagon had a railway receipt. The insolvents obtained
loanfromthe respondent Bank after sending to the said Bank the railway receipts duly endorsed in blank and also after
executing a promissory note for the amount a letter of hypothecation. When the goods arrived at the port, delivery
was taken from the Port Trust against the railway receipts. At the time the insolvents were adjudicated the bags of
ground- nuts in question in that case were either in transit on the railway or in the transit sheds or godowns of the Port
Trust.
15
(1916) LR 43 IA 164
16
Para 6 of the original judgement.
17
Indian Contract Act, 1872
advances they made on that footing. In these circumstances, it would be indeed a hardship that they
should lose their security."

Court after noticing all the relevant provisions of the Contract Act, the Transfer of Property Act and
the Sale of Goods Act held that railway receipts were documents of title and the goods covered by
the documents could be pledged by transferring the documents. Court held that if it is not allowed
then a reading of Section 178 of the Contract Act would suggest that an owner of goods cannot
pledge the goods by transferring the documents of title, whereas his agent can do so.

Regarding the next issue, whether the person in whose favour railway receipts are endorsed has the
right to sue for loss of goods, Court held that as per Section 180 of the Contract Act, a pledge being
a bailment of goods as security for payment of a debt, the pledgee will have the same remedies as
the owner of the goods would have against a third person for deprivation of the said goods or injury
to them. Accordingly, he Bank, being the pledgee, can maintain the present suit for the recovery of
the full value of the consignments amounting to Rs. 35,500 /-.The courts also remarked that the
answer to the above issue is based on the construction of Section 18018 of the Indian Contract Act
1872. Under this section, a pledge being a bailment of goods as security for payment of a debt, the
pledgee will have the same remedies as the owner of the goods would have against a third
person for deprivation of the said goods or injury to them. If so, it follows that the Bank, being the
pledgee, can maintain the present suit for the recoveryofthe full value of the consignments
amounting to Rs.35,500/-.

Talking about the next issue, whether Bank is the pledgee of the goods or is only the pledgee of the
documents of title and accordingly could only keep the documents against payment by the firm, the
court held that on the basis of the facts of the case, the firm by endorsing the railway receipts in
favour of the Bank for consideration pledged the goods covered by the said receipts to the Bank. The
Judicial Committee both in RamdasVithaldas Durbar v S. Amerchand&Co19., and the Official

18
"If a third person wrongfully deprives the bailee of the use or possession of the goods bailed, or does them any
injury, the bailee is entitled to use such remedies as the owner might have used in the like case if no bailment had been
made; and either the bailor or the bailee may bring a suit against a third person for such deprivation or injury "
19
(1916) LR 43 IA 164
Assignee of Madras v. The Mercantile Bank of India, Ltd.20 heId that such a transaction was a
pledge.
Talking about the dissenting opinion expressed by justice Ramaswami and Mudholkar, the main
points expressed by them are as follows:

 There was no valid pledge of the consignments of goods represented by the railway receipt in
favour of the Bank and the Bank was not entitled to sue the Railway for compensation for the
loss of goods, relying upon the endorsements of the railway receipts in itsfavour.
 After the passing of the Indian Contract (Amendment) Act, 1930, the legal position with
regard to the pledge of railway receipts, is exactly the same in Indian Law as it is in English
Law, and consequently, the owner of the goods cannot pledge the goods represented by a
railway receipt, by endorsing the railway receipt, unless the railway Authorities were notified
of the transfer, and they agreed to hold the goods as bailee of the pledgee. Under the
amended law a valid pledge can no longer be made by every person “in possession” of
goods. It can only be made by a mercantile agent as provided in s. 178 of the Contract Act
(after amendment) or by a person who has obtained possession of goods under a contract
voidable under s. 1921 or s. 19A of the Contract Act, as provided by s. 178 of the Act or by a
seller or buyer in possession of goods, after sale as provided in s. 3022of the Indian Sale of
Goods Act.
 Negotiability of such receipt is a creature of a statute or mercantile usage, not of Judicial
decisions apart from either. So, in the absence of any usage of trade or any statutory
provision to that effect, a railway receipt cannot be accorded the benefits which flow from
negotiability under the Negotiable Instruments Act, so as to entitle the endorsee, asthe

20
(1034) LR 61 AI 416
21
When consent to an agreement is caused by coercion {The words “undue influence” were rep.by Act 6 of 1899, s 3}
fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so
caused.
22
Where a person, having sold goods, continues or is in possession of the goods or of the documents of title to the
goods, the delivery or transfer by that person or by a mercantile agent acting for him, of the goods or documents of
title under any sale, pledge or other disposition thereof to any person receiving the same in good faith and without
notice of the previous sale shall have the same effect as if the person making the delivery or transfer were expressly
authorised by the owner of the goods to make the same. (2) Where a person, having bought or agreed to buy goods,
obtains, with the consent of the seller, possession of the goods or the documents of title to the goods, the delivery or
transfer by that person or by a mercantile agent acting for him, of the goods or documents of title under any sale,
pledge or other disposition thereof to any person receiving the same in good faith and without notice of any lien or
other right of the original seller in respect of the goods shall have effect as if such lien or right did notexist.
 holder for the time being of the document of title, to sue the carrier-the railway authority-in
his own name. In view of cl. (3) of the notice printed at the back of the receipt that an
endorsement made on the face of the receipt by the consignee was only meant to indicate the
person to whom the consignee wished delivery of goods to be made if he himself did not
attend to take delivery, the Bank had no right to sue the Railway.

Since the language of Section 17823of the Contract Act is clear and explicit, if any hardship and
inconvenience is felt because of, such practice of treating the receipt as a symbol of goods as not
recognized, it is for Parliament to take appropriate steps to amend the law and it is not for courts to
legislate under the guise of interpretation.

23
Where a mercantile agent is, with the consent of the owner, in possession of goods or the document of title to
goods, any pledge made by him, when acting in the ordinary course of business of a mercantile agent, shall be as valid
as if he were expressly authorised by the owner of the goods to make the same; provided that the pawnee acts in good
faith and has not at the time of the pledge notice that the pawnor has not authority to pledge.
 ANALYSIS
The judgement of Justice K. Subba Rao seems to be driven by utmost level of wisdom and
professionalism. The crux of the case was whether railway receipts could be treated with goods for a
valid pledge. Before the amendment of Section 178 and inception of the Sales of Goods Act, 1930,
there was no such provision but after the amendment, pledge of documents of title would be equal to
pledge of goods. This became one of the milestones in the development of contract law as it enabled
the “documents of title” to be goods for valid pledge.

Ordinarily delivery of tangible property is essential to a true pledge; but where the law recognizes
that delivery of tangible symbol involves a transfer of possession of the property symbolized, such a
symbolic possession takes the place of physical delivery. The Judicial Committee, after considering
its earlier decision in Ramdas Vithal das Durbar case and all the relevant provisions which we have
noticed earlier, came to the conclusion that there was a valid pledge of the goods represented by the
receipts.

One of the flaws that was identified was that, by the amendment of s. 178 of the Contract Act in
1930, the Legislature has taken away the right of an owner of goods to pledge the same by the
transfer of documents of title to the said goods. Under the old section "a person" who was in
possession of any goods etc. might make a valid pledge of such goods, whereas under the present
section "a mercantile agent", subject to the conditions mentioned therein, is authorized to make a
pledge of the goods by transferring the documents of title. Therefore, the argument proceeds, a
person other than a mercantile agent cannot make a valid pledge of goods by transferring the
documents representing the said goods. This argument appears to be plausible and even attractive;
but, if accepted, it will lead to anomalous results. It means an owner of goods cannot pledge the
goods by transferring the documents of title, whereas his agent can do so. As the Privy Council
pointed out it is impossible to justify a restriction on the owner's power to pledge when there is no
such restriction imposed on the like powers of a mercantile agent. A careful scrutiny of s. 178 of the
Contract Act and the other relevant provision thereof indicates that the section assumes the power of
an owner to pledge goods by transferring documents of title thereto and extends the power even to a
mercantile agent.
 CONCLUSION
With all the questions of law being satisfactorily answered, this case sets a precedent regarding the
delivery of a railway receipt to be considered enough to constitute delivery of goods represented by
that railway receipt. Earlier, the provision regarding whether the “document of title” can be equated
with goods for a valid pledge was quite vague, but this case became a milestone in clearing the air
regarding the same.
 ANNEXURE
1. Name of the Case : MorviMerchantile Bank Ltd. V. Union of India AIR 1965SC1
1954

2. Composition of the Bench: The Supreme Court of India: Constitution Bench

Name of Judges:
The Hon'ble Justice K. SubbaRao
The Hon'ble Justice RaghubarDayal
The Hon'ble Justice J.R Mudholkar
The Hon'ble Justice r, S. Bachawat
The Hon'ble Justice V. Ramaswami

3. Area of Law: Civil Law

4. Brief Facts of the Case:

A firm doing business in Bombay entrusted goods worth Rs. 35,500 the Railway
for delivery in Delhi. The goods were consigned to "self" and the firm endorsed
the railway receipts to a Bank against an advance of Rs. 20,000 made by the Bank
to the firm. The firm also executed a promissory note in favour of the Bank for that
amount. When the goods reached the destination, the Bank refused to take
delivery, on the ground that they were not the goods consigned by the firm. The
Bank, thereafter filed a suit for the recovery of the value of the goods. The trial
court dismissed the suit. On appeal by the Bank, the High Court allowed the appeal
and decreed the claim for Rs. 20,000 on the ground that as pledgee of the goods,
the Bank suffered loss only to the extent of the loss of its security. Both the Bank
and the Railway appealed to this Court, and it was contended on behalf of the
Railway that the endorsement of the railway receipt in favour of the Bank, did not
constitute a pledge of the goods covered by the receipt and that the Bank had no
right to sue forcompensation.

5. Jurisdiction: Case was a Civil appeal and thus arose Appellate jurisdiction of the
Supreme Court of India

6.

7. Reliance on Relevant

Statutes:
a. The Indian Contract Act,1872
b. Sale of Goods Act,1930
 c. Transfer of Property Act,1882
d. English FactorsAct,1842

Decided Cases:
(1)RamdasVithaldas Durbar v. S. Amerchand&Co
(2) Official Assignee of Madras v. Mercantile Bank of India
(3) Commissioner for the PortTrustof Calcutta v. General Trading
CorporationLtd.
(4) Union of India v. TaherAli

8. Legal issues of Determination:

1. Whether endorsement of railway receipt constitutes apledge?
2. Whether endorsement of a railway receipt for consideration constitutes a
mere pledge on the railway receipt or on the goods covered by it aswell?
3. Whether the person in whose favour railway receipts are endorsed has the
right to sue for loss ofgoods?
4. Whether Bank is the pledgee of the goods or is only the pledgee of the
documents of title and accordingly could only keep the documents against
payment by thefirm?

9. Nature of the issue

Impugning the constitutional validity of:

a. Statute: Whether railway receipts were covered by Section 178 of the Indian
Contract Act,1872?
b. Executive: Whether “documents of title” i.e. railway receipts could be treated
as goods to constitute a validpledge?

Impugning the correctness of the judgment on the ground of

1) Wrong appreciation ofevidence.

2) Wrong appreciation of law.
3) Violation of principle of NaturalJustice.
4) ExceedingJurisdiction
5) Perversefinding

2) Wrong appreciation of law.

Question of Interpretation of
 1) ConstitutionalProvisions
2) StatutoryProvisions
3) Fiscal/PenalStatute
4) Beneficial/ RemedialStatute

2) Statutory Provisions : Section 178 of the Indian Contract Act, 1872

10. Methodology of judging the issues involved: Judges were inductive in their
reasoning of coming with a judgment this comprehensive.

11. Weather the opinion of the court is:

a. unanimous as on Judgment ordifference
ifdivided
b. Majority view as one judgment, difference Judgments, Concurring if
any
c. Minority view as one judgment, difference Judgments, Concurring if
any
Majority view as one judgment, difference Judgments, Concurring if any

12. Majority- reasoning including reasoning of each judge (Ratio Decidendi) reason for
decision
 An owner of goods can make a valid pledge of them by transferring the
railway receipt representing the said goods.24 The firm by endorsing the
railway receipts in favour of the Bank, for consideration, pledged the goods
covered by the said receipts, to the Bank, and the Bank being the pledgee
could maintain the suit for the recovery of the full value of consignment
amounting to Rs.35,500.
 A pledge being a bailment of goods under s. 172 of the Contract Act the
pledgee, as a bailee will have the same remedies as the owner of the goods
would have against a third person for deprivation of the said goods or injury
to them under s. 180 of theAct.

Minority-reasoning including reasoning of each judge (Ratio Decidendi)

 After the passing of the Indian Contract (Amendment) Act, 1930, the legal
position with regard to the pledge of railway receipts is that the owner of the
goods cannot, pledge the goods represented by the railway receipts in the
present case unless the railway authorities are notified of the transfer and they
agree to hold the goods as baileefor the pledgee. Therefore, there is no valid
pledge of consignments of goods between the Bank and the firm and Bank
cannot sue the railways for the loss ofgoods.
 Bills of lading are mere promises by the seller, being the issuer or transferor,
to deliver, or authorise the buyer to receive possession. Railway receipthas

24
On a reasonable construction of s. 178 of the Contract Act, 1872, ss. 4 and 137 of the Transfer of Property Act, 1882,
and ss. 30 and 53 of the Indian Sale of Goods Act, 1930.
 been specified in Section 2(4) of the Sales of Goods Act and has been
assimilated to bills of lading for the purposes of the right of stoppage in
transit but not for allpurposes.
 There are no rights created merely by the reason of the endorsement of a
Railway Receipt between the endorsee (bank) and the railway company
which has issued the railway receipt to the consignee (firm), the only remedy
of the endorsee being against the endorser (firm).

13. Ratio of the majority opinion

Executive action or legislative action (Law) or Constitutional amendments quashed
Or upholds the same
Or merely interpreted the law

This case merely interpreted the law and further clarified upon its scope and
limitations.

14. Whether the majority has issued

Any new rulings or new guidelines
And new principle(s) of interpretation
While upholding or quashing or interpreting

The bench only clarified upon the previous interpretations of the statute regarding
Section 178 of the Indian Contract Act, 1872 and clarified on the issue of
“documents of title” i.ecould be treated as goods to constitute a validpledge.

15. Whether the majority ruling in each issue/point

I. still holds good,or

II. Overruled by S.C. Subsequently by larger benchor
III. Supressed by legislature by law or Constitutional Amendmentor
IV. Parliament making the Law in complying with thejudgment

Still holds good.

16. Whether the majority decision is towards establishing a

Just Social Order or
Just Economic Order or
Just Political Orderor
Just Legal Order or more than one

Just Legal Order

17. Student’s own remarks/submission: The case provided a holistic view of Section
178 of the Indian Contract Act, 1872 and clarified the provision regarding whether
documents of title could be treated as goods to constitute a valid pledge
 BIBLIOGRAPHY

 Avatar Singh, Contract and SpecificRelief

 Mulla, Indian ContractAct

REFERENCES

 www.casemine.com
 www.scconline.com